Allegiance Bancshares Reports Fourth Quarter and Year-End 2016 Results

• Fourth quarter 2016 diluted earnings per common share of $0.44 compared to $0.33 for the fourth quarter 2015 and $0.42 for the third quarter 2016
  
• Full year 2016 diluted earnings per common share of $1.75 compared to $1.43 for the year ended 2015
  
• Core loans for the fourth quarter 2016 increased 14.5% year over year and 4.0% compared to the third quarter 2016
  
• Continued shareholder value creation: tangible book value per common share grew 9.3% for the year ended 2016
  
• Strong asset quality as evidenced by annualized net charge-offs of 0.04% for the fourth quarter and year ended 2016
  

HOUSTON, Jan. 24, 2017 (GLOBE NEWSWIRE) -- Allegiance Bancshares, Inc. ABTX ("Allegiance"), the holding company of Allegiance Bank (the "Bank"), reported net income attributable to common stockholders of $5.8 million in the fourth quarter 2016, a 37.0% increase over the same period in 2015, and a 5.5% increase compared to the third quarter 2016. Net income per diluted common share increased 33.3% to $0.44 in the fourth quarter 2016 compared to $0.33 for the same period in 2015 and increased 4.8% compared to $0.42 for the third quarter 2016. Net income attributable to common shareholders for the year ended December 31, 2016 increased $7.6 million to $22.9 million, or $1.75 per diluted common share, compared to net income attributable to common shareholders of $15.2 million, or $1.43 per diluted common share, for the year ended December 31, 2015.  Excluding the gain on the sale of two Central Texas branch locations during the first quarter 2016, net income attributable to common shareholders would have been $21.5 million and net income per diluted common share would have been $1.65 for the year ended December 31, 2016.

"We are pleased with our overall financial performance in 2016, and the fourth quarter represented another great quarter for Allegiance," said George Martinez, Allegiance's Chairman and Chief Executive Officer.  "In our first full year of being a public company, we achieved a number of successes as we continued to deliver strong organic loan growth and record earnings. We owe our achievements to the exceptional efforts of our hard working and dedicated bankers along with the support we received from our loyal shareholders and customers.  Allegiance enters the year 2017 with a strong balance sheet, a stable and diversified portfolio and a continued focus on superior asset quality," continued Martinez.

"We are focused on the execution of our business plan and positioning ourselves for significant growth in the future.  Over the past year, we built upon our talented lending team by hiring 12 new lenders and further enhanced our infrastructure.  We are strengthening our internal  processes and systems which will provide our platform the requisite technology and capacity we will need to support our ambitious growth plans.  We believe these efforts position us well for continued growth and shareholder value creation in 2017 and beyond," concluded Martinez.

Fourth Quarter 2016 Results

Fourth quarter 2016 annualized returns on average assets, average common equity and average tangible common equity were 0.93%, 8.25% and 9.79%, respectively, compared to 0.81%, 6.71% and 8.19%, respectively, for the fourth quarter 2015.  The initial public offering of 2.9 million shares during the fourth quarter of 2015 generated net proceeds of $57.2 million.  Annualized returns on average assets, average common equity and average tangible common equity for the third quarter 2016 were 0.90%, 7.77% and 9.21%, respectively.

Net interest income before provision for loan losses in the fourth quarter 2016 increased $2.2 million, or 10.2%, to $23.4 million from $21.3 million for the fourth quarter 2015 primarily due to organic loan growth and an increase in our securities portfolio. Net interest income before provision for loan losses in the fourth quarter 2016 increased slightly compared to the third quarter 2016. The net interest margin on a tax equivalent basis decreased 28 basis points to 4.32% for the fourth quarter 2016 from 4.60% for the fourth quarter 2015, primarily due to a higher level of securities as a percentage of our interest-earning assets.  The net interest margin on a tax equivalent basis for the fourth quarter 2016 decreased 7 basis points from 4.39% for the third quarter 2016. Excluding the impact of acquisition accounting adjustments, the net interest margin in the fourth quarter 2016 would have been 4.27%, compared to 4.47% and 4.33% in the fourth quarter 2015 and third quarter 2016, respectively.

Noninterest income in the fourth quarter 2016 was $1.5 million, an increase of $500 thousand, or 51.1%, compared to $978 thousand in the fourth quarter 2015, and an increase of $204 thousand, or 16.0%, compared to $1.3 million in the third quarter 2016.

Noninterest expense in the fourth quarter 2016 increased $2.3 million, or 16.5%, to $16.2 million from $13.9 million in the fourth quarter 2015, and increased $1.3 million, or 8.7%, from $14.9 million in the third quarter 2016.  The increase in noninterest expense during the fourth quarter 2016 was primarily due to increases in salaries and benefits and professional fees related to supporting growth initiatives.  In the fourth quarter 2016, Allegiance's efficiency ratio increased to 65.09% from 62.40% in the fourth quarter 2015 and 60.34% in the third quarter 2016.

Year Ended December 31, 2016 Results

For the year ended December 31, 2016, annualized returns on average assets, average common equity and average tangible common equity were 0.98%, 8.36% and 9.96%, respectively, compared to 0.81%, 7.43% and 9.52%, respectively, for the year ended December 31, 2015.  Excluding the gain on the sale of two Central Texas branch locations during the first quarter 2016, the annualized returns on average assets, average common equity and average tangible common equity for the year ended December 31, 2016 would have been 0.92%, 7.88% and 9.38%, respectively.

Net interest income before provision for loan losses for the year ended December 31, 2016 increased $9.7 million, or 12.1%, to $89.9 million from $80.2 million for the year ended December 31, 2015 primarily due to organic growth within the loan portfolio and an increase in our securities portfolio. The net interest margin on a tax equivalent basis decreased 31 basis points to 4.37% for the year ended December 31, 2016 from 4.68% for the year ended December 31, 2015.  Excluding the impact of acquisition accounting adjustments, the net interest margin for the year ended December 31, 2016 would have been 4.30%, compared to 4.44% for the year ended December 31, 2015.

Noninterest income for the year ended December 31, 2016 was $7.3 million, an increase of $3.3 million, or 82.1%, when compared to $4.0 million for the year ended December 31, 2015. Noninterest income for the year ended 2016 included the gain on the sale of two Central Texas branch locations in the first quarter 2016.

Noninterest expense for the year ended December 31, 2016 increased $4.5 million, or 8.1%, to $59.3 million from $54.8 million for the year ended December 31, 2015.  Allegiance's efficiency ratio for the year ended December 31, 2016 decreased to 62.34% from 65.27% for the year ended December 31, 2015.

Financial Condition

Total loans at December 31, 2016 increased $210.6 million, or 12.5%, to $1.89 billion compared to $1.68 billion at December 31, 2015 and increased $60.9 million, or 3.3%, compared to $1.83 billion at September 30, 2016. These increases were due to strong organic loan growth within the Bank's loan portfolio. Core loans as of December 31, 2016, excluding the mortgage warehouse portfolio and loans held for sale, increased $230.5 million, or 14.5%, to $1.82 billion from $1.59 billion at December 31, 2015 and increased $69.9 million, or 4.0%, from $1.75 billion at September 30, 2016.

Deposits at December 31, 2016 increased $111.1 million, or 6.3%, to $1.87 billion compared to $1.76 billion at December 31, 2015 and decreased $30.7 million, or 1.6%, compared to $1.90 billion at September 30, 2016.

Asset Quality

Nonperforming assets totaled $18.5 million, or 0.75% of total assets, at December 31, 2016, compared to $5.3 million, or 0.25% of total assets, at December 31, 2015, and $17.1 million, or 0.69% of total assets, at September 30, 2016. The allowance for loan losses was 0.95% of total loans at December 31, 2016, 0.78% of total loans at December 31, 2015, and 0.94% of total loans at September 30, 2016.

The provision for loan losses in the fourth quarter 2016 was $900 thousand, or 0.19% (annualized) of average loans, compared to $2.2 million, or 0.53% (annualized) of average loans, in the fourth quarter 2015, and $2.2 million, or 0.49% (annualized) of average loans, in the third quarter 2016.  The provision for loan losses for the year ended December 31, 2016 was $5.5 million, or 0.31% of average loans, compared to $5.8 million, or 0.38% of average loans for the year ended December 31, 2015. Fourth quarter 2016 net charge-offs were $174 thousand, or 0.04% (annualized) of average loans, compared to net charge-offs of $51 thousand, or 0.01% (annualized) of average loans, in the fourth quarter 2015, and net recoveries of $54 thousand, in the third quarter 2016.  Net charge-offs for the year ended December 31, 2016 were $656 thousand, or 0.04% of average loans, compared to $940 thousand, or 0.06% of average loans for the year ended December 31, 2015.

GAAP Reconciliation of Non-GAAP Financial Measures

Allegiance's management uses certain non-GAAP financial measures to evaluate its performance. Specifically, Allegiance reviews tangible book value per common share, return on average tangible common equity and the ratio of tangible common equity to tangible assets. Please refer to the GAAP Reconciliation and Management's Explanation of non-GAAP Financial Measures on page 10 of this Earnings Release for a reconciliation of these non-GAAP financial measures.

Conference Call

As previously announced, Allegiance's management team will host a conference call on Tuesday, January 24, 2017 at 9:00 a.m. Central Time (10:00 a.m. Eastern Time) to discuss its fourth quarter and full year 2016 results. Individuals and investment professionals may participate in the call by dialing (877) 279-2520. The conference ID number is 50658288.  Alternatively, a simultaneous webcast may be accessed via the Investor Relations section of Allegiance's website at www.allegiancebank.com, under Upcoming Events.

Allegiance Bancshares, Inc.

Allegiance Bancshares, Inc. is a $2.45 billion asset Houston, Texas-based bank holding company. Through its wholly owned subsidiary, Allegiance Bank, Allegiance provides a diversified range of commercial banking services primarily to Houston metropolitan area-based small to medium-sized businesses and individual customers. Allegiance's unique super-community banking strategy was designed to foster strong customer relationships while benefitting from a platform and scale that is competitive with larger local and regional banks.  Allegiance Bank operates 16 full-service banking locations in the Houston metropolitan area. Visit www.allegiancebank.com for more information.

"Safe Harbor" Statement under the Private Securities Litigation Reform Act of 1995

This release may contain forward-looking statements within the meaning of the securities laws that are based on various facts and derived utilizing important assumptions, present expectations, estimates and projections about Allegiance and its subsidiaries. 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 words. Forward-looking statements include information concerning Allegiance'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. Such forward-looking statements are not guarantees of future performance and are subject to risks and uncertainties, many of which are outside of Allegiance's control, which may cause actual results to differ materially from those expressed or implied by the forward-looking statements. These risks and uncertainties include but are not limited to whether Allegiance can: continue to develop and maintain new and existing customer and community relationships; successfully implement its growth strategy, including identifying suitable acquisition targets and integrating the businesses of acquired companies and banks; continue to sustain its current internal growth rate; provide quality and competitive products and services that appeal to its customers; continue to have access to debt and equity capital markets; and achieve its performance objectives. These and various other risk factors are discussed in Allegiance's Annual Report on Form 10-K for the fiscal year ended December 31, 2015 and in other reports and statements Allegiance has filed with the Securities and Exchange Commission. Copies of such filings are available for download free of charge from the Investor Relations section of Allegiance's website at www.allegiancebank.com, under Financial Information, SEC Filings.  Any forward-looking statement made by Allegiance in this release speaks only as of the date on which it is made. Factors or events that could cause Allegiance's actual results to differ may emerge from time to time, and it is not possible for Allegiance to predict all of them. Allegiance undertakes no obligation to publicly update any forward-looking statement, whether as a result of new information, future developments or otherwise, except as may be required by law.

Allegiance Bancshares, Inc.
GAAP Reconciliation and Management's Explanation of Non-GAAP Financial Measures
(Unaudited)

Allegiance's management uses certain non−GAAP (generally accepted accounting principles) financial measures to evaluate its performance. Specifically, Allegiance reviews tangible book value per common share, return on average tangible common equity and the ratio of tangible common equity to tangible assets for internal planning and forecasting purposes. Allegiance has included in this Earnings Release information relating to these non-GAAP financial measures for the applicable periods presented.  Allegiance believes these non-GAAP financial measures provide information useful to management and investors that is supplementary to our financial condition and results of operations computed in accordance with GAAP.  These non-GAAP 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 manner in which Allegiance calculates the non-GAAP financial measures may differ from that of other companies reporting measures with similar names.