CBTX, Inc. Reports First Quarter Financial Results
04/28/2022 - 04:01 PM
HOUSTON, April 28, 2022 (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 quarter ended March 31, 2022.
Robert R. Franklin, Jr., Chairman, CEO and President of the Company said, “We are pleased to present the results for CBTX, Inc. for the first quarter of 2022. Our local economy continues to gain strength, and we carried momentum into this year. I am very proud of our team and its work to continue to grow our loans and remain disciplined in this competitive lending environment.”
Mr. Franklin continued, “We have made great progress with our new partners at Allegiance Bank. Our teams are hard at work on integration, while we work to gain approval from the regulators and our shareholders. We are focused on building additional shareholder value by combining two valued franchises into one of the premier banks in our markets.”
Mr. Franklin concluded, “Our markets are seeing increased competition from outside the state in the rising interest rate environment. Although we see economic challenges in the form of competition, inflation and the impact of geopolitical events, we believe that our balance sheet position, liquidity and strong capital give reason to be excited about the opportunities for the rest of 2022 and beyond.”
Highlights
The Company reported net income of $10.6 million for the first quarter of 2022, or $0.43 per diluted share, compared to a net loss of $545,000, or $0.02 per diluted share, for the fourth quarter of 2021 and net income of $10.0 million , or $0.41 per diluted share, for the first quarter of 2021. Securities increased $122.9 million from December 31, 2021 to March 31, 2022 and increased $258.9 million from March 31, 2021 to March 31, 2022. Cash and cash equivalents decreased $179.2 million from December 31, 2021 to March 31, 2022 and increased $166.3 million from March 31, 2021 to March 31, 2022. Loans excluding loans held for sale increased $12.4 million from December 31, 2021 to March 31, 2022 and decreased $11.8 million from March 31, 2021 to March 31, 2022. The allowance for credit losses, or ACL, was 1.09% , 1.09% and 1.41% of loans excluding loans held for sale at March 31, 2022, December 31, 2021 and March 31, 2021, respectively. Deposits decreased $10.1 million between December 31, 2021 and March 31, 2022 and increased $436.5 million between March 31, 2021 and March 31, 2022. Net interest margin on a tax equivalent basis was 3.22% for the first quarter of 2022, compared to 3.07% for the fourth quarter of 2021 and 3.71% for the first quarter of 2021. Pending Merger
On November 8, 2021, Allegiance Bancshares, Inc., or Allegiance, and the Company jointly announced that they entered into a definitive merger agreement pursuant to which the companies will combine in an all-stock merger of equals. Under the terms of the definitive merger agreement, Allegiance shareholders will receive 1.4184 shares of the Company’s common stock for each share of Allegiance common stock they own. Based on the number of outstanding shares of Allegiance and the Company as of November 5, 2021, Allegiance shareholders will own approximately 54% and the Company’s shareholders will own approximately 46% of the combined company. The companies have submitted the required regulatory filings and subject to satisfaction of the closing conditions, including approval of the merger agreement by both companies’ shareholders, the parties anticipate closing in the second quarter of 2022. Each company has scheduled a special meeting for May 24, 2022 at which its respective shareholders will consider and vote on the merger agreement and other related matters.
Operating Results
The Company reported net income of $10.6 million for the first quarter of 2022, or $0.43 per diluted share, compared to a net loss of $545,000, or $0.02 per diluted share, for the fourth quarter of 2021 and net income of $10.0 million , or $0.41 per diluted share, for the first quarter of 2021.
The increase of $11.1 million in net income for the first quarter of 2022, compared to the fourth quarter of 2021, was primarily due to a $10.2 million decrease in noninterest expense due to the payment of $8.0 million of civil money penalties to resolve Bank Secrecy Act, or BSA, and anti-money laundering, or AML, compliance matters during the fourth quarter of 2021, a $1.8 million increase in net interest income and a $1.2 million increase in noninterest income. In addition, net income for the first quarter of 2022, compared to the fourth quarter of 2021 was $1.6 million lower as the fourth quarter 2021 provision for credit losses was a recapture of $1.2 million and the first quarter of 2022 provision for credit losses was a provision of $435,000.
The increase of $576,000 in net income for the first quarter of 2022, compared to the first quarter of 2021, was primarily due to a $2.2 million increase in noninterest income, partially offset by a $1.4 million increase in noninterest expense and a $460,000 decrease in net interest income.
Net Interest Income
Net interest income was $32.6 million for the first quarter of 2022, compared to $30.8 million for the fourth quarter of 2021 and $33.1 million for the first quarter of 2021. Net interest income increased $1.8 million during the first quarter of 2022, compared to the fourth quarter of 2021, primarily due to higher average loans and securities, which was partially offset by the impact of an additional calendar day in the fourth quarter of 2021. Net interest income decreased $460,000 during the first quarter of 2022, compared to the first quarter of 2021, primarily due to lower rates on loans and lower average loans during the three months ended March 31, 2022, partially offset by higher average securities and lower rates on deposits.
The yield on interest-earning assets was 3.31% for the first quarter of 2022, compared to 3.16% for the fourth quarter of 2021 and 3.85% for the first quarter of 2021. The cost of interest-bearing liabilities was 0.27% for the first quarter of 2022, 0.28% for the fourth quarter of 2021 and 0.34% for the first quarter of 2021. The Company’s net interest margin on a tax equivalent basis was 3.22% for the first quarter of 2022, compared to 3.07% for the fourth quarter of 2021 and 3.71% for the first quarter of 2021.
Net fees recognized on Paycheck Protection Program, or PPP, loans during the first quarter of 2022 were $989,000, $1.5 million during the fourth quarter of 2021 and $3.2 million during the first quarter of 2021.
Provision (Recapture) for Credit Losses
The provision for credit losses for the first quarter of 2022 was $435,000, compared to a recapture of $1.2 million for the fourth quarter of 2021 and $412,000 for the first quarter of 2021.
The provision for credit losses for the first quarter of 2022 is comprised of a $415,000 provision for credit losses related to unfunded commitments and a $20,000 provision for credit losses for loans.
The recapture of credit losses during the fourth quarter of 2021 primarily resulted from qualitative factor adjustments associated with continued improvements in the local economy.
The provision for credit losses for the first quarter of 2021 was comprised of $286,000 and $126,000 for the ACL for loans and for unfunded commitments, respectively.
The ACL for loans was $31.4 million , or 1.09% , of loans excluding loans held for sale at March 31, 2022, $31.3 million , or 1.09% , at December 31, 2021 and $40.9 million , or 1.41% , at March 31, 2021. The increase in the ACL from December 31, 2021 to March 31, 2022 was primarily due to an increase in collectively evaluated loans resulting from growth in the loan portfolio and adjustments to certain qualitative factors, which was partially offset by a decrease in the ACL related to individually evaluated loans resulting from a reduction in the associated principal balances.
Noninterest Income
Noninterest income was $5.3 million for the first quarter of 2022, $4.1 million for the fourth quarter of 2021 and $3.1 million for the first quarter of 2021.
The increase in noninterest income during the first quarter of 2022 was primarily due to payments totaling $1.5 million recognized in connection with the early termination of a land lease included in other noninterest income, and a gain of $1.2 million for sales of assets underlying a portion of the Company’s equity investments, partially offset by a $1.2 million loss included in net gain on sale of assets for the disposal of the building and improvements for the land lease that was terminated early.
Noninterest Expense
Noninterest expense was $24.7 million for the first quarter of 2022, compared to $34.8 million for the fourth quarter of 2021 and $23.3 million for the first quarter of 2021.
The decrease in noninterest of $10.2 million for the first quarter of 2022, compared to the fourth quarter of 2021 was primarily due to a decrease of $7.8 million in regulatory fees associated with payment of $8.0 million of civil money penalties to resolve BSA/AML, compliance matters during the fourth quarter of 2021 and a $1.4 million decrease in salaries and employee benefits primarily due to bonus expense in the fourth quarter of 2021.
The increase in noninterest expense of $1.4 million for the first quarter of 2022, compared to the first quarter of 2021, was primarily due to a $1.1 million increase in salaries and employee benefits, a $824,000 decrease in professional and director fees and a $1.2 million increase in other expenses. The increase in salaries and employee benefits of $1.1 million for the three months ended March 31, 2022, compared to the three months ended March 31, 2021, is primarily due to a $874,000 increase in salaries due to merit increases and a $165,000 increase in bonus accruals. Professional and director fees decreased $824,000 for the three months ended March 31, 2022, compared to the three months ended March 31, 2021, primarily due to a decrease in professional fees related to BSA/AML compliance matters of $531,000 and a $213,000 decrease in legal fees. Other expenses increased $1.2 million during the three months ended March 31, 2022, compared to the three months ended March 31, 2021, primarily due to $784,000 of costs related to the pending merger with Allegiance.
Income Taxes
Income tax expense was $2.3 million for the first quarter of 2022, $1.8 million for the fourth quarter of 2021 and $2.5 million for the first quarter of 2021. The effective tax rates were 17.69% for the first quarter of 2022, 142.41% for the fourth quarter of 2021 and 19.87% for the first quarter of 2021.
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, bank-owned life insurance earnings and merger-related expenses. The tax rate for the fourth quarter of 2021 were also impacted by the resolution of the BSA/AML compliance matters as the civil money penalties were not tax deductible.
Balance Sheet Highlights
Loans
Loans excluding loans held for sale were $2.9 billion at March 31, 2022, $2.9 billion at December 31, 2021 and $2.9 billion at March 31, 2021. Loans excluding loans held for sale increased $12.4 million from December 31, 2021 to March 31, 2022 primarily due to loan originations and line of credit drawdowns outpacing paydowns.
The decrease of $11.8 million from March 31, 2021 to March 31, 2022 was impacted by the repayment of PPP loans. The Company’s PPP loans were $17.5 million , net of deferred fees and unearned discounts, at March 31, 2022, $52.8 million at December 31, 2021 and $258.8 million at March 31, 2021. The PPP program has been closed to further borrowings and the Company has not originated any new loans under this program since the second quarter of 2021.
In support of customers impacted by the COVID-19 pandemic, the Company offered relief through payment deferrals during 2020 and 2021. The Company had four loans subject to such deferral arrangements with an outstanding aggregate principal balance of $15.1 million at March 31, 2022, seven loans on deferral arrangements with an outstanding principal aggregate balance of $18.5 million at December 31, 2021 and 16 loans on deferral arrangement with an outstanding aggregate principal balance of $34.3 million at March 31, 2021.
Cash and Cash Equivalents
Cash and cash equivalents decreased $179.2 million from December 31, 2021 to March 31, 2022 primarily due to a net increase in securities. Cash and cash equivalents increased $166.3 million from March 31, 2021 to March 31, 2022 primarily due to net deposit inflows, partially offset by a net increase in securities.
Securities
Securities were $548.0 million at March 31, 2022, $425.0 million at December 31, 2021 and $289.1 million at March 31, 2021.
As of March 31, 2022, the fair value of the Company’s securities totaled $548.0 million , compared to $425.0 million as of December 31, 2021, an increase of $122.9 million . Amortized cost increased $161.3 million during 2022, primarily as a result of purchases totaling $324.3 million outpacing maturities, calls and paydowns totaling $162.7 million . Net unrealized losses on the securities portfolio were $34.5 million at March 31, 2022, compared to net unrealized gains of $3.9 million at December 31, 2021. This decrease of $38.4 million was due to a reduction in fair value as a result of interest rate increases and anticipated increases.
Securities increased $258.9 million from March 31, 2021 to March 31, 2022 primarily due to purchases out pacing maturities, calls and paydowns, partially offset by decreases in fair value due to changes in interest rates and anticipated changes in interest rates during the first quarter of 2022. Net unrealized losses on the securities portfolio were $34.5 million at March 31, 2022, compared to a net unrealized gain of $4.2 million at March 31, 2021. This decrease of $38.7 million was due to a reduction in fair value as a result of interest rate increases and anticipated increases.
Deposits and Borrowings
Total deposits were $3.8 billion , $3.8 billion and $3.4 billion at March 31, 2022, December 31, 2021 and March 31, 2021, respectively. The decrease in deposits of $10.1 million between December 31, 2021 and March 31, 2022 was due to net deposit outflows of $26.4 million in interest-bearing accounts and net deposit inflows of $16.3 million in noninterest-bearing accounts. The increase in deposits of $436.5 million between March 31, 2021 and March 31, 2022 was due to net deposit inflows of $256.6 million and $179.9 million in interest-bearing accounts and noninterest-bearing accounts, respectively.
The Company defines total borrowings as the total of Federal Home Loan Bank advances and notes payable. Total borrowings were $50.0 million of Federal Home Loan Bank advances at March 31, 2022, December 31, 2021 and March 31, 2021 and these advances were paid off in April 2022.
Capital
At March 31, 2022, 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 16.06% at March 31, 2022, 16.42% at December 31, 2021 and 17.00% at March 31, 2021. The Company’s tier 1 leverage ratio was 11.08% at March 31, 2022, 11.22% at December 31, 2021 and 11.90% at March 31, 2021. The Company’s total shareholders’ equity to total assets ratio was 12.14% at March 31, 2022, 12.53% at December 31, 2021 and 13.54% at March 31, 2021.
The ratio of tangible equity to tangible assets was 10.44% at March 31, 2022, 10.85% at December 31, 2021 and 11.67% at March 31, 2021. 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 first quarter 2022 financial results on Friday, April 29, 2022 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 5369784. 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 ongoing 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; 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- or fourth-party servicers; the failure of certain third- or fourth-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, or reviews or the ability to obtain required regulatory approvals; changes in the laws, rules, regulations, interpretations or policies relating to financial institution, accounting, tax, trade, monetary and fiscal matters; further government intervention in the U.S. financial system that may impact how the Company achieves its performance goals; the risk that the cost savings and any revenue synergies from the merger may not be fully realized or may take longer than anticipated to be realized; disruption to the parties’ businesses as a result of the announcement and pendency of the merger; the occurrence of any event, change or other circumstances that could give rise to the termination of the merger agreement; the risk that the integration of each party’s operations will be materially delayed or will be more costly or difficult than expected or that the parties are otherwise unable to successfully integrate each party’s businesses into the other’s businesses; the failure to obtain the necessary approvals by the shareholders of Allegiance or the Company; the amount of the costs, fees, expenses and charges related to the merger; the ability by each of Allegiance and the Company to obtain required governmental approvals of the merger (and the risk that such approvals may result in the imposition of conditions that could adversely affect the combined company or the expected benefits of the transaction); reputational risk and the reaction of each company’s customers, suppliers, employees or other business partners to the merger; the failure of the closing conditions in the merger agreement to be satisfied, or any unexpected delay in closing the merger; the possibility that the merger may be more expensive to complete than anticipated, including as a result of unexpected factors or events; the dilution caused by the Company’s issuance of additional shares of its common stock in the merger; general competitive, economic, political and market conditions; and other factors that may affect future results of the Company and Allegiance including changes in asset quality and credit risk; the inability to sustain revenue and earnings growth; changes in interest rates and capital markets; inflation; customer borrowing, repayment, investment and deposit practices; the impact, extent and timing of technological changes; capital management activities; and other actions of the Board of Governors of the Federal Reserve System, Federal Deposit Insurance Corporation and Office of the Comptroller of Currency, or OCC, and legislative and regulatory actions and reforms; and other risks, uncertainties, and factors that are discussed from time to time in the Company’s reports and documents filed with the Securities and Exchange Commission, or 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 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
The Company disclaims any obligation and does not intend to update or revise any forward-looking statements contained in this communication, which speak only as of the date hereof, whether as a result of new information, future events or otherwise, except as required by federal securities laws. As forward-looking statements involve significant risks and uncertainties, caution should be exercised against placing undue reliance on such statements.
Information about the Merger and Where to Find It
This communication does not constitute an offer to sell or the solicitation of an offer to buy any securities or a solicitation of any vote or approval.
In connection with the proposed merger, the Company filed a registration statement on Form S-4 (Registration No. 333-262322) with the SEC to register the shares of the Company’s common stock that will be issued to Allegiance shareholders in connection with the merger. The registration statement on Form S-4, as amended, was declared effective by the SEC on April 7, 2022. The registration statement includes a joint proxy statement/prospectus and other relevant materials in connection with the proposed merger. The Company and Allegiance commenced mailing the definitive joint proxy statement/prospectus to their respective shareholders on or about April 15, 2022.
WE URGE INVESTORS AND SECURITY HOLDERS TO READ THE REGISTRATION STATEMENT ON FORM S-4, THE JOINT PROXY STATEMENT/PROSPECTUS INCLUDED WITHIN THE REGISTRATION STATEMENT ON FORM S-4 AND ANY OTHER RELEVANT DOCUMENTS FILED OR TO BE FILED WITH THE SEC IN CONNECTION WITH THE PROPOSED MERGER BECAUSE THEY CONTAIN IMPORTANT INFORMATION ABOUT CBTX, ALLEGIANCE AND THE PROPOSED MERGER.
Investors and security holders may obtain free copies of these documents and other documents filed with the SEC by Allegiance or the Company through the website maintained by the SEC at https://www.sec.gov. Documents filed with the SEC by the Company are available free of charge by accessing the Company’s website at www.communitybankoftx.com under the heading “Investor Relations” or, alternatively, by directing a request by mail or telephone to CBTX, Inc., 9 Greenway Plaza, Suite 110, Houston, Texas 77046, Attn: Investor Relations, (713) 210-7600, and documents filed with the SEC by Allegiance are available free of charge by accessing Allegiance’s website at www.allegiancebank.com under the heading “Investor Relations” or, alternatively, by directing a request by mail or telephone to Allegiance Bancshares, Inc., 8847 West Sam Houston Parkway, N., Suite 200, Houston, Texas 77040, (281) 894-3200.
Participants in the Solicitation
The Company, Allegiance and certain of their respective directors and executive officers may be deemed to be participants in the solicitation of proxies from the shareholders of the Company and Allegiance in connection with the proposed merger. Certain information regarding the interests of these participants and a description of their direct or indirect interests, by security holdings or otherwise, are included in the joint proxy statement/prospectus regarding the proposed merger. Additional information about the directors and executive officers of the Company and their ownership of the Company’s common stock is set forth in the Company’s annual report on Form 10-K, filed with the SEC on February 25, 2022. Additional information about the directors and executive officers of Allegiance and their ownership of Allegiance’s common stock is set forth in Allegiance’s proxy statement for its annual meeting of shareholders, filed with the SEC on March 10, 2022. These documents can be obtained free of charge from the sources described above.
CBTX, INC. AND SUBSIDIARY Financial Highlights (In thousands, except per share data and percentages) Three Months Ended 3/31/2022 12/31/2021 9/30/2021 6/30/2021 3/31/2021 Profitability: Net income (loss) $ 10,595 $ (545 ) $ 14,421 $ 11,703 $ 10,019 Basic earnings (loss) per share $ 0.43 $ (0.02 ) $ 0.59 $ 0.48 $ 0.41 Diluted earnings (loss) per share $ 0.43 $ (0.02 ) $ 0.59 $ 0.48 $ 0.41 Return on average assets(1) 0.97 % (0.05 %) 1.37 % 1.14 % 1.03 % Return on average shareholders' equity(1) 7.67 % (0.38 %) 10.15 % 8.49 % 7.39 % Net interest margin - tax equivalent(1) 3.22 % 3.07 % 3.22 % 3.29 % 3.71 % Efficiency ratio(2) 64.94 % 99.78 % 66.21 % 73.02 % 64.32 % Liquidity and Capital Ratios: Total shareholders' equity to total assets 12.14 % 12.53 % 13.41 % 13.68 % 13.54 % Tangible equity to tangible assets(3) 10.44 % 10.85 % 11.64 % 11.84 % 11.67 % Common equity tier 1 capital ratio 14.97 % 15.31 % 16.87 % 16.46 % 15.75 % Tier 1 risk-based capital ratio 14.97 % 15.31 % 16.87 % 16.46 % 15.75 % Total risk-based capital ratio 16.06 % 16.42 % 18.12 % 17.72 % 17.00 % Tier 1 leverage ratio 11.08 % 11.22 % 11.69 % 11.63 % 11.90 % Credit Quality: Allowance for credit losses for loans to loans excluding loans held for sale 1.09 % 1.09 % 1.23 % 1.36 % 1.41 % Nonperforming assets to total assets 0.50 % 0.50 % 0.49 % 0.52 % 0.59 % Nonperforming loans to loans excluding loans held for sale 0.77 % 0.79 % 0.79 % 0.77 % 0.81 % Net charge-offs (recoveries) to average loans(1) (0.01 %) (0.01 %) (0.01 %) (0.07 %) 0.01 % Other Data: Weighted average common shares outstanding - basic 24,497 24,437 24,432 24,447 24,508 Weighted average common shares outstanding - diluted 24,605 24,575 24,544 24,571 24,616 Common shares outstanding at period end 24,502 24,488 24,420 24,450 24,442 Dividends per share $ 0.13 $ 0.13 $ 0.13 $ 0.13 $ 0.13 Book value per share $ 22.03 $ 22.96 $ 23.12 $ 22.75 $ 22.31 Tangible book value per share(3) $ 18.58 $ 19.50 $ 19.65 $ 19.28 $ 18.84 Employees - full-time equivalents 503 506 520 529 517
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CBTX, INC. AND SUBSIDIARY Condensed Consolidated Balance Sheets (In thousands) 3/31/2022 12/31/2021 9/30/2021 6/30/2021 3/31/2021 Loans excluding loans held for sale $ 2,879,880 $ 2,867,524 $ 2,608,402 $ 2,729,496 $ 2,891,632 Allowance for credit losses for loans (31,442 ) (31,345 ) (32,208 ) (37,183 ) (40,874 ) Loans, net 2,848,438 2,836,179 2,576,194 2,692,313 2,850,758 Cash and cash equivalents 770,991 950,146 998,785 788,409 604,671 Securities 547,979 425,046 359,539 309,233 289,091 Premises and equipment 56,665 58,417 59,235 59,987 60,551 Goodwill 80,950 80,950 80,950 80,950 80,950 Other intangible assets 3,540 3,658 3,702 3,846 3,991 Loans held for sale 748 164 327 808 1,005 Operating lease right-to-use asset 10,850 11,191 11,527 12,514 12,900 Other assets 125,816 120,250 118,860 118,474 124,722 Total assets $ 4,445,977 $ 4,486,001 $ 4,209,119 $ 4,066,534 $ 4,028,639 Noninterest-bearing deposits $ 1,801,323 $ 1,784,981 $ 1,628,144 $ 1,556,784 $ 1,621,408 Interest-bearing deposits 2,019,902 2,046,303 1,903,491 1,860,002 1,763,339 Total deposits 3,821,225 3,831,284 3,531,635 3,416,786 3,384,747 Federal Home Loan Bank advances 50,000 50,000 50,000 50,000 50,000 Operating lease liabilities 13,752 14,142 14,556 15,590 16,060 Other liabilities 21,277 28,450 48,335 27,931 32,483 Total liabilities 3,906,254 3,923,876 3,644,526 3,510,307 3,483,290 Total shareholders’ equity 539,723 562,125 564,593 556,227 545,349 Total liabilities and shareholders’ equity $ 4,445,977 $ 4,486,001 $ 4,209,119 $ 4,066,534 $ 4,028,639
CBTX, INC. AND SUBSIDIARY Condensed Consolidated Statements of Income (In thousands) Three Months Ended 3/31/2022 12/31/2021 9/30/2021 6/30/2021 3/31/2021 Interest income Interest and fees on loans $ 31,221 $ 29,882 $ 30,765 $ 30,793 $ 33,165 Securities 2,292 1,796 1,435 1,332 1,173 Interest-bearing deposits at other financial institutions 348 383 340 223 177 Equity investments 154 168 157 158 146 Total interest income 34,015 32,229 32,697 32,506 34,661 Interest expense Deposits 1,164 1,180 1,227 1,267 1,350 Federal Home Loan Bank advances 221 222 221 221 221 Other interest-bearing liabilities — 17 — — — Total interest expense 1,385 1,419 1,448 1,488 1,571 Net interest income 32,630 30,810 31,249 31,018 33,090 Provision (recapture) for credit losses Provision (recapture) for credit losses for loans 20 (901 ) (5,057 ) (4,190 ) 286 Provision (recapture) for credit losses for unfunded commitments 415 (306 ) 162 (893 ) 126 Total provision (recapture) for credit losses 435 (1,207 ) (4,895 ) (5,083 ) 412 Net interest income after provision (recapture) for credit losses 32,195 32,017 36,144 36,101 32,678 Noninterest income Deposit account service charges 1,370 1,370 1,352 1,167 1,193 Card interchange fees 1,037 1,081 1,048 1,095 976 Earnings on bank-owned life insurance 371 385 2,323 390 390 Net gain on sales of assets 530 910 360 366 192 Other 2,021 354 479 473 360 Total noninterest income 5,329 4,100 5,562 3,491 3,111 Noninterest expense Salaries and employee benefits 15,254 16,609 15,000 14,734 14,188 Occupancy expense 2,371 2,606 2,660 2,597 2,521 Professional and director fees 879 756 1,567 2,441 1,703 Data processing and software 1,763 1,716 1,629 1,661 1,576 Regulatory fees 614 8,366 478 501 556 Advertising, marketing and business development 249 263 493 510 285 Telephone and communications 454 471 516 550 463 Security and protection expense 324 439 425 537 390 Amortization of intangibles 181 179 182 186 191 Other expenses 2,563 3,427 1,422 1,480 1,412 Total noninterest expense 24,652 34,832 24,372 25,197 23,285 Net income before income tax expense 12,872 1,285 17,334 14,395 12,504 Income tax expense 2,277 1,830 2,913 2,692 2,485 Net income (loss) $ 10,595 $ (545 ) $ 14,421 $ 11,703 $ 10,019
CBTX, INC. AND SUBSIDIARY Net Interest Margin (In thousands, except percentages) Three Months Ended March 31, 2022 December 31, 2021 March 31, 2021 Average Interest Average(1) Average Interest Average(1) Average Interest Average(1) Assets Interest-earning assets: Total loans(2) $ 2,886,765 $ 31,221 4.39 % $ 2,702,211 $ 29,882 4.39 % $ 2,901,291 $ 33,165 4.64 % Securities 497,640 2,292 1.87 % 404,064 1,796 1.76 % 259,341 1,173 1.84 % Interest-bearing deposits at other financial institutions 768,665 348 0.18 % 921,545 383 0.16 % 475,279 177 0.15 % Equity investments 13,379 154 4.67 % 13,374 168 4.98 % 15,353 146 3.86 % Total interest-earning assets 4,166,449 $ 34,015 3.31 % 4,041,194 $ 32,229 3.16 % 3,651,264 $ 34,661 3.85 % Allowance for credit losses for loans (31,602 ) (32,840 ) (41,078 ) Noninterest-earning assets 307,796 312,308 321,334 Total assets $ 4,442,643 $ 4,320,662 $ 3,931,520 Liabilities and Shareholders’ Equity Interest-bearing liabilities: Interest-bearing deposits $ 2,019,609 $ 1,164 0.23 % $ 1,941,177 $ 1,180 0.24 % $ 1,802,175 $ 1,350 0.30 % Federal Home Loan Bank advances 50,000 221 1.79 % 50,000 222 1.76 % 50,000 221 1.79 % Other interest-bearing liabilities — — — 33 17 — — — — Total interest-bearing liabilities 2,069,609 $ 1,385 0.27 % 1,991,210 $ 1,419 0.28 % 1,852,175 $ 1,571 0.34 % Noninterest-bearing liabilities: Noninterest-bearing deposits 1,762,729 1,706,673 1,478,183 Other liabilities 49,990 54,612 51,634 Total noninterest-bearing liabilities 1,812,719 1,761,285 1,529,817 Shareholders’ equity 560,315 568,167 549,528 Total liabilities and shareholders’ equity $ 4,442,643 $ 4,320,662 $ 3,931,520 Net interest income $ 32,630 $ 30,810 $ 33,090 Net interest spread(3) 3.04 % 2.88 % 3.51 % Net interest margin(4) 3.18 % 3.02 % 3.68 % Net interest margin - tax equivalent(5) 3.22 % 3.07 % 3.71 %
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CBTX, INC. AND SUBSIDIARY Rate/Volume Analysis (In thousands) Three Months Ended March 31, 2022, Compared to Three Months Ended December 31, 2021 Increase (Decrease) due to (Dollars in thousands) Rate Volume Days Total Interest-earning assets: Total loans $ (53 ) $ 2,042 $ (650 ) $ 1,339 Securities 120 415 (39 ) 496 Interest-bearing deposits at other financial institutions 35 (62 ) (8 ) (35 ) Equity investments (10 ) — (4 ) (14 ) Total increase (decrease) in interest income 92 2,395 (701 ) 1,786 Interest-bearing liabilities: Interest-bearing deposits (38 ) 47 (25 ) (16 ) Federal Home Loan Bank advances 4 — (5 ) (1 ) Other interest-bearing liabilities (17 ) — — (17 ) Total increase (decrease) in interest expense (51 ) 47 (30 ) (34 ) Increase (decrease) in net interest income $ 143 $ 2,348 $ (671 ) $ 1,820
Three Months Ended March 31, 2022, Compared to Three Months Ended March 31, 2021 Increase (Decrease) due to (Dollars in thousands) Rate Volume Days Total Interest-earning assets: Total loans $ (1,778 ) $ (166 ) $ — $ (1,944 ) Securities 38 1,081 — 1,119 Interest-bearing deposits at other financial institutions 62 109 — 171 Equity investments 27 (19 ) — 8 Total increase (decrease) in interest income (1,651 ) 1,005 — (646 ) Interest-bearing liabilities: Interest-bearing deposits (347 ) 161 — (186 ) Federal Home Loan Bank advances — — — — Total increase (decrease) in interest expense (347 ) 161 — (186 ) Increase (decrease) in net interest income $ (1,304 ) $ 844 $ — $ (460 )
CBTX, INC. AND SUBSIDIARY Average Balances and Yields Three Months Ended 3/31/2022 12/31/2021 9/30/2021 6/30/2021 3/31/2021 Average Outstanding Balances (in thousands): Interest-earning assets: Total loans(1) $ 2,886,765 $ 2,702,211 $ 2,702,248 $ 2,835,995 $ 2,901,291 Securities 497,640 404,064 327,968 302,808 259,341 Interest-bearing deposits at other financial institutions 768,665 921,545 854,406 670,508 475,279 Equity investments 13,379 13,374 13,367 15,338 15,353 Total interest-earning assets 4,166,449 4,041,194 3,897,989 3,824,649 3,651,264 Allowance for credit losses for loans (31,602 ) (32,840 ) (36,945 ) (40,806 ) (41,078 ) Noninterest-earning assets 307,796 312,308 313,901 317,115 321,334 Total assets $ 4,442,643 $ 4,320,662 $ 4,174,945 $ 4,100,958 $ 3,931,520 Interest-bearing liabilities: Interest-bearing deposits $ 2,019,609 $ 1,941,177 $ 1,895,617 $ 1,839,812 $ 1,802,175 Federal Home Loan Bank advances 50,000 50,000 50,000 50,000 50,000 Other interest-bearing liabilities — 33 — — — Total interest-bearing liabilities 2,069,609 1,991,210 1,945,617 1,889,812 1,852,175 Noninterest-bearing liabilities: Noninterest-bearing deposits 1,762,729 1,706,673 1,612,985 1,611,565 1,478,183 Other liabilities 49,990 54,612 52,712 46,774 51,634 Total noninterest-bearing liabilities 1,812,719 1,761,285 1,665,697 1,658,339 1,529,817 Shareholders’ equity 560,315 568,167 563,631 552,807 549,528 Total liabilities and shareholders’ equity $ 4,442,643 $ 4,320,662 $ 4,174,945 $ 4,100,958 $ 3,931,520 Yield Trend (2) Interest-earning assets: Total loans 4.39 % 4.39 % 4.52 % 4.36 % 4.64 % Securities 1.87 % 1.76 % 1.74 % 1.76 % 1.84 % Interest-bearing deposits at other financial institutions 0.18 % 0.16 % 0.16 % 0.13 % 0.15 % Equity investments 4.67 % 4.98 % 4.66 % 4.13 % 3.86 % Total interest-earning assets 3.31 % 3.16 % 3.33 % 3.41 % 3.85 % Interest-bearing liabilities: Interest-bearing deposits 0.23 % 0.24 % 0.26 % 0.28 % 0.30 % Federal Home Loan Bank advances 1.79 % 1.76 % 1.75 % 1.77 % 1.79 % Other interest-bearing liabilities — — — — — Total interest-bearing liabilities 0.27 % 0.28 % 0.30 % 0.32 % 0.34 % Net interest spread(3) 3.04 % 2.88 % 3.03 % 3.09 % 3.51 % Net interest margin(4) 3.18 % 3.02 % 3.18 % 3.25 % 3.68 % Net interest margin - tax equivalent(5) 3.22 % 3.07 % 3.22 % 3.29 % 3.71 %
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CBTX, INC. AND SUBSIDIARY Loans and Deposits Period End Balances (In thousands, except percentages) 3/31/2022 12/31/2021 9/30/2021 6/30/2021 3/31/2021 Amount % Amount % Amount % Amount % Amount % Loan Portfolio: Commercial and industrial $ 600,990 20.8 % $ 634,384 22.0 % $ 596,251 22.8 % $ 658,733 24.0 % $ 756,707 26.1 % Real estate: Commercial real estate 1,142,646 39.5 % 1,091,969 38.0 % 1,029,137 39.3 % 1,060,968 38.7 % 1,072,263 36.9 % Construction and development 473,326 16.4 % 460,719 16.0 % 393,541 15.0 % 426,007 15.5 % 464,091 16.0 % 1-4 family residential 263,213 9.1 % 277,273 9.6 % 204,151 7.8 % 211,328 7.7 % 224,880 7.7 % Multi-family residential 279,099 9.7 % 286,396 10.0 % 285,852 10.9 % 265,252 9.7 % 271,719 9.4 % Consumer 28,230 1.0 % 28,090 1.0 % 27,930 1.1 % 31,444 1.1 % 32,767 1.1 % Agriculture 6,287 0.2 % 7,941 0.3 % 8,780 0.4 % 8,283 0.4 % 6,974 0.2 % Other 95,187 3.3 % 89,655 3.1 % 71,915 2.7 % 78,607 2.9 % 74,387 2.6 % Gross loans 2,888,978 100.0 % 2,876,427 100.0 % 2,617,557 100.0 % 2,740,622 100.0 % 2,903,788 100.0 % Less allowance for credit losses (31,442 ) (31,345 ) (32,208 ) (37,183 ) (40,874 ) Less deferred fees and unearned discount (8,350 ) (8,739 ) (8,828 ) (10,318 ) (11,151 ) Less loans held for sale (748 ) (164 ) (327 ) (808 ) (1,005 ) Loans, net $ 2,848,438 $ 2,836,179 $ 2,576,194 $ 2,692,313 $ 2,850,758 Deposits: Interest-bearing demand accounts $ 444,571 11.6 % $ 468,361 12.2 % $ 386,196 10.9 % $ 375,543 11.0 % $ 368,124 10.9 % Money market accounts 1,218,082 31.9 % 1,209,659 31.6 % 1,139,167 32.3 % 1,101,091 32.2 % 995,945 29.4 % Savings accounts 130,218 3.4 % 127,031 3.3 % 118,794 3.4 % 115,823 3.4 % 112,467 3.3 % Certificates and other time deposits, $100,000 or greater 127,798 3.4 % 134,775 3.5 % 140,740 4.0 % 142,343 4.2 % 145,762 4.3 % Certificates and other time deposits, less than $100,000 99,233 2.6 % 106,477 2.8 % 118,594 3.4 % 125,202 3.6 % 141,041 4.2 % Total interest-bearing deposits 2,019,902 52.9 % 2,046,303 53.4 % 1,903,491 54.0 % 1,860,002 54.4 % 1,763,339 52.1 % Noninterest-bearing deposits 1,801,323 47.1 % 1,784,981 46.6 % 1,628,144 46.0 % 1,556,784 45.6 % 1,621,408 47.9 % Total deposits $ 3,821,225 100.0 % $ 3,831,284 100.0 % $ 3,531,635 100.0 % $ 3,416,786 100.0 % $ 3,384,747 100.0 %
CBTX, INC. AND SUBSIDIARY Credit Quality (In thousands, except percentages) 3/31/2022 12/31/2021 9/30/2021 6/30/2021 3/31/2021 Nonperforming Assets (at period end): Nonaccrual loans: Commercial and industrial $ 8,765 $ 9,090 $ 9,773 $ 10,038 $ 12,230 Real estate: Commercial real estate 11,363 11,512 10,419 10,572 10,664 Construction and development 140 142 — — 236 1-4 family residential 1,777 1,784 351 363 378 Other 38 40 42 — — Nonaccrual loans 22,083 22,568 20,585 20,973 23,508 Accruing loans 90 or more days past due — — — — — Total nonperforming loans 22,083 22,568 20,585 20,973 23,508 Foreclosed assets — — — — 106 Total nonperforming assets $ 22,083 $ 22,568 $ 20,585 $ 20,973 $ 23,614 Allowance for Credit Losses for Loans (at period end): Commercial and industrial $ 10,895 $ 11,214 $ 11,401 $ 12,260 $ 13,812 Real estate: Commercial real estate 11,297 11,015 11,744 13,260 14,280 Construction and development 3,429 3,310 3,334 4,453 5,445 1-4 family residential 2,025 2,105 1,700 2,172 2,458 Multi-family residential 1,770 1,781 2,156 2,382 2,714 Consumer 403 406 449 494 434 Agriculture 70 88 109 115 107 Other 1,553 1,426 1,315 2,047 1,624 Total allowance for credit losses for loans $ 31,442 $ 31,345 $ 32,208 $ 37,183 $ 40,874 Credit Quality Ratios (at period end): Nonperforming assets to total assets 0.50 % 0.50 % 0.49 % 0.52 % 0.59 % Nonperforming loans to loans excluding loans held for sale 0.77 % 0.79 % 0.79 % 0.77 % 0.81 % Allowance for credit losses for loans to nonperforming loans 142.38 % 138.89 % 156.46 % 177.29 % 173.87 % Allowance for credit losses for loans to loans excluding loans held for sale 1.09 % 1.09 % 1.23 % 1.36 % 1.41 %
CBTX, INC. AND SUBSIDIARY Allowance for Credit Losses for Loans (In thousands, except percentages) Three Months Ended 3/31/2022 12/31/2021 9/30/2021 6/30/2021 3/31/2021 Beginning balance $ 31,345 $ 32,208 $ 37,183 $ 40,874 $ 40,637 Provision (recapture): Commercial and industrial (383 ) (227 ) (945 ) (1,955 ) 872 Real estate: Commercial real estate 282 (729 ) (1,516 ) (1,020 ) 482 Construction and development 119 (24 ) (1,119 ) (992 ) (644 ) 1-4 family residential (81 ) 406 (469 ) (286 ) (120 ) Multi-family residential (11 ) (375 ) (226 ) (332 ) 201 Consumer (5 ) (42 ) (39 ) (36 ) (10 ) Agriculture (28 ) (21 ) (11 ) 8 (72 ) Other 127 111 (732 ) 423 (423 ) Total provision (recapture) 20 (901 ) (5,057 ) (4,190 ) 286 Net (charge-offs) recoveries: Commercial and industrial 64 40 86 403 (95 ) Real estate: Commercial real estate — — — — — Construction and development — — — — — 1-4 family residential 1 (1 ) (3 ) — — Multi-family residential — — — — — Consumer 2 (1 ) (6 ) 96 4 Agriculture 10 — 5 — 42 Other — — — — — Total net (charge-offs) recoveries 77 38 82 499 (49 ) Ending balance $ 31,442 $ 31,345 $ 32,208 $ 37,183 $ 40,874 Net charge-offs (recoveries) to average loans(1) (0.01 %) (0.01 %) (0.01 %) (0.07 %) 0.01 %
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CBTX, INC. AND SUBSIDIARY Non-GAAP to GAAP Reconciliation (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 in our statements of income, balance sheets or statements of cash flows. Non-GAAP financial measures do not include operating, other statistical measures or ratios 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.
This earnings release contains certain non-GAAP financial measures including “tangible book value,” “tangible book value per common share,” and “tangible equity to tangible assets,” which are supplemental measures that are not required by, or are not presented in accordance with, GAAP.
The Company calculates tangible equity as total shareholders’ equity, less goodwill and other intangible assets, net of accumulated amortization, and tangible book value per share as tangible equity divided by shares of common stock outstanding at the end of the relevant period. The most directly comparable GAAP financial measure for tangible book value per share is book value per share.
The Company calculates 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.
The Company believes that tangible book value per share and tangible equity to tangible assets are measures that are important to many investors in the marketplace who are interested in book value per share and total shareholders’ equity to total assets, exclusive of change in intangible assets.
The following table reconciles, as of the dates set forth below, total shareholders’ equity to tangible equity, total assets to tangible assets and presents book value per share, tangible book value per share, tangible equity to tangible assets and total shareholders’ equity to total assets:
3/31/2022 12/31/2021 9/30/2021 6/30/2021 3/31/2021 Total shareholders’ equity $ 539,723 $ 562,125 $ 564,593 $ 556,227 $ 545,349 Adjustments: Goodwill (80,950 ) (80,950 ) (80,950 ) (80,950 ) (80,950 ) Other intangibles (3,540 ) (3,658 ) (3,702 ) (3,846 ) (3,991 ) Tangible equity $ 455,233 $ 477,517 $ 479,941 $ 471,431 $ 460,408 Total assets $ 4,445,977 $ 4,486,001 $ 4,209,119 $ 4,066,534 $ 4,028,639 Adjustments: Goodwill (80,950 ) (80,950 ) (80,950 ) (80,950 ) (80,950 ) Other intangibles (3,540 ) (3,658 ) (3,702 ) (3,846 ) (3,991 ) Tangible assets $ 4,361,487 $ 4,401,393 $ 4,124,467 $ 3,981,738 $ 3,943,698 Common shares outstanding 24,502 24,488 24,420 24,450 24,442 Book value per share $ 22.03 $ 22.96 $ 23.12 $ 22.75 $ 22.31 Tangible book value per share $ 18.58 $ 19.50 $ 19.65 $ 19.28 $ 18.84 Total shareholders’ equity to total assets 12.14 % 12.53 % 13.41 % 13.68 % 13.54 % Tangible equity to tangible assets 10.44 % 10.85 % 11.64 % 11.84 % 11.67 %
Investor Relations :
Justin M. Longinvestors@CBoTX.com
Media Contact :
Ashley Warrenawarren@CBoTX.com
