Cbtx, Inc. (CBTX) 8-K Earnings Release

Houston, Texas, October 25, 2018-- CBTX, Inc. (the “Company”) (NASDAQ: CBTX), the bank holding company for CommunityBank of Texas N.A., today announced net income of $13.0 million, or $0.52 per diluted share, for the quarter ended September 30, 2018, compared to $10.0 million, or $0.45 per diluted share, for the quarter ended September 30, 2017 and $11.0 million, or $0.44 per diluted share, for the quarter ended June 30, 2018.

For 2018, net income and earnings per share were positively impacted by the 14% reduction of the corporate U.S. statutory federal tax rate from 35% to 21% as a result of the enactment of the Tax Cuts and Jobs Act (the “Tax Act”), which became effective January 1, 2018.

Highlights

Total loans, excluding loans held for sale, increased $59.1 million, or 9.8% annualized, to $2.5 billion compared to the quarter ended June 30, 2018.

Net interest income for the quarter ended September 30, 2018 totaled $31.5 million, an increase of 2.1% from the second quarter of 2018, primarily due to the impact of increased average loans and average federal funds sold, partially offset by the impact of increased interest-bearing deposits and increased rates on those deposits.

The efficiency ratio improved to 57.0% for the quarter ended September 30, 2018, compared to 58.2% for the quarter ended June 30, 2018.

Operating Results:

Net Interest Income

Net interest income was $31.5 million for the third quarter of 2018, compared to $27.3 million for the third quarter of 2017 and $30.9 million for the second quarter of 2018. The increase in net interest income in the third quarter of 2018 from the third quarter of 2017, was primarily due to increased average loans and increased average yields on loans and federal funds sold. The increase in net interest income in the third quarter of 2018 from the second quarter of 2018 was due to increased average loans and average federal funds sold, partially offset by the impact of increased interest-bearing deposits and increased rates on those deposits.

The yield on interest-earning assets was 4.70% for the third quarter of 2018, compared to 4.32% for the third quarter of 2017 and 4.71% for the second quarter of 2018.

The cost of interest-bearing liabilities, including borrowings, was 0.80% for the third quarter of 2018, compared to 0.60% for the third quarter of 2017 and 0.60% for the second quarter of 2018.

The net interest margin was 4.28% for the third quarter of 2018 compared to 3.98% for the third quarter of 2017 and 4.39% for the second quarter of 2018.

Provision (Recapture) for Loan Losses

Provision for loan loss was a recapture of $1.1 million for the third quarter of 2018, compared to a recapture of $1.7 million for the third quarter of 2017 and a provision of $690,000 for the second quarter of 2018. The recapture in the third quarter of 2018 was driven by strong credit quality, improved national and local economic trends, continuing low nonperforming and impaired loans and minimal charge-off history. The recapture during

the third quarter of 2017 resulted from pay-offs of certain classified and problem loans, which resulted in the reversal of their related allowance for loan losses.

The allowance for loan losses was $24.5 million, or 0.99% of total loans, at September 30, 2018, compared to $23.8 million, or 1.08% of total loans, at September 30, 2017 and $25.7 million, or 1.07% of total loans, at June 30, 2018.

Noninterest Income

Noninterest income was $3.5 million for the third quarter of 2018, $4.1 million for the third quarter of 2017 and $3.5 million for the second quarter of 2018. Noninterest income for the third quarter of 2017 is higher compared to the third quarter of 2018 primarily due to gains on sales of two branches recorded in the third quarter of 2017.

Noninterest income was relatively flat from the second quarter of 2018 to the third quarter of 2018.

Noninterest Expense

Noninterest expense was $20.0 million for the third quarter of 2018, $19.0 million for the third quarter of 2017 and $20.0 million for the second quarter of 2018.

Noninterest expense increased $947,000 in the third quarter of 2018 compared to the third quarter of 2017 primarily due to increased salaries and employee benefits, partially offset by decreased repossessed and other asset expenses. Although we sold two branches in the third quarter of 2017, net occupancy expense increased $207,000 or 9.3% in the third quarter of 2018 compared to the third quarter of 2017. This increase is primarily due to increased costs for repairs and maintenance and other expenses.

Noninterest expense during the third quarter of 2018 compared to the second quarter of 2018 was relatively flat.

Income Taxes

Income tax expense was $3.2 million for the third quarter of 2018, $3.9 million for the third quarter of 2017 and $2.6 million for the second quarter of 2018.

The effective tax rates were 19.8% for the third quarter of 2018, 28.1% for the third quarter of 2017 and 19.3% for the second quarter of 2018. The effective tax rate for the second and third quarter of 2018 primarily reflects the reduction of the federal tax rate from 35% to 21% effective January 1, 2018 as a result of the Tax Act.

Balance Sheet Highlights:

Loans

Loans were $2.5 billion at September 30, 2018, $2.2 billion at September 30, 2017 and $2.4 billion at June 30, 2018. The increases from the prior year and second quarter are primarily due to organic growth.

Asset Quality

Nonperforming assets remain low relative to total assets at $5.8 million, or 0.18% of total assets, at September 30, 2018, $9.7 million, or 0.33% of total assets, at September 30, 2017 and $4.9 million, or 0.16% of total assets at June 30, 2018.

Annualized net charge-offs (recoveries) to average loans were 0.02% for the third quarter of 2018, (0.04%) for the third quarter of 2017 and 0.05% for the second quarter of 2018.

Deposits and Borrowings

Total deposits were $2.7 billion at September 30, 2018, compared to $2.6 billion at September 30, 2017 and $2.6 billion at June 30, 2018.

Our total borrowings are comprised of notes payable, repurchase agreements and Federal Home Loan Bank (FHLB) advances and were $1.4 million at September 30, 2018, $26.6 million at September 30, 2017 and $51.4 million at June 30, 2018. The decrease in borrowings from June 30, 2018 to September 30, 2018 is due to the payoff of FHLB short-term advances of $50 million outstanding at June 30, 2018. Borrowings at September 30, 2017 include $24.4 million for our note payable, which was repaid due to scheduled payments and repayment in full during the quarter ended December 31, 2017.

Capital

At September 30, 2018, the Company remained well capitalized under bank regulatory requirements. Our ratio of total shareholders’ equity to total assets was 14.8% at September 30, 2018, 12.8% at September 30, 2017 and 14.9% at June 30, 2018.

Our ratio of tangible equity to tangible assets was 12.4% at September 30, 2018, 10.1% at September 30, 2017 and 12.4% at June 30, 2018. Tangible equity to tangible assets is a non‑GAAP financial measure. See the table captioned “Non‑GAAP to GAAP Reconciliation” at the end of this earnings release. Our ratios of total shareholders’ equity to total assets and tangible equity to tangible assets both increased from September 30, 2017 to September 30, 2018 due to our November 2017 initial public offering of our common stock and earnings between those periods.

About CBTX, Inc.

CBTX, Inc. is the bank holding company for CommunityBank of Texas, N.A., a $3.2 billion asset bank, offering commercial banking solutions to local small and mid-sized businesses and professionals in Houston, Beaumont and surrounding communities in southeast Texas. Visit www.communitybankoftx.com for more information.

Forward-Looking Statements

This release may contain certain forward-looking statements within the meaning of the securities laws that are based on various facts and derived utilizing important assumptions, current expectations, estimates and projections about the Company and its subsidiary. Forward-looking statements include information regarding the Company’s future financial performance, business and growth strategy, projected plans and objectives, as well as projections of macroeconomic and industry trends, which are inherently unreliable due to the multiple factors that impact economic trends, and any such variations may be material. Statements preceded by, followed by or that otherwise include the words “believes,” “expects,” “anticipates,” “intends,” “projects,” “estimates,” “plans” and similar expressions or future or conditional verbs such as “will,” “should,” “would,” “may” and “could” are generally forward-looking in nature and not historical facts, although not all forward-looking statements include the foregoing. Further, certain factors that could affect our future results and cause actual results to differ materially from those expressed in the forward-looking statements include, but are not limited to, whether the Company can: prudently manage and execute its growth strategy; manage risks associated with its acquisition and de novo branching strategy; maintain its asset quality; address the volatility and direction of market interest rates; continue to have access to debt and equity capital markets; and achieve its performance goals. The foregoing factors should not be construed as exhaustive and should be read together with the other cautionary statements included in the Company’s 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

Condensed Consolidated Balance Sheets (Unaudited)

(In thousands)


Balance Sheet Data (at period end):	9/30/2018		6/30/2018		3/31/2018		12/31/2017		9/30/2017

Loans, excluding loans held for sale	$	2,463,197	$	2,404,132	$	2,356,053	$	2,311,544	$	2,199,478
Allowance for loan losses		(24,486)		(25,746)		(25,349)		(24,778)		(23,757)
Loans, net		2,438,711		2,378,386		2,330,704		2,286,766		2,175,721

Cash and equivalents		281,640		245,265		279,915		326,199		348,578
Debt securities		222,493		230,393		221,183		223,208		217,660
Premises and equipment, net		52,032		52,607		53,135		53,607		54,129
Goodwill		80,950		80,950		80,950		80,950		80,950
Other intangible assets, net		6,038		6,276		6,521		6,770		7,031
Repossessed real estate and other assets		175		137		295		705		1,136
Loans held for sale		384		560		113		1,460		466
Other assets		108,030		106,186		101,974		101,418		104,167
Total Assets	$	3,190,453	$	3,100,760	$	3,074,790	$	3,081,083	$	2,989,838

Noninterest-bearing deposits	$	1,144,985	$	1,114,155	$	1,120,521	$	1,109,789	$	1,051,755
Interest-bearing deposits		1,545,095		1,447,119		1,479,181		1,493,183		1,502,872
Total deposits		2,690,080		2,561,274		2,599,702		2,602,972		2,554,627

Note payable		-		-		-		-		24,357
Repurchase agreements		1,351		1,448		861		1,525		2,239
Federal Home Loan Bank advances		-		50,000		-		-		-
Junior subordinated debt		6,726		6,726		6,726		6,726		6,726
Other liabilities		20,445		20,117		15,930		23,646		20,768
Total Liabilities		2,718,602		2,639,565		2,623,219		2,634,869		2,608,717

Shareholders' Equity		471,851		461,195		451,571		446,214		381,121
Total Liabilities and Shareholders' Equity	$	3,190,453	$	3,100,760	$	3,074,790	$	3,081,083	$	2,989,838

CBTX, INC. AND SUBSIDIARY

Condensed Consolidated Statements of Income (Unaudited)

(In thousands)


	For the Three Months Ended										For the Nine Months Ended
	9/30/2018		6/30/2018		3/31/2018		12/31/2017		9/30/2017		9/30/2018		9/30/2017
Interest Income
Interest and fees on loans	$	31,513	$	30,493	$	28,462	$	27,726	$	27,129	$	90,468	$	79,642
Securities		1,535		1,507		1,436		1,357		1,334		4,478		3,990
Federal Funds and interest-bearing deposits		1,617		1,127		1,187		1,283		1,106		3,931		2,661
Total Interest Income		34,665		33,127		31,085		30,366		29,569		98,877		86,293
Interest Expense
Deposits		2,961		2,126		1,948		1,993		1,964		7,035		5,659
Repurchase agreements		1		1		1		—		2		3		5
Federal Home Loan Bank advances		61		12		—		—		—		73		—
Note payable		4		3		4		122		269		11		784
Junior subordinated debt		112		109		93		86		83		314		236
Total Interest Expense		3,139		2,251		2,046		2,201		2,318		7,436		6,684
Net Interest Income		31,526		30,876		29,039		28,165		27,251		91,441		79,609
Provision (Recapture) for Loan Losses		(1,142)		690		865		1,050		(1,654)		413		(1,388)
Net Interest Income After Provision (Recapture) for Loan Losses		32,668		30,186		28,174		27,115		28,905		91,028		80,997
Noninterest Income
Deposit account service charges		1,597		1,497		1,478		1,388		1,395		4,572		4,412
Net gain (loss) on sale of assets		152		210		130		(7)		828		492		1,531
Card interchange fees		922		971		927		941		803		2,820		2,512
Earnings on bank-owned life insurance		443		465		451		460		459		1,359		1,120
Other		412		363		375		362		601		1,150		1,485
Total Noninterest Income		3,526		3,506		3,361		3,144		4,086		10,393		11,060
Noninterest Expense
Salaries and employee benefits		12,499		12,496		12,695		14,021		11,829		37,690		34,552
Net occupancy expense		2,428		2,433		2,265		2,346		2,221		7,126		6,805
Regulatory fees		488		513		545		487		458		1,546		1,689
Data processing		664		666		683		674		662		2,013		1,955
Printing, stationery and office		503		480		411		415		348		1,394		1,065
Amortization of intangibles		245		248		255		263		267		748		816
Professional and director fees		809		686		919		1,168		606		2,414		1,937
Correspondent bank and customer related transaction expenses		66		68		67		67		67		201		219
Loan processing costs		102		75		118		141		115		295		320
Advertising, marketing and business development		437		475		506		508		266		1,418		953
Repossessed real estate and other asset expense		3		5		57		66		340		65		543
Security and protection expense		346		311		302		300		331		959		1,055
Telephone and communications		342		394		386		344		311		1,122		972
Other expenses		1,032		1,162		1,075		1,189		1,196		3,269		3,422
Total Noninterest Expense		19,964		20,012		20,284		21,989		19,017		60,260		56,303
Net Income Before Income Tax Expense		16,230		13,680		11,251		8,270		13,974		41,161		35,754
Income Tax Expense		3,207		2,638		2,139		6,313		3,927		7,984		10,140
Net Income	$	13,023	$	11,042	$	9,112	$	1,957	$	10,047	$	33,177	$	25,614

CBTX, INC. AND SUBSIDIARY

Financial Highlights (Unaudited)

(In thousands, except per share data and percentages)


	For the Three Months Ended															For the Nine Months Ended
	9/30/2018			6/30/2018			3/31/2018			12/31/2017			9/30/2017			9/30/2018			9/30/2017
Profitability:
Net income	$	13,023		$	11,042		$	9,112		$	1,957		$	10,047		$	33,177		$	25,614
Basic earnings per share	$	0.52		$	0.44		$	0.37		$	0.08		$	0.46		$	1.34		$	1.16
Diluted earnings per share	$	0.52		$	0.44		$	0.37		$	0.08		$	0.45		$	1.33		$	1.16

Return on average assets (1)		1.6	%		1.4	%		1.2	%		0.3	%		1.3	%		1.4	%		1.2	%
Return on average shareholders' equity (1)		11.0	%		9.7	%		8.2	%		1.8	%		10.5	%		9.7	%		8.6	%
Net interest margin- tax equivalent (1)		4.3	%		4.4	%		4.2	%		4.1	%		4.1	%		4.3	%		4.1	%
Efficiency ratio (2)		57.0	%		58.2	%		62.6	%		70.2	%		60.7	%		59.2	%		62.1	%

Liquidity and Capital Ratios:
Total shareholders' equity to total assets		14.8	%		14.9	%		14.7	%		14.5	%		12.8	%		14.8	%		12.8	%
Tangible equity to tangible assets (3)		12.4	%		12.4	%		12.2	%		12.0	%		10.1	%		12.4	%		10.1	%
Common equity tier 1 capital ratio		14.3	%		14.1	%		14.1	%		14.2	%		12.2	%		14.3	%		12.2	%
Tier 1 leverage ratio		12.8	%		12.9	%		12.6	%		12.3	%		10.5	%		12.8	%		10.5	%
Tier 1 risk-based capital ratio		14.5	%		14.3	%		14.4	%		14.4	%		12.5	%		14.5	%		12.5	%
Total risk-based capital ratio		15.4	%		15.3	%		15.4	%		15.4	%		13.5	%		15.4	%		13.5	%

Other Data:
Weighted average common shares outstanding- Basic		24,859			24,858			24,833			23,629			22,063			24,850			22,062
Weighted average common shares outstanding- Diluted		25,060			24,997			24,954			23,742			22,138			25,007			22,144
Common shares outstanding at period end		24,859			24,859			24,833			24,833			22,063			24,859			22,063
Dividends per share	$	0.05		$	0.05		$	0.05		$	0.05		$	0.05		$	0.15		$	0.15
Book value per share	$	19.0		$	18.6		$	18.2		$	18.0		$	17.3		$	19.0		$	17.3
Tangible book value per share (3)	$	15.5		$	15.0		$	14.7		$	14.4		$	13.3		$	15.5		$	13.3
Employees - full-time equivalents		489			488			477			462			464			489			464

(1)Quarterly ratios are annualized.

(2)Efficiency ratio represents noninterest expense divided by the sum of net interest income and noninterest income.

(3)Non‑GAAP financial measure. See the table captioned “Non‑GAAP to GAAP Reconciliation” at the end of this earnings release.

CBTX, INC. AND SUBSIDIARY

Net Interest Margin (Unaudited)

(In thousands, except percentages)

For the Three Months Ended

9/30/2018

6/30/2018

9/30/2017

Interest

Average

Earned/

Average

Earned/

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)

2,404,491

31,513

5.20

2,375,253

30,493

5.15

2,191,016

27,129

4.91

Debt securities

Cbtx, Inc. (CBTX) SEC Filing 8-K Material Event for the period ending Thursday, October 25, 2018

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CBTX Valuations

CBTX Annual Reports

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Cbtx, Inc.

Cbtx, Inc. (CBTX) SEC Filing 8-K Material Event for the period ending Thursday, October 25, 2018

SEC Filings

CBTX Valuations

CBTX Annual Reports

CBTX Quarterly Reports

CBTX Corporate News

CBTX Merger Prospectus

Last10K.com | 8-K Material Event Thu Oct 25 2018

Cbtx, Inc.