CBTX, Inc. Reports Third Quarter Financial Results

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

Highlights  

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

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

Operating Results:

Net Interest Income

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

Noninterest Income

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

Noninterest Expense

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

Provision (Recapture) for Loan Losses  

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

Income Taxes

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

Balance Sheet Highlights:

Loans

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

Asset Quality

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

Deposits and Borrowings

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

Capital

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

About CBTX, Inc.

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

Forward-Looking Statements

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

(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.”

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

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

(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%.

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

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: