CBTX, Inc. Reports Third Quarter Financial Results

HOUSTON, Dec. 14, 2017 (GLOBE NEWSWIRE) -- CBTX, Inc. (the “Company”) (NASDAQ:CBTX), the bank holding company for CommunityBank of Texas N.A., today announced the results for the quarter ended September 30, 2017. The Company reported net income of $10.0 million, or $0.45 per diluted share, for the quarter ended September 30, 2017, compared to $6.8 million, or $0.31 per diluted share, for the quarter ended September 30, 2016 and $8.7 million, or $0.39 per diluted share, for the quarter ended June 30, 2017.

Highlights

  • Increased total deposits by $38.8 million to $2.6 billion compared to second quarter 2017.
  • Improved efficiency ratio of 60.7%, compared to 62.8% for second quarter 2017.
  • Credit measures remain strong.
  • Completed successful initial public offering on November 10, 2017.

CBTX, Inc. Chairman and Chief Executive Officer Robert R. Franklin Jr. commented, “We are very pleased to have recently completed our initial public offering of 2.76 million shares of our common stock, generating net proceeds of approximately $64.5 million. We are gratified for the strong investor support received during the IPO process and enthusiastic about the quality of our new shareholders.”

Operating Results:

Net Interest Income

  • Net interest income was $27.3 million for third quarter 2017, compared to $25.5 million for third quarter 2016 and $26.5 million for second quarter 2017. The increase in net interest income in third quarter 2017 from third quarter 2016 and second quarter 2017 was due to increased average interest-earning asset balances resulting from organic growth and increased average yields for our loan portfolio.
  • The average balance of total interest-earning assets was $2.7 billion at September 30, 2017, an increase of $61.9 million compared to September 30, 2016 and $46.1 million compared to June 30, 2017.
  • The yield on interest-earning assets was 4.32% for third quarter 2017 compared to 4.16% for third quarter 2016 and 4.32% for second quarter 2017. The increase from the prior year quarter is primarily due to an increase in loan yield.
  • The cost of interest-bearing liabilities, including borrowings, was 0.60% for third quarter 2017 compared to 0.57% for third quarter 2016 and 0.58% for second quarter 2017. The increase from the prior year and linked quarter is primarily due to higher rates on certificates of deposit.
  • The net interest margin was 3.98% for third quarter 2017 compared to 3.83% for third quarter 2016 and 3.99% for second quarter 2017.

Noninterest Income

  • Noninterest income increased $535 thousand for third quarter 2017, compared to third quarter 2016 and $560 thousand compared to second quarter 2017. The increase in the third quarter 2017 primarily reflects an increase in net gains on sale of assets due to settlement of a legal matter related to one of our branches and the sale of certain assets of our branches in Huffman and Deweyville.

Noninterest Expense

  • Total noninterest expense increased $987 thousand compared to third quarter 2016 and increased $158 thousand compared to second quarter 2017.
  • The increase in noninterest expense compared to third quarter 2016 is due primarily to increases of $832 thousand in salaries and employee benefits and $242 thousand in repossessed real estate and other asset expense.
  • The increase from the linked quarter is primarily related to increases of $530 thousand in salaries and employee benefits, $255 thousand in repossessed real estate and other asset expense, partially offset by a decrease of $242 thousand in advertising, marketing and business development expenses.

Provision (Recapture) for Loan Losses

  • Provision for loan loss was a recapture of $1.7 million for third quarter 2017, a decrease of $2.9 million and $960 thousand, respectively compared to a provision of $1.2 million for third quarter 2016 and a recovery of $694 thousand for second quarter 2017. The recaptures in third and second quarter 2017 are primarily the result of pay-offs of certain classified and problem loans, which resulted in a decrease in their related allowance for loan losses.
  • The allowance for loan losses was $23.8 million, or 1.08% of total loans, at September 30, 2017, compared to $27.1 million, or 1.25% of total loans at September 30, 2016 and compared to $25.2 million, or 1.15% of total loans, at June 30, 2017. These changes are primarily the result of the recaptures mentioned above.

Income Taxes

  • Income tax expense was $3.9 million for third quarter 2017, $3.0 million for third quarter 2016 and $3.2 million for second quarter 2017. The effective tax rates were 28.11% for third quarter 2017, 30.90% for third quarter 2016 and 26.76% for second quarter 2017. The lower tax rate in second quarter 2017 was due to true-ups and return to provision adjustments booked in that quarter.

Balance Sheet Highlights:

Loans

  • Total net loans were $2.2 million at September 30, 2017. Total net loans increased $33.5 million from September 30, 2016 to September 30, 2017, resulted from a $30.7 million increase in commercial and industrial loans, a $16.5 million increase in real estate loans and a $17.9 million decrease in other loans.
  • The increase in total net loans of $8.5 million from June 30, 2017 to September 30, 2017 resulted from a $13.8 million increase in commercial and industrial loans, a $532,000 decrease in real estate loans and a $6.1 million decrease in other loans.

Asset Quality

  • Nonperforming assets were $9.7 million, or 0.33% of total assets at September 30, 2017, $9.7 million, or 0.33% of total assets at June 30, 2017 and $13.9 million, or 0.47% of total assets at September 30, 2016.
  • Nonperforming loans were $8.6 million, or 0.39% of total loans at September 30, 2017, $8.3 million, or 0.38% of total loans at June 30, 2017 and $11.4 million, or 0.52% of total loans at September 30, 2016.
  • The decrease in nonperforming assets and loans from September 30, 2016 to September 30, 2017 was primarily due to pay-offs, charge-offs and improvements in overall asset quality.
  • Annualized net charge-offs (recoveries) to average loans was (0.04)% for third quarter 2017, 0.00% for second quarter 2017 and 0.16% for third quarter 2016. The recaptures in third quarter 2017 are primarily the result of pay-offs of certain classified and problem loans.

Deposits and Borrowings

  • Total deposits were $2.6 billion at September 30, 2017 compared to $2.5 billion at June 30, 2017 and $2.5 billion at September 30, 2016. The increase from the prior year is primarily due to organic growth.
  • Total borrowings (excluding junior subordinated debentures) were $26.6 million at September 30, 2017, $27.6 million at June 30, 2017 and $30.4 million at September 30, 2016. The decrease in borrowings is due to scheduled payments. In November 2017, we repaid the outstanding balance of $23.3 million in full and we entered into a loan agreement with Frost Bank providing for a $30 million revolving line of credit on December 13, 2017.

Capital

  • At September 30, 2017, we were well capitalized under regulatory guidelines. At September 30, 2017, our ratio of total shareholders’ equity to total assets was 12.75% and our tangible equity to total tangible assets was 10.10%. Tangible equity to total tangible assets is a non‑GAAP financial measure. See the table captioned “Non‑GAAP to GAAP Reconciliation.”

  • In November 2017, we completed our initial public offering of our common stock issuing 2,760,000 common shares at $26.00 per share. Net proceeds are estimated to be $64.5 million.

About CBTX, Inc.

CBTX, Inc. is the bank holding company for CommunityBank of Texas, N.A., a $3.0 billion asset bank, offering commercial banking solutions to local small and mid-sized businesses and professionals in Houston, Beaumont and surrounding communities in southeast Texas. Visit www.communitybankoftx.com for more information.

Forward-Looking Statements

This release may contain certain forward-looking statements within the meaning of the securities laws that are based on various facts and derived utilizing important assumptions, current expectations, estimates and projections about the Company and its subsidiaries. Forward-looking statements include information regarding the Company’s future financial performance, business and growth strategy, projected plans and objectives, as well as projections of macroeconomic and industry trends, which are inherently unreliable due to the multiple factors that impact economic trends, and any such variations may be material. Statements preceded by, followed by or that otherwise include the words “believes,” “expects,” “anticipates,” “intends,” “projects,” “estimates,” “plans” and similar expressions or future or conditional verbs such as “will,” “should,” “would,” “may” and “could” are generally forward-looking in nature and not historical facts, although not all forward-looking statements include the foregoing. Further, certain factors that could affect our future results and cause actual results to differ materially from those expressed in the forward-looking statements include, but are not limited to whether the Company can: prudently manage and execute its growth strategy; manage risks associated with its acquisition and de novo branching strategy; maintain its asset quality; address the volatility and direction of market interest rates; continue to have access to debt and equity capital markets; and achieve its performance goals. The foregoing factors should not be construed as exhaustive and should be read together with the other cautionary statements included in the Company’s Final Prospectus filed pursuant to Rule 424(b)(4) and other reports and statements that the Company has filed with the SEC. If one or more events related to these or other risks or uncertainties materialize, or if the Company’s underlying assumptions prove to be incorrect, actual results may differ materially from what its anticipates. Accordingly, you should not place undue reliance on any such forward looking statements. Any forward-looking statement speaks only as of the date on which it is made, and the Company does not undertake any obligation to publicly update or review any forward-looking statement, whether as a result of new information, future developments or otherwise. New factors emerge from time to time, and it is not possible for the Company to predict which will arise. In addition, the Company cannot assess the impact of each factor on its business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. Copies of the SEC filings for the Company are available for download free of charge from www.communitybankoftx.com under the Investor Relations tab.

CBTX, INC. AND SUBSIDIARY
Condensed Consolidated Balance Sheets (Unaudited)
(In thousands)
9/30/17 6/30/17 3/31/17 12/31/16 9/30/16
Balance Sheet Data (at period end):
Loans, excluding loans held for sale $2,199,478 $2,192,443 $2,217,656 $2,154,885 $2,169,307
Allowance for loan losses (23,757) (25,187) (25,881) (25,006) (27,096)
Loans, net 2,175,721 2,167,256 2,191,775 2,129,879 2,142,211
Cash and due from banks 54,117 58,124 52,669 53,000 54,524
Interest‑bearing deposits at other financial institutions 294,461 249,049 219,686 329,103 324,768
Total cash and cash Equivalents 348,578 307,173 272,355 382,103 379,292
Securities 217,660 220,330 219,978 205,978 179,701
Premises and equipment, net 54,129 56,609 55,986 57,514 60,416
Goodwill 80,950 80,950 80,950 80,950 80,950
Other intangible assets, net 7,031 7,298 7,513 7,791 8,074
Repossessed real estate and other assets 1,136 1,435 1,179 1,861 2,530
Loans held for sale 466 559 675 613 727
Other assets 104,167 99,267 84,137 84,833 82,721
Total Assets $2,989,838 $2,940,877 $2,914,548 $2,951,522 $2,936,622
Noninterest‑bearing deposits $1,051,755 $1,030,865 $993,839 $1,025,425 $1,025,429
Interest‑bearing deposits 1,502,872 1,485,919 1,504,606 1,515,335 1,503,802
Total deposits 2,554,627 2,516,784 2,498,445 2,540,760 2,529,231
Note payable 24,357 25,464 26,571 27,679 28,786
Repurchase agreements 2,239 2,179 2,464 2,343 1,583
Junior subordinated debt 6,726 6,726 6,726 6,726 6,726
Other liabilities 20,768 17,760 16,699 16,377 17,778
Total Liabilities 2,608,717 2,568,913 2,550,905 2,593,885 2,584,104
Shareholders’ Equity 381,121 371,964 363,643 357,637 352,518
Total Liabilities and Shareholders’ Equity $2,989,838 $2,940,877 $2,914,548 $2,951,522 $2,936,622


CBTX, INC. AND SUBSIDIARY
Condensed Consolidated Statements of Income (Unaudited)
(In thousands)
For the Three Months Ended Year-to-Date
9/30/17 6/30/17 3/31/17 12/31/16 9/30/16 9/30/17 9/30/16
INTEREST INCOME
Interest and fees on loans $27,129 $26,560 $25,953 $26,298 $26,121 $79,642 $77,425
Securities 1,334 1,353 1,303 1,055 973 3,990 2,746
Federal Funds and interest‑bearing deposits 1,106 813 742 658 601 2,661 1,769
Total Interest Income 29,569 28,726 27,998 28,011 27,695 86,293 81,940
INTEREST EXPENSE
Deposits 1,964 1,857 1,838 1,914 1,851 5,659 5,159
Repurchase agreements 2 1 2 2 - 5 3
Note payable 269 264 251 256 260 784 805
Junior subordinated debt 83 79 74 72 67 236 194
Total Interest Expense 2,318 2,201 2,165 2,244 2,178 6,684 6,161
NET INTEREST INCOME 27,251 26,525 25,833 25,767 25,517 79,609 75,779
PROVISION (RECAPTURE) FOR LOAN LOSS (1,654) (694) 960 650 1,225 (1,388) 3,925
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSS 28,905 27,219 24,873 25,117 24,292 80,997 71,854
NONINTEREST INCOME
Deposit account service charges 1,395 1,517 1,500 1,591 1,695 4,412 4,947
Net gain on sale of assets 828 339 364 1,282 107 1,531 640
Card interchange fees 803 877 832 830 837 2,512 2,522
Earnings on bank‑owned life insurance 459 335 326 276 339 1,120 1,016
Other 601 458 426 421 573 1,485 2,224
Total Noninterest Income 4,086 3,526 3,448 4,400 3,551 11,060 11,349
NONINTEREST EXPENSE
Salaries and employee benefits 11,829 11,299 11,424 11,181 10,997 34,552 33,058
Net occupancy expense 2,221 2,351 2,233 2,448 2,322 6,805 7,652
Regulatory fees 458 621 610 606 546 1,689 1,694
Data processing 662 651 642 623 621 1,955 1,861
Printing, stationery and office 348 370 347 444 395 1,065 1,094
Amortization of intangibles 267 271 278 283 290 816 884
Professional and director fees 606 706 625 680 615 1,937 1,801
Correspondent bank and customer related transaction expenses 67 78 74 77 82 219 243
Loan processing costs 115 133 72 192 77 320 317
Advertising, marketing and business development 266 508 179 219 173 953 570
Repossessed real estate and other asset expense 340 85 118 99 98 543 219
Security and protection expense 331 352 372 363 473 1,055 1,355
Other expenses 1,507 1,434 1,453 1,423 1,341 4,394 4,116
Total Noninterest Expense 19,017 18,859 18,427 18,638 18,030 56,303 54,864
NET INCOME BEFORE INCOME TAX EXPENSE 13,974 11,886 9,894 10,879 9,813 35,754 28,339
INCOME TAX EXPENSE 3,927 3,181 3,032 3,322 3,032 10,140 8,688
NET INCOME $10,047 $8,705 $6,862 $7,557 $6,781 $25,614 $19,651


CBTX, INC. AND SUBSIDIARY
Financial Highlights (Unaudited)
(In thousands, except per share data and percentages)
At or for the Three Months Ended Year-to-Date
9/30/17 6/30/17 3/31/17 12/31/16 9/30/16 9/30/17 9/30/16
Profitability:
Net income $10,047 $8,705 $6.862 $7,557 $6,781 $25,614 $19,651
Basic earnings per share $0.46 $0.39 $0.31 $0.34 $0.31 $1.16 $0.89
Diluted earnings per share $0.45 $0.39 $0.31 $0.34 $0.31 $1.16 $0.88
Return on average assets (1) 1.34% 1.20% 0.95% 1.02% 0.93% 1.17% 0.92%
Return on average shareholders’ Equity(1) 10.54% 9.46% 7.73% 8.47% 7.72% 9.25% 7.56%
Net interest margin – tax equivalent(1) 4.07% 4.08% 4.02% 3.87% 3.92% 4.05% 3.99%
Efficiency ratio(2) 60.69% 62.76% 62.93% 61.78% 62.03% 62.10% 62.97%
Liquidity and Capital Ratios:
Total shareholders’ equity to total assets 12.75% 12.65% 12.48% 12.12% 12.00% 12.75% 12.00%
Tangible equity to tangible assets(3) 10.10% 9.95% 9.74% 9.39% 9.25% 10.10% 9.25%
Common equity tier 1 capital Ratio 12.87% 12.00% 11.32% 11.52% 11.03% 12.87% 11.03%
Tier 1 leverage ratio 11.01% 10.39% 10.10% 9.78% 9.68% 11.01% 9.68%
Tier 1 risk‑based capital ratio 13.13% 12.26% 11.58% 11.78% 11.30% 13.13% 11.30%
Total risk‑based capital ratio 14.13% 13.33% 12.64% 12.85% 12.45% 14.13% 12.45%
Other Data:
Weighted average basic shares outstanding 22,063 22,062 22,062 21,933 21,871 22,062 22,067
Weighted average diluted shares outstanding 22,138 22,148 22,162 22,007 21,993 22,144 22,205
Common shares outstanding at period end 22,063 22,063 22,062 22,062 21,870 22,063 21,870
Dividends per share $0.05 $0.05 $0.05 $0.05 $0.05 $0.15 $0.15
Book value per share $17.27 $16.86 $16.48 $16.21 $16.12 $17.27 $16.12
Tangible book value per share(3) $13.29 $12.86 $12.47 $12.19 $12.05 $13.29 $12.05
Employees – full-time equivalent 464 472 479 479 475 464 475

(1) Annualized.
(2) Efficiency ratio represents noninterest expense divided by the sum of net interest income and noninterest income.
(3) Non‑GAAP financial measure. See the table captioned “Non‑GAAP to GAAP Reconciliation.”

CBTX, INC. AND SUBSIDIARY
Net Interest Margin (Unaudited)
(In thousands, except percentages)
For the Three Months Ended
9/30/17 6/30/17 9/30/16
(Dollars in thousands) Average
Outstanding
Balance
Interest
Earned/
Interest
Paid
Average
Yield/
Rate
(1)
Average
Outstanding
Balance
Interest
Earned/
Interest
Paid
Average
Yield/
Rate
(1)
Average
Outstanding
Balance
Interest
Earned/
Interest
Paid
Average
Yield/
Rate
(1)
Assets
Interest‑earnings assets:
Total loans(2) $2,191,016 $27,129 4.91%$2,203,145 $26,560 4.84%$2,149,917 $26,121 4.83%
Securities (available for sale and held to maturity) 223,132 1,334 2.37% 220,903 1,353 2.46% 176,699 973 2.19%
Federal funds sold and other interest‑earning assets 284,334 927 1.29% 228,393 637 1.12% 309,939 431 0.55%
Nonmarketable equity securities 14,695 179 4.83% 14,691 176 4.81% 14,682 170 4.61%
Total interest‑earning assets 2,713,177 $29,569 4.32% 2,667,132 $28,726 4.32% 2,651,237 $27,695 4.16%
Allowance for loan losses (25,316) (26,439) (26,957)
Noninterest‑earnings assets 290,767 274,421 278,623
Total assets $2,978,628 $2,915,114 $2,902,903
Liabilities and Shareholders’ Equity
Interest‑bearing liabilities:
Interest‑bearing deposits $1,501,732 $1,964 0.52%$1,478,578 $1,857 0.50%$1,473,177 $1,851 0.50%
Repurchase agreements 2,404 2 0.33% 2,356 1 0.17% 1,478 %
Note payable 24,742 269 4.31% 25,841 264 4.10% 29,171 260 3.55%
Junior subordinated debt 10,826 83 3.04% 10,826 79 2.93% 10,826 67 2.46%
Total interest‑bearing liabilities 1,539,704 $2,318 0.60% 1,517,601 $2,201 0.58% 1,514,652 $2,178 0.57%
Noninterest‑bearing liabilities:
Noninterest‑bearing deposits 1,041,731 1,010,824 1,020,446
Other liabilities 18,844 17,564 18,559
Total noninterest‑bearing liabilities 1,060,575 1,028,388 1,039,005
Shareholders’ equity 378,349 369,125 349,246
Total liabilities and shareholders’ equity $2,978,628 $2,915,114 $2,902,903
Net interest income $27,251 $26,525 $25,517
Net interest rate spread(3) 3.73% 3.74% 3.58%
Net interest margin(4) 3.98% 3.99% 3.83%
Net interest margin—tax equivalent(5) 4.07% 4.08% 3.92%

(1) Annualized.
(2) Includes average outstanding balances of loans held for sale of $1.0 million, $770 thousand and $1.0 million for the three months ended September 30, 2017, June 30, 2017 and September 30, 2016, respectively.
(3) Net interest spread is the average yield on interest‑earning assets minus the average rate on interest‑bearing liabilities.
(4) Net interest margin is equal to net interest income divided by average interest‑earning assets.
(5) To make pre‑tax income and resultant yields on tax‑exempt investments and loans comparable to those on taxable investments and loans, a tax equivalent adjustment of $1.1 million, $585 thousand and $1.1 million for the three months ended September 30, 2017, June 30, 2017 and September 30, 2016, respectively, has been computed using a federal income tax rate of 35%.

CBTX, INC. AND SUBSIDIARY
Net Interest Margin (Unaudited)
(In thousands, except percentages)
For the Nine Months Ended September 30,
2017 2016
(Dollars in thousands) Average
Outstanding
Balance
Interest
Earned/
Interest
Paid
Average
Yield/
Rate
(1)
Average
Outstanding
Balance
Interest
Earned/
Interest
Paid
Average
Yield/
Rate
(1)
Assets
Interest‑earnings assets:
Total loans(2) $2,190,975 $79,642 4.86%$2,127,840 $77,425 4.86%
Securities (available for sale and held to maturity) 220,396 3,990 2.42% 161,643 2,746 2.27%
Federal funds sold and other interest‑earning assets 257,628 2,110 1.10% 297,283 1,239 0.56%
Nonmarketable equity securities 14,690 551 5.01% 14,684 530 4.82%
Total interest‑earning assets 2,683,689 $86,293 4.30% 2,601,450 $81,940 4.21%
Allowance for loan losses (25,719) (26,648)
Noninterest‑earnings assets 280,139 278,191
Total assets $2,938,109 $2,852,993
Liabilities and Shareholders’ Equity
Interest‑bearing liabilities:
Interest‑bearing deposits $1,497,845 $5,659 0.51%$1,436,507 $5,159 0.48%
Repurchase agreements 2,409 5 0.28% 1,838 3 0.22%
Note payable 25,841 784 4.06% 30,147 805 3.57%
Junior subordinated debt 10,826 236 2.91% 10,826 194 2.39%
Total interest‑bearing liabilities 1,536,921 $6,684 0.58% 1,479,318 $6,161 0.56%
Noninterest‑bearing liabilities:
Noninterest‑bearing deposits 1,012,952 1,008,665
Other liabilities 18,080 17,850
Total noninterest‑bearing liabilities 1,031,032 1,026,515
Shareholders’ equity 370,156 347,160
Total liabilities and shareholders’ equity $2,938,109 $2,852,993
Net interest income $79,609 $75,779
Net interest spread(3) 3.72% 3.65%
Net interest margin(4) 3.97% 3.89%
Net interest margin—tax equivalent(5) 4.05% 3.99%

(1) Annualized.
(2) Includes average outstanding balances of loans held for sale of $853 thousand and $1.0 million for the nine months ended September 30, 2017 and 2016, respectively.
(3) Net interest spread is the average yield on interest‑earning assets minus the average rate on interest‑bearing liabilities.
(4) Net interest margin is equal to net interest income divided by average interest‑earning assets.
(5) To make pre‑tax income and resultant yields on tax‑exempt investments and loans comparable to those on taxable investments and loans, a tax equivalent adjustment of $1.8 million and $1.8 million for the nine months ended September 30, 2017 and 2016, respectively, has been computed using a federal income tax rate of 35%.

CBTX, INC. AND SUBSIDIARY
Yield Trend (Unaudited)
Three Months Ended
9/30/17 6/30/17 3/31/17 12/31/16 9/30/16
Yield Trend - Annualized:
Interest‑earnings assets:
Total loans 4.91%4.84%4.83%4.80%4.83%
Securities (available for sale and held to maturity) 2.37%2.46%2.43%2.18%2.19%
Federal funds sold and other interest‑earning assets 1.29%1.12%0.87%0.60%0.55%
Nonmarketable equity securities 4.83%4.81%5.33%4.66%4.61%
Total interest‑earning assets 4.32%4.32%4.26%4.11%4.16%
Interest‑bearing liabilities:
Interest‑bearing deposits 0.52%0.50%0.49%0.50%0.50%
Repurchase agreements 0.33%0.17%0.33%0.18%%
Note payable 4.31%4.10%3.78%3.63%3.55%
Junior subordinated debt 3.04%2.93%2.77%2.65%2.46%
Total interest‑bearing liabilities 0.60%0.58%0.57%0.57%0.57%
Net interest spread(1) 3.73%3.74%3.69%3.54%3.58%
Net interest margin(2) 3.98%3.99%3.93%3.78%3.83%
Net interest margin—tax equivalent(3) 4.07%4.08%4.02%3.87%3.92%

(1) Net interest spread is the average yield on interest‑earning assets minus the average rate on interest‑bearing liabilities.
(2) Net interest margin is equal to net interest income divided by average interest‑earning assets.
(3) To make pre‑tax income and resultant yields on tax‑exempt investments and loans comparable to those on taxable investments and loans, a tax equivalent adjustment has been computed using a federal income tax rate of 35%.

CBTX, INC. AND SUBSIDIARY
Average Outstanding Balances (Unaudited)
(In thousands)
Three Months Ended
9/30/17 6/30/17 3/31/17 12/31/16 9/30/16
Average Outstanding Balances:
Interest‑earnings assets:
Total loans(1) $2,191,016 $2,203,145 $2,178,626 $2,179,862 $2,149,917
Securities (available for sale and held to maturity) 223,132 220,903 217,086 192,938 176,699
Federal funds sold and other interest‑earning assets 284,334 228,393 257,152 320,955 309,939
Nonmarketable equity securities 14,695 14,691 14,685 14,683 14,682
Total interest‑earning assets 2,713,177 2,667,132 2,667,549 2,708,438 2,651,237
Allowance for loan losses (25,316) (26,439) (25,419) (27,357) (26,957)
Noninterest‑earnings assets 290,767 274,421 273,437 278,850 278,623
Total assets $2,978,628 $2,915,114 $2,915,567 $2,959,931 $2,902,903
Interest‑bearing liabilities:
Interest‑bearing deposits $1,501,732 $1,478,578 $1,513,348 $1,524,262 $1,473,177
Repurchase agreements 2,404 2,356 2,468 2,155 1,478
Note payable 24,742 25,841 26,965 28,064 29,171
Junior subordinated debt 10,826 10,826 10,826 10,826 10,826
Total interest‑bearing liabilities 1,539,704 1,517,601 1,553,607 1,565,307 1,514,652
Noninterest‑bearing liabilities:
Noninterest‑bearing deposits 1,041,731 1,010,824 985,690 1,015,577 1,020,446
Other liabilities 18,844 17,564 16,421 24,139 18,559
Total noninterest‑bearing liabilities 1,060,575 1,028,388 1,002,111 1,039,716 1,039,005
Shareholders’ equity 378,349 369,125 359,849 354,908 349,246
Total liabilities and shareholders’ equity $2,978,628 $2,915,114 $2,915,567 $2,959,931 $2,902,903

(1) Includes average outstanding balances of loans held for sale.

CBTX, INC. AND SUBSIDIARY
Period End Balances (Unaudited)
(In thousands, except percentages)
9/30/17 6/30/17 3/31/17 12/31/16 9/30/16
Loan Portfolio:
Commercial and industrial $548,870 24.9%$535,116 24.4%$ 524,201 23.6%$ 511,554 23.7%$ 518,138 23.8%
Real estate:
Commercial real estate 689,501 31.3% 690,044 31.4% 723,253 32.5% 697,794 32.3% 692,938 31.9%
Construction and development 424,489 19.3% 433,966 19.8% 522,508 23.5% 491,626 22.8% 486,127 22.3%
1-4 family residential 246,564 11.2% 240,073 10.9% 237,218 10.7% 236,882 11.0% 235,797 10.8%
Multi-family residential 211,219 9.6% 208,222 9.5% 124,246 5.6% 133,210 6.2% 140,403 6.5%
% % %
Consumer 42,772 1.9% 41,130 1.9% 41,326 1.9% 39,694 1.8% 38,682 1.8%
Agriculture 11,424 0.5% 10,650 0.4% 10,217 0.4% 11,106 0.5% 13,994 0.6%
Other 29,684 1.3% 38,237 1.7% 39,869 1.8% 38,180 1.7% 49,113 2.3%
Total gross loans 2,204,523 100.0% 2,197,438 100.0% 2,222,838 100.0% 2,160,046 100.0% 2,175,192 100.0%
Less deferred loan fees and unearned discounts (4,579) (4,436) (4,507) (4,548) (5,158)
Less allowance for loan loss (23,757) (25,187) (25,881) (25,006) (27,096)
Less loans held for sale (466) (559) (675) (613) (727)
Loans, net $2,175,721 $2,167,256 $ 2,191,775 $ 2,129,879 $ 2,142,211
Deposits:
Interest-bearing demand deposits $340,627 13.3%$343,826 13.7% $355,235 14.2%% 359,560 14.2% $315,064 12.5%
Money market accounts 726,903 28.5% 698,546 27.7% 714,863 28.6%% 731,942 28.8% 760,835 30.1%
Savings accounts 88,613 3.5% 88,083 3.5% 88,360 3.5%% 85,927 3.4% 86,219 3.4%
Certificates and other deposits greater than $100,000 179,777 7.0% 182,143 7.2% 171,147 6.9%% 179,621 7.1% 182,193 7.2%
Certificates and other deposits less than $100,000 166,952 6.5% 173,321 6.9% 175,001 7.0%% 158,285 6.2% 159,491 6.3%
Total interest-bearing deposits 1,502,872 58.8% 1,485,919 59.0% 1,504,606 60.2% 1,515,335 59.7% 1,503,802 59.5%
Noninterest- bearing deposits 1,051,755 41.2% 1,030,865 41.0% 993,839 39.8% 1,025,425 40.3% 1,025,429 40.5%
Total deposits $2,554,627 100.0%$2,517,784 100.0% $2,498,445 100.0% $2,540,760 100.0%$ 2,529,231 100.0%


CBTX, INC. AND SUBSIDIARY
Credit Quality (Unaudited)
(In thousands)
9/30/17 6/30/17 3/31/17 12/31/16 9/30/16
Nonaccrual loans (at period end):
Commercial and industrial $2,444 $2,348 $2,040 $2,318 $5,907
Real estate:
Commercial real estate 5,038 4,964 2,317 2,118 3,795
Construction and development 265 362 414 458 565
1-4 family residential 844 578 1,283 1,302 984
Multi-family residential 1 3 5 7 9
Consumer
Agriculture 6 36 93
Other
Total nonaccrual loans $8,592 $8,255 $6,065 $6,239 $11,353
Nonperforming assets (at period end):
Nonaccrual loans $8,592 $8,255 $6,065 $6,239 11,353
Accruing loans 90 or more days past due
Total nonperforming loans 8,592 8,255 6,065 6,239 11,353
Foreclosed assets, including other real estate:
Commercial real estate, construction and development, land and land development 729 1,018 1,179 1,078 1,699
Residential real estate 407 417 29
Other 783 802
Total foreclosed assets 1,136 1,435 1,179 1,861 2,530
Total nonperforming assets $9,728 $9.690 $7,244 $8,100 $13,883
Allowance for Loan Losses (at period end):
Commercial and industrial $7,194 $8,466 $7,746 $6,409 $7,058
Real estate:
Commercial real estate 9,640 10,000 10,507 10,770 7,061
Construction and development 3,364 3,313 4,145 4,598 4,889
1-4 family residential 1,282 1,138 1,111 1,286 2,099
Multi-family residential 1,360 1,341 800 916 955
Consumer 626 599 615 353 348
Agriculture 69 64 63 79 97
Other 222 266 894 595 4,589
Total allowance for loan losses $23,757 $25,187 $25,881 $25,006 $27,096
Credit Quality Ratios (at period end):
Nonperforming assets to total assets 0.33% 0.33% 0.25% 0.27% 0.47%
Nonperforming loans to total loans 0.39% 0.38% 0.27% 0.29% 0.52%
Allowance for loan losses to nonperforming loans 276.50% 305.11% 426.73% 400.80% 238.67%
Allowance for loan losses to total loans 1.08% 1.15% 1.17% 1.16% 1.25%


CBTX, INC. AND SUBSIDIARY
Allowance for Loan Losses (Unaudited)
(In thousands)
For the Three Months Ended Year-to-Date
9/30/17 6/30/17 3/31/17 12/31/16 9/30/16 9/30/17 9/30/16
Analysis of Allowance for Loan Losses:
Allowance for loan losses at beginning of period $25,187 $25,881 $25,006 $27,096 $26,716 $25,006 $25,315
Provision (recapture) for loan losses (1,654) (694) 960 650 1,225 (1,388) 3,925
Net charge-offs (recoveries):
Commercial and industrial (205) (66) 117 2,748 573 (154) 1,126
Real estate:
Commercial real estate (2) (2) (3) (64) (1) (7) 545
Construction and development
1-4 family residential (2) (8) (2) (1) (2) (12) (2)
Multi-family residential
Consumer (4) 90 (27) (2) 2 59 234
Agriculture (11) (6) 273 (17) 241
Other (8) 59 (8)
Total net charge-offs (recoveries) (224) 85 2,740 845 (139) 2,144
Allowance for loan losses at end of period $23,757 $25,187 $25,881 $25,006 $27,096 $23,757 $27,096
Net charge‑offs (recoveries) to average loans - annualized (0.04)% 0.00 % 0.02 % 0.50 % 0.16 % (0.01)% 0.13 %


CBTX, INC. AND SUBSIDIARY
Non‑GAAP to GAAP Reconciliation (Unaudited)
(In thousands, except per share data and percentages)

Our accounting and reporting policies conform to GAAP and the prevailing practices in the banking industry. However, we also evaluate our performance based on certain additional non‑GAAP financial measures. We classify a financial measure as being a non‑GAAP financial measure if that financial measure excludes or includes amounts, or is subject to adjustments that have the effect of excluding or including amounts, that are not included or excluded in the most directly comparable measure calculated and presented in accordance with GAAP as in effect from time to time in the United States in our statements of income, balance sheets or statements of cash flows. Non‑GAAP financial measures do not include operating and other statistical measures or ratios or statistical measures calculated using exclusively financial measures calculated in accordance with GAAP. Non‑GAAP financial measures should not be considered in isolation or as a substitute for the most directly comparable or other financial measures calculated in accordance with GAAP. Moreover, the way we calculate the non‑GAAP financial measures may differ from that of other companies reporting measures with similar names.

We calculate (1) tangible equity as total shareholders’ equity, less goodwill and other intangible assets, net of accumulated amortization, and (2) tangible book value per share as tangible equity divided by shares of common stock outstanding at the end of the relevant period. The most directly comparable GAAP financial measure for tangible book value per share is book value per share. We calculate tangible assets as total assets less goodwill and other intangible assets, net of accumulated amortization. The most directly comparable GAAP financial measure for tangible equity to tangible assets is total shareholders’ equity to total assets. We believe that tangible book value per share and tangible equity to tangible assets are measures that are important to many investors in the marketplace who are interested in book value per share and total shareholders’ equity to total assets, exclusive of change in intangible assets.

The following tables reconcile, as of the dates set forth below, total shareholders’ equity to tangible equity, total assets to tangible assets and presents book value per share, tangible book value per share, tangible equity to tangible assets and shareholders equity to total assets:

9/30/17 6/30/17 3/31/17 12/31/16 9/30/16
Tangible Equity:
Total shareholders’ equity $381,121 $371,964 $363,643 $357,637 $352,518
Adjustments:
Goodwill 80,950 80,950 80,950 80,950 80,950
Other intangibles 7,031 7,298 7,513 7,791 8,074
Tangible equity $293,140 $283,716 $275,180 $268,896 $263,494
Tangible Assets:
Total assets $2,989,838 $2,940,877 $2,914,548 $2,951,522 $2,936,622
Adjustments:
Goodwill 80,950 80,950 80,950 80,950 80,950
Other intangibles 7,031 7,298 7,513 7,791 8,074
Tangible assets $2,901,857 $2,852,629 $2,826,085 $2,862,781 $2,847,598
Common shares outstanding 22,063 22,063 22,062 22,062 21,870
Book value per share $17.27 $16.86 $16.48 $16.21 $16.12
Tangible book value per share $13.29 $12.86 $12.47 $12.19 $12.05
Total shareholders’ equity to total assets 12.75% 12.65% 12.48% 12.12% 12.00%
Tangible equity to tangible assets 10.10% 9.95% 9.74% 9.39% 9.25%

Investor Relations:

James L. Sturgeon
281.325.5013
investors@CBoTX.com

Media Contact:

Ashley Warren
713.210.7622
awarren@CBoTX.com

Source:CommunityBank of Texas, N.A.