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2017BOARD OF DIRECTORSNacogdoches Commercial Bancshares, Inc.Thomas W. EllisonChairman of the BoardFarmersvilleBanking & FinanceDianne M. BakerNacogdochesBenjamin Dee WinstonLufkinBanking & FinanceLand, Cattle, &InvestmentsW. Steven MuckleroyAustinWilliam M. Elliott, Jr.NacogdochesConstructionWholesale ElectricalJames O. Standley, PhDNacogdochesStephen Greak, CPALufkinHigher EducationAccounting &Oil Field Services16%ONLINE BANKING27%Jefferson B. Davis, JDNacogdochesHospital AdministrationLawINCOMING DIRECTORST. Andrew EllisonParkerHigher EducationTechnologyCBTx expanded into thePalestine market with afull-service banking center.#BankingTexasStyleMOBILE APP USERSFor over a century, Commercial Bank hasbeen fortunate to have individuals willingto invest their money, time, and efforts asboard members to provide direction andoversight to our organization. Beginningin 1901, businessmen saw an opportunityto serve the Nacogdoches community byorganizing Commercial National Bank.While many things in the banking industryhave changed over the past 118 years, oneaspect remains the same – the leadershipfrom an engaged board ofdirectors has been,and continues tobe, a vision,directionandoversightof our directors,CommercialBankwould not havesurvived the stockmarketcrashes,depressions,oreconomic downturnsthat we have weathered. This year marksthe retirement of two directors who havebeen instrumental in our success, ThomasW. Ellison and Dr. James Standley.Mr. Ellison’s tenure as President andChairman of the Board resulted insignificant growth of the Company. Hiscommand of all things banking has beeninvaluable to our organization’s success.His passion for success of the bank isonly matched by his passion for successCBTx attended over 200 ribboncuttings. #CommunityFocusedBe intensely focused on customersatisfaction, personnel development,community service, and shareholder value.Dr. James Standleys’ career in highereducation spanned over 35 years. Heserved as Interim Dean of the College ofFine Arts, Dean of the College of Liberal Artsand College of Applied Arts and Sciences,and Dean of Graduate Studies. HisCurriculum Vitae is replete with significantaccomplishments in Higher Education.Although Dr. Standleyhadsignificantresponsibilitiesinhis profession, weare fortunate hewas willing to serveon our Board ofDirectorssince1996. Over that timeDr. Standley hasserved as chairmanandmemberon a number ofcommittees of theboard. His insightand commitment as a director hasserved our board and the Company well.The perspective these two brought intoplay as the bank faced critical decisionswas instrumental in our success andhelped form the strong foundation forour current and future growth. We aregrateful for the time and effort these twogentlemen spent leading our Company.Their knowledge and experience willbe missed. Through their efforts, theCompany is well positioned to compete,grow and prosper for years to come.A LEGACY OF LEADERSHIPBrought to you by Commercial Bank of Texas2017 ANNUAL REPORTcbtx.com108%EMPLOYEESNEW VISITORS103%USERSBe the premier community- focusedfinancial services organization rightproducts, right people, right reasons.of our officers and employees, not only inbanking but also in life.Nacogdoches Commercial Bancshares, Inc.206Todd A. Brown, PhDNacogdochesThe inaugural class of CBTxEmerging Leaders completedtheir 9-month program.#EmergingLeadersBILL PAY ENROLLMENT21%Bryant H. Krenek, Jr.Mt. EnterpriseThomas W. Ellison and James O. Standley, PhDThe CBTx family hit the historicmilestone of 200 employees,two of whom tied the knot inJanuary. #MrandMrsCBTxEducationRusty Rust, JDNacogdochesRETIRING DIRECTORS18BANKING CENTERSThe CBTx Allen Banking Centerrelocated to 1216 W. McDermottDrive to better serve ourcustomers. #OpenForBusiness11%SESSION TIME26%SMS BANKINGCUSTOMERS12%MOBILE RDCCUSTOMERS312,798ATM TRANSACTIONS34,197ATM DEPOSITS3,907ITM TRANSACTIONS All Rights Reserved. Commercial Bank of Texas, N.A. Palestine ribbon cutting photo courtesy of Jeffrey Todd Photography.Alba Allen Bedford Diboll Elkhart Emory Kennard Lewisville Lufkin Nacogdoches Palestine Roxton Wells

VISION FOR TOMORROWThis March, I conclude a forty-nine-year career asa community banker — over forty five of those asthe President and or Chairman of the organizationsI had the good fortune to lead, including twentyseven as Chairman of Nacogdoches CommercialBancshares, Inc. Few people have the opportunity andresponsibility of guiding a financial services company,and I shall be forever thankful for the encouragementand support I received from directors, shareholders,coworkers, customers, and community members.It’s been an exciting and often challenging twentyseven years. Beginning with the restructuring ofthe Company’s debt in 1990 and the subsequentacquisition of assets and deposits of Superior Savings,NCB’s operating subsidiary, Commercial Bank ofTexas, has evolved from a single unit bankinto a financial servicesorganizationservingcommunities in elevenTexas counties. Duringthat period, assets of CBTxincreased over 600%, themarket value of commonstock increased over 350%,employment opportunitiesincreased threefold, andcommon stock dividendsincreased each year for overtwo decades.Success of that magnitudeis not attributable to a singleindividual but is the result ofthe contributions of many. Recognition should begiven to directors who have served our Companywell, particularly all who put their personal assets atrisk to recapitalize the Company’s debt in 1990. Ouremployees are the face of the Bank to customers andthe community. They are the basis of the Company’ssuccess and reputation for community service. Ithas been an honor and pleasure to lead such anoutstanding team of community bankers.While it is important to recall and celebrate thelessons learned and principles developed duringCBTx’s 116 year history and even from my smallperiod of service, it is more important to concentrateon a vision and strategy for the future, and I want toshare a few thoughts about that topic.A significant number of CBTx employees haveparticipated in the Company’s tuition-assistanceprogram, which has resulted in a highly skilled workgroup. In excess of 65% of CBTx officers and 15%of nonexempt employees have baccalaureate orhigher degrees. Education, communication skills, andtechnology are of critical importance as the financialTO OUR SHAREHOLDERSservices industry transitions fromfocused to customer engagement.2017 ushered in high expectations for changesin the banking industry based on changes inWashington, D.C. leadership. Under the s in the financial services industry.While a reduction in the regulatory burden hasbeen slow to materialize, the President andCongress did enact significant changes in the taxlaws and the tax rates that apply to our Company.President Trump signed the Tax Cuts and Jobs Acton December 22, 2017. Due to accounting rulesthe impact of such changes was approximately 1.2 million in additional tax expense for 2017,which effectively reduced Company net incomefrom 6.2 million to 5 million for the year. Afterthis one-time tax expense, earnings per sharewere 5.29. Average common stockholder equityincreased 8.8% from the prior year to 64.3million and book value per share also increasedtransaction-Employee skills and revenue per employee will be moreimportant to long-term success than efficiency ratios.It is service delivery and speed that differentiatesbanks. Set and expect high ethical standards. Thecommon and primary goal of each employee is toidentify, attract and retain profitable customers.Effective risk management has a simple measurement:the elimination or avoidance of any permanent lossof capital. We are in the risk management business.Our shareholders put their capital at risk to make aprofit, but we are expected to take prudent risks. Thecommon characteristic of high-performance banks ishigh-quality assets.Continuing education fordirectors and a mandatorydirectorretirementageare critical. They improvedirector performance, forcedirectors to consider theirlegacy,andencouragemore involvement in policydevelopment, of goals, and directorrecruitment.Financial services is ahighly competitive workplace.We may choose not to be competitive, but we willhave to compete. Anticipate customer preferencefor convenience and value. Provide the services andproducts profitable customers desire.We should always remember the foundation of CBTxis that of a community bank. I have often quotedThomas W. Baker’s statement on the occasion of theBank’s 75th anniversary, “The Bank will prosper asthe Community prospers.” Our belief in that principalshapes our attitudes toward community service andby extension toward each other.I close with the belief that I have been a good stewardof the assets entrusted to me and with confidencein the future prosperity and service of our company.Patty and I are thankful for the friendship and kindnessextended to us by the community and everyone inour bank family during our time in Nacogdoches. Youwill be forever in our thoughts and prayers.Thomas W. EllisonChairman of the Board6.9% to 77.12. For the year, total assets saw asmall increase, net interest income and otherincome increased, while operating expensesalso increased. In short, our Company grew, butthe pace was hampered by provision for loanlosses and changes in the tax rate that adverselyimpacted our earnings.As we go into 2018 we anticipate a reduction inprovision expenses for loan losses, and a reductionin our tax rate will benefit Company earnings.The Board took action to pass along a portion ofthe anticipated tax savings to our employees byincreasing our starting wage to 12.00 per hour andincreasing all non-exempt employee wages by 25cents per hour. We also allocated additional fundsto train our employees and invest in technologyto enable the bank to operate more efficiently andmaintain the security and usefulness of our data.FINANCIAL INFORMATION AT A GLANCE As of December 31, 2017TOTAL ASSETS (Consolidated) 2016 2015100200300TOTAL CAPITAL400500600807069.6 66.1 62.6 20162017RETURN ON EQUITY12.0010.008.006.0012.1310.7972.15 201611.4810.698.367.71201520162017ROEROE (Ex Intangibles)801080 876 7570EARNINGS PER SHARE2017201764.20201520172016DIVIDEND PERCOMMON SHARE 60201577.12 704,9646,321700BOOK VALUEPER COMMON SHARE80Before theone-time taxadjustment of 1.2 million basedon changes in thecorporate tax rate. 2015571 0606,110 620166.63 6.88 20162015201772 2CBTx TOTAL LOANS (in millions)16 225114 38818 3639533 201620155.29 420152017234 207 Our dedication to the people and communities weserve is as important today as it was when the bankwas organized in 1901. Our employees’ involvementin their respective communities is impressive, butthat’s just who we are. We continue our belief theBank can only prosper as our communities prosperand we will focus our efforts accordingly.Raymond H. “Rusty” Rust IIIPresident and C.E.O.FOR TWELVE MONTHS 12/31/2017678672investment in the right people and technology willserve our Company well as we go forward.SUMMARY OF SELECTED FINANCIAL HIGHLIGHTSCOMPANY NET INCOME (in thousands)2017While good old-fashioned relationships will alwaysbe a mainstay of our success, technology continuesits climb into our everyday customer interactionsand back office operations. The CBTx website andsmart phone/tablet mobile applications are touchpoints that customers and prospective customersexpect and we deliver. Online loan applications,bill pay and financial budgeting are all availableto recruit and retain profitable customers. Inaddition, our network of Automatic Teller Machines(ATMs) and Interactive (video) Teller Machines(ITMs) provide quick, convenient banking to thecustomers and communities we serve. This yearwe installed our fourth ITM at our new AllenBanking Center. We also have ITM’s located atthe Main Bank in Nacogdoches, at SFASU and atour Palestine Banking Center. This technologyallows us to continue our level of service whilereducing associated expenses. We believe prudent107 10 35 336 84 COMMERCIAL MORTGAGE RETAIL AGRICULTURETo view the 2017 Independent Auditor’s Report and Consolidated Financial Statements, please go towww.cbtxonline.com/home/customerserv/about us or contact the Corporate Secretary at 936-715-4100. 12/31/201612/31/2015(Dollars in thousands, except per share data)Net interest income 22,93121,49318,643Provision for loan losses1,6091,624923Other operating income9,8339,8059,379Other operating expense 21,99520,41218,497Income from operations 9,1619,2638,602Federal income tax*4,1982,9422,492Netincome 4,9646,3216,110Per Common ShareNet income, after preferred dividends 5.296.886.63Book value 77.1272.1564.20Dividends declared 58,050857,695857,390At Dec 31Earning assets 641,673638,199545,303Loans, net of unearned discounts & overdrafts 388,161395,817331,580Investmentsecurities 211,586208,443179,253Average for PeriodAverage assets 665,902599,371550,318Average deposits quity 64,35459,13753,943Financial Ratios (Annualized)(%)(%)(%)Return on average total assets*0.751.051.11Return on average total tangible assets0.751.061.12Return on average common shareholders’ equity7.7110.6910.79Return on average common tangible shareholders’ equity8.3611.4812.13Tangible shareholders’ equity to total assets10.019.4010.47* A one-time charge to federal income tax expense in the amount of 1.2M was made at year-end. This adjustment was necessary to properlyaccount for the change in the corporate income tax rate signed into law on December 22, 2017. FASB required the write down of deferred tax assetsto be recognized in current earnings for the year 2017. This resulted in an increase in our effective tax rate for 2017 to 47.1% from 31.8% in 2016. Thiswas a one-time adjustment. In 2018, we will enjoy the benefit of a 21% corporate tax rate.

William Miller Elliott, Jr.Electrical Director Commercial Bank, Director President - Elliott Electric Supply, Inc. 0.01% 0% Elliott Electric Supply, Inc. - 82.53% Wholesale President - Elliott Real Estate Elliott Real Estate - 100% Vice President - Elliott Partners Elliott Partners - 0% NacSpace - President NacSpace - 100% Nacogdoches, TX