8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8‑K

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of earliest event reported): July 26, 2018

CBTX, Inc.

(Exact name of registrant as specified in its charter)

Texas	001-38280	20‑8339782
(State or other jurisdiction of	(Commission File Number)	(I.R.S. Employer
incorporation or organization)		Identification No.)

9 Greenway Plaza, Suite 110

Houston, Texas 77046

(Address of principal executive offices)

(713) 210‑7600

(Registrant’s telephone number, including area code)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§230.12b-2 of this chapter).     Emerging growth company ☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☒

Item 2.02    Results of Operations and Financial Condition.

On July 26, 2018, CBTX, Inc. issued a press release announcing its financial results for the quarter ended June  30, 2018.  A copy of the press release is furnished as Exhibit 99.1 to this Form 8-K and is incorporated herein by reference.

In accordance with General Instruction B.2 of Form 8-K, the information furnished in Item 2.02 of this Form 8-K and Exhibit 99.1 to such report shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liability of that section, and shall not be deemed to be incorporated by reference into any registration statement or other filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.

Item 9.01    Financial Statements and Exhibits.

(d) Exhibits.  The following are furnished as exhibits to this Current Report on Form 8-K:

Exhibit Number	Description of Exhibit
99.1	Press Release of CBTX, Inc. dated July 26, 2018.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	CBTX, Inc.
	(Registrant)
Date: July 26, 2018	/s/ Robert T. Pigott, Jr.
	Robert T. Pigott, Jr.
	Chief Financial Officer

EX-99.1

Exhibit 99.1

CBTX, Inc. Reports Second Quarter Financial Results

Houston, Texas, July 26, 2018-- CBTX, Inc. (the “Company”) (NASDAQ: CBTX), the bank holding company for CommunityBank of Texas N.A., today announced net income of $11.0 million, or $0.44 per diluted share, for the quarter ended June 30, 2018, compared to $8.7 million, or $0.39 per diluted share, for the quarter ended June 30, 2017 and $9.1 million, or $0.37 per diluted share, for the quarter ended March 31, 2018. 

For 2018, net income and earnings per share were positively impacted by the 14% reduction of the corporate U.S. statutory federal tax rate from 35% to 21% as a result of the enactment of the Tax Cuts and Jobs Act (the “Tax Act”), which became effective January 1, 2018.

Highlights

· Total loans, excluding loans held for sale, increased $48.1 million, or 8.2% annualized, to $2.4 billion compared to the quarter ended March 31, 2018. 

· Net interest income for the quarter ended June 30, 2018 totaled $30.9 million, an increase of 6.3% from the first quarter of 2018, primarily due to increased average loans and yields on loans.

· The efficiency ratio improved to 58.2% for the quarter ended June 30, 2018, compared to 62.6% for the quarter ended March 31, 2018.

Operating Results:

Net Interest Income

Net interest income was $30.9 million for the second quarter of 2018, compared to $26.5 million for the second quarter of 2017 and $29.0 million for the first quarter of 2018. The increase in net interest income in the second quarter of 2018 from the second quarter of 2017, was due to increased average loans and increased average yields on loans and federal funds sold. The increase in net interest income in the second quarter of 2018 from the first quarter of 2018 was due to increased average loans and average loan yields. 

The yield on interest-earning assets was 4.71% for the second quarter of 2018, compared to 4.32% for the second quarter of 2017 and 4.49% for the first quarter of 2018.  

The cost of interest-bearing liabilities, including borrowings, was 0.60% for the second quarter of 2018, compared to 0.58% for the second quarter of 2017 and 0.55% for the first quarter of 2018.  

The net interest margin was 4.39% for the second quarter of 2018 compared to 3.99% for the second quarter of 2017 and 4.19% for the first quarter of 2018.  

Provision (Recapture) for Loan Losses

Provision for loan loss was $690,000 for the second quarter of 2018, compared to a recapture of $694,000 for the second quarter of 2017 and a provision of $865,000 for the first quarter of 2018.  

The allowance for loan losses was $25.7 million, or 1.07% of total loans, at June 30, 2018, compared to $25.2 million, or 1.15% of total loans, at June 30, 2017 and $25.3 million, or 1.08% of total loans, at March 31, 2018.  

Noninterest Income

Noninterest income was $3.5 million for the second quarter of 2018,  $3.5 million for the second quarter of 2017 

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and $3.4 million for the first quarter of 2018. Although noninterest income was relatively flat between the second quarter 2018 and the second quarter 2017, there was a decrease in gains on sales of loans and assets, offset by an increase in earnings on bank-owned life insurance. 

Noninterest income increased from the first quarter of 2018 to the second quarter of 2018 primarily due to higher gains on sales of loans and assets in the second quarter of 2018.    

Noninterest Expense

Noninterest expense was $20.0 million for the second quarter of 2018,  $18.9 million for the second quarter of 2017 and $20.3 million for the first quarter of 2018.  

Noninterest expense during the second quarter of 2018 compared to the first quarter of 2018 was relatively flat, with decreases in salaries and employee benefits and professional and director fees offset by increased occupancy costs. 

Noninterest expense increased $1.2 million in the second quarter of 2018 compared to the second quarter of 2017 primarily due to increased salaries, employee benefits, incentive compensation, health insurance premiums and stock compensation expense. 

Income Taxes

Income tax expense was $2.6 million for the second quarter of 2018,  $3.2 million for the second quarter of 2017 and $2.1 million for the first quarter of 2018.  

The effective tax rates were 19.3% for the second quarter of 2018,  26.8% for the second quarter of 2017 and 19.0% for the first quarter of 2018. The effective tax rate for the first and second quarter of 2018 reflect reduction of the federal tax rate from 35% to 21% in the fourth quarter of 2017.

Balance Sheet Highlights:

Loans

Loans were $2.4 billion at June 30, 2018,  $2.2 billion at June 30, 2017 and $2.4 billion at March 31, 2018. The increases from the prior year and first quarter are primarily due to organic growth. 

Asset Quality 

Nonperforming assets remain low relative to total assets at $4.9 million, or 0.16% of total assets, at June 30, 2018,  $9.7 million, or 0.33% of total assets, at June 30, 2017 and $6.1 million, or 0.20% of total assets at March 31, 2018.

Annualized net charge-offs (recoveries) to average loans were 0.05% for the second quarter of 2018, 0.00% for the second quarter of 2017 and 0.05% for the first quarter of 2018.  

Deposits and Borrowings

Total deposits were $2.6 billion at June 30, 2018, compared to $2.5 billion at June 30, 2017 and $2.6 billion at March 31, 2018.

Total borrowings (excluding junior subordinated debentures) were $51.4 million at  June 30, 2018, $27.6 million at June 30, 2017 and $861,000 at March 31, 2018. The increase in borrowings from March 31, 2018 to June 30, 2018 is due to Federal Home Loan Bank (FHLB) short-term advances of $50 million. Borrowings at June 30, 2017 include $25.5 million for our note payable, which was repaid due to scheduled payments and repayment in full during the quarter ended December 31, 2017.

2

Capital

At June 30, 2018,  the Company remains well capitalized. Our ratio of total shareholders’ equity to total assets was 14.87% at June 30, 2018, 12.65% at June 30, 2017 and 14.69% at March 31, 2018.

Our ratio of tangible equity to total tangible assets was 12.41% at June 30, 2018, 9.95% at June 30, 2017 and 12.19% at March 31, 2018. Tangible equity to total tangible assets is a non‑GAAP financial measure. See the table captioned “Non‑GAAP to GAAP Reconciliation.”

Our ratio of tangible equity to total assets increased from June 30, 2017 to June 30, 2018 due to our November 2017  initial public offering of our common stock. 

About CBTX, Inc.

CBTX, Inc. is the bank holding company for CommunityBank of Texas, N.A., a $3.1 billion asset bank, offering commercial banking solutions to local small and mid-sized businesses and professionals in Houston, Beaumont and surrounding communities in southeast Texas.  Visit www.communitybankoftx.com for more information.

Forward-Looking Statements

This 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 whether the Company can: prudently manage and execute its growth strategy; manage risks associated with its acquisition and de novo branching strategy; maintain its asset quality; address the volatility and direction of market interest rates; continue to have access to debt and equity capital markets; and achieve its performance goals. 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 (‘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 its anticipates. Accordingly, you should not place undue reliance on any such forward looking statements. Any forward-looking statement speaks only as of the date on which it is made, and the Company does not undertake any obligation to publicly update or review any forward-looking statement, whether as a result of new information, future developments or otherwise. New factors emerge from time to time, and it is not possible for the Company to predict which will arise. In addition, the Company cannot assess the impact of each factor on its business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. Copies of the SEC filings for the Company are available for download free of charge from www.communitybanktx.com under the Investor Relations tab.

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CBTX, INC. AND SUBSIDIARY

Condensed Consolidated Balance Sheets (Unaudited)

(In thousands)

Balance Sheet Data (at period end):	6/30/2018		3/31/2018		12/31/2017		9/30/2017		6/30/2017
Loans, excluding loans held for sale	$	2,404,132	$	2,356,053	$	2,311,544	$	2,199,478	$	2,192,443
Allowance for loan losses		(25,746)		(25,349)		(24,778)		(23,757)		(25,187)
Loans, net		2,378,386		2,330,704		2,286,766		2,175,721		2,167,256
Cash and equivalents		245,265		279,915		326,199		348,578		307,173
Debt securities		230,393		221,183		223,208		217,660		220,330
Premises and equipment, net		52,607		53,135		53,607		54,129		56,609
Goodwill		80,950		80,950		80,950		80,950		80,950
Other intangible assets, net		6,276		6,521		6,770		7,031		7,298
Repossessed real estate and other assets		137		295		705		1,136		1,435
Loans held for sale		560		113		1,460		466		559
Other assets		106,186		101,974		101,418		104,167		99,267
Total Assets	$	3,100,760	$	3,074,790	$	3,081,083	$	2,989,838	$	2,940,877
Noninterest-bearing deposits	$	1,114,155	$	1,120,521	$	1,109,789	$	1,051,755	$	1,030,865
Interest-bearing deposits		1,447,119		1,479,181		1,493,183		1,502,872		1,485,919
Total deposits		2,561,274		2,599,702		2,602,972		2,554,627		2,516,784
Note payable		-		-		-		24,357		25,464
Repurchase agreements		1,448		861		1,525		2,239		2,179
Federal Home Loan Bank advances		50,000		-		-		-		-
Junior subordinated debt		6,726		6,726		6,726		6,726		6,726
Other liabilities		20,117		15,930		23,646		20,768		17,760
Total Liabilities		2,639,565		2,623,219		2,634,869		2,608,717		2,568,913
Shareholders' Equity		461,195		451,571		446,214		381,121		371,964
Total Liabilities and Shareholders' Equity	$	3,100,760	$	3,074,790	$	3,081,083	$	2,989,838	$	2,940,877

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CBTX, INC. AND SUBSIDIARY

Condensed Consolidated Statements of Income (Unaudited)

(In thousands)

	For the Three Months Ended										For the Six Months Ended
	6/30/2018		3/31/2018		12/31/2017		9/30/2017		6/30/2017		6/30/2018		6/30/2017
Interest Income
Interest and fees on loans	$	30,493	$	28,462	$	27,726	$	27,129	$	26,560	$	58,955	$	52,513
Securities		1,507		1,436		1,357		1,334		1,353		2,943		2,656
Federal Funds and interest-bearing deposits		1,127		1,187		1,283		1,106		813		2,314		1,555
Total Interest Income		33,127		31,085		30,366		29,569		28,726		64,212		56,724
Interest Expense
Deposits		2,126		1,948		1,993		1,964		1,857		4,074		3,695
Repurchase agreements		1		1		—		2		1		2		3
Federal Home Loan Bank advances		12		—		—		—		—		12		—
Note payable		3		4		122		269		264		7		515
Junior subordinated debt		109		93		86		83		79		202		153
Total Interest Expense		2,251		2,046		2,201		2,318		2,201		4,297		4,366
Net Interest Income		30,876		29,039		28,165		27,251		26,525		59,915		52,358
Provision (Recapture) for Loan Losses		690		865		1,050		(1,654)		(694)		1,555		266
Net Interest Income After Provision (Recapture) for Loan Losses		30,186		28,174		27,115		28,905		27,219		58,360		52,092
Noninterest Income
Deposit account service charges		1,497		1,478		1,388		1,395		1,517		2,975		3,017
Net gain (loss) on sale of assets		210		130		(7)		828		339		340		703
Card interchange fees		971		927		941		803		877		1,898		1,709
Earnings on bank-owned life insurance		465		451		460		459		335		916		661
Other		363		375		362		601		458		738		884
Total Noninterest Income		3,506		3,361		3,144		4,086		3,526		6,867		6,974
Noninterest Expense
Salaries and employee benefits		12,496		12,695		14,021		11,829		11,299		25,191		22,723
Net occupancy expense		2,433		2,265		2,346		2,221		2,351		4,698		4,584
Regulatory fees		513		545		487		458		621		1,058		1,231
Data processing		666		683		674		662		651		1,349		1,293
Printing, stationery and office		480		411		415		348		370		891		717
Amortization of intangibles		248		255		263		267		271		503		549
Professional and director fees		686		919		1,168		606		706		1,605		1,331
Correspondent bank and customer related transaction expenses		68		67		67		67		78		135		152
Loan processing costs		75		118		141		115		133		193		205
Advertising, marketing and business development		475		506		508		266		508		981		687
Repossessed real estate and other asset expense		5		57		66		340		85		62		203
Security and protection expense		311		302		300		331		352		613		724
Telephone and communications		394		386		344		311		307		780		661
Other expenses		1,162		1,075		1,189		1,196		1,127		2,237		2,226
Total Noninterest Expense		20,012		20,284		21,989		19,017		18,859		40,296		37,286
Net Income Before Income Tax Expense		13,680		11,251		8,270		13,974		11,886		24,931		21,780
Income Tax Expense		2,638		2,139		6,313		3,927		3,181		4,777		6,213
Net Income	$	11,042	$	9,112	$	1,957	$	10,047	$	8,705	$	20,154	$	15,567

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CBTX, INC. AND SUBSIDIARY

Financial Highlights (Unaudited)

(In thousands, except per share data and percentages)

	For the Three Months Ended															For the Six Months Ended
	6/30/2018			3/31/2018			12/31/2017			9/30/2017			6/30/2017			6/30/2018			6/30/2017
Profitability:
Net income	$	11,042		$	9,112		$	1,957		$	10,047		$	8,705		$	20,154		$	15,567
Basic earnings per share	$	0.44		$	0.37		$	0.08		$	0.46		$	0.39		$	0.81		$	0.71
Diluted earnings per share	$	0.44		$	0.37		$	0.08		$	0.45		$	0.39		$	0.81		$	0.70
Return on average assets (1)		1.44	%		1.20	%		0.25	%		1.34	%		1.20	%		1.32	%		1.08	%
Return on average shareholders' equity (1)		9.66	%		8.20	%		1.83	%		10.54	%		9.46	%		8.94	%		8.58	%
Net interest margin- tax equivalent (1)		4.43	%		4.23	%		4.06	%		4.07	%		4.08	%		4.33	%		4.05	%
Efficiency ratio (2)		58.20	%		62.60	%		70.23	%		60.69	%		62.76	%		60.34	%		62.84	%
Liquidity and Capital Ratios:
Total shareholders' equity to total assets		14.87	%		14.69	%		14.48	%		12.75	%		12.65	%		14.87	%		12.65	%
Tangible equity to tangible assets (3)		12.41	%		12.19	%		11.98	%		10.10	%		9.95	%		12.41	%		9.95	%
Common equity tier 1 capital ratio		14.08	%		14.12	%		14.19	%		12.23	%		12.00	%		14.08	%		12.00	%
Tier 1 leverage ratio		12.87	%		12.58	%		12.30	%		10.48	%		10.39	%		12.87	%		10.39	%
Tier 1 risk-based capital ratio		14.32	%		14.37	%		14.44	%		12.49	%		12.26	%		14.32	%		12.26	%
Total risk-based capital ratio		15.29	%		15.35	%		15.42	%		13.48	%		13.33	%		15.29	%		13.33	%
Other Data:
Weighted average common shares outstanding- Basic		24,858			24,833			23,629			22,063			22,062			24,845			22,062
Weighted average common shares outstanding- Diluted		24,997			24,954			23,742			22,138			22,148			24,977			22,148
Common shares outstanding at period end		24,859			24,833			24,833			22,063			22,063			24,859			22,063
Dividends per share	$	0.05		$	0.05		$	0.05		$	0.05		$	0.05		$	0.10		$	0.10
Book value per share	$	18.55		$	18.18		$	17.97		$	17.27		$	16.86		$	18.55		$	16.86
Tangible book value per share (3)	$	15.04		$	14.66		$	14.44		$	13.29		$	12.86		$	15.04		$	12.86
Employees - full-time equivalents		488			477			462			464			472			488			472

(1)Quarterly ratios are annualized.

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

(3)Non‑GAAP financial measure. See the table captioned “Non‑GAAP to GAAP Reconciliation.”

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CBTX, INC. AND SUBSIDIARY

Net Interest Margin (Unaudited)

(In thousands, except percentages)

	For the Three Months Ended
	6/30/2018						3/31/2018						6/30/2017
			Interest						Interest						Interest
	Average		Earned/		Average		Average		Earned/		Average		Average		Earned/		Average
	Outstanding		Interest		Yield/		Outstanding		Interest		Yield/		Outstanding		Interest		Yield/
	Balance		Paid		Rate (1)		Balance		Paid		Rate (1)		Balance		Paid		Rate (1)
Assets
Interest-earnings assets:
Total loans (2)	$	2,375,253	$	30,493	5.15	%	$	2,319,463	$	28,462	4.98	%	$	2,203,145	$	26,560	4.83	%
Debt securities		228,262		1,507	2.65	%		223,730		1,436	2.60	%		220,905		1,353	2.45	%
Federal funds sold and other interest-earning assets		201,906		936	1.86	%		252,722		994	1.60	%		228,393		637	1.12	%
Nonmarketable equity securities		14,823		191	5.17	%		14,701		193	5.32	%		14,691		176	4.81	%
Total interest-earning assets		2,820,244	$	33,127	4.71	%		2,810,616	$	31,085	4.49	%		2,667,134	$	28,726	4.32	%
Allowance for loan losses		(25,392)						(24,866)						(26,424)
Noninterest-earnings assets		288,416						287,099						273,760
Total assets	$	3,083,268					$	3,072,849					$	2,914,470
Liabilities and Shareholders’ Equity
Interest-bearing liabilities:
Interest-bearing deposits	$	1,478,016	$	2,126	0.58	%	$	1,491,613	$	1,948	0.53	%	$	1,478,579	$	1,857	0.50	%
Repurchase agreements		1,540		1	0.26	%		1,418		1	0.29	%		2,356		1	0.17	%
FHLB advances		2,198		12	2.19	%		—		—	—	%		—		—	—	%
Note payable		—		3	—	%		—		4	—	%		25,841		264	4.10	%
Junior subordinated debt		10,826		109	4.04	%		10,826		93	3.48	%		10,826		79	2.93	%
Total interest-bearing liabilities		1,492,580	$	2,251	0.60	%		1,503,857	$	2,046	0.55	%		1,517,602	$	2,201	0.58	%
Noninterest-bearing liabilities:
Noninterest-bearing deposits		1,111,736						1,097,085						1,010,823
Other liabilities		20,441						21,165						16,910
Total noninterest-bearing liabilities		1,132,177						1,118,250						1,027,733
Shareholders’ equity		458,511						450,742						369,135
Total liabilities and shareholders’ equity	$	3,083,268					$	3,072,849					$	2,914,470
Net interest income			$	30,876					$	29,039					$	26,525
Net interest spread (3)					4.11	%					3.93	%					3.74	%
Net interest margin (4)					4.39	%					4.19	%					3.99	%
Net interest margin—tax equivalent (5)					4.43	%					4.23	%					4.08	%

(1)Annualized.

(2)Includes average outstanding balances of loans held for sale of $425,000,  $544,000  and $770,000 for the quarter ended June 30, 2018,  March 31, 2018 and June 30, 2017, respectively.

(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)To make pre‑tax income and resultant yields on tax‑exempt investments and loans comparable to those on taxable investments and loans, a tax equivalent adjustment of $267,000,  $270,000 and $585,000 for the quarter ended June 30, 2018,  March 31, 2018 and June 30, 2017, respectively, has been computed using a federal income tax rate of 21% for 2018 and 35% for 2017.  

7

	For the Six Months Ended June 30,
	2018						2017
			Interest						Interest
	Average		Earned/		Average		Average		Earned/		Average
	Outstanding		Interest		Yield/		Outstanding		Interest		Yield/
(Dollars in thousands)	Balance		Paid		Rate		Balance		Paid		Rate
Assets
Interest-earnings assets:
Total loans (1)	$	2,347,512	$	58,955	5.06	%	$	2,190,953	$	52,513	4.83	%
Debt securities		226,008		2,943	2.63	%		219,005		2,656	2.45	%
Federal funds sold and other interest-earning assets		227,172		1,929	1.71	%		244,053		1,186	0.98	%
Nonmarketable equity securities		14,763		385	5.26	%		14,688		369	5.07	%
Total interest-earning assets		2,815,455	$	64,212	4.60	%		2,668,699	$	56,724	4.29	%
Allowance for loan losses		(25,131)						(25,932)
Noninterest-earnings assets		287,764						275,208
Total assets	$	3,078,088					$	2,917,975
Liabilities and Shareholders’ Equity
Interest-bearing liabilities:
Interest-bearing deposits	$	1,484,777	$	4,074	0.55	%	$	1,495,867	$	3,695	0.50	%
Repurchase agreements		1,480		2	0.27	%		2,412		3	0.25	%
FHLB advances		1,105		12	2.19	%		—		—	—	%
Note payable		—		7	—	%		26,400		515	3.93	%
Junior subordinated debt		10,826		202	3.76	%		10,826		153	2.85	%
Total interest-bearing liabilities		1,498,188	$	4,297	0.58	%		1,535,505	$	4,366	0.57	%
Noninterest-bearing liabilities:
Noninterest-bearing deposits		1,104,451						998,326
Other liabilities		20,801						18,157
Total noninterest-bearing liabilities		1,125,252						1,016,483
Shareholders’ equity		454,648						365,987
Total liabilities and shareholders’ equity	$	3,078,088					$	2,917,975
Net interest income			$	59,915					$	52,358
Net interest spread(2)					4.02	%					3.71	%
Net interest margin (3)					4.29	%					3.96	%
Net interest margin—tax equivalent (4)					4.33	%					4.05	%

(1)Annualized. 

(2)Includes average outstanding balances of loans held for sale of $484,000 and $730,000 for the six months ended June 30, 2018 and June 30, 2017, respectively.

(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)To make pre‑tax income and resultant yields on tax‑exempt investments and loans comparable to those on taxable investments and loans, a tax equivalent adjustment of $537,000 and $1.2 million for the six months ended June 30, 2018 and June 30, 2017, respectively, has been computed using a federal income tax rate of 21% for 2018 and 35% for 2017.

8

CBTX, INC. AND SUBSIDIARY

Yield Trend (Unaudited)

	For the Three Months Ended
	6/30/2018		3/31/2018		12/31/2017		9/30/2017		6/30/2017
Yield Trend - Annualized:
Interest-earnings assets:
Total loans	5.15	%	4.98	%	4.88	%	4.91	%	4.83	%
Debt securities	2.65	%	2.60	%	2.42	%	2.37	%	2.45	%
Federal funds sold and other interest-earning assets	1.86	%	1.60	%	1.37	%	1.29	%	1.12	%
Nonmarketable equity securities	5.17	%	5.32	%	5.13	%	4.83	%	4.81	%
Total interest-earning assets	4.71	%	4.49	%	4.29	%	4.32	%	4.32	%
Interest-bearing liabilities:
Interest-bearing deposits	0.58	%	0.53	%	0.52	%	0.52	%	0.50	%
Repurchase agreements	0.26	%	0.29	%	—	%	0.33	%	0.17	%
FHLB advances	2.19	%	—	%	—	%	—	%	—	%
Note payable	—	%	—	%	4.30	%	4.31	%	4.10	%
Junior subordinated debt	4.04	%	3.48	%	3.15	%	3.04	%	2.93	%
Total interest-bearing liabilities	0.60	%	0.55	%	0.56	%	0.60	%	0.58	%
Net interest spread (1)	4.11	%	3.93	%	3.73	%	3.73	%	3.74	%
Net interest margin (2)	4.39	%	4.19	%	3.98	%	3.98	%	3.99	%
Net interest margin—tax equivalent (3)	4.43	%	4.23	%	4.06	%	4.07	%	4.08	%

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

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

(3)To make pre‑tax income and resultant yields on tax‑exempt investments and loans comparable to those on taxable investments and loans, a tax equivalent adjustment has been computed using a federal income tax rate of 21% for 2018 and 35% for 2017.  

9

CBTX, INC. AND SUBSIDIARY

Average Outstanding Balances (Unaudited)

(In thousands)

	For the Three Months Ended
	6/30/2018		3/31/2018		12/31/2017		9/30/2017		6/30/2017
Average Outstanding Balances:
Assets
Interest-earnings assets:
Total loans (1)	$	2,375,253	$	2,319,463	$	2,252,735	$	2,191,016	$	2,203,145
Debt securities		228,262		223,730		222,602		223,132		220,905
Federal funds sold and other interest-earning assets		201,906		252,722		317,484		284,334		228,393
Nonmarketable equity securities		14,823		14,701		14,698		14,695		14,691
Total interest-earning assets		2,820,244		2,810,616		2,807,519		2,713,177		2,667,134
Allowance for loan losses		(25,392)		(24,866)		(24,127)		(25,316)		(26,424)
Noninterest-earnings assets		288,416		287,099		296,108		290,767		273,760
Total assets	$	3,083,268	$	3,072,849	$	3,079,500	$	2,978,628	$	2,914,470
Liabilities and Shareholders’ Equity
Interest-bearing liabilities:
Interest-bearing deposits	$	1,478,016	$	1,491,613	$	1,519,631	$	1,501,732	$	1,478,579
Repurchase agreements		1,540		1,418		1,793		2,404		2,356
FHLB advances		2,198		—		—		—		—
Note payable		—		—		11,252		24,742		25,841
Junior subordinated debt		10,826		10,826		10,826		10,826		10,826
Total interest-bearing liabilities		1,492,580		1,503,857		1,543,502		1,539,704		1,517,602
Noninterest-bearing liabilities:
Noninterest-bearing deposits		1,111,736		1,097,085		1,087,416		1,041,731		1,010,823
Other liabilities		20,441		21,165		23,271		18,844		16,910
Total noninterest-bearing liabilities		1,132,177		1,118,250		1,110,687		1,060,575		1,027,733
Shareholders’ equity		458,511		450,742		425,311		378,349		369,135
Total liabilities and shareholders’ equity	$	3,083,268	$	3,072,849	$	3,079,500	$	2,978,628	$	2,914,470

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

10

CBTX, INC. AND SUBSIDIARY

Period End Balances (Unaudited)

(In thousands, except percentages)

	6/30/2018				3/31/2018				12/31/2017				9/30/2017				6/30/2017
	Amount		%		Amount		%		Amount		%		Amount		%		Amount		%
Loan Portfolio:
Commercial and industrial	$	565,850	23.5	%	$	559,070	23.7	%	$	559,363	24.1	%	$	548,870	24.9	%	$	535,116	24.4	%
Real estate:
Commercial real estate		780,224	32.4	%		767,108	32.5	%		738,293	31.9	%		689,501	31.3	%		690,044	31.4	%
Construction and development		449,390	18.6	%		436,260	18.5	%		449,211	19.4	%		424,489	19.3	%		433,966	19.8	%
1-4 family residential		279,227	11.6	%		260,580	11.0	%		258,584	11.2	%		246,564	11.2	%		240,073	10.9	%
Multi-family residential		229,609	9.5	%		236,000	10.0	%		220,305	9.5	%		211,219	9.6	%		208,222	9.5	%
Consumer		41,833	1.7	%		40,869	1.7	%		40,433	1.7	%		42,772	1.9	%		41,130	1.9	%
Agricultural		10,951	0.5	%		8,807	0.4	%		11,256	0.5	%		11,424	0.5	%		10,650	0.4	%
Other		53,376	2.2	%		52,382	2.2	%		40,344	1.7	%		29,684	1.3	%		38,237	1.7	%
Gross loans		2,410,460	100.0	%		2,361,076	100.0	%		2,317,789	100.0	%		2,204,523	100.0	%		2,197,438	100.0	%
Less deferred fees and unearned discount		(5,768)				(4,910)				(4,785)				(4,579)				(4,436)
Less allowance for loan losses		(25,746)				(25,349)				(24,778)				(23,757)				(25,187)
Less loans held for sale		(560)				(113)				(1,460)				(466)				(559)
Loans, net	$	2,378,386			$	2,330,704			$	2,286,766			$	2,175,721			$	2,167,256
Deposits:
Interest-bearing demand accounts	$	342,890	13.4	%	$	345,378	13.3	%	$	363,015	14.0	%	$	340,627	13.3	%	$	343,826	13.7	%
Money market accounts		650,747	25.4	%		717,548	27.6	%		702,299	27.0	%		726,903	28.5	%		698,546	27.7	%
Savings accounts		97,576	3.8	%		95,603	3.7	%		95,842	3.7	%		88,613	3.5	%		88,083	3.5	%
Certificates and other time deposits, $100,000 or greater		164,464	6.4	%		161,777	6.2	%		172,469	6.6	%		179,777	7.0	%		182,143	7.2	%
Certificates and other time deposits, less than $100,000		191,442	7.5	%		158,875	6.1	%		159,558	6.1	%		166,952	6.5	%		173,321	6.9	%
Total interest-bearing deposits		1,447,119	56.5	%		1,479,181	56.9	%		1,493,183	57.4	%		1,502,872	58.8	%		1,485,919	59.0	%
Noninterest-bearing deposits		1,114,155	43.5	%		1,120,521	43.1	%		1,109,789	42.6	%		1,051,755	41.2	%		1,030,865	41.0	%
Total deposits	$	2,561,274	100.0	%	$	2,599,702	100.0	%	$	2,602,972	100.0	%	$	2,554,627	100.0	%	$	2,516,784	100.0	%

11

CBTX, INC. AND SUBSIDIARY

Credit Quality (Unaudited)

(In thousands, except percentages)

	6/30/2018			3/31/2018			12/31/2017			9/30/2017			6/30/2017
Nonperforming assets (at period end):
Nonaccrual loans:
Commercial and industrial	$	1,734		$	2,533		$	3,280		$	2,444		$	2,348
Real estate:
Commercial real estate		2,092			2,217			3,216			5,038			4,964
Construction and development		225			233			252			265			362
1-4 family residential		738			765			898			844			578
Multi-family residential		—			—			—			1			3
Consumer		4			21			—			—			—
Agricultural		—			—			—			—			—
Nonaccrual loans		4,793			5,769			7,646			8,592			8,255
Accruing loans 90 or more days past due		—			—			—			—			—
Total nonperforming loans		4,793			5,769			7,646			8,592			8,255
Foreclosed assets, including other real estate:
Commercial real estate, construction and development, land and land development		137			295			298			729			1,018
Residential real estate		—			—			407			407			417
Total foreclosed assets		137			295			705			1,136			1,435
Total nonperforming assets	$	4,930		$	6,064		$	8,351		$	9,728		$	9,690
Allowance for Loan Losses (at period end):
Commercial and industrial	$	7,648		$	7,439		$	7,257		$	7,194		$	8,466
Real estate:
Commercial real estate		10,930			10,742			10,375			9,640			10,000
Construction and development		3,335			3,356			3,482			3,364			3,313
1-4 family residential		1,404			1,329			1,326			1,282			1,138
Multi-family residential		1,479			1,520			1,419			1,360			1,341
Consumer		479			517			566			626			599
Agricultural		66			53			68			69			64
Other		405			393			285			222			266
Total allowance for loan losses	$	25,746		$	25,349		$	24,778		$	23,757		$	25,187
Credit Quality Ratios (at period end):
Nonperforming assets to total assets		0.16	%		0.20	%		0.27	%		0.33	%		0.33	%
Nonperforming loans to total loans		0.20	%		0.24	%		0.33	%		0.39	%		0.38	%
Allowance for loan losses to nonperforming loans		537.16	%		439.40	%		324.06	%		276.50	%		305.11	%
Allowance for loan losses to total loans		1.07	%		1.08	%		1.07	%		1.08	%		1.15	%

12

CBTX, INC. AND SUBSIDIARY

Allowance for Loan Losses (Unaudited)

(In thousands, except percentages)

	For the Three Months Ended
	6/30/2018			3/31/2018			12/31/2017			9/30/2017			6/30/2017
Analysis of Allowance for Loan Losses
Allowance for loan losses at beginning of period	$	25,349		$	24,778		$	23,757		$	25,187		$	25,881
Provision (recapture) for loan losses		690			865			1,050			(1,654)			(694)
Net (charge-offs) recoveries
Commercial and industrial		(301)			(297)			52			205			66
Real estate:
Commercial real estate		5			3			(118)			2			2
Construction and development		—			—			—			—			—
1-4 family residential		—			(2)			(7)			2			8
Multi-family residential		—			—			—			—			—
Consumer		3			2			9			4			(90)
Agricultural		—			—			35			11			6
Other		—			—			—			—			8
Total net (charge-offs) recoveries		(293)			(294)			(29)			224			—
Allowance for loan losses at end of period	$	25,746		$	25,349		$	24,778		$	23,757		$	25,187
Net charge-offs (recoveries) to average loans		0.05	%		0.05	%		—	%		(0.04)	%		—	%

13

CBTX, INC. AND SUBSIDIARY

Non‑GAAP to GAAP Reconciliation (Unaudited)

(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 as in effect from time to time in the United States in our statements of income, balance sheets or statements of cash flows. Non‑GAAP financial measures do not include operating and other statistical measures or ratios or statistical measures 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.

We calculate (1) tangible equity as total shareholders’ equity, less goodwill and other intangible assets, net of accumulated amortization, and (2) 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 tables reconcile, 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 shareholders’ equity to total assets:

	6/30/2018			3/31/2018			12/31/2017			9/30/2017			6/30/2017
Tangible Equity
Total shareholders’ equity	$	461,195		$	451,571		$	446,214		$	381,121		$	371,964
Adjustments:
Goodwill		80,950			80,950			80,950			80,950			80,950
Other intangibles		6,276			6,521			6,770			7,031			7,298
Tangible equity	$	373,969		$	364,100		$	358,494		$	293,140		$	283,716
Tangible Assets
Total assets	$	3,100,760		$	3,074,790		$	3,081,083		$	2,989,838		$	2,940,877
Adjustments:
Goodwill		80,950			80,950			80,950			80,950			80,950
Other intangibles		6,276			6,521			6,770			7,031			7,298
Tangible assets	$	3,013,534		$	2,987,319		$	2,993,363		$	2,901,857		$	2,852,629
Common shares outstanding		24,859			24,833			24,833			22,063			22,063
Book value per share	$	18.55		$	18.18		$	17.97		$	17.27		$	16.86
Tangible book value per share	$	15.04		$	14.66		$	14.44		$	13.29		$	12.86
Total shareholders’ equity to total assets		14.87	%		14.69	%		14.48	%		12.75	%		12.65	%
Tangible equity to tangible assets		12.41	%		12.19	%		11.98	%		10.10	%		9.95	%

14

Investor Relations:

James L. Sturgeon

281.325.5013

investors@CBoTX.com

Media Contact:

Ashley Warren

713.210.7622

awarren@CBoTX.com

15