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.

(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.
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.