Market Overview

Allegiance Bancshares, Inc. Reports Record Third Quarter 2018 Results

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  • Record earnings of $8.9 million and diluted earnings per common share of $0.65 for the third quarter 2018

  • Core loan growth of $274.1 million year over year, or 12.9%, and $84.9 million for the third quarter 2018 compared to the linked quarter, or 14.7% (annualized)

  • Net charge-offs of 0.04% and 0.08% (annualized) for the third quarter and year-to-date 2018, respectively

  • Completed the acquisition of Post Oak Bancshares, Inc. on October 1, 2018

HOUSTON, Oct. 25, 2018 (GLOBE NEWSWIRE) -- Allegiance Bancshares, Inc. (NASDAQ:ABTX) ("Allegiance"), the holding company of Allegiance Bank (the "Bank"), today reported net income of $8.9 million and diluted earnings per share of $0.65 for the third quarter 2018 compared to $3.0 million and diluted earnings per share of $0.22 for the third quarter 2017.  Net income for the nine months ended September 30, 2018 was $24.1 million, or $1.77 per diluted share, compared to $14.4 million, or $1.07 per diluted share, for the nine months ended September 30, 2017. The nine months ended September 30, 2018 results include $1.8 million and $821 thousand of core system conversion and merger-related expenses, respectively.

"I am extremely pleased to report record quarterly earnings for Allegiance, both in terms of net income and earnings per share. Our results reflect the execution of our core strategies as evidenced by double-digit organic loan growth and a continued focus on strong credit quality," said George Martinez, Allegiance's Chairman and Chief Executive Officer.

"Additionally, we are excited to have completed our merger with Post Oak on October 1st, which further enhanced our market position as Houston's largest community bank. With this merger, we have surpassed $4 billion in total assets, which we believe will allow us to gain valuable scale and take advantage of organic and strategic growth opportunities that will further enhance shareholder value. We are proud to welcome the employees, clients and shareholders of Post Oak to the Allegiance family.  Together, we are committed to providing the same superior, personalized service to which our customers are accustomed and to the continued investment in the communities where we live and work.  We anticipate completing the operational integration of Post Oak during the first quarter of 2019," concluded Martinez. 

Third Quarter 2018 Results

Net interest income before provision for loan losses in the third quarter 2018 increased $1.0 million, or 3.8%, to $28.0 million from $27.0 million for the third 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 third quarter 2018 increased slightly from $27.8 million in the second quarter 2018.  The net interest margin on a tax equivalent basis decreased 27 basis points to 4.10% for the third quarter 2018 from 4.37% for the third quarter 2017 and decreased 11 basis points from 4.21% for the second quarter 2018. The decrease from the prior year was 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 third quarter 2018 was $1.9 million, an increase of $468 thousand, or 32.1%, compared to $1.5 million for the third quarter 2017 and increased $123 thousand compared to $1.8 million for the second quarter 2018.

Noninterest expense for the third quarter 2018 increased $1.5 million, or 8.4%, to $19.2 million from $17.7 million for the third quarter 2017, and decreased $696 thousand, or 3.5%, from $19.9 million for the second quarter 2018. The increase in noninterest expense over the third quarter 2017 was primarily due to salaries and benefits and data processing and software amortization expenses incurred to support strategic growth initiatives, partially offset by a decrease in professional fees.  Noninterest expense decreased over the linked quarter primarily due to core system conversion and merger-related expenses incurred during the second quarter 2018.  In the third quarter 2018, Allegiance's efficiency ratio increased to 63.95% from 62.14% for the third quarter 2017 and decreased from 67.05% for the second quarter 2018.  Third quarter 2018 annualized returns on average assets, average equity and average tangible equity were 1.18%, 10.80% and 12.40%, respectively, compared to 0.43%, 3.90% and 4.55%, respectively, for the third quarter 2017.  Annualized returns on average assets, average equity and average tangible equity for the second quarter 2018 were 1.03%, 9.55% and 11.02%, respectively.

Nine Months Ended September 30, 2018 Results

Net interest income before provision for loan losses for the nine months ended September 30, 2018 increased $6.5 million, or 8.5%, to $82.7 million from $76.2 million for the nine months ended September 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 17 basis points to 4.17% for the nine months ended September 30, 2018 from 4.34% for the nine months ended September 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 nine months ended September 30, 2018 was $5.4 million, an increase of $1.1 million, or 25.7%, compared to $4.3 million for the nine months ended September 30, 2017.

Noninterest expense for the nine months ended September 30, 2018 increased $7.1 million, or 13.9%, to $57.7 million from $50.7 million for the nine months ended September 30, 2017.  The increase in noninterest expense over the nine months ended September 30, 2017 was primarily due to expenses related to the core system conversion of $1.8 million and merger-related expenses of $821 thousand during the nine months ended September 30, 2018.

During the nine months ended September 30, 2018, Allegiance's efficiency ratio increased to 65.52% from 62.97% for the nine months ended September 30, 2017. For the nine months ended September 30, 2018, annualized returns on average assets, average equity and average tangible equity were 1.10%, 10.16% and 11.72%, respectively, compared to 0.73%, 6.55% and 7.67%, respectively, for the nine months ended September 30, 2017.

Financial Condition

Total assets at September 30, 2018 increased $222.1 million, or 7.9%, to $3.04 billion compared to $2.81 billion at September 30, 2017 and increased $69.1 million, or 2.3%, compared to $2.97 billion at June 30, 2018.

Total loans at September 30, 2018 increased $239.4 million, or 10.9%, to $2.44 billion compared to $2.20 billion at September 30, 2017 and increased $82.3 million, or 3.5%, compared to $2.36 billion at June 30, 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 $274.1 million, or 12.9%, to $2.39 billion at September 30, 2018 from $2.12 billion at September 30, 2017 and increased $84.9 million, or 3.7%, from $2.31 billion at June 30, 2018.

Deposits at September 30, 2018 increased $147.2 million, or 6.4%, to $2.43 billion compared to $2.29 billion at September 30, 2017 and increased $120.0 million, or 5.2%, compared to $2.31 billion at March 31, 2018.

Asset Quality

Nonperforming assets totaled $16.9 million, or 0.56% of total assets, at September 30, 2018, compared to $14.6 million, or 0.52%, of total assets, at September 30, 2017, and $14.6 million, or 0.49% of total assets, at June 30, 2018. The allowance for loan losses was 0.97% of total loans at September 30, 2018, 1.08% of total loans at September 30, 2017 and 1.01% of total loans at June 30, 2018.

There was no provision for loan losses recorded during the third quarter 2018 due in part to the reversal of the remaining Hurricane Harvey reserve compared to $6.9 million, or 1.28% (annualized) of average loans, for the third quarter 2017, and $631 thousand, or 0.11% (annualized) of average loans, for the second quarter 2018.

Third quarter 2018 net charge-offs were $245 thousand compared to net charge-offs of $4.2 million for the third quarter 2017 and net charge-offs of $1.4 million for the second 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, October 25, 2018 at 9:00 a.m. Central Time (10:00 a.m. Eastern Time) to discuss its third quarter 2018 results. Individuals and investment professionals may participate in the call by dialing (877) 279-2520. The conference ID number is 3079335.  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.

As of September 30, 2018, Allegiance was a $3.04 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.  As of September 30, 2018, Allegiance Bank operated 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  
    September 30     June 30     March 31     December 31     September 30  
       
    (Dollars in thousands)  
Cash and cash equivalents   $ 191,468     $ 200,645     $ 190,088     $ 182,103     $ 192,427  
Available for sale securities     300,115       300,897       307,411       309,615       323,856  
                                         
Total loans     2,440,926       2,358,675       2,290,494       2,270,876       2,201,540  
Allowance for loan losses     (23,586 )     (23,831 )     (24,628 )     (23,649 )     (23,722 )
Loans, net     2,417,340       2,334,844       2,265,866       2,247,227       2,177,818  
                                         
Goodwill     39,389       39,389       39,389       39,389       39,389  
Core deposit intangibles, net     2,688       2,883       3,079  
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