Market Overview

Allegiance Bancshares, Inc. Reports Second Quarter 2019 Results

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  • Record earnings of $14.2 million and diluted earnings per share of $0.66 for the second quarter 2019
     
  • Net interest margin increased to 4.33% for the second quarter 2019 from 4.31% for the first quarter 2019 (4.07% for the second quarter 2019 from 4.03% for the first quarter 2019 excluding purchase accounting adjustments on a Non-GAAP basis)
     
  • Completed share repurchase authorization of one million shares of common stock and approved a new one million share  repurchase authorization

HOUSTON, July 26, 2019 (GLOBE NEWSWIRE) -- Allegiance Bancshares, Inc. (NASDAQ:ABTX) ("Allegiance"), the holding company of Allegiance Bank (the "Bank"), today reported net income of $14.2 million and diluted earnings per share of $0.66 for the second quarter 2019 compared to $7.6 million and diluted earnings per share of $0.55 for the second quarter 2018.  Net income for the six months ended June 30, 2019 was $26.9 million, or $1.24 per diluted share, compared to $15.3 million, or $1.12 per diluted share, for the six months ended June 30, 2018.  The six months ended June 30, 2019 and 2018 results included $1.3 million and $625 thousand, respectively, of pre-tax acquisition and merger-related expenses.

"We are extremely pleased with our second quarter results, highlighting a period of execution on our strategic initiatives by Allegiance bankers that resulted in record quarterly earnings of $14.2 million," said George Martinez, Allegiance's Chairman and Chief Executive Officer.  "Our solid performance was driven by our talented Allegiance bankers, creating new and deepening existing relationships with our customers and achieving great results for our shareholders.  In addition, our experienced credit team has made significant progress toward the integration of one credit culture across Allegiance," continued Martinez.

"We continue to maintain strong asset quality, capital levels and solid operating results, allowing us to invest in opportunities that drive future performance. During the first half of the year, our ongoing recruitment efforts added ten revenue producers as we continue to invest in future organic and market share growth.  Additionally, we completed our current stock buyback program of one million shares and authorized a new program of another one million shares, to provide flexibility as we work to optimize our capital structure.  We also made the strategic decision to exit the mortgage warehouse lending program which allows us to redirect operational resources to focus on our core lending. All of this points to the confidence we have in our employees and their ongoing ability to succeed in a highly competitive market, serve the growing needs of both customers and businesses of all sizes, and generate solid returns for our shareholders," concluded Martinez.

Second Quarter 2019 Results

Net interest income before the provision for loan losses in the second quarter 2019 increased $17.8 million, or 63.8%, to $45.6 million from $27.8 million for the second quarter 2018 primarily due to a $1.56 billion, or 58.1%, increase in average interest-earning assets for the same period mainly due to the Post Oak Bancshares, Inc. acquisition during the fourth quarter of 2018 as well as organic growth for the year-over-year period.  Net interest income before provision for loan losses for the second quarter 2019 increased from $44.6 million in the first quarter 2019.  The net interest margin on a tax equivalent basis increased 12 basis points to 4.33% for the second quarter 2019 from 4.21% for the second quarter 2018 and increased 2 basis points from 4.31% for the first quarter 2019. Excluding the impact of acquisition accounting adjustments, the net interest margin on a tax equivalent basis for the second quarter 2019 would have been 4.07% compared to 4.03% for the first quarter 2019 and 4.18% for the second quarter 2018.

Noninterest income for the second quarter 2019 was $3.8 million, an increase of $2.0 million, or 113.0%, compared to $1.8 million for the second quarter 2018 and increased $556 thousand, or 16.9%, compared to $3.3 million for the first quarter 2019.  Noninterest income for the second quarter 2019 included $846 thousand of gain on the sale of securities and noninterest income associated with additional accounts from the Post Oak acquisition. 

Noninterest expense for the second quarter 2019 increased $10.2 million, or 51.5%, to $30.1 million from $19.9 million for the second quarter 2018, and decreased $1.0 million, or 3.3%, from $31.1 million for the first quarter 2019. The increase over the prior year quarter was primarily due to additional expenses associated with increased headcount and branches from the Post Oak acquisition.

In the second quarter 2019, Allegiance's efficiency ratio was 61.93% compared to 64.97% for the first quarter 2019 and 67.05% for the second quarter 2018.  Second quarter 2019 annualized returns on average assets, average equity and average tangible equity were 1.19%, 8.10% and 12.52%, respectively, compared to 1.08%, 7.27% and 11.22%, respectively, for the first quarter 2019.  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.

Six Months Ended June 30, 2019 Results

Net interest income before provision for loan losses for the six months ended June 30, 2019 increased $35.5 million, or 64.8%, to $90.2 million from $54.7 million for the six months ended June 30, 2018 primarily due to a $1.57 billion, or 59.3%, increase in average interest-earning assets over the prior year associated with the Post Oak acquisition.  The net interest margin on a tax equivalent basis increased 12 basis points to 4.32% for the six months ended June 30, 2019 from 4.20% for the six months ended June 30, 2018. Excluding the impact of acquisition accounting adjustments, the net interest margin for the six months ended June 30, 2019 would have been 4.05%, compared to 4.19% for the six months ended June 30, 2018.

Noninterest income for the six months ended June 30, 2019 was $7.1 million, an increase of $3.7 million, or 106.7%, compared to $3.5 million for the six months ended June 30, 2018 due primarily to additional noninterest income resulting from the Post Oak acquisition along with the gain on sale of securities.

Noninterest expense for the six months ended June 30, 2019 increased $22.6 million, or 58.6%, to $61.2 million from $38.6 million for the six months ended June 30, 2018.  The increase in noninterest expense over the six months ended June 30, 2018 was primarily due to additional expenses associated with increased headcount and branches along with merger-related expenses from the Post Oak acquisition.

Allegiance's efficiency ratio decreased from 66.33% for the six months ended June 30, 2018 to 63.44% for the six months ended June 30, 2019. For the six months ended June 30, 2019, returns on average assets, average equity and average tangible equity were 1.14%, 7.69% and 11.87%, respectively, compared to 1.06%, 9.82% and 11.36%, respectively, for the six months ended June 30, 2018.

Financial Condition

Total assets at June 30, 2019 increased $25.4 million, or 0.5%, to $4.79 billion compared to $4.77 billion at March 31, 2019 and increased $1.83 billion, or 61.6%, compared to $2.97 billion at June 30, 2018, primarily due to the Post Oak acquisition and organic loan growth.

Total loans at June 30, 2019 increased $51.8 million, or 5.4% (annualized), to $3.86 billion compared to $3.81 billion at March 31, 2019 and increased $1.50 billion, or 63.6%, compared to $2.36 billion at June 30, 2018, primarily due to loans acquired in the Post Oak acquisition. Core loans, which exclude the mortgage warehouse portfolio, increased $42.4 million, or 4.5% (annualized), to $3.81 billion at June 30, 2019 from $3.77 billion at March 31, 2019 and increased $1.50 billion, or 65.2%, from $2.31 billion at June 30, 2018.  Excluding loans acquired from Post Oak at acquisition of $1.16 billion, core loans at June 30, 2019 increased $344.7 million, from June 30, 2018.

Deposits at June 30, 2019 increased $80.6 million, or 2.1%, to $3.86 billion compared to $3.78 billion at March 31, 2019 and increased $1.55 billion, or 66.9%, compared to $2.31 billion at June 30, 2018, primarily related to the Post Oak acquisition.

Asset Quality

Nonperforming assets totaled $37.7 million, or 0.79% of total assets, at June 30, 2019, compared to $33.8 million, or 0.71%, of total assets, at March 31, 2019, and $14.6 million, or 0.49% of total assets, at June 30, 2018. The allowance for loan losses was 0.72% of total loans at June 30, 2019, 0.71% of total loans at March 31, 2019 and 1.01% of total loans at June 30, 2018. The decrease in the allowance for loan losses as a percentage of loans from June 30, 2018 reflects the loans acquired in the Post Oak acquisition that were recorded at fair value without an allowance for loan losses at acquisition date.

The provision for loan losses for the second quarter 2019 was $1.4 million, or 0.15% (annualized) of average loans, compared to $1.0 million, 0.11% (annualized) of average loans, for the first quarter 2019 and $631 thousand, or 0.11% (annualized) of average loans, for the second quarter 2018.

Second quarter 2019 net charge-offs were $589 thousand, or 0.06% (annualized) of average loans, compared to net charge-offs of $210 thousand, or 0.02% (annualized) of average loans, for the first quarter 2019 and $1.4 million, or 0.25% (annualized) of average loans, for the second quarter 2018. Net charge-offs for the six months ended June 30, 2019 were $799 thousand, or 0.04% (annualized) of average loans, compared to net charge-offs for the six months ended June 30, 2018 of $1.1 million, or 0.06% (annualized) of average loans.

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 Friday, July 26, 2019 at 9:00 a.m. Central Time (10:00 a.m. Eastern Time) to discuss its second quarter 2019 results. Individuals and investment professionals may participate in the call by dialing (877) 279-2520. The conference ID number is 9254608.  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 June 30, 2019, Allegiance was a $4.79 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 small to medium-sized businesses and individual customers in the Houston region. 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 June 30, 2019, Allegiance Bank operated 27 full-service banking locations in the Houston region, which we define as the Houston-The Woodlands-Sugar Land and Beaumont-Port Arthur metropolitan statistical areas, with 26 bank offices and one loan production office in the Houston metropolitan area and one bank office location in Beaumont, just outside of 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, 2018 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)

    2019     2018  
    June 30     March 31     December 31     September 30     June 30  
    (Dollars in thousands)  
Cash and cash equivalents   $ 232,607     $ 258,843     $ 268,947     $ 191,468     $ 200,645  
Available for sale securities     348,173       345,716       337,293       300,115       300,897  
                                         
Total loans     3,857,963       3,806,161       3,708,306       2,440,926       2,358,675  
Allowance for loan losses     (27,940 )     (27,123 )     (26,331 )     (23,586 )     (23,831 )
Loans, net     3,830,023       3,779,038       3,681,975       2,417,340       2,334,844  
                                         
Goodwill     223,642       223,642       223,125       39,389       39,389  
Core deposit intangibles, net     24,231       25,409       26,587       2,688       2,883  
Premises and equipment, net     59,690       60,327       41,717       18,970       19,049  
Other real estate owned     6,294       1,152       630       1,801       1,710  
Bank owned life insurance     26,794  
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