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

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

Highlights

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

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

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

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

Operating Results:

Net Interest Income

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

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

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

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

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

Provision (Recapture) for Loan Losses

Provision for loan loss was $1.1 million for the fourth quarter of 2017, compared to a provision for the fourth quarter of 2016 of $650,000 and a recapture of $1.7 million for the third quarter of 2017. The recapture in the third quarter of 2017 is primarily the result of pay-offs of certain classified and problem loans, which resulted in a decrease in their related allowance for loan losses. Provision for loan loss was a recapture of $338,000 for the year ended December 31, 2017, compared to a provision of $4.6 million for the year ended December 31, 2016. The recapture in the year ended December 31, 2017 was primarily the result of pay-offs of certain classified and problem loans, which resulted in a decrease in their related allowance for loan losses.

The allowance for loan losses was $24.8 million, or 1.07% of total loans, at December 31, 2017, compared to $25.0 million, or 1.16% of total loans, at December 31, 2016 and $23.8 million, or 1.08% of total loans, at September 30, 2017. The lower balance at September 30, 2017 is primarily the result of the recaptures mentioned above.

Noninterest Income

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

Noninterest Expense

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

Income Taxes

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

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

Balance Sheet Highlights:

Loans

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

Asset Quality

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

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

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

Deposits and Borrowings

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

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

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

Capital

At December 31, 2017, we were well capitalized under regulatory guidelines. At December 31, 2017, our ratio of total shareholders’ equity to total assets was 14.48% and our tangible equity to total tangible assets was 11.98%. At December 31, 2016, our ratio of total shareholders’ equity to total assets was 12.12% and our tangible equity to total tangible assets was 9.39%. Tangible equity to total tangible assets is a non‑GAAP financial measure. See the table captioned “Non‑GAAP to GAAP Reconciliation.”

In November 2017, we completed our initial public offering of our common stock issuing 2,760,000 common shares at $26.00 per share and net proceeds of $64.5 million, which is the primary cause of the increase in these ratios.

About CBTX, Inc.

CBTX, Inc. is the bank holding company for CommunityBank of Texas, N.A., a $3.1 billion asset bank, offering commercial banking solutions to local small and mid-sized businesses and professionals in Houston, Beaumont and surrounding communities in southeast Texas.  Visit www.communitybankoftx.com for more information.

Forward-Looking Statements

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

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


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


 
CBTX, INC. AND SUBSIDIARY
Financial Highlights (Unaudited)
(In thousands, except per share data and percentages)
                       
  For the Three Months Ended  For the Years Ended 
  12/31/2017 9/30/2017 6/30/2017 3/31/2017 12/31/2016 12/31/2017 12/31/2016 
Profitability:                      
Net income  $ 1,957 $ 10,047 $ 8,705 $ 6,862 $ 7,557 $ 27,571 $ 27,208 
Basic earnings per share $ 0.08 $ 0.46 $ 0.39 $ 0.31 $ 0.34 $ 1.23 $ 1.23 
Diluted earnings per share $ 0.08 $ 0.45 $ 0.39 $ 0.31 $ 0.34 $ 1.22 $ 1.22 
                       
Return on average assets (1)   0.25%  1.34%  1.20%  0.95%  1.02%  0.93%  0.95%
Return on average shareholders' equity (1)   1.83%  10.54%  9.46%  7.73%  8.47%  7.18%  7.79%
Net interest margin- tax equivalent (1)   4.06%  4.07%  4.08%  4.02%  3.87%  4.06%  3.96%
Efficiency ratio (2)   70.23%  60.69%  62.76%  62.93%  61.78%  64.19%  62.66%
                       
Liquidity and Capital Ratios:                      
Total shareholders' equity to total assets   14.48%  12.75%  12.65%  12.48%  12.12%  14.48%  12.12%
Tangible equity to tangible assets (3)   11.98%  10.10%  9.95%  9.74%  9.39%  11.98%  9.39%
Common equity tier 1 capital ratio   14.19%  12.23%  12.00%  11.32%  11.52%  14.19%  11.52%
Tier 1 leverage ratio   12.30%  10.48%  10.39%  10.10%  9.78%  12.30%  9.78%
Tier 1 risk-based capital ratio   14.44%  12.49%  12.26%  11.58%  11.78%  14.44%  11.78%
Total risk-based capital ratio   15.42%  13.48%  13.33%  12.64%  12.85%  15.42%  12.85%
                       
Other Data:                      
Weighted average common shares outstanding- Basic   23,629   22,063   22,062   22,062   21,993   22,457   22,049 
Weighted average common shares outstanding- Diluted   23,742   22,138   22,148   22,162   22,067   22,573   22,235 
Common shares outstanding at period end   24,833   22,063   22,063   22,062   22,062   24,833   22,062 
Dividends per share $ 0.05 $ 0.05 $ 0.05 $ 0.05 $ 0.05 $ 0.20 $ 0.20 
Book value per share $ 17.97 $ 17.27 $ 16.86 $ 16.48 $ 16.21 $ 17.97 $ 16.21 
Tangible book value per share (3) $ 14.44 $ 13.29 $ 12.86 $ 12.47 $ 12.19 $ 14.44 $ 12.19 
Employees - full-time equivalents   462   464   472   479   479   462   479 
                       
(1)  Quarterly ratios are annualized.
(2)  Efficiency ratio represents noninterest expense divided by the sum of net interest income and noninterest income.
(3)  Non‑GAAP financial measure. See the table captioned “Non‑GAAP to GAAP Reconciliation.”


 
CBTX, INC. AND SUBSIDIARY
Net Interest Margin (Unaudited)
(In thousands, except percentages)
                          
  For the Three Months Ended 
  12/31/2017 9/30/2017 12/31/2016 
     Interest      Interest      Interest   
  Average Earned/ Average Average Earned/ Average Average Earned/ Average 
  Outstanding Interest Yield/ Outstanding Interest Yield/ Outstanding Interest Yield/ 
  Balance Paid Rate (1) Balance Paid Rate (1) Balance Paid Rate (1) 
Assets                         
Interest-earnings assets:                         
Total loans (2) $ 2,252,735  $ 27,726  4.88$ 2,191,016  $ 27,129  4.91$ 2,179,862  $ 26,298  4.80%
Securities (available for sale and held to maturity)   222,602    1,357  2.42  223,132    1,334  2.37  192,938    1,055  2.18%
Federal funds sold and other interest-earning assets   317,484    1,093  1.37  284,334    927  1.29  320,955    485  0.60%
Nonmarketable equity securities   14,698    190  5.13  14,695    179  4.83  14,683    173  4.66%
Total interest-earning assets   2,807,519  $ 30,366  4.29  2,713,177  $ 29,569  4.32  2,708,438  $ 28,011  4.11%
Allowance for loan losses   (24,127)        (25,316)        (27,357)      
Noninterest-earnings assets   296,108         290,767         278,850       
Total assets $ 3,079,500       $ 2,978,628       $ 2,959,931       
Liabilities and Shareholders’ Equity                         
Interest-bearing liabilities:                         
Interest-bearing deposits $ 1,519,631  $ 1,993  0.52$ 1,501,732  $ 1,964  0.52$ 1,524,262  $ 1,914  0.50%
Repurchase agreements   1,793    —  —  2,404    2  0.33  2,155    2  0.18%
Note payable   11,252    122  4.30  24,742    269  4.31  28,064    256  3.63%
Junior subordinated debt   10,826    86  3.15  10,826    83  3.04  10,826    72  2.65%
Total interest-bearing liabilities   1,543,502  $ 2,201  0.56  1,539,704  $ 2,318  0.60  1,565,307  $ 2,244  0.57%
Noninterest-bearing liabilities:                         
Noninterest-bearing deposits   1,087,416         1,041,731         1,015,577       
Other liabilities   23,271         18,844         24,139       
Total noninterest-bearing liabilities   1,110,687         1,060,575         1,039,716       
Shareholders’ equity   425,311         378,349         354,908       
Total liabilities and shareholders’ equity $ 3,079,500       $ 2,978,628       $ 2,959,931       
Net interest income    $ 28,165      $ 27,251      $ 25,767   
Net interest spread (3)        3.73       3.73       3.54%
Net interest margin (4)        3.98       3.98       3.78%
Net interest margin—tax equivalent (5)        4.06       4.07       3.87%
                          
(1)  Annualized.
(2)  Includes average outstanding balances of loans held for sale of $521,000, $1.0 million and $592,000 for the three months ended December 31, 2017, September 30, 2017 and December 31, 2016, respectively.
(3)  Net interest spread is the average yield on interest‑earning assets minus the average rate on interest‑bearing liabilities.
(4)  Net interest margin is equal to net interest income divided by average interest‑earning assets.
(5)  To make pre‑tax income and resultant yields on tax‑exempt investments and loans comparable to those on taxable investments and loans, a tax equivalent adjustment of $549,000, $1.1 million and $605,000 for the three months ended December 31, 2017, September 30, 2017 and December 31, 2016, respectively, has been computed using a federal income tax rate of 35%.


 
CBTX, INC. AND SUBSIDIARY
Net Interest Margin (Unaudited)
(In thousands, except percentages)
                   
  For the Years Ended December 31, 
  2017  2016 
     Interest       Interest   
  Average Earned/ Average  Average Earned/ Average 
  Outstanding Interest Yield/  Outstanding Interest Yield/ 
(Dollars in thousands) Balance Paid Rate  Balance Paid Rate 
Assets                  
Interest-earnings assets:                  
Total loans (1) $ 2,206,541  $ 107,368  4.87 $ 2,140,917  $ 103,723  4.84%
Securities (available for sale and held to maturity)   220,953    5,347  2.42   169,509    3,801  2.24%
Federal funds sold and other interest-earning assets   272,715    3,204  1.17   301,018    1,732  0.58%
Nonmarketable equity securities   14,692    740  5.04   14,683    695  4.73%
Total interest-earning assets   2,714,901  $ 116,659  4.30   2,626,127  $ 109,951  4.19%
Allowance for loan losses   (25,319)         (26,826)      
Noninterest-earnings assets   284,165          276,413       
Total assets $ 2,973,747        $ 2,875,714       
Liabilities and Shareholders’ Equity                  
Interest-bearing liabilities:                  
Interest-bearing deposits $ 1,503,350  $ 7,652  0.51 $ 1,458,566  $ 7,073  0.48%
Repurchase agreements   2,254    5  0.27   1,918    5  0.26%
Note payable   22,164    906  4.09   29,624    1,061  3.58%
Junior subordinated debt   10,826    322  2.97   10,826    266  2.46%
Total interest-bearing liabilities   1,538,594  $ 8,885  0.58   1,500,934  $ 8,405  0.56%
Noninterest-bearing liabilities:                  
Noninterest-bearing deposits   1,031,707          1,010,403       
Other liabilities   19,388          15,270       
Total noninterest-bearing liabilities   1,051,095          1,025,673       
Shareholders’ equity   384,058          349,107       
Total liabilities and shareholders’ equity $ 2,973,747        $ 2,875,714       
Net interest income    $ 107,774       $ 101,546   
Net interest spread (2)        3.72        3.63%
Net interest margin (3)        3.97        3.87%
Net interest margin—tax equivalent (4)        4.06        3.96%
                   
(1)  Includes average outstanding balances of loans held for sale of $769,000 and $905,000 for the years ended December 31, 2017 and 2016, respectively.
(2)  Net interest spread is the average yield on interest‑earning assets minus the average rate on interest‑bearing liabilities.
(3)  Net interest margin is equal to net interest income divided by average interest‑earning assets.
(4)  To make pre‑tax income and resultant yields on tax‑exempt investments and loans comparable to those on taxable investments and loans, a tax equivalent adjustment of $2.3 million and $2.4 million for the years ended December 31, 2017 and 2016, respectively, has been computed using a federal income tax rate of 35%.


 
CBTX, INC. AND SUBSIDIARY
Yield Trend (Unaudited)
                 
  For the Three Months Ended 
  12/31/2017 9/30/2017 6/30/2017 3/31/2017 12/31/2016 
Yield Trend - Annualized:                
Interest-earnings assets:                
Total loans   4.88%  4.91%  4.83%  4.83%  4.80%
Securities (available for sale and held to maturity)   2.42%  2.37%  2.45%  2.43%  2.18%
Federal funds sold and other interest-earning assets   1.37%  1.29%  1.12%  0.87%  0.60%
Nonmarketable equity securities   5.13%  4.83%  4.81%  5.33%  4.66%
Total interest-earning assets   4.29%  4.32%  4.32%  4.26%  4.11%
                 
Interest-bearing liabilities:                
Interest-bearing deposits   0.52%  0.52%  0.50%  0.49%  0.50%
Repurchase agreements   —%  0.33%  0.17%  0.33%  0.18%
Note payable   4.30%  4.31%  4.10%  3.78%  3.63%
Junior subordinated debt   3.15%  3.04%  2.93%  2.77%  2.65%
Total interest-bearing liabilities   0.56%  0.60%  0.58%  0.57%  0.57%
                 
Net interest spread (1)   3.73%  3.73%  3.74%  3.69%  3.54%
Net interest margin (2)   3.98%  3.98%  3.99%  3.93%  3.78%
Net interest margin—tax equivalent (3)   4.06%  4.07%  4.08%  4.02%  3.87%
                 
(1)  Net interest spread is the average yield on interest‑earning assets minus the average rate on interest‑bearing liabilities.
(2)  Net interest margin is equal to net interest income divided by average interest‑earning assets.
(3)  To make pre‑tax income and resultant yields on tax‑exempt investments and loans comparable to those on taxable investments and loans, a tax equivalent adjustment has been computed using a federal income tax rate of 35%.


 
CBTX, INC. AND SUBSIDIARY
Average Outstanding Balances (Unaudited)
(In thousands)
                
  For the Three Months Ended
  12/31/2017 9/30/2017 6/30/2017 3/31/2017 12/31/2016
Average Outstanding Balances:               
                
Assets               
Interest-earnings assets:               
Total loans (1) $ 2,252,735  $ 2,191,016  $ 2,203,145  $ 2,178,626  $ 2,179,862 
Securities (available for sale and held to maturity)   222,602    223,132    220,905    217,086    192,938 
Federal funds sold and other interest-earning assets   317,484    284,334    228,393    257,152    320,955 
Nonmarketable equity securities   14,698    14,695    14,691    14,685    14,683 
Total interest-earning assets   2,807,519    2,713,177    2,667,134    2,667,549    2,708,438 
Allowance for loan losses   (24,127)   (25,316)   (26,424)   (25,419)   (27,357)
Noninterest-earnings assets   296,108    290,767    273,760    273,437    278,850 
Total assets $ 3,079,500  $ 2,978,628  $ 2,914,470  $ 2,915,567  $ 2,959,931 
                
Liabilities and Shareholders’ Equity               
Interest-bearing liabilities:               
Interest-bearing deposits $ 1,519,631  $ 1,501,732  $ 1,478,579  $ 1,513,348  $ 1,524,262 
Repurchase agreements   1,793    2,404    2,356    2,468    2,155 
Note payable   11,252    24,742    25,841    26,965    28,064 
Junior subordinated debt   10,826    10,826    10,826    10,826    10,826 
Total interest-bearing liabilities   1,543,502    1,539,704    1,517,602    1,553,607    1,565,307 
Noninterest-bearing liabilities:               
Noninterest-bearing deposits   1,087,416    1,041,731    1,010,823    985,690    1,015,577 
Other liabilities   23,271    18,844    16,910    16,421    24,139 
Total noninterest-bearing liabilities   1,110,687    1,060,575    1,027,733    1,002,111    1,039,716 
Shareholders’ equity   425,311    378,349    369,135    359,849    354,908 
Total liabilities and shareholders’ equity $ 3,079,500  $ 2,978,628  $ 2,914,470  $ 2,915,567  $ 2,959,931 
                     
(1)  Includes average outstanding balances of loans held for sale.


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


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


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

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

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

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

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

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