CBTX, Inc. Reports Second Quarter Financial Results
07/28/2022 - 04:38 PM
HOUSTON, July 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 June 30, 2022.
Robert R. Franklin, Jr., Chairman, CEO and President of the Company said, “We are pleased to present our results for the second quarter in which the company earned $0.48 per share on a diluted basis and loans grew over the $3 billion mark for the first time in our history.”
“We have continued our efforts to prepare for closing of the merger with Allegiance Bancshares and position us to provide a smooth transition for our customers, employees and communities,” continued Mr. Franklin. “During the quarter, shareholders of both companies approved the agreement for the merger, and we received approvals from the Federal Deposit Insurance Corporation and the Texas Department of Banking of the regulatory applications filed related to the transaction.”
Mr. Franklin concluded, “Although economic news remains unsettled with inflation, and volatile energy prices and global crises persist, we believe our markets remain relatively strong and the pending merger will benefit the shareholders, employees and communities of the combined organizations.”
Highlights
The Company reported net income of $11.7 million for the second quarter of 2022, or $0.48 per diluted share, compared to net income of $10.6 million , or $0.43 per diluted share, for the first quarter of 2022 and net income of $11.7 million , or $0.48 per diluted share, for the second quarter of 2021. Loans excluding loans held for sale were $3.0 billion at June 30, 2022, an increase of $153.0 million from March 31, 2022. The allowance for credit losses, or ACL, was 1.06% of loans excluding loans held for sale at June 30, 2022 compared to 1.09% at March 31, 2022. Net interest margin on a tax equivalent basis was 3.49% for the second quarter of 2022, compared to 3.22% for the first quarter of 2022 and 3.29% for the second quarter of 2021. Deposits decreased $64.6 million between March 31, 2022 and June 30, 2022 and increased $339.8 million between June 30, 2021 and June 30, 2022. Cash and cash equivalents decreased $287.0 million from March 31, 2022 to June 30, 2022. Received requisite shareholder approvals of the agreement for the merger of equals of Allegiance Bancshares, Inc. and the Company and received regulatory approvals from the Federal Deposit Insurance Corporation and the Texas Department of Banking. 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 received regulatory approvals from the Federal Deposit Insurance Corporation and the Texas Department of Banking. The merger remains subject to the receipt of regulatory approval from the Board of Governors of the Federal Reserve System. Subject to satisfaction of the closing conditions, the parties anticipate closing in the third quarter of 2022.
Operating Results
The Company reported net income of $11.7 million for the second quarter of 2022, or $0.48 per diluted share, compared to net income of $10.6 million , or $0.43 per diluted share, for the first quarter of 2022 and net income of $11.7 million , or $0.48 per diluted share, for the second quarter of 2021.
The increase of $1.1 million in net income for the second quarter of 2022, compared to the first quarter of 2022, was primarily due to a $2.2 million increase in net interest income and a $894,000 decrease in noninterest expense, partially offset by a $1.8 million decrease in noninterest income.
Net income was $11.7 million for both the second quarter of 2022 and 2021. Net interest income was $3.9 million higher and non-interest expense was $1.4 million lower in the second quarter of 2022, compared to the second quarter of 2021. Additionally, the provision for credit losses was a provision of $126,000 for the second quarter of 2022, compared to a recapture of $5.1 million in the second quarter of 2021.
Net Interest Income
Net interest income was $34.9 million for the second quarter of 2022, compared to $32.6 million for the first quarter of 2022 and $31.0 million for the second quarter of 2021.
Net interest income increased $2.3 million during the second quarter of 2022, compared to the first quarter of 2022, primarily due to higher rates on interest-bearing deposits at other financial institutions and securities, higher average securities and loans, lower average Federal Home Loan Bank advances and an additional calendar day in the second quarter of 2022.
Net interest income increased $3.9 million during the second quarter of 2022, compared to the second quarter of 2021, primarily due to higher rates on interest-earning assets, higher average loans and securities, lower rates on deposits and lower average Federal Home Loan Bank advances.
The yield on interest-earning assets was 3.56% for the second quarter of 2022, compared to 3.31% for the first quarter of 2022 and 3.41% for the second quarter of 2021. The cost of interest-bearing liabilities was 0.25% for the second quarter of 2022, 0.27% for the first quarter of 2022 and 0.32% for the second quarter of 2021. The Company’s net interest margin on a tax equivalent basis was 3.49% for the second quarter of 2022, compared to 3.22% for the first quarter of 2022 and 3.29% for the second quarter of 2021.
Net fees recognized on Paycheck Protection Program, or PPP, loans were $234,000 , $989,000 and $1.5 million during the second quarter of 2022, the first quarter of 2022 and second quarter of 2021, respectively.
Provision (Recapture) for Credit Losses
The provision for credit losses for the second quarter of 2022 was $126,000 , compared to $435,000 for the first quarter of 2022 and a recapture of $5.1 million for the second quarter of 2021.
The provision for credit losses for the second quarter of 2022 is comprised of a $479,000 provision for credit losses for loans due to an increase in the loan portfolio and a $353,000 recapture for credit losses related to unfunded commitments due to a decrease in available unfunded commitments.
The provision for credit losses for the first quarter of 2022 was comprised of recaptures of $20,000 and $415,000 for the ACL for loans and for unfunded commitments, respectively.
The provision for credit losses for the second quarter of 2021 was comprised of recaptures of $4.2 million and $893,000 for the ACL for loans and for unfunded commitments, respectively. The recapture of credit losses during the second quarter of 2021 primarily resulted from improvements in the local economy during that period.
The ACL for loans was $32.1 million , or 1.06% , of loans excluding loans held for sale at June 30, 2022, $31.4 million , or 1.09% , at March 31, 2022 and $37.2 million , or 1.36% , at June 30, 2021.
Noninterest Income
Noninterest income was $3.5 million for the second quarter of 2022, $5.3 million for the first quarter of 2022 and $3.5 million for the second quarter of 2021.
Noninterest income was decreased $1.8 million for the second quarter of 2022, as compared to the first quarter of 2022. Noninterest income for the first quarter of 2022 included 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 income was $3.5 million for both the second quarter of 2022 and 2021. Deposit account service charge income was $219,000 higher and net gains on sales of assets were $308,000 lower in the second quarter of 2022, compared to the second quarter of 2021.
Noninterest Expense
Noninterest expense was $23.8 million for the second quarter of 2022, compared to $24.7 million for the first quarter of 2022 and $25.2 million for the second quarter of 2021.
The decrease in noninterest expense of $894,000 for the second quarter of 2022, compared to the first quarter of 2022, was primarily due to a $556,000 decrease in salaries and employee benefits, primarily due to higher insurance expense in the first quarter of 2022 and a decrease of $305,000 in data processing and software expense.
The decrease in noninterest expense of $1.4 million for the second quarter of 2022, compared to the second quarter of 2021, was primarily due to a $1.3 million decrease in professional and director fees primarily related to BSA/AML compliance matters and legal fees, partially offset by $1.0 million of costs related to the pending merger with Allegiance.
Income Taxes
Income tax expense was $2.8 million for the second quarter of 2022, $2.3 million for the first quarter of 2022 and $2.7 million for the second quarter of 2021. The effective tax rates were 19.45% for the second quarter of 2022, 17.69% for the first quarter of 2022 and 18.70% for the second 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.
Balance Sheet Highlights
Loans
Loans excluding loans held for sale were $3.0 billion at June 30, 2022, $2.9 billion at March 31, 2022 and $2.7 billion at June 30, 2021. Loans excluding loans held for sale increased $153.0 million from March 31, 2022 to June 30, 2022 primarily due to loan originations and line of credit drawdowns outpacing paydowns.
The Company’s PPP loans were $8.9 million , net of deferred fees and unearned discounts, at June 30, 2022, $17.5 million at March 31, 2022 and $179.1 million at June 30, 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.
Cash and Cash Equivalents
Cash and cash equivalents decreased $287.0 million from March 31, 2022 to June 30, 2022 primarily due to a net increase in loans and net deposit outflows. Cash and cash equivalents decreased $304.4 million from June 30, 2021 to June 30, 2022 primarily due to a net increase in securities and loans, partially offset by net deposit inflows.
Securities
Securities were $550.1 million at June 30, 2022, $548.0 million at March 31, 2022 and $309.2 million at June 30, 2021.
As of June 30, 2022, the fair value of the Company’s securities totaled $550.1 million , compared to $548.0 million as of March 31, 2022, an increase of $2.1 million . Amortized cost increased $26.9 million during the second quarter of 2022, primarily as a result of purchases totaling $188.2 million outpacing maturities, calls and paydowns totaling $163.2 million . Net unrealized losses on the securities portfolio were $59.3 million at June 30, 2022, compared to net unrealized losses of $34.5 million at March 31, 2022. This decrease of $24.8 million was due to a reduction in fair value as a result of increases in interest rates.
Securities increased $240.9 million from June 30, 2021 to June 30, 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 second quarter of 2022. Net unrealized losses on the securities portfolio were $59.3 million at June 30, 2022, compared to a net unrealized gain of $6.5 million at June 30, 2021. This decrease of $65.8 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 June 30, 2022, March 31, 2022 and June 30, 2021, respectively. The decrease in deposits of $64.6 million between March 31, 2022 and June 30, 2022 was due to net deposit outflows of $73.5 million in interest-bearing accounts and net deposit inflows of $9.0 million in noninterest-bearing accounts. The increase in deposits of $339.8 million between June 30, 2021 and June 30, 2022 was due to net deposit inflows of $86.4 million and $253.5 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 and June 30, 2021. The Company’s Federal Home Loan Bank advances were paid off in April 2022 and the Company had no borrowings outstanding at June 30, 2022.
Capital
At June 30, 2022, the Company continued to be well capitalized and maintained strong capital ratios under regulatory requirements. The Company’s total risk-based capital ratio was 15.53% at June 30, 2022, 16.06% at March 31, 2022 and 17.72% at June 30, 2021. The Company’s tier 1 leverage ratio was 11.48% at June 30, 2022, 11.08% at March 31, 2022 and 11.63% at June 30, 2021. The Company’s total shareholders’ equity to total assets ratio was 12.19% at June 30, 2022, 12.14% at March 31, 2022 and 13.68% at June 30, 2021.
The ratio of tangible equity to tangible assets was 10.44% at June 30, 2022, 10.44% at March 31, 2022 and 11.84% at June 30, 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 [update]
The Company will hold a conference call to discuss second quarter 2022 financial results on Friday, July 29, 2022 at 8:00 a.m. Central Time (9:00 a.m. Eastern Time). Investors and interested parties may access the live webcast of the conference call by registering at: https://register.vevent.com/register/BIe2950431a1294744a2773ccd1e690564
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 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 under the Investor Relations tab.
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.
CBTX, INC. AND SUBSIDIARY Financial Highlights (In thousands, except per share data and percentages)
Three Months Ended Six Months Ended 6/30/2022 3/31/2022 12/31/2021 9/30/2021 6/30/2021 6/30/2022 6/30/2021 Profitability: Net income (loss) $ 11,707 $ 10,595 $ (545) $ 14,421 $ 11,703 $ 22,302 $ 21,722 Basic earnings (loss) per share $ 0.48 $ 0.43 $ (0.02) $ 0.59 $ 0.48 $ 0.91 $ 0.89 Diluted earnings (loss) per share $ 0.48 $ 0.43 $ (0.02) $ 0.59 $ 0.48 $ 0.91 $ 0.88 Return on average assets(1) 1.08% 0.97% (0.05% ) 1.37% 1.14% 1.02% 1.09% Return on average shareholders' equity(1) 8.75% 7.67% (0.38% ) 10.15% 8.49% 8.20% 7.95% Net interest margin - tax equivalent(1) 3.49% 3.22% 3.07% 3.22% 3.29% 3.35% 3.49% Efficiency ratio(2) 61.84% 64.94% 99.78% 66.21% 73.02% 63.38% 68.56% Liquidity and Capital Ratios: Total shareholders' equity to total assets 12.19% 12.14% 12.53% 13.41% 13.68% 12.19% 13.68% Tangible equity to tangible assets(3) 10.44% 10.44% 10.85% 11.64% 11.84% 10.44% 11.84% Common equity tier 1 capital ratio 14.49% 14.97% 15.31% 16.87% 16.46% 14.49% 16.46% Tier 1 risk-based capital ratio 14.49% 14.97% 15.31% 16.87% 16.46% 14.49% 16.46% Total risk-based capital ratio 15.53% 16.06% 16.42% 18.12% 17.72% 15.53% 17.72% Tier 1 leverage ratio 11.48% 11.08% 11.22% 11.69% 11.63% 11.48% 11.63% Credit Quality: Allowance for credit losses for loans to loans excluding loans held for sale 1.06% 1.09% 1.09% 1.23% 1.36% 1.06% 1.36% Nonperforming assets to total assets 0.65% 0.50% 0.50% 0.49% 0.52% 0.65% 0.52% Nonperforming loans to loans excluding loans held for sale 0.93% 0.77% 0.79% 0.79% 0.77% 0.93% 0.77% Net charge-offs (recoveries) to average loans(1) (0.02% ) (0.01% ) (0.01% ) (0.01% ) (0.07% ) (0.02% ) (0.03% ) Other Data: Weighted average common shares outstanding - basic 24,493 24,497 24,437 24,432 24,447 24,495 24,477 Weighted average common shares outstanding - diluted 24,593 24,605 24,575 24,544 24,571 24,613 24,591 Common shares outstanding at period end 24,425 24,502 24,488 24,420 24,450 24,425 24,450 Dividends per share $ 0.13 $ 0.13 $ 0.13 $ 0.13 $ 0.13 $ 0.26 $ 0.26 Book value per share $ 21.56 $ 22.03 $ 22.96 $ 23.12 $ 22.75 $ 21.56 $ 22.75 Tangible book value per share(3) $ 18.11 $ 18.58 $ 19.50 $ 19.65 $ 19.28 $ 18.11 $ 19.28 Employees - full-time equivalents 491 503 506 520 529 491 529
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CBTX, INC. AND SUBSIDIARY Condensed Consolidated Balance Sheets (In thousands)
6/30/2022 3/31/2022 12/31/2021 9/30/2021 6/30/2021 Loans excluding loans held for sale $ 3,032,914 $ 2,879,880 $ 2,867,524 $ 2,608,402 $ 2,729,496 Allowance for credit losses for loans (32,087) (31,442) (31,345) (32,208) (37,183) Loans, net 3,000,827 2,848,438 2,836,179 2,576,194 2,692,313 Cash and cash equivalents 483,966 770,991 950,146 998,785 788,409 Securities 550,083 547,979 425,046 359,539 309,233 Premises and equipment 56,010 56,665 58,417 59,235 59,987 Goodwill 80,950 80,950 80,950 80,950 80,950 Other intangible assets 3,353 3,540 3,658 3,702 3,846 Loans held for sale — 748 164 327 808 Operating lease right-to-use asset 11,324 10,850 11,191 11,527 12,514 Other assets 135,790 125,816 120,250 118,860 118,474 Total assets $ 4,322,303 $ 4,445,977 $ 4,486,001 $ 4,209,119 $ 4,066,534 Noninterest-bearing deposits $ 1,810,275 $ 1,801,323 $ 1,784,981 $ 1,628,144 $ 1,556,784 Interest-bearing deposits 1,946,359 2,019,902 2,046,303 1,903,491 1,860,002 Total deposits 3,756,634 3,821,225 3,831,284 3,531,635 3,416,786 Federal Home Loan Bank advances — 50,000 50,000 50,000 50,000 Operating lease liabilities 14,169 13,752 14,142 14,556 15,590 Other liabilities 24,821 21,277 28,450 48,335 27,931 Total liabilities 3,795,624 3,906,254 3,923,876 3,644,526 3,510,307 Total shareholders’ equity 526,679 539,723 562,125 564,593 556,227 Total liabilities and shareholders’ equity $ 4,322,303 $ 4,445,977 $ 4,486,001 $ 4,209,119 $ 4,066,534
CBTX, INC. AND SUBSIDIARY Condensed Consolidated Statements of Income (In thousands)
Three Months Ended Six Months Ended 6/30/2022 3/31/2022 12/31/2021 9/30/2021 6/30/2021 6/30/2022 6/30/2021 Interest income Interest and fees on loans $ 31,768 $ 31,221 $ 29,882 $ 30,765 $ 30,793 $ 62,989 $ 63,958 Securities 2,937 2,292 1,796 1,435 1,332 5,229 2,505 Interest-bearing deposits at other financial institutions 1,238 348 383 340 223 1,586 400 Equity investments 158 154 168 157 158 312 304 Total interest income 36,101 34,015 32,229 32,697 32,506 70,116 67,167 Interest expense Deposits 1,178 1,164 1,180 1,227 1,267 2,342 2,617 Federal Home Loan Bank advances 51 221 222 221 221 272 442 Other interest-bearing liabilities — — 17 — — — — Total interest expense 1,229 1,385 1,419 1,448 1,488 2,614 3,059 Net interest income 34,872 32,630 30,810 31,249 31,018 67,502 64,108 Provision (recapture) for credit losses Provision (recapture) for credit losses for loans 479 20 (901) (5,057) (4,190) 499 (3,904) Provision (recapture) for credit losses for unfunded commitments (353) 415 (306) 162 (893) 62 (767) Total provision (recapture) for credit losses 126 435 (1,207) (4,895) (5,083) 561 (4,671) Net interest income after provision (recapture) for credit losses 34,746 32,195 32,017 36,144 36,101 66,941 68,779 Noninterest income Deposit account service charges 1,386 1,370 1,370 1,352 1,167 2,756 2,360 Card interchange fees 1,135 1,037 1,081 1,048 1,095 2,172 2,071 Earnings on bank-owned life insurance 371 371 385 2,323 390 742 780 Net gain on sales of assets 58 530 910 360 366 588 558 Other 596 2,021 354 479 473 2,617 833 Total noninterest income 3,546 5,329 4,100 5,562 3,491 8,875 6,602 Noninterest expense Salaries and employee benefits 14,698 15,254 16,609 15,000 14,734 29,952 28,922 Occupancy expense 2,396 2,371 2,606 2,660 2,597 4,767 5,118 Professional and director fees 1,142 879 756 1,567 2,441 2,021 4,144 Data processing and software 1,458 1,763 1,716 1,629 1,661 3,221 3,237 Regulatory fees 803 614 8,366 478 501 1,417 1,057 Advertising, marketing and business development 366 249 263 493 510 615 795 Telephone and communications 349 454 471 516 550 803 1,013 Security and protection expense 170 324 439 425 537 494 927 Amortization of intangibles 172 181 179 182 186 353 377 Other expenses 2,204 2,563 3,427 1,422 1,480 4,767 2,892 Total noninterest expense 23,758 24,652 34,832 24,372 25,197 48,410 48,482 Net income before income tax expense 14,534 12,872 1,285 17,334 14,395 27,406 26,899 Income tax expense 2,827 2,277 1,830 2,913 2,692 5,104 5,177 Net income (loss) $ 11,707 $ 10,595 $ (545) $ 14,421 $ 11,703 $ 22,302 $ 21,722
CBTX, INC. AND SUBSIDIARY Net Interest Margin (In thousands, except percentages)
Three Months Ended 6/30/2022 3/31/2022 6/30/2021 Average Interest Average Average Interest Average Average Interest Average Outstanding Earned/ Yield/ Outstanding Earned/ Yield/ Outstanding Earned/ Yield/ Balance Interest Paid Rate(1) Balance Interest Paid Rate (1) Balance Interest Paid Rate(1) Assets Interest-earning assets: Total loans(2) $ 2,897,335 $ 31,768 4.40% $ 2,886,765 $ 31,221 4.39% $ 2,835,995 $ 30,793 4.36% Securities 562,518 2,937 2.09% 497,640 2,292 1.87% 302,808 1,332 1.76% Interest-bearing deposits at other financial institutions 593,255 1,238 0.84% 768,665 348 0.18% 670,508 223 0.13% Equity investments 13,386 158 4.73% 13,379 154 4.67% 15,338 158 4.13% Total interest-earning assets 4,066,494 $ 36,101 3.56% 4,166,449 $ 34,015 3.31% 3,824,649 $ 32,506 3.41% Allowance for credit losses for loans (31,081) (31,602) (40,806) Noninterest-earning assets 315,133 307,796 317,115 Total assets $ 4,350,546 $ 4,442,643 $ 4,100,958 Liabilities and Shareholders’ Equity Interest-bearing liabilities: Interest-bearing deposits $ 1,939,990 $ 1,178 0.24% $ 2,019,609 $ 1,164 0.23% $ 1,839,812 $ 1,267 0.28% Federal Home Loan Bank advances 5,495 51 3.72% 50,000 221 1.79% 50,000 221 1.77% Total interest-bearing liabilities 1,945,485 $ 1,229 0.25% 2,069,609 $ 1,385 0.27% 1,889,812 $ 1,488 0.32% Noninterest-bearing liabilities: Noninterest-bearing deposits 1,825,400 1,762,729 1,611,565 Other liabilities 42,861 49,990 46,774 Total noninterest-bearing liabilities 1,868,261 1,812,719 1,658,339 Shareholders’ equity 536,800 560,315 552,807 Total liabilities and shareholders’ equity $ 4,350,546 $ 4,442,643 $ 4,100,958 Net interest income $ 34,872 $ 32,630 $ 31,018 Net interest spread(3) 3.31% 3.04% 3.09% Net interest margin(4) 3.44% 3.18% 3.25% Net interest margin - tax equivalent(5) 3.49% 3.22% 3.29%
____________________$478,000 , $463,000 and $321,000 for the three months ended June 30, 2022, March 31, 2022 and June 30, 2021, respectively, were computed using a federal income tax rate of 21% .
CBTX, INC. AND SUBSIDIARY Net Interest Margin (In thousands, except percentages)
Six Months Ended June 30, 2022 2021 Average Interest Average Average Interest Average Outstanding Earned/ Yield/ Outstanding Earned/ Yield/ (Dollars in thousands) Balance Interest Paid Rate(1) Balance Interest Paid Rate(1) Assets Interest-earning assets: Total loans(1) $ 2,892,079 $ 62,989 4.39% $ 2,868,463 $ 63,958 4.50% Securities 530,259 5,229 1.99% 281,196 2,505 1.80% Interest-bearing deposits at other financial institutions 680,477 1,586 0.47% 573,433 400 0.14% Equity investments 13,383 312 4.70% 15,346 304 3.99% Total interest-earning assets 4,116,198 $ 70,116 3.44% 3,738,438 $ 67,167 3.62% Allowance for credit losses for loans (31,340) (40,941) Noninterest-earning assets 311,482 318,520 Total assets $ 4,396,340 $ 4,016,017 Liabilities and Shareholders’ Equity Interest-bearing liabilities: Interest-bearing deposits $ 1,979,578 $ 2,342 0.24% $ 1,821,098 $ 2,617 0.29% Federal Home Loan Bank advances 27,624 272 1.99% 50,000 442 1.78% Total interest-bearing liabilities 2,007,202 $ 2,614 0.26% 1,871,098 $ 3,059 0.33% Noninterest-bearing liabilities: Noninterest-bearing deposits 1,794,239 1,545,242 Other liabilities 46,406 48,503 Total noninterest-bearing liabilities 1,840,645 1,593,745 Shareholders’ equity 548,493 551,174 Total liabilities and shareholders’ equity $ 4,396,340 $ 4,016,017 Net interest income $ 67,502 $ 64,108 Net interest spread(3) 3.18% 3.29% Net interest margin(4) 3.31% 3.46% Net interest margin - tax equivalent(5) 3.35% 3.49%
_______________________$941,000 and $621,000 for the six months ended June 30, 2022 and June 30, 2021, respectively, were computed using a federal income tax rate of 21% .
CBTX, INC. AND SUBSIDIARY Rate/Volume Analysis (In thousands)
Three Months Ended June 30, 2022, Compared to Three Months Ended March 31, 2022 Increase (Decrease) due to (Dollars in thousands) Rate Volume Days Total Interest-earning assets: Total loans $ 86 $ 114 $ 347 $ 547 Securities 321 299 25 645 Interest-bearing deposits at other financial institutions 964 (78) 4 890 Equity investments 2 — 2 4 Total increase (decrease) in interest income 1,373 335 378 2,086 Interest-bearing liabilities: Interest-bearing deposits 46 (45) 13 14 Federal Home Loan Bank advances 24 (196) 2 (170) Total increase (decrease) in interest expense 70 (241) 15 (156) Increase (decrease) in net interest income $ 1,303 $ 576 $ 363 $ 2,242
Three Months Ended June 30, 2022, Compared to Three Months Ended June 30, 2021 Increase (Decrease) due to (Dollars in thousands) Rate Volume Total Interest-earning assets: Total loans $ 308 $ 667 $ 975 Securities 465 1,140 1,605 Interest-bearing deposits at other financial institutions 1,040 (25) 1,015 Equity investments 20 (20) — Total increase (decrease) in interest income 1,833 1,762 3,595 Interest-bearing liabilities: Interest-bearing deposits (159) 70 (89) Federal Home Loan Bank advances 26 (196) (170) Total increase (decrease) in interest expense (133) (126) (259) Increase (decrease) in net interest income $ 1,966 $ 1,888 $ 3,854
Six Months Ended June 30, 2022, Compared to Six Months Ended June 30, 2021 Increase (Decrease) due to (Dollars in thousands) Rate Volume Total Interest-earning assets: Total loans $ (1,496) $ 527 $ (969) Securities 501 2,223 2,724 Interest-bearing deposits at other financial institutions 1,112 74 1,186 Equity investments 47 (39) 8 Total decrease in interest income 164 2,785 2,949 Interest-bearing liabilities: Interest-bearing deposits (503) 228 (275) Federal Home Loan Bank advances 28 (198) (170) Total increase (decrease) in interest expense (475) 30 (445) Decrease in net interest income $ 639 $ 2,755 $ 3,394
CBTX, INC. AND SUBSIDIARY Average Balances and Yields
Three Months Ended 6/30/2022 3/31/2022 12/31/2021 9/30/2021 6/30/2021 Average Outstanding Balances (in thousands): Interest-earning assets: Total loans(1) $ 2,897,335 $ 2,886,765 $ 2,702,211 $ 2,702,248 $ 2,835,995 Securities 562,518 497,640 404,064 327,968 302,808 Interest-bearing deposits at other financial institutions 593,255 768,665 921,545 854,406 670,508 Equity investments 13,386 13,379 13,374 13,367 15,338 Total interest-earning assets 4,066,494 4,166,449 4,041,194 3,897,989 3,824,649 Allowance for credit losses for loans (31,081) (31,602) (32,840) (36,945) (40,806) Noninterest-earning assets 315,133 307,796 312,308 313,901 317,115 Total assets $ 4,350,546 $ 4,442,643 $ 4,320,662 $ 4,174,945 $ 4,100,958 Interest-bearing liabilities: Interest-bearing deposits $ 1,939,990 $ 2,019,609 $ 1,941,177 $ 1,895,617 $ 1,839,812 Federal Home Loan Bank advances 5,495 50,000 50,000 50,000 50,000 Other interest-bearing liabilities — — 33 — — Total interest-bearing liabilities 1,945,485 2,069,609 1,991,210 1,945,617 1,889,812 Noninterest-bearing liabilities: Noninterest-bearing deposits 1,825,400 1,762,729 1,706,673 1,612,985 1,611,565 Other liabilities 42,861 49,990 54,612 52,712 46,774 Total noninterest-bearing liabilities 1,868,261 1,812,719 1,761,285 1,665,697 1,658,339 Shareholders’ equity 536,800 560,315 568,167 563,631 552,807 Total liabilities and shareholders’ equity $ 4,350,546 $ 4,442,643 $ 4,320,662 $ 4,174,945 $ 4,100,958 Tax equivalent adjustments $ 478,000 $ 463,000 $ 426,000 $ 369,000 $ 321,000 Yield Trend(2) Interest-earning assets: Total loans 4.40% 4.39% 4.39% 4.52% 4.36% Securities 2.09% 1.87% 1.76% 1.74% 1.76% Interest-bearing deposits at other financial institutions 0.84% 0.18% 0.16% 0.16% 0.13% Equity investments 4.73% 4.67% 4.98% 4.66% 4.13% Total interest-earning assets 3.56% 3.31% 3.16% 3.33% 3.41% Interest-bearing liabilities: Interest-bearing deposits 0.24% 0.23% 0.24% 0.26% 0.28% Federal Home Loan Bank advances 3.72% 1.79% 1.76% 1.75% 1.77% Total interest-bearing liabilities 0.25% 0.27% 0.28% 0.30% 0.32% Net interest spread(3) 3.31% 3.04% 2.88% 3.03% 3.09% Net interest margin(4) 3.44% 3.18% 3.02% 3.18% 3.25% Net interest margin - tax equivalent(5) 3.49% 3.22% 3.07% 3.22% 3.29%
__________________21% .
CBTX, INC. AND SUBSIDIARY Loans and Deposits Period End Balances (In thousands, except percentages)
6/30/2022 3/31/2022 12/31/2021 9/30/2021 6/30/2021 Amount % Amount % Amount % Amount % Amount % Loan Portfolio: Commercial and industrial $ 581,443 19.1% $ 600,990 20.8% $ 634,384 22.0% $ 596,251 22.8% $ 658,733 24.0% Real estate: Commercial real estate 1,181,620 38.8% 1,142,646 39.5% 1,091,969 38.0% 1,029,137 39.3% 1,060,968 38.7% Construction and development 560,903 18.4% 473,326 16.4% 460,719 16.0% 393,541 15.0% 426,007 15.5% 1-4 family residential 264,428 8.7% 263,213 9.1% 277,273 9.6% 204,151 7.8% 211,328 7.7% Multi-family residential 300,582 9.9% 279,099 9.7% 286,396 10.0% 285,852 10.9% 265,252 9.7% Consumer 26,810 0.9% 28,230 1.0% 28,090 1.0% 27,930 1.1% 31,444 1.1% Agriculture 8,036 0.3% 6,287 0.2% 7,941 0.3% 8,780 0.4% 8,283 0.4% Other 118,153 3.9% 95,187 3.3% 89,655 3.1% 71,915 2.7% 78,607 2.9% Gross loans 3,041,975 100.0% 2,888,978 100.0% 2,876,427 100.0% 2,617,557 100.0% 2,740,622 100.0% Less allowance for credit losses (32,087) (31,442) (31,345) (32,208) (37,183) Less deferred fees and unearned discount (9,061) (8,350) (8,739) (8,828) (10,318) Less loans held for sale — (748) (164) (327) (808) Loans, net $ 3,000,827 $ 2,848,438 $ 2,836,179 $ 2,576,194 $ 2,692,313 Deposits: Interest-bearing demand accounts $ 445,149 11.9% $ 444,571 11.6% $ 468,361 12.2% $ 386,196 10.9% $ 375,543 11.0% Money market accounts 1,109,265 29.5% 1,218,082 31.9% 1,209,659 31.6% 1,139,167 32.3% 1,101,091 32.2% Savings accounts 130,713 3.5% 130,218 3.4% 127,031 3.3% 118,794 3.4% 115,823 3.4% Certificates and other time deposits, $100,000 or greater 169,616 4.5% 127,798 3.4% 134,775 3.5% 140,740 4.0% 142,343 4.2% Certificates and other time deposits, less than $100,000 91,616 2.4% 99,233 2.6% 106,477 2.8% 118,594 3.4% 125,202 3.6% Total interest-bearing deposits 1,946,359 51.8% 2,019,902 52.9% 2,046,303 53.4% 1,903,491 54.0% 1,860,002 54.4% Noninterest-bearing deposits 1,810,275 48.2% 1,801,323 47.1% 1,784,981 46.6% 1,628,144 46.0% 1,556,784 45.6% Total deposits $ 3,756,634 100.0% $ 3,821,225 100.0% $ 3,831,284 100.0% $ 3,531,635 100.0% $ 3,416,786 100.0%
CBTX, INC. AND SUBSIDIARY Credit Quality (In thousands, except percentages)
6/30/2022 3/31/2022 12/31/2021 9/30/2021 6/30/2021 Nonperforming Assets (at period end): Nonaccrual loans: Commercial and industrial $ 8,312 $ 8,765 $ 9,090 $ 9,773 $ 10,038 Real estate: Commercial real estate 16,481 11,363 11,512 10,419 10,572 Construction and development 143 140 142 — — 1-4 family residential 3,302 1,777 1,784 351 363 Consumer 35 38 40 42 — Nonaccrual loans 28,273 22,083 22,568 20,585 20,973 Accruing loans 90 or more days past due — — — — — Total nonperforming loans 28,273 22,083 22,568 20,585 20,973 Foreclosed assets — — — — — Total nonperforming assets $ 28,273 $ 22,083 $ 22,568 $ 20,585 $ 20,973 Allowance for Credit Losses for Loans (at period end): Commercial and industrial $ 9,730 $ 10,895 $ 11,214 $ 11,401 $ 12,260 Real estate: Commercial real estate 11,708 11,297 11,015 11,744 13,260 Construction and development 4,243 3,429 3,310 3,334 4,453 1-4 family residential 2,071 2,025 2,105 1,700 2,172 Multi-family residential 1,925 1,770 1,781 2,156 2,382 Consumer 391 403 406 449 494 Agriculture 88 70 88 109 115 Other 1,931 1,553 1,426 1,315 2,047 Total allowance for credit losses for loans $ 32,087 $ 31,442 $ 31,345 $ 32,208 $ 37,183 Credit Quality Ratios (at period end): Nonperforming assets to total assets 0.65% 0.50% 0.50% 0.49% 0.52% Nonperforming loans to loans excluding loans held for sale 0.93% 0.77% 0.79% 0.79% 0.77% Allowance for credit losses for loans to nonperforming loans 113.49% 142.38% 138.89% 156.46% 177.29% Allowance for credit losses for loans to loans excluding loans held for sale 1.06% 1.09% 1.09% 1.23% 1.36%
CBTX, INC. AND SUBSIDIARY Allowance for Credit Losses for Loans (In thousands, except percentages)
Three Months Ended 6/30/2022 3/31/2022 12/31/2021 9/30/2021 6/30/2021 Beginning balance $ 31,442 $ 31,345 $ 32,208 $ 37,183 $ 40,874 Provision (recapture): Commercial and industrial (1,395) (383) (227) (945) (1,955) Real estate: Commercial real estate 411 282 (729) (1,516) (1,020) Construction and development 814 119 (24) (1,119) (992) 1-4 family residential 50 (81) 406 (469) (286) Multi-family residential 155 (11) (375) (226) (332) Consumer 48 (5) (42) (39) (36) Agriculture 18 (28) (21) (11) 8 Other 378 127 111 (732) 423 Total provision (recapture) 479 20 (901) (5,057) (4,190) Net (charge-offs) recoveries: Commercial and industrial 230 64 40 86 403 Real estate: Commercial real estate — — — — — Construction and development — — — — — 1-4 family residential (4) 1 (1) (3) — Multi-family residential — — — — — Consumer (60) 2 (1) (6) 96 Agriculture — 10 — 5 — Other — — — — — Total net (charge-offs) recoveries 166 77 38 82 499 Ending balance $ 32,087 $ 31,442 $ 31,345 $ 32,208 $ 37,183 Net charge-offs (recoveries) to average loans(1) (0.02% ) (0.01% ) (0.01% ) (0.01% ) (0.07% )
____________________
(1) Annualized.
CBTX, INC. AND SUBSIDIARY Non‑GAAP to GAAP Reconciliation (In thousands, except per share data and percentages)
The Company’s accounting and reporting policies conform to GAAP and the prevailing practices in the banking industry. However, the Company also evaluates its 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 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 the Company calculates 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:
6/30/2022 3/31/2022 12/31/2021 9/30/2021 6/30/2021 Total shareholders’ equity $ 526,679 $ 539,723 $ 562,125 $ 564,593 $ 556,227 Adjustments: Goodwill (80,950) (80,950) (80,950) (80,950) (80,950) Other intangibles (3,353) (3,540) (3,658) (3,702) (3,846) Tangible equity $ 442,376 $ 455,233 $ 477,517 $ 479,941 $ 471,431 Total assets $ 4,322,303 $ 4,445,977 $ 4,486,001 $ 4,209,119 $ 4,066,534 Adjustments: Goodwill (80,950) (80,950) (80,950) (80,950) (80,950) Other intangibles (3,353) (3,540) (3,658) (3,702) (3,846) Tangible assets $ 4,238,000 $ 4,361,487 $ 4,401,393 $ 4,124,467 $ 3,981,738 Common shares outstanding 24,425 24,502 24,488 24,420 24,450 Book value per share $ 21.56 $ 22.03 $ 22.96 $ 23.12 $ 22.75 Tangible book value per share $ 18.11 $ 18.58 $ 19.50 $ 19.65 $ 19.28 Total shareholders’ equity to total assets 12.19% 12.14% 12.53% 13.41% 13.68% Tangible equity to tangible assets 10.44% 10.44% 10.85% 11.64% 11.84%
Investor Relations :
Justin M. Longinvestors@CBoTX.com
Media Contact :
Ashley Warrenawarren@CBoTX.com
