Stellar Bancorp (STEL) 8-K CBTX, Inc. Reports Quarterly Financial Results

Exhibit 99.1

CBTX, Inc. Reports Quarterly Financial Results

Houston, Texas, October 27, 2021 -- 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 third quarter of 2021.

Robert R. Franklin, Jr., Chairman, CEO and President of the Company said, “We are proud to present our third quarter financial results which continue to be indicative of the transition from a COVID dominated economy through most of the first half of the year to an improved economic environment as we enter the fourth quarter. We have seen credit stabilize, and continued growth in deposits which have provided the Bank with significant liquidity and opportunity. As we enter the fourth quarter, with the local economy continuing to improve, our customers are starting new projects and looking for new ways to expand their businesses.”

Mr. Franklin continued, “During much of 2020 and early 2021 we consciously curtailed our commercial real estate lending due to the uncertainty surrounding the sector and we are seeing the effects of slowing that engine as we rebuild our pipeline. Our lenders have made good efforts to increase our pipeline in a highly competitive environment. We have experienced an unusually high number of payoffs during the last couple of quarters but see the stabilization of our portfolio in the fourth quarter and foresee the ability to get back to our traditional growth rate in the next couple of quarters.”

“In light of the significant liquidity that our customers have provided us, we increased our bond purchases on a measured basis given that we continue to reside in a very low interest rate environment. We will continue to look at our expense base as we budget for 2022 and make adjustments where warranted,” Mr. Franklin added.

Mr. Franklin further said, “CBTX, Inc. is in a solid position for success with an experienced lending staff, liquidity to lend and significant capital to give us flexibility in supporting our future expansion decisions. Our strong, loyal and low-cost relationship driven deposit base continues to provide significant shareholder value. Our asset sensitivity gives us an upside as we transition to a higher interest rate environment possibly in late 2022. Our goal is to finish strong in the fourth quarter as we build momentum into 2022 and return to our traditional growth rate. We are excited about the future for CBTX, Inc.”

Highlights

● Net income was $14.4 million for the third quarter of 2021, or $0.59 per diluted share, compared to $11.7 million, or $0.48 per diluted share, for the second quarter of 2021 and $6.4 million, or $0.26 per diluted share, for the third quarter of 2020.

● Decrease in the allowance for credit losses, or ACL, resulted in a recapture of credit losses of $4.9 million during the third quarter of 2021, primarily due to continued improvements in the national and local economies and economic forecasts and the reduction of the loan portfolios during the third quarter of 2021.

● Net interest margin on a tax equivalent basis decreased to 3.22% for the third quarter of 2021, compared to 3.29% for the second quarter of 2021, primarily due to lower average balances for the loan portfolio.

● Cash and equivalents increased $210.4 million to $998.8 million during the third quarter of 2021, primarily due to net deposit inflows and loan payments received.  

Operating Results

Net Interest Income

Net interest income was $31.2 million for the third quarter of 2021, compared to $31.0 million for the second quarter of 2021 and $31.7 million for the third quarter of 2020. Net interest income increased $231,000 during the third quarter of 2021, compared to the second quarter of 2021, primarily due to an increase in income on interest-bearing deposits at

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other financial institutions due to higher rates and higher average balances and an increase in income on securities due to higher average securities balances, higher rates on loans and the impact of an additional day during the third quarter of 2021 compared to the second quarter of 2021. These increases were partially offset by lower average loans. The increase in loan yield during the third quarter of 2021 includes $2.3 million of net fees recognized on Paycheck Protection Program, or PPP, loans in the third quarter of 2021, compared to $1.5 million recognized in the second quarter of 2021.

Net interest income decreased $459,000 during the third quarter of 2021, compared to the third quarter of 2020, primarily due to lower average loans and higher average interest-bearing deposits, partially offset by lower rates on interest-bearing deposits and higher rates on loans.

The yield on interest-earning assets was 3.33% for the third quarter of 2021, compared to 3.41% for the second quarter of 2021 and 3.75% for the third quarter of 2020. The cost of interest-bearing liabilities was 0.30% for the third quarter of 2021, 0.32% for the second quarter of 2021 and 0.46% for the third quarter of 2020. The Company’s net interest margin on a tax equivalent basis was 3.22% for the third quarter of 2021, compared to 3.29% for the second quarter of 2021 and 3.55% for the third quarter of 2020.

Provision (Recapture) for Credit Losses

The provision for credit losses was a recapture of credit losses of $4.9 million for the third quarter of 2021, compared to a recapture of credit losses of $5.1 million for the second quarter of 2021 and a provision of credit losses of $4.1 million for the third quarter of 2020.

The recapture of credit losses for the third and second quarters of 2021 were primarily the result of the adjustment of certain qualitative factors used to determine the ACL due to the continued improvements in the national and local economies and economic forecasts.

The provision for credit losses of $4.1 million for the third quarter of 2020 resulted from the impact of the COVID-19 pandemic and the sustained instability of the oil and gas industry, which led to the adjustment of certain factors utilized to determine the ACL.

At September 30, 2021, the ACL for loans was $32.2 million, or 1.23%, to loans excluding loans held for sale, $37.2 million, or 1.36%, to loans excluding loans held for sale, at June 30, 2021 and $44.1 million, or 1.49%, to loans excluding loans held for sale at September 30, 2020. The decrease in the ACL for loans at September 30, 2021 was primarily the result of the adjustment of certain qualitative factors utilized in the Company’s ACL estimate due to the continued improvements in the national and local economies and economic forecasts. A decrease in the Company’s loan portfolio also contributed to the decrease in the ACL during 2021.

The ACL for unfunded commitments was $3.6 million at September 30, 2021, compared to $3.4 million at June 30, 2021 and $4.5 million at September 30, 2020. The decrease in the ACL for unfunded commitments from June 30, 2021 to September 30, 2021 and from September 30, 2020 to September 30, 2021 was primarily the result of the adjustment to certain qualitative factors due to the continued improvements in the national and local economies and economic forecasts as well as fluctuations in unfunded commitments.

Noninterest Income

Noninterest income was $5.6 million for the third quarter of 2021, $3.5 million for the second quarter of 2021 and $4.0 million for the third quarter of 2020. The increase of $2.1 million for the third quarter of 2021, compared to the second quarter of 2021 and an increase of $1.5 million for the third quarter of 2021, compared to the third quarter of 2020 were both primarily due to gains of $1.9 million and $769,000 during the third quarter of 2021 and 2020 related to bank-owned life insurance. As the owner and beneficiary under bank-owned insurance policies as the result of claims submitted on covered individuals, the Company received proceeds of $2.7 million and $2.0 million during the third quarter of 2021 and the third quarter of 2020, respectively.

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Noninterest Expense

Noninterest expense was $24.4 million for the third quarter of 2021, compared to $25.2 million for the second quarter of 2021 and $23.9 million for the third quarter of 2020. The decrease in noninterest expense of $825,000 between the third quarter of 2021 and the second quarter of 2021 was primarily due to a $874,000 decrease in professional and director fees. Professional fees related to Bank Secrecy Act/Anti-Money Laundering, or BSA/AML, compliance matters decreased $1.2 million to $202,000 for the third quarter of 2021, compared to $1.4 million for the second quarter of 2021. This decrease in BSA/AML related professional fees during the third quarter of 2021 was partially offset by increases in consulting fees related to a loan review project.

The increase in noninterest expense of $514,000 for the third quarter of 2021, compared to the third quarter of 2020, was primarily due to a $668,000 increase in salaries and employee benefits, a $164,000 increase in occupancy expense, a $104,000 increase in data processing and software, and a $126,000 increase in security and protection expense, partially offset by a $879,000 decrease in professional and director fees. Professional fees related to BSA/AML compliance matters decreased $1.3 million to $202,000 for the third quarter of 2021, compared to $1.5 million for the third quarter of 2020.

Income Taxes

Income tax expense was $2.9 million for the third quarter of 2021, $2.7 million for the second quarter of 2021 and $1.3 million for the third quarter of 2020. The effective tax rates were 16.81% for the third quarter of 2021, 18.70% for the second quarter of 2021 and 17.31% for the third quarter of 2020. 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 and bank-owned life insurance earnings.

Balance Sheet Highlights

Loans

Loans excluding loans held for sale were $2.6 billion at September 30, 2021, $2.7 billion at June 30, 2021 and $3.0 billion at September 30, 2020. The decrease from June 30, 2021 to September 30, 2021 and the decrease from September 30, 2020 to September 30, 2021 were both primarily due to larger loan paydowns than loan originations.

The decrease in loans was also impacted by the decrease in the Company’s PPP loans which were $100.8 million, net of deferred fees and unearned discounts, at September 30, 2021, $179.1 million at June 30, 2021 and $324.3 million at September 30, 2020. During the third quarter of 2021, no PPP loans were originated and payments totaling $80.6 million were received. During the second quarter of 2021, $20.4 million of PPP loans were originated and payments totaling $110.4 million were received.

In support of customers impacted by the COVID-19 pandemic, the Company offered relief through payment deferrals during 2020 and the first nine months of 2021. As of September 30, 2021, the Company had 7 loans subject to such deferral arrangements with outstanding principal balances of $18.8 million and 9 loans on deferral arrangements with total outstanding principal balances of $20.5 million at June 30, 2021 and 41 loans on deferral arrangement with total outstanding principal balances totaling $82.4 million at September 30, 2020.

Cash and Cash Equivalents

Cash and equivalents increased $210.4 million from June 30, 2021 to September 30, 2021 and $621.2 million from September 30, 2020 to September 30, 2021. These increases are primarily due to loan payments received and net deposit inflows.

Securities

Securities were $359.5 million at September 30, 2021, $309.2 million at June 30, 2021 and $226.1 million at September 30, 2020. The increase in securities was primarily due to purchases out pacing maturities, call and paydowns.

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Deposits and Borrowings

Total deposits were $3.5 billion at September 30, 2021, $3.4 billion at June 30, 2021 and $3.2 billion at September 30, 2020. The increase in deposits of $114.8 million between June 30, 2021 and September 30, 2021 was due to net deposit inflows of $43.5 million in interest-bearing accounts and net deposit inflows of $71.4 million in non-interest-bearing accounts. The increase in deposits of $361.0 million between September 30, 2020 and September 30, 2021 was due to net deposit inflows of $193.8 million and $167.2 million in interest-bearing accounts and noninterest-bearing accounts, respectively.

The Company defines total borrowings as the total of repurchase agreements, Federal Home Loan Bank advances and notes payable. Total borrowings were $50.0 million, $50.0 million and $52.2 million at September 30, 2021, June 30, 2021 and September 30, 2020, respectively.

Capital

At September 30, 2021, 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 18.12% at September 30, 2021, compared to 17.72% at June 30, 2021 and 16.67% at September 30, 2020. The Company’s tier 1 leverage ratio was 11.69% at September 30, 2021, compared to 11.63% at June 30, 2021 and 11.90% at September 30, 2020. The Company’s total shareholders’ equity to total assets ratio was 13.41% at September 30, 2021, 13.68% at June 30, 2021 and 14.18% at September 30, 2020.

The ratio of tangible equity to tangible assets was 11.64% at September 30, 2021, 11.84% at June 30, 2021 and 12.22% at September 30, 2020. 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 third quarter 2021 financial results on Thursday, October 28, 2021 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 5048704. 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.

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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 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; the Company’s ability to pursue available remedies in the event of a loan default for PPP loans and the risk of holding such loans at unfavorable interest rates and on terms that are less favorable than those with customers to whom the Company would have otherwise lent; 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-party servicers; the failure of certain third-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, including the ongoing investigation by the Financial Crimes Enforcement Network of the U.S. Department of Treasury, or FinCEN, or reviews or the ability to obtain required regulatory approvals; the possible results and amount of civil money penalties related to such FinCEN investigation and the Company’s BSA/AML program; changes in the laws, rules, regulations, interpretations or policies relating to financial institution, accounting, tax, trade, monetary and fiscal matters; governmental or regulatory responses to the COVID-19 pandemic that may impact the Company’s loan portfolio and forbearance practice; further government intervention in the U.S. financial system that may impact how the Company achieves its performance goals; and other risks, uncertainties, and factors that are discussed from time to time in the Company’s reports and documents filed with the 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 Securities and Exchange Commission, or 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

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factor on its business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. Copies of the SEC filings for the Company are available for download free of charge from www.communitybankoftx.com under the Investor Relations tab.

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CBTX, INC. AND SUBSIDIARY

Financial Highlights

(In thousands, except per share data and percentages)

	Three Months Ended										Nine Months Ended
	9/30/2021		6/30/2021		3/31/2021		12/31/2020		9/30/2020		9/30/2021		9/30/2020
Profitability:
Net income	$	14,421	$	11,703	$	10,019	$	10,236	$	6,421	$	36,143	$	16,125
Basic earnings per share	$	0.59	$	0.48	$	0.41	$	0.42	$	0.26	$	1.48	$	0.65
Diluted earnings per share	$	0.59	$	0.48	$	0.41	$	0.41	$	0.26	$	1.47	$	0.65
Return on average assets(1)		1.37%		1.14%		1.03%		1.05%		0.66%		1.19%		0.58%
Return on average shareholders' equity(1)		10.15%		8.49%		7.39%		7.47%		4.70%		8.70%		3.97%
Net interest margin - tax equivalent(1)		3.22%		3.29%		3.71%		3.62%		3.55%		3.40%		3.76%
Efficiency ratio(2)		66.21%		73.02%		64.32%		65.64%		66.77%		67.76%		63.76%
Liquidity and Capital Ratios:
Total shareholders' equity to total assets		13.41%		13.68%		13.54%		13.84%		14.18%		13.41%		14.18%
Tangible equity to tangible assets(3)		11.64%		11.84%		11.67%		11.94%		12.22%		11.64%		12.22%
Common equity tier 1 capital ratio		16.87%		16.46%		15.75%		15.45%		15.41%		16.87%		15.41%
Tier 1 risk-based capital ratio		16.87%		16.46%		15.75%		15.45%		15.41%		16.87%		15.41%
Total risk-based capital ratio		18.12%		17.72%		17.00%		16.71%		16.67%		18.12%		16.67%
Tier 1 leverage ratio		11.69%		11.63%		11.90%		12.00%		11.90%		11.69%		11.90%
Credit Quality:
Allowance for credit losses for loans to loans excluding loans held for sale		1.23%		1.36%		1.41%		1.39%		1.49%		1.23%		1.49%
Nonperforming assets to total assets		0.49%		0.52%		0.59%		0.61%		0.41%		0.49%		0.41%
Nonperforming loans to loans excluding loans held for sale		0.79%		0.77%		0.81%		0.82%		0.53%		0.79%		0.53%
Net charge-offs (recoveries) to average loans(1)		(0.01)%		(0.07)%		0.01%		0.49%		0.02%		(0.03)%		—
Other Data:
Weighted average common shares outstanding - basic		24,432		24,447		24,508		24,621		24,748		24,462		24,808
Weighted average common shares outstanding - diluted		24,544		24,571		24,616		24,678		24,770		24,572		24,847
Common shares outstanding at period end		24,420		24,450		24,442		24,613		24,713		24,420		24,713
Dividends per share	$	0.13	$	0.13	$	0.13	$	0.10	$	0.10	$	0.39	$	0.30
Book value per share	$	23.12	$	22.75	$	22.31	$	22.20	$	21.89	$	23.12	$	21.89
Tangible book value per share(3)	$	19.65	$	19.28	$	18.84	$	18.74	$	18.44	$	19.65	$	18.44
Employees - full-time equivalents		520		529		517		511		515		520		515

(1) Annualized.

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

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

CBTX, INC. AND SUBSIDIARY

Condensed Consolidated Balance Sheets

(In thousands)

	9/30/2021		6/30/2021		3/31/2021		12/31/2020		9/30/2020
Loans excluding loans held for sale	$	2,608,402	$	2,729,496	$	2,891,632	$	2,924,117	$	2,964,526
Allowance for credit losses for loans		(32,208)		(37,183)		(40,874)		(40,637)		(44,069)
Loans, net		2,576,194		2,692,313		2,850,758		2,883,480		2,920,457
Cash and equivalents		998,785		788,409		604,671		538,007		377,572
Securities		359,539		309,233		289,091		237,281		226,101
Premises and equipment		59,235		59,987		60,551		61,152		61,732
Goodwill		80,950		80,950		80,950		80,950		80,950
Other intangible assets		3,702		3,846		3,991		4,171		4,303
Loans held for sale		327		808		1,005		2,673		1,763
Operating lease right-to-use asset		11,527		12,514		12,900		13,285		12,893
Other assets		118,860		118,474		124,722		128,218		128,901
Total assets	$	4,209,119	$	4,066,534	$	4,028,639	$	3,949,217	$	3,814,672
Noninterest-bearing deposits	$	1,628,144	$	1,556,784	$	1,621,408	$	1,476,425	$	1,460,983
Interest-bearing deposits		1,903,491		1,860,002		1,763,339		1,825,369		1,709,681
Total deposits		3,531,635		3,416,786		3,384,747		3,301,794		3,170,664
Federal Home Loan Bank advances		50,000		50,000		50,000		50,000		50,000
Repurchase agreements		—		—		—		—		2,153
Operating lease liabilities		14,556		15,590		16,060		16,447		15,759
Other liabilities		48,335		27,931		32,483		34,525		35,175
Total liabilities		3,644,526		3,510,307		3,483,290		3,402,766		3,273,751
Total shareholders’ equity		564,593		556,227		545,349		546,451		540,921
Total liabilities and shareholders’ equity	$	4,209,119	$	4,066,534	$	4,028,639	$	3,949,217	$	3,814,672

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CBTX, INC. AND SUBSIDIARY

Condensed Consolidated Statements of Income

(In thousands)

	Three Months Ended										Nine Months Ended
	9/30/2021		6/30/2021		3/31/2021		12/31/2020		9/30/2020		9/30/2021		9/30/2020
Interest income
Interest and fees on loans	$	30,765	$	30,793	$	33,165	$	32,886	$	32,318	$	94,723	$	98,792
Securities		1,435		1,332		1,173		1,070		1,107		3,940		3,698
Interest-bearing deposits at other financial institutions		340		223		177		168		176		740		1,400
Equity investments		157		158		146		170		162		461		509
Total interest income		32,697		32,506		34,661		34,294		33,763		99,864		104,399
Interest expense
Deposits		1,227		1,267		1,350		1,549		1,831		3,844		7,619
Federal Home Loan Bank advances		221		221		221		221		221		663		682
Other interest-bearing liabilities		—		—		—		4		3		—		12
Total interest expense		1,448		1,488		1,571		1,774		2,055		4,507		8,313
Net interest income		31,249		31,018		33,090		32,520		31,708		95,357		96,086
Provision (recapture) for credit losses
Provision (recapture) for credit losses for loans		(5,057)		(4,190)		286		229		4,569		(8,961)		17,845
Provision (recapture) for credit losses for unfunded commitments		162		(893)		126		(364)		(461)		(605)		1,182
Total provision (recapture) for credit losses		(4,895)		(5,083)		412		(135)		4,108		(9,566)		19,027
Net interest income after provision (recapture) for credit losses		36,144		36,101		32,678		32,655		27,600		104,923		77,059
Noninterest income
Deposit account service charges		1,352		1,167		1,193		1,270		1,176		3,712		3,756
Card interchange fees		1,048		1,095		976		999		995		3,119		2,832
Earnings on bank-owned life insurance		2,323		390		390		407		1,187		3,103		2,015
Net gain on sales of assets		360		366		192		379		114		918		376
Other		479		473		360		467		551		1,312		2,280
Total noninterest income		5,562		3,491		3,111		3,522		4,023		12,164		11,259
Noninterest expense
Salaries and employee benefits		15,000		14,734		14,188		12,848		14,332		43,922		42,567
Occupancy expense		2,660		2,597		2,521		2,628		2,496		7,778		7,478
Professional and director fees		1,567		2,441		1,703		3,209		2,446		5,711		5,139
Data processing and software		1,629		1,661		1,576		1,330		1,525		4,866		4,039
Regulatory fees		478		501		556		748		471		1,535		1,050
Advertising, marketing and business development		493		510		285		438		429		1,288		1,062
Telephone and communications		516		550		463		455		486		1,529		1,297
Security and protection expense		425		537		390		423		299		1,352		1,024
Amortization of intangibles		182		186		191		197		198		559		649
Other expenses		1,422		1,480		1,412		1,382		1,176		4,314		4,137
Total noninterest expense		24,372		25,197		23,285		23,658		23,858		72,854		68,442
Net income before income tax expense		17,334		14,395		12,504		12,519		7,765		44,233		19,876
Income tax expense		2,913		2,692		2,485		2,283		1,344		8,090		3,751
Net income	$	14,421	$	11,703	$	10,019	$	10,236	$	6,421	$	36,143	$	16,125

9

CBTX, INC. AND SUBSIDIARY

Net Interest Margin

(In thousands, except percentages)

	Three Months Ended
	9/30/2021					6/30/2021					9/30/2020
	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)	$	2,702,248	$	30,765	4.52%	$	2,835,995	$	30,793	4.36%	$	2,945,320	$	32,318	4.37%
Securities		327,968		1,435	1.74%		302,808		1,332	1.76%		236,015		1,107	1.87%
Interest-bearing deposits at other financial institutions		854,406		340	0.16%		670,508		223	0.13%		383,626		176	0.18%
Equity investments		13,367		157	4.66%		15,338		158	4.13%		15,334		162	4.20%
Total interest-earning assets		3,897,989	$	32,697	3.33%		3,824,649	$	32,506	3.41%		3,580,295	$	33,763	3.75%
Allowance for credit losses for loans		(36,945)					(40,806)					(40,135)
Noninterest-earning assets		313,901					317,115					326,590
Total assets	$	4,174,945				$	4,100,958				$	3,866,750
Liabilities and Shareholders’ Equity
Interest-bearing liabilities:
Interest-bearing deposits	$	1,895,617	$	1,227	0.26%	$	1,839,812	$	1,267	0.28%	$	1,730,812	$	1,831	0.42%
Federal Home Loan Bank advances		50,000		221	1.75%		50,000		221	1.77%		50,000		221	1.76%
Other interest-bearing liabilities		—		—	—		—		—	—		2,230		3	0.54%
Total interest-bearing liabilities		1,945,617	$	1,448	0.30%		1,889,812	$	1,488	0.32%		1,783,042	$	2,055	0.46%
Noninterest-bearing liabilities:
Noninterest-bearing deposits		1,612,985					1,611,565					1,484,557
Other liabilities		52,712					46,774					55,386
Total noninterest-bearing liabilities		1,665,697					1,658,339					1,539,943
Shareholders’ equity		563,631					552,807					543,765
Total liabilities and shareholders’ equity	$	4,174,945				$	4,100,958				$	3,866,750
Net interest income			$	31,249				$	31,018				$	31,708
Net interest spread(3)					3.03%					3.09%					3.29%
Net interest margin(4)					3.18%					3.25%					3.52%
Net interest margin - tax equivalent(5)					3.22%					3.29%					3.55%

(1) Annualized.

(2) Includes average outstanding balances related to loans held for sale.

(3) Net interest spread is the average yield on interest-earning assets minus the average rate on interest-bearing liabilities.

(4) Net interest margin is equal to net interest income divided by average interest-earning assets.

(5) Tax equivalent adjustments of $369,000, $321,000 and $258,000 for the quarters ended September 30, 2021, June 30, 2021 and September 30, 2020, respectively, were computed using a federal income tax rate of 21%.

10

CBTX, INC. AND SUBSIDIARY

Net Interest Margin – Year to Date

(In thousands, except percentages)

	Nine Months Ended September 30,
	2021					2020
	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(2)	$	2,812,449	$	94,723	4.50%	$	2,829,767	$	98,792	4.66%
Securities		296,958		3,940	1.77%		236,756		3,698	2.09%
Interest-bearing deposits at other financial institutions		668,119		740	0.15%		359,134		1,400	0.52%
Equity investments		14,679		461	4.20%		14,716		509	4.62%
Total interest-earning assets		3,792,205	$	99,864	3.52%		3,440,373	$	104,399	4.05%
Allowance for credit losses for loans		(39,594)					(32,499)
Noninterest-earning assets		318,009					309,778
Total assets	$	4,070,620				$	3,717,652
Liabilities and Shareholders’ Equity
Interest-bearing liabilities:
Interest-bearing deposits	$	1,846,211	$	3,844	0.28%	$	1,689,772	$	7,619	0.60%
Federal Home Loan Bank advances		50,000		663	1.77%		56,898		682	1.60%
Other interest-bearing liabilities		—		—	—		1,700		12	0.95%
Total interest-bearing liabilities		1,896,211	$	4,507	0.32%		1,748,370	$	8,313	0.64%
Noninterest-bearing liabilities:
Noninterest-bearing deposits		1,568,071					1,377,594
Other liabilities		50,966					48,881
Total noninterest-bearing liabilities		1,619,037					1,426,475
Shareholders’ equity		555,372					542,807
Total liabilities and shareholders’ equity	$	4,070,620				$	3,717,652
Net interest income			$	95,357				$	96,086
Net interest spread(3)					3.20%					3.41%
Net interest margin(4)					3.36%					3.73%
Net interest margin - tax equivalent(5)					3.40%					3.76%

(1)    Annualized.

(2) Includes average outstanding balances related to loans held for sale.

(3) Net interest spread is the average yield on interest-earning assets minus the average rate on interest-bearing liabilities.

(4) Net interest margin is equal to net interest income divided by average interest-earning assets.

(5) Tax equivalent adjustments of $989,000 and $754,000 for the nine months ended September 30, 2021 and 2020, respectively, were computed using a federal income tax rate of 21%.

11

CBTX, INC. AND SUBSIDIARY

Rate/Volume Analysis

(In thousands)

	Three Months Ended September 30, 2021,
	Compared to Three Months Ended June 30, 2021
	Increase (Decrease) due to
(Dollars in thousands)	Rate		Volume		Days		Total
Interest-earning assets:
Total loans	$	1,087	$	(1,454)	$	339	$	(28)
Securities		(22)		110		15		103
Interest-bearing deposits at other financial institutions		55		60		2		117
Equity investments		18		(21)		2		(1)
Total increase (decrease) in interest income		1,138		(1,305)		358		191
Interest-bearing liabilities:
Interest-bearing deposits		(94)		40		14		(40)
Federal Home Loan Bank advances		(2)		—		2		—
Other interest-bearing liabilities		—		—		—		—
Total increase (decrease) in interest expense		(96)		40		16		(40)
Increase (decrease) in net interest income	$	1,234	$	(1,345)	$	342	$	231

	Three Months Ended September 30, 2021,
	Compared to Three Months Ended September 30, 2020
	Increase (Decrease) due to
(Dollars in thousands)	Rate		Volume			Days	Total
Interest-earning assets:
Total loans	$	1,117	$	(2,670)	$	—	$	(1,553)
Securities		(104)		432		—		328
Interest-bearing deposits at other financial institutions		(49)		213		—		164
Equity investments		15		(20)		—		(5)
Total increase (decrease) in interest income		979		(2,045)		—		(1,066)
Interest-bearing liabilities:
Interest-bearing deposits		(778)		174		—		(604)
Federal Home Loan Bank advances		—		—		—		—
Other interest-bearing liabilities		—		(3)		—		(3)
Total increase (decrease) in interest expense		(778)		171		—		(607)
Increase (decrease) in net interest income	$	1,757	$	(2,216)	$	—	$	(459)

	Nine Months Ended September 30, 2021,
	Compared to Nine Months Ended September 30, 2020
	Increase (Decrease) due to
(Dollars in thousands)	Rate		Volume			Days	Total
Interest-earning assets:
Total loans	$	(3,104)	$	(604)	$	(361)	$	(4,069)
Securities		(687)		943		(14)		242
Interest-bearing deposits at other financial institutions		(1,858)		1,203		(5)		(660)
Equity investments		(45)		(1)		(2)		(48)
Total increase (decrease) in interest income		(5,694)		1,541		(382)		(4,535)
Interest-bearing liabilities:
Interest-bearing deposits		(4,450)		703		(28)		(3,775)
Federal Home Loan Bank advances		67		(84)		(2)		(19)
Other interest-bearing liabilities		—		(12)		—		(12)
Total increase (decrease) in interest expense		(4,383)		607		(30)		(3,806)
Increase (decrease) in net interest income	$	(1,311)	$	934	$	(352)	$	(729)

12

CBTX, INC. AND SUBSIDIARY

Yield Trend⁽¹⁾

	Three Months Ended
	9/30/2021	6/30/2021	3/31/2021	12/31/2020	9/30/2020
Interest-earning assets:
Total loans	4.52%	4.36%	4.64%	4.42%	4.37%
Securities	1.74%	1.76%	1.84%	1.80%	1.87%
Interest-bearing deposits at other financial institutions	0.16%	0.13%	0.15%	0.17%	0.18%
Equity investments	4.66%	4.13%	3.86%	4.41%	4.20%
Total interest-earning assets	3.33%	3.41%	3.85%	3.79%	3.75%
Interest-bearing liabilities:
Interest-bearing deposits	0.26%	0.28%	0.30%	0.35%	0.42%
Federal Home Loan Bank advances	1.75%	1.77%	1.79%	1.76%	1.76%
Other interest-bearing liabilities	—	—	—	1.12%	0.54%
Total interest-bearing liabilities	0.30%	0.32%	0.34%	0.39%	0.46%
Net interest spread(2)	3.03%	3.09%	3.51%	3.40%	3.29%
Net interest margin(3)	3.18%	3.25%	3.68%	3.59%	3.52%
Net interest margin - tax equivalent(4)	3.22%	3.29%	3.71%	3.62%	3.55%

(1)Annualized.

(2) Net interest spread is the average yield on interest-earning assets minus the average rate on interest-bearing liabilities.

(3) Net interest margin is equal to net interest income divided by average interest-earning assets.

(4) Tax equivalent adjustments were computed using a federal income tax rate of 21%.

13

CBTX, INC. AND SUBSIDIARY

Average Outstanding Balances

(In thousands)

	Three Months Ended
	9/30/2021		6/30/2021		3/31/2021		12/31/2020		9/30/2020
Assets
Interest-earning assets:
Total loans(1)	$	2,702,248	$	2,835,995	$	2,901,291	$	2,961,622	$	2,945,320
Securities		327,968		302,808		259,341		236,233		236,015
Interest-bearing deposits at other financial institutions		854,406		670,508		475,279		388,936		383,626
Equity investments		13,367		15,338		15,353		15,346		15,334
Total interest-earning assets		3,897,989		3,824,649		3,651,264		3,602,137		3,580,295
Allowance for credit losses for loans		(36,945)		(40,806)		(41,078)		(44,233)		(40,135)
Noninterest-earning assets		313,901		317,115		321,334		321,303		326,590
Total assets	$	4,174,945	$	4,100,958	$	3,931,520	$	3,879,207	$	3,866,750
Liabilities and Shareholders’ Equity
Interest-bearing liabilities:
Interest-bearing deposits	$	1,895,617	$	1,839,812	$	1,802,175	$	1,744,557	$	1,730,812
Federal Home Loan Bank advances		50,000		50,000		50,000		50,163		50,000
Other interest-bearing liabilities		—		—		—		1,426		2,230
Total interest-bearing liabilities		1,945,617		1,889,812		1,852,175		1,796,146		1,783,042
Noninterest-bearing liabilities:
Noninterest-bearing deposits		1,612,985		1,611,565		1,478,183		1,482,753		1,484,557
Other liabilities		52,712		46,774		51,634		55,174		55,386
Total noninterest-bearing liabilities		1,665,697		1,658,339		1,529,817		1,537,927		1,539,943
Shareholders’ equity		563,631		552,807		549,528		545,134		543,765
Total liabilities and shareholders’ equity	$	4,174,945	$	4,100,958	$	3,931,520	$	3,879,207	$	3,866,750

(1) Includes average outstanding balances of loans held for sale.

14

CBTX, INC. AND SUBSIDIARY

Loans and Deposits Period End Balances

(In thousands, except percentages)

	9/30/2021			6/30/2021			3/31/2021			12/31/2020			9/30/2020
	Amount		%	Amount		%	Amount		%	Amount		%	Amount		%
Loan Portfolio:
Commercial and industrial	$	596,251	22.8%	$	658,733	24.0%	$	756,707	26.1%	$	742,957	25.3%	$	832,686	28.0%
Real estate:
Commercial real estate		1,029,137	39.3%		1,060,968	38.7%		1,072,263	36.9%		1,041,998	35.5%		949,933	31.9%
Construction and development		393,541	15.0%		426,007	15.5%		464,091	16.0%		522,705	17.8%		506,216	17.0%
1-4 family residential		204,151	7.8%		211,328	7.7%		224,880	7.7%		239,872	8.2%		253,868	8.5%
Multi-family residential		285,852	10.9%		265,252	9.7%		271,719	9.4%		258,346	8.8%		298,733	10.0%
Consumer		27,930	1.1%		31,444	1.1%		32,767	1.1%		33,884	1.1%		35,637	1.2%
Agriculture		8,780	0.4%		8,283	0.4%		6,974	0.2%		8,670	0.3%		9,753	0.3%
Other		71,915	2.7%		78,607	2.9%		74,387	2.6%		88,238	3.0%		91,501	3.1%
Gross loans		2,617,557	100.0%		2,740,622	100.0%		2,903,788	100.0%		2,936,670	100.0%		2,978,327	100.0%
Less allowance for credit losses		(32,208)			(37,183)			(40,874)			(40,637)			(44,069)
Less deferred fees and unearned discount		(8,828)			(10,318)			(11,151)			(9,880)			(12,038)
Less loans held for sale		(327)			(808)			(1,005)			(2,673)			(1,763)
Loans, net	$	2,576,194		$	2,692,313		$	2,850,758		$	2,883,480		$	2,920,457
Deposits:
Interest-bearing demand accounts	$	386,196	10.9%	$	375,543	11.0%	$	368,124	10.9%	$	380,175	11.5%	$	346,406	10.9%
Money market accounts		1,139,167	32.3%		1,101,091	32.2%		995,945	29.4%		1,039,617	31.5%		916,668	28.9%
Savings accounts		118,794	3.4%		115,823	3.4%		112,467	3.3%		108,167	3.3%		103,062	3.3%
Certificates and other time deposits, $100,000 or greater		140,740	4.0%		142,343	4.2%		145,762	4.3%		152,592	4.6%		171,854	5.4%
Certificates and other time deposits, less than $100,000		118,594	3.4%		125,202	3.6%		141,041	4.2%		144,818	4.4%		171,691	5.4%
Total interest-bearing deposits		1,903,491	54.0%		1,860,002	54.4%		1,763,339	52.1%		1,825,369	55.3%		1,709,681	53.9%
Noninterest-bearing deposits		1,628,144	46.0%		1,556,784	45.6%		1,621,408	47.9%		1,476,425	44.7%		1,460,983	46.1%
Total deposits	$	3,531,635	100.0%	$	3,416,786	100.0%	$	3,384,747	100.0%	$	3,301,794	100.0%	$	3,170,664	100.0%

15

CBTX, INC. AND SUBSIDIARY

Credit Quality

(In thousands, except percentages)

	9/30/2021		6/30/2021		3/31/2021		12/31/2020		9/30/2020
Nonperforming Assets (at period end):
Nonaccrual loans:
Commercial and industrial	$	9,773	$	10,038	$	12,230	$	12,588	$	6,699
Real estate:
Commercial real estate		10,419		10,572		10,664		10,665		4,811
Construction and development		—		—		236		238		241
1-4 family residential		351		363		378		526		325
Other		42		—		—		—		3,500
Nonaccrual loans		20,585		20,973		23,508		24,017		15,576
Accruing loans 90 or more days past due		—		—		—		—		—
Total nonperforming loans		20,585		20,973		23,508		24,017		15,576
Foreclosed assets		—		—		106		—		—
Total nonperforming assets	$	20,585	$	20,973	$	23,614	$	24,017	$	15,576
Allowance for Credit Losses for Loans (at period end):
Commercial and industrial	$	11,401	$	12,260	$	13,812	$	13,035	$	13,347
Real estate:
Commercial real estate		11,744		13,260		14,280		13,798		12,745
Construction and development		3,334		4,453		5,445		6,089		6,334
1-4 family residential		1,700		2,172		2,458		2,578		2,871
Multi-family residential		2,156		2,382		2,714		2,513		3,117
Consumer		449		494		434		440		507
Agriculture		109		115		107		137		164
Other		1,315		2,047		1,624		2,047		4,984
Total allowance for credit losses for loans	$	32,208	$	37,183	$	40,874	$	40,637	$	44,069
Credit Quality Ratios (at period end):
Nonperforming assets to total assets		0.49%		0.52%		0.59%		0.61%		0.41%
Nonperforming loans to loans excluding loans held for sale		0.79%		0.77%		0.81%		0.82%		0.53%
Allowance for credit losses for loans to nonperforming loans		156.46%		177.29%		173.87%		169.20%		282.93%
Allowance for credit losses for loans to loans excluding loans held for sale		1.23%		1.36%		1.41%		1.39%		1.49%

16

CBTX, INC. AND SUBSIDIARY

Allowance for Credit Losses for Loans

(In thousands, except percentages)

	Three Months Ended
	9/30/2021		6/30/2021		3/31/2021		12/31/2020		9/30/2020
Beginning balance	$	37,183	$	40,874	$	40,637	$	44,069	$	39,678
Provision (recapture):
Commercial and industrial		(945)		(1,955)		872		(7)		1,270
Real estate:
Commercial real estate		(1,516)		(1,020)		482		910		456
Construction and development		(1,119)		(992)		(644)		(245)		(716)
1-4 family residential		(469)		(286)		(120)		(293)		(297)
Multi-family residential		(226)		(332)		201		(604)		237
Consumer		(39)		(36)		(10)		(68)		(15)
Agriculture		(11)		8		(72)		(27)		30
Other		(732)		423		(423)		563		3,604
Total provision (recapture)		(5,057)		(4,190)		286		229		4,569
Net (charge-offs) recoveries:
Commercial and industrial		86		403		(95)		(305)		(31)
Real estate:
Commercial real estate		—		—		—		143		(135)
Construction and development		—		—		—		—		—
1-4 family residential		(3)		—		—		—		(5)
Multi-family residential		—		—		—		—		—
Consumer		(6)		96		4		1		(7)
Agriculture		5		—		42		—		—
Other		—		—		—		(3,500)		—
Total net (charge-offs) recoveries		82		499		(49)		(3,661)		(178)
Ending balance	$	32,208	$	37,183	$	40,874	$	40,637	$	44,069
Net charge-offs (recoveries) to average loans(1)		(0.01)%		(0.07)%		0.01%		0.49%		0.02%

(1) Annualized.

17

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.

We calculate 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.

We calculate 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.

We believe 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:

	9/30/2021		6/30/2021		3/31/2021		12/31/2020		9/30/2020
Total shareholders’ equity	$	564,593	$	556,227	$	545,349	$	546,451	$	540,921
Adjustments:
Goodwill		(80,950)		(80,950)		(80,950)		(80,950)		(80,950)
Other intangibles		(3,702)		(3,846)		(3,991)		(4,171)		(4,303)
Tangible equity	$	479,941	$	471,431	$	460,408	$	461,330	$	455,668
Total assets	$	4,209,119	$	4,066,534	$	4,028,639	$	3,949,217	$	3,814,672
Adjustments:
Goodwill		(80,950)		(80,950)		(80,950)		(80,950)		(80,950)
Other intangibles		(3,702)		(3,846)		(3,991)		(4,171)		(4,303)
Tangible assets	$	4,124,467	$	3,981,738	$	3,943,698	$	3,864,096	$	3,729,419
Common shares outstanding		24,420		24,450		24,442		24,613		24,713
Book value per share	$	23.12	$	22.75	$	22.31	$	22.20	$	21.89
Tangible book value per share	$	19.65	$	19.28	$	18.84	$	18.74	$	18.44
Total shareholders’ equity to total assets		13.41%		13.68%		13.54%		13.84%		14.18%
Tangible equity to tangible assets		11.64%		11.84%		11.67%		11.94%		12.22%

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Investor Relations:

Justin M. Long

281.325.5013

investors@CBoTX.com

Media Contact:

Ashley Warren

713.210.7622

awarren@CBoTX.com

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