CBTX, Inc. Reports Third Quarter Financial Results

CommunityBank of Texas, N.A.
·24 min read

HOUSTON, Oct. 28, 2020 (GLOBE NEWSWIRE) -- CBTX, Inc., or the Company (NASDAQ: CBTX), the bank holding company for CommunityBank of Texas, N.A., or the Bank, today announced net income of $6.4 million, or $0.26 per diluted share, for the quarter ended September 30, 2020, compared to $2.2 million, or $0.09 per diluted share, for the quarter ended June 30, 2020 and $13.1 million, or $0.52 per diluted share, for the quarter ended September 30, 2019.

Robert R. Franklin, Jr., Chairman, CEO and President of the Company remarked, During the third quarter, we continued to work through the impact of the pandemic on our operations and the economy. The quarter provided us more visibility into the relationships that had entered into deferrals and the impact of the shutdown on their businesses. We are pleased that our markets are opening cautiously including the more affected industries such as schools, restaurants and hotels. We believe that the fourth quarter will be one of caution as we begin to see more clearly the longer-term effect of the pandemic.

Mr. Franklin added, As we move through the fourth quarter, we will stay close to our borrowers to understand the stresses they may be experiencing. We will also be watchful around the economic uncertainty that may be created by our contentious political climate and the outcomes of the upcoming elections. We will continue to build reserve as needed and recognize real time our stressed relationships. Although challenges remain, we are using our experiences gained in past difficult times as we seek to identify and address any potential problematic credits through classifications and plans with our customers.

Mr. Franklin continued, Our capital remains strong, we continued our dividend program and we resumed our buyback program during the third quarter. Although we remain watchful, we believe that our experience, relationships and focus will provide us continued opportunities in the fourth quarter and into 2021. We are optimistic about the new year as the world learns to live with COVID-19. Our great bank family has done an excellent job continuing to provide the great service our customers have come to expect throughout the current stresses both at home and at work. It is in times like these that our team shines the brightest.

Highlights

  • Net income was $6.4 million for the third quarter of 2020, an increase of $4.3 million compared to the second quarter of 2020 and a decrease of $6.7 million for the third quarter of 2020 compared to the third quarter of 2019 primarily due to fluctuations in the provision for credit losses.

  • The provision for credit losses was $4.1 million for the third quarter of 2020, compared to $9.9 million for the second quarter of 2020 and $579,000 for the third quarter of 2019. The increase in 2020 was primarily due to the impact of COVID-19 and the sustained instability of the oil and gas industry on current and forecasted economic factors and increased adversely graded loans.

  • The allowance for credit losses, or ACL, for loans increased to $44.1 million at September 30, 2020, compared to $39.7 million at June 30, 2020 and $25.6 million at September 30, 2019.

  • Loans on COVID-19 related deferral arrangements decreased to 41 loans with total principal outstanding of $82.4 million as of September 30, 2020, down from 689 loans with total principal outstanding of $545.0 million as of June 30, 2020. A total of 16 of the 41 loans on deferral arrangements at the end of the third quarter were scheduled to return to payment in October of 2020.

  • Net interest margin on a tax equivalent basis was 3.55% for the quarter ended September 30, 2020, compared to 3.68% for the quarter ended June 30, 2020 and 4.43% for the quarter ended September 30, 2019. 

  • Maintained strong capital ratios with the Companys total risk-based capital ratio being 16.67% at September 30, 2020, compared to 16.56% at June 30, 2020 and 15.88% at September 30, 2019.

Operating Results

Net Interest Income

Net interest income was $31.7 million for the third quarter of 2020, compared to $32.2 million for the second quarter of 2020 and $34.6 million for the third quarter of 2019. Net interest income decreased $450,000 during the third quarter of 2020, compared to the second quarter of 2020, primarily due to lower rates on loans and other securities, partially offset by the impact of increased average loans and lower rates on interest-bearing deposits. Net interest income decreased $2.9 million during the third quarter of 2020, compared to the third quarter of 2019, primarily due to lower rates on loans and other interest-earning assets and higher average interest-bearing deposits, partially offset by the impact of increased average loans and other interest earning-assets and lower rates on interest-bearing deposits.

The yield on interest-earning assets was 3.75% for the third quarter of 2020, compared to 3.91% for the second quarter of 2020 and 4.98% for the third quarter of 2019. The cost of interest-bearing liabilities was 0.46% for the third quarter of 2020, 0.52% for the second quarter of 2020 and 1.12% for the third quarter of 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 Companys net interest margin on a tax equivalent basis to 3.55% for the third quarter of 2020, from 3.68% for the second quarter of 2020 and 4.43% for the third quarter of 2019.

Provision/Recapture for Credit Losses

The provision for credit losses was $4.1 million for the third quarter of 2020, compared to $9.9 million for the second quarter of 2020 and $579,000 for the third quarter of 2019. The increase in the provision for credit losses during 2020 was primarily due to the impact of COVID-19 and the sustained instability of the oil and gas industry during such periods on the local and national economy and on current and forecasted economic factors and an increase in adversely graded loans.

The ACL for loans was $44.1 million, or 1.49% of total loans, at September 30, 2020, compared to $39.7 million, or 1.35% of total loans, at June 30, 2020 and $25.6 million, or 0.96% of total loans, at September 30, 2019. The increase in the ACL for loans was primarily due to the impact of COVID-19 and the sustained instability of the oil and gas industry on current and forecasted economic factors during 2020 and an increase in adversely graded loans.

The liability associated with the ACL for unfunded commitments was $4.5 million at September 30, 2020, compared to $5.0 million at June 30, 2020 and $378,000 at September 30, 2019. The increase in 2020 was primarily due to the adoption of Accounting Standards Update, or ASU 2016-13, Financial InstrumentsCredit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, or CECL, effective January 1, 2020, the impact of COVID-19 and the sustained instability of the oil and gas industry, as noted above.

Noninterest Income

Noninterest income was $4.0 million for the third quarter of 2020, $2.9 million for the second quarter of 2020 and $4.1 million for the third quarter of 2019. The increase in noninterest income during the third quarter of 2020, as compared to the second quarter of 2020 and third quarter of 2019 was primarily due to nontaxable death proceeds of $2.0 million received under bank-owned life insurance policies. The Company recorded a gain of $769,000 over the carrying value during the third quarter of 2020.

Noninterest Expense

Noninterest expense was $23.9 million for the third quarter of 2020, compared to $22.5 million for the second quarter of 2020 and $22.0 million for the third quarter of 2019. The increase in noninterest expense of $1.4 million between the third and second quarter of 2020 was primarily due to increased professional and director fees, mainly consulting fees related to Bank Secrecy Act/Anti-Money Laundering, or BSA/AML, compliance  matters, and increased salaries and employee benefits.

The increase in noninterest expense of $1.8 million between the third quarter of 2020 and the third quarter of 2019 primarily related to an increase in professional and director fees, mainly consulting fees related to BSA/AML matters, increased regulatory fees and increased salaries and employee benefits.

Income Taxes

Income tax expense was $1.3 million for the third quarter of 2020, $539,000 for the second quarter of 2020 and $3.0 million for the third quarter of 2019. The effective tax rates were 17.31% for the third quarter of 2020, 19.95% for the second quarter of 2020 and 18.61% for the third 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.

Balance Sheet Highlights

Loans

Loans, excluding loans held for sale, were $3.0 billion at September 30, 2020, $2.9 billion at June 30, 2020 and $2.7 billion at September 30, 2019.

In support of customers impacted by COVID-19, the Company offered relief through payment deferrals. The deferral periods range from one to six-months, with the majority of the deferrals involving three-month arrangements. As of September 30, 2020, the Company had 41 loans on deferral with total outstanding principal of $82.4 million, down from 689 loans on deferral with total outstanding principal of $545.0 million as of June 30, 2020.

Asset Quality

Nonperforming assets remain low at $15.6 million, or 0.41% of total assets, at September 30, 2020, $11.2 million, or 0.29% of total assets, at June 30, 2020 and $1.1 million, or 0.03% of total assets, at September 30, 2019. The increase in nonperforming assets during the third quarter of 2020 is primarily related to two loans totaling $5.0 million.

During the nine months ended September 30, 2020, 37 loans totaling $36.4 million were restructured as troubled debt restructurings, or TDRs, which include 35 loans totaling $36.0 million that were provided a deferral arrangement as the borrower was impacted by the COVID-19 pandemic and resultant economic circumstances.  As of September 30, 2020, eight of these 35 TDRs were still on a deferral arrangement and had principal balances totaling $14.4 million.

Annualized net charge-offs to average loans were 0.02% for the third quarter of 2020, 0.01% for the second quarter of 2020 and 0.05% for the third quarter of 2019.

Deposits and Borrowings

Total deposits were $3.2 billion at September 30, 2020, $3.3 billion at June 30, 2020 and $2.7 billion at September 30, 2019.

The Company defines total borrowings as the total of repurchase agreements, Federal Home Loan Bank advances and notes payable. Total borrowings were $52.2 million, $52.5 million and $121.2 million at September 30, 2020, June 30, 2020 and September 30, 2019, respectively. Borrowings fluctuated between the third quarter of 2020 and third quarter of 2019 due to increased Federal Home Loan Bank advances to fund loan growth in 2019.

Capital

At September 30, 2020, the Company continued to be well capitalized and maintained strong capital ratios under bank regulatory requirements. The Companys total risk-based capital ratio was 16.67% at September 30, 2020, compared to 16.56% at June 30, 2020, and 15.88% at September 30, 2019. The Companys Tier 1 leverage ratio was 11.90% at September 30, 2020, compared to 11.96% at June 30, 2020, and 13.23% at September 30, 2019. The Companys total shareholders equity to total assets ratio was 14.18% at September 30, 2020, 13.77% at June 30, 2020 and 15.31% at September 30, 2019.

The ratio of tangible equity to tangible assets was 12.22% at September 30, 2020, 11.84% at June 30, 2020 and 13.13% at September 30, 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 press release.

Non-GAAP Financial Measures

The Companys accounting and reporting policies conform to GAAP and the prevailing practices in the banking industry. The Companys 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 press 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 September 30, 2020 on October 29, 2020 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 Companys website: https://ir.cbtxinc.com/events-and-presentations. An archived edition of the earnings webcast will also be posted on the Companys 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 Companys 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 Companys 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 $3.8 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 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 Companys 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 Companys 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 Companys 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 its asset quality; interest rate risks associated with the Companys business; business and economic conditions generally and in the financial services industry, nationally and within the Companys 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 Companys 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 Companys ability to maintain important deposit customer relationships and the Companys reputation; the Companys ability to maintain effective internal control over financial reporting; the Companys 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 Companys business; systems failures, interruptions or breaches involving the Companys information technology and telecommunications systems or thirdparty servicers; the failure of certain third-party vendors to perform; the institution and outcome of litigation and other legal proceedings against the Company or to which it may become subject; operational risks associated with the Companys 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 Companys 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 Companys 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 Companys 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 Companys 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 Companys 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

 

Nine Months Ended

 

    

9/30/2020

    

6/30/2020

    

3/31/2020

    

12/31/2019

    

9/30/2019

    

9/30/2020

 

9/30/2019

Profitability:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

$

 6,421

 

$

 2,163

 

$

 7,541

 

$

 12,636

 

$

 13,076

 

$

 16,125

 

$

 37,881

Basic earnings per share

 

$

 0.26

 

$

 0.09

 

$

 0.30

 

$

 0.51

 

$

 0.52

 

$

 0.65

 

$

 1.52

Diluted earnings per share

 

$

 0.26

 

$

 0.09

 

$

 0.30

 

$

 0.50

 

$

 0.52

 

$

 0.65

 

$

 1.51

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Return on average assets (1)

 

 

0.66%

 

 

0.23%

 

 

0.87%

 

 

1.43%

 

 

1.53%

 

 

0.58%

 

 

1.52%

Return on average shareholders' equity (1)

 

 

4.70%

 

 

1.60%

 

 

5.64%

 

 

9.40%

 

 

9.92%

 

 

3.97%

 

 

9.95%

Net interest margin- tax equivalent (1)

 

 

3.55%

 

 

3.68%

 

 

4.06%

 

 

4.18%

 

 

4.43%

 

 

3.76%

 

 

4.51%

Efficiency ratio (2)

 

 

66.77%

 

 

64.15%

 

 

60.44%

 

 

58.96%

 

 

56.98%

 

 

63.76%

 

 

58.09%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Liquidity and Capital Ratios:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total shareholders' equity to total assets

 

 

14.18%

 

 

13.77%

 

 

15.67%

 

 

15.40%

 

 

15.31%

 

 

14.18%

 

 

15.31%

Tangible equity to tangible assets (3)

 

 

12.22%

 

 

11.84%

 

 

13.51%

 

 

13.26%

 

 

13.13%

 

 

12.22%

 

 

13.13%

Common equity tier 1 capital ratio

 

 

15.41%

 

 

15.30%

 

 

15.23%

 

 

15.52%

 

 

14.99%

 

 

15.41%

 

 

14.99%

Tier 1 risk-based capital ratio

 

 

15.41%

 

 

15.30%

 

 

15.23%

 

 

15.52%

 

 

14.99%

 

 

15.41%

 

 

14.99%

Total risk-based capital ratio

 

 

16.67%

 

 

16.56%

 

 

16.42%

 

 

16.41%

 

 

15.88%

 

 

16.67%

 

 

15.88%

Tier 1 leverage ratio

 

 

11.90%

 

 

11.96%

 

 

13.18%

 

 

13.11%

 

 

13.23%

 

 

11.90%

 

 

13.23%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Credit Quality:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Allowance for credit losses for loans to total loans

 

 

1.49%

 

 

1.35%

 

 

1.17%

 

 

0.96%

 

 

0.96%

 

 

1.49%

 

 

0.96%

Nonperforming assets to total assets

 

 

0.41%

 

 

0.29%

 

 

0.04%

 

 

0.03%

 

 

0.03%

 

 

0.41%

 

 

0.03%

Nonperforming loans to total loans

 

 

0.53%

 

 

0.38%

 

 

0.05%

 

 

0.04%

 

 

0.04%

 

 

0.53%

 

 

0.04%

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

 

 

0.02%

 

 

0.01%

 

 

(0.05%)

 

 

0.02%

 

 

0.05%

 

 

 

 

 

0.03%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other Data:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding - basic

 

 

 24,748

 

 

 24,752

 

 

 24,926

 

 

 24,951

 

 

 24,923

 

 

 24,808

 

 

 24,918

Weighted average common shares outstanding - diluted

 

 

 24,770

 

 

 24,780

 

 

 25,000

 

 

 25,071

 

 

 25,046

 

 

 24,847

 

 

 25,053

Common shares outstanding at period end

 

 

 24,713

 

 

 24,755

 

 

 24,746

 

 

 24,980

 

 

 24,923

 

 

 24,713

 

 

 24,923

Dividends per share

 

$

 0.10

 

$

 0.10

 

$

 0.10

 

$

 0.10

 

$

 0.10

 

$

 0.30

 

$

 0.30

Book value per share

 

$

 21.89

 

$

 21.71

 

$

 21.70

 

$

 21.45

 

$

 21.07

 

$

 21.89

 

$

 21.07

Tangible book value per share (3)

 

$

 18.44

 

$

 18.26

 

$

 18.23

 

$

 18.01

 

$

 17.62

 

$

 18.44

 

$

 17.62

Employees - full-time equivalents

 

 

 515

 

 

 523

 

 

 512

 

 

 500

 

 

 504

 

 

 515

 

 

 504

(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)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance Sheet Data (at period end):

    

9/30/2020

    

6/30/2020

 

3/31/2020

 

12/31/2019

 

9/30/2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loans, excluding loans held for sale

 

$

 2,964,526

 

 

$

 2,934,888

 

 

$

 2,671,587

 

 

$

 2,639,085

 

 

$

 2,676,824

 

Allowance for credit losses for loans

 

 

 (44,069

)

 

 

 (39,678

)

 

 

 (31,194

)

 

 

 (25,280

)

 

 

 (25,576

)

Loans, net

 

 

 2,920,457

 

 

 

 2,895,210

 

 

 

 2,640,393

 

 

 

 2,613,805

 

 

 

 2,651,248

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and equivalents

 

 

 377,572

 

 

 

 492,400

 

 

 

 284,898

 

 

 

 372,064

 

 

 

 289,399

 

Securities

 

 

 226,101

 

 

 

 235,438

 

 

 

 234,014

 

 

 

 231,262

 

 

 

 228,061

 

Premises and equipment

 

 

 61,732

 

 

 

 50,729

 

 

 

 50,243

 

 

 

 50,875

 

 

 

 51,183

 

Goodwill

 

 

 80,950

 

 

 

 80,950

 

 

 

 80,950

 

 

 

 80,950

 

 

 

 80,950

 

Other intangible assets

 

 

 4,303

 

 

 

 4,496

 

 

 

 4,700

 

 

 

 4,938

 

 

 

 5,106

 

Loans held for sale

 

 

 1,763

 

 

 

 -

 

 

 

 882

 

 

 

 1,463

 

 

 

 -

 

Operating lease right-to-use asset

 

 

 12,893

 

 

 

 14,081

 

 

 

 12,577

 

 

 

 12,926

 

 

 

 12,864

 

Other assets

 

 

 128,901

 

 

 

 128,421

 

 

 

 116,993

 

 

 

 110,261

 

 

 

 112,774

 

Total assets

 

$

 3,814,672

 

 

$

 3,901,725

 

 

$

 3,425,650

 

 

$

 3,478,544

 

 

$

 3,431,585

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Noninterest-bearing deposits

 

$

 1,460,983

 

 

$

 1,513,748

 

 

$

 1,195,541

 

 

$

 1,184,861

 

 

$

 1,196,720

 

Interest-bearing deposits

 

 

 1,709,681

 

 

 

 1,740,455

 

 

 

 1,596,692

 

 

 

 1,667,527

 

 

 

 1,547,607

 

Total deposits

 

 

 3,170,664

 

 

 

 3,254,203

 

 

 

 2,792,233

 

 

 

 2,852,388

 

 

 

 2,744,327

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Federal Home Loan Bank advances

 

 

 50,000

 

 

 

 50,000

 

 

 

 50,000

 

 

 

 50,000

 

 

 

 120,000

 

Repurchase agreements

 

 

 2,153

 

 

 

 2,500

 

 

 

 1,415

 

 

 

 485

 

 

 

 1,208

 

Operating lease liabilities

 

 

 15,759

 

 

 

 16,983

 

 

 

 15,356

 

 

 

 15,704

 

 

 

 15,513

 

Other liabilities

 

 

 35,175

 

 

 

 40,683

 

 

 

 29,772

 

 

 

 24,246

 

 

 

 25,317

 

Total liabilities

 

 

 3,273,751

 

 

 

 3,364,369

 

 

 

 2,888,776

 

 

 

 2,942,823

 

 

 

 2,906,365

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total shareholders equity

 

 

 540,921

 

 

 

 537,356

 

 

 

 536,874

 

 

 

 535,721

 

 

 

 525,220

 

Total liabilities and shareholders equity

 

$

 3,814,672

 

 

$

 3,901,725

 

 

$

 3,425,650

 

 

$

 3,478,544

 

 

$

 3,431,585

 


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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

Nine Months Ended

 

    

9/30/2020

    

6/30/2020

    

3/31/2020

    

12/31/2019

    

9/30/2019

    

9/30/2020

    

9/30/2019

Interest income

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

Interest and fees on loans

 

$

 32,318

 

 

$

 32,857

 

$

 33,617

 

$

 35,634

 

 

$

 36,353

 

$

 98,792

 

$

 105,754

Securities

 

 

 1,107

 

 

 

 1,228

 

 

 1,363

 

 

 1,442

 

 

 

 1,436

 

 

 3,698

 

 

 4,512

Other interest-earning assets

 

 

 176

 

 

 

 169

 

 

 1,055

 

 

 1,279

 

 

 

 1,212

 

 

 1,400

 

 

 4,054

Equity investments

 

 

 162

 

 

 

 171

 

 

 176

 

 

 213

 

 

 

 192

 

 

 509

 

 

 507

Total interest income

 

 

 33,763

 

 

 

 34,425

 

 

 36,211

 

 

 38,568

 

 

 

 39,193

 

 

 104,399

 

 

 114,827

Interest expense

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Deposits

 

 

 1,831

 

 

 

 2,022

 

 

 3,766

 

 

 4,463

 

 

 

 4,130

 

 

 7,619

 

 

 11,536

Federal Home Loan Bank advances

 

 

 221

 

 

 

 240

 

 

 221

 

 

 316

 

 

 

 483

 

 

 682

 

 

 1,070

Repurchase agreements

 

 

 

 

 

 

 1

 

 

 

 

 

 

 

 

 

 1

 

 

 1

 

 

 3

Note payable and junior subordinated debt

 

 

 3

 

 

 

 4

 

 

 4

 

 

 3

 

 

 

 4

 

 

 11

 

 

 16

Total interest expense

 

 

 2,055

 

 

 

 2,267

 

 

 3,991

 

 

 4,782

 

 

 

 4,618

 

 

 8,313

 

 

 12,625

Net interest income

 

 

 31,708

 

 

 

 32,158

 

 

 32,220

 

 

 33,786

 

 

 

 34,575

 

 

 96,086

 

 

 102,202

Provision (recapture) for credit losses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Provision (recapture) for credit losses for loans

 

 

 4,569

 

 

 

 8,537

 

 

 4,739

 

 

 (148

)

 

 

 579

 

 

 17,845

 

 

 2,533

Provision (recapture) for credit losses for unfunded commitments

 

 

 (461

)

 

 

 1,333

 

 

 310

 

 

 

 

 

 

 

 

 

 1,182

 

 

 

Total provision (recapture) for credit losses

 

 

 4,108

 

 

 

 9,870

 

 

 5,049

 

 

 (148

)

 

 

 579

 

 

 19,027

 

 

 2,533

Net interest income after provision (recapture) for credit losses

 

 

 27,600

 

 

 

 22,288

 

 

 27,171

 

 

 33,934

 

 

 

 33,996

 

 

 77,059

 

 

 99,669

Noninterest income

 

 

  

 

 

  

 

Deposit account service charges 1,176 1,095 1,485 1,587 1,681 3,756 4,967Card interchange fees 995 915 922 1,007 908 2,832 2,713Earnings on bank-owned life insurance 1,187 412 416 430 430 2,015 4,581Net gain on sales of assets 114 139 123 305 190 376 347Other 551 348 1,381 388 906 2,280 2,303Total noninterest income 4,023 2,909 4,327 3,717 4,115 11,259 14,911Noninterest expense Salaries and employee benefits 14,332 14,012 14,223 14,264 13,951 42,567 41,958Occupancy expense 2,496 2,558 2,424 2,417 2,484 7,478 7,089Professional and director fees 2,446 1,541 1,152 1,220 1,455 5,139 5,828Data processing and software 1,525 1,292 1,222 1,074 1,121 4,039 3,361Regulatory fees 471 476 103 84 144 1,050 1,054Advertising, marketing and business development 429 269 364 452 407 1,062 1,379Telephone and communications 486 392 419 506 434 1,297 1,268Security and protection expense 299 351 374 364 410 1,024 1,100Amortization of intangibles 198 230 221 216 221 649 678Other expenses 1,176 1,374 1,587 1,513 1,418 4,137 4,318Total noninterest expense 23,858 22,495 22,089 22,110 22,045 68,442 68,033Net income before income tax expense 7,765 2,702 9,409 15,541 16,066 19,876 46,547Income tax expense 1,344 539 1,868 2,905 2,990 3,751 8,666Net income $ 6,421 $ 2,163 $ 7,541 $ 12,636 $ 13,076 $ 16,125 $ 37,881



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

Three Months Ended

9/30/2020

6/30/2020

9/30/2019

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)

$

2,945,320

$

32,318

4.37

%

$

2,908,204

$

32,857

4.54

%

$

2,655,941

$

36,353

5.43

%

Securities

236,015

1,107

1.87

%

240,343

1,228

2.05

%

234,525

1,436

2.41

%

Other interest-earning assets

383,626

176

0.18

%

378,405

169

0.18

%

215,900

1,212

2.25

%

Equity investments

15,334

162

4.20

%

15,147

171

4.54

%

16,154

192

4.72

%

Total interest-earning assets

3,580,295

$

33,763

3.75

%

3,542,099

$

34,425

3.91

%

3,122,520

$

39,193

4.98

%

Allowance for credit losses for loans

(40,135

)

(31,443

)

(25,422

)

Noninterest-earning assets

326,590

305,821

296,861

Total assets

$

3,866,750

$

3,816,477

$

3,393,959

Liabilities and Shareholders’ Equity

Interest-bearing liabilities:

Interest-bearing deposits

$

1,730,812

$

1,831

0.42

%

$

1,687,991

$

2,022

0.48

%

$

1,557,503

$

4,130

1.05

%

Federal Home Loan Bank advances

50,000

221

1.76

%

70,769

240

1.36

%

83,804

483

2.29

%

Repurchase agreements

2,230

2,101

1

0.19

%

1,043

1

0.38

%

Note payable and junior subordinated debt

3

4

4

Total interest-bearing liabilities

1,783,042

$

2,055

0.46

%

1,760,861

$

2,267

0.52

%

1,642,350

$

4,618

1.12

%

Noninterest-bearing liabilities:

Noninterest-bearing deposits

1,484,557

1,462,271

1,189,087

Other liabilities

55,386

49,958

39,775

Total noninterest-bearing liabilities

1,539,943

1,512,229

1,228,862

Shareholders’ equity

543,765

543,387

522,747

Total liabilities and shareholders’ equity

$

3,866,750

$

3,816,477

$

3,393,959

Net interest income

$

31,708

$

32,158

$

34,575

Net interest spread(3)

3.29

%

3.39

%

3.86

%

Net interest margin(4)

3.52

%

3.65

%

4.39

%

Net interest margin—tax equivalent(5)

3.55

%

3.68

%

4.43

%

(1) Annualized.
(2) Includes average outstanding balances related to loans held for sale.
(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) Tax equivalent adjustments of $258,000, $247,000 and $257,000 for the quarters ended September 30, 2020, June 30, 2020 and September 30, 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)

Nine Months Ended September 30,

2020

2019

Average

Interest

Average

Average

Interest

Average

Outstanding

Earned/

Yield/

Outstanding

Earned/

Yield/

(Dollars in thousands)

Balance

Interest Paid

Rate(1)

Balance

Interest Paid

Rate(1)

Assets

Interest-earning assets:

Total loans(2)

$

2,829,767

$

98,792

4.66

%

$

2,583,454

$

105,754

5.47

%

Securities

236,756

3,698

2.09

%

233,913

4,512

2.58

%

Other interest-earning assets

359,134

1,400

0.52

%

224,123

4,054

2.42

%

Equity investments

14,716

509

4.62

%

14,419

507

4.70

%

Total interest-earning assets

3,440,373

$

104,399

4.05

%

3,055,909

$

114,827

5.02

%

Allowance for credit losses for loans

(32,499

)

(24,762

)

Noninterest-earning assets

309,778

299,648

Total assets

$

3,717,652

$

3,330,795

Liabilities and Shareholders’ Equity

Interest-bearing liabilities:

Interest-bearing deposits

$

1,689,772

$

7,619

0.60

%

$

1,538,793

$

11,536

1.00

%

Federal Home Loan Bank advances

56,898

682

1.60

%

59,121

1,070

2.42

%

Repurchase agreements

1,700

1

0.08

%

1,256

3

0.32

%

Note payable and junior subordinated debt

11

16

Total interest-bearing liabilities

1,748,370

$

8,313

0.64

%

1,599,170

$

12,625

1.06

%

Noninterest-bearing liabilities:

Noninterest-bearing deposits

1,377,594

1,186,985

Other liabilities

48,881

35,791

Total noninterest-bearing liabilities

1,426,475

1,222,776

Shareholders’ equity

542,807

508,849

Total liabilities and shareholders’ equity

$

3,717,652

$

3,330,795

Net interest income

$

96,086

$

102,202

Net interest spread(3)

3.41

%

3.96

%

Net interest margin(4)

3.73

%

4.47

%

Net interest margin—tax equivalent(5)

3.76

%

4.51

%


(1) Annualized.
(2) Includes average outstanding balances related to loans held for sale.
(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) Tax equivalent adjustments of $754,000 and $770,000 for the nine months ended September 30, 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 September 30, 2020,

Compared to Three Months Ended June 30, 2020

Increase (Decrease) due to

(Dollars in thousands)

Rate

Volume

Days

Total

Interest-earning assets:

Total loans

$

(1,320

)

$

419

$

362

$

(539

)

Securities

(112

)

(22

)

13

(121

)

Other interest-earning assets

3

2

2

7

Equity investments

(13

)

2

2

(9

)

Total increase (decrease) in interest income

(1,442

)

401

379

(662

)

Interest-bearing liabilities:

Interest-bearing deposits

(265

)

51

23

(191

)

Federal Home Loan Bank advances

48

(70

)

3

(19

)

Repurchase agreements

(1

)

(1

)

Note payable and junior subordinated debt

(1

)

(1

)

Total increase (decrease) in interest expense

(218

)

(20

)

26

(212

)

Increase (decrease) in net interest income

$

(1,224

)

$

421

$

353

$

(450

)


Three Months Ended September 30, 2020,

Compared to Three Months Ended September 30, 2019

Increase (Decrease) due to

(Dollars in thousands)

Rate

Volume

Days

Total

Interest-earning assets:

Total loans

$

(7,996

)

$

3,961

$

$

(4,035

)

Securities

(338

)

9

(329

)

Other interest-earning assets

(1,987

)

951

(1,036

)

Equity investments

(20

)

(10

)

(30

)

Total increase (decrease) in interest income

(10,341

)

4,911

(5,430

)

Interest-bearing liabilities:

Interest-bearing deposits

(2,758

)

459

(2,299

)

Federal Home Loan Bank advances

(67

)

(195

)

(262

)

Repurchase agreements

(2

)

1

(1

)

Note payable and junior subordinated debt

(1

)

(1

)

Total increase (decrease) in interest expense

(2,827

)

264

(2,563

)

Increase (decrease) in net interest income

$

(7,514

)

$

4,647

$

$

(2,867

)


Nine Months Ended September 30, 2020,

Compared to Nine Months Ended September 30, 2019

Increase (Decrease) due to

(Dollars in thousands)

Rate

Volume

Days

Total

Interest-earning assets:

Total loans

$

(17,426

)

$

10,077

$

387

$

(6,962

)

Securities

(886

)

55

17

(814

)

Other interest-earning assets

(5,112

)

2,444

14

(2,654

)

Equity investments

(10

)

10

2

2

Total increase (decrease) in interest income

(23,434

)

12,586

420

(10,428

)

Interest-bearing liabilities:

Interest-bearing deposits

(5,088

)

1,129

42

(3,917

)

Federal Home Loan Bank advances

(351

)

(40

)

3

(388

)

Repurchase agreements

(3

)

1

(2

)

Note payable and junior subordinated debt

(5

)

(5

)

Total increase (decrease) in interest expense

(5,442

)

1,085

45

(4,312

)

Increase (decrease) in net interest income

$

(17,992

)

$

11,501

$

375

$

(6,116

)


CBTX, INC. AND SUBSIDIARY
Yield Trend(1)

Three Months Ended

9/30/2020

6/30/2020

3/31/2020

12/31/2019

9/30/2019

Interest-earning assets:

Total loans

4.37

%

4.54

%

5.13

%

5.27

%

5.43

%

Securities

1.87

%

2.05

%

2.34

%

2.46

%

2.41

%

Other interest-earning assets

0.18

%

0.18

%

1.35

%

1.69

%

2.25

%

Equity investments

4.20

%

4.54

%

5.18

%

5.24

%

4.72

%

Total interest-earning assets

3.75

%

3.91

%

4.56

%

4.73

%

4.98

%

Interest-bearing liabilities:

Interest-bearing deposits

0.42

%

0.48

%

0.92

%

1.08

%

1.05

%

Federal Home Loan Bank advances

1.76

%

1.36

%

1.78

%

1.82

%

2.29

%

Repurchase agreements

0.19

%

0.38

%

Note payable and junior subordinated debt

Total interest-bearing liabilities

0.46

%

0.52

%

0.94

%

1.11

%

1.12

%

Net interest spread(2)

3.29

%

3.39

%

3.62

%

3.62

%

3.86

%

Net interest margin(3)

3.52

%

3.65

%

4.05

%

4.15

%

4.39

%

Net interest margin—tax equivalent(4)

3.55

%

3.68

%

4.06

%

4.18

%

4.43

%


  1. Annualized.

  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. 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

9/30/2020

6/30/2020

3/31/2020

12/31/2019

9/30/2019

Assets

Interest-earning assets:

Total loans(1)

$

2,945,320

$

2,908,204

$

2,634,507

$

2,682,842

$

2,655,941

Securities

236,015

240,343

233,917

232,441

234,525

Other interest-earning assets

383,626

378,405

315,099

300,395

215,900

Equity investments

15,334

15,147

13,661

16,140

16,154

Total interest-earning assets

3,580,295

3,542,099

3,197,184

3,231,818

3,122,520

Allowance for credit losses for loans

(40,135

)

(31,443

)

(25,831

)

(25,591

)

(25,422

)

Noninterest-earning assets

326,590

305,821

296,698

298,615

296,861

Total assets

$

3,866,750

$

3,816,477

$

3,468,051

$

3,504,842

$

3,393,959

Liabilities and Shareholders’ Equity

Interest-bearing liabilities:

Interest-bearing deposits

$

1,730,812

$

1,687,991

$

1,650,064

$

1,646,883

$

1,557,503

Federal Home Loan Bank advances

50,000

70,769

50,000

68,913

83,804

Repurchase agreements

2,230

2,101

763

423

1,043

Note payable and junior subordinated debt

Total interest-bearing liabilities

1,783,042

1,760,861

1,700,827

1,716,219

1,642,350

Noninterest-bearing liabilities:

Noninterest-bearing deposits

1,484,557

1,462,271

1,184,776

1,212,939

1,189,087

Other liabilities

55,386

49,958

44,620

42,406

39,775

Total noninterest-bearing liabilities

1,539,943

1,512,229

1,229,396

1,255,345

1,228,862

Shareholders’ equity

543,765

543,387

537,828

533,278

522,747

Total liabilities and shareholders’ equity

$

3,866,750

$

3,816,477

$

3,468,051

$

3,504,842

$

3,393,959


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


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

9/30/2020

6/30/2020

3/31/2020

12/31/2019

9/30/2019

Amount

%

Amount

%

Amount

%

Amount

%

Amount

%

Loan Portfolio:

Commercial and industrial

$

832,686

28.0

%

$

837,667

28.4

%

$

542,650

20.3

%

$

527,607

19.9

%

$

523,831

19.5

%

Real estate:

Commercial real estate

949,933

31.9

%

908,027

30.8

%

904,395

33.8

%

900,746

34.0

%

875,329

32.6

%

Construction and development

506,216

17.0

%

552,879

18.8

%

558,343

20.8

%

527,812

19.9

%

572,276

21.4

%

1-4 family residential

253,868

8.5

%

272,253

9.2

%

276,142

10.3

%

280,192

10.6

%

287,434

10.7

%

Multi-family residential

298,733

10.0

%

255,273

8.7

%

267,152

10.0

%

277,209

10.5

%

298,396

11.1

%

Consumer

35,637

1.2

%

36,338

1.2

%

38,133

1.4

%

36,782

1.4

%

37,975

1.4

%

Agriculture

9,753

0.3

%

7,795

0.3

%

7,520

0.3

%

9,812

0.4

%

10,836

0.4

%

Other

91,501

3.1

%

77,535

2.6

%

84,076

3.1

%

86,513

3.3

%

76,860

2.9

%

Gross loans

2,978,327

100.0

%

2,947,767

100.0

%

2,678,411

100.0

%

2,646,673

100.0

%

2,682,937

100.0

%

Less allowance for credit losses

(44,069

)

(39,678

)

(31,194

)

(25,280

)

(25,576

)

Less deferred fees and unearned discount

(12,038

)

(12,879

)

(5,942

)

(6,125

)

(6,113

)

Less loans held for sale

(1,763

)

(882

)

(1,463

)

Loans, net

$

2,920,457

$

2,895,210

$

2,640,393

$

2,613,805

$

2,651,248

Deposits:

Interest-bearing demand accounts

$

346,406

10.9

%

$

366,281

11.2

%

$

359,943

12.9

%

$

369,744

13.0

%

$

337,746

12.3

%

Money market accounts

916,668

28.9

%

878,006

27.0

%

760,036

27.2

%

805,942

28.3

%

739,436

26.9

%

Savings accounts

103,062

3.3

%

98,485

3.0

%

90,227

3.2

%

92,183

3.2

%

91,413

3.3

%

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

171,854

5.4

%

200,505

6.2

%

212,341

7.6

%

208,018

7.3

%

198,561

7.3

%

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

171,691

5.4

%

197,178

6.1

%

174,145

6.3

%

191,640

6.7

%

180,451

6.6

%

Total interest-bearing deposits

1,709,681

53.9

%

1,740,455

53.5

%

1,596,692

57.2

%

1,667,527

58.5

%

1,547,607

56.4

%

Noninterest-bearing deposits

1,460,983

46.1

%

1,513,748

46.5

%

1,195,541

42.8

%

1,184,861

41.5

%

1,196,720

43.6

%

Total deposits

$

3,170,664

100.0

%

$

3,254,203

100.0

%

$

2,792,233

100.0

%

$

2,852,388

100.0

%

$

2,744,327

100.0

%


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

9/30/2020

6/30/2020

3/31/2020

12/31/2019

9/30/2019

Nonperforming Assets (at period end):

Nonaccrual loans:

Commercial and industrial

$

6,699

$

5,519

$

449

$

596

$

354

Real estate:

Commercial real estate

4,811

4,811

67

67

159

Construction and development

241

506

519

1-4 family residential

325

332

413

314

629

Multi-family residential