CBTX - Earnings call transcript Q1 2022

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Operator

Ladies and ,gentlemen thank you for standing by and welcome to the CBTX First Quarter 2022 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker’s presentation, there will be a question-and-answer session. [Operator Instructions] I would now like to hand the conference over to your speaker today Mr.

Justin Long, General Counsel of Community Bank of Texas. you. Thank ahead. go Please

Justin Long

we joining quarter our morning. press management Long, welcome on team release, Inc. the our the Good CBTX you you Counsel refer presentation. with along the and of CBTX appreciate first for call our that issued would is to we this copy will which earnings earnings XXXX. I'm Yesterday us. you. available website We General Justin of a to of slide Thank presentation like during to

Before I'd presentation performance, begin, events, statements like we that to financial during we regarding remind this our our forward-looking you business prospects. may make future

Forward-looking results statements materially. and uncertainties subject risks to that could differ to cause actual are

available which section earnings Any Risk on in in with the are can obligation concerning ir.cbtxinc.com. quarterly our assume to at XX-K, all SEC, our of and on no other as update our actual Relations call information website accessed Additional that be of and of the is could release Factors forward-looking such we factors filings report XX-Q this and the reports date cause our on statements. our statements any only made annual Form Form differ results to Investor

of Chairman open it that, to our Controller. CEO, turn Chief presentation. over With our measures their You financial certain is should Chairman Franklin. we directly included measures joined end financial President McMullen Jr., aware our and Officer; Officer; A morning Credit I'm I'll this to CEO; reconciliation our and Chief these this Joe R. Financial the GAAP will will questions. Franklin during Joseph our in non-GAAP release Bob call also the we be that reference of information. by most remarks, investor and our financial President to Pigott comparable Ted call Robert earnings and At the West,

Robert Franklin

quarter the Thank Welcome for CBTX for Inc. XXXX. call Justin. of you earnings first to the

results quarter our present to pleased for first XXXX. are We

The quarter behind. momentum we generated in first fourth regulatory positive overhang quarter the as XXXX our of continued the left

continued and a return lower Our growth. than high loan normalized a single-digit the growth rate core at to more to mid our fourth quarter

strong approach year-end season. Our tax a has runoff we as remained in historically quarter after the some seen deposits that

local gain pipeline build. strength to economy Our continuing continues to our is and

We rate are rising in with asset-sensitive opportunity. this interest us balance and environment we a an with provides sheet, believe

However, signals also a the to rate maintain rising environment cautious discipline. be need and interest

Federal valuations. look with and press geopolitical been challenges with working navigate we our integrate partnership pressures, inflation great we flows interest and preparing other supply issues, to also moment. Reserve We forward rates. as rising to withstand prepared from well the to shareholders. we folks new But impact pressures approval closely these Allegiance Allegiance to estate COVID-XX, teams, at Rising of be demands at will and on able will markets and rates real are our continue the cash to the as rates on our fully and feel as pressure while to chain interest to gain strong our forward regulators monitor its the mean look Bank. We've Bank

meeting merger move to that years we shareholders towards as our for have come. We Our value shareholder the XXth build and feedback for believe been encouraged will set shareholder to this we one by vote vote. is that May is

are with that Bank. of remainder in challenges the our equals the the We are prepared that economic may We are excited merger as of we we efforts successful lay Allegiance determined ahead and for XXXX. for feel look to

Now meeting I'll Ted our Pigott, to turn Chief over the Officer. Financial

Ted Pigott

investor for slide million presentation. prior of reported and per $X.XX and earnings X our Bob. first Thank for information periods $XX.X share of diluted net financial of you on Certain company XXXX The quarter begins first income quarter.

of included land investments, termination or quarter million business XX decreased XXXX partially XXXX. million to interest and first increased effective was a fourth was gain million on same compared in cash first X.X% XXXX for XX basis Non-interest for rate reported for a for margin low X.XX% related regulatory provision first $X.X losses compared gains credit X.XX% the XXXX, equity company for expenses decrease $X.XX quarter and Allegiance settlement quarter held net net merger $X.X due tax first growth $X.X The basis income concerning to write-offs X.XX% quarter, totaling X.X% XXXX. equivalent and associated was $X.X quarter $X.X for and first XXXX. continued the $X.XX for And interest the compared increased excluding due million the comprised for XXXX. $XX.X level as compared quarter for with loans. points from down for of to fourth $XXX,XXX in with billion $XXX.X or to due for on first improvements pending credit to $X.XX compression for XX the cash first in first of $X.XX cost securities or to assets regulatory billion, million to was another in primarily yield million totaling credit $XXX,XXX quarter and Non-interest $X.X to the the costs XX which payments paydowns. quarter losses earlier. company's $XX.X associated terminated basis offset the for decreased December cost in X.XX% X.X% $X.X provision The tax XX.X% assets remained earnings XXXX. equivalent with to of by interest-bearing the fourth quarter $XXX,XXX to loss of quarter quarter for losses and that a BSA/AML and fourth for penalties $X.X for compared the loss for million or total diluted leasehold was for of liabilities for total in quarter the an was March quarter of sale compared to tax a basis for to $X.XX buildings net $XXX,XXX $X.X for primarily million earning $XX.X primarily as Yields income or lease XXXX. for XX% portion $X.X income of XXXX, the PPP or billion expenses was to to of to were earning agencies expense million first the recognized and of The Annual For of first share million due $X from Non-interest early billion XXXX. land quarter quarter impacted million of assets The fourth due $XXX,XXX disposals XXXX. the per for for XXXX. decreased paid first XX.X% to income provision million fees quarter pending sales at a Total quarter interest-bearing compared for of XXXX. of quarter. $X.X non-interest matters on increase decreased first $XX,XXX for and $X.X of to $XXX.X interest income commitments the losses million sale million first points assets from first million and the Bancshares. for first XXXX quarter primarily of unfunded lease, liabilities compliance the provision Loans, X.XX% $XXX,XXX to quarter The a million to quarter income $XXX XX or non-interest credit settlement the merger. Other the decreased in a tax from $XXX,XXX $XX loan fourth XXXX, increased compared million by first of was first assets Net billion of as XXXX million compared included the of $X.XX $X.X compared March on to quarter to also the to million a XX.XX% points underlying about XX Income for included quarter The million basis decreased interest XXst first decreased equivalents. they or -- XX.X% X.X% million quarter XXXX margin million increased first at assets quarter to March cost and increased in on $XX.X for was XXXX. of which those

Excluding as over the billion billion the The common at X.XXX% March to and December as PPP and for months. decreased $XX.X increased XXXX. loans, XX XXXX. on XX, XX compared quarter. strong or capital XX Tier by the was about was in The loan March Tier finally or cost was and ratio March to March assets $XX.X The capital first to capital X on assets at of XXXX, XX, X.X% points portfolio compared the the losses of XXXX. to XX, at December increased March X.X deposits the X.XX% loans $X.XX totaled credit total $XX.X at and basis $X.XX risk-based $XXX or XX.XX% million million -- assets X.XX% XX XXXX. allowance $X.XX for $XXX.X still XX, $XX.X or total million assets leverage billion, XXXX XX.X% The Non-performing in to to compared Total XX.XX% or ratios all down -- X.X% XX.XX%. XX a total maintains was March total or was to X.X% $X.XX at XX, compared and at March at X total of XXXX, ratio percentage at deposits million capital December basis loans billion increased XX, ratio equity points million million X.XX% XX, XXXX, at XXXX XXXX,

the Now over West. I'll Joe turn presentation to

Joe West

bit Thank from I'll presentation. portfolio, nine loan investor a with beginning our you, to Ted. the slide speak

$X.XX funded and the new $XXX at excluding billion payoff, increase million. loans first during $XXX PPP of payoffs. first loans had were million then, approximately in billion $X.XX our QX approximately and $XX loans up We net versus XXXX quarter million quarter, For in

quarter million million, to four quarter, fourth the the CRE PPP quarter-over-quarter. $XX up declined the family X% declined of X.XX% $XX multifamily declined Slide this one and effect XX PPP C&I the was payoffs excluding approximately up million, of or $X compared and million and $XX $XX including C&I commercial by $X compared X.X% our or developable components to XXXX loans. and to approximately million, of sets or payoffs. X.X%, forth million. increased was Construction QX For

billion Slide slightly end the our up were forth to quantify gas XX quarter for direct including and the exposure. billion exposure, indirect our loans PPP commercial also of we the $X.X first $X.XX fourth total oil quarter how and versus Our sets including at our loans.

our XXXX. our of third sets forth XX the about to exposure continue quarter fourth indirect direct loans Slide information decreased oil loans the of and $XXX to to wind million that down. direct gas -- compared for Our end the quarter PPP

yield decreased to received yield $XX to million for loans customers. PPP yield losses. of our loans. first our our payments our and XX slide net on the loans credit $XX Slide and table loan allowance During our loan to information PPP forgiveness of quarter on at portfolio out PPP the our forth The sets portfolio, for the average when average million average related we sets taking about XX bottom our the forth

Ted noted, allowance to for X.XX% March loans losses As at credit was our XXXX. XX,

XX. Turning to slide

low of with our first X.XX% when strong. March which assets during assets XXXX. XX of compared as to credit our quality remained Slide nonperforming Our regarding fourth information remains unchanged total also and quarter assets, quarter nonperforming XX, shows the the was

turn of our Franklin. our $XX,XXX. As recovery the quarter back with recoveries over it charge-offs, during fourth to I'll Bob net exceeded in resulting With that, quarter, a

Robert Franklin

questions. Thank operator you, that, for open With up we'll Joe.

Operator

Your Understood. Jones from Instructions] from of line the Will first comes [Operator question KBW.

Your line open. is

Will Jones

morning, Hey. Great. guys. Good

Robert Franklin

Good morning, Will.

Will Jones

Hey.

merger. you're that wanted regulators. saw pushback stand the then, with you just from the all for required there, do set second approval And close? later remind start like update noticed to or vote. just still date you quarter to Are feel you're who us any curious, could get I I got you approval So you getting or track I’m on you guys you just for -- the guys where shareholder regarding an from?

Robert Franklin

in as Well, the we and the And have path. we're But the FDIC that are think and the indication case, the then all I won't everybody's meet. on waiting we approvals state Fed. no

think Our be we was I we point. indication And close no this shouldn't that would transaction at that we this around expectation somewhere that have target meeting June XX.

Will Jones

state the those then FDIC, are outstanding But you. just as still Got well? from and

Robert Franklin

get let typically you'll they that, I Fed it's until wait sometimes out the comes lead But they to think, are. But the Fed see typically do They front. them so but in -- --

Will Jones

But off proxy -- growth, really alluded nice mid more you. the rest expect momentum still for what fourth back helpful to you to, Got That like then, there. feel turning single-digit year? makes And does unprecedented on a you the to some good the upper quarter. that that of maintained guys loan of you've range that

Robert Franklin

I is think it Will.

sort little there I pressures loans. in a more There's think interesting the -- out of normalized. there's of of looking good but lot lot market, at we're bit a still more a

markets are strong. Our

I what's think to there, have. the exactly there's interest rates happening. continue momentum there's some sure good around to go and that opportunities where a know think are But we're directionally going up. projections us -- kinds of for cautious I little of not going more being they're We're out all we sort but we

in risk think going job market our strong we -- they're sheet. all that asset-sensitive to Houston, population balance growth. with standpoint I lending is seeing and -- But cautious for the the I take. us earnings should be around Dallas, the growth from all an good we're think still pretty Beaumont and be that And but side

also So seeing around on get little we'll as to to are a But decisions. aware think go and And people rising to able make interest Texas. that sure I we out just simply continue the to have we're folks and I to for that be forward. as rates those there of that issues eager move we chain of think making we're supply cautionary think signs tougher I some capitalize

Will Jones

And your excluding a smidge quarter. Great. the I were loan noticed Okay. I yields commentary linked appreciate that up there. PPP,

better a loans? these seeing pricing function curious on new Just was some that of you're

Robert Franklin

the and happens they time disintermediation. pricing got every down you -- this or or when There's so move start all rates No. happens think. now to interest way -- Right other, I same one kinds up. don't of thing move

rates. pricing still old are people Some at

are more Some aggressive get people to about it. starting

the regard. stable in So right market now is that not

upward goes time sort we'll even deals rate start pricing if market least doing, on. variable there more first non-market that have the to on with sensitive the set and hasn't see of pricing at get pricing. as think although We're floors And ceilings them. So centers, trying the we're to in significantly we're of being in most as around we certainly that to still Fed out moves, these on moved I

put So new mindful we're rising interest of we on. rates deals as

Will Jones

pulled very about in there. just with wanted in have the or what buyback line authorized And Again, haven't your quarters, Okay. with the historically in of buybacks and at pending helpful one what could make for kind deal. you more a today the group guys you the lot I broader I just squeak thoughts can past one sure sense I'm you guys along we with the bought stocks you've the there. get back. talked right bank here. if but few last But not back just know now to

get to your there? wanted Just thoughts

Robert Franklin

But use our Yeah. that we'd and will as it's right we combination now. It's we the that with available the don't It's come approvals us. active out us strongly certainly this we where -- to as like in our really we our things along given it. are think where with tool regulatory it's difficult for and We all when Allegiance, be feel stock we of certainly something a to that to is market about. pricing see of see

of part when think in so it, you'll I us green to -- see we're the that be active light And we'll given the do market.

Will Jones

Understood. Thanks guys.

Robert Franklin

Will. you, Thank

Operator

from next Piper from Sandler. of question comes the Brad Your line Milsaps

line Your is open.

Brad Milsaps

Hey, good morning.

Robert Franklin

Brad. Hi,

Brad Milsaps

Can each of you may variable kind kind wanted floors rate kind of on remind move Hey, to reprice what bit your the from Fed little to of maybe loans way about eat talk that and us fixed and you any Bob loan of expect be mix with have inclusive through up? of to in would the just terms more a repricing. you

Robert Franklin

Go ahead, Joe.

Joe West

or under Yeah, Brad. of SOFR about variables $X.X to cost XXth to mortgages. LIBOR roughly it's million indexed XX-XX just prime. variable that's got and the whether We're And we've other District fixed using basically other indexes billion funds $X.X billion for $XXX of

in X.X% over as loans I'm X% XX% loans up that that think that March -- we about roughly made. floors meeting prime talking move prime had there. over -- hits was million we it -- capturing and just loans with and $XXX repriced last XX% we that will and capture prime than to prime on the index be our And So adjusted here probably the

So we're loans, really a as -- repricing as are far pretty up as prime index I good in loans. spot think move our on rates

Brad Milsaps

Should bit you and I a the then, growth, as the know liquidity holding larger But until or we bond quarter. your do wanted And portfolio more together helpful. you'll two very earmarked degree that well. in pattern more that that a rates holding as you That's -- companies Just den is little but some I together? for a in thoughts now are Allegiance of you in be balance a come this aggressive quite made out how building the you. Thank you're about higher? should bit get put two think liquidity, around some of sheets accelerated think be know loan kind to

kind you're thinking Just curious that. about how of

Robert Franklin

Yeah.

is of I aggressive to some bond into think yes think portfolio. to be we have to do, we together certainly -- after. I want that additional We things the But banks do kind make around discussions the liquidity to more the we do. deploying because have what we two deployment putting around want we're in sure loans did

as not in there. and to other use doing. each rates of we're come we of that up continue to that right doing we're partners some that whatever mindful think we'll and coming -- that the our we're I things, as crossing liquidity sure want But we are make be to look try at have together so we

of So, around discussions that. lot a

have have make what to some going do but still as but I idea we that liquidity, what we're with we think think an to -- probably come is significant primarily we want I together loans. we'll do of and

we So want of to it. most put that's where

Brad Milsaps

just the higher rates Got XXXX when Bob, gotten with a final people on you Fed I expectations we but be turned And pressure. of it. you a sit as just were in you in think steeper have then, of curious And of of how assumptions since And that how in probably Just EPS X.XX bigger-picture think number of better kind of funds also two rate. maybe your you've you higher back kind number. a I kind targeting for time, me, that. about more kind have today any The for do two out pushed some have you're XX question higher thinking curve even maybe the since or worse? And maybe to of curious how inflationary have there announced sort might things Kind November? how XX of that kind right. terms cases think of changed about even merger, and gotten in at

Robert Franklin

Yeah. projections tough I are mean sometimes.

we we that are against a lot pressures I do. good feel of can think we moving of from our there's a standpoint that lot sort and And pressures think about of still are sort pretty what us tailwind. of back

meet we're this are push of XXXX that I but still our So, around will be for to now. I in in show deploy right exactly And recession whether -- we and gauge sure it's demand some going going the we're me. out And to what there liquidity going now. supply. or lot to demand to of think lingers then, out questions in question in a of not uncomfortable that. meet mark to still is right to are kind supply there I'm those whether to move that down up hard feel ability

think So, put about there. that I feel mean we still the good we know. don't out I I projections

come of I that. I So would don't think off

Brad Milsaps

Great. taking Thank you you, guys. my appreciate questions. I

Robert Franklin

Thanks Brad.

Operator

line next Matt question Stephens Olney Inc. Your of comes from from the

line open. Your is

Matt Olney

thanks. Hey, Good morning, everybody.

Robert Franklin

morning, Good Matt.

Matt Olney

on it's your the you they loans into priority mid the guess it have I put that of is based mid to combined to Bob, X%. down. if big these be going over Thanks. going speed But I about sounds time. like together, kind thinking I'm the time, guidance curious just think a I'm looking while you're But combined of limit commentary, long-standing that longer-term been X% growing to slowed upper-teens since of in over growth. across And you mentioned this as to liquidity. CBX for goal still going and have a with growth guess not near-term as earlier, putting of kind companies loans has maintain any to you and about I'm that lots loan to growth of on is had for company kind to respect high-single-digit XXXX. Allegiance company street, for a the loan loan

Robert Franklin

Yeah.

I think good a it's question. that's --

other. you a we together, kind into of as average X% think feel mean I of over X% of -- we I time. this trajectories really combine both sort But, the depends like companies that lot will each merge to

there It's been we've track. cycle. different why that. we've to do was not for on -- the able in to right But think So, than I appears that were had the many where better projections. pressures be so we times we make exactly to so I are now. economy directions -- sure That's And Allegiance me their where we're are good think I'm those harder in

a may I the our if looks that coming track. market on I better the way holds think actually it now. do right it feel is over year the we like like little we're than

are. depends banks they deal. our appears think appear good all bank think folks on And in feel about I the lenders actually think And explain does as what and we about quarter I But we are. same end the be where to us. be their good do Allegiance in to a the call, might at excited the kind The So where themselves. mode. they'll had both they our just But for the range. it of of economy They upper I be

light combination didn't and do successful. make it. guys to bank our keep banks excited try it's and even their both think, work in And the I things we've people I have about seen the bring heads this have. to to the go combination think maybe down that great are And they stuff to of a that all other table to

So, good feel us see that. through I so, and that sides on The where is both momentum the good year. about we'll takes

Matt Olney

Bob. the rate sensitivity. color interest helpful, That's I going Okay. for there. guess to Thank And you back

a us few some kind minutes adjusted disclosures guys on good curious a meeting loan expectations you Fed gave ago guess from the of week? the I'm curious mid-March deposit manage next move Thanks. Have rate deposit to on the about trying I just of that of I'm part deposit You rates XX-bp any the the side. the near-term first of Fed and side. expectations on cycle. costs since

Robert Franklin

our We and I of we -- mean, pressure we're up. XX% think have feel -- to on going deposits. We be interest XX% do is it. good demand rates about deposits

haven't a We marketplace in move. the seen huge

we going in do pressure market couple our We stays think things. will XX-basis maybe be maybe don't watching, but what other move great have don't to rates there -- I the rates the move is that rates moved if But we through next most moved upside. yet, pressure be a I not CD few not to Typically, the degree. think or any stays to directionally, much. play if point a quarters to that specific the much, true some know of. we of our we're it's have the to as than rate we move But for couple part, those

-- tend also alternative are but in to because, watch, my ours am but account. typically I market, really locals playing So that the typically it's go what firms market and to not only around is customers not of but to most in brokerage money brokerage bank, where another getting is their our we our

that to much see watch we they're haven't to we doing. what so seen And just And are also there. to sensitive movement

Matt Olney

services volatility the Okay. And disclosures of just we've Joe, don't this know energy energy a Bob or Very front, for but helpful. some on the in if seen and around your energy little balances specifically is lastly loan of I line. on bit

seasonality the customers, a calling fourth was you Anything this it in out quite anything down worth quarter or XQ. worth up Just adding customers in Thanks. there? are some there. normal I think now losing customers? Is calling bit out of

Joe West

of One, a a to we a was QX loan then in of real and combination sold the and service company We dependent other off one they service to the loan disappointed sort was business. a -- new one was estate lender. that two refinanced That see was customers. had loan that inventory QX and their in were property their They an it go. about be and to -- sold another it working property paid out [indiscernible] us frank booked

of we're we've last for quarters. X where been XX. around That's So kind the at hanging few

If you X go back, X we were like XXs. at XX, high

so we're down just We straight -- back and QX -- bump line. that a came And pretty in in it's QX. it had we

Robert Franklin

we something we not and to We're sponsor oil and the a oil we We're behind sponsors that's when opportunities gas react our but significant When in strong gas driven. really lender have Matt see it. we business. definitely tend will when take

from than volatile specific there. reason. well but shy when necessarily we away people But our for don't sponsors, you you're move we business any we It where we think in. and have we of like have strong to and it oil we that and strong what in could I money. end sponsors can be no want So industry gas And matter that, the kind that's do tend that understand to area

Matt Olney

Thanks, guys.

Robert Franklin

you. Thank

Operator

are [Operator this Instructions] time. no There more at questions

over the call Bob Franklin. Mr. to back Turning

Robert Franklin

interest being ability and you Thank call. our earnings give you. quarter in Appreciate your thank the on first for to

Operator

participation. today's you concludes Thank gentlemen, your this call. for and Ladies conference

You may now disconnect.

Stellar Bancorp (STEL) 29 Apr 222022 Q1 Earnings call transcript