Spirit Of Texas Bancshares, Inc. Reports Third Quarter 2021 Financial Results

CONROE, Texas, Oct. 27, 2021 /PRNewswire/ -- Spirit of Texas Bancshares, Inc. (NASDAQ:STXB) ("Spirit," the "Company," "we," "our," or "us"), reported net income of $10.5 million in the third quarter of 2021, representing diluted earnings per share of $0.59, compared to net income of $7.1 million in the third quarter of 2020, representing diluted earnings per share of $0.41.  Financial results for the third quarter of 2021 were favorably impacted by $2.2 million net accretion of deferred origination fees on Paycheck Protection Program ("PPP") loans forgiven by the U.S. Small Business Administration ("SBA") and lower provision expense due to improved credit quality of the loan portfolio.

Third Quarter 2021 Financial and Operational Highlights

• Excluding the impact of PPP forgiveness, loans held for investment increased 11.8% annualized for the three months ended September 30, 2021.
• Net interest margin for the third quarter of 2021 as reported and on a tax equivalent basis⁽¹⁾ was 3.92% and 4.00%, respectively.
• Quarterly dividend increased to $0.12 per share from $0.09 per share.
• At September 30, 2021, return on average assets was 1.33% on an annualized basis.
• Book value per share increased to $22.49 and tangible book value per share⁽¹⁾ increased to $17.67 at September 30, 2021.
• Total stockholders' equity to total assets was 12.30% and tangible stockholders' equity to tangible assets⁽¹⁾ was 9.92% at September 30, 2021.

"I would like to commend the Spirit team on another outstanding quarter of impressive financial and operational results," Dean Bass, Spirit's Chairman and Chief Executive Officer, stated. "We are excited to see the return of robust loan growth driven by an increased demand for our portfolio of service offerings. The overall economy continues to recover, which presents interesting opportunities for organic growth for Spirit in the short term.  Our focus remains on generating non-interest income through our swap offerings while reducing non-interest expense as much as possible. We have completed the restructuring of our SBA department and anticipate earning premiums on loan sales beginning in the fourth quarter.  These non-interest income streams are expected to replace the revenue generated from PPP fee income earned during the current year.

"Third quarter asset quality continued to improve with further reductions in nonperforming loans and lower charge off activity. Finally, we are pleased that our capital levels have grown stronger quarter after quarter, providing Spirit with a clear runway for growth opportunities in the coming quarters," Mr. Bass concluded.

Loan Portfolio and Composition

During the third quarter of 2021, gross loans decreased to $2.25 billion as of September 30, 2021, a decrease of 0.85% from $2.27 billion as of June 30, 2021, and a decrease of 8.1% from $2.45 billion as of September 30, 2020.  PPP loan forgiveness which has caused the overall decrease in loans should have less of an impact in future quarters as we work through a smaller population of loans seeking forgiveness. Excluding the effect of PPP loan forgiveness, the loan portfolio as of September 30, 2021 increased by $62.2 million, or 11.8% annualized from June 30, 2021. We currently see strong loan demand, which has allowed the current loan pipeline to remain at historically elevated levels.  We anticipate robust loan growth in the fourth quarter and still expect to achieve our year over year growth target of 8% to 12%.

Asset Quality

Asset quality continues to strengthen with loans migrating into lower risk ratings during the third quarter of 2021 and with non-performing loans declining $1.3 million or 16.7% from the second quarter of 2021.  Economic activity continues to improve and despite supply and labor shortages the majority of our borrowers have fully recovered from the COVID-19 pandemic.  The provision for loan losses recorded for the third quarter of 2021 was $306 thousand, which served to decrease the allowance to $16.3 million, or 0.72% of the $2.25 billion in gross loans outstanding as of September 30, 2021. Provision expense for the third quarter of 2021 related primarily to the provisioning of new loans.

As of September 30, 2021, the nonperforming loans to loans held for investment ratio remains low at 0.28%, which decreased from 0.33% at June 30, 2021, and decreased from 0.36% as of September 30, 2020.  Annualized net charge-offs were 10 basis points for the third quarter of 2021 compared to 20 basis points for the second quarter of 2021.

Deposits and Borrowings

Deposits totaled $2.67 billion as of September 30, 2021, an increase of 3.8% from $2.57 billion as of June 30, 2021, and an increase of 16.8% from $2.29 billion as of September 30, 2020.  Noninterest-bearing demand deposits decreased $4.6 million, or 0.59%, from June 30, 2021, and increased $100.2 million, or 15.0%, from September 30, 2020. Noninterest-bearing demand deposits represented 28.7% of total deposits as of September 30, 2021, down from 30.0% of total deposits as of June 30, 2021, and down from 29.2% of total deposits as of September 30, 2020.  Interest-bearing demand deposits as of September 30, 2021 increased $35.3 million, or 6.7%, from June 30, 2021, primarily due to increases in balances associated with accounts opened in conjunction with the PPP and Main Street Lending Program authorized by the Coronavirus Aid, Relief, and Economic Security Act (the "CARES Act") and established by the Board of Governors of the Federal Reserve System (the "Federal Reserve") in response to the COVID-19 pandemic.  Savings and money market accounts as of September 30, 2021 increased $91.2 million, or 14.0%, from June 30, 2021, due to our success in retaining and growing client relationships from COVID-19 related assistance programs. These increases were partially offset by a decrease in time deposits of $23.4 million, or 3.8%. The average cost of deposits was 0.28% for the third quarter of 2021, representing a 4 basis point decrease from the second quarter of 2021 and a 29 basis point decrease from the third quarter of 2020.  The decrease in average cost of deposits was due primarily to the continued repricing of certificates of deposit and rate reductions in money market accounts.

Borrowings decreased by $39.8 million during the third quarter of 2021 to $79.3 million, due primarily to repayment of advances under the Paycheck Protection Program Liquidity Facility (the "PPPLF") with the Federal Reserve. At September 30, 2021, we did not have any remaining borrowings under the PPPLF. Borrowings totaled 2.5% of total assets at September 30, 2021, compared to 3.9% at June 30, 2021 and 9.4% at September 30, 2020.

Net Interest Margin and Net Interest Income

The net interest margin for the third quarter of 2021 was 3.92%, a decrease of 14 basis points from the second quarter of 2021 and an increase of 2 basis points from the third quarter of 2020.  The tax equivalent net interest margin⁽¹⁾ for the third quarter of 2021 was 4.00%, a decrease of 14 basis points from the second quarter of 2021 and an increase of 3 basis points from the third quarter of 2020.   Approximately $2.5 million of net deferred fees related to PPP loans remain unamortized at September 30, 2021. The yield on loans for the third quarter of 2021 was 5.09% compared to 5.30% at June 30, 2021. 

Net interest income totaled $28.1 million for the third quarter of 2021, a decrease of 5.4% from $29.7 million for the second quarter of 2021.  Interest income totaled $30.8 million for the third quarter of 2021, a decrease of 6.1% from $32.8 million for the second quarter of 2021.  Interest and fees on loans decreased $2.1 million, or 6.6%, compared to the second quarter of 2021, and decreased by $1.0 million, or 3.2%, from the third quarter of 2020.  Interest expense was $2.7 million for the third quarter of 2021, a decrease of 13.0% from $3.1 million for the second quarter of 2021 and a decrease of 37.8% from $4.3 million for the third quarter of 2020. 

Noninterest Income and Noninterest Expense

Noninterest income totaled $3.3 million for the third quarter of 2021, compared to $3.9 million for the second quarter of 2021.  This decrease was primarily driven by lower swap fees.  Swap fees fluctuate from quarter to quarter; however, given anticipated rate hikes in 2022 and 2023, we anticipate an increased demand for these products in coming quarters.

Noninterest expense totaled $18.0 million in the third quarter of 2021, an increase of 7.4 % from $16.8 million in the second quarter of 2021, which was primarily due to increases in salaries and benefits expense. 

The efficiency ratio was 57.5% in the third quarter of 2021, compared to 50.0% in the second quarter of 2021, and 62.2% in the third quarter of 2020.  The third quarter of 2021 efficiency ratio continues to be assisted by net deferred PPP loan origination fees immediately recognized at the time of forgiveness by the SBA.

Conference Call

Spirit of Texas Bancshares, Inc. has scheduled a conference call to discuss its third quarter 2021 financial results, which will be broadcast live over the Internet, on Thursday, October 28, 2021 at 11:00 a.m., Eastern Time / 10:00 a.m., Central Time.  To participate in the call, dial 201-389-0867 and ask for the "Spirit of Texas" call at least 10 minutes prior to the start time, or access it live over the Internet at https://ir.sotb.com/news-events/ir-calendar.  For those who cannot listen to the live call, a replay will be available through November 4, 2021, and may be accessed by dialing 201-612-7415 and using pass code 13724288#. Also, an archive of the webcast will be available shortly after the call at https://ir.sotb.com/news-events/ir-calendar for 90 days.

About Spirit of Texas Bancshares, Inc.

Spirit, through its wholly-owned subsidiary, Spirit of Texas Bank, SSB (the "Bank"), provides a wide range of relationship-driven commercial banking products and services tailored to meet the needs of businesses, professionals and individuals.  The Bank has 38 locations in the Houston, Dallas/Fort Worth, Bryan/College Station, Austin, San Antonio-New Braunfels, Corpus Christi, Austin and Tyler metropolitan areas, along with offices in North Central and South Texas.  Please visit https://www.sotb.com for more information.

Forward Looking Statements

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 that are subject to risks and uncertainties and are made pursuant to the safe harbor provisions of Section 27A of the Securities Act of 1933, as amended.  Any statements about our expectations, beliefs, plans, predictions, protections, forecasts, objectives, assumptions or future events or performance are not historical facts and may be forward-looking.  Forward-looking statements are typically, but not exclusively, identified by the use of forward-looking terminology such as "believes," "expects," "could," "may," "will," "should," "seeks," "likely," "intends" "plans," "pro forma," "projects," "estimates" or "anticipates" or the negative of these words and phrases or similar words or phrases that are predictions of or indicate future events or trends and that do not relate solely to historical matters.  Forward-looking statements involve numerous risks and uncertainties and you should not rely on them as predictions of future events.  Factors that could cause our actual results to differ materially from those described in the forward-looking statements include, among others: (i) changes in general business, industry or economic conditions, or competition; (ii) the impact of the ongoing COVID-19 pandemic on the Bank's business, including the impact of actions taken by governmental and regulatory authorities in response to such pandemic, such as the CARES Act and the programs established thereunder, and the Bank's participation in such programs, (iii) changes in any applicable law, rule, regulation, policy, guideline, or practice governing or affecting bank holding companies and their subsidiaries or with respect to tax or accounting principles or otherwise; (iv) adverse changes or conditions in capital and financial markets; (v) changes in interest rates; (vi) higher-than-expected costs or other difficulties related to integration of combined or merged businesses; (vii) the inability to realize expected cost savings or achieve other anticipated benefits in connection with business combinations and other acquisitions; (viii) changes in the quality or composition of our loan and investment portfolios; (ix) adequacy of loan loss reserves; (x) increased competition; (xi) loss of certain key officers; (xii) continued relationships with major customers; (xiii) deposit attrition; (xiv) rapidly changing technology; (xv) unanticipated regulatory or judicial proceedings and liabilities and other costs; (xvi) changes in the cost of funds, demand for loan products, or demand for financial services; (xvii) other economic, competitive, governmental, or technological factors affecting our operations, markets, products, services, and prices; and (xviii) our success at managing the foregoing items.  For a discussion of additional factors that could cause our actual results to differ materially from those described in the forward-looking statements, please see the risk factors discussed in our most recent Annual Report on Form 10-K for the year ended December 31, 2020, filed with the U.S. Securities and Exchange Commission (the "SEC") on March 5, 2021, and our other filings with the SEC.

While forward-looking statements reflect our good-faith beliefs, they are not guarantees of future performance.  All forward-looking statements are necessarily only estimates of future results.  Accordingly, actual results may differ materially from those contemplated, expressed in or implied by the particular forward-looking statement due to additional risks and uncertainties of which the Company is not currently aware or which it does not currently view as, but in the future may become, material to its business or operating results.  Due to these and other possible uncertainties and risks, we can give no assurance that the results contemplated in the forward-looking statements will be realized and, therefore, you are cautioned not to place undue reliance on such statements.  Further, any forward-looking statement speaks only as of the date on which it is made, and we undertake no obligation to update any forward-looking statement to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence of unanticipated events or circumstances, except as required by applicable law.  All forward-looking statements, express or implied, included in this press release are qualified in their entirety by this cautionary statement.

 

 

 

 

 

 

 

 

 

 

Dennard Lascar Investor Relations

Ken Dennard / Natalie Hairston

(713) 529-6600

[email protected]

 

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SOURCE Spirit of Texas Bancshares, Inc.