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Allegiance Bancshares, Inc. Reports Second Quarter 2017 Results

  • Record core loan growth of $363.0 million, or 21.6%, year over year and $118.8 million, or 24.7% (annualized), for the second quarter 2017 compared to the linked quarter

  • Net interest income increased 14.4% year over year and 4.1% for the second quarter 2017 compared to the linked quarter

  • Efficiency ratio decreased to 61.92% for the second quarter 2017 from 64.98% for the first quarter 2017

HOUSTON, July 25, 2017 (GLOBE NEWSWIRE) -- Allegiance Bancshares, Inc. (NASDAQ:ABTX) ("Allegiance"), the holding company of Allegiance Bank (the "Bank"), today reported net income of $5.4 million in the second quarter 2017 compared to $5.3 million in the second quarter 2016 and diluted earnings per share for the second quarter 2017 and 2016 of $0.40.

"We are extremely proud to report another record quarter of high-quality organic loan production," commented George Martinez, Allegiance's Chairman and Chief Executive Officer. "Our linked second quarter core loan growth of $118.8 million represents an annualized increase of 24.7% and reflects the hard work and dedication of our talented team of legacy lenders who, in collaboration with our recently added lenders, continue to build strong relationships in the vibrant Houston market. At the same time, our asset quality continues to be solid with net charge-offs of 0.13%, which reflects our disciplined underwriting," continued Martinez.

"In addition to enhancing our lending team, we have hired key personnel to strengthen our infrastructure and support the operational and regulatory requirements applicable to a larger bank as we pursue our ambitious growth goals. While net income declined in the second quarter 2017 compared to the linked quarter, primarily due to an increased provision for loan loss expense as a result of robust loan growth and prior nonperforming credit relationships, we are pleased to see gains in both efficiency and pre-tax pre-provision earnings in our second quarter 2017 performance,” concluded Martinez.

Second Quarter 2017 Results

Net interest income before provision for loan losses in the second quarter 2017 increased $3.2 million, or 14.4%, to $25.1 million from $21.9 million for the second quarter 2016 primarily due to organic loan growth and an increase in our securities portfolio. Net interest income before provision for loan losses in the second quarter 2017 increased $979 thousand, or 4.1%, from $24.1 million in the first quarter 2017. The net interest margin on a tax equivalent basis decreased 3 basis points to 4.29% for the second quarter 2017 from 4.32% for the second quarter 2016 and decreased 9 basis points from 4.38% for the first quarter 2017.

Noninterest income for the second quarter 2017 was $1.5 million, an increase of $265 thousand, or 21.9%, compared to $1.2 million for the second quarter 2016 and an increase of $136 thousand, or 10.1%, compared to $1.3 million for the first quarter 2017.

Noninterest expense for the second quarter 2017 increased $2.5 million, or 18.2%, to $16.5 million from $13.9 million for the second quarter 2016, and decreased $88 thousand, or 0.5%, from $16.5 million for the first quarter 2017. The increase in noninterest expense over the second quarter 2016 was primarily due to increased professional service fees to support growth initiatives.

In the second quarter 2017, Allegiance’s efficiency ratio decreased to 61.92% from 64.98% for the first quarter 2017 and increased from 60.11% for the second quarter 2016.

Second quarter 2017 annualized returns on average assets, average equity and average tangible equity were 0.81%, 7.32% and 8.57%, respectively, compared to 0.91%, 7.79% and 9.30%, respectively, for the second quarter 2016. Annualized returns on average assets, average equity and average tangible equity for the first quarter 2017 were 0.96%, 8.61% and 10.15%, respectively.

Six Months Ended June 30, 2017 Results

Net interest income before provision for loan losses for the six months ended June 30, 2017 increased $6.2 million, or 14.4%, to $49.2 million from $43.0 million for the six months ended June 30, 2016 primarily due to organic loan growth and an increase in our securities portfolio. The net interest margin on a tax equivalent basis decreased 5 basis points to 4.33% for the six months ended June 30, 2017 from 4.38% for the six months ended June 30, 2016.

Noninterest income for the six months ended June 30, 2017 was $2.8 million, a decrease of $1.7 million, or 37.6%, compared to $4.5 million for the six months ended June 30, 2016. The six months ended June 30, 2016 included a pre-tax gain of $2.1 million 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, noninterest income would have increased $352 thousand, or 14.3%, for the six months ended June 30, 2017 compared to the six months ended June 30, 2016.

Noninterest expense for the six months ended June 30, 2017 increased $4.8 million, or 17.2%, to $33.0 million from $28.2 million for the six months ended June 30, 2016. The increase in noninterest expense over the six months ended June 30, 2016 was primarily due to increases in salaries and benefits as a result of the increased headcount and professional service fees related to supporting growth initiatives.

During the six months ended June 30, 2017, Allegiance’s efficiency ratio increased to 63.41% from 61.93% for the six months ended June 30, 2016.

For the six months ended June 30, 2017, annualized returns on average assets, average equity and average tangible equity were 0.89%, 7.95% and 9.34%, respectively, compared to 1.04%, 8.74% and 10.46%, respectively, for the six months ended June 30, 2016. Excluding the gain on the sale of the two Central Texas branch locations during the first quarter 2016, the annualized returns on average assets, average equity and average tangible equity for the six months ended June 30, 2016 would have been 0.92%, 7.73% and 9.26%, respectively.

Financial Condition

Total loans at June 30, 2017 increased $361.0 million, or 20.6%, to $2.11 billion compared to $1.75 billion at June 30, 2016 and increased $128.2 million, or 6.5%, compared to $1.99 billion at March 31, 2017. These increases were due to strong organic loan growth within the Bank’s loan portfolio. Core loans, which exclude the mortgage warehouse portfolio, increased $363.0 million, or 21.6%, to $2.04 billion at June 30, 2017 from $1.68 billion at June 30, 2016 and increased $118.8 million, or 6.2%, from $1.92 billion at March 31, 2017.

Deposits at June 30, 2017 increased $255.9 million, or 13.9%, to $2.10 billion compared to $1.84 billion at June 30, 2016 and increased $86.7 million, or 4.3%, compared to $2.01 billion at March 31, 2017.

Asset Quality

Nonperforming assets totaled $19.9 million, or 0.73% of total assets, at June 30, 2017, compared to $8.6 million, or 0.37% of total assets, at June 30, 2016, and $19.9 million, or 0.77% of total assets, at March 31, 2017. The allowance for loan losses was 0.99% of total loans at June 30, 2017, 0.85% of total loans at June 30, 2016 and 0.94% of total loans at March 31, 2017.

The provision for loan losses for the second quarter 2017 was $3.0 million, or 0.59% (annualized) of average loans, compared to $1.6 million, or 0.38% (annualized) of average loans, for the second quarter 2016, and $1.3 million, or 0.28% (annualized) of average loans, for the first quarter 2017. During the quarter, Allegiance bolstered its reserves with consistent application of its allowance methodology. The provision for loan losses for the six months ended June 30, 2017 was $4.4 million, or 0.44% (annualized) of average loans, compared to $2.4 million, or 0.28% (annualized) of average loans for the six months ended June 30, 2016.

Second quarter 2017 net charge-offs were $684 thousand, or 0.13% (annualized) of average loans, compared to net charge-offs of $485 thousand, or 0.11% (annualized) of average loans, for the second quarter 2016, and $567 thousand, or 0.12% (annualized) of average loans, for the first quarter 2017. Net charge-offs for the six months ended June 30, 2017 were $1.3 million, or 0.13% (annualized) of average loans, compared to $656 thousand, or 0.08% (annualized) of average loans for the six months ended June 30, 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 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, July 25, 2017 at 9:00 a.m. Central Time (10:00 a.m. Eastern Time) to discuss its second quarter 2017 results. Individuals and investment professionals may participate in the call by dialing (877) 279-2520. The conference ID number is 51461392. 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, Past Events.

Allegiance Bancshares, Inc.

Allegiance Bancshares, Inc. is a $2.72 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; 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 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
June 30 March 31 December 31 September 30 June 30
(Dollars in thousands)
Cash and cash equivalents$187,491 $184,146 $142,098 $225,082 $210,863
Available for sale securities321,268 317,219 316,455 310,033 303,463
Total loans2,114,652 1,986,438 1,891,635 1,830,722 1,753,683
Allowance for loan losses(21,010) (18,687) (17,911) (17,185) (14,917)
Loans, net2,093,642 1,967,751 1,873,724 1,813,537 1,738,766
Goodwill39,389 39,389 39,389 39,389 39,389
Core deposit intangibles, net3,664 3,860 4,055 4,250 4,446
Premises and equipment, net18,240 18,138 18,340 17,811 17,821
Other real estate owned365 365 1,503 1,138 1,397
Bank owned life insurance22,131 21,985 21,837 21,684 21,530
Other assets38,526 39,477 33,547 28,978 29,906
Total assets$2,724,716 $2,592,330 $2,450,948 $2,461,902 $2,367,581
Noninterest-bearing deposits$662,527 $615,225 $593,751 $604,278 $630,689
Interest-bearing deposits1,436,715 1,397,344 1,276,432 1,296,601 1,212,650
Total deposits2,099,242 2,012,569 1,870,183 1,900,879 1,843,339
Short-term borrowings310,000 75,000 85,000 61,000 30,000
Other borrowed funds569 200,569 200,569 200,569 200,569
Subordinated debentures9,249 9,222 9,196 9,169 9,142
Other liabilities7,197 5,840 6,183 9,190 8,280
Total liabilities2,426,257 2,303,200 2,171,131 2,180,807 2,091,330
Common stock13,153 13,080 12,958 12,905 12,869
Capital surplus216,158 215,015 212,649 211,349 210,512
Retained earnings68,704 63,309 57,262 51,491 46,020
Accumulated other comprehensive income (loss)444 (2,274) (3,052) 5,350 6,850
Shareholders' equity298,459 289,130 279,817 281,095 276,251
Total liabilities and equity$2,724,716 $2,592,330 $2,450,948 $2,461,902 $2,367,581


Allegiance Bancshares, Inc.
Financial Highlights
(Unaudited)
Three Months Ended Year-to-Date
2017 2016 2017 2016
June 30 March 31 December 31 September 30 June 30 June 30 June 30
(Dollars in thousands, except per share data)
INTEREST INCOME:
Loans, including fees$26,736 $25,260 $24,232 $24,057 $22,839 $51,996 $45,067
Securities
Taxable503 498 478 607 452 1,001 723
Tax-exempt1,591 1,624 1,642 1,505 1,086 3,215 1,896
Deposits in other financial institutions157 130 129 150 150 287 292
Total interest income28,987 27,512 26,481 26,319 24,527 56,499 47,978
INTEREST EXPENSE:
Demand, money market and savings deposits702 654 673 651 569 1,356 1,113
Certificates and other time deposits2,283 1,957 1,947 1,872 1,665 4,240 3,225
Short-term borrowings620 324 90 63 106 944 245
Subordinated debt134 120 128 123 120 254 237
Other borrowed funds141 329 221 201 118 470 125
Total interest expense3,880 3,384 3,059 2,910 2,578 7,264 4,945
NET INTEREST INCOME25,107 24,128 23,422 23,409 21,949 49,235 43,033
Provision for loan losses3,007 1,343 900 2,214 1,645 4,350 2,355
Net interest income after provision for loan losses22,100 22,785 22,522 21,195 20,304 44,885 40,678
NONINTEREST INCOME:
Nonsufficient funds fees184 199 178 175 145 383 308
Service charges on deposit accounts205 195 177 182 173 400 318
Gain on sale of branch assets 2,050
Gain on sale of securities 30
Gain on sale of other real estate 206 60
Bank owned life insurance146 148 153 154 153 294 319
Other942 799 734 703 741 1,741 1,521
Total noninterest income1,477 1,341 1,478 1,274 1,212 2,818 4,516
NONINTEREST EXPENSE:
Salaries and employee benefits10,415 10,562 10,627 9,781 9,177 20,977 18,450
Net occupancy and equipment1,302 1,427 1,238 1,260 1,214 2,729 2,446
Depreciation398 400 391 404 415 798 832
Data processing and software amortization719 695 703 655 622 1,414 1,275
Professional fees987 895 857 442 401 1,882 935
Regulatory assessments and FDIC insurance569 589 485 396 355 1,158 700
Core deposit intangibles amortization196 195 195 196 195 391 394
Communications233 247 237 264 274 480 554
Advertising288 263 319 228 197 551 398
Other1,354 1,276 1,135 1,269 1,073 2,630 2,192
Total noninterest expense16,461 16,549 16,187 14,895 13,923 33,010 28,176
INCOME BEFORE INCOME TAXES7,116 7,577 7,813 7,574 7,593 14,693 17,018
Provision for income taxes1,721 1,530 2,042 2,103 2,339 3,251 5,409
NET INCOME$5,395 $6,047 $5,771 $5,471 $5,254 $11,442 $11,609
EARNINGS PER SHARE
Basic$0.41 $0.46 $0.45 $0.42 $0.41 $0.88 $0.90
Diluted$0.40 $0.45 $0.44 $0.42 $0.40 $0.85 $0.89


Allegiance Bancshares, Inc.
Financial Highlights
(Unaudited)
Three Months Ended Year-to-Date
2017 2016 2017 2016
June 30 March 31 December 31 September 30 June 30 June 30 June 30
(Dollars and share amounts in thousands, except per share data)
Net income $5,395 $6,047 $5,771 $5,471 $5,254 $11,442 $11,609
Earnings per share, basic $0.41 $0.46 $0.45 $0.42 $0.41 $0.88 $0.90
Earnings per share, diluted $0.40 $0.45 $0.44 $0.42 $0.40 $0.85 $0.89
Return on average assets(A) 0.81% 0.96% 0.93% 0.90% 0.91% 0.89% 1.04%
Return on average equity(A) 7.32% 8.61% 8.25% 7.77% 7.79% 7.95% 8.74%
Return on average tangible equity(A)(B) 8.57% 10.15% 9.79% 9.21% 9.30% 9.34% 10.46%
Tax equivalent net interest margin(C) 4.29% 4.38% 4.32% 4.39% 4.32% 4.33% 4.38%
Efficiency ratio(D) 61.92% 64.98% 65.09% 60.34% 60.11% 63.41% 61.93%
Liquidity and Capital Ratios
Equity to assets 10.95% 11.15% 11.42% 11.42% 11.67% 10.95% 11.67%
Common equity Tier 1 capital 10.84% 11.10% 11.44% 11.40% 11.69% 10.84% 11.69%
Tier 1 risk-based capital 11.24% 11.51% 11.87% 11.84% 12.16% 11.24% 12.16%
Total risk-based capital 12.13% 12.35% 12.72% 12.68% 12.92% 12.13% 12.92%
Tier 1 leverage capital 10.11% 10.28% 10.35% 10.25% 10.43% 10.11% 10.43%
Tangible equity to tangible assets(B) 9.52% 9.65% 9.82% 9.82% 10.00% 9.52% 10.00%
Other Data
Weighted average shares:
Basic 13,125 13,021 12,913 12,882 12,857 13,073 12,849
Diluted 13,471 13,377 13,180 13,108 13,039 13,425 13,003
Period end shares outstanding 13,153 13,080 12,958 12,905 12,869 13,153 12,869
Book value per share $22.69 $22.10 $21.59 $21.78 $21.47 $22.69 $21.47
Tangible book value per share(B) $19.42 $18.80 $18.24 $18.40 $18.06 $19.42 $18.06
(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
June 30, 2017 March 31, 2017 June 30, 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$2,042,460 $26,736 5.25% $1,928,333 $25,260 5.31% $1,724,346 $22,839 5.33%
Securities326,388 2,094 2.57% 325,911 2,122 2.64% 270,619 1,538 2.29%
Deposits in other financial institutions49,703 157 1.26% 53,338 130 0.99% 96,358 150 0.62%
Total interest-earning assets2,418,551 $28,987 4.81% 2,307,582 $27,512 4.84% 2,091,323 $24,527 4.72%
Allowance for loan losses(19,253) (18,200) (14,129)
Noninterest-earning assets261,668 259,315 236,857
Total assets$2,660,966 $2,548,697 $2,314,051
Liabilities and Shareholders' Equity
Interest-Bearing Liabilities:
Interest-bearing demand deposits$137,507 $118 0.34% $130,909 $100 0.31% $102,550 $88 0.34%
Money market and savings deposits499,335 584 0.47% 486,779 554 0.46% 435,851 481 0.44%
Certificates and other time deposits785,194 2,283 1.17% 685,169 1,957 1.16% 627,982 1,665 1.07%
Short-term borrowings237,681 620 1.05% 145,278 324 0.91% 88,242 106 0.48%
Subordinated debt9,232 134 5.83% 9,205 120 5.28% 9,125 120 5.28%
Other borrowed funds66,503 141 0.85% 200,570 329 0.66% 118,629 118 0.40%
Total interest-bearing liabilities1,735,452 $3,880 0.90% 1,657,910 $3,384 0.83% 1,382,379 $2,578 0.75%
Noninterest-Bearing Liabilities:
Noninterest-bearing demand deposits624,100 600,006 652,405
Other liabilities5,889 5,892 8,139
Total liabilities2,365,442 2,263,808 2,042,923
Shareholders' equity295,524 284,889 271,128
Total liabilities and shareholders' equity$2,660,966 $2,548,697 $2,314,051
Net interest rate spread 3.91% 4.01% 3.97%
Net interest income and margin $25,107 4.16% $24,128 4.24% $21,949 4.22%
Net interest income and margin (tax equivalent) $25,862 4.29% $24,907 4.38% $22,481 4.32%


Allegiance Bancshares, Inc.
Financial Highlights
(Unaudited)
Year-to-Date
June 30, 2017 June 30, 2016
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$1,985,712 $51,996 5.28% $1,694,029 $45,067 5.35%
Securities326,151 4,216 2.61% 228,540 2,619 2.30%
Deposits in other financial institutions51,511 287 1.12% 94,091 292 0.62%
Total interest-earning assets2,363,374 $56,499 4.82% 2,016,660 $47,978 4.78%
Allowance for loan losses(18,729) (13,808)
Noninterest-earning assets260,497 231,901
Total assets$2,605,142 $2,234,753
Liabilities and Shareholders' Equity
Interest-Bearing Liabilities:
Interest-bearing demand deposits$134,226 $218 0.33% $99,028 $155 0.31%
Money market and savings deposits493,092 1,138 0.47% 434,495 958 0.44%
Certificates and other time deposits735,458 4,240 1.16% 621,099 3,225 1.04%
Short-term borrowings191,735 944 0.99% 107,308 245 0.46%
Subordinated debt9,218 254 5.56% 9,111 237 5.23%
Other borrowed funds133,166 470 0.71% 59,599 125 0.42%
Total interest-bearing liabilities1,696,895 $7,264 0.86% 1,330,640 $4,945 0.75%
Noninterest-Bearing Liabilities:
Noninterest-bearing demand deposits612,120 629,187
Other liabilities5,891 7,663
Total liabilities2,314,906 1,967,490
Shareholders' equity290,236 267,263
Total liabilities and shareholders' equity$2,605,142 $2,234,753
Net interest rate spread 3.96% 4.03%
Net interest income and margin $49,235 4.20% $43,033 4.29%
Net interest income and margin (tax equivalent) $50,770 4.33% $43,964 4.38%


Allegiance Bancshares, Inc.
Financial Highlights
(Unaudited)
As of and For the Three Months Ended
2017 2016
June 30 March 31 December 31 September 30 June 30
(Dollars in thousands)
Period-end Loan Portfolio:
Commercial and industrial$444,701 $425,154 $416,752 $402,273 $382,795
Mortgage warehouse73,499 64,132 67,038 76,043 75,554
Real estate:
Commercial real estate (including multi-family residential)1,008,027 961,212 891,989 848,939 806,771
Commercial real estate construction and land development206,024 175,264 159,247 167,936 161,572
1-4 family residential (including home equity)267,939 250,881 246,987 228,651 214,442
Residential construction102,832 99,648 98,657 93,923 101,677
Consumer and other11,630 10,147 10,965 12,957 10,872
Total loans$2,114,652 $1,986,438 $1,891,635 $1,830,722 $1,753,683
Asset Quality:
Nonaccrual loans$19,330 $19,315 $15,788 $15,882 $7,124
Accruing loans 90 or more days past due 911
Total nonperforming loans19,330 19,315 16,699 15,882 7,124
Other real estate365 365 1,503 1,138 1,397
Other repossessed assets205 260 286 30 128
Total nonperforming assets$19,900 $19,940 $18,488 $17,050 $8,649
Net charge-offs (recoveries)$684 $567 $174 $(54) $485
Nonaccrual loans:
Commercial and industrial$9,051 $8,933 $3,896 $4,983 $2,723
Mortgage warehouse
Real estate:
Commercial real estate (including multi-family residential)9,556 9,726 11,663 10,495 4,141
Commercial real estate construction and land development 70
1-4 family residential (including home equity)568 574 217 11 227
Residential construction
Consumer and other155 12 12 393 33
Total nonaccrual loans$19,330 $19,315 $15,788 $15,882 $7,124
Asset Quality Ratios:
Nonperforming assets to total assets0.73% 0.77% 0.75% 0.69% 0.37%
Nonperforming loans to total loans0.91% 0.97% 0.88% 0.87% 0.41%
Allowance for loan losses to nonperforming loans108.69% 96.75% 107.26% 108.20% 209.39%
Allowance for loan losses to total loans0.99% 0.94% 0.95% 0.94% 0.85%
Net charge-offs (recoveries) to average loans (annualized)0.13% 0.12% 0.04% (0.01)% 0.11%

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 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. Additionally, 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 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 Year-to-Date
2017 2016 2017 2016
June 30 March 31 December 31 September 30 June 30 June 30 June 30
(Dollars and share amounts in thousands, except per share data)
Total shareholders' equity $298,459 $289,130 $279,817 $281,095 $276,251 $298,459 $276,251
Less: Goodwill and core deposit intangibles, net 43,054 43,249 43,444 43,639 43,835 43,054 43,835
Tangible shareholders’ equity $255,405 $245,881 $236,373 $237,456 $232,416 $255,405 $232,416
Shares outstanding at end of period 13,153 13,080 12,958 12,905 12,869 13,153 12,869
Tangible book value per share $19.42 $18.80 $18.24 $18.40 $18.06 $19.42 $18.06
Net income attributable to shareholders $5,395 $6,047 $5,771 $5,471 $5,254 $11,442 $11,609
Average shareholders' equity $295,524 $284,889 $278,123 $280,065 $271,128 $290,236 $267,263
Less: Average goodwill and core deposit intangibles, net 43,149 43,345 43,539 43,735 43,930 43,246 44,124
Average tangible shareholders’ equity $252,375 $241,544 $234,584 $236,330 $227,198 $246,990 $223,139
Return on average tangible equity 8.57% 10.15% 9.79% 9.21% 9.30% 9.34% 10.46%
Total assets $2,724,716 $2,592,330 $2,450,948 $2,461,902 $2,367,581 $2,724,716 $2,367,581
Less: Goodwill and core deposit intangibles, net 43,054 43,249 43,444 43,639 43,835 43,054 43,835
Tangible assets $2,681,662 $2,549,081 $2,407,504 $2,418,263 $2,323,746 $2,681,662 $2,323,746
Tangible equity to tangible assets 9.52% 9.65% 9.82% 9.82% 10.00% 9.52% 10.00%

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

Source:Allegiance Bancshares, Inc.