​

​

CBTX, Inc. Reports Second Quarter Financial Results

​

Houston, Texas, July 28, 2022 -- 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

​

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 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.  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 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)

​

​

​

CBTX, INC. AND SUBSIDIARY

Condensed Consolidated Balance Sheets

(In thousands)

​

​

​

CBTX, INC. AND SUBSIDIARY

Condensed Consolidated Statements of Income

(In thousands)

​

​

​

​

CBTX, INC. AND SUBSIDIARY

Net Interest Margin

(In thousands, except percentages)

​

​