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Allegiance Bancshares, Inc. Reports First Quarter 2017 Results

  • Record core loan growth of 17.8% year over year and 5.4% for the first quarter 2017 compared to the linked quarter
  • Net interest income increased 14.4% year over year and 3.0% for the first quarter 2017 compared to the linked quarter
  • Net interest margin on a tax equivalent basis increased six basis points to 4.38% for the first quarter 2017 compared to 4.32% for the linked quarter

HOUSTON, April 25, 2017 (GLOBE NEWSWIRE) -- Allegiance Bancshares, Inc. (NASDAQ:ABTX) ("Allegiance"), the holding company of Allegiance Bank (the "Bank"), today reported net income of $6.0 million in the first quarter 2017 compared to $6.4 million in the first quarter 2016 and diluted earnings per share for the first quarter 2017 of $0.45 compared to $0.49 in the first quarter 2016. The first quarter 2016 included a $1.3 million after tax gain on the sale of two Central Texas branch locations that were sold in order to focus on the Houston MSA. Excluding the gain on the sale of these branches during the first quarter 2016, net income for the first quarter 2017 increased 20.4% and diluted earnings per share for the first quarter 2017 increased 15.4% compared to the same period in 2016. Net income for the first quarter 2017 increased 4.8% compared to the fourth quarter 2016 and diluted earnings per share for the first quarter 2017 increased 2.3% compared to $0.44 for the fourth quarter 2016.

"We are excited to report another solid quarter driven by a record level of core loan growth that grew at an annualized rate of over 21% in the first quarter. Our continued focus is on leveraging the recruiting successes that we have experienced over the past several quarters. Our success is due in large part to our bankers and to their existing and new customer relationships within the Houston MSA. In addition to adding high quality lenders, we have recruited experienced operations specialists and retained consultants to help us enhance our policies, procedures and infrastructure to position the Bank for continued growth," commented George Martinez, Allegiance's Chairman and Chief Executive Officer.

"Credit quality remains a core foundational strength with key metrics remaining favorable. We continue to monitor current events and economic trends that could impact our market and clients. We are fortunate to be located in Houston where customers are continuing to make investments in the increasingly diversified local economy," concluded Martinez.

First Quarter 2017 Results

First quarter 2017 annualized returns on average assets, average equity and average tangible equity were 0.96%, 8.61% and 10.15%, respectively, compared to 1.19%, 9.70% and 11.67%, respectively, for the first quarter 2016. Excluding the gain on the sale of two Central Texas branch locations that occurred during the first quarter 2016, the annualized returns on average assets, average equity and average tangible equity for the first quarter 2016 would have been 0.94%, 7.67% and 9.22%, respectively. Annualized returns on average assets, average equity and average tangible equity for the fourth quarter 2016 were 0.93%, 8.25% and 9.79%, respectively.

Net interest income before provision for loan losses for the first quarter 2017 increased $3.0 million, or 14.4%, to $24.1 million from $21.1 million for the first quarter 2016 primarily due to organic loan growth and an increase in our securities portfolio. Net interest income before provision for loan losses for the first quarter 2017 increased $706 thousand, or 3.0%, from $23.4 million for the fourth quarter 2016. The net interest margin on a tax equivalent basis decreased 7 basis points to 4.38% for the first quarter 2017 from 4.45% for the first quarter 2016, and increased 6 basis points from 4.32% for the fourth quarter 2016.

Noninterest income for the first quarter 2017 was $1.3 million, a decrease of $2.0 million, or 59.4%, compared to $3.3 million for the first quarter 2016 and a decrease of $137 thousand, or 9.3%, compared to $1.5 million for the fourth quarter 2016. The first quarter 2016 included a pre-tax gain of $2.1 million on the sale of the two Central Texas branch locations and the fourth quarter 2016 included a gain on the sale of other real estate of $206 thousand.

Noninterest expense for the first quarter 2017 increased $2.3 million, or 16.1%, to $16.5 million from $14.3 million for the first quarter 2016, and increased $362 thousand, or 2.2%, from $16.2 million for the fourth quarter 2016. The increase in noninterest expense over the first quarter 2016 was primarily due to increases in salaries and benefits and professional fees related to supporting growth initiatives.

In the first quarter 2017, Allegiance’s efficiency ratio increased to 64.98% from 63.80% for the first quarter 2016 and decreased from 65.09% for the fourth quarter 2016.

Financial Condition

Total loans at March 31, 2017 increased $269.0 million, or 15.7%, to $1.99 billion compared to $1.72 billion at March 31, 2016 and increased $94.8 million, or 5.0%, compared to $1.89 billion at December 31, 2016. These increases were due to strong organic loan growth within the Bank’s loan portfolio. Core loans, which exclude the mortgage warehouse portfolio, increased $291 million, or 17.8%, to $1.92 billion at March 31, 2017 from $1.63 billion at March 31, 2016 and increased $97.7 million, or 5.4%, from $1.82 billion at December 31, 2016.

Deposits at March 31, 2017 increased $169.9 million, or 9.2%, to $2.01 billion compared to $1.84 billion at March 31, 2016 and increased $142.4 million, or 7.6%, compared to $1.87 billion at December 31, 2016.

Asset Quality

Nonperforming assets totaled $19.9 million, or 0.77% of total assets, at March 31, 2017, compared to $8.5 million, or 0.38% of total assets, at March 31, 2016, and $18.5 million, or 0.75% of total assets, at December 31, 2016. The allowance for loan losses was 0.94% of total loans at March 31, 2017, 0.80% of total loans at March 31, 2016 and 0.95% of total loans at December 31, 2016.

The provision for loan losses for the first quarter 2017 was $1.3 million, or 0.28% (annualized) of average loans, compared to $710 thousand, or 0.17% (annualized) of average loans, for the first quarter 2016, and $900 thousand, or 0.19% (annualized) of average loans, for the fourth quarter 2016. First quarter 2017 net charge-offs were $567 thousand, or 0.12% (annualized) of average loans, compared to net charge-offs of $51 thousand, or 0.01% (annualized) of average loans, for the first quarter 2016, and $174 thousand, or 0.04% (annualized) of average loans, for the fourth quarter 2016.

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 9 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 25, 2017 at 9:00 a.m. Central Time (10:00 a.m. Eastern Time) to discuss its first quarter 2017 results. Individuals and investment professionals may participate in the call by dialing (877) 279-2520. The conference ID number is 1503877. 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.

Allegiance Bancshares, Inc.

Allegiance Bancshares, Inc. is a $2.59 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 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,” “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, 2016 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 Investor Relations, 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)
2017 2016
March 31 December 31 September 30 June 30 March 31
(Dollars in thousands)
Cash and cash equivalents$184,146 $142,098 $225,082 $210,863 $183,290
Available for sale securities317,219 316,455 310,033 303,463 215,401
Total loans1,986,438 1,891,635 1,830,722 1,753,683 1,717,448
Allowance for loan losses(18,687) (17,911) (17,185) (14,917) (13,757)
Loans, net1,967,751 1,873,724 1,813,537 1,738,766 1,703,691
Goodwill39,389 39,389 39,389 39,389 39,389
Core deposit intangibles, net3,860 4,055 4,250 4,446 4,641
Premises and equipment, net18,138 18,340 17,811 17,821 18,121
Other real estate owned365 1,503 1,138 1,397 1,397
Bank owned life insurance21,985 21,837 21,684 21,530 21,377
Other assets39,477 33,547 28,978 29,906 23,400
Total assets$2,592,330 $2,450,948 $2,461,902 $2,367,581 $2,210,707
Noninterest-bearing deposits$615,225 $593,751 $604,278 $630,689 $684,245
Interest-bearing deposits1,397,344 1,276,432 1,296,601 1,212,650 1,158,409
Total deposits2,012,569 1,870,183 1,900,879 1,843,339 1,842,654
Short-term borrowings75,000 85,000 61,000 30,000 85,000
Other borrowed funds200,569 200,569 200,569 200,569 569
Subordinated debentures9,222 9,196 9,169 9,142 9,115
Other liabilities5,840 6,183 9,190 8,280 7,076
Total liabilities2,303,200 2,171,131 2,180,807 2,091,330 1,944,414
Common stock13,080 12,958 12,905 12,869 12,845
Capital surplus215,015 212,649 211,349 210,512 209,883
Retained earnings63,309 57,262 51,491 46,020 40,766
Accumulated other comprehensive (loss) income(2,274) (3,052) 5,350 6,850 2,799
Shareholders' equity289,130 279,817 281,095 276,251 266,293
Total liabilities and equity$2,592,330 $2,450,948 $2,461,902 $2,367,581 $2,210,707


Allegiance Bancshares, Inc.
Financial Highlights
(Unaudited)
Three Months Ended
2017 2016
March 31 December 31 September 30 June 30 March 31
(Dollars in thousands, except per share data)
INTEREST INCOME:
Loans, including fees$25,260 $24,232 $24,057 $22,839 $22,228
Securities
Taxable498 478 607 452 270
Tax-exempt1,624 1,642 1,505 1,086 811
Deposits in other financial institutions130 129 150 150 142
Total interest income27,512 26,481 26,319 24,527 23,451
INTEREST EXPENSE:
Demand, money market and savings deposits654 673 651 569 544
Certificates and other time deposits1,957 1,947 1,872 1,665 1,560
Short-term borrowings324 90 63 106 139
Subordinated debt120 128 123 120 117
Other borrowed funds329 221 201 118 7
Total interest expense3,384 3,059 2,910 2,578 2,367
NET INTEREST INCOME24,128 23,422 23,409 21,949 21,084
Provision for loan losses1,343 900 2,214 1,645 710
Net interest income after provision for loan losses22,785 22,522 21,195 20,304 20,374
NONINTEREST INCOME:
Nonsufficient funds fees199 178 175 145 163
Service charges on deposit accounts195 177 182 173 145
Gain on sale of branch assets 2,050
Gain on sale of securities 30
Gain on sales of other real estate 206 60
Bank owned life insurance148 153 154 153 166
Other799 734 703 741 780
Total noninterest income1,341 1,478 1,274 1,212 3,304
NONINTEREST EXPENSE:
Salaries and employee benefits10,562 10,627 9,781 9,177 9,273
Net occupancy and equipment1,427 1,238 1,260 1,214 1,232
Depreciation400 391 404 415 417
Data processing and software amortization695 703 655 622 653
Professional fees895 857 442 401 534
Regulatory assessments and FDIC insurance589 485 396 355 345
Core deposit intangibles amortization195 195 196 195 199
Communications247 237 264 274 280
Advertising263 319 228 197 201
Other1,276 1,135 1,269 1,073 1,119
Total noninterest expense16,549 16,187 14,895 13,923 14,253
INCOME BEFORE INCOME TAXES7,577 7,813 7,574 7,593 9,425
Provision for income taxes1,530 2,042 2,103 2,339 3,070
NET INCOME$6,047 $5,771 $5,471 $5,254 $6,355
EARNINGS PER SHARE
Basic$0.46 $0.45 $0.42 $0.41 $0.49
Diluted$0.45 $0.44 $0.42 $0.40 $0.49


Allegiance Bancshares, Inc.
Financial Highlights
(Unaudited)
Three Months Ended
2017 2016
March 31 December 31 September 30 June 30 March 31
(Dollars and share amounts in thousands, except per share data)
Net income $6,047 $5,771 $5,471 $5,254 $6,355
Earnings per share, basic $0.46 $0.45 $0.42 $0.41 $0.49
Earnings per share, diluted $0.45 $0.44 $0.42 $0.40 $0.49
Return on average assets(A) 0.96% 0.93% 0.90% 0.91% 1.19%
Return on average equity(A) 8.61% 8.25% 7.77% 7.79% 9.70%
Return on average tangible equity(A)(B) 10.15% 9.79% 9.21% 9.30% 11.67%
Tax equivalent net interest margin(C) 4.38% 4.32% 4.39% 4.32% 4.45%
Efficiency ratio(D) 64.98% 65.09% 60.34% 60.11% 63.80%
Liquidity and Capital Ratios
Equity to assets 11.15% 11.42% 11.42% 11.67% 12.05%
Common equity Tier 1 capital 11.10% 11.44% 11.40% 11.50% 11.57%
Tier 1 risk-based capital 11.51% 11.87% 11.84% 11.97% 12.04%
Total risk-based capital 12.35% 12.72% 12.68% 12.72% 12.76%
Tier 1 leverage capital 10.28% 10.35% 10.25% 10.43% 10.92%
Tangible equity to tangible assets(B) 9.65% 9.82% 9.82% 10.00% 10.26%
Other Data
Weighted average shares:
Basic 13,021 12,913 12,882 12,857 12,840
Diluted 13,377 13,180 13,108 13,039 12,967
Period end shares outstanding 13,080 12,958 12,905 12,869 12,845
Book value per share $22.10 $21.59 $21.78 $21.47 $20.73
Tangible book value per share(B) $18.80 $18.24 $18.40 $18.06 $17.30

(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 9 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, 2017 December 31, 2016 March 31, 2016
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$1,928,333 $25,260 5.31% $1,847,122 $24,232 5.22% $1,663,711 $22,228 5.37%
Securities325,911 2,122 2.64% 314,387 2,120 2.68% 186,460 1,081 2.33%
Deposits in other financial institutions53,338 130 0.99% 68,974 129 0.74% 91,824 142 0.62%
Total interest-earning assets2,307,582 $27,512 4.84% 2,230,483 $26,481 4.72% 1,941,995 $23,451 4.86%
Allowance for loan losses(18,200) (17,579) (13,487)
Noninterest-earning assets259,315 247,465 226,946
Total assets$2,548,697 $2,460,369 $2,155,454
Liabilities and Shareholders' Equity
Interest-Bearing Liabilities:
Interest-bearing demand deposits$130,909 $100 0.31% $107,180 $84 0.31% $95,506 $67 0.28%
Money market and savings deposits486,779 554 0.46% 507,362 589 0.46% 433,139 477 0.44%
Certificates and other time deposits685,169 1,957 1.16% 681,425 1,947 1.14% 614,216 1,560 1.02%
Short-term borrowings145,278 324 0.91% 57,478 90 0.63% 126,374 139 0.44%
Subordinated debt9,205 120 5.28% 9,178 128 5.55% 9,098 117 5.19%
Other borrowed funds200,570 329 0.66% 200,570 221 0.44% 569 7 5.23%
Total interest-bearing liabilities1,657,910 $3,384 0.83% 1,563,193 $3,059 0.78% 1,278,902 $2,367 0.74%
Noninterest-Bearing liabilities:
Noninterest-bearing demand deposits600,006 610,310 605,969
Other liabilities5,892 8,743 7,186
Total liabilities2,263,808 2,182,246 1,892,057
Shareholders' equity284,889 278,123 263,397
Total liabilities and shareholders' equity$2,548,697 $2,460,369 $2,155,454
Net interest rate spread 4.01% 3.94% 4.12%
Net interest income and margin $24,128 4.24% $23,422 4.18% $21,084 4.37%
Net interest income and margin (tax equivalent) $24,907 4.38% $24,219 4.32% $21,483 4.45%


Allegiance Bancshares, Inc.
Financial Highlights
(Unaudited)
As of and For the Three Months Ended
2017 2016
March 31 December 31 September 30 June 30 March 31
(Dollars in thousands)
Period-end Loan Portfolio:
Commercial and industrial$425,154 $416,752 $402,273 $382,795 $372,056
Mortgage warehouse64,132 67,038 76,043 75,554 86,157
Real Estate:
Commercial real estate (including multi-family residential)961,212 891,989 848,939 806,771 770,252
Commercial real estate construction and land development175,264 159,247 167,936 161,572 167,810
1-4 family residential (including home equity)250,881 246,987 228,651 214,442 209,704
Residential construction99,648 98,657 93,923 101,677 100,611
Consumer and other10,147 10,965 12,957 10,872 10,858
Total loans$1,986,438 $1,891,635 $1,830,722 $1,753,683 $1,717,448
Asset Quality:
Nonaccrual loans$19,315 $15,788 $15,882 $7,124 $6,979
Accruing loans 90 or more days past due 911
Total nonperforming loans19,315 16,699 15,882 7,124 6,979
Other real estate365 1,503 1,138 1,397 1,397
Other repossessed assets260 286 30 128 131
Total nonperforming assets$19,940 $18,488 $17,050 $8,649 $8,507
Net charge-offs (recoveries)$567 $174 $(54) $485 $51
Nonaccrual loans:
Commercial and industrial$8,933 $3,896 $4,983 $2,723 $2,700
Mortgage warehouse
Real Estate:
Commercial real estate (including multi-family residential)9,726 11,663 10,495 4,141 3,293
Commercial real estate construction and land development70
1-4 family residential (including home equity)574 217 11 227 934
Residential construction
Consumer and other12 12 393 33 52
Total nonaccrual loans$19,315 $15,788 $15,882 $7,124 $6,979
Asset Quality Ratios:
Nonperforming assets to total assets0.77% 0.75% 0.69% 0.37% 0.38%
Nonperforming loans to total loans0.97% 0.88% 0.87% 0.41% 0.41%
Allowance for loan losses to nonperforming loans96.75% 107.26% 108.20% 209.39% 197.12%
Allowance for loan losses to total loans0.94% 0.95% 0.94% 0.85% 0.80%
Net charge-offs (recoveries) to average loans (annualized)0.12% 0.04% (0.01)% 0.11% 0.01%


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. Allegiance believes that these non-GAAP financial measures provide meaningful supplemental information regarding its performance. Allegiance excluded the one time sale of two Central Texas branch locations during the first quarter 2016 as noted within the narrative, as Allegiance believes this transaction was not indicative of its recurring operating results. Allegiance believes that management and investors benefit from referring to these non-GAAP financial measures in assessing Allegiance’s performance and when planning, forecasting, analyzing and comparing past, present and future periods. 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. 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
2017 2016
March 31 December 31 September 30 June 30 March 31
(Dollars and share amounts in thousands, except per share data)
Total shareholders' equity $289,130 $279,817 $281,095 $276,251 $266,293
Less: Goodwill and core deposit intangibles, net 43,249 43,444 43,639 43,835 44,030
Tangible shareholders’ equity $245,881 $236,373 $237,456 $232,416 $222,263
Shares outstanding at end of period 13,080 12,958 12,905 12,869 12,845
Tangible book value per share $18.80 $18.24 $18.40 $18.06 $17.30
Net income attributable to shareholders $6,047 $5,771 $5,471 $5,254 $6,355
Average shareholders' equity $284,889 $278,123 $280,065 $271,128 $263,397
Less: Average goodwill and core deposit intangibles, net 43,345 43,539 43,735 43,930 44,319
Average tangible shareholders’ equity $241,544 $234,584 $236,330 $227,198 $219,078
Return on average tangible equity 10.15% 9.79% 9.21% 9.30% 11.67%
Total assets $2,592,330 $2,450,948 $2,461,902 $2,367,581 $2,210,707
Less: Goodwill and core deposit intangibles, net 43,249 43,444 43,639 43,835 44,030
Tangible assets $2,549,081 $2,407,504 $2,418,263 $2,323,746 $2,166,677
Tangible equity to tangible assets 9.65% 9.82% 9.82% 10.00% 10.26%


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

Source:Allegiance Bancshares, Inc.