EX-99.1

EX-99.1 2 d13539dex991.htm EX-99.1 EX-99.1

Exhibit 99.1

LOGO

NEWS RELEASE

Contacts:

Dennard Lascar Investor Relations

Ken Dennard / Natalie Hairston

(713) 529-6600

STXB@dennardlascar.com

SPIRIT OF TEXAS BANCSHARES, INC. REPORTS STRONG

THIRD QUARTER 2020 FINANCIAL RESULTS

CONROE, TX – October 20, 2020 – Spirit of Texas Bancshares, Inc. (NASDAQ: STXB) (“Spirit”, the “Company”, “we”, “our”, or “us”), reported net income of $7.1 million in the third quarter of 2020, representing diluted earnings per share of $0.41, compared to net income of $5.3 million in the third quarter of 2019, representing diluted earnings per share of $0.34. Strong financial results for the third quarter of 2020 were assisted by $1.3 million net accretion of origination fees on Paycheck Protection Program (“PPP”) loans offset by increased provision expense for potential loan losses related to the COVID-19 pandemic.

Third Quarter 2020 Financial and Operational Highlights

•

Declared first quarterly cash dividend of $0.07 per share.

•

Successfully completed the core system conversion associated with the acquisition of Citizens State Bank.

•

Capital remained strong with a Tier 1 leverage ratio of 9.91% at Spirit of Texas Bank, SSB (the “Bank”) and 9.62% at the Company on a consolidated basis at September 30, 2020.

•

Net interest margin for the third quarter of 2020 as reported and on a tax equivalent basis⁽¹⁾ was 3.90% and 3.97%, respectively.

•

At September 30, 2020, return on average assets was 0.96% annualized.

•

Book value per share increased to $20.30 at September 30, 2020 and tangible book value per share⁽¹⁾ increased to $15.31 at the same date.

•

At September 30, 2020, total stockholders’ equity to total assets was 12.02% and tangible stockholders’ equity to tangible assets⁽¹⁾ was 9.34%.

Dean Bass, Spirit’s Chairman and Chief Executive Officer, stated, “We are extremely excited to have reached a historic milestone in the evolution of our Company. During the quarter we declared our first quarterly cash dividend of $0.07 per share. The decision was made given our strong and stable capital position and the strength and consistency of our core earnings. We believe we are providing a level of dividend that represents a solid dividend yield for our investors while still allowing us to pursue growth opportunities through strategic partnerships.

Although there is a great deal of uncertainty surrounding the economic impact of the COVID-19 pandemic, our Company posted a strong third quarter. Our team’s ability to perform at a high level, deliver outstanding service, and continue to execute on our strategic vision in a very difficult operating environment, is exceptional. I am confident that our company is well positioned to continue navigating this uncertain environment with our core earnings, solid capital position, and excellent liquidity. Our focus will continue to be on the needs of our clients and the safety and welfare of our employees,” Mr. Bass concluded.

Loan Portfolio and Composition

During the third quarter of 2020, gross loans grew to $2.45 billion, an increase of 1.0% from $2.43 billion as of June 30, 2020, and an increase of 64.9% from $1.49 billion as of September 30, 2019. Our loan pipeline continues to build back to pre-COVID-19 levels. We continue to see some loan growth, but we do not expect to see our pre-COVID-19 loan growth until uncertainty surrounding the effects of the global pandemic and the timeline of a vaccine lessens. However, we are committed to lending in these times and are in regular contact with prospective borrowers regarding future plans and funding needs.

Many of the industries in our loan portfolio that we have been monitoring have begun to show signs of improvement. Specifically, we expect restaurants, which comprise $33.7 million, or 1.4%, of our loan portfolio, to benefit from recently opened dining rooms and an easing of occupancy restrictions. Additionally, retail strip centers, which comprise $164.7 million, or 6.7%, of our loan portfolio, appear to be benefiting from increased retail sales and movements to support local small businesses. We will continue to monitor trends in these portfolio segments, but our primary short-term focus is on the hospitality segment, which is still under stress as business and leisure travel has yet to return to pre-COVID-19 levels. At September 30, 2020, our total exposure in the hospitality segment consisted of $97.6 million, or 4.0%, of our loan portfolio. Oil and gas prices appear to have stabilized, however, we continue to closely monitoring our exposure in this segment which at September 30, 2020 was $66.5 million, or 2.7%, of our loan portfolio.

Asset Quality

Asset quality continues to remain strong in the third quarter of 2020. We have enhanced monitoring processes throughout the Bank to quickly identify problem loans and/or negative industry trends in order to ensure timely downgrades, charge-offs, and qualitative factor adjustments. Based on the results of these enhanced processes, we are pleased that downgrades and increases in impaired loans appear to be due to borrower specific events and not systemic weakness. The provision for loan losses recorded for the third quarter of 2020 was $2.8 million, which served to increase the allowance to $12.2 million, or 0.50% of the $2.45 billion in gross loans outstanding as of September 30, 2020. The coverage ratio on the organic portfolio was 0.94% of the $1.29 billion in organic loans outstanding, excluding PPP loans which are fully guaranteed and not reserved for as of September 30, 2020. The majority of the provision expense for the third quarter of 2020 related to annual updates to the allowance model as opposed to a deterioration in credit quality or an increase in impaired loan balances. As an emerging growth company, we have opted to delay the adoption of CECL until 2023. Under our current incurred loss model, our reserves are based upon an estimate of loss events which have occurred as opposed to forecasting future loss events.

Nonperforming loans to loans held for investment ratio continues to remain low as of September 30, 2020 at 0.36% compared to 0.31% as of June 30, 2020, and 0.61% as of September 30, 2019. Annualized net charge-offs were 8 basis points for the third quarter of 2020, compared to 17 basis points for the third quarter of 2019.

As of September 30, 2020, the vast majority of our approved COVID-19 related loan relief requests, including periods of interest-only payments, full payment deferrals, and escrow deferrals associated with loans with an unpaid principal balance of approximately $520.6 million. Approximately 81% of the approved deferrals have exited the 90 day deferral period, and 98.5% of these borrowers have resumed regularly scheduled payments.

Deposits and Borrowings

Deposits totaled $2.29 billion as of September 30, 2020, a decrease of 5.3% from $2.41 billion as of June 30, 2020, and an increase of 44.3% from $1.59 billion as of September 30, 2019. Noninterest-bearing demand deposits decreased $78.4 million, or 10.5%, from June 30, 2020, and increased $301.0 million, or 82.2% from September 30, 2019. The decrease in noninterest-bearing deposits is partially due to deposit accounts related to PPP loan funding. PPP related deposit accounts totaled $39.4 million at September 30, 2020. Noninterest-bearing demand deposits represented 29.2% of total deposits as of September 30, 2020, down from 30.9% of total deposits as of June 30, 2020, and up from 23.1% of total deposits as of September 30, 2019. Due to seasonal fluctuations of public funds, we also saw a $31.0 million decrease in public funds during the quarter. The average cost of deposits was 0.57% for the third quarter of 2020, representing a 10 basis point decrease from the second quarter of 2020 and a 46 basis point decrease from the third quarter of 2019.

Borrowings increased by $84.7 million during the third quarter of 2020 to $277.7 million due primarily to increased borrowings of $78.9 million under the Paycheck Protection Program Lending Facility with the Board of Governors of the Federal Reserve System and to the issuance of $37.0 million of subordinated notes, offset by paydowns of $21.0 million of FHLB borrowings and the payoff of our third-party holding company line of credit of $10.0 million. Borrowings totaled 9.5% of total assets at September 30, 2020, compared to 6.5% at June 30, 2020 and 3.8% at September 30, 2019.

Net Interest Margin and Net Interest Income

The net interest margin for the third quarter of 2020 was 3.90%, a decrease of 5 basis points from the second quarter of 2020 and a decrease of 69 basis points from the third quarter of 2019. The tax equivalent net interest margin⁽¹⁾ for the third quarter of 2020 was 3.97%, a decrease of 3 basis points from the second quarter of 2020 and a decrease of 66 basis points from the third quarter of 2019. The decline from the second quarter of 2020 is primarily due to remaining rate resets on interest-earning assets as a result of decreases in interest rates set by the Federal Open Market Committee during the first quarter of 2020 and PPP loans which yield 1.00%. Excluding the impact of PPP loans, net interest margin and tax equivalent net interest margin for the third quarter of 2020 were 4.20% and 4.28%, respectively.

Net interest income totaled $26.2 million for the third quarter of 2020, an increase of 28.0% from $20.5 million for the third quarter of 2019. Interest income totaled $30.5 million for the third quarter of 2020, an increase of 21.9% from $25.0 million for the third quarter of 2019. Interest and fees on loans remained constant compared to the second quarter of 2020, and increased by $6.8 million, or 29.6%, from the third quarter of 2019. Interest expense was $4.3 million for the third quarter of 2020, a decrease of 5.2% from $4.5 million for the second quarter of 2020 and a decrease of 5.6% from $4.5 million for the third quarter of 2019.

Noninterest Income and Noninterest Expense

Noninterest income totaled $4.8 million for the third quarter of 2020, compared to $2.6 million for the second quarter of 2020. U.S. Small Business Administration loan servicing fees increased $363 thousand, quarter over quarter, as a result of a favorable servicing asset valuation. Additionally, during the third quarter of 2020, gain on sale of loans increased $286 thousand as small business lending demand has slowly begun to rebound. During the quarter, we took a gain on the sale of securities of $1.0 million in order to offset the prepayment penalties of $436 thousand associated with inefficient leverage held at the FHLB.

Noninterest expense totaled $19.3 million in the third quarter of 2020, an increase of 19.8% from $16.1 million in the second quarter of 2020, primarily due to an increase in salaries and benefits. Salaries and benefits increased $3.4 million in the third quarter of 2020 given that the prior quarter included deferred salaries related to PPP loan origination.

The efficiency ratio was 62.2% in the third quarter of 2020, compared to 56.3% in the second quarter of 2020, and 67.2% in the third quarter of 2019. The second quarter efficiency ratio was assisted by the deferral of $4.9 million of salary expense related to PPP loan originations.

Subsequent Events

On October 16, 2020, we closed the previously announced sale of our Clear Lake Branch to Moody National Bank (the “Clear Lake Branch Sale”), which resulted in the sale of deposits of approximately $24.2 million. Final settlement on the sale will occur during the fourth quarter of 2020 and is expected to result in a gain on sale of approximately $700 thousand and a reduction in rental and personnel expenses of $350 thousand. We continue to focus on expense reductions going into the fourth quarter through the optimization of our branch network. On October 20, 2020, the Bank entered into a Branch Purchase and Assumption Agreement with First State Bank, pursuant to which First State Bank will purchase certain assets and assume certain liabilities (the “Jacksboro Branch Sale” and together with the Clear Lake Branch Sale, the “Branch Sales”) associated with the Bank’s branch located at 1220 North Main Street, Jacksboro, Texas 76458 (the “Jacksboro Branch”).

(1)

Adjusted Basic and Diluted Earnings Per Share, Tax Equivalent Net Interest Margin, Tangible Book Value Per Share, and Tangible Stockholders’ Equity to Tangible Assets Ratio are all non-GAAP measures. Spirit believes that for Adjusted Basic and Diluted Earnings Per Share, the adjustments made to net income allow investors and analysts to better assess its basic and diluted earnings per common share by removing the volatility that is associated with merger-related expenses and gain on sale of investment securities that are unrelated to its core business. In Spirit’s judgment, regarding Tax Equivalent Net Interest Margin, the fully tax equivalent basis is the preferred industry measurement basis for net interest margin and that it enhances comparability of net interest income arising from taxable and tax-exempt sources. Regarding Tangible Book Value Per Share and Tangible Stockholders’ Equity To Tangible Assets, Spirit believes that that these measures are important to many investors in the marketplace who are interested in changes from period to period in book value per share exclusive of changes in intangible assets. Goodwill and other intangible assets have the effect of increasing total book value while not increasing its tangible book value. The non-GAAP financial measures that we discuss in this news release 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 manner in which we calculate the non-GAAP financial measures that it discusses in this earnings release may differ from that of other banking organizations reporting measures with similar names. You should understand how such other banking organizations calculate their financial measures similar or with names similar to the non-GAAP financial measures Spirit has discussed in this earnings release when comparing such non-GAAP financial measures. Please see a reconciliation to the nearest respective GAAP measures at the end of this earnings release.

Conference Call

Spirit of Texas Bancshares has scheduled a conference call to discuss its third quarter 2020 results, which will be broadcast live over the Internet, on Wednesday, October 21, 2020 at 10:00 a.m. Eastern Time / 9:00 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 October 28, 2020, and may be accessed by dialing 201-612-7415 and using pass code 13711787#. 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, provides a wide range of relationship-driven commercial banking products and services tailored to meet the needs of businesses, professionals and individuals. Spirit of Texas Bank has 38 locations in the Houston, Dallas/Fort Worth, Bryan/College Station, Austin, San Antonio, Corpus Christi 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 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 Coronavirus Aid, Relief, and Economic Security 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) the possibility that any of the anticipated benefits of the Clear Lake Branch Sale and the proposed Jacksboro Branch Sale will not be realized or will not be realized within the expected time period; (vii) the risk that converting the operations of the Jacksboro Branch to First State Bank will be materially delayed or will be more difficult than expected; (viii) the effect of the announcement of the Jacksboro Branch Sale on customer relationships and operating results; (ix) the possibility that the Branch Sales may be more expensive to complete than anticipated, including as a result of unexpected factors or events; (x) higher-than-expected costs or other difficulties related to integration of combined or merged businesses; (xi) the inability to realize expected cost savings or achieve other anticipated benefits in connection with business combinations and other acquisitions; (xii) changes in the quality or composition of our loan and investment portfolios; (xii) adequacy of loan loss reserves; (xiii) increased competition; (xiv) loss of certain key officers; (xv) continued relationships with major customers; (xvi) deposit attrition; (xvii) rapidly changing technology; (xviii) unanticipated regulatory or judicial proceedings and liabilities and other costs; (xix) changes in the cost of funds, demand for loan products, or demand for financial services; (xx) other economic, competitive, governmental, or technological factors affecting our operations, markets, products, services, and prices; and (xxi) 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, 2019, filed with the U.S. Securities and Exchange Commission (the “SEC”) on March 16, 2020, its Quarterly Reports on Form 10-Q and its 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 expressed in or contemplated by the particular forward-looking statement, 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.

SPIRIT OF TEXAS BANCSHARES, INC. AND SUBSIDIARY

Consolidated Statements of Income

(Unaudited)


			For the Three Months Ended
	September 30, 2020		June 30, 2020		March 31, 2020		December 31, 2019		September 30, 2019
			(Dollars in thousands, except per share data)
Interest income:
Interest and fees on loans	$	29,901	$	29,912	$	27,409	$	25,160	$	23,064
Interest and dividends on investment securities		465		457		504		997		1,143
Other interest income		115		185		900		918		794

Total interest income		30,481		30,554		28,813		27,075		25,001

Interest expense:
Interest on deposits		3,392		3,945		4,507		4,434		4,097
Interest on FHLB advances and other borrowings		875		558		508		416		425

Total interest expense		4,267		4,503		5,015		4,850		4,522

Net interest income		26,214		26,051		23,798		22,225		20,479
Provision for loan losses		2,831		2,838		1,171		775		900

Net interest income after provision for loan losses		23,383		23,213		22,627		21,450		19,579

Noninterest income:
Service charges and fees		1,525		1,270		1,311		1,146		866
SBA loan servicing fees, net		619		256		10		391		234
Mortgage referral fees		428		357		202		232		173
Gain on sales of loans, net		612		326		464		675		1,151
Gain (loss) on sales of investment securities		1,031		—		—		2,448		—
Other noninterest income		604		356		725		162		257

Total noninterest income		4,819		2,565		2,712		5,054		2,681

Noninterest expense:
Salaries and employee benefits		11,365		7,946		11,789		10,684		9,502
Occupancy and equipment expenses		2,222		2,761		2,315		2,222		1,710
Professional services		555		716		895		1,200		791
Data processing and network		1,002		849		743		936		884
Regulatory assessments and insurance		517		379		402		265		(256	)
Amortization of intangibles		919		919		946		1,006		1,015
Advertising		333		119		153		225		134
Marketing		18		38		160		131		136
Telephone expense		563		483		407		226		289
Conversion expense		279		69		1,477		180		314
Other operating expenses		1,520		1,825		1,673		1,584		1,037

Total noninterest expense		19,293		16,104		20,960		18,659		15,556

Income before income tax expense		8,909		9,674		4,379		7,845		6,704
Income tax expense		1,821		1,980		305		1,676		1,374

Net income	$	7,088	$	7,694	$	4,074	$	6,169	$	5,330

Earnings per common share:
Basic	$	0.41	$	0.44	$	0.22	$	0.35	$	0.35
Diluted		0.41		0.44		0.22	$	0.35	$	0.34

Weighted average common shares outstanding:
Basic		17,340,898		17,581,959		18,184,110		17,434,954		15,370,480
Diluted		17,383,427		17,612,919		18,441,977		17,830,538		15,771,249

SPIRIT OF TEXAS BANCSHARES, INC. AND SUBSIDIARY

Consolidated Balance Sheets

(Unaudited)


	As of
	September 30, 2020			June 30, 2020			March 31, 2020			December 31, 2019			September 30, 2019
	(Dollars in thousands)
Assets:
Cash and due from banks	$	29,345		$	35,248		$	33,946		$	32,490		$	28,822
Interest-bearing deposits in other banks		121,739			200,096			193,707			293,467			122,721

Total cash and cash equivalents		151,084			235,344			227,653			325,957			151,543

Time deposits in other banks		—			—			245			490			1,225
Investment securities:
Available for sale securities, at fair value		119,814			90,878			94,963			96,937			166,669

Total investment securities		119,814			90,878			94,963			96,937			166,669

Loans held for sale		4,287			7,718			7,765			3,989			2,784
Loans:
Loans held for investment		2,452,353			2,427,292			2,013,367			1,767,182			1,487,602
Less: allowance for loan and lease losses		(12,207	)		(9,905	)		(7,620	)		(6,737	)		(6,565	)

Loans, net		2,440,146			2,417,387			2,005,747			1,760,445			1,481,037

Premises and equipment, net		82,734			79,156			78,594			75,150			65,144
Accrued interest receivable		11,612			12,188			7,314			6,507			6,319
Other real estate owned and repossessed assets		302			3,743			3,731			3,653			1,042
Goodwill		77,681			77,966			79,009			68,503			43,086
Core deposit intangible		8,698			9,617			10,536			11,472			11,628
SBA servicing asset		3,051			3,115			3,055			3,355			3,548
Deferred tax asset, net		494			—			—			—			—
Bank-owned life insurance		15,878			15,787			15,699			15,610			15,521
Federal Home Loan Bank and other bank stock, at cost		5,709			5,696			5,660			8,310			6,233
Other assets		3,580			4,423			4,526			4,244			4,005

Total assets	$	2,925,070		$	2,963,018		$	2,544,497		$	2,384,622		$	1,959,784

Liabilities and Stockholders’ Equity
Liabilities:
Deposits:
Transaction accounts:
Noninterest-bearing	$	667,199		$	745,646		$	487,060		$	444,822		$	366,209
Interest-bearing		940,930			946,969			878,279			803,557			593,064

Total transaction accounts		1,608,129			1,692,615			1,365,339			1,248,379			959,273
Time deposits		679,387			722,376			711,968			679,747			625,940

Total deposits		2,287,516			2,414,991			2,077,307			1,928,126			1,585,213
Accrued interest payable		1,321			1,025			1,218			1,219			1,002
Short-term borrowings		10,000			104,830			10,000			—			—
Long-term borrowings		267,746			88,246			103,276			105,140			74,165
Deferred tax liability, net		—			405			1,706			672			215
Other liabilities		6,966			5,943			5,173			3,760			2,451

Total liabilities		2,573,549			2,615,440			2,198,680			2,038,917			1,663,046

Stockholders’ Equity:
Common stock		298,509			298,176			297,966			297,188			251,875
Retained earnings		65,783			59,907			52,213			48,139			41,970
Accumulated other comprehensive income (loss)		(237	)		1,272			732			667			3,091
Treasury stock		(12,534	)		(11,777	)		(5,094	)		(289	)		(198	)

Total stockholders’ equity		351,521			347,578			345,817			345,705			296,738

Total liabilities and stockholders’ equity	$	2,925,070		$	2,963,018		$	2,544,497		$	2,384,622		$	1,959,784

SPIRIT OF TEXAS BANCSHARES, INC. AND SUBSIDIARY

Loan Composition

(Unaudited)


	As of
	September 30, 2020		June 30, 2020		March 31, 2020		December 31, 2019		September 30, 2019
	(Dollars in thousands)
Loans:
Commercial and industrial loans (1)(2)	$	690,009	$	724,913	$	320,418	$	282,949	$	248,745
Real estate:
1-4 single family residential loans		373,220		372,445		382,900		375,743		321,044
Construction, land and development loans		402,476		390,068		405,661		259,384		233,830
Commercial real estate loans (including multifamily)		906,134		835,614		821,952		753,812		597,415
Consumer loans and leases		12,977		19,159		22,398		22,769		17,663
Municipal and other loans		67,537		85,092		60,038		72,525		68,905

Total loans held in portfolio	$	2,452,353	$	2,427,292	$	2,013,367	$	1,767,182	$	1,487,602

(1)	Balance includes $72.7 million, $75.1 million, $75.3 million, $74.2 million, and $78.7 million of the unguaranteed portion of SBA loans as of September 30, 2020, June 30, 2020, March 31, 2020, December 31, 2019, and September 30, 2019, respectively.

(2)	Balance includes $421.1 million of PPP loans as of September 30, 2020.

SPIRIT OF TEXAS BANCSHARES, INC. AND SUBSIDIARY

Deposit Composition

(Unaudited)


			As of
	September 30, 2020		June 30, 2020		March 31, 2020		December 31, 2019		September 30, 2019
					(Dollars in thousands)
Deposits:
Noninterest-bearing demand deposits	$	667,199	$	745,646	$	487,060	$	444,822	$	366,209
Interest-bearing demand deposits		391,396		360,282		334,302		370,467		303,037
Interest-bearing NOW accounts		8,655		31,132		28,376		28,204		8,626
Savings and money market accounts		540,879		555,555		515,601		404,886		281,401
Time deposits		679,387		722,376		711,968		679,747		625,940

Total deposits	$	2,287,516	$	2,414,991	$	2,077,307	$	1,928,126	$	1,585,213

SPIRIT OF TEXAS BANCSHARES, INC. AND SUBSIDIARY

Average Balances and Yields

(Unaudited)


	Three Months Ended September 30,
	2020							2019
	Average Balance (1)		Interest/ Expense		Annualized Yield/Rate			Average Balance (1)		Interest/ Expense		Annualized Yield/Rate
	(Dollars in thousands)
Interest-earning assets:
Interest-earning deposits in other banks	$	134,573	$	101		0.30	%	$	135,460	$	750		2.20	%
Loans, including loans held for sale (2)		2,436,667		29,901		4.87	%		1,458,603		23,064		6.27	%
Investment securities and other		93,115		479		2.04	%		175,369		1,187		2.69	%

Total interest-earning assets		2,664,355		30,481		4.54	%		1,769,432		25,001		5.61	%

Noninterest-earning assets		265,462							150,139

Total assets	$	2,929,817						$	1,919,571

Interest-bearing liabilities:
Interest-bearing demand deposits	$	375,421	$	176		0.19	%	$	285,306	$	349		0.49	%
Interest-bearing NOW accounts		14,644		7		0.19	%		7,846		3		0.15	%
Savings and money market accounts		541,681		621		0.45	%		273,662		579		0.84	%
Time deposits		713,618		2,588		1.44	%		630,969		3,166		1.99	%
FHLB advances and other borrowings		211,214		875		1.64	%		65,358		425		2.58	%

Total interest-bearing liabilities		1,856,578		4,267		0.91	%		1,263,141		4,522		1.42	%

Noninterest-bearing liabilities and shareholders’ equity:
Noninterest-bearing demand deposits		715,783							380,997
Other liabilities		8,451							4,232
Stockholders’ equity		349,005							271,201

Total liabilities and stockholders’ equity	$	2,929,817						$	1,919,571

Net interest rate spread						3.63	%						4.19	%

Net interest income and margin			$	26,214		3.90	%			$	20,479		4.59	%

Net interest income and margin (tax equivalent)(3)			$	26,660		3.97	%			$	20,632		4.63	%

(1)	Average balances presented are derived from daily average balances.

(2)	Includes loans on nonaccrual status.

(3)	In order to make pretax income and resultant yields on tax-exempt loans comparable to those on taxable loans, a tax-equivalent adjustment has been computed using a federal tax rate of 21% for the three months ended September 30, 2020 and 2019, respectively.

SPIRIT OF TEXAS BANCSHARES, INC. AND SUBSIDIARY

Average Balances and Yields

(Unaudited)


	Three Months Ended
	September 30, 2020							June 30, 2020
	Average Balance (1)		Interest/ Expense		Annualized Yield/Rate			Average Balance (1)		Interest/ Expense		Annualized Yield/Rate
	(Dollars in thousands)
Interest-earning assets:
Interest-earning deposits in other banks		134,573	$	101		0.30	%	$	220,940	$	148		0.27	%
Loans, including loans held for sale (2)		2,436,667		29,901		4.87	%		2,332,707		29,911		5.14	%
Investment securities and other		93,115		479		2.04	%		93,256		495		2.13	%

Total interest-earning assets		2,664,355		30,481		4.54	%		2,646,903		30,554		4.63	%

Noninterest-earning assets		265,462							228,203

Total assets	$	2,929,817						$	2,875,106

Interest-bearing liabilities:
Interest-bearing demand deposits	$	375,421	$	176		0.19	%	$	346,220	$	175		0.20	%
Interest-bearing NOW accounts		14,644		7		0.19	%		29,087		18		0.25	%
Savings and money market accounts		541,681		621		0.45	%		539,533		825		0.61	%
Time deposits		713,618		2,588		1.44	%		719,498		2,927		1.63	%
FHLB advances and other borrowings		211,214		875		1.64	%		150,388		558		1.49	%

Total interest-bearing liabilities		1,856,578		4,267		0.91	%		1,784,726		4,503		1.01	%

Noninterest-bearing liabilities and shareholders’ equity:
Noninterest-bearing demand deposits		715,783							742,542
Other liabilities		8,451							2,236
Stockholders’ equity		349,005							345,602

Total liabilities and stockholders’ equity	$	2,929,817						$	2,875,106

Net interest rate spread						3.63	%						3.62	%

Net interest income and margin			$	26,214		3.90	%			$	26,051		3.95	%

Net interest income and margin (tax equivalent)(3)			$	26,660		3.97	%			$	26,424		4.00	%

(1)	Average balances presented are derived from daily average balances.

(2)	Includes loans on nonaccrual status.

(3)	In order to make pretax income and resultant yields on tax-exempt loans comparable to those on taxable loans, a tax-equivalent adjustment has been computed using a federal tax rate of 21% for the three months ended September 30, 2020 and June 30, 2020, respectively.

SPIRIT OF TEXAS BANCSHARES, INC. AND SUBSIDIARY

Reconciliation of Non-GAAP Financial Measures - Adjusted Net Income and Adjusted Basic and Diluted Earnings Per Share

(Unaudited)


	As of or for the Three Months Ended
	September 30, 2020			June 30, 2020			March 31, 2020			December 31, 2019			September 30, 2019
	(Dollars in thousands, except per share data)
Basic and diluted earnings per share - GAAP basis:
Net income available to common stockholders	$	7,088		$	7,694		$	4,074		$	6,169		$	5,330

Weighted average number of common shares - basic		17,340,898			17,581,959			18,184,110			17,434,954			15,370,480
Weighted average number of common shares - diluted		17,383,427			17,612,919			18,441,977			17,830,538			15,771,249
Basic earnings per common share	$	0.41		$	0.44		$	0.22		$	0.35		$	0.35

Diluted earnings per common share	$	0.41		$	0.44		$	0.22		$	0.35		$	0.34

Basic and diluted earnings per share - Non-GAAP basis:
Net income	$	7,088		$	7,694		$	4,074		$	6,169		$	5,330
Pre-tax adjustments:
Noninterest income
Gain on sale of investment securities		(1,031	)		—			—			(2,448	)		—
Noninterest expense
Merger related expenses		342			69			1,614			821			1,094
Taxes:
NOL Carryback					—			(575	)
Tax effect of adjustments		145			(14	)		(331	)		467			(193	)

Adjusted net income	$	6,544		$	7,749		$	4,782		$	5,009		$	6,231

Weighted average number of common shares - basic		17,340,898			17,581,959			18,184,110			17,434,954			15,370,480
Weighted average number of common shares - diluted		17,383,427			17,612,919			18,441,977			17,830,538			15,771,249
Basic earnings per common share - Non-GAAP basis	$	0.38		$	0.44		$	0.26		$	0.29		$	0.41

Diluted earnings per common share - Non-GAAP basis	$	0.38		$	0.44		$	0.26		$	0.28		$	0.40

SPIRIT OF TEXAS BANCSHARES, INC. AND SUBSIDIARY

Reconciliation of Non-GAAP Financial Measures - Net Interest Margin on a Fully Taxable Equivalent Basis

(Unaudited)


	As of or for the Three Months Ended
	September 30, 2020			June 30, 2020			March 31, 2020			December 31, 2019			September 30, 2019
	(Dollars in thousands, except per share data)
Net interest margin - GAAP basis:
Net interest income	$	26,214		$	26,051		$	23,798		$	22,225		$	20,479
Average interst-earning assets		2,664,355			2,646,903			2,179,501			2,003,868			1,769,432
Net interest margin		3.90	%		3.95	%		4.38	%		4.40	%		4.59	%
Net interest margin - Non-GAAP basis:
Net interest income	$	26,214		$	26,051		$	23,798		$	22,225		$	20,479
Plus:
Impact of fully taxable equivalent adjustment		446			373			92			127			153

Net interest income on a fully taxable equivalent basis	$	26,660		$	26,424		$	23,890		$	22,352		$	20,632

Average interst-earning assets		2,664,355			2,646,903			2,179,501			2,003,868			1,769,432
Net interest margin on a fully taxable equivalent basis - Non-GAAP basis		3.97	%		4.00	%		4.40	%		4.43	%		4.63	%

SPIRIT OF TEXAS BANCSHARES, INC. AND SUBSIDIARY

Reconciliation of Non-GAAP Financial Measures - Tangible Book Value Per Share

(Unaudited)


	As of
	September 30, 2020		June 30, 2020		March 31, 2020		December 31, 2019		September 30, 2019
	(Dollars in thousands, except per share data)
Total stockholders’ equity	$	351,521	$	347,578	$	345,817	$	345,705	$	296,738
Less:
Goodwill and other intangible assets		86,379		87,583		89,545		79,975		54,714

Tangible stockholders’ equity	$	265,142	$	259,995	$	256,272	$	265,730	$	242,024

Shares outstanding		17,316,313		17,368,573		17,969,012		18,258,222		16,121,479
Book value per share	$	20.30	$	20.01	$	19.25	$	18.93	$	18.41
Less:
Goodwill and other intangible assets per share	$	4.99	$	5.04	$	4.99		4.38		3.40

Tangible book value per share	$	15.31	$	14.97	$	14.26	$	14.55	$	15.01

SPIRIT OF TEXAS BANCSHARES, INC. AND SUBSIDIARY

Reconciliation of Non-GAAP Financial Measures - Tangible Equity to Tangible Assets

(Unaudited)


	As of
	September 30, 2020			June 30, 2020			March 31, 2020			December 31, 2019			September 30, 2019
	(Dollars in thousands)
Total stockholders’ equity to total assets - GAAP basis:
Total stockholders’ equity (numerator)	$	351,521		$	347,578		$	345,817		$	345,705		$	296,738
Total assets (denominator)		2,925,070			2,963,018			2,544,497			2,384,622			1,959,784
Total stockholders’ equity to total assets		12.02	%		11.73	%		13.59	%		14.50	%		15.14	%
Tangible equity to tangible assets - Non-GAAP basis:
Tangible equity:
Total stockholders’ equity	$	351,521		$	347,578		$	345,817		$	345,705		$	296,738
Less:
Goodwill and other intangible assets		86,379			87,583			89,545			79,975			54,714

Total tangible common equity (numerator)	$	265,142		$	259,995		$	256,272		$	265,730		$	242,024

Tangible assets:
Total assets		2,925,070			2,963,018			2,544,497			2,384,622			1,959,784
Less:
Goodwill and other intangible assets		86,379			87,583			89,545			79,975			54,714

Total tangible assets (denominator)	$	2,838,691		$	2,875,435		$	2,454,952		$	2,304,647		$	1,905,070

Tangible equity to tangible assets		9.34	%		9.04	%		10.44	%		11.53	%		12.70	%