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Cbtx, Inc. (CBTX) SEC Filing 10-Q Quarterly report for the period ending Monday, September 30, 2019

SEC Filings

Cbtx, Inc.

CIK: 1473844 Ticker: CBTX

 

 

Picture 1 

Exhibit 99.1

 

 

CBTX, Inc. Reports Second Quarter Financial Results

 

Houston, Texas, July 25, 2019 -- 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 $14.3 million, or $0.57 per diluted share, for the quarter ended June 30, 2019, compared to $10.5 million, or $0.42 per diluted share, for the quarter ended March 31, 2019 and $11.0 million, or $0.44 per diluted share, for the quarter ended June 30, 2018. 

 

“We are pleased that the first half of 2019 gave us record profitability, solid loan growth, and strong credit quality,” said Robert Franklin, Jr., Chairman, Chief Executive Officer, and President of the Company. “Our dedicated team continues to work to build our business one quality relationship at a time,” he added. “For the rest of 2019, we will continue to focus on our goals and stay disciplined to our process which we feel drives shareholder value.”

 

“We continue to see good opportunities throughout our markets: Houston, East Texas, and Dallas,” said Franklin. “Although pricing in our markets continues to be challenging on both the loan and deposit sides, we believe that our strong discipline and relationship-driven approach gives us the ability to win new business while maintaining a solid net interest margin.”

 

Franklin further noted, “Our markets remain favorable and we look for that to continue through the remainder of the year. We are cautious about 2020 given the intensity of the political climate going into the presidential election along with downward pressure on interest rates, but we feel well positioned to weather the effects of either on our future.”

 

Highlights

 

·

Loans increased to $2.6 billion at June 30, 2019, compared to $2.5 billion at March 31, 2019 and $2.4 billion at June 30, 2018.  

·

Net interest margin on a tax equivalent basis was 4.53% for the quarter ended June 30, 2019, compared to 4.56% for the first quarter of 2019 and 4.43% for the second quarter of 2018. 

·

The cost of interest-bearing deposits remains low at 1.01% for the three months ended June 30, 2019, compared to 0.94% for the three months ended March 31, 2019 and 0.58% for the three months ended June 30, 2018.  

·

Noninterest income was $7.3 million for the second quarter of 2019, including a gain of $3.3 million recorded related to bank-owned life insurance.

·

Nonperforming assets remain low relative to total assets at 0.10% at June 30, 2019 compared to 0.09% of total assets at March 31, 2019 and 0.16% of total assets at June 30, 2018.  

Operating Results

Net Interest Income

Net interest income was $34.3 million for the second quarter of 2019, compared to $33.3 million for the first quarter of 2019 and $30.9 million for the second quarter of 2018.  The increase in net interest income in the second quarter of 2019 from the first quarter of 2019 was primarily due to higher average loans and the impact of one additional day in the second quarter of 2019 compared the first quarter of 2019, partially offset by higher average Federal Home Loan Bank, or FHLB,  advances and repurchase agreements. 

 

The increase in net interest income in the second quarter of 2019 from the second quarter of 2018 was primarily due to higher average loans, higher average yields on loans and higher yields on federal funds sold and other interest-earning assets, partially offset by the impact of higher rates on interest-bearing deposits and increased average FHLB advances and repurchase agreements.

 

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Provision for Loan Losses

 

Provision for loan loss was $807,000 for the second quarter of 2019, compared to $1.1 million for the first quarter of 2019 and $690,000  for the second quarter of 2018. 

 

The allowance for loan losses was $25.3 million, or 0.96% of total loans, at June 30, 2019, compared to $24.6 million, or 0.97% of total loans, at March 31, 2019, and $25.7 million, or 1.07% of total loans, at June 30, 2018.   

 

Noninterest Income

 

Noninterest income was $7.3 million for the second quarter of 2019,  $3.5 million for the first quarter of 2019 and $3.5 million for the second 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 $23.4 million for the second quarter of 2019,  $22.6 million for the first quarter of 2019 and $20.0 million for the second quarter of 2018.  Noninterest expense increased $818,000 during the second quarter of 2019 compared to the first quarter of 2019 primarily due to an increase in salaries and employee benefits resulting from increased headcount and increased legal fees included in professional and director fees The Bank incurred legal fees of $1.4 million in the second quarter of 2019 compared to $1.1 million in the first quarter of 2019. 

 

Noninterest expense increased  $3.4 million in the second quarter of 2019 compared to the second quarter of 2018. Salaries and benefits increased $1.7 million resulting from annual salary increases in 2019 and increased stock compensation expense due to grants of restricted stock during the current quarter. Professional and director fees increased due to legal fees noted above.

 

Income Taxes

 

Income tax expense was $3.1 million for the second quarter of 2019,  $2.6 million for the first quarter of 2019 and $2.6 million for the second quarter of 2018.  

 

The effective tax rates were 17.69% for the second quarter of 2019,  19.86% for the first quarter of 2019 and 19.28% for the second quarter of 2018.  The decrease in the effective tax rate for the second quarter of 2019 was due to the non-taxable gain related to bank-owned life insurance.

 

Balance Sheet Highlights:

 

Loans

 

Loans, excluding loans held for sale, were $2.6 billion at June 30, 2019,  $2.5 billion at March 31, 2019 and $2.4 billion at June 30, 2018.  Loans, excluding loans held for sale, increased 9.9%  during the twelve months ended June 30, 2019 due to organic growth.

 

Asset Quality 

 

Nonperforming assets remain low relative to total assets at $3.3 million, or 0.10% of total assets, at June 30, 2019,  $3.0 million, or 0.09% of total assets, at March 31, 2019 and $4.9 million, or 0.16% of total assets at June 30, 2018.

 

Annualized net charge-offs to average loans were 0.02% for the second quarter of 2019, 0.03% for the first quarter of 2019 and 0.05%  for the second quarter of 2018.  

 

 

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Deposits and Borrowings

 

Total deposits were $2.7 billion at June 30, 2019 and $2.8 billion at March 31, 2019 and $2.6 billion at June 30, 2018. Deposits increased 6.9%  during the twelve months ended June 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 $90.8 million, $1.6 million and $51.4 million at June 30, 2019, March 31, 2019 and June 30, 2018,  respectively.  Borrowings increased during the three months ended June 30, 2019 due to short-term liquidity needs.

 

Capital

 

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

 

Our ratio of tangible equity to tangible assets was 12.96% at June 30, 2019, 12.89% at March 31, 2019 and 12.41% at June 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 15.18% at June 30, 2019,  15.19% at March 31, 2019 and 14.87% at June 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,”

 

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“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.

 

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CBTX, INC. AND SUBSIDIARY

Financial Highlights (Unaudited)

(In thousands, except per share data and percentages)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

Six Months Ended

 

 

    

6/30/2019

    

3/31/2019

    

12/31/2018

    

9/30/2018

    

6/30/2018

    

6/30/2019

 

6/30/2018

 

Profitability:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

$

14,315

 

$

10,490

 

$

14,112

 

$

13,023

 

$

11,042

 

$

24,805

 

$

20,154

 

Basic earnings per share

 

$

0.57

 

$

0.42

 

$

0.57

 

$

0.52

 

$

0.44

 

$

1.00

 

$

0.81

 

Diluted earnings per share

 

$

0.57

 

$

0.42

 

$

0.56

 

$

0.52

 

$

0.44

 

$

0.99

 

$

0.81

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Return on average assets (1)

 

 

1.72%

 

 

1.30%

 

 

1.71%

 

 

1.62%

 

 

1.44%

 

 

1.52%

 

 

1.32%

 

Return on average shareholders' equity (1)

 

 

11.30%

 

 

8.59%

 

 

11.66%

 

 

11.02%

 

 

9.66%

 

 

9.97%

 

 

8.94%

 

Net interest margin- tax equivalent (1)

 

 

4.53%

 

 

4.56%

 

 

4.42%

 

 

4.31%

 

 

4.43%

 

 

4.55%

 

 

4.33%

 

Efficiency ratio (2)

 

 

56.25%

 

 

61.34%

 

 

58.67%

 

 

56.96%

 

 

58.20%

 

 

58.64%

 

 

60.34%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Liquidity and Capital Ratios:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total shareholders' equity to total assets

 

 

15.18%

 

 

15.19%

 

 

14.87%

 

 

14.79%

 

 

14.87%

 

 

15.18%

 

 

14.87%

 

Tangible equity to tangible assets (3)

 

 

12.96%

 

 

12.89%

 

 

12.56%

 

 

12.40%

 

 

12.41%

 

 

12.96%

 

 

12.41%

 

Common equity tier 1 capital ratio

 

 

14.71%

 

 

14.53%

 

 

14.71%

 

 

14.29%

 

 

14.08%

 

 

14.71%

 

 

14.08%

 

Tier 1 risk-based capital ratio

 

 

14.71%

 

 

14.53%

 

 

14.76%

 

 

14.53%

 

 

12.87%

 

 

14.71%

 

 

12.87%

 

Total risk-based capital ratio

 

 

15.59%

 

 

15.41%

 

 

15.63%

 

 

15.44%

 

 

14.32%

 

 

15.59%

 

 

14.32%

 

Tier 1 leverage ratio

 

 

13.12%

 

 

13.02%

 

 

12.74%

 

 

12.84%

 

 

15.29%

 

 

13.12%

 

 

15.29%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other Data:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding- Basic

 

 

24,921

 

 

24,910

 

 

24,886

 

 

24,859

 

 

24,858

 

 

24,916

 

 

24,845

 

Weighted average common shares outstanding- Diluted

 

 

25,042

 

 

25,054

 

 

25,046

 

 

25,060

 

 

24,997

 

 

25,047

 

 

24,977

 

Common shares outstanding at period end

 

 

24,923

 

 

24,918

 

 

24,907

 

 

24,859

 

 

24,859

 

 

24,923

 

 

24,859

 

Dividends per share

 

$

0.10

 

$

0.10

 

$

0.05

 

$

0.05

 

$

0.05

 

$

0.20

 

$

0.10

 

Book value per share

 

$

20.59

 

$

20.01

 

$

19.58

 

$

18.98

 

$

18.55

 

$

20.59

 

$

18.55

 

Tangible book value per share (3)

 

$

17.13

 

$

16.54

 

$

16.10

 

$

15.48

 

$

15.04

 

$

17.13

 

$

15.04

 

Employees - full-time equivalents

 

 

508

 

 

494

 

 

495

 

 

489

 

 

488

 

 

508

 

 

488

 

 


The following information was filed by Cbtx, Inc. (CBTX) on Thursday, July 25, 2019 as an 8K 2.02 statement, which is an earnings press release pertaining to results of operations and financial condition. It may be helpful to assess the quality of management by comparing the information in the press release to the information in the accompanying 10-Q Quarterly Report statement of earnings and operation as management may choose to highlight particular information in the press release.

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Financial Statements, Disclosures and Schedules

Inside this 10-Q Quarterly Report

Document And Entity Information
Condensed Consolidated Balance Sheets (Unaudited)
Condensed Consolidated Balance Sheets (Unaudited) (Parentheticals)
Condensed Consolidated Statements Of Cash Flows (Unaudited)
Condensed Consolidated Statements Of Changes In Shareholders Equity (Unaudited)
Condensed Consolidated Statements Of Changes In Shareholders Equity (Unaudited) (Parentheticals)
Condensed Consolidated Statements Of Comprehensive Income (Unaudited)
Condensed Consolidated Statements Of Income (Unaudited)
Allowance For Loan Losses
Allowance For Loan Losses (Tables)
Allowance For Loan Losses - Allowance For Loan Losses By Loan Category (Details)
Allowance For Loan Losses - Loan Impairment Assessment (Details)
Allowance For Loan Losses - Loan Losses On The Basis Of Company's Impairment Methodology (Details)
Allowance For Loan Losses - Risk Grading (Details)
Allowance For Loan Losses - Segregated By Loan Class (Details)
Bank Owned Life Insurance
Bank Owned Life Insurance (Details)
Bank Owned Life Insurance (Tables)
Commitments And Contingencies And Financial Instruments With Off-Balance-Sheet Risk
Commitments And Contingencies And Financial Instruments With Off-Balance-Sheet Risk (Details)
Commitments And Contingencies And Financial Instruments With Off-Balance-Sheet Risk (Tables)
Deposits
Deposits (Details)
Deposits (Tables)
Deposits - Schedule Of Maturities Of Time Deposits (Details)
Derivative Financial Instruments
Derivative Financial Instruments (Details)
Derivative Financial Instruments (Tables)
Earnings Per Share
Earnings Per Share (Details)
Earnings Per Share (Tables)
Employee Benefit Plans And Deferred Compensation Arrangements
Employee Benefit Plans And Deferred Compensation Arrangements (Details)
Equity Investments
Equity Investments (Tables)
Equity Investments - Equity Investments (Details)
Fair Value Disclosures
Fair Value Disclosures (Details)
Fair Value Disclosures (Tables)
Fair Value Disclosures - Certain Assets Measured On A Non Recurring Basis (Details)
Fair Value Disclosures - Fair Market Values Of All Financial Instruments (Details)
Fair Value Disclosures - Non Financial Assets And Non Financial Liabilities (Details)
Goodwill And Other Intangible Assets
Goodwill And Other Intangible Assets (Details)
Goodwill And Other Intangible Assets (Tables)
Goodwill And Other Intangible Assets - Servicing Assets (Details)
Income Taxes
Income Taxes (Details)
Income Taxes (Tables)
Junior Subordinated Debt
Junior Subordinated Debt (Details)
Lines Of Credit
Lines Of Credit (Details)
Loan Performance
Loan Performance (Tables)
Loan Performance - Aging Analysis Of Loan Past Due (Details)
Loan Performance - Nonaccrual Loans, Segregated By Loan Class (Details)
Loan Performance - Restructured Loans (Details)
Loans
Loans (Tables)
Loans - By Portfolio Segment (Details)
Loans - Loan Participation And Loan Guarantees (Details)
Operating Leases
Operating Leases (Details)
Operating Leases (Tables)
Operating Leases - Lease Costs (Details)
Operating Leases - Maturity Of Operating Lease Liabilities (Details)
Premises And Equipment
Premises And Equipment (Tables)
Premises And Equipment - Components Of Premises And Equipment (Details)
Regulatory Matters
Regulatory Matters (Tables)
Regulatory Matters - Regulatory Capital (Details)
Related Party Transactions
Related Party Transactions (Details)
Revenue Recognition
Revenue Recognition (Tables)
Revenue Recognition - Revenue-Generating Activities Within Scope Of Asc 606 (Details)
Securities
Securities (Tables)
Securities - Amortized Cost And Estimated Fair Values Of Investments In Securities (Details)
Securities - Amortized Cost And Estimated Fair Values Of Securities By Contractual Maturities (Details)
Securities - Securities Carrying Amount (Details)
Securities - Securities With Gross Unrealized Losses (Details)
Stock-Based Compensation
Stock-Based Compensation (Tables)
Stock-Based Compensation - Narrative (Details)
Stock-Based Compensation - Restricted Stock Activity (Details)
Stock-Based Compensation - Shares Of Stock Options Exercised And Restricted Stock Vested, Shares Withheld For Taxes And Shares Issued (Details)
Stock-Based Compensation - Stock Option Activity (Details)
Stock-Based Compensation - Summary Of Restricted Stock (Details)
Stock-Based Compensation - Summary Of Stock Options (Details)
Summary Of Significant Accounting Policies
Summary Of Significant Accounting Policies (Policies)
Summary Of Significant Accounting Policies (Tables)
Summary Of Significant Accounting Policies - Accounting Standards Recently Adopted (Details)
Summary Of Significant Accounting Policies - Cash And Due From Banks (Details)
Summary Of Significant Accounting Policies - Cash Flow Reporting (Details)
Summary Of Significant Accounting Policies - Nature Of Operations (Details)
Summary Of Significant Accounting Policies - Share Repurchase Program (Details)
Ticker: CBTX
CIK: 1473844
Form Type: 10-Q Quarterly Report
Accession Number: 0001558370-19-009080
Submitted to the SEC: Thu Oct 24 2019 4:03:40 PM EST
Accepted by the SEC: Thu Oct 24 2019
Period: Monday, September 30, 2019
Industry: National Commercial Banks

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