CBTX, Inc. Reports Fourth Quarter and Annual Financial Results

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CommunityBank of Texas, N.A.
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HOUSTON, Jan. 27, 2021 (GLOBE NEWSWIRE) -- CBTX, Inc., or the Company (NASDAQ: CBTX), the bank holding company for CommunityBank of Texas, N.A., or the Bank, today announced fourth quarter and annual results for 2020. The Company reported net income of $10.2 million, or $0.41 per diluted share, for the quarter ended December 31, 2020, compared to $6.4 million, or $0.26 per diluted share, for the quarter ended September 30, 2020 and $12.6 million, or $0.50 per diluted share, for the quarter ended December 31, 2019.

The Company reported net income for the year ended December 31, 2020 of $26.4 million, or $1.06 per diluted share, compared to $50.5 million, or $2.02 per diluted share, for the year ended December 31, 2019.

Robert R. Franklin, Jr., Chairman, CEO and President of the Company commented, “Our fourth quarter results serve as evidence of our team’s ongoing efforts to contain the damage the pandemic has caused to our markets. COVID-19 has continued to affect our families, our customers and our way of life.”

Mr. Franklin added, “We enter the new year with optimism but also caution as vaccines are developed and disseminated. We will continue to work to keep our employees safe while working to help our customers through this challenging time.”

Mr. Franklin concluded, “Our markets are resilient, and we see a brighter future ahead. My hope is that as we move through the year, we will begin to see steady improvement as more of our population is immunized and we get back to a more mobile society. We continue to maintain a strong balance sheet and capital position and are well positioned to take advantage of the opportunities that may present themselves this year.”

Highlights

  • Net income increased $3.8 million in the fourth quarter of 2020, compared to the third quarter of 2020 primarily due to a $135,000 credit reserve release, or recapture, in the fourth quarter, compared to a $4.1 million provision for credit losses in the third quarter. Net income decreased $2.4 million during the fourth quarter of 2020, compared to the fourth quarter of 2019, primarily due to a $1.3 million decrease in net interest income and a $1.5 million increase in noninterest expense. Net income decreased $24.1 million for the year ended December 31, 2020, compared to the year ended December 31, 2019, primarily due to an increase of $16.5 million in the provision for credit losses and a $7.4 million decrease in net interest income.

  • The allowance for credit losses, or ACL, for loans decreased to $40.6 million at December 31, 2020, compared to $44.1 million at September 30, 2020, primarily due to a $3.5 million loan charged off. The ACL for loans increased from $25.3 million at December 31, 2019, primarily due to the impact of the COVID-19 pandemic.

  • Maintained a solid net interest margin on a tax equivalent basis of 3.62% and 3.73% for the quarter and year ended December 31, 2020, respectively.

  • Maintained strong capital ratios with the Company’s total risk-based capital ratio being 16.71% at December 31, 2020, compared to 16.67% at September 30, 2020 and 16.41% at December 31, 2019.

Operating Results

Net Interest Income

Net interest income was $32.5 million for the fourth quarter of 2020, compared to $31.7 million for the third quarter of 2020 and $33.8 million for the fourth quarter of 2019. Net interest income increased $812,000 during the fourth quarter of 2020, compared to the third quarter of 2020, primarily due to higher average loans, the impact of one additional day in the fourth quarter of 2020 and lower rates on interest-bearing deposits. Net interest income decreased $1.3 million during the fourth quarter of 2020, compared to the fourth quarter of 2019, primarily due to lower rates on loans and other interest-earning assets, partially offset by the impact of increased average loans and lower rates on deposits.

Net interest income decreased $7.4 million during the year ended December 31, 2020, compared to the year ended December 31, 2019, primarily due to higher average interest-bearing deposits, lower rates on loans, securities and other interest-earning assets, partially offset by the impact of lower rates on deposits and increased average loans and other interest-earning assets.

The yield on interest-earning assets was 3.79% for the fourth quarter of 2020, compared to 3.75% for the third quarter of 2020 and 4.73% for the fourth quarter of 2019. The cost of interest-bearing liabilities was 0.39% for the fourth quarter of 2020, 0.46% for the third quarter of 2020 and 1.11% for the fourth quarter of 2019. The Company’s net interest margin on a tax equivalent basis was 3.62% for the fourth quarter of 2020, compared to 3.55% for the third quarter of 2020 and 4.18% for the fourth quarter of 2019. The increase in the net interest margin for the quarter ended December 31, 2020, was primarily due to a decrease in rates for interest-bearing deposits. The decrease in the net interest margin on a tax equivalent basis for the quarter and year ended December 31, 2020, compared to the quarter and year ended December 31, 2019, was primarily due to a decrease in rates on interest-earning assets, partially offset by an increase in the volume of loans and a decrease in rates on interest-bearing deposits.

The yield on interest-earning assets was 3.98% for the year ended December 31, 2020, compared to 4.95% for the year ended December 31, 2019. The cost of interest-bearing liabilities was 0.57% for the year ended December 31, 2020 and 1.07% for the year ended December 31, 2019. The Company’s net interest margin on a tax equivalent basis was 3.73% for the year ended December 31, 2020, compared to 4.42% for the year ended December 31, 2019. Yields on interest-earning assets decreased and the costs of interest-bearing liabilities did not decrease to the same extent, which caused compression of the Company’s net interest margin on a tax equivalent basis during 2020.

The average yield on loans increased to 4.42% for the quarter ended December 31, 2020, compared to 4.37% for the quarter ended September 30, 2020, while the cost of interest-bearing deposits decreased to 0.35% from 0.42% for the same periods. The cost of total deposits was 0.19% for the quarter ended December 31, 2020 and 0.23% for the quarter ended September 30, 2020.

Provision/Recapture for Credit Losses

The Company had a credit reserve recapture of $135,000 for the fourth quarter of 2020, compared to a provision of $4.1 million for the third quarter of 2020 and a recapture of $148,000 for the fourth quarter of 2019. The recapture in the fourth quarter of 2020 was primarily related to a $364,000 recapture for unfunded commitments, partially offset by a provision of $229,000 for loans. The recapture in the fourth quarter related to unfunded commitments was due to a decrease in the total unfunded commitments from the third to fourth quarter of 2020.

The provision for credit losses was $18.9 million for the year ended December 31, 2020, an increase of $16.5 million compared to the year ended December 31, 2019, primarily due to the impact of the COVID-19 pandemic, the sustained instability of the oil and gas industry, an increase in adversely graded loans and an increase in charge-offs.

The ACL for loans was $40.6 million, or 1.39% of loans excluding loans held for sale, at December 31, 2020, compared to $44.1 million, or 1.49% of loans excluding loans held for sale, at September 30, 2020 and $25.3 million, or 0.96% of loans excluding loans held for sale, at December 31, 2019. The decrease in the ACL from September 30, 2020 to December 31, 2020 was primarily due to a $3.5 million charge-off that was fully reserved for during prior quarters. The increase in the ACL from December 31, 2019 to December 31, 2020 was due to the impact of the COVID-19 pandemic, the sustained instability of the oil and gas industry, an increase in adversely graded loans and an increase in charge-offs. The increase in 2020 was also due to the adoption of Accounting Standards Update, or ASU 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, or CECL, effective January 1, 2020.

The liability associated with the ACL for unfunded commitments was $4.2 million at December 31, 2020, compared to $4.5 million at September 30, 2020 and $378,000 at December 31, 2019. The increase in 2020 was primarily due to the adoption of CECL, effective January 1, 2020, the impact of the COVID-19 pandemic and the sustained instability of the oil and gas industry, as noted above.

Noninterest Income

Noninterest income was $3.5 million for the fourth quarter of 2020, $4.0 million for the third quarter of 2020 and $3.7 million for the fourth quarter of 2019. During the third quarter of 2020, the Company received nontaxable death proceeds of $2.0 million under bank-owned life insurance policies and the Company recorded a gain of $769,000.

Noninterest income was $14.8 million for the year ended December 31, 2020 and $18.6 million for 2019. During 2020, the Company received nontaxable death proceeds mentioned above and recorded a gain of $769,000. During 2019, the Company received nontaxable death proceeds of $4.7 million under bank-owned life insurance policies and the Company recorded a gain of $3.3 million.

Noninterest Expense

Noninterest expense was $23.7 million for the fourth quarter of 2020, compared to $23.9 million for the third quarter of 2020 and $22.1 million for the fourth quarter of 2019. The decrease in noninterest expense of $200,000 between the fourth and third quarter of 2020 was primarily due to a decrease in salaries and employee benefits of $1.5 million, partially offset by a $763,000 increase in professional and director fees, mainly consulting fees related to Bank Secrecy Act/Anti-Money Laundering, or BSA/AML, compliance matters. The increase in noninterest expense of $1.5 million for the fourth quarter of 2020, compared to the fourth quarter of 2019 was primarily due to a $2.0 million increase in professional and director fees and a $664,000 increase in regulatory fees, partially offset by a $1.4 million decrease in salaries and employee benefits. The increase in professional and director fees during the fourth quarter of 2020 was primarily due to $2.4 million in consulting related fees associated with BSA/AML compliance matters, compared to $1.3 million during the third quarter of 2020.

Noninterest expense was $92.1 million for the year ended December 31, 2020, compared to $90.1 million for the year ended December 31, 2019. The increase in noninterest expense of $2.0 million between 2020 and 2019 was primarily due to a $1.3 million increase in professional and director fees and a $660,000 increase in regulatory fees, partially offset by an $807,000 decrease in salaries and employee benefits. The increase in professional and director fees during the year ended December 31, 2020 was primarily due to $3.9 million in consulting related fees associated with BSA/AML compliance matters, compared to $18,000 during the year ended December 31, 2019, partially offset by lower legal fees of $721,000 during the year ended December 31, 2020, compared to $3.7 million during the year ended December 31, 2019.

Income Taxes

Income tax expense was $2.3 million for the fourth quarter of 2020, $1.3 million for the third quarter of 2020 and $2.9 million for the fourth quarter of 2019. The effective tax rates were 18.24% for the fourth quarter of 2020, 17.31% for the third quarter of 2020 and 18.69% for the fourth quarter of 2019. The differences between the federal statutory rate of 21% and the effective tax rates were largely attributable to permanent differences primarily related to tax exempt interest and bank-owned life insurance earnings.

Income tax expense was $6.0 million for 2020 and $11.6 million for 2019. The effective tax rates were 18.63% for 2020 and 18.64% for 2019. The decrease in the effective tax rate for 2020 was primarily due to the nontaxable gain related to the bank-owned life insurance policies noted above.

Balance Sheet Highlights

Loans

Loans, excluding loans held for sale, were $2.9 billion at December 31, 2020, $3.0 billion at September 30, 2020 and $2.6 billion at December 31, 2019. The increase from December 31, 2019 to December 31, 2020 was impacted by the Company’s participation in the Paycheck Protection Program, or PPP, under the Coronavirus Aid, Relief and Economic Security Act, or CARES Act, which facilitates loans to small businesses. PPP loans were $275.4 million at December 31, 2020 and $330.5 million at September 30, 2020. On January 19, 2021, the Company began participating in the next round of PPP financing under the CARES Act, as amended by the Economic Aid to Hard-Hit Small Businesses, Nonprofits and Venues Act (Economic Aid Act).

In support of customers impacted by the COVID-19 pandemic, the Company offered relief through payment deferrals during 2020. The deferral periods range from one to six-months, with the majority of the deferrals involving three-month deferral periods. As of December 31, 2020, the Company had 21 loans subject to such deferral arrangements with total outstanding principal of $38.4 million, down from 41 loans subject to deferral arrangements with total outstanding principal of $82.4 million as of September 30, 2020. Of the 21 loans with deferral arrangements at the end of the fourth quarter, 15 loans totaling $33.0 million were scheduled to return to their original payment schedule in January of 2021.

Loans restructured during 2020 due to borrower financial difficulties, or TDRs, included 34 loans totaling $43.1 million that were subject to COVID-19 related deferral arrangements. At December 31, 2020, 10 of these COVID-19 TDRs with principal balances totaling $22.4 million were still subject to a deferral arrangement.

Asset Quality

Nonperforming assets remain low at $24.0 million, or 0.61% of total assets, at December 31, 2020, $15.6 million, or 0.41% of total assets, at September 30, 2020 and $1.0 million, or 0.03% of total assets, at December 31, 2019. Nonperforming assets increased $8.4 million during the fourth quarter of 2020, primarily due to eight commercial and industrial loans totaling $6.0 million and one commercial real estate loan of $5.9 million being placed on nonaccrual status, partially offset by one loan of $3.5 million charged-off during the fourth quarter.

During the year ended December 31, 2020, the Company restructured 36 loans as TDRs with pre-modification outstanding recorded investments totaling $43.7 million, which remained outstanding at year end. As noted above, 34 of the 36 loans restructured as TDRs were loans subject to COVID-19 related deferral arrangements during 2020.

Annualized net charge-offs to average loans was 0.49% for the fourth quarter of 2020, 0.02% for the third quarter of 2020 and 0.02% for the fourth quarter of 2019. Net charge-offs to average loans was 0.13% for the year ended December 31, 2020 and 0.03% for the year ended December 31, 2019.

Deposits and Borrowings

Total deposits were $3.3 billion at December 31, 2020, $3.2 billion at September 30, 2020 and $2.9 billion at December 31, 2019.

The Company defines total borrowings as the total of repurchase agreements, Federal Home Loan Bank advances and notes payable. Total borrowings were $50.0 million, $52.2 million and $50.5 million at December 31, 2020, September 30, 2020 and December 31, 2019, respectively.

Capital

At December 31, 2020, the Company continued to be well capitalized and maintained strong capital ratios under bank regulatory requirements. The Company’s total risk-based capital ratio was 16.71% at December 31, 2020, compared to 16.67% at September 30, 2020 and 16.41% at December 31, 2019. The Company’s Tier 1 leverage ratio was 12.00% at December 31, 2020, compared to 11.90% at September 30, 2020 and 13.11% at December 31, 2019. The Company’s total shareholders’ equity to total assets ratio was 13.84% at December 31, 2020, 14.18% at September 30, 2020 and 15.40% at December 31, 2019.

The ratio of tangible equity to tangible assets was 11.94% at December 31, 2020, 12.22% at September 30, 2020 and 13.26% at December 31, 2019. Tangible equity to tangible assets is a non-GAAP financial measure. The most directly comparable financial measure calculated in accordance with United States generally accepted accounting principles, or GAAP, to tangible equity to tangible assets is total shareholders’ equity to total assets. See the table captioned “NonGAAP to GAAP Reconciliation” at the end of this earnings release.

Non-GAAP Financial Measures

The Company’s accounting and reporting policies conform to GAAP and the prevailing practices in the banking industry. The Company’s management also evaluates performance based on certain non-GAAP financial measures. The Company classifies 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.

This earnings release contains certain non-GAAP financial measures including “tangible book value,” “tangible book value per common share,” and “tangible equity to tangible assets,” which are supplemental measures that are not required by, or are not presented in accordance with, GAAP. Non-GAAP financial measures do not include operating, other statistical measures or ratios 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.

Please refer to the table titled “Non-GAAP to GAAP Reconciliation” at the end of this earnings release for a reconciliation of these non-GAAP financial measures.

Conference Call Information

The Company will hold a conference call to discuss results for the quarter ended December 31, 2020 on January 28, 2021 at 8:00 a.m. Central Standard Time. Investors and interested parties may listen to the teleconference via telephone by calling (877) 620-1733 if calling from the U.S. or Canada (or (470) 414-9785 if calling from outside the U.S.). The conference call ID number is 9087182. To access the live webcast of the conference call, individuals can visit the Investor Relations page of the Company’s website: https://ir.cbtxinc.com/events-and-presentations. An archived edition of the earnings webcast will also be posted on the Company’s website later that day and will remain available to interested parties via the same link for one year.

The conference call will contain forward-looking statements in addition to statements of historical fact. The actual achievement of any forecasted results or the unfolding of future economic or business developments in a way anticipated or projected by the Company involves numerous risks and uncertainties that may cause the Company’s actual performance to be materially different from that stated or implied in the forward-looking statements. Such risks and uncertainties include, among other things, risks discussed within the “Risk Factors” section of the Company’s most recent Forms 10-Q and 10-K and subsequent 8-Ks.

About CBTX, Inc.

CBTX, Inc. is the bank holding company for CommunityBank of Texas, N.A., a $3.9 billion asset bank, offering commercial banking solutions to small and mid-sized businesses and professionals in Houston, Dallas, Beaumont and surrounding communities in Texas. Visit www.communitybankoftx.com for more information.

Forward-Looking Statements

This earnings 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: manage the economic risks related to the impact of COVID-19 and the sustained instability of the oil and gas industry (including risks related to its customers’ credit quality, deferrals and modifications to loans, the Company’s ability to borrow, and the impact of a resultant recession generally), and other hazards such as natural disasters and adverse weather, acts of war or terrorism, other pandemics, an outbreak of hostilities or other international or domestic calamities and the governmental or military response thereto, and other matters beyond the Company’s control; the geographic concentration of our markets in Beaumont and Houston, Texas; whether the Company can manage changes and the continued health or availability of management personnel; the amount of nonperforming and classified assets that the Company holds and the efforts to resolve the nonperforming assets; deterioration of the Company’s asset quality; interest rate risks associated with the Company’s business; business and economic conditions generally and in the financial services industry, nationally and within the Company’s primary markets; volatility and direction of oil prices, including risks related to the instability of oil prices, and the strength of the energy industry, generally and within Texas; the composition of the Company’s loan portfolio, including the identity of its borrowers and the concentration of loans in specialized industries, especially the creditworthiness of energy company borrowers; changes in the value of collateral securing the loans; the Company’s ability to maintain important deposit customer relationships and the Company’s reputation; the Company’s ability to maintain effective internal control over financial reporting; the Company’s ability to pursue available remedies in the event of a loan default for loans under the PPP and the risk of holding the PPP loans at unfavorable interest rates as compared to the loans to customers that we would have otherwise lent to; the volatility and direction of market interest rates; liquidity risks associated with the Company’s business; systems failures, interruptions or breaches involving the Company’s information technology and telecommunications systems or thirdparty servicers; the failure of certain third-party vendors to perform; the initiation and outcome of litigation and other legal proceedings against the Company or to which it may become subject; operational risks associated with the Company’s business; the costs, effects and results of regulatory examinations, investigations, including the ongoing investigation by the Financial Crimes Enforcement Network, or FinCEN, of the U.S. Department of Treasury, or reviews or the ability to obtain the required regulatory approvals; the Company’s ability to meet the requirements of its Formal Agreement with the Office of the Comptroller of the Currency, and the risk that such Formal Agreement may have a negative impact on the Company’s financial performance and results of operations; changes in the laws, rules, regulations, interpretations or policies relating to financial institution, accounting, tax, trade, monetary and fiscal matters; governmental or regulatory responses to the COVID-19 pandemic and newly enacted fiscal stimulus that impact the Company’s loan portfolio and forbearance practice; and other governmental interventions in the U.S. financial system that may impact how the Company achieves its performance goals. Additionally, many of these risks and uncertainties are currently elevated by and may or will continue to be elevated by the COVID-19 pandemic. The foregoing factors should not be construed as exhaustive and should be read together with the other cautionary statements included in the Company’s Annual Report on Form 10-K, filed with the Securities and Exchange Commission, or SEC, 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 it 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
Financial Highlights
(In thousands, except per share data and percentages)

Three Months Ended

Twelve Months Ended

12/31/2020

9/30/2020

6/30/2020

3/31/2020

12/31/2019

12/31/2020

12/31/2019

Profitability:

Net income

$

10,236

$

6,421

$

2,163

$

7,541

$

12,636

$

26,361

$

50,517

Basic earnings per share

$

0.42

$

0.26

$

0.09

$

0.30

$

0.51

$

1.06

$

2.03

Diluted earnings per share

$

0.41

$

0.26

$

0.09

$

0.30

$

0.50

$

1.06

$

2.02

Return on average assets(1)

1.05

%

0.66

%

0.23

%

0.87

%

1.43

%

0.70

%

1.50

%

Return on average shareholders' equity(1)

7.47

%

4.70

%

1.60

%

5.64

%

9.40

%

4.85

%

9.81

%

Net interest margin - tax equivalent(1)

3.62

%

3.55

%

3.68

%

4.06

%

4.18

%

3.73

%

4.42

%

Efficiency ratio(2)

65.64

%

66.77

%

64.15

%

60.44

%

58.96

%

64.23

%

58.30

%

Liquidity and Capital Ratios:

Total shareholders' equity to total assets

13.84

%

14.18

%

13.77

%

15.67

%

15.40

%

13.84

%

15.40

%

Tangible equity to tangible assets(3)

11.94

%

12.22

%

11.84

%

13.51

%

13.26

%

11.94

%

13.26

%

Common equity tier 1 capital ratio

15.45

%

15.41

%

15.30

%

15.23

%

15.52

%

15.45

%

15.52

%

Tier 1 risk-based capital ratio

15.45

%

15.41

%

15.30

%

15.23

%

15.52

%

15.45

%

15.52

%

Total risk-based capital ratio

16.71

%

16.67

%

16.56

%

16.42

%

16.41

%

16.71

%

16.41

%

Tier 1 leverage ratio

12.00

%

11.90

%

11.96

%

13.18

%

13.11

%

12.00

%

13.11

%

Credit Quality:

Allowance for credit losses for loans to loans excluding loans held for sale

1.39

%

1.49

%

1.35

%

1.17

%

0.96

%

1.39

%

0.96

%

Nonperforming assets to total assets

0.61

%

0.41

%

0.29

%

0.04

%

0.03

%

0.61

%

0.03

%

Nonperforming loans to loans excluding loans held for sale

0.82

%

0.53

%

0.38

%

0.05

%

0.04

%

0.82

%

0.04

%

Net charge-offs (recoveries) to average loans(1)

0.49

%

0.02

%

0.01

%

(0.05

)%

0.02

%

0.13

%

0.03

%

Other Data:

Weighted average common shares outstanding - basic

24,621

24,748

24,752

24,926

24,951

24,761

24,926

Weighted average common shares outstanding - diluted

24,678

24,770

24,780

25,000

25,071

24,803

25,053

Common shares outstanding at period end

24,613

24,713

24,755

24,746

24,980

24,613

24,980

Dividends per share

$

0.10

$

0.10

$

0.10

$

0.10

$

0.10

$

0.40

$

0.40

Book value per share

$

22.20

$

21.89

$

21.71

$

21.70

$

21.45

$

22.20

$

21.45

Tangible book value per share(3)

$

18.74

$

18.44

$

18.26

$

18.23

$

18.01

$

18.74

$

18.01

Employees - full-time equivalents

511

515

523

512

500

511

500

(1) Annualized.
(2) Efficiency ratio represents noninterest expense divided by the sum of net interest income and noninterest income.
(3) NonGAAP financial measure. See the table captioned “NonGAAP to GAAP Reconciliation” at the end of this earnings release.


CBTX, INC. AND SUBSIDIARY
Condensed Consolidated Balance Sheets
(In thousands)

12/31/2020

9/30/2020

6/30/2020

3/31/2020

12/31/2019

Loans, excluding loans held for sale

$

2,924,117

$

2,964,526

$

2,934,888

$

2,671,587

$

2,639,085

Allowance for credit losses for loans

(40,637

)

(44,069

)

(39,678

)

(31,194

)

(25,280

)

Loans, net

2,883,480

2,920,457

2,895,210

2,640,393

2,613,805

Cash and equivalents

538,007

377,572

492,400

284,898

372,064

Securities

237,281

226,101

235,438

234,014

231,262

Premises and equipment

61,152

61,732

50,729

50,243

50,875

Goodwill

80,950

80,950

80,950

80,950

80,950

Other intangible assets

4,171

4,303

4,496

4,700

4,938

Loans held for sale

2,673

1,763

-

882

1,463

Operating lease right-to-use asset

13,285

12,893

14,081

12,577

12,926

Other assets

128,218

128,901

128,421

116,993

110,261

Total assets

$

3,949,217

$

3,814,672

$

3,901,725

$

3,425,650

$

3,478,544

Noninterest-bearing deposits

$

1,476,425

$

1,460,983

$

1,513,748

$

1,195,541

$

1,184,861

Interest-bearing deposits

1,825,369

1,709,681

1,740,455

1,596,692

1,667,527

Total deposits

3,301,794

3,170,664

3,254,203

2,792,233

2,852,388

Federal Home Loan Bank advances

50,000

50,000

50,000

50,000

50,000

Repurchase agreements

-

2,153

2,500

1,415

485

Operating lease liabilities

16,447

15,759

16,983

15,356

15,704

Other liabilities

34,525

35,175

40,683

29,772

24,246

Total liabilities

3,402,766

3,273,751

3,364,369

2,888,776

2,942,823

Total shareholders’ equity

546,451

540,921

537,356

536,874

535,721

Total liabilities and shareholders’ equity

$

3,949,217

$

3,814,672

$

3,901,725

$

3,425,650

$

3,478,544

CBTX, INC. AND SUBSIDIARY
Condensed Consolidated Statements of Income
(In thousands)

Three Months Ended

Twelve Months Ended

12/31/2020

9/30/2020

6/30/2020

3/31/2020

12/31/2019

12/31/2020

12/31/2019

Interest income

Interest and fees on loans

$

32,886

$

32,318

$

32,857

$

33,617

$

35,634

$

131,678

$

141,388

Securities

1,070

1,107

1,228

1,363

1,442

4,768

5,954

Other interest-earning assets

168

176

169

1,055

1,279

1,568

5,333

Equity investments

170

162

171

176

213

679

720

Total interest income

34,294

33,763

34,425

36,211

38,568

138,693

153,395

Interest expense

Deposits

1,549

1,831

2,022

3,766

4,463

9,168

15,999

Federal Home Loan Bank advances

221

221

240

221

316

903

1,386

Repurchase agreements

1

1

3

Note payable and junior subordinated debt

4

3

4

4

3

15

19

Total interest expense

1,774

2,055

2,267

3,991

4,782

10,087

17,407

Net interest income

32,520

31,708

32,158

32,220

33,786

128,606

135,988

Provision (recapture) for credit losses

Provision (recapture) for credit losses for loans

229

4,569

8,537

4,739

(148

)

18,074

2,385

Provision (recapture) for credit losses for unfunded commitments

(364

)

(461

)

1,333

310

818

Total provision (recapture) for credit losses

(135

)

4,108

9,870

5,049

(148

)

18,892

2,385

Net interest income after provision (recapture) for credit losses

32,655

27,600

22,288

27,171

33,934

109,714

133,603

Noninterest income

Deposit account service charges

1,270

1,176

1,095

1,485

1,587

5,026

6,554

Card interchange fees

999

995

915

922

1,007

3,831

3,720

Earnings on bank-owned life insurance

407

1,187

412

416

430

2,422

5,011

Net gain on sales of assets

379

114

139

123

305

755

652

Other

467

551

348

1,381

388

2,747

2,691

Total noninterest income

3,522

4,023

2,909

4,327

3,717

14,781

18,628

Noninterest expense

Salaries and employee benefits

12,848

14,332

14,012

14,223

14,264

55,415

56,222

Occupancy expense

2,628

2,496

2,558

2,424

2,417

10,106

9,506

Professional and director fees

3,209

2,446

1,541

1,152

1,220

8,348

7,048

Data processing and software

1,330

1,525

1,292

1,222

1,074

5,369

4,435

Regulatory fees

748

471

476

103

84

1,798

1,138

Advertising, marketing and business development

438

429

269

364

452

1,500

1,831

Telephone and communications

455

486

392

419

506

1,752

1,774

Security and protection expense

423

299

351

374

364

1,447

1,464

Amortization of intangibles

197

198

230

221

216

846

894

Other expenses

1,382

1,176

1,374

1,587

1,513

5,519

5,831

Total noninterest expense

23,658

23,858

22,495

22,089

22,110

92,100

90,143

Net income before income tax expense

12,519

7,765

2,702

9,409

15,541

32,395

62,088

Income tax expense

2,283

1,344

539

1,868

2,905

6,034

11,571

Net income

$

10,236

$

6,421

$

2,163

$

7,541

$

12,636

$

26,361

$

50,517

CBTX, INC. AND SUBSIDIARY
Net Interest Margin
(In thousands, except percentages)

Three Months Ended

12/31/2020

9/30/2020

12/31/2019

Average

Interest

Average

Average

Interest

Average

Average

Interest

Average

Outstanding

Earned/

Yield/

Outstanding

Earned/

Yield/

Outstanding

Earned/

Yield/

Balance

Interest Paid

Rate(1)

Balance

Interest Paid

Rate(1)

Balance

Interest Paid

Rate(1)

Assets

Interest-earning assets:

Total loans(2)

$

2,961,622

$

32,886

4.42

%

$

2,945,320

$

32,318

4.37

%

$

2,682,842

$

35,634

5.27

%

Securities

236,233

1,070

1.80

%

236,015

1,107

1.87

%

232,441

1,442

2.46

%

Other interest-earning assets

388,936

168

0.17

%

383,626

176

0.18

%

300,395

1,279

1.69

%

Equity investments

15,346

170

4.41

%

15,334

162

4.20

%

16,140

213

5.24

%

Total interest-earning assets

3,602,137

$

34,294

3.79

%

3,580,295

$

33,763

3.75

%

3,231,818

$

38,568

4.73

%

Allowance for credit losses for loans

(44,233

)

(40,135

)

(25,591

)

Noninterest-earning assets

321,303

326,590

298,615

Total assets

$

3,879,207

$

3,866,750

$

3,504,842

Liabilities and Shareholders’ Equity

Interest-bearing liabilities:

Interest-bearing deposits

$

1,744,557

$

1,549

0.35

%

$

1,730,812

$

1,831

0.42

%

$

1,646,883

$

4,463

1.08

%

Federal Home Loan Bank advances

50,163

221

1.76

%

50,000

221

1.76

%

68,913

316

1.82

%

Repurchase agreements

1,426

2,230

423

Note payable and junior subordinated debt

4

3

3

Total interest-bearing liabilities

1,796,146

$

1,774

0.39

%

1,783,042

$

2,055

0.46

%

1,716,219

$

4,782

1.11

%

Noninterest-bearing liabilities:

Noninterest-bearing deposits

1,482,753

1,484,557

1,212,939

Other liabilities

55,174

55,386

42,406

Total noninterest-bearing liabilities

1,537,927

1,539,943

1,255,345

Shareholders’ equity

545,134

543,765

533,278

Total liabilities and shareholders’ equity

$

3,879,207

$

3,866,750

$

3,504,842

Net interest income

$

32,520

$

31,708

$

33,786

Net interest spread(3)

3.40

%

3.29

%

3.62

%

Net interest margin(4)

3.59

%

3.52

%

4.15

%

Net interest margin - tax equivalent(5)

3.62

%

3.55

%

4.18

%

(1) Annualized.
(2) Includes average outstanding balances related to loans held for sale.
(3) Net interest spread is the average yield on interestearning assets minus the average rate on interestbearing liabilities.
(4) Net interest margin is equal to net interest income divided by average interestearning assets.
(5) Tax equivalent adjustments of $287,000, $258,000 and $251,000 for the quarters ended December 31, 2020, September 30, 2020 and December 31, 2019, respectively, were computed using a federal income tax rate of 21%.

CBTX, INC. AND SUBSIDIARY
Year to Date Net Interest Margin
(In thousands, except percentages)

Years Ended December 31,

2020

2019

Average

Interest

Average

Average

Interest

Average

Outstanding

Earned/

Yield/

Outstanding

Earned/

Yield/

(Dollars in thousands)

Balance

Interest Paid

Rate

Balance

Interest Paid

Rate

Assets

Interest-earning assets:

Total loans(1)

$

2,862,911

$

131,678

4.60

%

$

2,608,505

$

141,388

5.42

%

Securities

236,625

4,768

2.02

%

233,543

5,954

2.55

%

Other interest-earning assets

366,628

1,568

0.43

%

243,349

5,333

2.19

%

Equity investments

14,874

679

4.57

%

14,852

720

4.85

%

Total interest-earning assets

3,481,038

$

138,693

3.98

%

3,100,249

$

153,395

4.95

%

Allowance for credit losses for loans

(35,448

)

(24,971

)

Noninterest-earning assets

312,672

299,387

Total assets

$

3,758,262

$

3,374,665

Liabilities and Shareholders’ Equity

Interest-bearing liabilities:

Interest-bearing deposits

$

1,703,543

$

9,168

0.54

%

$

1,566,038

$

15,999

1.02

%

Federal Home Loan Bank advances

55,205

903

1.64

%

61,589

1,386

2.25

%

Repurchase agreements

1,631

1

0.06

%

1,046

3

0.29

%

Note payable and junior subordinated debt

15

19

Total interest-bearing liabilities

1,760,379

$

10,087

0.57

%

1,628,673

$

17,407

1.07

%

Noninterest-bearing liabilities:

Noninterest-bearing deposits

1,404,027

1,193,527

Other liabilities

50,464

37,458

Total noninterest-bearing liabilities

1,454,491

1,230,985

Shareholders’ equity

543,392

515,007

Total liabilities and shareholders’ equity

$

3,758,262

$

3,374,665

Net interest income

$

128,606

$

135,988

Net interest spread(2)

3.41

%

3.88

%

Net interest margin(3)

3.69

%

4.39

%

Net interest margin - tax equivalent(4)

3.73

%

4.42

%

(1) Annualized.
(2) Includes average outstanding balances related to loans held for sale.
(3) Net interest spread is the average yield on interestearning assets minus the average rate on interestbearing liabilities.
(4) Net interest margin is equal to net interest income divided by average interestearning assets.
(5) Tax equivalent adjustments of $1.1 million and $1.0 million for the years ended December 31, 2020 and 2019, respectively, were computed using a federal income tax rate of 21%.

CBTX, INC. AND SUBSIDIARY
Rate/Volume Analysis
(In thousands)

Three Months Ended December 31, 2020,

Compared to Three Months Ended September 30, 2020

Increase (Decrease) due to

(Dollars in thousands)

Rate

Volume

Days

Total

Interest-earning assets:

Total loans

$

38

$

177

$

353

$

568

Securities

(50

)

1

12

(37

)

Other interest-earning assets

(12

)

2

2

(8

)

Equity investments

6

2

8

Total increase (decrease) in interest income

(18

)

180

369

531

Interest-bearing liabilities:

Interest-bearing deposits

(316

)

14

20

(282

)

Federal Home Loan Bank advances

(3

)

1

2

Repurchase agreements

Note payable and junior subordinated debt

1

1

Total increase (decrease) in interest expense

(318

)

15

22

(281

)

Increase (decrease) in net interest income

$

300

$

165

$

347

$

812


Three Months Ended December 31, 2020,

Compared to Three Months Ended December 31, 2019

Increase (Decrease) due to

(Dollars in thousands)

Rate

Volume

Days

Total

Interest-earning assets:

Total loans

$

(6,451

)

$

3,703

$

$

(2,748

)

Securities

(396

)

24

(372

)

Other interest-earning assets

(1,488

)

377

(1,111

)

Equity investments

(33

)

(10

)

(43

)

Total increase (decrease) in interest income

(8,368

)

4,094

(4,274

)

Interest-bearing liabilities:

Interest-bearing deposits

(3,180

)

266

(2,914

)

Federal Home Loan Bank advances

(9

)

(86

)

(95

)

Repurchase agreements

(1

)

(1

)

Note payable and junior subordinated debt

1

1

Total increase (decrease) in interest expense

(3,188

)

179

(3,009

)

Increase (decrease) in net interest income

$

(5,180

)

$

3,915

$

$

(1,265

)


Year Ended December 31, 2020,

Compared to Year Ended December 31, 2019

Increase (Decrease) due to

(Dollars in thousands)

Rate

Volume

Days

Total

Interest-earning assets:

Total loans

$

(23,886

)

$

13,789

$

387

$

(9,710

)

Securities

(1,281

)

79

16

(1,186

)

Other interest-earning assets

(6,480

)

2,700

15

(3,765

)

Equity investments

(44

)

1

2

(41

)

Total increase (decrease) in interest income

(31,691

)

16,569

420

(14,702

)

Interest-bearing liabilities:

Interest-bearing deposits

(8,278

)

1,403

44

(6,831

)

Federal Home Loan Bank advances

(343

)

(144

)

4

(483

)

Repurchase agreements

(4

)

2

(2

)

Note payable and junior subordinated debt

(4

)

(4

)

Total increase (decrease) in interest expense

(8,629

)

1,261

48

(7,320

)

Increase (decrease) in net interest income

$

(23,062

)

$

15,308

$

372

$

(7,382

)

CBTX, INC. AND SUBSIDIARY
Yield Trend(1)

Three Months Ended

12/31/2020

9/30/2020

6/30/2020

3/31/2020

12/31/2019

Interest-earning assets:

Total loans

4.42

%

4.37

%

4.54

%

5.13

%

5.27

%

Securities

1.80

%

1.87

%

2.05

%

2.34

%

2.46

%

Other interest-earning assets

0.17

%

0.18

%

0.18

%

1.35

%

1.69

%

Equity investments

4.41

%

4.20

%

4.54

%

5.18

%

5.24

%

Total interest-earning assets

3.79

%

3.75

%

3.91

%

4.56

%

4.73

%

Interest-bearing liabilities:

Interest-bearing deposits

0.35

%

0.42

%

0.48

%

0.92

%

1.08

%

Federal Home Loan Bank advances

1.76

%

1.76

%

1.36

%

1.78

%

1.82

%

Repurchase agreements

0.19

%

Note payable and junior subordinated debt

Total interest-bearing liabilities

0.39

%

0.46

%

0.52

%

0.94

%

1.11

%

Net interest spread(2)

3.40

%

3.29

%

3.39

%

3.62

%

3.62

%

Net interest margin(3)

3.59

%

3.52

%

3.65

%

4.05

%

4.15

%

Net interest margin - tax equivalent(4)

3.62

%

3.55

%

3.68

%

4.06

%

4.18

%

(1) Annualized.
(2) Net interest spread is the average yield on interestearning assets minus the average rate on interestbearing liabilities.
(3) Net interest margin is equal to net interest income divided by average interestearning assets.
(4) Tax equivalent adjustments were computed using a federal income tax rate of 21%.

CBTX, INC. AND SUBSIDIARY
Average Outstanding Balances
(In thousands)

Three Months Ended

12/31/2020

9/30/2020

6/30/2020

3/31/2020

12/31/2019

Assets

Interest-earning assets:

Total loans(1)

$

2,961,622

$

2,945,320

$

2,908,204

$

2,634,507

$

2,682,842

Securities

236,233

236,015

240,343

233,917

232,441

Other interest-earning assets

388,936

383,626

378,405

315,099

300,395

Equity investments

15,346

15,334

15,147

13,661

16,140

Total interest-earning assets

3,602,137

3,580,295

3,542,099

3,197,184

3,231,818

Allowance for credit losses for loans

(44,233

)

(40,135

)

(31,443

)

(25,831

)

(25,591

)

Noninterest-earning assets

321,303

326,590

305,821

296,698

298,615

Total assets

$

3,879,207

$

3,866,750

$

3,816,477

$

3,468,051

$

3,504,842

Liabilities and Shareholders’ Equity

Interest-bearing liabilities:

Interest-bearing deposits

$

1,744,557

$

1,730,812

$

1,687,991

$

1,650,064

$

1,646,883

Federal Home Loan Bank advances

50,163

50,000

70,769

50,000

68,913

Repurchase agreements

1,426

2,230

2,101

763

423

Note payable and junior subordinated debt

Total interest-bearing liabilities

1,796,146

1,783,042

1,760,861

1,700,827

1,716,219

Noninterest-bearing liabilities:

Noninterest-bearing deposits

1,482,753

1,484,557

1,462,271

1,184,776

1,212,939

Other liabilities

55,174

55,386

49,958

44,620

42,406

Total noninterest-bearing liabilities

1,537,927

1,539,943

1,512,229

1,229,396

1,255,345

Shareholders’ equity

545,134

543,765

543,387

537,828

533,278

Total liabilities and shareholders’ equity

$

3,879,207

$

3,866,750

$

3,816,477

$

3,468,051

$

3,504,842

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


CBTX, INC. AND SUBSIDIARY
Loans and Deposits Period End Balances
(In thousands, except percentages)

12/31/2020

9/30/2020

6/30/2020

3/31/2020

12/31/2019

Amount

%

Amount

%

Amount

%

Amount

%

Amount

%

Loan Portfolio:

Commercial and industrial

$

742,957

25.3

%

$

832,686

28.0

%

$

837,667

28.4

%

$

542,650

20.3

%

$

527,607

19.9

%

Real estate:

Commercial real estate

1,041,998

35.5

%

949,933

31.9

%

908,027

30.8

%

904,395

33.8

%

900,746

34.0

%

Construction and development

522,705

17.8

%

506,216

17.0

%

552,879

18.8

%

558,343

20.8

%

527,812

19.9

%

1-4 family residential

239,872

8.2

%

253,868

8.5

%

272,253

9.2

%

276,142

10.3

%

280,192

10.6

%

Multi-family residential

258,346

8.8

%

298,733

10.0

%

255,273

8.7

%

267,152

10.0

%

277,209

10.5

%

Consumer

33,884

1.1

%

35,637

1.2

%

36,338

1.2

%

38,133

1.4

%

36,782

1.4

%

Agriculture

8,670

0.3

%

9,753

0.3

%

7,795

0.3

%

7,520

0.3

%

9,812

0.4

%

Other

88,238

3.0

%

91,501

3.1

%

77,535

2.6

%

84,076

3.1

%

86,513

3.3

%

Gross loans

2,936,670

100.0

%

2,978,327

100.0

%

2,947,767

100.0

%

2,678,411

100.0

%

2,646,673

100.0

%

Less allowance for credit losses

(40,637

)

(44,069

)

(39,678

)

(31,194

)

(25,280

)

Less deferred fees and unearned discount

(9,880

)

(12,038

)

(12,879

)

(5,942

)

(6,125

)

Less loans held for sale

(2,673

)

(1,763

)

(882

)

(1,463

)

Loans, net

$

2,883,480

$

2,920,457

$

2,895,210

$

2,640,393

$

2,613,805

Deposits:

Interest-bearing demand accounts

$

380,175

11.5

%

$

346,406

10.9

%

$

366,281

11.2

%

$

359,943

12.9

%

$

369,744

13.0

%

Money market accounts

1,039,617

31.5

%

916,668

28.9

%

878,006

27.0

%

760,036

27.2

%

805,942

28.3

%

Savings accounts

108,167

3.3

%

103,062

3.3

%

98,485

3.0

%

90,227

3.2

%

92,183

3.2

%

Certificates and other time deposits, $100,000 or greater

152,592

4.6

%

171,854

5.4

%

200,505

6.2

%

212,341

7.6

%

208,018

7.3

%

Certificates and other time deposits, less than $100,000

144,818

4.4

%

171,691

5.4

%

197,178

6.1

%

174,145

6.3

%

191,640

6.7

%

Total interest-bearing deposits

1,825,369

55.3

%

1,709,681

53.9

%

1,740,455

53.5

%

1,596,692

57.2

%

1,667,527

58.5

%

Noninterest-bearing deposits

1,476,425

44.7

%

1,460,983

46.1

%

1,513,748

46.5

%

1,195,541

42.8

%

1,184,861

41.5

%

Total deposits

$

3,301,794

100.0

%

$

3,170,664

100.0

%

$

3,254,203

100.0

%

$

2,792,233

100.0

%

$

2,852,388

100.0

%

CBTX, INC. AND SUBSIDIARY
Credit Quality
(In thousands, except percentages)

12/31/2020

9/30/2020

6/30/2020

3/31/2020

12/31/2019

Nonperforming Assets (at period end):

Nonaccrual loans:

Commercial and industrial

$

12,588

$

6,699

$

5,519

$

449

$

596

Real estate:

Commercial real estate

10,665

4,811

4,811

67

67

Construction and development

238

241

506

519

1-4 family residential

526

325

332

413

314

Multi-family residential

Consumer

Agriculture

Other

3,500

Nonaccrual loans

24,017

15,576

11,168

1,448

977

Accruing loans 90 or more days past due

Total nonperforming loans

24,017

15,576

11,168

1,448

977

Foreclosed assets

Total nonperforming assets

$

24,017

$

15,576

$

11,168

$

1,448

$

977

Allowance for Credit Losses for Loans (at period end):

Commercial and industrial

$

13,035

$

13,347

$

12,108

$

9,535

$

7,671

Real estate:

Commercial real estate

13,798

12,745

12,424

9,576

7,975

Construction and development

6,089

6,334

7,050

5,795

4,446

1-4 family residential

2,578

2,871

3,173

2,430

2,257

Multi-family residential

2,513

3,117

2,880

2,413

1,699

Consumer

440

507

529

477

388

Agriculture

137

164

134

129

74

Other

2,047

4,984

1,380

839

770

Total allowance for credit losses for loans

$

40,637

$

44,069

$

39,678

$

31,194

$

25,280

Credit Quality Ratios (at period end):

Nonperforming assets to total assets

0.61

%

0.41

%

0.29

%

0.04

%

0.03

%

Nonperforming loans to loans excluding loans held for sale

0.82

%

0.53

%

0.38

%

0.05

%

0.04

%

Allowance for credit losses for loans to nonperforming loans

169.20

%

282.93

%

355.28

%

2,154.28

%