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Allegiance Bancshares, Inc. Reports First Quarter 2016 Results

  • Core loans, excluding mortgage warehouse loans and loans held for sale, increased 18.7% year over year and 2.3% for the first quarter 2016

  • Strong asset quality as evidenced by annualized net charge-offs of 0.01% and a nonperforming assets to total assets ratio of 0.38% for the first quarter 2016

  • Completed the sale of two Central Texas branch locations and recorded an after tax gain of $1.3 million during the first quarter 2016

HOUSTON, April 26, 2016 (GLOBE NEWSWIRE) -- Allegiance Bancshares, Inc. (NASDAQ:ABTX), the holding company of Allegiance Bank (collectively, “Allegiance”), reported net income attributable to common stockholders of $6.4 million in the first quarter 2016, a 90.0% increase over the prior year period and a 50.9% increase compared to the fourth quarter 2015. Net income per diluted common share increased 48.5% to $0.49 compared to net income per diluted common share of $0.33 for both the first quarter 2015 and the fourth quarter 2015. This increase was primarily due to the sale of two Central Texas branch locations during the first quarter 2016 resulting in an after tax gain of $1.3 million. Excluding the gain on the sale of the branch locations, net income attributable to common stockholders would have been $5.0 million and net income per diluted common share would have been $0.39 for the first quarter 2016.

Commenting on the quarter, George Martinez, Allegiance’s Chairman and Chief Executive Officer, said, “Allegiance bank recorded another quarter of profitable growth. Loan volume and profitability reached all-time highs and liquidity and capital levels remained very strong. We continue to be pleased with our consistently strong earnings capability and solid credit quality. Specifically, our growth in core loans enables us to maintain our confidence in the future prospects of the Bank, including our efforts to expand our market position primarily through organic growth. Most importantly, through our super-community banking strategy, we continued to serve our customers and fulfill our mission to deliver dependable credit and financial services to medium-sized business customers across Houston.”

“During the first quarter, we completed the sale of two Central Texas branch locations. The branch locations were acquired in the F&M Bancshares, Inc. transaction on January 1, 2015. Our decision to divest these branches was driven by our strategic plan to concentrate on the growing and significant market in greater Houston,” continued Martinez.

First Quarter 2016 Results

First quarter 2016 annualized returns on average assets, average common equity and average tangible common equity were 1.19%, 9.70% and 11.67%, respectively. Excluding the gain on the sale of the two Central Texas branch locations, the annualized returns on average assets, average common equity and average tangible common equity for the first quarter 2016 would have been 0.94%, 7.67% and 9.22%, respectively. Annualized returns on average assets, average common equity and average tangible common equity for the fourth quarter 2015 were 0.81%, 6.71% and 8.19%, respectively.

Allegiance’s efficiency ratio in the first quarter 2016 decreased to 63.80% from 69.19% in the first quarter 2015, and increased from 62.40% in the fourth quarter 2015 due primarily to seasonal payroll increases and expenses.

Net interest income before provision for loan losses in the first quarter 2016 increased $2.3 million, or 12.3%, from $18.8 million for the same period in 2015, primarily due to a 20.1% increase in average interest-earning assets as a result of the organic growth within the loan portfolio. Net interest income before provision for loan losses decreased slightly to $21.1 million, compared to $21.3 million in the fourth quarter 2015, primarily due to reduced income during the quarter as a result of loans sold in the sale of the two Central Texas branch locations. The net interest margin on a tax equivalent basis decreased 27 basis points to 4.45% for the first quarter 2016 from 4.72% for the first quarter 2015, and decreased 15 basis points from 4.60% for the fourth quarter 2015. Excluding the impact of acquisition accounting adjustments, the net interest margin in the first quarter 2016 would have been 4.35%, compared to 4.38% and 4.47% in the first quarter 2015 and fourth quarter 2015, respectively.

Noninterest income in the first quarter 2016 was $3.3 million, an increase of $2.4 million, or 281.5%, when compared to $866 thousand in the first quarter 2015 and an increase of $2.3 million, or 237.8%, when compared to $978 thousand in the fourth quarter 2015. These increases were primarily due to the gain on the sale of two Central Texas branch locations completed during the first quarter of 2016.

Noninterest expense in the first quarter 2016 increased $667 thousand, or 4.9%, to $14.3 million from $13.6 million in the first quarter 2015, and increased $357 thousand, or 2.6%, from $13.9 million in the fourth quarter 2015. These increases were primarily due to additional salaries and benefits related to the hiring of several key income-producing employees during 2015.

Financial Condition

Total loans at March 31, 2016 increased $272.7 million, or 18.9%, to $1.72 billion compared to $1.44 billion at March 31, 2015 and increased $36.4 million, or 2.2%, compared to $1.68 billion at December 31, 2015. These increases were due to strong organic loan growth within Allegiance’s loan portfolio. First quarter 2016 core loans, excluding the mortgage warehouse portfolio and loans held for sale, increased $256.9 million, or 18.7%, to $1.63 billion from $1.37 billion in the first quarter 2015 and increased $37.2 million, or 2.3%, from $1.59 billion in the fourth quarter 2015.

Deposits at March 31, 2016 increased $198.9 million, or 12.1%, to $1.84 billion compared to $1.64 billion at March 31, 2015 and increased $83.5 million, or 4.7%, compared to $1.76 billion at December 31, 2015.

Asset Quality

Nonperforming assets totaled $8.5 million, or 0.38% of total assets, at March 31, 2016, compared to $6.9 million, or 0.36% of total assets, at March 31, 2015, and $6.2 million, or 0.30% of total assets, at December 31, 2015. The allowance for loan losses was 0.80% of total loans at March 31, 2016, 0.62% of total loans at March 31, 2015, and 0.78% of total loans at December 31, 2015.

The provision for loan losses in the first quarter 2016 was $710 thousand, or 0.17% (annualized) of average loans, compared to $683 thousand, or 0.20% (annualized) of average loans, in the first quarter 2015, and $2.2 million, or 0.53% (annualized) of average loans, in the fourth quarter 2015.

First quarter 2016 net charge offs were $51 thousand, or 0.01% (annualized) of average loans, compared to $265 thousand, or 0.06% (annualized) of average loans, in the fourth quarter 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, April 26, 2016 at 9:00 a.m. Central Time (10:00 a.m. Eastern Time) to discuss its first quarter 2016 results. Individuals and investment professionals may participate in the call by dialing (877) 279-2520. The conference ID number is 93166802. 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 $2.21 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.
Financial Highlights
(Unaudited)
2016
2015
March 31 December 31 September 30 June 30 March 31
(Dollars in thousands)
Cash and cash equivalents$183,290 $148,431 $144,590 $138,685 $252,558
Available for sale securities 215,401 165,097 154,546 151,662 96,910
Total Loans (including loans held for sale) 1,717,448 1,681,052 1,616,416 1,561,657 1,444,732
Allowance for loan losses (13,757) (13,098) (11,204) (10,312) (8,940)
Loans, net 1,703,691 1,667,954 1,605,212 1,551,345 1,435,792
Goodwill 39,389 39,389 39,389 39,389 39,389
Core deposit intangibles, net 4,641 5,230 5,437 5,645 5,852
Premises and equipment, net 18,121 18,471 18,838 18,887 18,510
Other real estate owned 1,397 - - - -
Bank owned life insurance 21,377 21,211 21,040 20,872 20,699
Other assets 23,400 18,796 23,298 18,671 15,176
Total assets$2,210,707 $2,084,579 $2,012,350 $1,945,156 $1,884,886
Noninterest-bearing deposits$684,245 $620,320 $560,773 $556,502 $554,624
Interest-bearing deposits 1,158,409 1,138,813 1,095,775 1,068,822 1,089,095
Total deposits 1,842,654 1,759,133 1,656,548 1,625,324 1,643,719
Short-term borrowings 85,000 50,000 115,000 75,000 -
Other borrowed funds 569 569 28,069 28,069 28,069
Subordinated debentures 9,115 9,089 9,062 9,032 8,953
Other liabilities 7,076 7,298 7,628 5,901 5,121
Total liabilities 1,944,414 1,826,089 1,816,307 1,743,326 1,685,862
Preferred equity - - - 11,550 11,550
Common equity 266,293 258,490 196,043 190,280 187,474
Stockholders' equity 266,293 258,490 196,043 201,830 199,024
Total liabilities and equity$2,210,707 $2,084,579 $2,012,350 $1,945,156 $1,884,886


Allegiance Bancshares, Inc.
Financial Highlights
(Unaudited)
Three Months Ended
2016 2015
March 31 December 31 September 30 June 30 March 31
(Dollars in thousands)
INTEREST INCOME:
Loans, including fees$22,228 $22,431 $21,627 $21,079 $20,306
Securities 1,081 989 975 721 439
Deposits in other financial institutions 142 72 43 50 74
Total interest income 23,451 23,492 22,645 21,850 20,819
INTEREST EXPENSE:
Demand, money market and savings deposits 544 555 508 482 456
Certificates and other time deposits 1,560 1,494 1,324 1,254 1,200
Short-term borrowings 139 33 47 2 -
Subordinated debt 117 139 114 162 163
Other borrowed funds 7 16 245 216 230
Total interest expense 2,367 2,237 2,238 2,116 2,049
NET INTEREST INCOME 21,084 21,255 20,407 19,734 18,770
Provision for loan losses 710 2,159 1,530 1,420 683
Net interest income after provision for loan losses 20,374 19,096 18,877 18,314 18,087
NONINTEREST INCOME:
Nonsufficient funds fees 163 191 179 168 165
Service charges on deposit accounts 145 166 163 176 175
Gain on sale of branch assets 2,050 - - - -
Loss on sale of securities - (37) - - -
Gain (loss) on sales of other real estate - - 1 - (6)
Gain on sale of loans - - 235 - -
Bank owned life insurance 166 171 167 174 92
Other 780 487 456 429 440
Total noninterest income 3,304 978 1,201 947 866
NONINTEREST EXPENSE:
Salaries and employee benefits 9,273 8,905 8,996 8,481 8,942
Net occupancy and equipment 1,232 1,179 1,289 1,274 1,084
Depreciation 417 424 414 409 367
Data processing and software amortization 653 750 841 827 626
Professional fees 534 451 343 397 480
Regulatory assessments and FDIC insurance 345 356 296 320 374
Core deposit intangibles amortization 199 208 207 207 208
Communications 280 298 300 358 334
Advertising 201 271 188 184 138
Other 1,119 1,054 1,027 965 1,033
Total noninterest expense 14,253 13,896 13,901 13,422 13,586
INCOME BEFORE INCOME TAXES 9,425 6,178 6,177 5,839 5,367
Provision for income taxes 3,070 1,966 1,957 1,956 1,896
NET INCOME 6,355 4,212 4,220 3,883 3,471
Preferred stock dividends - - 173 260 126
NET INCOME ATTRIBUTABLE TO COMMON
STOCKHOLDERS$6,355 $4,212 $4,047 $3,623 $3,345

Allegiance Bancshares, Inc.
Financial Highlights
(Unaudited)
Three Months Ended
2016 2015
March 31 December 31 September 30 June 30 March 31
(Dollars and share amounts in thousands, except per share data)
Net income$6,355 $4,212 $4,220 $3,883 $3,471
Net income attributable to common stockholders$6,355 $4,212 $4,047 $3,623 $3,345
Earnings per common share, basic$0.49 $0.34 $0.41 $0.37 $0.34
Earnings per common share, diluted$0.49 $0.33 $0.40 $0.36 $0.33
Return on average assets (A) 1.19% 0.81% 0.85% 0.84% 0.77%
Return on average common equity (A) 9.70% 6.71% 8.27% 8.20% 7.56%
Return on average tangible common equity (A) (B) 11.67% 8.19% 10.77% 10.04% 9.62%
Tax equivalent net interest margin (C) 4.45% 4.60% 4.61% 4.79% 4.72%
Efficiency ratio(D) 63.80% 62.40% 65.04% 64.90% 69.19%
Liquidity and Capital Ratios
Equity to assets 12.05% 12.40% 9.74% 10.38% 10.56%
Common equity Tier 1 capital 11.69% 11.71% 8.61% 8.68% 8.98%
Tier 1 risk-based capital 12.17% 12.20% 9.12% 9.88% 10.25%
Total risk-based capital 12.89% 12.92% 9.75% 10.48% 10.80%
Tier 1 leverage capital 10.96% 11.02% 8.37% 9.34% 9.22%
Tangible common equity to tangible assets(B) 10.26% 10.48% 7.69% 7.64% 7.73%
Other Data
Weighted average shares:
Basic 12,840 12,390 9,823 9,825 9,823
Diluted 12,967 12,589 10,003 10,004 9,999
Period end shares outstanding 12,845 12,813 9,823 9,823 9,824
Book value per common share$20.73 $20.17 $19.96 $19.37 $19.08
Tangible book value per common share(B)$17.30 $16.69 $15.39 $14.79 $14.48
(A) Interim periods annualized.
(B) Refer to the calculation of these non-GAAP financial measures and a reconciliation to their most directly comparable GAAP financial measures on page 10 of
this Earnings Release.
(C) Net interest margin represents net interest income divided by average interest-earning assets.
(D) Represents noninterest expense divided by the sum of net interest income plus noninterest income, excluding net gains and losses on the sale of branch assets,
loans and securities. Additionally, taxes and provision for loan losses are not part of this calculation.

Allegiance Bancshares, Inc.
Financial Highlights
(Unaudited)
Three Months Ended
March 31, 2016 December 31, 2015 March 31, 2015
Average
Balance
Interest
Earned/
Interest
Paid
Average
Yield/
Rate
Average
Balance
Interest
Earned/
Interest
Paid
Average
Yield/
Rate
Average
Balance
Interest
Earned/
Interest
Paid
Average
Yield/
Rate
(Dollars in thousands)
Assets
Interest-Earning Assets:
Loans$1,663,711 $22,228 5.37% $1,631,068 $22,431 5.46% $1,416,159 $20,306 5.82%
Securities 186,460 1,081 2.33% 161,245 989 2.43% 92,634 439 1.92%
Deposits in other financial institutions 91,824 142 0.62% 72,262 72 0.40% 108,331 74 0.28%
Total interest-earning assets 1,941,995 $23,451 4.86% 1,864,575 $23,492 5.00% 1,617,124 $20,819 5.22%
Allowance for loan losses (13,487) (11,598) (8,492)
Noninterest-earning assets 226,946 222,624 225,894
Total assets$2,155,454 $2,075,601 $1,834,526
Liabilities and Stockholders' Equity
Interest-Bearing Liabilities:
Interest-bearing demand deposits$95,506 $67 0.28% $95,696 $43 0.18% $106,490 $39 0.15%
Money market and savings deposits 433,139 477 0.44% 456,867 512 0.44% 405,497 417 0.42%
Certificates and other time deposits 614,216 1,560 1.02% 591,403 1,494 1.00% 549,289 1,200 0.89%
Short-term borrowings 126,374 139 0.44% 63,587 33 0.20% - - 0.00%
Subordinated debt 9,098 117 5.19% 9,072 139 6.06% 8,900 163 7.43%
Other borrowed funds 569 7 5.23% 5,053 16 1.24% 28,069 230 3.32%
Total interest-bearing liabilities 1,278,902 $2,367 0.74% 1,221,678 $2,237 0.73% 1,098,245 $2,049 0.76%
Noninterest-Bearing liabilities:
Noninterest-bearing demand deposits 605,969 596,854 531,492
Other liabilities 7,186 8,144 6,945
Total liabilities 1,892,057 1,826,676 1,636,682
Stockholders' equity 263,397 248,925 197,844
Total liabilities and stockholders' equity$2,155,454 $2,075,601 $1,834,526
Net interest rate spread 4.12% 4.27% 4.46%
Net interest income and margin $21,084 4.37% $21,255 4.52% $18,770 4.71%
Net interest income and margin (tax equivalent) $21,483 4.45% $21,623 4.60% $18,839 4.72%

Allegiance Bancshares, Inc.
Financial Highlights
(Unaudited)
Three Months Ended
2016 2015
March 31 December 31 September 30 June 30 March 31
(Dollars in thousands)
Period-end Loan Portfolio:
Loans held for sale $- $27,887 $27,004 $25,629 $33,409
Commercial and industrial 372,056 383,044 367,341 346,703 325,598
Mortgage warehouse 86,157 59,071 65,928 81,255 36,912
Real Estate:
Commercial real estate (including multi-family residential) 770,252 745,595 710,857 678,979 640,391
Commercial real estate construction and land development 167,810 154,646 151,369 140,437 135,760
1-4 family residential (including home equity) 209,704 205,200 185,473 178,635 174,070
Residential construction 100,611 93,848 95,212 94,167 86,412
Consumer and other 10,858 11,761 13,232 15,852 12,180
Total loans $1,717,448 $1,681,052 $1,616,416 $1,561,657 $1,444,732
Asset Quality:
Nonaccrual loans $6,979 $6,035 $6,185 $5,722 $6,852
Accruing loans 90 or more
days past due - - - - -
Total nonperforming loans 6,979 6,035 6,185 5,722 6,852
Other real estate 1,397 - - 21 -
Other repossessed assets 131 131 131 491 -
Total nonperforming assets $8,507 $6,166 $6,316 $6,234 $6,852
Net charge-offs (recoveries) $51 $265 $638 $48 $(11)
Nonaccrual loans:
Loans held for sale $- $209 $498 $1,130 $782
Commercial and industrial 2,700 2,664 3,477 3,186 4,204
Mortgage warehouse - - - - -
Real Estate:
Commercial real estate (including multi-family residential) 3,293 2,857 1,783 974 1,293
Commercial real estate construction and land development - - - - 246
1-4 family residential (including home equity) 934 239 341 343 296
Residential construction - - - - -
Consumer and other 52 66 86 89 31
Total nonaccrual loans $6,979 $6,035 $6,185 $5,722 $6,852
Asset Quality Ratios:
Nonperforming assets to total assets 0.38% 0.30% 0.31% 0.32% 0.36%
Nonperforming loans to total loans 0.41% 0.36% 0.38% 0.37% 0.47%
Allowance for loan losses to nonperforming loans 197.12% 217.03% 181.15% 180.22% 130.47%
Allowance for loan losses to total loans 0.80% 0.78% 0.69% 0.66% 0.62%
Net charge-offs to average loans (annualized) 0.01% 0.06% 0.16% 0.01% 0.00%

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.

Three Months Ended
2016 2015
March 31 December 31 September 30 June 30 March 31
(Dollars and share amounts in thousands, except per share data)
Total Stockholders' equity $ 266,293 $ 258,490 $ 196,043 $ 201,830 $ 199,024
Less: Goodwill and core deposit intangibles, net 44,030 44,619 44,826 45,034 45,241
Tangible stockholders’ equity $ 222,263 $ 213,871 $ 151,217 $ 156,796 $ 153,783
Less: Preferred Stock - - - 11,550 11,550
Tangible common stockholders’ equity $ 222,263 $ 213,871 $ 151,217 $ 145,246 $ 142,233
Shares outstanding at end of period 12,845 12,813 9,823 9,823 9,824
Tangible book value per common share $ 17.30 $ 16.69 $ 15.39 $ 14.79 $ 14.48
Net income attributable to common stockholders $ 6,355 $ 4,212 $ 4,047 $ 3,623 $ 3,345
Average common stockholders equity $ 263,397 $ 248,925 $ 194,045 $ 189,907 $ 186,294
Less: Average goodwill and core deposit intangibles, net 44,319 44,886 44,929 45,150 45,260
Average tangible common stockholders’ equity $ 219,078 $ 204,039 $ 149,116 $ 144,757 $ 141,034
Return on average tangible common equity 11.67% 8.19% 10.77% 10.04% 9.62%
Total assets $ 2,210,707 $ 2,084,579 $ 2,012,350 $ 1,945,156 $ 1,884,886
Less: Goodwill and core deposit intangibles, net 44,030 44,619 44,826 45,034 45,241
Tangible assets $ 2,166,677 $ 2,039,960 $ 1,967,524 $ 1,900,122 $ 1,839,645
Tangible common equity to tangible assets 10.26% 10.48% 7.69% 7.64% 7.73%

Allegiance Bancshares, Inc. 8847 West Sam Houston Parkway N., Suite 200 Houston, Texas 77040 ir@allegiancebank.com

Source:Allegiance Bancshares, Inc.