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CBTX, Inc. Reports Quarterly Financial Results

GlobeNewswire Inc.

HOUSTON, Oct. 27, 2021 (GLOBE NEWSWIRE) -- CBTX, Inc., or the Company (NASDAQ: CBTX), the bank holding company for CommunityBank of Texas, N.A., or the Bank, today announced its results for the third quarter of 2021.

Robert R. Franklin, Jr., Chairman, CEO and President of the Company said, “We are proud to present our third quarter financial results which continue to be indicative of the transition from a COVID dominated economy through most of the first half of the year to an improved economic environment as we enter the fourth quarter. We have seen credit stabilize, and continued growth in deposits which have provided the Bank with significant liquidity and opportunity. As we enter the fourth quarter, with the local economy continuing to improve, our customers are starting new projects and looking for new ways to expand their businesses.”

Mr. Franklin continued, “During much of 2020 and early 2021 we consciously curtailed our commercial real estate lending due to the uncertainty surrounding the sector and we are seeing the effects of slowing that engine as we rebuild our pipeline. Our lenders have made good efforts to increase our pipeline in a highly competitive environment. We have experienced an unusually high number of payoffs during the last couple of quarters but see the stabilization of our portfolio in the fourth quarter and foresee the ability to get back to our traditional growth rate in the next couple of quarters.”

“In light of the significant liquidity that our customers have provided us, we increased our bond purchases on a measured basis given that we continue to reside in a very low interest rate environment. We will continue to look at our expense base as we budget for 2022 and make adjustments where warranted,” Mr. Franklin added.

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Mr. Franklin further said, “CBTX, Inc. is in a solid position for success with an experienced lending staff, liquidity to lend and significant capital to give us flexibility in supporting our future expansion decisions. Our strong, loyal and low-cost relationship driven deposit base continues to provide significant shareholder value. Our asset sensitivity gives us an upside as we transition to a higher interest rate environment possibly in late 2022. Our goal is to finish strong in the fourth quarter as we build momentum into 2022 and return to our traditional growth rate. We are excited about the future for CBTX, Inc.”

Highlights

  • Net income was $14.4 million for the third quarter of 2021, or $0.59 per diluted share, compared to $11.7 million, or $0.48 per diluted share, for the second quarter of 2021 and $6.4 million, or $0.26 per diluted share, for the third quarter of 2020.

  • Decrease in the allowance for credit losses, or ACL, resulted in a recapture of credit losses of $4.9 million during the third quarter of 2021, primarily due to continued improvements in the national and local economies and economic forecasts and the reduction of the loan portfolios during the third quarter of 2021.

  • Net interest margin on a tax equivalent basis decreased to 3.22% for the third quarter of 2021, compared to 3.29% for the second quarter of 2021, primarily due to lower average balances for the loan portfolio.

  • Cash and equivalents increased $210.4 million to $998.8 million during the third quarter of 2021, primarily due to net deposit inflows and loan payments received.

Operating Results

Net Interest Income

Net interest income was $31.2 million for the third quarter of 2021, compared to $31.0 million for the second quarter of 2021 and $31.7 million for the third quarter of 2020. Net interest income increased $231,000 during the third quarter of 2021, compared to the second quarter of 2021, primarily due to an increase in income on interest-bearing deposits at other financial institutions due to higher rates and higher average balances and an increase in income on securities due to higher average securities balances, higher rates on loans and the impact of an additional day during the third quarter of 2021 compared to the second quarter of 2021. These increases were partially offset by lower average loans. The increase in loan yield during the third quarter of 2021 includes $2.3 million of net fees recognized on Paycheck Protection Program, or PPP, loans in the third quarter of 2021, compared to $1.5 million recognized in the second quarter of 2021.

Net interest income decreased $459,000 during the third quarter of 2021, compared to the third quarter of 2020, primarily due to lower average loans and higher average interest-bearing deposits, partially offset by lower rates on interest-bearing deposits and higher rates on loans.

The yield on interest-earning assets was 3.33% for the third quarter of 2021, compared to 3.41% for the second quarter of 2021 and 3.75% for the third quarter of 2020. The cost of interest-bearing liabilities was 0.30% for the third quarter of 2021, 0.32% for the second quarter of 2021 and 0.46% for the third quarter of 2020. The Company’s net interest margin on a tax equivalent basis was 3.22% for the third quarter of 2021, compared to 3.29% for the second quarter of 2021 and 3.55% for the third quarter of 2020.

Provision (Recapture) for Credit Losses

The provision for credit losses was a recapture of credit losses of $4.9 million for the third quarter of 2021, compared to a recapture of credit losses of $5.1 million for the second quarter of 2021 and a provision of credit losses of $4.1 million for the third quarter of 2020.

The recapture of credit losses for the third and second quarters of 2021 were primarily the result of the adjustment of certain qualitative factors used to determine the ACL due to the continued improvements in the national and local economies and economic forecasts.

The provision for credit losses of $4.1 million for the third quarter of 2020 resulted from the impact of the COVID-19 pandemic and the sustained instability of the oil and gas industry, which led to the adjustment of certain factors utilized to determine the ACL.

At September 30, 2021, the ACL for loans was $32.2 million, or 1.23%, to loans excluding loans held for sale, $37.2 million, or 1.36%, to loans excluding loans held for sale, at June 30, 2021 and $44.1 million, or 1.49%, to loans excluding loans held for sale at September 30, 2020. The decrease in the ACL for loans at September 30, 2021 was primarily the result of the adjustment of certain qualitative factors utilized in the Company’s ACL estimate due to the continued improvements in the national and local economies and economic forecasts. A decrease in the Company’s loan portfolio also contributed to the decrease in the ACL during 2021.

The ACL for unfunded commitments was $3.6 million at September 30, 2021, compared to $3.4 million at June 30, 2021 and $4.5 million at September 30, 2020. The decrease in the ACL for unfunded commitments from June 30, 2021 to September 30, 2021 and from September 30, 2020 to September 30, 2021 was primarily the result of the adjustment to certain qualitative factors due to the continued improvements in the national and local economies and economic forecasts as well as fluctuations in unfunded commitments.

Noninterest Income

Noninterest income was $5.6 million for the third quarter of 2021, $3.5 million for the second quarter of 2021 and $4.0 million for the third quarter of 2020. The increase of $2.1 million for the third quarter of 2021, compared to the second quarter of 2021 and an increase of $1.5 million for the third quarter of 2021, compared to the third quarter of 2020 were both primarily due to gains of $1.9 million and $769,000 during the third quarter of 2021 and 2020 related to bank-owned life insurance. As the owner and beneficiary under bank-owned insurance policies as the result of claims submitted on covered individuals, the Company received proceeds of $2.7 million and $2.0 million during the third quarter of 2021 and the third quarter of 2020, respectively.

Noninterest Expense

Noninterest expense was $24.4 million for the third quarter of 2021, compared to $25.2 million for the second quarter of 2021 and $23.9 million for the third quarter of 2020. The decrease in noninterest expense of $825,000 between the third quarter of 2021 and the second quarter of 2021 was primarily due to a $874,000 decrease in professional and director fees. Professional fees related to Bank Secrecy Act/Anti-Money Laundering, or BSA/AML, compliance matters decreased $1.2 million to $202,000 for the third quarter of 2021, compared to $1.4 million for the second quarter of 2021. This decrease in BSA/AML related professional fees during the third quarter of 2021 was partially offset by increases in consulting fees related to a loan review project.

The increase in noninterest expense of $514,000 for the third quarter of 2021, compared to the third quarter of 2020, was primarily due to a $668,000 increase in salaries and employee benefits, a $164,000 increase in occupancy expense, a $104,000 increase in data processing and software, and a $126,000 increase in security and protection expense, partially offset by a $879,000 decrease in professional and director fees. Professional fees related to BSA/AML compliance matters decreased $1.3 million to $202,000 for the third quarter of 2021, compared to $1.5 million for the third quarter of 2020.

Income Taxes

Income tax expense was $2.9 million for the third quarter of 2021, $2.7 million for the second quarter of 2021 and $1.3 million for the third quarter of 2020. The effective tax rates were 16.81% for the third quarter of 2021, 18.70% for the second quarter of 2021 and 17.31% for the third quarter of 2020. The differences between the federal statutory rate of 21% and the effective tax rates were largely attributable to permanent differences primarily related to tax exempt interest income and bank-owned life insurance earnings.

Balance Sheet Highlights

Loans

Loans excluding loans held for sale were $2.6 billion at September 30, 2021, $2.7 billion at June 30, 2021 and $3.0 billion at September 30, 2020. The decrease from June 30, 2021 to September 30, 2021 and the decrease from September 30, 2020 to September 30, 2021 were both primarily due to larger loan paydowns than loan originations.

The decrease in loans was also impacted by the decrease in the Company’s PPP loans which were $100.8 million, net of deferred fees and unearned discounts, at September 30, 2021, $179.1 million at June 30, 2021 and $324.3 million at September 30, 2020. During the third quarter of 2021, no PPP loans were originated and payments totaling $80.6 million were received. During the second quarter of 2021, $20.4 million of PPP loans were originated and payments totaling $110.4 million were received.

In support of customers impacted by the COVID-19 pandemic, the Company offered relief through payment deferrals during 2020 and the first nine months of 2021. As of September 30, 2021, the Company had 7 loans subject to such deferral arrangements with outstanding principal balances of $18.8 million and 9 loans on deferral arrangements with total outstanding principal balances of $20.5 million at June 30, 2021 and 41 loans on deferral arrangement with total outstanding principal balances totaling $82.4 million at September 30, 2020.

Cash and Cash Equivalents

Cash and equivalents increased $210.4 million from June 30, 2021 to September 30, 2021 and $621.2 million from September 30, 2020 to September 30, 2021. These increases are primarily due to loan payments received and net deposit inflows.

Securities

Securities were $359.5 million at September 30, 2021, $309.2 million at June 30, 2021 and $226.1 million at September 30, 2020. The increase in securities was primarily due to purchases out pacing maturities, call and paydowns.

Deposits and Borrowings

Total deposits were $3.5 billion at September 30, 2021, $3.4 billion at June 30, 2021 and $3.2 billion at September 30, 2020. The increase in deposits of $114.8 million between June 30, 2021 and September 30, 2021 was due to net deposit inflows of $43.5 million in interest-bearing accounts and net deposit inflows of $71.4 million in non-interest-bearing accounts. The increase in deposits of $361.0 million between September 30, 2020 and September 30, 2021 was due to net deposit inflows of $193.8 million and $167.2 million in interest-bearing accounts and noninterest-bearing accounts, respectively.

The Company defines total borrowings as the total of repurchase agreements, Federal Home Loan Bank advances and notes payable. Total borrowings were $50.0 million, $50.0 million and $52.2 million at September 30, 2021, June 30, 2021 and September 30, 2020, respectively.

Capital

At September 30, 2021, the Company continued to be well capitalized and maintained strong capital ratios under bank regulatory requirements. The Company’s total risk-based capital ratio was 18.12% at September 30, 2021, compared to 17.72% at June 30, 2021 and 16.67% at September 30, 2020. The Company’s tier 1 leverage ratio was 11.69% at September 30, 2021, compared to 11.63% at June 30, 2021 and 11.90% at September 30, 2020. The Company’s total shareholders’ equity to total assets ratio was 13.41% at September 30, 2021, 13.68% at June 30, 2021 and 14.18% at September 30, 2020.

The ratio of tangible equity to tangible assets was 11.64% at September 30, 2021, 11.84% at June 30, 2021 and 12.22% at September 30, 2020. Tangible equity to tangible assets is a non-GAAP financial measure. The most directly comparable financial measure calculated in accordance with United States generally accepted accounting principles, or GAAP, to tangible equity to tangible assets is total shareholders’ equity to total assets. See the table captioned “Non-GAAP to GAAP Reconciliation” at the end of this earnings release.

Non-GAAP Financial Measures

This earnings release contains certain non-GAAP financial measures including “tangible book value,” “tangible book value per share,” and “tangible equity to tangible assets,” which are supplemental measures that are not required by, or are not presented in accordance with, GAAP. Please refer to the table titled “Non-GAAP to GAAP Reconciliation” at the end of this earnings release for a reconciliation of these non-GAAP financial measures.

Conference Call Information

The Company will hold a conference call to discuss third quarter 2021 financial results on Thursday, October 28, 2021 at 8:00 a.m. Central Time (9:00 a.m. Eastern Time). Investors and interested parties may listen to the teleconference via telephone by calling (877) 620-1733 if calling from the U.S. or Canada (or (470) 414-9785 if calling from outside the U.S.). The conference call ID number is 5048704. To access the live webcast of the conference call, individuals can visit the Investor Relations page of the Company’s website: https://ir.cbtxinc.com/events-and-presentations. An archived edition of the earnings webcast will also be posted on the Company’s website later that day and will remain available to interested parties via the same link for one year.

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

About CBTX, Inc.

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

Forward-Looking Statements

This earnings release may contain certain forward-looking statements within the meaning of the securities laws that are based on various facts and derived utilizing important assumptions, current expectations, estimates and projections about the Company and its subsidiary. Forward-looking statements include information regarding the Company’s future financial performance, business and growth strategy, projected plans and objectives, as well as projections of macroeconomic and industry trends, which are inherently unreliable due to the multiple factors that impact economic trends, and any such variations may be material. Statements preceded by, followed by or that otherwise include the words “believes,” “expects,” “anticipates,” “intends,” “projects,” “estimates,” “plans” and similar expressions or future or conditional verbs such as “will,” “should,” “would,” “may” and “could” are generally forward-looking in nature and not historical facts, although not all forward-looking statements include the foregoing. Further, certain factors that could affect our future results and cause actual results to differ materially from those expressed in the forward-looking statements include, but are not limited to: natural disasters and adverse weather on the Company’s market area, acts of terrorism, pandemics, an outbreak of hostilities or other international or domestic calamities and other matters beyond the Company’s control; the Company’s ability to manage the economic risks related to the impact of the COVID-19 pandemic (including risks related to its customers’ credit quality, deferrals and modifications to loans); the geographic concentration of the Company’s markets in Houston and Beaumont, Texas; the Company’s ability to manage changes and the continued health or availability of management personnel; the amount of nonperforming and classified assets that the Company holds and the time and effort necessary to resolve nonperforming assets; deterioration of asset quality; interest rate risk associated with the Company’s business; national business and economic conditions in general, in the financial services industry and within the Company’s primary markets; sustained instability of the oil and gas industry in general and within Texas; the composition of the Company’s loan portfolio, including the identity of the Company’s borrowers and the concentration of loans in specialized industries; changes in the value of collateral securing the Company’s loans; the Company’s ability to maintain important deposit customer relationships and its reputation; the Company’s ability to maintain effective internal control over financial reporting; the Company’s ability to pursue available remedies in the event of a loan default for PPP loans and the risk of holding such loans at unfavorable interest rates and on terms that are less favorable than those with customers to whom the Company would have otherwise lent; volatility and direction of market interest rates; liquidity risks associated with the Company’s business; systems failures, interruptions or breaches involving the Company’s information technology and telecommunications systems or third-party servicers; the failure of certain third-party vendors to perform; the institution and outcome of litigation and other legal proceedings against the Company or to which it may become subject; the operational risks associated with the Company’s business; the costs, effects and results of regulatory examinations, investigations, including the ongoing investigation by the Financial Crimes Enforcement Network of the U.S. Department of Treasury, or FinCEN, or reviews or the ability to obtain required regulatory approvals; the possible results and amount of civil money penalties related to such FinCEN investigation and the Company’s BSA/AML program; changes in the laws, rules, regulations, interpretations or policies relating to financial institution, accounting, tax, trade, monetary and fiscal matters; governmental or regulatory responses to the COVID-19 pandemic that may impact the Company’s loan portfolio and forbearance practice; further government intervention in the U.S. financial system that may impact how the Company achieves its performance goals; and other risks, uncertainties, and factors that are discussed from time to time in the Company’s reports and documents filed with the SEC. Additionally, many of these risks and uncertainties have been elevated by and may continue to be elevated by the COVID-19 pandemic.

The foregoing factors should not be construed as exhaustive and should be read together with the other cautionary statements included in the Company’s Annual Report on Form 10-K, filed with the Securities and Exchange Commission, or SEC, and other reports and statements that the Company has filed with the SEC. If one or more events related to these or other risks or uncertainties materialize, or if the Company’s underlying assumptions prove to be incorrect, actual results may differ materially from what it anticipates. Accordingly, you should not place undue reliance on any such forward-looking statements. Any forward-looking statement speaks only as of the date on which it is made, and the Company does not undertake any obligation to publicly update or review any forward-looking statement, whether as a result of new information, future developments or otherwise. New factors emerge from time to time, and it is not possible for the Company to predict which will arise. In addition, the Company cannot assess the impact of each factor on its business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. Copies of the SEC filings for the Company are available for download free of charge from www.communitybankoftx.com under the Investor Relations tab.


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

Three Months Ended

Nine Months Ended

9/30/2021

6/30/2021

3/31/2021

12/31/2020

9/30/2020

9/30/2021

9/30/2020

Profitability:

Net income

$

14,421

$

11,703

$

10,019

$

10,236

$

6,421

$

36,143

$

16,125

Basic earnings per share

$

0.59

$

0.48

$

0.41

$

0.42

$

0.26

$

1.48

$

0.65

Diluted earnings per share

$

0.59

$

0.48

$

0.41

$

0.41

$

0.26

$

1.47

$

0.65

Return on average assets(1)

1.37

%

1.14

%

1.03

%

1.05

%

0.66

%

1.19

%

0.58

%

Return on average shareholders' equity(1)

10.15

%

8.49

%

7.39

%

7.47

%

4.70

%

8.70

%

3.97

%

Net interest margin - tax equivalent(1)

3.22

%

3.29

%

3.71

%

3.62

%

3.55

%

3.40

%

3.76

%

Efficiency ratio(2)

66.21

%

73.02

%

64.32

%

65.64

%

66.77

%

67.76

%

63.76

%

Liquidity and Capital Ratios:

Total shareholders' equity to total assets

13.41

%

13.68

%

13.54

%

13.84

%

14.18

%

13.41

%

14.18

%

Tangible equity to tangible assets(3)

11.64

%

11.84

%

11.67

%

11.94

%

12.22

%

11.64

%

12.22

%

Common equity tier 1 capital ratio

16.87

%

16.46

%

15.75

%

15.45

%

15.41

%

16.87

%

15.41

%

Tier 1 risk-based capital ratio

16.87

%

16.46

%

15.75

%

15.45

%

15.41

%

16.87

%

15.41

%

Total risk-based capital ratio

18.12

%

17.72

%

17.00

%

16.71

%

16.67

%

18.12

%

16.67

%

Tier 1 leverage ratio

11.69

%

11.63

%

11.90

%

12.00

%

11.90

%

11.69

%

11.90

%

Credit Quality:

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

1.23

%

1.36

%

1.41

%

1.39

%

1.49

%

1.23

%

1.49

%

Nonperforming assets to total assets

0.49

%

0.52

%

0.59

%

0.61

%

0.41

%

0.49

%

0.41

%

Nonperforming loans to loans excluding loans held for sale

0.79

%

0.77

%

0.81

%

0.82

%

0.53

%

0.79

%

0.53

%

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

(0.01

)%

(0.07

)%

0.01

%

0.49

%

0.02

%

(0.03

)%

Other Data:

Weighted average common shares outstanding - basic

24,432

24,447

24,508

24,621

24,748

24,462

24,808

Weighted average common shares outstanding - diluted

24,544

24,571

24,616

24,678

24,770

24,572

24,847

Common shares outstanding at period end

24,420

24,450

24,442

24,613

24,713

24,420

24,713

Dividends per share

$

0.13

$

0.13

$

0.13

$

0.10

$

0.10

$

0.39

$

0.30

Book value per share

$

23.12

$

22.75

$

22.31

$

22.20

$

21.89

$

23.12

$

21.89

Tangible book value per share(3)

$

19.65

$

19.28

$

18.84

$

18.74

$

18.44

$

19.65

$

18.44

Employees - full-time equivalents

520

529

517

511

515

520

515



(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
(In thousands)

9/30/2021

6/30/2021

3/31/2021

12/31/2020

9/30/2020

Loans excluding loans held for sale

$

2,608,402

$

2,729,496

$

2,891,632

$

2,924,117

$

2,964,526

Allowance for credit losses for loans

(32,208

)

(37,183

)

(40,874

)

(40,637

)

(44,069

)

Loans, net

2,576,194

2,692,313

2,850,758

2,883,480

2,920,457

Cash and equivalents

998,785

788,409

604,671

538,007

377,572

Securities

359,539

309,233

289,091

237,281

226,101

Premises and equipment

59,235

59,987

60,551

61,152

61,732

Goodwill

80,950

80,950

80,950

80,950

80,950

Other intangible assets

3,702

3,846

3,991

4,171

4,303

Loans held for sale

327

808

1,005

2,673

1,763

Operating lease right-to-use asset

11,527

12,514

12,900

13,285

12,893

Other assets

118,860

118,474

124,722

128,218

128,901

Total assets

$

4,209,119

$

4,066,534

$

4,028,639

$

3,949,217

$

3,814,672

Noninterest-bearing deposits

$

1,628,144

$

1,556,784

$

1,621,408

$

1,476,425

$

1,460,983

Interest-bearing deposits

1,903,491

1,860,002

1,763,339

1,825,369

1,709,681

Total deposits

3,531,635

3,416,786

3,384,747

3,301,794

3,170,664

Federal Home Loan Bank advances

50,000

50,000

50,000

50,000

50,000

Repurchase agreements

2,153

Operating lease liabilities

14,556

15,590

16,060

16,447

15,759

Other liabilities

48,335

27,931

32,483

34,525

35,175

Total liabilities

3,644,526

3,510,307

3,483,290

3,402,766

3,273,751

Total shareholders’ equity

564,593

556,227

545,349

546,451

540,921

Total liabilities and shareholders’ equity

$

4,209,119

$

4,066,534

$

4,028,639

$

3,949,217

$

3,814,672


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

Three Months Ended

Nine Months Ended

9/30/2021

6/30/2021

3/31/2021

12/31/2020

9/30/2020

9/30/2021

9/30/2020

Interest income

Interest and fees on loans

$

30,765

$

30,793

$

33,165

$

32,886

$

32,318

$

94,723

$

98,792

Securities

1,435

1,332

1,173

1,070

1,107

3,940

3,698

Interest-bearing deposits at other financial institutions

340

223

177

168

176

740

1,400

Equity investments

157

158

146

170

162

461

509

Total interest income

32,697

32,506

34,661

34,294

33,763

99,864

104,399

Interest expense

Deposits

1,227

1,267

1,350

1,549

1,831

3,844

7,619

Federal Home Loan Bank advances

221

221

221

221

221

663

682

Other interest-bearing liabilities

4

3

12

Total interest expense

1,448

1,488

1,571

1,774

2,055

4,507

8,313

Net interest income

31,249

31,018

33,090

32,520

31,708

95,357

96,086

Provision (recapture) for credit losses

Provision (recapture) for credit losses for loans

(5,057

)

(4,190

)

286

229

4,569

(8,961

)

17,845

Provision (recapture) for credit losses for unfunded commitments

162

(893

)

126

(364

)

(461

)

(605

)

1,182

Total provision (recapture) for credit losses

(4,895

)

(5,083

)

412

(135

)

4,108

(9,566

)

19,027

Net interest income after provision (recapture) for credit losses

36,144

36,101

32,678

32,655

27,600

104,923

77,059

Noninterest income

Deposit account service charges

1,352

1,167

1,193

1,270

1,176

3,712

3,756

Card interchange fees

1,048

1,095

976

999

995

3,119

2,832

Earnings on bank-owned life insurance

2,323

390

390

407

1,187

3,103

2,015

Net gain on sales of assets

360

366

192

379

114

918

376

Other

479

473

360

467

551

1,312

2,280

Total noninterest income

5,562

3,491

3,111

3,522

4,023

12,164

11,259

Noninterest expense

Salaries and employee benefits

15,000

14,734

14,188

12,848

14,332

43,922

42,567

Occupancy expense

2,660

2,597

2,521

2,628

2,496

7,778

7,478

Professional and director fees

1,567

2,441

1,703

3,209

2,446

5,711

5,139

Data processing and software

1,629

1,661

1,576

1,330

1,525

4,866

4,039

Regulatory fees

478

501

556

748

471

1,535

1,050

Advertising, marketing and business development

493

510

285

438

429

1,288

1,062

Telephone and communications

516

550

463

455

486

1,529

1,297

Security and protection expense

425

537

390

423

299

1,352

1,024

Amortization of intangibles

182

186

191

197

198

559

649

Other expenses

1,422

1,480

1,412

1,382

1,176

4,314

4,137

Total noninterest expense

24,372

25,197

23,285

23,658

23,858

72,854

68,442

Net income before income tax expense

17,334

14,395

12,504

12,519

7,765

44,233

19,876

Income tax expense

2,913

2,692

2,485

2,283

1,344

8,090

3,751

Net income

$

14,421

$

11,703

$

10,019

$

10,236

$

6,421

$

36,143

$

16,125


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

Three Months Ended

9/30/2021

6/30/2021

9/30/2020

Average

Interest

Average

Average

Interest

Average

Average

Interest

Average

Outstanding

Earned/

Yield/

Outstanding

Earned/

Yield/

Outstanding

Earned/

Yield/

Balance

Interest Paid

Rate(1)

Balance

Interest Paid

Rate(1)

Balance

Interest Paid

Rate(1)

Assets

Interest-earning assets:

Total loans(2)

$

2,702,248

$

30,765

4.52

%

$

2,835,995

$

30,793

4.36

%

$

2,945,320

$

32,318

4.37

%

Securities

327,968

1,435

1.74

%

302,808

1,332

1.76

%

236,015

1,107

1.87

%

Interest-bearing deposits at other financial institutions

854,406

340

0.16

%

670,508

223

0.13

%

383,626

176

0.18

%

Equity investments

13,367

157

4.66

%

15,338

158

4.13

%

15,334

162

4.20

%

Total interest-earning assets

3,897,989

$

32,697

3.33

%

3,824,649

$

32,506

3.41

%

3,580,295

$

33,763

3.75

%

Allowance for credit losses for loans

(36,945

)

(40,806

)

(40,135

)

Noninterest-earning assets

313,901

317,115

326,590

Total assets

$

4,174,945

$

4,100,958

$

3,866,750

Liabilities and Shareholders’ Equity

Interest-bearing liabilities:

Interest-bearing deposits

$

1,895,617

$

1,227

0.26

%

$

1,839,812

$

1,267

0.28

%

$

1,730,812

$

1,831

0.42

%

Federal Home Loan Bank advances

50,000

221

1.75

%

50,000

221

1.77

%

50,000

221

1.76

%

Other interest-bearing liabilities

2,230

3

0.54

%

Total interest-bearing liabilities

1,945,617

$

1,448

0.30

%

1,889,812

$

1,488

0.32

%

1,783,042

$

2,055

0.46

%

Noninterest-bearing liabilities:

Noninterest-bearing deposits

1,612,985

1,611,565

1,484,557

Other liabilities

52,712

46,774

55,386

Total noninterest-bearing liabilities

1,665,697

1,658,339

1,539,943

Shareholders’ equity

563,631

552,807

543,765

Total liabilities and shareholders’ equity

$

4,174,945

$

4,100,958

$

3,866,750

Net interest income

$

31,249

$

31,018

$

31,708

Net interest spread(3)

3.03

%

3.09

%

3.29

%

Net interest margin(4)

3.18

%

3.25

%

3.52

%

Net interest margin - tax equivalent(5)

3.22

%

3.29

%

3.55

%



(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 $369,000, $321,000 and $258,000 for the quarters ended September 30, 2021, June 30, 2021 and September 30, 2020, respectively, were computed using a federal income tax rate of 21%.


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

Nine Months Ended September 30,

2021

2020

Average

Interest

Average

Average

Interest

Average

Outstanding

Earned/

Yield/

Outstanding

Earned/

Yield/

(Dollars in thousands)

Balance

Interest Paid

Rate(1)

Balance

Interest Paid

Rate(1)

Assets

Interest-earning assets:

Total loans(2)

$

2,812,449

$

94,723

4.50

%

$

2,829,767

$

98,792

4.66

%

Securities

296,958

3,940

1.77

%

236,756

3,698

2.09

%

Interest-bearing deposits at other financial institutions

668,119

740

0.15

%

359,134

1,400

0.52

%

Equity investments

14,679

461

4.20

%

14,716

509

4.62

%

Total interest-earning assets

3,792,205

$

99,864

3.52

%

3,440,373

$

104,399

4.05

%

Allowance for credit losses for loans

(39,594

)

(32,499

)

Noninterest-earning assets

318,009

309,778

Total assets

$

4,070,620

$

3,717,652

Liabilities and Shareholders’ Equity

Interest-bearing liabilities:

Interest-bearing deposits

$

1,846,211

$

3,844

0.28

%

$

1,689,772

$

7,619

0.60

%

Federal Home Loan Bank advances

50,000

663

1.77

%

56,898

682

1.60

%

Other interest-bearing liabilities

1,700

12

0.95

%

Total interest-bearing liabilities

1,896,211

$

4,507

0.32

%

1,748,370

$

8,313

0.64

%

Noninterest-bearing liabilities:

Noninterest-bearing deposits

1,568,071

1,377,594

Other liabilities

50,966

48,881

Total noninterest-bearing liabilities

1,619,037

1,426,475

Shareholders’ equity

555,372

542,807

Total liabilities and shareholders’ equity

$

4,070,620

$

3,717,652

Net interest income

$

95,357

$

96,086

Net interest spread(3)

3.20

%

3.41

%

Net interest margin(4)

3.36

%

3.73

%

Net interest margin - tax equivalent(5)

3.40

%

3.76

%



(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 $989,000 and $754,000 for the nine months ended September 30, 2021 and 2020, respectively, were computed using a federal income tax rate of 21%.


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

Three Months Ended September 30, 2021,

Compared to Three Months Ended June 30, 2021

Increase (Decrease) due to

(Dollars in thousands)

Rate

Volume

Days

Total

Interest-earning assets:

$

1,087