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CST: 13/11/2019 19:53:41   

CBTX, Inc. Reports Third Quarter Financial Results

20 Days ago

HOUSTON, Oct. 24, 2019 (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 $13.1 million, or $0.52 per diluted share, for the quarter ended September 30, 2019, compared to $14.3 million, or $0.57 per diluted share, for the quarter ended June 30, 2019 and $13.0 million, or $0.52 per diluted share, for the quarter ended September 30, 2018.

Robert R. Franklin, Jr., the Company’s Chairman, CEO and President said, “We are pleased to announce our results for the third quarter. We  maintained our strong net interest margin in an environment of downward pressure on interest rates. Our team remains disciplined in our relationship-driven approach and focused on our goal of continuing to steadily grow our earnings.”

Mr. Franklin continued, “We are in great markets and continue to see opportunities to grow our franchise. We continue to concentrate on credit quality and we expect to remain mindful of the credit headwinds that may rise in the coming year.”

“We believe that we are positioned to meet the continuing challenges of a lower interest rate environment including utilizing the  advantage provided by our great deposit mix,” he added. “We intend to finish the year strong.”

Highlights

  • Loans increased to $2.7 billion at September 30, 2019, compared to $2.6 billion at June 30, 2019 and $2.5 billion at September 30, 2018.
  • Net interest margin on a tax equivalent basis was 4.43% for the quarter ended September 30, 2019, compared to 4.53% for the quarter ended June 30, 2019 and 4.31% for the quarter ended September 30, 2018.
  • The cost of interest-bearing deposits was at 1.05% for the quarter ended September 30, 2019, compared to 1.01% for the quarter ended June 30, 2019 and 0.77% for the quarter ended September 30, 2018.
  • Nonperforming assets remain low relative to total assets at 0.03% at September 30, 2019 compared to 0.10% of total assets at June 30, 2019 and 0.18% of total assets at September 30, 2018.

Operating Results

Net Interest Income

Net interest income was $34.6 million for the third quarter of 2019, compared to $34.3 million for the second quarter of 2019 and $31.5 million for the third quarter of 2018. The increase in net interest income in the third quarter of 2019 from the second quarter of 2019 was primarily due to higher average loans and the impact of one additional day in the third quarter of 2019 compared to the second quarter of 2019, partially offset by lower  average yields on interest-earning assets, increased average interest-bearing deposits and rates on interest-bearing deposits.

The increase in net interest income in the third quarter of 2019 from the third quarter of 2018 was primarily due to higher average loan balances and yields, partially offset by the impact of higher rates on interest-bearing deposits and increased average FHLB advances.

Provision/Recapture for Loan Losses

Provision for loan loss was $579,000 for the third quarter of 2019, compared to $807,000 for the second quarter of 2019 and a $1.1 million recapture for the third quarter of 2018.

The allowance for loan losses was $25.6 million, or 0.96% of total loans, at September 30, 2019, compared to $25.3 million, or 0.96% of total loans, at June 30, 2019, and $24.5 million, or 0.99% of total loans, at September 30, 2018.  

Noninterest Income

Noninterest income was $4.1 million for the third quarter of 2019, $7.3 million for the second quarter of 2019 and $3.5 million for the third quarter of 2018. During the second quarter of 2019, the Company received nontaxable death benefit proceeds of $4.7 million under bank-owned life insurance policies and recorded a gain of $3.3 million over the carrying value.

Noninterest Expense

Noninterest expense was $22.0 million for the third quarter of 2019, $23.4 million for the second quarter of 2019 and $20.0 million for the third quarter of 2018. Noninterest expense decreased $1.4 million during the third quarter of 2019, compared to the second quarter of 2019, primarily due to decreased legal fees included in professional and director fees and decreased regulatory fees resulting from an FDIC deposit assessment credit received. The Bank incurred legal fees of $729,000 in the third quarter of 2019, compared to $1.4 million in the second quarter of 2019.

Noninterest expense increased $2.1 million in the third quarter of 2019, compared to the third quarter of 2018. Salaries and benefits increased $1.5 million resulting from annual salary increases in 2019 and increased stock compensation expense due to grants of restricted stock. Professional and director fees increased $646,000 due to legal fees as noted above.

Income Taxes

Income tax expense was $3.0 million for the third quarter of 2019, $3.1 million for the second quarter of 2019 and $3.2 million for the third quarter of 2018.

The effective tax rates were 18.61% for the third quarter of 2019, 17.69% for the second quarter of 2019 and 19.76% for the third quarter of 2018. The decrease in the effective tax rate for the second quarter of 2019 was due to a nontaxable gain related to bank-owned life insurance policies as noted above.

Balance Sheet Highlights

Loans

Loans, excluding loans held for sale, were $2.7 billion at September 30, 2019, $2.6 billion at June 30, 2019 and $2.5 billion at September 30, 2018. Loans, excluding loans held for sale, increased 8.7% during the twelve months ended September 30, 2019 due to organic growth.

Asset Quality

Nonperforming assets remain low relative to total assets at $1.1 million, or 0.03% of total assets, at September 30, 2019, $3.3 million, or 0.10% of total assets, at June 30, 2019 and $5.8 million, or 0.18% of total assets, at September 30, 2018.

Annualized net charge-offs to average loans were 0.05% for the third quarter of 2019, 0.02% for the second quarter of 2019 and 0.02% for the third quarter of 2018.

Deposits and Borrowings

Total deposits were $2.7 billion at September 30, 2019 and $2.7 billion at June 30, 2019 and $2.7 billion at September 30, 2018. Deposits increased 2.0% during the twelve months ended September 30, 2019 due to normal fluctuations in customer activities.

We define total borrowings as the total of repurchase agreements, FHLB advances and notes payable. Total borrowings were $121.2 million, $90.8 million and $1.4 million at September 30, 2019, June 30, 2019 and September 30, 2018,  respectively. Borrowings increased during the three months ended September 30, 2019 and June 30, 2019 due to loan growth during each period.

Capital

At September 30, 2019, the Company remained well capitalized under bank regulatory requirements.

Our ratio of tangible equity to tangible assets was 13.13% at September 30, 2019, 12.96% at June 30, 2019 and 12.40% at September 30, 2018. Tangible equity to tangible assets is a non-GAAP financial measure. The most directly comparable GAAP financial measure of tangible equity to tangible assets is total shareholders’ equity to total assets, which was 15.31% at September 30, 2019, 15.18% at June 30, 2019 and 14.79% at September 30, 2018. See the table captioned “Non‑GAAP to GAAP Reconciliation” at the end of this earnings release.

Non-GAAP Financial Measures

The Company’s accounting and reporting policies conform to United States. generally accepted accounting principles, or GAAP, and the prevailing practices in the banking industry. The Company’s management also evaluates performance based on certain additional 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,” “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 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.

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.

About CBTX, Inc.

CBTX, Inc. is the bank holding company for CommunityBank of Texas, N.A., a $3.4 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 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; avoid or address interruptions or breaches in the Company’s information system security; address the costs and effects of regulatory or other government inquiries, the results of regulatory examinations, investigations or reviews or the ability to obtain the required regulatory approvals; 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 Annual Report on Form 10-K, filed with the Securities and Exchange Commission (“SEC”) and other reports and statements that the Company has filed with the SEC. If one or more events related to these or other risks or uncertainties materialize, or if the Company’s underlying assumptions prove to be incorrect, actual results may differ materially from what it anticipates. Accordingly, you should not place undue reliance on any such forward looking statements. Any forward-looking statement speaks only as of the date on which it is made, and the Company does not undertake any obligation to publicly update or review any forward-looking statement, whether as a result of new information, future developments or otherwise. New factors emerge from time to time, and it is not possible for the Company to predict which will arise. In addition, the Company cannot assess the impact of each factor on its business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. Copies of the SEC filings for the Company are available for download free of charge from www.communitybankoftx.com under the Investor Relations tab.

CBTX, INC. AND SUBSIDIARY
Financial Highlights (Unaudited)
(In thousands, except per share data and percentages)

                                         
  Three Months Ended   Nine Months Ended
  9/30/2019   6/30/2019   3/31/2019   12/31/2018   9/30/2018   9/30/2019   9/30/2018
Profitability:                                        
Net income $  13,076     $  14,315     $  10,490     $  14,112     $  13,023     $  37,881     $  33,177  
Basic earnings per share $  0.52     $  0.57     $  0.42     $  0.57     $  0.52     $  1.52     $  1.34  
Diluted earnings per share $  0.52     $  0.57     $  0.42     $  0.56     $  0.52     $  1.51     $  1.33  
                                         
Return on average assets (1)   1.53 %     1.72 %     1.30 %     1.71 %     1.62 %     1.52 %     1.42 %
Return on average shareholders' equity (1)   9.92 %     11.30 %     8.59 %     11.66 %     11.02 %     9.95 %     9.65 %
Net interest margin- tax equivalent (1)   4.43 %     4.53 %     4.56 %     4.42 %     4.31 %     4.51 %     4.32 %
Efficiency ratio (2)   56.98 %     56.25 %     61.34 %     58.67 %     56.96 %     58.09 %     59.17 %
                                         
Liquidity and Capital Ratios:                                        
Total shareholders' equity to total assets   15.31 %     15.18 %     15.19 %     14.87 %     14.79 %     15.31 %     14.79 %
Tangible equity to tangible assets (3)   13.13 %     12.96 %     12.89 %     12.56 %     12.40 %     13.13 %     12.40 %
Common equity tier 1 capital ratio   14.99 %     14.71 %     14.53 %     14.71 %     14.29 %     14.99 %     14.29 %
Tier 1 risk-based capital ratio   14.99 %     14.71 %     14.53 %     14.76 %     14.53 %     14.99 %     14.53 %
Total risk-based capital ratio   15.88 %     15.59 %     15.41 %     15.63 %     15.44 %     15.88 %     15.44 %
Tier 1 leverage ratio   13.23 %     13.12 %     13.02 %     12.74 %     12.84 %     13.23 %     12.84 %
                                         
Other Data:                                        
Weighted average common shares outstanding- Basic    24,923        24,921        24,910        24,886        24,859        24,918        24,850  
Weighted average common shares outstanding- Diluted    25,046        25,042        25,054        25,046        25,060        25,053        25,007  
Common shares outstanding at period end    24,923        24,923        24,918        24,907        24,859        24,923        24,859  
Dividends per share $  0.10     $  0.10     $  0.10     $  0.05     $  0.05     $  0.30     $  0.15  
Book value per share $  21.07     $  20.59     $  20.01     $  19.58     $  18.98     $  21.07     $  18.98  
Tangible book value per share (3) $  17.62     $  17.13     $  16.54     $  16.10     $  15.48     $  17.62     $  15.48  
Employees - full-time equivalents    504        508        494        495        489        504        489  
                                                       

 

_______________
(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” at the end of this earnings release.

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

Balance Sheet Data (at period end): 9/30/2019   6/30/2019   3/31/2019   12/31/2018   9/30/2018
                             
Loans, excluding loans held for sale $  2,676,824     $  2,642,289     $  2,544,709     $  2,446,823     $  2,463,197  
Allowance for loan losses    (25,576 )      (25,342 )      (24,643 )      (23,693 )      (24,486 )
Loans, net    2,651,248        2,616,947        2,520,066        2,423,130        2,438,711  
                             
Cash and equivalents    289,399        266,776        276,515        382,070        281,640  
Securities    228,061        232,601        228,684        229,964        222,493  
Premises and equipment    51,183        51,346        51,453        51,622        52,032  
Goodwill    80,950        80,950        80,950        80,950        80,950  
Other intangible assets    5,106        5,318        5,538        5,775        6,038  
Loans held for sale    —        1,408        852        —        384  
Operating lease right-to-use asset    12,864        12,355        12,879        —        —  
Other assets    112,774        111,805        106,525        105,585        108,205  
Total assets $  3,431,585     $  3,379,506     $  3,283,462     $  3,279,096     $  3,190,453  
                             
Noninterest-bearing deposits $  1,196,720     $  1,201,287     $  1,229,172     $  1,183,058     $  1,144,985  
Interest-bearing deposits    1,547,607        1,537,620        1,521,827        1,583,224        1,545,095  
Total deposits    2,744,327        2,738,907        2,750,999        2,766,282        2,690,080  
                             
Repurchase agreements    1,208        805        1,600        2,498        1,351  
Federal Home Loan Bank advances    120,000        90,000        —        —        —  
Junior subordinated debt    —        —        —        1,571        6,726  
Operating lease liabilities    15,513        14,806        15,134        —        —  
Other liabilities    25,317        21,830        17,076        21,120        20,445  
Total liabilities    2,906,365        2,866,348        2,784,809        2,791,471        2,718,602  
                             
Shareholders' equity    525,220        513,158        498,653        487,625        471,851  
Total liabilities and shareholders' equity $  3,431,585     $  3,379,506     $  3,283,462     $  3,279,096     $  3,190,453  
                                       

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

  Three Months Ended   Nine Months Ended
  9/30/2019   6/30/2019   3/31/2019   12/31/2018   9/30/2018   9/30/2019   9/30/2018
Interest income                                        
Interest and fees on loans $  36,353   $  35,608   $  33,793   $  33,427     $  31,513     $  105,754   $  90,468
Securities    1,436      1,519      1,557      1,542        1,535        4,512      4,478
Other interest-earning assets    1,212      1,359      1,483      1,696        1,404        4,054      3,334
Equity investments    192      163      152      217        213        507      597
Total interest income    39,193      38,649      36,985      36,882        34,665        114,827      98,877
Interest expense                                        
Deposits    4,130      3,822      3,584      3,551        2,961        11,536      7,035
FHLB advances and repurchase agreements    484      524      65      1        62        1,073      76
Note payable and junior subordinated debt    4      4      8      110        116        16      325
Total interest expense    4,618      4,350      3,657      3,662        3,139        12,625      7,436
Net interest income    34,575      34,299      33,328      33,220        31,526        102,202      91,441
Provision (recapture) for loan losses    579      807      1,147      (2,169 )      (1,142 )      2,533      413
Net interest income after provision (recapture) for loan losses    33,996      33,492      32,181      35,389        32,668        99,669      91,028
Noninterest income                                        
Deposit account service charges    1,681      1,657      1,629      1,709        1,597        4,967      4,572
Net gain (loss) on sale of assets    190      69      88      168        152        347      492
Card interchange fees    908      941      864      921        922        2,713      2,820
Earnings on bank-owned life insurance    430      3,721      430      456        443        4,581      1,359
Other    906      915      482      605        412        2,303      1,150
Total noninterest income    4,115      7,303      3,493      3,859        3,526        14,911      10,393
Noninterest expense                                        
Salaries and employee benefits    13,951      14,185      13,822      13,834        12,499        41,958      37,690
Net occupancy expense    2,484      2,338      2,267      2,268        2,428        7,089      7,126
Regulatory fees    144      446      464      507        488        1,054      1,546
Data processing    652      661      714      664        664        2,027      2,013
Software    469      425      440      408        400        1,334      1,168
Printing, stationery and office    313      327      353      303        291        993      858
Amortization of intangibles    221      225      232      237        245        678      748
Professional and director fees    1,455      2,282      2,091      1,123        809        5,828      2,414
Correspondent bank and customer related transaction expenses    67      66      65      64        66        198      201
Loan processing costs    124      124      95      153        102        343      295
Advertising, marketing and business development    407      532      440      406        437        1,379      1,418
Repossessed real estate and other asset expense    —      —      —      7        3        —      65
Security and protection expense    410      367      323      317        346        1,100      959
Telephone and communications    434      456      378      408        342        1,268      1,122
Other expenses    914      969      901      1,057        844        2,784      2,637
Total noninterest expense    22,045      23,403      22,585      21,756        19,964        68,033      60,260
Net income before income tax expense    16,066      17,392      13,089      17,492        16,230        46,547      41,161
Income tax expense    2,990      3,077      2,599      3,380        3,207        8,666      7,984
Net income $  13,076   $  14,315   $  10,490   $  14,112     $  13,023     $  37,881   $  33,177
                                             

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

  Three Months Ended
  9/30/2019   6/30/2019   9/30/2018
        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) $  2,655,941     $  36,353   5.43 %   $  2,591,928     $  35,608   5.51 %   $  2,404,491     $  31,513   5.20 %
Securities    234,525        1,436   2.41 %      233,339        1,519   2.61 %      230,592        1,535   2.64 %
Other interest-earning assets    215,900        1,212   2.25 %      219,639        1,359   2.48 %      272,739        1,404   2.04 %
Equity investments    16,154        192   4.72 %      15,218        163   4.32 %      16,799        213   5.01 %
Total interest-earning assets    3,122,520     $  39,193   4.98 %      3,060,124     $  38,649   5.07 %      2,924,621     $  34,665   4.70 %
Allowance for loan losses    (25,422 )                (24,829 )                (25,689 )          
Noninterest-earnings assets    296,861                  299,234                  292,598            
Total assets $  3,393,959               $  3,334,529               $  3,191,530            
Liabilities and Shareholders’ Equity                                              
Interest-bearing liabilities:                                              
Interest-bearing deposits $  1,557,503     $  4,130   1.05 %   $  1,514,697     $  3,822   1.01 %   $  1,530,077     $  2,961   0.77 %
FHLB advances and repurchase agreements    84,847        484   2.26 %      83,899        524   2.51 %      12,657        62   1.94 %
Note payable and junior subordinated debt    —        4    —        —        4    —        10,826        116   4.25 %
Total interest-bearing liabilities    1,642,350     $  4,618   1.12 %      1,598,596     $  4,350   1.09 %      1,553,560     $  3,139   0.80 %
Noninterest-bearing liabilities:                                              
Noninterest-bearing deposits    1,189,087                  1,194,645                  1,145,516            
Other liabilities    39,775                  32,991                  23,600            
Total noninterest-bearing liabilities    1,228,862                  1,227,636                  1,169,116            
Shareholders’ equity    522,747                  508,297                  468,854            
Total liabilities and shareholders’ equity $  3,393,959               $  3,334,529               $  3,191,530            
Net interest income       $  34,575             $  34,299             $  31,526    
Net interest spread (3)             3.86 %               3.98 %               3.90 %
Net interest margin (4)             4.39 %               4.50 %               4.28 %
Net interest margin—tax equivalent (5)             4.43 %               4.53 %               4.31 %
                                                     

_______________
(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 $257,000, $258,000 and $261,000 for the quarter ended September 30, 2019, June 30, 2019 and September 30, 2018, respectively, were computed using a federal income tax rate of 21%.

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

     Nine Months Ended September 30,
    2019    2018
          Interest             Interest    
    Average   Earned/   Average   Average   Earned/   Average
    Outstanding   Interest   Yield/   Outstanding   Interest   Yield/
(Dollars in thousands)   Balance   Paid   Rate (1)   Balance   Paid   Rate (1)
Assets                                
Interest-earnings assets:                                
Total loans (2)   $  2,583,454     $  105,754   5.47 %   $  2,366,714     $  90,468   5.11 %
Securities      233,913        4,512   2.58 %      227,552        4,478   2.63 %
Other interest-earning assets      224,123        4,054   2.42 %      242,529        3,334   1.84 %
Equity investments      14,419        507   4.70 %      15,449        597   5.17 %
Total interest-earning assets      3,055,909     $  114,827   5.02 %      2,852,244     $  98,877   4.63 %
Allowance for loan losses      (24,762 )                (25,318 )          
Noninterest-earnings assets      299,648                  289,391            
Total assets   $  3,330,795               $  3,116,317            
Liabilities and Shareholders’ Equity                                
Interest-bearing liabilities:                                
Interest-bearing deposits   $  1,538,793     $  11,536   1.00 %   $  1,499,925     $  7,035   0.63 %
FHLB advances and repurchase agreements      60,377        1,073   2.38 %      5,979        76   1.70 %
Note payable and junior subordinated debt      —        16    —        10,826        325   4.01 %
Total interest-bearing liabilities      1,599,170     $  12,625   1.06 %      1,516,730     $  7,436   0.66 %
Noninterest-bearing liabilities:                                
Noninterest-bearing deposits      1,186,985                  1,118,408            
Other liabilities      35,791                  21,744            
Total noninterest-bearing liabilities      1,222,776                  1,140,152            
Shareholders’ equity      508,849                  459,435            
Total liabilities and shareholders’ equity   $  3,330,795               $  3,116,317            
Net interest income         $  102,202             $  91,441    
Net interest spread (3)               3.96 %               3.97 %
Net interest margin (4)               4.47 %               4.29 %
Net interest margin—tax equivalent (5)               4.51 %               4.32 %
                                     

_______________
(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 $770,000 and $798,000 for the nine months ended September 30, 2019 and September 30, 2018, respectively, were computed using a federal income tax rate of 21%.

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

    Three Months Ended September 30, 2019, Compared to
      Three Months Ended June 30, 2019
    Increase (Decrease) due to      
(Dollars in thousands)   Volume   Rate   Days   Total
Interest-earning assets:                        
Total loans   $  889     $  (534 )   $  390   $  745  
Securities      8        (108 )      17      (83 )
Other interest-earning assets      (23 )      (139 )      15      (147 )
Equity investments      10        17        2      29  
Total increase (decrease) in interest income      884        (764 )      424      544  
Interest-bearing liabilities:                        
Interest-bearing deposits      109        157        42      308  
FHLB advances and repurchase agreements      5        (51 )      6      (40 )
Note payable and junior subordinated debt      —        —        —      —  
Total increase in interest expense      114        106        48      268  
Increase (decrease) in net interest income   $  770     $  (870 )   $  376   $  276  
                         


    Three Months Ended September 30, 2019, Compared to
    Three Months Ended September 30, 2018
    Increase (Decrease) due to    
(Dollars in thousands)   Volume   Rate   Total 
Interest-earning assets:                  
Total loans   $  3,295     $  1,545     $  4,840  
Securities      26        (125 )      (99 )
Other interest-earning assets      (293 )      101        (192 )
Equity investments      (8 )      (13 )      (21 )
Total increase in interest income      3,020        1,508        4,528  
Interest-bearing liabilities:                  
Interest-bearing deposits      53        1,116        1,169  
FHLB advances and repurchase agreements      398        24        422  
Note payable and junior subordinated debt      (112 )      —        (112 )
Total increase in interest expense      339        1,140        1,479  
Increase in net interest income   $  2,681     $  368     $  3,049  
                         


    Nine Months Ended September 30, 2019, Compared to
    Nine Months Ended September 30, 2018
    Increase (Decrease) due to    
(Dollars in thousands)   Volume   Rate   Total 
Interest-earning assets:                  
Total loans   $  8,285     $  7,001     $  15,286  
Securities      125        (91 )      34  
Other interest-earning assets      (253 )      973        720  
Equity investments      (40 )      (50 )      (90 )
Total increase in interest income      8,117        7,833        15,950  
Interest-bearing liabilities:                  
Interest-bearing deposits      182        4,319        4,501  
FHLB advances and repurchase agreements      889        108        997  
Note payable and junior subordinated debt      (314 )      5        (309 )
Total increase in interest expense      757        4,432        5,189  
Increase in net interest income   $  7,360     $  3,401     $  10,761  
                         

CBTX, INC. AND SUBSIDIARY
Yield Trend (Unaudited)

  Three Months Ended
  9/30/2019   6/30/2019   3/31/2019   12/31/2018   9/30/2018
Yield Trend - Annualized:                  
Interest-earnings assets:                  
Total loans 5.43 %   5.51 %   5.48 %   5.37 %   5.20 %
Securities 2.41 %   2.61 %   2.73 %   2.70 %   2.64 %
Other interest-earning assets 2.25 %   2.48 %   2.51 %   2.30 %   2.04 %
Equity investments 4.72 %   4.32 %   5.02 %   5.79 %   5.01 %
Total interest-earning assets 4.98 %   5.07 %   5.03 %   4.87 %   4.70 %
                   
Interest-bearing liabilities:                  
Interest-bearing deposits 1.05 %   1.01 %   0.94 %   0.89 %   0.77 %
FHLB advances and repurchase agreements 2.26 %   2.51 %   2.28 %   0.21 %   1.94 %
Note payable and junior subordinated debt  —      —     8.89 %   4.45 %   4.25 %
Total interest-bearing liabilities 1.12 %   1.09 %   0.95 %   0.91 %   0.80 %
                   
Net interest spread (1) 3.86 %   3.98 %   4.08 %   3.96 %   3.90 %
Net interest margin (2) 4.39 %   4.50 %   4.53 %   4.39 %   4.28 %
Net interest margin—tax equivalent (3) 4.43 %   4.53 %   4.56 %   4.42 %   4.31 %
                             

_______________
(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)   Tax equivalent adjustments were computed using a federal income tax rate of 21%.

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

  Three Months Ended
  9/30/2019   6/30/2019   3/31/2019   12/31/2018   9/30/2018
Average Outstanding Balances:                            
                             
Assets                            
Interest-earnings assets:                            
Total loans (1) $  2,655,941     $  2,591,928     $  2,500,788     $  2,468,415     $  2,404,491  
Securities    234,525        233,339        231,650        226,882        230,592  
Other interest-earning assets    215,900        219,639        239,281        293,299        272,739  
Equity investments    16,154        15,218        12,285        14,789        16,799  
Total interest-earning assets    3,122,520        3,060,124        2,984,004        3,003,385        2,924,621  
Allowance for loan losses    (25,422 )      (24,829 )      (24,016 )      (24,305 )      (25,689 )
Noninterest-earnings assets    296,861        299,234        302,915        295,236        292,598  
Total assets $  3,393,959     $  3,334,529     $  3,262,903     $  3,274,316     $  3,191,530  
                             
Liabilities and Shareholders’ Equity                            
Interest-bearing liabilities:                            
Interest-bearing deposits $  1,557,503     $  1,514,697     $  1,544,039     $  1,578,146     $  1,530,077  
FHLB advances and repurchase agreements    84,847        83,899        11,578        1,925        12,657  
Note payable and junior subordinated debt    —        —        365        9,817        10,826  
Total interest-bearing liabilities    1,642,350        1,598,596        1,555,982        1,589,888        1,553,560  
Noninterest-bearing liabilities:                            
Noninterest-bearing deposits    1,189,087        1,194,645        1,177,086        1,181,035        1,145,516  
Other liabilities    39,775        32,991        34,634        23,083        23,600  
Total noninterest-bearing liabilities    1,228,862        1,227,636        1,211,720        1,204,118        1,169,116  
Shareholders’ equity    522,747        508,297        495,201        480,310        468,854  
Total liabilities and shareholders’ equity $  3,393,959     $  3,334,529     $  3,262,903     $  3,274,316     $  3,191,530  
                                       

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

CBTX, INC. AND SUBSIDIARY
Period End Balances (Unaudited)
(In thousands, except percentages)

  9/30/2019   6/30/2019   3/31/2019   12/31/2018   9/30/2018
  Amount     Amount     Amount     Amount     Amount  
                                                 
Loan Portfolio:                                                
Commercial and industrial $  523,831     19.5 %   $  540,084     20.4 %   $  559,882     21.9 %   $  519,779     21.2 %   $  569,334     23.1 %
Real estate:                                                
Commercial real estate    875,329     32.6 %      854,513     32.2 %      811,742     31.8 %      795,733     32.4 %      776,439     31.4 %
Construction and development    572,276     21.4 %      559,672     21.1 %      572,861     22.5 %      515,533     21.0 %      487,289     19.7 %
1-4 family residential    287,434     10.7 %      281,525     10.6 %      281,502     11.0 %      282,011     11.5 %      288,737     11.7 %
Multi-family residential    298,396     11.1 %      298,887     11.3 %      213,582     8.4 %      221,194     9.0 %      236,907     9.6 %
Consumer    37,975     1.4 %      39,803     1.5 %      39,072     1.5 %      39,421     1.6 %      39,807     1.6 %
Agricultural    10,836     0.4 %      9,923     0.4 %      8,915     0.4 %      11,076     0.5 %      11,609     0.5 %
Other    76,860     2.9 %      65,471     2.5 %      64,215     2.5 %      68,382     2.8 %      59,484     2.4 %
Gross loans    2,682,937     100.0 %      2,649,878     100.0 %      2,551,771     100.0 %      2,453,129     100.0 %      2,469,606     100.0 %
Less deferred fees and unearned discount    (6,113 )          (6,181 )          (6,210 )          (6,306 )          (6,025 )    
Less allowance for loan losses    (25,576 )          (25,342 )          (24,643 )          (23,693 )          (24,486 )    
Less loans held for sale    —            (1,408 )          (852 )          —            (384 )    
Loans, net $  2,651,248         $  2,616,947         $  2,520,066         $  2,423,130         $  2,438,711      
                                                 
                                                 
Deposits:                                                
Interest-bearing demand accounts $  337,746     12.3 %   $  351,326     12.8 %   $  352,623     12.8 %   $  387,457     14.0 %   $  367,120     13.6 %
Money market accounts    739,436     26.9 %      717,883     26.2 %      695,968     25.3 %      737,770     26.7 %      722,382     26.9 %
Savings accounts    91,413     3.3 %      91,828     3.4 %      96,251     3.5 %      96,962     3.5 %      94,344     3.5 %
Certificates and other time deposits, $100,000 or greater    198,561     7.3 %      189,741     6.9 %      181,507     6.6 %      189,007     6.8 %      182,552     6.8 %
Certificates and other time deposits, less than $100,000    180,451     6.6 %      186,842     6.8 %      195,478     7.1 %      172,028     6.2 %      178,697     6.6 %
Total interest-bearing deposits    1,547,607     56.4 %      1,537,620     56.1 %      1,521,827     55.3 %      1,583,224     57.2 %      1,545,095     57.4 %
Noninterest-bearing deposits    1,196,720     43.6 %      1,201,287     43.9 %      1,229,172     44.7 %      1,183,058     42.8 %      1,144,985     42.6 %
Total deposits $  2,744,327     100.0 %   $  2,738,907     100.0 %   $  2,750,999     100.0 %   $  2,766,282     100.0 %   $  2,690,080     100.0 %
                                                                     

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

                             
  9/30/2019   6/30/2019   3/31/2019   12/31/2018   9/30/2018
Nonperforming assets (at period end):                            
Nonaccrual loans:                            
Commercial and industrial $  354     $  1,795     $  1,390     $  1,317     $  2,161  
Real estate:                            
Commercial real estate    159        850        862        1,517        2,751  
Construction and development    —        —        —        —        13  
1-4 family residential    629        624        635        656        677  
Multi-family residential    —        —        —        —        —  
Consumer    —        —        47        —        —  
Agricultural    —        —        —        —        —  
Nonaccrual loans    1,142        3,269        2,934        3,490        5,602  
Accruing loans 90 or more days past due    —        9        —        —        —  
Total nonperforming loans    1,142        3,278        2,934        3,490        5,602  
Foreclosed assets:                            
Real estate    —        36        —        12        175  
Other    —        —        41        —        —  
Total foreclosed assets    —        36        41        12        175  
Total nonperforming assets $  1,142     $  3,314     $  2,975     $  3,502     $  5,777  
                             
Allowance for Loan Losses (at period end):                            
Commercial and industrial $  7,470     $  7,792     $  8,416     $  7,719     $  8,763  
Real estate:                            
Commercial real estate    7,788        7,371        6,784        6,730        6,913  
Construction and development    4,825        4,579        4,700        4,298        3,606  
1-4 family residential    2,338        2,236        2,249        2,281        2,454  
Multi-family residential    1,829        2,178        1,457        1,511        1,630  
Consumer    558        458        357        387        394  
Agricultural    82        73        50        62        71  
Other    686        655        630        705        655  
Total allowance for loan losses $  25,576     $  25,342     $  24,643     $  23,693     $  24,486  
                             
Credit Quality Ratios (at period end):                            
Nonperforming assets to total assets   0.03 %     0.10 %     0.09 %     0.11 %     0.18 %
Nonperforming loans to total loans   0.04 %     0.12 %     0.12 %     0.14 %     0.23 %
Allowance for loan losses to nonperforming loans   2239.58 %     773.09 %     839.91 %     678.88 %     437.09 %
Allowance for loan losses to total loans   0.96 %     0.96 %     0.97 %     0.97 %     0.99 %
                                       

CBTX, INC. AND SUBSIDIARY
Allowance for Loan Losses (Unaudited)
(In thousands, except percentages)

  Three Months Ended
  9/30/2019   6/30/2019   3/31/2019   12/31/2018   9/30/2018
Analysis of Allowance for Loan Losses                            
                             
Allowance for loan losses at beginning of period $  25,342     $  24,643     $  23,693     $  24,486     $  25,746  
                             
Provision (recapture) for loan losses    579        807        1,147        (2,169 )      (1,142 )
                             
Net (charge-offs) recoveries                            
Commercial and industrial    (374 )      22        (206 )      1,521        (114 )
Real estate:                            
Commercial real estate    33        2        2        (156 )      (3 )
Construction and development    —        —        —        (1 )      —  
1-4 family residential    1        (11 )      1        —        4  
Consumer    (1 )      (78 )      6        1        (4 )
Agricultural    —        —        —        10        —  
Other    (4 )      (43 )      —        1        (1 )
Total net (charge-offs) recoveries    (345 )      (108 )      (197 )      1,376        (118 )
                             
Allowance for loan losses at end of period $  25,576     $  25,342     $  24,643     $  23,693     $  24,486  
                             
Net charge-offs (recoveries) to average loans(1)   0.05 %     0.02 %     0.03 %     (0.22 %)     0.02 %
                                       

_______________
(1)   Annualized.

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 tangible equity as total shareholders’ equity, less goodwill and other intangible assets, net of accumulated amortization, and 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 table reconciles, 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 total shareholders’ equity to total assets:

  9/30/2019   6/30/2019   3/31/2019   12/31/2018   9/30/2018
Tangible Equity                            
Total shareholders’ equity $  525,220     $  513,158     $  498,653     $  487,625     $  471,851  
Adjustments:                            
Goodwill    80,950        80,950        80,950        80,950        80,950  
Other intangibles    5,106        5,318        5,538        5,775        6,038  
Tangible equity $  439,164     $  426,890     $  412,165     $  400,900     $  384,863  
Tangible Assets                            
Total assets $  3,431,585     $  3,379,506     $  3,283,462     $  3,279,096     $  3,190,453  
Adjustments:                            
Goodwill    80,950        80,950        80,950        80,950        80,950  
Other intangibles    5,106        5,318        5,538        5,775        6,038  
Tangible assets $  3,345,529     $  3,293,238     $  3,196,974     $  3,192,371     $  3,103,465  
                             
Common shares outstanding    24,923        24,923        24,918        24,907        24,859  
                             
Book value per share $  21.07     $  20.59     $  20.01     $  19.58     $  18.98  
Tangible book value per share $  17.62     $  17.13     $  16.54     $  16.10     $  15.48  
Total shareholders’ equity to total assets   15.31 %     15.18 %     15.19 %     14.87 %     14.79 %
Tangible equity to tangible assets   13.13 %     12.96 %     12.89 %     12.56 %     12.40 %
                                       
Investor Relations:

Justin M. Long
281.325.5013
investors@CBoTX.com

Media Contact:

Ashley Warren
713.210.7622 
awarren@CBoTX.com

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