CBTX - Earnings call transcript Q2 2022

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Operator

Ladies and gentlemen, thank you for standing by and welcome to the CBTX Q2 2022 Earnings Conference Call. At this time all participants are in a listen-only mode. After the speaker's presentation, there'll be a question-and-answer. [Operator Instructions]. I would now like to turn the call over to your host, Justin Long, General Counsel.

begin. may You

Justin Long

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

Before I'd presentation, performance begin, events, statements like we that to financial during we regarding remind this or or 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

the Chairman, Franklin. joined and GAAP At remarks, our I'm Pigott, to Controller. Chief will comparable turn Any presentation. Officer; website accessed available section the earnings be Ted this With and we is measures risk Financial McMullen, financial earnings Officer; Chairman, we all on in call can information, the to in President to the reconciliation a our we concerning Quarterly our and our President the non-GAAP assume that, aware date in statements. investor also XX-K, questions. other of of the reference included by that financial CEO, no and certain filings our call, with SEC, as actual information Additional Chief most update call be ir.cbtxinc.com. that morning over of on is West, could these release factors factors are this during I'll directly Report and of and end our Bob Reports Bob cause and our which our on the Annual Should obligation release Form-XXQ, Investor Relations it measures to our CEO, this made Credit Form differ financial only our Joe Franklin, results will such of any at forward-looking open Joseph our statements to

Robert Franklin

and welcome CBTX you, for Thank the to call earnings Justin Inc.

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

quarter, portfolio. the see a consequently loan on base seen continued second fairly some We've our a to the while strong of and pressure also growth provides upside nice we our low-priced in the beginning of During experience economy even benefits us to pricing. deposit some to have

we interest pursues continue During see to Reserve some expansion interest we Federal as the did net rates. margin higher and expect that the quarter, trend

We of are very proud that our to produce. continues team

merger to be our Bank. team takes distracting customers, has sure work can it a have make doing while successful our merger. the towards hard Allegiance with work hard Mergers to we we but continued While serve that our also

shareholders received both quarter the FDIC Department the the of of Texas Banking. of and agreement and Allegiance and approval second the for CBTX During we merger approved the

economy interest it slow handle a to vigilant and the shareholders While inflation. smooth a we to these work wait interest us the counterparts know the customers, economy. we on on of certain told We the through and we try our approval get asset hikes we The our employees, to that that series patiently Fed to can rate for has a Federal for transition remain intends higher lead which the strains economy rates changes at repricing. to continue positives, diligently for to for provide of Allegiance and Despite Reserve, must serve. the communities with

from the where good the world. economy. that bringing banks continue must positioned of to one. nation happening operating to growth. and we in do population a is accommodate is our timing rest job and to Texas benefit of underwriting We we However, continue state our in see adjust But to the slowing a together both well what to immune not are think Texas of We we the

We well a with a loan strong to deposit low-cost be portfolio. more base granular work and organization continue priced one as efficient to

we cautious long-term and of are optimistic about rates, inflation, we on very economy several the Although are future next adjust our months bank. as the interest higher the to

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

Ted Pigott

first Thank income million XX quarter a the you, XX, income reported million or quarter primarily X.XX%. quarter quarter tax year. and begins XXXX per Bob. year The which for recapture improvements interest quarter XXXX quarter our XXXX. quarter for for of in income of a Slide to X.XX% quarter quarter net X.X Yield this of second quarter interest the quarter assets interest-bearing our for from basis of the information and million income was credit decreased first The the in income expense. $XXX,XXX first million in second and Net of for as in first to a local the points second margin million payments with quarter termination, quarter XXXX. million XXXX. Non-interest of income second employee due and XXXX the software offset rate X.X for The on to $X.XX Certain processing during X.X from to primarily of in due salaries resulted for diluted gain with down for million deposit second to million for $X.X quarter of XXX,XXX XX.X million second underlying was financial second second to decrease losses land lease, of cost X sale the for was XXXX, variance and of primarily benefits, periods fees The earning was or the was include director share provision liabilities Non-interest for per second company ended of second increased compared decrease for second for X.XX% connection primarily $X.XX share X.XX% second first XXXX. the of expense earlier. due and for that million quarter financial XXXX. with interest XX.X first million in quarter gain increased related equivalent and costs and Non-interest diluted the basis of X.X to the on XXXX has for quarter terminated second second Allegiance early on quarter. presentation. period. on XXXX quarter, that to and adjusted compared quarter data provision company's compared legal compared offset XX.X in assets XX.X decrease pending to million professional decrease fees X.X quarter XX.X non-interest X.X X.X second land interest of sales year share, in $XXX,XXX economy XXXX in of million quarter first in to and was institutions Compared the per this XXXX other for six XXXX the X.XX% in diluted Net net net June million the XXXX. bearing XX.X asset quarter quarter investor of decrease other matters $XXX,XXX first related income partially for it or and first million $XXX,XXX $X.XX related merger XXXX by primarily this lease a non-interest to to non-interest included to to to compared a the was by of including The totaling the quarter portion and primarily higher compliance expense quarter, loss, income second and of compared BSA/AML to insurance compared X.X investments million was and disposal XX.X to for net was building a of improvements partially for recognized for equity million XXXX attributable Bancshares.

efficiency the Our second quarter ratio XX.XX%. XXXX was down for to

X.XX Our XX, X.XX or assets of million XXXX, loans June XX, from X.X Securities compared and XXX XX.X% loans at from March second increase held XXXX, million at billion sale XX, June for of Loans and are for Loans of decrease March million [X.XX] XXXX. excluding sale from to it held increased XX, excluding million XXX.X an XXXX. March X.X June XX, to billion quarter XX, XX an increased of loans XXXX. XXXX, from increase or XX.X% XXX.X or [ph] X.X% from increased billion XX, XXXX. million million PPP June were XXX

at Total XX.X The assets on compared cost strong loan totaled decreased of of XX.XX% points to compared or million XX, at for XX.X maintains XX.X the quarter Joe company ratio capital or percent the basis second leverage at XX, XXXX, June XXXX. X.XX as total now total Non-performing billion X.XX% June X.XX% XX. June to the X.XX%. March XX.XX% The I was at million XXXX. and XXXX. assets was XXXX. was XXXX, risk-based was capital deposits XX, June total ratios of XX, average a X.XX at XX, was West. one March ratio losses as loans XX, was assets XXXX. ratio for percentage million total and it allowance The turn XX, the It to XXXX for total for second Our will CETX capital X.X% to quarter over was tier return June at assets deposits at March XX XX.XX%, X.XX%

Joe West

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

pay QX our of million first loans We or payoffs, downs at billion approximately XXX net end XXX excluding loans approximately loans. at of increase million the million. second the quarter, had XX, XXX and up new the in For X.X an billion were versus during of quarter PPP funded X in

billion sets components was in end quarter and or X.X our was compared and C&I including including also payoffs. one or oil quantify Slide family C&I, and million, XX.X XX CRE to X.X%, sets our billion commercial approximately second multifamily the four PPP were exposure. quarter, total Slide quarter-over-quarter, million quarter-over-quarter, effects payoffs slightly forth our the excluding the PPP QX our our increased X.X%. the of versus of the or declined including stable the how C&D XX X.X% direct indirect to the at decreased quarter, gas exposure, up commercial was X.X first XX.X For loans. loans first million we XX.X quarter by compared XX.X of and the or and million forth PPP XX loans to up of million XX.X%

to Our for wind and million that our the at gas first Slide continue million to sets the about the forth indirect direct XXX of loans end decreased flows PPP quarter oil down. XXX compared and second XX information quarter. to

During our million the The our decreased at on sets net our the forth X.X bottom loans from payments PPP related X.X and portfolio. we XX of for million, yield to Slide second forgiveness average quarter table customers. received loan

Our and portfolio on allowance on will PPP Slide our take our for about average XX information the sets yield half loans. average our forth of PPP losses. yield loans credit

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

remains quality shows Turning X.XX XX, remain assets our June was low March non-performing our our assets, non-performing to XX, assets XXXX, to credit regarding second Slide the XXXX. quarter, compared XX total of during strong. also our XX, to as Slide and which at X.XX% information

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

Robert Franklin

we'll Thank you, Joe. that, up With to open it questions.

Operator

Our Brady KBW. first with Instructions] Gailey from question [Operator comes

open. Your line is

Brady Gailey

Hey, we're guys side? thanks. mean, I the do the have set Fed on they're far Good the holdup lack start sense since you of merger. what months morning, guys. as approval Or on just could as that wanted transaction on? Is to there nine with coming was announced. anything up be I the any for focused the

Robert Franklin

don't I tell January. clarity I got you from November I not of give announced a with Fed lot little. I'll standpoint, in can we give that much. timing will the fully because a really and There's papered you have in a But

you to her within I timeframe through get don't don't have start their reason what this you as I a for while, if to here the relatively of So know approved. a with has that from still any doesn't and folks January, but process, talked doesn't why other I this guess, -- that we we take And Fed been communicate wouldn't think gone deal much. we're,

approved deal. the regulators Our two have primary

Our holding it, of we that's that there's nothing this approved thing shareholders up. have know

wish to I in are we've XX you line, pending are our give that to we could. now in And been line. know where But we before specifics we some just understanding is right any don't I have don't deals XX we we that. there So -- are

the poised So to Fed. we're hit from to we are very frustrating this on and done, to but get us, folks because employees the it's very our deal to button trying ready frustrating waiting

Brady Gailey

to And wait you forma then the you have something have you need think we basis capital, guys the fact? on buybacks closed? a is a that just after and the about excess deal capital, will excess pro standalone Fed? bank Or And possibility, are buybacks get wait that even think as for this

Robert Franklin

and for all over us XX blackouts. very back quarter. the stock been last buyback buy with We -- bit front, a just about around shares it's ins did of on the little difficult Well, little since XX,XXX outs

been in bit. sort those And would ability all have market. clear we in have the So a the can we to get intend back market of we once the --

I that's repurchases, I but think both a them go probably go. I banks in to think yes, for doing won't as on. far are us today, but as place for do We some interested good we're continues share if those especially feel like to speak mean, I concerned,

Brady Gailey

rate. about X% Okay. know And have I X% kind then guys you finally for talked loan me, of growth to

thinking than organic about a clearly more lot What's how going did forward? that update the quarter. you're growth loan core this You on

Robert Franklin

over the long-term. think I still

a on opportunities, sure us we're where for are we have But be feel tightening to like hold our we're prepared If sure on they we're might service when people can that. the to calls, to the equity I'm we still it. would If -- be bit, we've underwriting for get out taking of Texas to able and we But for strong, weakening, end. economy, starting little heard making to it to they see way hold that have longer that a although consistent hold have fairly there's we ability be a front and opportunities the some kind sort other times have it, we what debt. they we're basis. to be average have appears And we're you to as that's there on of us. than thought the able might more liquidity lot a in of

So it's still economy for a good us.

do don't everybody because will where be to it loan think to of just we're loan happen. and to our I think this next growth that's wants I it'll off see what quarters, a take do come think start so seems the can several going grow, to to bit. we type opportunities bit, I we're for and a So the to But necessarily but wane going Fed continue

Brady Gailey

the great. for Okay, Bob. Thanks color

Robert Franklin

you, Thank

Operator

our for question. One next moment

Sandler. Our next question Piper from comes Brad Milsaps with

line Your open. is

Brad Milsaps

Maybe, Bob, start wanted maybe margin. to I interest net with the

think wonder and get three I you floors, different. pretty you guys a bit after how improve disclosed pre-COVID, the here? that to much this of deck, thinking are NIM quarters to rate, half loans from but week, about sheet about opportunity the improve the expansion little kind about, wanted further be have floors. here, the I sense balance we a the in just you margin are what would of of if you variable are kind were from But is much higher your is through

Joe West

caught point in moves, -- to about up that -- the this the month. think XX, Joe, second we're half month much March June we the We the fours, through pretty the think of in this half quarter of couple Yes. first last of is these floors, point up, those X, was that May and the

the too much we didn't get that really in benefit QX. So of

-- So last going of think two we the pretty last to benefit we're this this well the reap in moves portfolio. move

So caught us the do. expand up that for most the we've little floors a part. yes, margin should help have the to And

Brad Milsaps

expenses. then, And you. Thank great. switching to maybe gears Okay,

XX kind noise of flat some looks You down the guys like of of kind people. excluding It head counts are about year-over-year.

just Have to the change kind kind run curious expense how you of that? the expensive kind Just outline to more identified any or the know, is of think you already you about XX% in savings, in of opportunity. regard when those maybe of saves curious, I deal, some announced rate,

Robert Franklin

I those the your is, around Well, as question things. together. thing And yes, towards now. taking is, we as and go will as are The are all moving to we is us put answer for banks ones getting think ones This for certain folks place two about think certain you -- all that forward dates. right that people going identify stay certain the

I plan some we'll put going and with does little if the Federal to get while go planning It run the can and doing get of when off have we a to think from and we're folks and the in good thing us because running. I But ready some on we is side. extent. do Reserve, the on it we're banks approval a be light have pressure for pretty But been a I some quite to think both this the good stuff other to game to associated areas. think combination. around part, a for makes what we So our what most of we're it's certain And

just one And they over. get to hurdle where not we're sure more placed So we're we've -- got hurdle. the

Brad Milsaps

but of any one update November, And just the of me, Bob. in should a of about the companies just where to of about, we expectations lot together, do level if provide of maybe, all closing, guys the Thanks, kind only just how plans, since terms maybe to Okay. kind guys coming an you not thinking set you given two sort maybe of things kind rates, at will have marks, on, happened. that had you for changed has curious there final think you're think the kind

Robert Franklin

today. understanding the we at kind don't opportunities Yes, timing But when think do that some like. is, people I a better look to can, that. there'll I of try this give to really think of to and closer be prepared think of, we'll be do get we I we're might as what that looking understand

tuned would I on that say, stay front. So

Brad Milsaps

would in would have you that that guys it comfortable you where of still to mean, only of what thought kind put net I seem what's out given that that given sort Got terms of kind me in it, but have of, with improved, could back companies there, numbers rates November, of the feel sort earn, happened, moved?

Robert Franklin

a I not can't that we're of there I've the most better bit standpoint. little -- projection a I don't on the about imagine things But for we out part, Yes. had much from all that worried generalizations. pretty

what production to has think better real I'm like has projected. this find the I would of But we better, like our I wasn't, But if operating forward piece been say, for hate what have like pricing we we than things I'll improved go projected. better, think most is that. looked so I look been hard somebody something that the over to generalize part, we've sure the that affect

Brad Milsaps

Bob. thanks, Great,

Robert Franklin

Thank you.

Operator

moment one question. next our And for

Matt next Our Stephens. question comes from Olney with

Your is line open.

Matt Olney

Hey, morning, everybody. good

Brad's Going question to back savings around the timeline. cost and

since that we curious, waiting approvals? on still you're get systems back Or push deal hit Did this is could date the original future? if conversion final approval soon. Just the still in have still we you an And to date?

Robert Franklin

good a really couple We're a We've identified. question, of close. That's dates got Matt. getting

second So one we the I one, on far pressed we're little don't hidden a think, bit behind -- for first that.

we're will it push still too the mean, can still we're it it we in within much get next I I get -- a conversion that that have -- goes we conversion too to longer can make we that next longer, say If So into this or few that day may think XXXX. we approval that appears still weeks that year. have in year. But I

Matt Olney

more which commercial like to disclosures this front, Okay, by appreciate from a loan led that, the growth then, on multifamily was it lot and of the your looks that looks construction was about land. it based growth hear like driven quarter this Bob. diversified to And on

I the are the Thanks. else anything can now think short-term in around the construction over nature construction you guidelines, disclose or is to this that appreciate, love would XXX% you pace balances disclosed

Robert Franklin

things economies. and C&D various fairly been which what that our state some our firstly, just things are In and fairly two normal of the and diversified done a doing those good of of normal which environment, we're there's components too actually in normalized bug one we're in parts geography is is. C&D what just and larger sort some is it is it business the C&D we're And because Dallas, Austin, really is pretty operating having some doing of diversified business

for to that those The we like piece something a our depending on be that X where see that is to projects it'll on size tend But good other drives volume that do. And that probably, certain fairly wise project one. year. XX those the It's with really and we are housing the low-income us piece in we circumstances. regulators And to it guys do up. C&D depends

it, a so, of separate a And C&D they when that is we've for And as look credit has see. a our it strong the to it construction we've of book, we're able at because regulator's And that like piece It's credit but ignore to it it cycles. it's not very out, us. development, go different watched part seen I think through mix. something

take and piece us, So out, to they when down you it mid-XXs. the look at that drops

-- the if at we XXX. thing, are So it's and look you CRE CRE, in same where versus

get since we think doing that, together basically, I benefits of for XXXX. the so it So the in Community that it, been we've Bank and with we hasn't, like regulators came

So helps. that if

Matt Olney

the that. appreciate then, most how any if few Seems week. timeframe, spoken pricing I it we'd Bob. kind and towards at more a color, pricing cost. of moved Thanks. times. until great got and deposit that deposit Fed move their love That's into guess really with we I kind over May banks about June then, to shifting hear we've of didn't That's announcement pricing and helpful. then like Since and all we've during higher this Yes. adjustments. deposit XQ recent then the Since banks changed And

Robert Franklin

move, deposit certain We've market in a We've banks can after the little aggressive bit. on to some board, pricing we bit and we, in a little move about the across much pretty least others. that at this categories. more moved But I last expect a are our side in think little some got

pieces able point seeing into little some bit aggressive. fairly the and what demand piece little that market that side. you've then, really hold deposits. to been us which important stayed lag think piece up behind. most is feel accounts like And has base a to The attached on But that's continue our stable. the of relationship we have, maintaining as, that's money are driven costs one market down because very we're we'll of of Most that second get deposit the we I this are stay So to we'll demand folks more we've the strong other deposit getting a to disciplined seen but around we back pricing, that

And so are around brokerage of not houses sensitive, we're of -- town, they'll really the with very we or and of accounts the [indiscernible] customers Fidelity relationship but their just other they it's more can't happen. Schwab in let aren't those are around when banks typically or the some our because other or might without what but from then are not doing because most for it's statements whoever Schwab bags, have that and brokerage and they they moving not, part, that guys those we're most see get here

stay never we're going we're to town, competitive. be in going highest the to but deposit priced So

behaved. now with So market right market. the fairly And well we'll seems move the be to

Matt Olney

me. That's Okay. for for guys. Congrats all Thanks, the quarter.

Robert Franklin

Thank any showing at to for remarks? call you. to I'm like I’ll the back over Bob turn further questions this any And closing time. not

Robert Franklin

really will take bank, they're of a be organization jobs the beneficial getting our grow future. to really our Well, to hard this want to reiterate and of merger much. And for that I in doing People proud participated everyone I in call working continue today. customers, to think we very two the thank very ready and our you are do care are very that for staff. that Thanks

So thank in you call for participating our today.

Operator

this presentation. gentlemen, conclude does Ladies and today's

disconnect You may day. have wonderful now and a

Stellar Bancorp (STEL) 30 Jul 222022 Q2 Earnings call transcript