Allegiance Bancshares Reports Third Quarter 2016 Results

• Core loans increased 15.2% year over year and 4.6% for the third quarter 2016 compared to the linked quarter
  
  
• Deposits increased 14.7% year over year and 3.1% for the third quarter 2016 compared to the linked quarter

HOUSTON, Oct. 25, 2016 (GLOBE NEWSWIRE) -- Allegiance Bancshares, Inc. (NASDAQ:ABTX), the holding company of Allegiance Bank (collectively, “Allegiance” or the "Bank"), reported net income attributable to common stockholders of $5.5 million in the third quarter 2016, a 35.2% increase over the same period in 2015, and a 4.1% increase compared to the second quarter 2016. Net income per diluted common share increased 5.0% to $0.42 in the third quarter 2016 compared to $0.40 for the same period in 2015 and increased 5.0% compared to $0.40 for the second quarter 2016.

"Our outstanding team of bankers has delivered another strong quarter of well-managed growth," said George Martinez, Allegiance's Chairman and Chief Executive Officer.  "We are pleased with our third quarter results despite an increase in our provision for loan losses, which signifies the strength of our Bank.  Allegiance's credit quality continues to be strong despite today's challenging market.  Our third quarter results reflect solid organic loan and deposit growth as we continue to focus on serving our customers and executing on our super-community bank growth strategy.

"October marks Allegiance's one-year anniversary as a public company.  We have achieved a lot in the past year, including generating strong internal growth and positioning ourselves for continued growth by adding exceptional bankers.  We are well on track to complete another outstanding year of increasing value to our shareholders leading into 2017," continued Martinez.

Third Quarter 2016 Results

Third quarter 2016 annualized returns on average assets, average common equity and average tangible common equity were 0.90%, 7.77% and 9.21%, respectively, compared to annualized returns on average assets, average common equity and average tangible common equity of 0.85%, 8.27% and 10.77%, respectively, for the third quarter 2015.  The initial public offering of 2.9 million shares generated net proceeds of $57.2 million during the fourth quarter of 2015.  Annualized returns on average assets, average common equity and average tangible common equity for the second quarter 2016 were 0.91%, 7.79% and 9.30%, respectively.

In the third quarter 2016, Allegiance’s efficiency ratio decreased to 60.34% from 65.04% in the third quarter 2015 and increased slightly from 60.11% in the second quarter 2016.

Net interest income before provision for loan losses in the third quarter 2016 increased $3.0 million, or 14.7%, to $23.4 million from $20.4 million for the third 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 third quarter 2016 increased $1.5 million, or 6.7%, from $21.9 million in the second quarter 2016. The net interest margin on a tax equivalent basis decreased 22 basis points to 4.39% for the third quarter 2016 from 4.61% for the third quarter 2015, and increased 7 basis points from 4.32% for the second quarter 2016. Excluding the impact of acquisition accounting adjustments, the net interest margin in the third quarter 2016 would have been 4.33%, compared to 4.44% and 4.24% in the third quarter 2015 and second quarter 2016, respectively.

Noninterest income in the third quarter 2016 was $1.3 million, an increase of $73 thousand, or 6.1%, compared to $1.2 million in the third quarter 2015 and an increase of $62 thousand, or 5.1%, compared to $1.2 million in the second quarter 2016.

Noninterest expense in the third quarter 2016 increased $994 thousand, or 7.2%, to $14.9 million from $13.9 million in the third quarter 2015, and increased $972 thousand, or 7.0%, from $13.9 million in the second quarter 2016.

Nine Months Ended September 30, 2016 Results

For the nine months ended September 30, 2016, annualized returns on average assets, average common equity and average tangible common equity were 0.99%, 8.40% and 10.03%, respectively, compared to annualized returns on average assets, average common equity and average tangible common equity of 0.82%, 7.75% and 10.16%, respectively, for the nine months ended September 30, 2015.  Excluding the gain on the sale of two Central Texas branch locations during the first quarter of 2016, the annualized returns on average assets, average common equity and average tangible common equity for the nine months ended September 30, 2016 would have been 0.92%, 7.75% and 9.24%, respectively.

Allegiance’s efficiency ratio for the nine months ended September 30, 2016 decreased to 61.37% from 66.31% for the nine months ended September 30, 2015.

Net interest income before provision for loan losses for the nine months ended September 30, 2016 increased $7.5 million, or 12.8%, to $66.4 million from $58.9 million for the nine months ended September 30, 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 32 basis points to 4.39% for the nine months ended September 30, 2016 from 4.71% for the nine months ended September 30, 2015.  Excluding the impact of acquisition accounting adjustments, the net interest margin for the nine months ended September 30, 2016 would have been 4.31%, compared to 4.44% for the nine months ended September 30, 2015.

Noninterest income for the nine months ended September 30, 2016 was $5.8 million, an increase of $2.8 million, or 92.1%, when compared to $3.0 million for the nine months ended September 30, 2015. Noninterest income for the first quarter 2016 included the gain on the sale of two Central Texas branch locations.  Noninterest expense for the nine months ended September 30, 2016 increased $2.2 million, or 5.3%, to $43.1 million from $40.9 million for the nine months ended September 30, 2015.

Financial Condition

Total loans at September 30, 2016 increased $214.3 million, or 13.3%, to $1.83 billion compared to $1.62 billion at September 30, 2015 and increased $77.0 million, or 4.4%, compared to $1.75 billion at June 30, 2016. These increases were due to strong organic loan growth within Allegiance Bank’s loan portfolio. Third quarter 2016 core loans, excluding the mortgage warehouse portfolio and loans held for sale, increased $231.2 million, or 15.2%, to $1.75 billion from $1.52 billion in the third quarter 2015 and increased $76.6 million, or 4.6%, from $1.68 billion in the second quarter 2016.

Deposits at September 30, 2016 increased $244.3 million, or 14.7%, to $1.90 billion compared to $1.66 billion at September 30, 2015 and increased $57.5 million compared to $1.84 billion at June 30, 2016.

Asset Quality

Nonperforming assets totaled $17.1 million, or 0.69% of total assets, at September 30, 2016, compared to $6.3 million, or 0.31% of total assets, at September 30, 2015, and $8.6 million, or 0.37% of total assets, at June 30, 2016. The allowance for loan losses was 0.94% of total loans at September 30, 2016, 0.69% of total loans at September 30, 2015, and 0.85% of total loans at June 30, 2016.

The provision for loan losses in the third quarter 2016 was $2.2 million, or 0.49% (annualized) of average loans, compared to $1.5 million, or 0.39% (annualized) of average loans, in the third quarter 2015, and $1.6 million, or 0.38% (annualized) of average loans, in the second quarter 2016.  The provision for loan losses for the nine months ended September 30, 2016 was $4.6 million, or 0.35% (annualized) of average loans, compared to $3.6 million, or 0.33% (annualized) of average loans for the nine months ended September 30, 2015.

Third quarter 2016 net recoveries were $54 thousand, compared to net charge-offs of $638 thousand, or 0.16% (annualized) of average loans, in the third quarter 2015, and $485 thousand, or 0.11% (annualized) of average loans, in the second quarter 2016.  Net charge-offs for the nine months ended September 30, 2016 were $482 thousand, or 0.04% (annualized) of average loans, compared to $675 thousand, or 0.06% (annualized) of average loans for the nine months ended September 30, 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, October 25, 2016 at 9:00 a.m. Central Time (10:00 a.m. Eastern Time) to discuss its third quarter 2016 results. Individuals and investment professionals may participate in the call by dialing (877) 279-2520. The conference ID number is 84384942.  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 $2.46 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.