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CBTX, Inc. Reports Fourth Quarter Financial Results

HOUSTON, Jan. 31, 2018 (GLOBE NEWSWIRE) -- CBTX, Inc. (the “Company”) (NASDAQ:CBTX), the bank holding company for CommunityBank of Texas N.A., today announced net income of $2.0 million, or $0.08 per diluted share, for the quarter ended December 31, 2017, compared to $7.6 million, or $0.34 per diluted share, for the quarter ended December 31, 2016 and $10.0 million, or $0.45 per diluted share, for the quarter ended September 30, 2017.

The Company reported net income for the year ended December 31, 2017 of $27.6 million, or $1.22 per diluted share, compared to $27.2 million, or $1.22 per diluted share, for the year ended December 31, 2016.

Highlights

  • Net income for the fourth quarter of 2017 included a charge of $3.9 million related to the Tax Cuts and Jobs Act (the "Tax Act") and change of control expenses of $2.5 million ($1.6 million after tax), triggered by our initial public offering.

  • Loan growth, excluding loans held for sale, was 20.2% for the quarter (annualized) and 7.3% for the year.

  • The Company completed its previously announced initial public offering of 2,760,000 shares of its common stock to the public at $26.00 per share for gross proceeds of approximately $71.8 million. Our common stock began trading on the NASDAQ Global Market on November 8, under the ticker symbol "CBTX."

CBTX, Inc. Chairman and Chief Executive Officer Robert R. Franklin Jr. commented, “2017 was an outstanding year for our Company. We reported total assets of $3.1 billion, total loans of $2.3 billion, total deposits of $2.6 billion and net income of $27.6 million, each of which are all-time highs for our Company.”

Operating Results:

Net Interest Income

Net interest income was $28.2 million for the fourth quarter of 2017, compared to $25.8 million for the fourth quarter of 2016 and $27.3 million for the third quarter of 2017. The increase in net interest income in the fourth quarter of 2017 from the fourth quarter of 2016, was due to increased average loans and securities and increased average yields on federal funds sold and other interest-earning assets. The increase in net interest income in the fourth quarter of 2017 from the third quarter of 2017 was due to increased average loans and federal funds sold and other interest-earning assets and the impact of the November repayment of our note payable in the amount of $23.3 million. Net interest income was $107.8 million for the year ended December 31, 2017, compared to $101.5 million for year ended December 31, 2016. The increase in net interest income in 2017, as compared to 2016 was due to increased average loans and securities and increased average yields on federal funds sold and other interest-earning assets.

The average balance of total interest-earning assets was $2.8 billion for the quarter ended December 31, 2017, an increase of $99.1 million, compared to the average balance for the quarter ended December 31, 2016 and $94.3 million, compared to the average balance for the quarter ended September 30, 2017. The increase in the average interest-earnings assets for the quarter ended December 31, 2017, compared to the quarter ended September 30, 2017 is primarily due to increases in average loans and federal funds sold. The increase in the average interest-earnings assets for the quarter ended December 31, 2017, compared to the quarter ended December 31, 2016, is primarily due to increases in average loans and average securities. The average balance of interest-earning assets was $2.7 billion for the year ended December 31, 2017, an increase of $88.8 million, compared to the average for the year ended December 31, 2016. The increase in average interest-earning assets for the year ended December 31, 2017, compared to the year ended December 31, 2016 is primarily due to increases in average loans and average securities, partially offset by a decrease in average federal funds sold.

The yield on interest-earning assets was 4.29% for the fourth quarter of 2017, compared to 4.11% for the fourth quarter of 2016 and 4.32% for the third quarter of 2017. The yield on interest-earning assets was 4.30% for the year ended December 31, 2017, compared to 4.19% for the year ended December 31, 2016. The increase from the prior year is primarily due to an increase in the yield on investments and federal funds sold.

The cost of interest-bearing liabilities, including borrowings, was 0.56% for the fourth quarter of 2017, compared to 0.57% for the fourth quarter of 2016 and 0.60% for the third quarter of 2017. The cost of interest-bearing liabilities, including borrowings, was 0.58% for the year ended December 31, 2017 compared to 0.56% for the year ended December 31, 2016.

The net interest margin was 3.98% for the fourth quarter of 2017 compared to 3.78% for the fourth quarter of 2016 and 3.98% for the third quarter of 2017. The net interest margin was 3.97% for the year ended December 31, 2017 compared to 3.87% for the year ended December 31, 2016.

Provision (Recapture) for Loan Losses

Provision for loan loss was $1.1 million for the fourth quarter of 2017, compared to a provision for the fourth quarter of 2016 of $650,000 and a recapture of $1.7 million for the third quarter of 2017. The recapture in the third quarter of 2017 is primarily the result of pay-offs of certain classified and problem loans, which resulted in a decrease in their related allowance for loan losses. Provision for loan loss was a recapture of $338,000 for the year ended December 31, 2017, compared to a provision of $4.6 million for the year ended December 31, 2016. The recapture in the year ended December 31, 2017 was 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 $24.8 million, or 1.07% of total loans, at December 31, 2017, compared to $25.0 million, or 1.16% of total loans, at December 31, 2016 and $23.8 million, or 1.08% of total loans, at September 30, 2017. The lower balance at September 30, 2017 is primarily the result of the recaptures mentioned above.

Noninterest Income

Noninterest income was $3.1 million for the fourth quarter of 2017, $4.4 million for the fourth quarter of 2016 and $4.1 million for the third quarter of 2017. These fluctuations are primarily due to net gains recorded on sales of assets recorded in the third quarter of 2017 and the fourth quarter of 2016 resulting from sales of branches in those periods. Noninterest income was $14.2 million for the year ended December 31, 2017 and $15.7 million for the year ended December 31, 2016, a decrease of $1.5 million, or 9.8%. This decrease primarily resulted from a decrease in deposit account service charges due to a reduction of non-sufficient and overdraft charges incurred by our deposit customers and a decrease in other income due to income from our SBIC investment in 2016.

Noninterest Expense

Noninterest expense increased $3.3 million during the fourth quarter of 2017, as compared to the fourth quarter of 2016 and increased $3.0 million, as compared to the third quarter of 2017. The increase in noninterest expense compared to the fourth quarter of 2016 and the third quarter of 2017 is due primarily to a $2.5 million charge for change of control payments to certain employees triggered by our initial public offering, which is reflected in salaries and employee benefits and increased professional and director fees. Noninterest expense increased $4.8 million during 2017, as compared to 2016 due to the change of control payments previously mentioned, increased professional and director fees and increased advertising due to our branding campaign in 2017, partially offset by decreased occupancy costs due to sales of branches in 2016 and 2017.

Income Taxes

Income tax expense was $6.3 million for the fourth quarter of 2017, $3.3 million for the fourth quarter of 2016 and $3.9 million for the third quarter of 2017. During the fourth quarter of 2017, we recorded a deferred tax asset impairment of $3.9 million related to the recent Tax Cuts and Jobs Act. Income tax expense was $16.5 million for the year ended December 31, 2017 and $12.0 million for the year ended December 31, 2016, an increase of $4.5 million, due to deferred tax asset impairment previously mentioned above and true-ups and return to provision adjustments booked in 2017.

As a result of the Tax Act passed in December 2017, the Company was required to recalculate its deferred tax assets and deferred tax liabilities to account for the future impact of lower corporate tax rates and lost deductions on these assets and liabilities. The effective tax rate for the fourth quarter of 2017 including the impact of the Tax Act was 76.3% and would have been approximately 29.7% without the impact of the Tax Act. The effective tax rate for 2017 including the impact of the Tax Act was 37.4% and would have been approximately 28.6% without the impact of the Tax Act. The effective tax rates were 30.5% for the fourth quarter of 2016, 28.1% for the third quarter of 2017 and 30.7% for 2016.

Balance Sheet Highlights:

Loans

Loans were $2.3 billion at December 31, 2017, $2.1 billion at December 31, 2016 and $2.2 billion at September 30, 2017. The increases from the prior year and linked quarter are primarily due to organic growth.

Asset Quality

Nonperforming assets were $8.4 million, or 0.27% of total assets, at December 31, 2017, $8.1 million, or 0.27% of total assets, at December 31, 2016 and $9.7 million, or 0.33% of total assets at September 30, 2017.

Nonperforming loans were $7.6 million, or 0.33% of total loans, at December 31, 2017, $6.2 million, or 0.29% of total loans, at December 31, 2016 and $8.6 million, or 0.39% of total loans, at September 30, 2017.

Annualized net charge-offs (recoveries) to average loans were 0.00% for the fourth quarter of 2017 and 0.50% for the fourth quarter of 2016 and (0.04)% for the third quarter of 2017. The recoveries in the third quarter of 2017 are primarily the result of payoffs of certain classified and problem loans.

Deposits and Borrowings

Total deposits were $2.6 billion at December 31, 2017, compared to $2.5 billion at December 31, 2016 and $2.6 billion at September 30, 2017. The increase from the prior year is primarily due to organic growth.

Total borrowings (excluding junior subordinated debentures) were $1.5 million at December 31, 2017, $30.0 million at December 31, 2016 and $26.6 million at September 30, 2017. The decrease in borrowings at December 31, 2017 is due to scheduled payments and our fourth quarter repayment in full of the outstanding balance of our note payable.

On December 13, 2017, we entered into a loan agreement providing for a $30 million revolving line of credit and from that date through December 31, 2017, we made no borrowings under that agreement.

Capital

At December 31, 2017, we were well capitalized under regulatory guidelines. At December 31, 2017, our ratio of total shareholders’ equity to total assets was 14.48% and our tangible equity to total tangible assets was 11.98%. At December 31, 2016, our ratio of total shareholders’ equity to total assets was 12.12% and our tangible equity to total tangible assets was 9.39%. 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 and net proceeds of $64.5 million, which is the primary cause of the increase in these ratios.

About CBTX, Inc.

CBTX, Inc. is the bank holding company for CommunityBank of Texas, N.A., a $3.1 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 subsidiary. 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.communitybanktx.com under the Investor Relations tab.

CBTX, INC. AND SUBSIDIARY
Condensed Consolidated Balance Sheets (Unaudited)
(In thousands)
Balance Sheet Data (at period end): 12/31/2017 9/30/2017 6/30/2017 3/31/2017 12/31/2016
Loans, excluding loans held for sale $ 2,311,544 $ 2,199,478 $ 2,192,443 $ 2,217,656 $ 2,154,885
Allowance for loan losses (24,778) (23,757) (25,187) (25,881) (25,006)
Loans, net 2,286,766 2,175,721 2,167,256 2,191,775 2,129,879
Cash and equivalents 326,199 348,578 307,173 272,355 382,103
Securities 223,208 217,660 220,330 219,978 205,978
Premises and equipment, net 53,607 54,129 56,609 55,986 57,514
Goodwill 80,950 80,950 80,950 80,950 80,950
Other intangible assets, net 6,770 7,031 7,298 7,513 7,791
Repossessed real estate and other assets 705 1,136 1,435 1,179 1,861
Loans held for sale 1,460 466 559 675 613
Other assets 101,418 104,167 99,267 84,137 84,833
Total Assets $ 3,081,083 $ 2,989,838 $ 2,940,877 $ 2,914,548 $ 2,951,522
Noninterest-bearing deposits $ 1,109,789 $ 1,051,755 $ 1,030,865 $ 993,839 $ 1,025,425
Interest-bearing deposits 1,493,183 1,502,872 1,485,919 1,504,606 1,515,335
Total deposits 2,602,972 2,554,627 2,516,784 2,498,445 2,540,760
Note payable - 24,357 25,464 26,571 27,679
Repurchase agreements 1,525 2,239 2,179 2,464 2,343
Junior subordinated debt 6,726 6,726 6,726 6,726 6,726
Other liabilities 23,646 20,768 17,760 16,699 16,377
Total Liabilities 2,634,869 2,608,717 2,568,913 2,550,905 2,593,885
Shareholders' Equity 446,214 381,121 371,964 363,643 357,637
Total Liabilities and Shareholders' Equity $ 3,081,083 $ 2,989,838 $ 2,940,877 $ 2,914,548 $ 2,951,522


CBTX, INC. AND SUBSIDIARY
Condensed Consolidated Statements of Income (Unaudited)
(In thousands)
For the Three Months Ended For the Years Ended
12/31/2017 9/30/2017 6/30/2017 3/31/2017 12/31/2016 12/31/2017 12/31/2016
Interest Income
Interest and fees on loans $ 27,726 $ 27,129 $ 26,560 $ 25,953 $ 26,298 $ 107,368 $ 103,723
Securities 1,357 1,334 1,353 1,303 1,055 5,347 3,801
Federal Funds and interest-bearing deposits 1,283 1,106 813 742 658 3,944 2,427
Total Interest Income 30,366 29,569 28,726 27,998 28,011 116,659 109,951
Interest Expense
Deposits 1,993 1,964 1,857 1,838 1,914 7,652 7,073
Repurchase agreements 2 1 2 2 5 5
Note payable 122 269 264 251 256 906 1,061
Junior subordinated debt 86 83 79 74 72 322 266
Total Interest Expense 2,201 2,318 2,201 2,165 2,244 8,885 8,405
Net Interest Income 28,165 27,251 26,525 25,833 25,767 107,774 101,546
Provision (Recapture) for Loan Losses 1,050 (1,654) (694) 960 650 (338) 4,575
Net Interest Income After Provision (Recapture) for Loan Losses 27,115 28,905 27,219 24,873 25,117 108,112 96,971
Noninterest Income
Deposit account service charges 1,388 1,395 1,517 1,500 1,591 5,800 6,538
Net gain on sale of assets (7) 828 339 364 1,282 1,524 1,922
Card interchange fees 941 803 877 832 830 3,453 3,352
Earnings on bank-owned life insurance 460 459 335 326 340 1,580 1,356
Other 362 601 458 426 357 1,847 2,581
Total Noninterest Income 3,144 4,086 3,526 3,448 4,400 14,204 15,749
Noninterest Expense
Salaries and employee benefits 14,021 11,829 11,299 11,424 11,181 48,573 44,239
Net occupancy expense 2,346 2,221 2,351 2,233 2,448 9,151 10,100
Regulatory fees 487 458 621 610 606 2,176 2,300
Data processing 674 662 651 642 623 2,629 2,484
Printing, stationery and office 415 348 370 347 444 1,480 1,537
Amortization of intangibles 263 267 271 278 283 1,079 1,167
Professional and director fees 1,168 606 706 625 680 3,105 2,481
Correspondent bank and customer related transaction expenses 67 67 78 74 77 286 320
Loan processing costs 141 115 133 72 191 461 509
Advertising, marketing and business development 508 266 508 179 219 1,461 789
Repossessed real estate and other asset expense 66 340 85 118 99 609 318
Security and protection expense 300 331 352 372 363 1,355 1,718
Telephone and communications 344 311 307 354 384 1,316 1,444
Other expenses 1,189 1,196 1,127 1,099 1,040 4,611 4,096
Total Noninterest Expense 21,989 19,017 18,859 18,427 18,638 78,292 73,502
Net Income Before Income Tax Expense 8,270 13,974 11,886 9,894 10,879 44,024 39,218
Income Tax Expense 6,313 3,927 3,181 3,032 3,322 16,453 12,010
Net Income $ 1,957 $ 10,047 $ 8,705 $ 6,862 $ 7,557 $ 27,571 $ 27,208


CBTX, INC. AND SUBSIDIARY
Financial Highlights (Unaudited)
(In thousands, except per share data and percentages)
For the Three Months Ended For the Years Ended
12/31/2017 9/30/2017 6/30/2017 3/31/2017 12/31/2016 12/31/2017 12/31/2016
Profitability:
Net income $ 1,957 $ 10,047 $ 8,705 $ 6,862 $ 7,557 $ 27,571 $ 27,208
Basic earnings per share $ 0.08 $ 0.46 $ 0.39 $ 0.31 $ 0.34 $ 1.23 $ 1.23
Diluted earnings per share $ 0.08 $ 0.45 $ 0.39 $ 0.31 $ 0.34 $ 1.22 $ 1.22
Return on average assets (1) 0.25% 1.34% 1.20% 0.95% 1.02% 0.93% 0.95%
Return on average shareholders' equity (1) 1.83% 10.54% 9.46% 7.73% 8.47% 7.18% 7.79%
Net interest margin- tax equivalent (1) 4.06% 4.07% 4.08% 4.02% 3.87% 4.06% 3.96%
Efficiency ratio (2) 70.23% 60.69% 62.76% 62.93% 61.78% 64.19% 62.66%
Liquidity and Capital Ratios:
Total shareholders' equity to total assets 14.48% 12.75% 12.65% 12.48% 12.12% 14.48% 12.12%
Tangible equity to tangible assets (3) 11.98% 10.10% 9.95% 9.74% 9.39% 11.98% 9.39%
Common equity tier 1 capital ratio 14.19% 12.23% 12.00% 11.32% 11.52% 14.19% 11.52%
Tier 1 leverage ratio 12.30% 10.48% 10.39% 10.10% 9.78% 12.30% 9.78%
Tier 1 risk-based capital ratio 14.44% 12.49% 12.26% 11.58% 11.78% 14.44% 11.78%
Total risk-based capital ratio 15.42% 13.48% 13.33% 12.64% 12.85% 15.42% 12.85%
Other Data:
Weighted average common shares outstanding- Basic 23,629 22,063 22,062 22,062 21,993 22,457 22,049
Weighted average common shares outstanding- Diluted 23,742 22,138 22,148 22,162 22,067 22,573 22,235
Common shares outstanding at period end 24,833 22,063 22,063 22,062 22,062 24,833 22,062
Dividends per share $ 0.05 $ 0.05 $ 0.05 $ 0.05 $ 0.05 $ 0.20 $ 0.20
Book value per share $ 17.97 $ 17.27 $ 16.86 $ 16.48 $ 16.21 $ 17.97 $ 16.21
Tangible book value per share (3) $ 14.44 $ 13.29 $ 12.86 $ 12.47 $ 12.19 $ 14.44 $ 12.19
Employees - full-time equivalents 462 464 472 479 479 462 479
(1) Quarterly ratios are 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
12/31/2017 9/30/2017 12/31/2016
Interest Interest Interest
Average Earned/ Average Average Earned/ Average Average Earned/ Average
Outstanding Interest Yield/ Outstanding Interest Yield/ Outstanding Interest Yield/
Balance Paid Rate (1) Balance Paid Rate (1) Balance Paid Rate (1)
Assets
Interest-earnings assets:
Total loans (2) $ 2,252,735 $ 27,726 4.88% $ 2,191,016 $ 27,129 4.91% $ 2,179,862 $ 26,298 4.80%
Securities (available for sale and held to maturity) 222,602 1,357 2.42% 223,132 1,334 2.37% 192,938 1,055 2.18%
Federal funds sold and other interest-earning assets 317,484 1,093 1.37% 284,334 927 1.29% 320,955 485 0.60%
Nonmarketable equity securities 14,698 190 5.13% 14,695 179 4.83% 14,683 173 4.66%
Total interest-earning assets 2,807,519 $ 30,366 4.29% 2,713,177 $ 29,569 4.32% 2,708,438 $ 28,011 4.11%
Allowance for loan losses (24,127) (25,316) (27,357)
Noninterest-earnings assets 296,108 290,767 278,850
Total assets $ 3,079,500 $ 2,978,628 $ 2,959,931
Liabilities and Shareholders’ Equity
Interest-bearing liabilities:
Interest-bearing deposits $ 1,519,631 $ 1,993 0.52% $ 1,501,732 $ 1,964 0.52% $ 1,524,262 $ 1,914 0.50%
Repurchase agreements 1,793 % 2,404 2 0.33% 2,155 2 0.18%
Note payable 11,252 122 4.30% 24,742 269 4.31% 28,064 256 3.63%
Junior subordinated debt 10,826 86 3.15% 10,826 83 3.04% 10,826 72 2.65%
Total interest-bearing liabilities 1,543,502 $ 2,201 0.56% 1,539,704 $ 2,318 0.60% 1,565,307 $ 2,244 0.57%
Noninterest-bearing liabilities:
Noninterest-bearing deposits 1,087,416 1,041,731 1,015,577
Other liabilities 23,271 18,844 24,139
Total noninterest-bearing liabilities 1,110,687 1,060,575 1,039,716
Shareholders’ equity 425,311 378,349 354,908
Total liabilities and shareholders’ equity $ 3,079,500 $ 2,978,628 $ 2,959,931
Net interest income $ 28,165 $ 27,251 $ 25,767
Net interest spread (3) 3.73% 3.73% 3.54%
Net interest margin (4) 3.98% 3.98% 3.78%
Net interest margin—tax equivalent (5) 4.06% 4.07% 3.87%
(1) Annualized.
(2) Includes average outstanding balances of loans held for sale of $521,000, $1.0 million and $592,000 for the three months ended December 31, 2017, September 30, 2017 and December 31, 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 $549,000, $1.1 million and $605,000 for the three months ended December 31, 2017, September 30, 2017 and December 31, 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 Years Ended December 31,
2017 2016
Interest Interest
Average Earned/ Average Average Earned/ Average
Outstanding Interest Yield/ Outstanding Interest Yield/
(Dollars in thousands) Balance Paid Rate Balance Paid Rate
Assets
Interest-earnings assets:
Total loans (1) $ 2,206,541 $ 107,368 4.87% $ 2,140,917 $ 103,723 4.84%
Securities (available for sale and held to maturity) 220,953 5,347 2.42% 169,509 3,801 2.24%
Federal funds sold and other interest-earning assets 272,715 3,204 1.17% 301,018 1,732 0.58%
Nonmarketable equity securities 14,692 740 5.04% 14,683 695 4.73%
Total interest-earning assets 2,714,901 $ 116,659 4.30% 2,626,127 $ 109,951 4.19%
Allowance for loan losses (25,319) (26,826)
Noninterest-earnings assets 284,165 276,413
Total assets $ 2,973,747 $ 2,875,714
Liabilities and Shareholders’ Equity
Interest-bearing liabilities:
Interest-bearing deposits $ 1,503,350 $ 7,652 0.51% $ 1,458,566 $ 7,073 0.48%
Repurchase agreements 2,254 5 0.27% 1,918 5 0.26%
Note payable 22,164 906 4.09% 29,624 1,061 3.58%
Junior subordinated debt 10,826 322 2.97% 10,826 266 2.46%
Total interest-bearing liabilities 1,538,594 $ 8,885 0.58% 1,500,934 $ 8,405 0.56%
Noninterest-bearing liabilities:
Noninterest-bearing deposits 1,031,707 1,010,403
Other liabilities 19,388 15,270
Total noninterest-bearing liabilities 1,051,095 1,025,673
Shareholders’ equity 384,058 349,107
Total liabilities and shareholders’ equity $ 2,973,747 $ 2,875,714
Net interest income $ 107,774 $ 101,546
Net interest spread (2) 3.72% 3.63%
Net interest margin (3) 3.97% 3.87%
Net interest margin—tax equivalent (4) 4.06% 3.96%
(1) Includes average outstanding balances of loans held for sale of $769,000 and $905,000 for the years ended December 31, 2017 and 2016, respectively.
(2) Net interest spread is the average yield on interest‑earning assets minus the average rate on interest‑bearing liabilities.
(3) Net interest margin is equal to net interest income divided by average interest‑earning assets.
(4) 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 $2.3 million and $2.4 million for the years ended December 31, 2017 and 2016, respectively, has been computed using a federal income tax rate of 35%.


CBTX, INC. AND SUBSIDIARY
Yield Trend (Unaudited)
For the Three Months Ended
12/31/2017 9/30/2017 6/30/2017 3/31/2017 12/31/2016
Yield Trend - Annualized:
Interest-earnings assets:
Total loans 4.88% 4.91% 4.83% 4.83% 4.80%
Securities (available for sale and held to maturity) 2.42% 2.37% 2.45% 2.43% 2.18%
Federal funds sold and other interest-earning assets 1.37% 1.29% 1.12% 0.87% 0.60%
Nonmarketable equity securities 5.13% 4.83% 4.81% 5.33% 4.66%
Total interest-earning assets 4.29% 4.32% 4.32% 4.26% 4.11%
Interest-bearing liabilities:
Interest-bearing deposits 0.52% 0.52% 0.50% 0.49% 0.50%
Repurchase agreements % 0.33% 0.17% 0.33% 0.18%
Note payable 4.30% 4.31% 4.10% 3.78% 3.63%
Junior subordinated debt 3.15% 3.04% 2.93% 2.77% 2.65%
Total interest-bearing liabilities 0.56% 0.60% 0.58% 0.57% 0.57%
Net interest spread (1) 3.73% 3.73% 3.74% 3.69% 3.54%
Net interest margin (2) 3.98% 3.98% 3.99% 3.93% 3.78%
Net interest margin—tax equivalent (3) 4.06% 4.07% 4.08% 4.02% 3.87%
(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)
For the Three Months Ended
12/31/2017 9/30/2017 6/30/2017 3/31/2017 12/31/2016
Average Outstanding Balances:
Assets
Interest-earnings assets:
Total loans (1) $ 2,252,735 $ 2,191,016 $ 2,203,145 $ 2,178,626 $ 2,179,862
Securities (available for sale and held to maturity) 222,602 223,132 220,905 217,086 192,938
Federal funds sold and other interest-earning assets 317,484 284,334 228,393 257,152 320,955
Nonmarketable equity securities 14,698 14,695 14,691 14,685 14,683
Total interest-earning assets 2,807,519 2,713,177 2,667,134 2,667,549 2,708,438
Allowance for loan losses (24,127) (25,316) (26,424) (25,419) (27,357)
Noninterest-earnings assets 296,108 290,767 273,760 273,437 278,850
Total assets $ 3,079,500 $ 2,978,628 $ 2,914,470 $ 2,915,567 $ 2,959,931
Liabilities and Shareholders’ Equity
Interest-bearing liabilities:
Interest-bearing deposits $ 1,519,631 $ 1,501,732 $ 1,478,579 $ 1,513,348 $ 1,524,262
Repurchase agreements 1,793 2,404 2,356 2,468 2,155
Note payable 11,252 24,742 25,841 26,965 28,064
Junior subordinated debt 10,826 10,826 10,826 10,826 10,826
Total interest-bearing liabilities 1,543,502 1,539,704 1,517,602 1,553,607 1,565,307
Noninterest-bearing liabilities:
Noninterest-bearing deposits 1,087,416 1,041,731 1,010,823 985,690 1,015,577
Other liabilities 23,271 18,844 16,910 16,421 24,139
Total noninterest-bearing liabilities 1,110,687 1,060,575 1,027,733 1,002,111 1,039,716
Shareholders’ equity 425,311 378,349 369,135 359,849 354,908
Total liabilities and shareholders’ equity $ 3,079,500 $ 2,978,628 $ 2,914,470 $ 2,915,567 $ 2,959,931
(1) Includes average outstanding balances of loans held for sale.


CBTX, INC. AND SUBSIDIARY
Period End Balances (Unaudited)
(In thousands, except percentages)
12/31/2017 9/30/2017 6/30/2017 3/31/2017 12/31/2016
Amount % Amount % Amount % Amount % Amount %
Loan Portfolio:
Commercial and industrial $ 559,363 24.1% $ 548,870 24.9% $ 535,116 24.4% $ 524,201 23.6% $ 511,554 23.7%
Real estate:
Commercial real estate 738,293 31.9% 689,501 31.3% 690,044 31.4% 723,253 32.5% 697,794 32.3%
Construction and development 449,211 19.4% 424,489 19.3% 433,966 19.8% 522,508 23.5% 491,626 22.8%
1-4 family residential 258,584 11.2% 246,564 11.2% 240,073 10.9% 237,218 10.7% 236,882 11.0%
Multi-family residential 220,305 9.5% 211,219 9.6% 208,222 9.5% 124,246 5.6% 133,210 6.2%
Consumer 40,433 1.7% 42,772 1.9% 41,130 1.9% 41,326 1.9% 39,694 1.8%
Agricultural 11,256 0.5% 11,424 0.5% 10,650 0.4% 10,217 0.4% 11,106 0.5%
Other 40,344 1.7% 29,684 1.3% 38,237 1.7% 39,869 1.8% 38,180 1.7%
Gross loans 2,317,789 100.0% 2,204,523 100.0% 2,197,438 100.0% 2,222,838 100.0% 2,160,046 100.0%
Less deferred fees and unearned discount (4,785) (4,579) (4,436) (4,507) (4,548)
Less allowance for loan losses (24,778) (23,757) (25,187) (25,881) (25,006)
Less loans held for sale (1,460) (466) (559) (675) (613)
Loans, net $ 2,286,766 $ 2,175,721 $ 2,167,256 $ 2,191,775 $ 2,129,879
Deposits:
Interest-bearing demand accounts $ 363,015 14.0% $ 340,627 13.3% $ 343,826 13.7% $ 355,235 14.2% $ 359,560 14.2%
Money market accounts 702,299 27.0% 726,903 28.5% 698,546 27.7% 714,863 28.6% 731,942 28.8%
Savings accounts 95,842 3.7% 88,613 3.5% 88,083 3.5% 88,360 3.5% 85,927 3.4%
Certificates and other time deposits, greater than $100,000 172,469 6.6% 179,777 7.0% 182,143 7.2% 171,147 6.9% 179,621 7.1%
Certificates and other time deposits, less than $100,000 159,558 6.1% 166,952 6.5% 173,321 6.9% 175,001 7.0% 158,285 6.2%
Total interest-bearing deposits 1,493,183 57.4% 1,502,872 58.8% 1,485,919 59.0% 1,504,606 60.2% 1,515,335 59.7%
Noninterest-bearing deposits 1,109,789 42.6% 1,051,755 41.2% 1,030,865 41.0% 993,839 39.8% 1,025,425 40.3%
Total deposits $ 2,602,972 100.0% $ 2,554,627 100.0% $ 2,516,784 100.0% $ 2,498,445 100.0% $ 2,540,760 100.0%


CBTX, INC. AND SUBSIDIARY
Credit Quality (Unaudited)
(In thousands)
12/31/2017 9/30/2017 6/30/2017 3/31/2017 12/31/2016
Nonaccrual loans (at period end):
Commercial and industrial $ 3,280 $ 2,444 $ 2,348 $ 2,040 $ 2,318
Real estate:
Commercial real estate 3,216 5,038 4,964 2,317 2,118
Construction and development 252 265 362 414 458
1-4 family residential 898 844 578 1,283 1,302
Multi-family residential 1 3 5 7
Consumer
Agricultural 6 36
Other
Total nonaccrual loans $ 7,646 $ 8,592 $ 8,255 $ 6,065 $ 6,239
Nonperforming assets (at period end):
Nonaccrual loans $ 7,646 $ 8,592 $ 8,255 $ 6,065 $ 6,239
Accruing loans 90 or more days past due
Total nonperforming loans 7,646 8,592 8,255 6,065 6,239
Foreclosed assets, including other real estate:
Commercial real estate, construction and development, land and land development 298 729 1,018 1,179 1,078
Residential real estate 407 407 417
Other 783
Total foreclosed assets 705 1,136 1,435 1,179 1,861
Total nonperforming assets $ 8,351 $ 9,728 $ 9,690 $ 7,244 $ 8,100
Allowance for Loan Losses (at period end):
Commercial and industrial $ 7,257 $ 7,194 $ 8,466 $ 7,746 $ 6,409
Real estate:
Commercial real estate 10,375 9,640 10,000 10,507 10,770
Construction and development 3,482 3,364 3,313 4,145 4,598
1-4 family residential 1,326 1,282 1,138 1,111 1,286
Multi-family residential 1,419 1,360 1,341 800 916
Consumer 566 626 599 615 353
Agricultural 68 69 64 63 79
Other 285 222 266 894 595
Total allowance for loan losses $ 24,778 $ 23,757 $ 25,187 $ 25,881 $ 25,006
Credit Quality Ratios (at period end):
Nonperforming assets to total assets 0.27% 0.33% 0.33% 0.25% 0.27%
Nonperforming loans to total loans 0.33% 0.39% 0.38% 0.27% 0.29%
Allowance for loan losses to nonperforming loans 324.06% 276.50% 305.11% 426.73% 400.80%
Allowance for loan losses to total loans 1.07% 1.08% 1.15% 1.17% 1.16%


CBTX, INC. AND SUBSIDIARY
Allowance for Loan Losses (Unaudited)
(In thousands)
For the Three Months Ended For the Years Ended
12/31/2017 9/30/2017 6/30/2017 3/31/2017 12/31/2016 12/31/2017 12/31/2016
Analysis of Allowance for Loan Losses
Allowance for loan losses at beginning of period $ 23,757 $ 25,187 $ 25,881 $ 25,006 $ 27,096 $ 25,006 $ 25,315
Provision (recapture) for loan losses 1,050 (1,654) (694) 960 650 (338) 4,575
Net charge-offs (recoveries)
Commercial and industrial (52) (205) (66) 117 2,748 (206) 3,874
Real estate:
Commercial real estate 118 (2) (2) (3) (64) 111 481
Construction and development
1-4 family residential 7 (2) (8) (2) (1) (5) (3)
Multi-family residential
Consumer (9) (4) 90 (27) (2) 50 232
Agricultural (35) (11) (6) (52) 241
Other (8) 59 (8) 59
Total net charge-offs (recoveries) 29 (224) 85 2,740 (110) 4,884
Allowance for loan losses at end of period $ 24,778 $ 23,757 $ 25,187 $ 25,881 $ 25,006 $ 24,778 $ 25,006
Net charge-offs (recoveries) to average loans % (0.04)% % 0.02% 0.50% % 0.23%

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:

12/31/2017 9/30/2017 6/30/2017 3/31/2017 12/31/2016
Tangible Equity
Total shareholders’ equity $ 446,214 $ 381,121 $ 371,964 $ 363,643 $ 357,637
Adjustments:
Goodwill 80,950 80,950 80,950 80,950 80,950
Other intangibles 6,770 7,031 7,298 7,513 7,791
Tangible equity $ 358,494 $ 293,140 $ 283,716 $ 275,180 $ 268,896
Tangible Assets
Total assets $ 3,081,083 $ 2,989,838 $ 2,940,877 $ 2,914,548 $ 2,951,522
Adjustments:
Goodwill 80,950 80,950 80,950 80,950 80,950
Other intangibles 6,770 7,031 7,298 7,513 7,791
Tangible assets $ 2,993,363 $ 2,901,857 $ 2,852,629 $ 2,826,085 $ 2,862,781
Common shares outstanding 24,833 22,063 22,063 22,062 22,062
Book value per share $ 17.97 $ 17.27 $ 16.86 $ 16.48 $ 16.21
Tangible book value per share $ 14.44 $ 13.29 $ 12.86 $ 12.47 $ 12.19
Total shareholders’ equity to total assets 14.48% 12.75% 12.65% 12.48% 12.12%
Tangible equity to tangible assets 11.98% 10.10% 9.95% 9.74% 9.39%

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.

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