CBTX, Inc. Reports Third Quarter Financial Results

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

Highlights 

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

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

Operating Results:

Net Interest Income

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

Noninterest Income

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

Noninterest Expense

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

Provision (Recapture) for Loan Losses 

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

Income Taxes

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

Balance Sheet Highlights:

Loans

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

Asset Quality

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

Deposits and Borrowings

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

Capital

  • At September 30, 2017, we were well capitalized under regulatory guidelines. At September 30, 2017, our ratio of total shareholders’ equity to total assets was 12.75% and our tangible equity to total tangible assets was 10.10%. Tangible equity to total tangible assets is a non‑GAAP financial measure. See the table captioned “Non‑GAAP to GAAP Reconciliation.”
  • In November 2017, we completed our initial public offering of our common stock issuing 2,760,000 common shares at $26.00 per share.  Net proceeds are estimated to be $64.5 million.

About CBTX, Inc.

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

Forward-Looking Statements

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Investor Relations:

James L. Sturgeon
281.325.5013
investors@CBoTX.com 

Media Contact:

Ashley Warren
713.210.7622
awarren@CBoTX.com