Market Overview

Allegiance Bancshares, Inc. Reports Second Quarter 2018 Results

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  • Core loan growth of $266.0 million, or 13.0%, year over year and $58.2 million, or 10.4% (annualized), for the second quarter 2018 compared to the linked quarter
     
  • Deposit growth of $214.5 million, or 10.2%, year over year and $29.0 million, or 5.1% (annualized), for the second quarter 2018 compared to the linked quarter
     
  • Announced the pending acquisition of Post Oak Bancshares, Inc. headquartered in Houston, Texas

HOUSTON, July 26, 2018 (GLOBE NEWSWIRE) -- Allegiance Bancshares, Inc. (NASDAQ:ABTX) ("Allegiance"), the holding company of Allegiance Bank (the "Bank"), today reported net income of $7.6 million and diluted earnings per share of $0.55 for the second quarter 2018 compared to $5.4 million and diluted earnings per share of $0.40 for the second quarter 2017.  The second quarter 2018 results include $1.1 million and $625 thousand of core system conversion and merger related expenses, respectively.  Net income for the six months ended June 30, 2018 was $15.3 million, or $1.12 per diluted share, compared to $11.4 million, or $0.85 per diluted share, for the six months ended June 30, 2017.

"This quarter was an exciting one for us as we further executed our growth strategies. We generated continued organic loan and deposit growth, successfully completed our core technology conversion and advanced our acquisition strategy by announcing a transaction with Post Oak Bancshares, Inc. headquartered in Houston, Texas," said George Martinez, Allegiance's Chairman and Chief Executive Officer.  "Allegiance and Post Oak share the same tradition of customer, employee and community bank focus and we continue to anticipate that the acquisition will close in the fourth quarter of 2018. We are excited about this partnership and the opportunities that will further enhance our value as Houston's largest community bank," commented Martinez.

"I would like to thank our outstanding team of dedicated employees for a remarkable job well done as we effectively enhanced our core  system during the quarter.  Our employees continue to ensure an outstanding customer experience every day to help our bank grow and innovate while working diligently to deliver great results.  We believe that this quarter's results reflect our commitment to our customers and the enhancement of shareholder value," concluded Martinez.

Second Quarter 2018 Results

Net interest income before provision for loan losses in the second quarter 2018 increased $2.7 million, or 10.8%, to $27.8 million from $25.1 million for the second quarter 2017 primarily due to organic loan growth partially offset by interest expense on the subordinated debt that was issued in December 2017.  Net interest income before provision for loan losses in the second quarter 2018 increased slightly from $26.9 million in the first quarter 2018.  The net interest margin on a tax equivalent basis decreased eight basis points to 4.21% for the second quarter 2018 from 4.29% for the second quarter 2017 and increased one basis point from 4.20% for the first quarter 2018. The decrease from the prior year is primarily due to the increase in interest expense on interest-bearing liabilities driven in part by the subordinated debt issuance in December 2017.

Noninterest income for the second quarter 2018 was $1.8 million, an increase of $328 thousand, or 22.2%, compared to $1.5 million for the second quarter 2017 and increased $159 thousand compared to $1.6 million for the first quarter 2018.

Noninterest expense for the second quarter 2018 increased $3.4 million, or 20.4%, to $19.9 million from $16.5 million for the second quarter 2017, and increased $1.1 million, or 6.1%, from $18.7 million for the first quarter 2018. The increases in noninterest expense over the second quarter 2017 and the linked quarter were primarily due to expenses of $1.1 million related to the core system conversion and $625 thousand of merger related expenses. In the second quarter 2018, Allegiance's efficiency ratio increased to 67.05% from 61.92% for the second quarter 2017 and increased from 65.59% for the first quarter 2018.  Second quarter 2018 annualized returns on average assets, average equity and average tangible equity were 1.03%, 9.55% and 11.02%, respectively, compared to 0.81%, 7.32% and 8.57%, respectively, for the second quarter 2017.  Annualized returns on average assets, average equity and average tangible equity for the first quarter 2018 were 1.09%, 10.10% and 11.71%, respectively.

Six Months Ended June 30, 2018 Results

Net interest income before provision for loan losses for the six months ended June 30, 2018 increased $5.5 million, or 11.1%, to $54.7 million from $49.2 million for the six months ended June 30, 2017 primarily due to organic loan growth partially offset by the increased interest expense on interest-bearing liabilities.  The net interest margin on a tax equivalent basis decreased 13 basis points to 4.20% for the six months ended June 30, 2018 from 4.33% for the six months ended June 30, 2017 primarily due to the increase in interest expense on interest-bearing liabilities driven in part by the subordinated debt issuance in December 2017

Noninterest income for the six months ended June 30, 2018 was $3.5 million, an increase of $633 thousand, or 22.5%, compared to $2.8 million for the six months ended June 30, 2017.

Noninterest expense for the six months ended June 30, 2018 increased $5.6 million, or 16.9%, to $38.6 million from $33.0 million for the six months ended June 30, 2017.  The increase in noninterest expense over the six months ended June 30, 2017 was primarily due to expenses related to the core system conversion of $1.5 million and the merger related expenses of $625 thousand during the six months ended June 30, 2018.

During the six months ended June 30, 2018, Allegiance's efficiency ratio increased to 66.33% from 63.41% for the six months ended June 30, 2017.

For the six months ended June 30, 2018, annualized returns on average assets, average equity and average tangible equity were 1.06%, 9.82% and 11.36%, respectively, compared to 0.89%, 7.95% and 9.34%, respectively, for the six months ended June 30, 2017.

Financial Condition

Total assets at June 30, 2018 increased $241.7 million, or 8.9%, to $2.97 billion compared to $2.72 billion at June 30, 2017 and increased $79.9 million, or 2.8%, compared to $2.89 billion at March 31, 2018.

Total loans at June 30, 2018 increased $244.0 million, or 11.5%, to $2.36 billion compared to $2.11 billion at June 30, 2017 and increased $68.2 million, or 3.0%, compared to $2.29 billion at March 31, 2018. These increases were due to strong organic loan growth within the Bank's loan portfolio. Core loans, which exclude the mortgage warehouse portfolio, increased $266.0 million, or 13.0%, to $2.31 billion at June 30, 2018 from $2.04 billion at June 30, 2017 and increased $58.2 million, or 2.6%, from $2.25 billion at March 31, 2018.

Deposits at June 30, 2018 increased $214.5 million, or 10.2%, to $2.31 billion compared to $2.10 billion at June 30, 2017 and increased $29.0 million, or 1.3%, compared to $2.28 billion at March 31, 2018.

Asset Quality

Nonperforming assets totaled $14.6 million, or 0.49% of total assets, at June 30, 2018, compared to $19.9 million, or 0.73% of total assets, at June 30, 2017, and $14.2 million, or 0.49% of total assets, at March 31, 2018. The allowance for loan losses was 1.01% of total loans at June 30, 2018, 0.99% of total loans at June 30, 2017 and 1.08% of total loans at March 31, 2018.

The provision for loan losses for the second quarter 2018 was $631 thousand, or 0.11% (annualized) of average loans, compared to $3.0 million, or 0.59% (annualized) of average loans, for the second quarter 2017, and $653 thousand, or 0.12% (annualized) of average loans, for the first quarter 2018.

Second quarter 2018 net charge-offs were $1.4 million compared to net charge-offs of $684 thousand for the second quarter 2017 and net recoveries of $326 thousand for the first quarter 2018.

GAAP Reconciliation of Non-GAAP Financial Measures

Allegiance's management uses certain non-GAAP financial measures to evaluate its performance. 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 Thursday, July 26, 2018 at 9:00 a.m. Central Time (10:00 a.m. Eastern Time) to discuss its second quarter 2018 results. Individuals and investment professionals may participate in the call by dialing (877) 279-2520. The conference ID number is 8558406.  Alternatively, a simultaneous audio-only webcast may be accessed via the Investor Relations section of Allegiance's website at www.allegiancebank.com, under Upcoming Events. If you are unable to participate during the live webcast, the webcast will be archived on the Investor Relations section of Allegiance's website at www.allegiancebank.com, under News and Events, Event Calendar, Past Events.

Allegiance Bancshares, Inc.

Allegiance is a $2.97 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 super-community banking strategy was designed to foster strong customer relationships while benefiting from a platform and scale that is competitive with larger local and regional banks.  Allegiance Bank operates 16 full-service banking locations and one loan production office 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," "continues," "anticipates," "intends," "projects," "estimates," "potential," "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; 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, 2017 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.
Financial Highlights
(Unaudited)
                   
  2018   2017
   June 30    March 31    December 31    September 30    June 30
  (Dollars in thousands)
Cash and cash equivalents $ 200,645     $ 190,088     $ 182,103     $ 192,427     $ 187,491  
Available for sale securities 300,897     307,411     309,615     323,856     321,268  
                   
Total loans 2,358,675     2,290,494     2,270,876     2,201,540     2,114,652  
Allowance for loan losses (23,831 )   (24,628 )   (23,649 )   (23,722 )   (21,010 )
Loans, net 2,334,844     2,265,866     2,247,227     2,177,818     2,093,642  
                   
Goodwill 39,389     39,389     39,389     39,389     39,389  
Core deposit intangibles, net 2,883     3,079     3,274     3,469     3,664  
Premises and equipment, net 19,049     18,605     18,477     18,273     18,240  
Other real estate owned 1,710     365     365     453     365  
Bank owned life insurance 22,701     22,563     22,422     22,277     22,131  
Other assets 44,308     39,118     37,359     35,472     38,526  
Total assets $ 2,966,426     $ 2,886,484     $ 2,860,231     $ 2,813,434     $ 2,724,716  
                   
Noninterest-bearing deposits $ 749,787     $ 694,880     $ 683,110     $ 712,951     $ 662,527  
Interest-bearing deposits 1,563,999     1,589,922     1,530,864
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