Allegiance Bancshares, Inc. Reports Third Quarter 2020 Results

  • Record net income of $16.2 million and diluted earnings per share of $0.79, representing 34.2% net income growth and 38.6% diluted earnings per share growth from the third quarter of 2019
  • Net charge-offs to average loans of 0.03% (annualized) for the third quarter 2020

  • Deposits increased 4.6%, or 18.4% annualized, over the second quarter 2020

  • Declared quarterly dividend of $0.10 per share of common stock

HOUSTON, Oct. 29, 2020 (GLOBE NEWSWIRE) --  Allegiance Bancshares, Inc. (NASDAQ: ABTX) (Allegiance), the holding company of Allegiance Bank (the "Bank"), today reported net income of $16.2 million and diluted earnings per share of $0.79 for the third quarter 2020 compared to net income of $12.0 million and diluted earnings per share of $0.57 for the third quarter 2019. Net income for the nine months ended September 30, 2020 was $29.6 million, or $1.44 per diluted share, compared to $39.0 million, or $1.81 per diluted share, for the nine months ended September 30, 2019.   The three months ended September 30, 2020 results were primarily due to increased net interest income partially offset by write-downs of other real estate of $1.9 million. The nine months ended September 30, 2020 results were primarily impacted by the increased provision for loan losses in response to COVID-19-related uncertainties in the current economic environment partially offset by increased net interest income.

“Given the continuing economic slowdown and uncertainties due to the pandemic, we are very pleased with our level of loan and deposit production and core earnings that contributed to a record level of net income for the third quarter. Our team continues to work diligently to support our customers and the communities we serve. The experience we have with our long established customer relationships and disciplined underwriting are key strengths that guide and serve us well during this extended period of recovery,” said Steve Retzloff, Allegiance’s Chief Executive Officer. “We further extended our customer outreach during the third quarter as we assessed current conditions and related risks and as we determined appropriate grading of our portfolio and related assessments. These one-on-one discussions and status updates, as well as working with those who requested payment deferrals, give us confidence in the overall quality of our loan portfolio,” commented Retzloff.

“We believe our strong liquidity, solid capital and focus on expense management, as well as the tradition of community banking, experience and continued commitment of the entire Allegiance team, will help ensure that our core business is solid and resilient. We remain focused on achieving our goals as we strategically position Allegiance to provide long-term value to our shareholders, and continue to be a source of strength for our customers, employees and community as we all navigate toward a more normalized economic environment,” concluded Retzloff.

Third Quarter 2020 Results

Net interest income before the provision for loan losses in the third quarter 2020 increased $7.1 million, or 15.8%, to $51.9 million from $44.8 million for the third quarter 2019 and increased $1.1 million, or 2.1%, from $50.8 million in the second quarter 2020. These increases were primarily due to changes in the volume and relative mix of the underlying assets and liabilities, the impact of PPP loans as well as lower costs on interest-bearing liabilities. The net interest margin on a tax equivalent basis decreased 21 basis points to 3.95% for the third quarter 2020 from 4.16% for the third quarter 2019 and decreased 15 basis points from 4.10% for the second quarter 2020. Excluding the impact of acquisition accounting adjustments, adjusted net interest margin on a tax equivalent basis was 3.91% for the third quarter 2020 compared to 3.97% for the third quarter 2019 and 4.05% for the second quarter 2020. Adjusted net interest margin is a non-GAAP measure. Please refer to the non-GAAP reconciliation on page 11.

Noninterest income for the third quarter 2020 was $1.9 million, a decrease of $1.0 million, or 36.0%, compared to $2.9 million for the third quarter 2019 and an increase of $288 thousand, or 18.4%, compared to $1.6 million for the second quarter 2020. Third quarter 2020 noninterest income reflected lower transactional fee income and significantly lower correspondent bank rebates.  

Noninterest expense for the third quarter 2020 increased $2.6 million, or 8.5%, to $32.6 million from $30.0 million for the third quarter 2019 and increased $2.8 million, or 9.4%, compared to the second quarter 2020. Noninterest expense for the third quarter 2020 included $1.9 million of other real estate write-downs.

In the third quarter 2020, Allegiance’s efficiency ratio was 60.58% compared to 56.92% for the second quarter 2020 and 62.88% for the third quarter 2019. Third quarter 2020 annualized returns on average assets, average equity and average tangible equity were 1.09%, 8.59% and 12.72%, respectively, compared to 0.71%, 5.51% and 8.32%, respectively, for the second quarter 2020. Annualized returns on average assets, average equity and average tangible equity for the third quarter 2019 were 0.98%, 6.73% and 10.33%, respectively. Return on average tangible equity is a non-GAAP measure. Please refer to the non-GAAP reconciliation on page 11.

Nine Months Ended September 30, 2020 Results

Net interest income before provision for loan losses for the nine months ended September 30, 2020 increased $12.8 million, or 9.5%, to $147.8 million from $135.0 million for the nine months ended September 30, 2019 primarily due to a $654.4 million, or 15.4%, increase in average interest-earning assets over the prior year, the impact of PPP loans as well as lower costs related to interest-bearing liabilities. The net interest margin on a tax equivalent basis decreased 21 basis points to 4.06% for the nine months ended September 30, 2020 from 4.27% for the nine months ended September 30, 2019. Excluding the impact of acquisition accounting adjustments, the adjusted net interest margin for the nine months ended September 30, 2020 was 3.99%, compared to 4.02% for the nine months ended September 30, 2019. Adjusted net interest margin is a non-GAAP measure. Please refer to the non-GAAP reconciliation on page 11.

Noninterest income for the nine months ended September 30, 2020 was $6.1 million, a decrease of $3.9 million, or 38.8%, compared to $10.0 million for the nine months ended September 30, 2019 due primarily to significantly lower correspondent bank rebates and losses on the sales of other real estate owned of $258 thousand. Additionally, noninterest income for the first nine months of 2020 included $287 thousand of gains on the sale of securities compared to $846 thousand for the first nine months of 2019.

Noninterest expense for the nine months ended September 30, 2020 increased $3.5 million, or 3.9%, to $94.7 million from $91.2 million for the nine months ended September 30, 2019. The increase in noninterest expense during the nine months ended September 30, 2020 was primarily due to $4.1 million of other real estate write-downs partially offset by having no merger-related expenses incurred compared to $1.3 million during the first nine months of 2019.

Allegiance’s efficiency ratio decreased from 63.25% for the nine months ended September 30, 2019 to 61.67% for the nine months ended September 30, 2020. For the nine months ended September 30, 2020, returns on average assets, average equity and average tangible equity were 0.72%, 5.43% and 8.16%, respectively, compared to 1.09%, 7.36% and 11.35%, respectively, for the nine months ended September 30, 2019. Return on average tangible equity is a non-GAAP measure. Please refer to the non-GAAP reconciliation on page 11.

Financial Condition

Total assets at September 30, 2020 increased $130.9 million, or 9.0% (annualized), to $5.97 billion compared to $5.84 billion at June 30, 2020 and increased $1.06 billion, or 21.6%, compared to $4.91 billion at September 30, 2019, primarily due to the origination of PPP loans and growth in the securities portfolio.

Total loans at September 30, 2020 increased $8.7 million, or 0.8% (annualized), to $4.59 billion compared to $4.58 billion at June 30, 2020 and increased $706.4 million, or 18.2%, compared to $3.89 billion at September 30, 2019, primarily due to the origination of $710.2 million of PPP loans. Core loans, which exclude the mortgage warehouse portfolio and PPP loans, decreased $5.8 million, or 0.6% (annualized), to $3.88 billion at September 30, 2020 from $3.89 billion at June 30, 2020 and increased $32.7 million, or 0.8%, from $3.85 billion at September 30, 2019.

Deposits at September 30, 2020 increased $216.7 million, or 18.4% (annualized), to $4.92 billion compared to $4.70 billion at June 30, 2020 and increased $1.02 billion, or 26.2%, compared to $3.90 billion at September 30, 2019.

Asset Quality

Nonperforming assets totaled $46.8 million, or 0.78% of total assets, at September 30, 2020, compared to $45.1 million, or 0.77% of total assets, at June 30, 2020, and $42.9 million, or 0.88% of total assets, at September 30, 2019. The allowance for loan losses was 1.06% of total loans at September 30, 2020, 1.04% of total loans at June 30, 2020 and 0.77% of total loans at September 30, 2019. Accounting Standards Update (ASU) 2016-13, “Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments” (CECL), became effective for the Company on January 1, 2020. On March 27, 2020, the CARES Act included an option for entities to delay the implementation of CECL until the earlier of the termination date of the national emergency declaration by the President or December 31, 2020. Due to the uncertainty on the economy from COVID-19, the Company chose to delay its implementation of CECL and recorded its provision for loan losses under the incurred loss model that existed prior to CECL.

The provision for loan losses for the third quarter 2020 was $1.3 million, or 0.12% (annualized) of average loans, compared to $10.7 million, or 0.97% (annualized) of average loans, for the second quarter 2020 and $2.6 million, or 0.27% (annualized) of average loans for the third quarter 2019 primarily due to economic risks and uncertainties related to the COVID-19 pandemic. The Company’s increased provision for loan losses of $18.0 million during the nine months ended 2020 compared to the same period in 2019 reflects the uncertainty surrounding unemployment, the economic impact caused by COVID-19 and the economic effects related to the sustained lower crude oil prices.

Third quarter 2020 net charge-offs were $291 thousand, or 0.03% (annualized) of average loans, a decrease from net charge-offs of $538 thousand, or 0.05% (annualized) of average loans, for the second quarter 2020 and $729 thousand, or 0.07% (annualized) of average loans, for the third quarter 2019. Net charge-offs for the nine months ended September 30, 2020 were $3.7 million, or 0.12% (annualized) of average loans, compared to net charge-offs for the nine months ended September 30, 2019 of $1.5 million, or 0.05% (annualized) of average loans.

The Company believes the largest risks within its loan portfolio are in the hotel, restaurant and bar, and oil and gas portfolios. Loan balances in the hotel industry, excluding PPP loans, totaled $133.8 million, or 2.9% of total loans, at September 30, 2020, of which $7.1 million were on nonaccrual. At September 30, 2020, restaurant and bar industry loans, excluding PPP loans, totaled $117.1 million, or 2.6%, of total loans, of which $683 thousand were on nonaccrual. At September 30, 2020, the Company’s allowance for loan losses allocated to its hotel portfolio was 4.0% of total hotel loans and its restaurant and bar portfolio was 1.2% of total restaurant and bar loans. The oil and gas portfolio, excluding PPP loans, totaled $74.0 million, or 1.6%, of total loans at September 30, 2020, of which $592 thousand were on nonaccrual. At September 30, 2020, the allowance for loan losses allocated to the oil and gas loan portfolio was 2.0% of total oil and gas loans.

During the nine months ended September 30, 2020, the Company granted 2,007 initial principal and interest deferrals on outstanding loan balances of $1.15 billion at September 30, 2020 with associated accrued interest of $16.1 million to borrowers in connection with the COVID-19 relief provided by the CARES Act. Of the initial deferrals, 242 loans with outstanding loan balances of $219.6 million had been granted additional deferrals upon request and after meeting certain conditions with associated accrued interest of $3.4 million as of September 30, 2020. These deferrals were generally no more than 90 days in duration. As of September 30, 2020, 286 loans with outstanding loan balances of $237.0 million remained on deferral.

Dividend

On October 22, 2020, the Board of Directors of Allegiance declared a cash dividend of $0.10 per share to be paid on December 15, 2020 to all shareholders of record as of November 30, 2020. The amount and timing of any future dividend payments to shareholders will be subject to the discretion of Allegiance’s Board of Directors.

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 11 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 Thursday, October 29, 2020 at 9:00 a.m. Central Time (10:00 a.m. Eastern Time) to discuss its third quarter 2020 results. Individuals and investment professionals may participate in the call by dialing (877) 279-2520. The conference ID number is 1188487. 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, Event Calendar, Past Events.

Allegiance Bancshares, Inc.

As of September 30, 2020, Allegiance was a $5.97 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 small- to medium-sized businesses and individual customers in the Houston region. Allegiance’s 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. As of September 30, 2020, Allegiance Bank operated 28 full-service banking locations in the Houston region, which we define as the Houston-The Woodlands-Sugar Land and Beaumont-Port Arthur metropolitan statistical areas, with 27 bank offices in the Houston metropolitan area and one bank office location in Beaumont, just outside of 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 contains forward-looking statements within the meaning of the securities laws that are derived utilizing assumptions, present expectations, estimates and projections about Allegiance and its subsidiaries. Statements preceded by, followed by or that otherwise include the words “believes,” “expects,” “continues,” “anticipates,” “intends,” “projects,” “estimates,” “potential,” “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 expected 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. Additionally, the impact of the COVID-19 pandemic is rapidly evolving and its future effects on Allegiance are difficult to predict. These and various other risk factors are discussed in Allegiance’s Annual Report on Form 10-K for the fiscal year ended December 31, 2019 and Quarterly Reports on Form 10-Q for the quarters ended March 31, 2020 and June 30, 2020 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. Because of these uncertainties, readers should not place undue reliance on any forward-looking statement. Allegiance disclaims any 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)

    2020     2019  
    September 30     June 30     March 31     December 31     September 30  
    (Dollars in thousands)  
ASSETS                                        
Cash and due from banks   $ 327,416     $ 237,585     $ 156,700     $ 213,347     $ 246,312  
Interest-bearing deposits at other financial
institutions
    19,732       28,815       18,189       132,901       54,307  
Total cash and cash equivalents     347,148       266,400       174,889       346,248       300,619  
Available for sale securities, at fair value     663,301       618,751       508,250       372,545       353,000  
Loans held for investment     4,592,362       4,583,656       3,955,546       3,915,310       3,886,004  
Less: allowance for loan losses     (48,698 )     (47,642 )     (37,511 )     (29,438 )     (29,808 )
Loans, net     4,543,664       4,536,014       3,918,035       3,885,872       3,856,196  
Accrued interest receivable     36,996       32,795       17,203       15,468       15,201  
Premises and equipment, net     69,887       67,229       66,798       66,790       67,175  
Other real estate owned     8,876       11,847       12,617       8,337       8,333  
Federal Home Loan Bank stock     9,716       14,844       12,798       6,242       14,138  
Bank owned life insurance     27,542       27,398       27,255       27,104       26,947  
Goodwill     223,642       223,642       223,642       223,642       223,642  
Core deposit intangibles, net     18,907       19,896       20,886       21,876       23,053  
Other assets     18,072       18,065       20,056       18,530       17,536  
Total assets   $ 5,967,751     $ 5,836,881     $ 5,002,429     $ 4,992,654     $ 4,905,840  
LIABILITIES AND SHAREHOLDERS’
EQUITY
                                       
LIABILITIES:                                        
Deposits:                                        
Noninterest-bearing   $ 1,772,700     $ 1,754,128     $ 1,217,532     $ 1,252,232     $ 1,227,839  
Interest-bearing                                        
Demand     409,137       375,353       341,524       367,278       340,754  
Money market and savings     1,483,370       1,270,437       1,110,631       1,258,008       1,114,233  
Certificates and other time     1,252,159       1,300,793       1,283,887       1,190,583       1,214,659  
Total interest-bearing deposits     3,144,666       2,946,583       2,736,042       2,815,869       2,669,646  
Total deposits     4,917,366       4,700,711       3,953,574       4,068,101       3,897,485  
Accrued interest payable     3,082       3,293       3,821       4,326       4,915  
Borrowed funds     155,512       255,509       190,506       75,503       159,501  
Subordinated debt     108,191       108,061       107,930       107,799       107,771  
Other liabilities     30,547       33,164       40,005       27,060       29,860  
Total liabilities     5,214,698       5,100,738       4,295,836       4,282,789       4,199,532  
SHAREHOLDERS’ EQUITY:                                        
Common stock     20,445       20,431       20,355       20,524       20,737  
Capital surplus     516,151       515,045       513,894       521,066       529,688  
Retained earnings     186,866       172,723       164,858       163,375       149,389  
Accumulated other comprehensive
income
    29,591       27,944       7,486       4,900       6,494  
Total shareholders’ equity     753,053       736,143       706,593       709,865       706,308  
TOTAL LIABILITIES AND
SHAREHOLDERS’ EQUITY
  $ 5,967,751     $ 5,836,881     $ 5,002,429     $ 4,992,654     $ 4,905,840  


Allegiance Bancshares, Inc.
Financial Highlights
(Unaudited)

    Three Months Ended     Year-to-Date  
    2020     2019     2020     2019  
    September 30     June 30     March 31     December 31     September 30     September 30     September 30  
    (Dollars in thousands, except per share data)  
INTEREST INCOME:                                                        
Loans, including fees   $ 56,418     $ 56,421     $ 54,624     $ 55,368     $ 55,790     $ 167,463     $ 165,995  
Securities:                                                        
Taxable     2,095       1,842       2,087       2,066       2,090       6,024       4,909  
Tax-exempt     2,280       2,169       546       469       483       4,995       2,465  
Deposits in other financial
institutions
    18       20       195       244       302       233       1,391  
Total interest income     60,811       60,452       57,452       58,147       58,665       178,715       174,760  
                                                         
INTEREST EXPENSE:                                                        
Demand, money market and
savings deposits
    1,657       1,729       4,364       5,091       4,975       7,750       13,216  
Certificates and other time
deposits
    5,239       5,845       6,084       6,483       6,909       17,168       20,173  
Borrowed funds     558       562       506       547       1,183       1,626       4,128  
Subordinated debt     1,448       1,469       1,473       1,500       761       4,390       2,232  
Total interest expense     8,902       9,605       12,427       13,621       13,828       30,934       39,749  
NET INTEREST INCOME     51,909       50,847       45,025       44,526       44,837       147,781       135,011  
Provision for loan losses     1,347       10,669       10,990       933       2,597       23,006       5,006  
Net interest income after provision
for loan losses
    50,562       40,178       34,035       43,593       42,240       124,775       130,005  
                                                         
NONINTEREST INCOME:                                                        
Nonsufficient funds fees     75       60       169       189       168       304       469  
Service charges on deposit
accounts
    325       343       457       403       379       1,125       1,069  
Gain on sale of securities           93       194       613             287       846  
Gain (loss) on sales of other real
estate and repossessed assets
    117       (306 )     (69 )     (45 )           (258 )     71  
Bank owned life insurance     144       143       151       157       153       438       467  
Rebate from correspondent bank     98       89       493       900       900       680       2,680  
Other     1,091       1,140       1,330       1,183       1,289       3,561       4,421  
Total noninterest income     1,850       1,562       2,725       3,400       2,889       6,137       10,023  
                                                         
NONINTEREST EXPENSE:                                                        
Salaries and employee benefits     20,034       19,334       19,781       18,273       20,221       59,149       59,320  
Net occupancy and equipment     2,057       1,926       1,907       1,994       1,973       5,890       6,139  
Depreciation     946       885       866       861       822       2,697       2,331  
Data processing and software
amortization
    2,125       1,934       1,826       2,120       2,058       5,885       5,390  
Professional fees     756       800       573       540       667       2,129       1,793  
Regulatory assessments and
FDIC insurance
    875       609       632       216       (41 )     2,116       1,489  
Core deposit intangibles
amortization
    989       990       990       1,177       1,178       2,969       3,534  
Communications     355       390       417       486       455       1,162       1,353  
Advertising     327       370       521       597       449       1,218       1,770  
Other real estate expense     2,017       114       2,649       164       137       4,780       450  
Acquisition and merger-related
expenses
                                        1,326  
Other     2,084       2,427       2,239       3,003       2,090       6,750       6,309  
Total noninterest expense     32,565       29,779       32,401       29,431       30,009       94,745       91,204  
INCOME BEFORE INCOME
TAXES
    19,847       11,961       4,359       17,562       15,120       36,167       48,824  
Provision for income taxes     3,677       2,054       843       3,576       3,073       6,574       9,851  
NET INCOME   $ 16,170     $ 9,907     $ 3,516     $ 13,986     $ 12,047     $ 29,593     $ 38,973  
                                                         
EARNINGS PER SHARE                                                        
Basic   $ 0.79     $ 0.49     $ 0.17     $ 0.68     $ 0.57     $ 1.45     $ 1.83  
Diluted   $ 0.79     $ 0.48     $ 0.17     $ 0.67     $ 0.57     $ 1.44     $ 1.81  


Allegiance Bancshares, Inc.
Financial Highlights
(Unaudited)

    Three Months Ended     Year-to-Date  
    2020     2019     2020     2019  
    September 30     June 30     March 31     December 31     September 30     September 30     September 30  
    (Dollars and share amounts in thousands, except per share data)  
Net income   $ 16,170     $ 9,907     $ 3,516     $ 13,986     $ 12,047     $ 29,593     $ 38,973  
                                                         
Earnings per share, basic   $ 0.79     $ 0.49     $ 0.17     $ 0.68     $ 0.57     $ 1.45     $ 1.83  
Earnings per share, diluted   $ 0.79     $ 0.48     $ 0.17     $ 0.67     $ 0.57     $ 1.44     $ 1.81  
                                                         
Return on average assets(A)     1.09 %     0.71 %     0.29 %     1.13 %     0.98 %     0.72 %     1.09 %
Return on average equity(A)     8.59 %     5.51 %     1.98 %     7.81 %     6.73 %     5.43 %     7.36 %
Return on average tangible
equity(A)(B)
    12.72 %     8.32 %     3.02 %     11.96 %     10.33 %     8.16 %     11.35 %
Net interest margin
(tax equivalent)(C)
    3.95 %     4.10 %     4.15 %     4.11 %     4.16 %     4.06 %     4.27 %
Adjusted net interest margin
(tax equivalent)(B)
    3.91 %     4.05 %     4.04 %     3.94 %     3.97 %     3.99 %     4.02 %
Efficiency ratio(D)     60.58 %     56.92 %     68.13 %     62.20 %     62.88 %     61.67 %     63.25 %
                                                         
Capital Ratios                                                        
Allegiance Bancshares, Inc.
(Consolidated)
                                                       
Equity to assets     12.62 %     12.61 %     14.12 %     14.22 %     14.40 %     12.62 %     14.40 %
Tangible equity to tangible
assets(B)
    8.92 %     8.81 %     9.71 %     9.78 %     9.86 %     8.92 %     9.86 %
Estimated common equity
tier 1 capital
    11.73 %     11.36 %     11.15 %     11.42 %     11.28 %     11.73 %     11.28 %
Estimated tier 1 risk-based
capital
    11.96 %     11.60 %     11.38 %     11.66 %     11.51 %     11.96 %     11.51 %
Estimated total risk-based
capital
    15.56 %     15.17 %     14.72 %     14.83 %     14.70 %     15.56 %     14.70 %
Estimated tier 1 leverage
capital
    8.70 %     8.83 %     9.89 %     10.02 %     10.06 %     8.70 %     10.06 %
Allegiance Bank                                                        
Estimated common equity
tier 1 capital
    13.25 %     12.84 %     12.58 %     12.67 %     12.28 %     13.25 %     12.28 %
Estimated tier 1 risk-based
capital
    13.25 %     12.84 %     12.58 %     12.67 %     12.28 %     13.25 %     12.28 %
Estimated total risk-based
capital
    15.41 %     14.97 %     14.48 %     14.39 %     14.01 %     15.41 %     14.01 %
Estimated tier 1 leverage
capital
    9.64 %     9.77 %     10.94 %     10.89 %     10.73 %     9.64 %     10.73 %
                                                         
Other Data                                                        
Weighted average shares:                                                        
Basic     20,439       20,414       20,411       20,652       20,981       20,421       21,321  
Diluted     20,532       20,514       20,690       20,930       21,256       20,551       21,591  
Period end shares
outstanding
    20,445       20,431       20,355       20,524       20,737       20,445       20,737  
Book value per share   $ 36.83     $ 36.03     $ 34.71     $ 34.59     $ 34.06     $ 36.83     $ 34.06  
Tangible book value per
share(B)
  $ 24.97     $ 24.11     $ 22.70     $ 22.62     $ 22.16     $ 24.97     $ 22.16  

(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 11 of this Earnings Release.
(C) Net interest margin represents net interest income divided by average interest-earning assets.
(D) Represents total noninterest expense divided by the sum of net interest income plus noninterest income, excluding net gains and losses on the sale of loans, securities and assets. Additionally, taxes and provision for loan losses are not part of this calculation.

Allegiance Bancshares, Inc.
Financial Highlights
(Unaudited)

    Three Months Ended  
    September 30, 2020     June 30, 2020     September 30, 2019  
    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   $ 4,594,333     $ 56,418       4.89 %   $ 4,425,036     $ 56,421       5.13 %   $ 3,870,205     $ 55,790       5.72 %
Securities     667,008       4,375       2.61 %     594,205       4,011       2.71 %     359,392       2,573       2.84 %
Deposits in other financial
institutions and other
    20,176       18       0.35 %     18,173       20       0.44 %     55,070       302       2.17 %
Total interest-earning assets     5,281,517     $ 60,811       4.58 %     5,037,414     $ 60,452       4.83 %     4,284,667     $ 58,665       5.43 %
Allowance for loan losses     (47,593 )                     (41,334 )                     (28,593 )                
Noninterest-earning assets     679,750                       637,608                       600,004                  
Total assets   $ 5,913,674                     $ 5,633,688                     $ 4,856,078                  
                                                                         
Liabilities and
Shareholders' Equity
                                                                       
Interest-Bearing Liabilities:                                                                        
Interest-bearing demand
deposits
  $ 394,612     $ 392       0.40 %   $ 353,252     $ 421       0.48 %   $ 332,652     $ 943       1.13 %
Money market and savings
deposits
    1,409,969       1,265       0.36 %     1,169,225       1,308       0.45 %     1,099,937       4,032       1.45 %
Certificates and other time
deposits
    1,291,536       5,239       1.61 %     1,302,743       5,845       1.80 %     1,269,886       6,909       2.16 %
Borrowed funds     171,804       558       1.29 %     320,332       562       0.71 %     158,358       1,183       2.96 %
Subordinated debt     108,130       1,448       5.33 %     107,998       1,469       5.47 %     51,607       761       5.85 %
Total interest-bearing
liabilities
    3,376,051     $ 8,902       1.05 %     3,253,550     $ 9,605       1.19 %     2,912,440     $ 13,828       1.88 %
                                                                         
Noninterest-Bearing
Liabilities:
                                                                       
Noninterest-bearing demand
deposits
    1,752,404                       1,624,641                       1,198,564                  
Other liabilities     36,572                       32,393                       35,030                  
Total liabilities     5,165,027                       4,910,584                       4,146,034                  
Shareholders' equity     748,647                       723,104                       710,044                  
Total liabilities and
shareholders' equity
  $ 5,913,674                     $ 5,633,688                     $ 4,856,078                  
                                                                         
Net interest rate spread                     3.53 %                     3.64 %                     3.55 %
                                                                         
Net interest income and margin           $ 51,909       3.91 %           $ 50,847       4.06 %           $ 44,837       4.15 %
                                                                         
Net interest income and net
interest margin (tax equivalent)
          $ 52,446       3.95 %           $ 51,342       4.10 %           $ 44,924       4.16 %


Allegiance Bancshares, Inc.
Financial Highlights
(Unaudited)

    Nine Months Ended September 30,  
    2020     2019  
    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   $ 4,318,564     $ 167,463       5.18 %   $ 3,812,827     $ 165,995       5.82 %
Securities     550,405       11,019       2.67 %     352,074       7,374       2.80 %
Deposits in other financial institutions     29,652       233       1.05 %     79,309       1,391       2.34 %
Total interest-earning assets     4,898,621     $ 178,715       4.87 %     4,244,210     $ 174,760       5.51 %
Allowance for loan losses     (39,245 )                     (27,500 )                
Noninterest-earning assets     639,606                       581,932                  
Total assets   $ 5,498,982                     $ 4,798,642                  
                                                 
Liabilities and Shareholders' Equity                                                
Interest-Bearing Liabilities:                                                
Interest-bearing demand deposits   $ 370,485     $ 1,659       0.60 %   $ 340,310     $ 3,058       1.20 %
Money market and savings deposits     1,249,832       6,091       0.65 %     992,349       10,158       1.37 %
Certificates and other time deposits     1,262,674       17,168       1.82 %     1,301,478       20,173       2.07 %
Borrowed funds     210,902       1,626       1.03 %     198,839       4,128       2.78 %
Subordinated debt     107,998       4,390       5.43 %     49,849       2,232       5.99 %
Total interest-bearing liabilities     3,201,891     $ 30,934       1.29 %     2,882,825     $ 39,749       1.84 %
                                                 
Noninterest-Bearing Liabilities:                                                
Noninterest-bearing demand deposits     1,535,107                       1,179,914                  
Other liabilities     33,482                       28,270                  
Total liabilities     4,770,480                       4,091,009                  
Shareholders' equity     728,502                       707,633                  
Total liabilities and shareholders' equity   $ 5,498,982                     $ 4,798,642                  
                                                 
Net interest rate spread                     3.58 %                     3.67 %
                                                 
Net interest income and margin           $ 147,781       4.03 %           $ 135,011       4.25 %
                                                 
Net interest income and net interest
margin (tax equivalent)
          $ 148,939       4.06 %           $ 135,413       4.27 %


Allegiance Bancshares, Inc.
Financial Highlights
(Unaudited)

    Three Months Ended  
    2020     2019  
    September 30     June 30     March 31     December 31     September 30  
    (Dollars in thousands)  
Period-end Loan Portfolio:                                        
Commercial and industrial   $ 650,634     $ 651,430     $ 702,267     $ 689,360     $ 675,055  
Mortgage warehouse                 1,051       8,304       36,594  
Paycheck Protection Program (PPP)     710,234       695,772                    
Real estate:                                        
Commercial real estate (including
multi-family residential)
    1,971,228       1,956,116       1,951,080       1,873,782       1,859,721  
Commercial real estate construction and
land development
    376,877       386,865       378,987       410,471       386,723  
1-4 family residential (including home equity)     716,565       703,513       704,212       698,957       695,520  
Residential construction     148,056       171,656       177,025       192,515       189,608  
Consumer and other     18,768       18,304       40,924       41,921       42,783  
Total loans   $ 4,592,362     $ 4,583,656     $ 3,955,546     $ 3,915,310     $ 3,886,004  
                                         
Asset Quality:                                        
Nonaccrual loans   $ 37,928     $ 33,223     $ 21,621     $ 28,371     $ 34,615  
Accruing loans 90 or more days past due                              
Total nonperforming loans     37,928       33,223       21,621       28,371       34,615  
Other real estate     8,876       11,847       12,617       8,337       8,333  
Other repossessed assets                              
Total nonperforming assets   $ 46,804     $ 45,070     $ 34,238     $ 36,708     $ 42,948  
                                         
Net charge-offs   $ 291     $ 538     $ 2,917     $ 1,303     $ 729  
                                         
Nonaccrual loans:                                        
Commercial and industrial   $ 13,171     $ 12,578     $ 8,669     $ 8,388     $ 8,033  
Mortgage warehouse                              
Real estate:                                        
Commercial real estate (including
multi-family residential)
    15,849       16,127       7,024       6,741       15,356  
Commercial real estate construction and
land development
    3,085       53       1,958       9,050       9,050  
1-4 family residential (including home equity)     4,263       3,434       2,845       3,294       1,992  
Residential construction     876       898       982       746        
Consumer and other     684       133       143       152       184  
Total nonaccrual loans   $ 37,928     $ 33,223     $ 21,621     $ 28,371     $ 34,615  
                                         
Asset Quality Ratios:                                        
Nonperforming assets to total assets     0.78 %     0.77 %     0.68 %     0.74 %     0.88 %
Nonperforming loans to total loans     0.83 %     0.72 %     0.55 %     0.72 %     0.89 %
Allowance for loan losses to nonperforming loans     128.40 %     143.40 %     173.49 %     103.76 %     86.11 %
Allowance for loan losses to total loans     1.06 %     1.04 %     0.95 %     0.75 %     0.77 %
Net charge-offs to average loans (annualized)     0.03 %     0.05 %     0.30 %     0.13 %     0.07 %

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 and 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 share, return on average tangible equity, the ratio of tangible equity to tangible assets and adjusted net interest margin on a tax equivalent basis 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     Year-to-Date  
  2020     2019     2020     2019  
  September 30     June 30     March 31     December 31     September 30     September 30     September 30  
  (Dollars and share amounts in thousands, except per share data)  
Total shareholders' equity $ 753,053     $ 736,143     $ 706,593     $ 709,865     $ 706,308     $ 753,053     $ 706,308  
Less: Goodwill and core
deposit intangibles, net
  242,549       243,538       244,528       245,518       246,695       242,549       246,695  
Tangible shareholders
equity
$ 510,504     $ 492,605     $ 462,065     $ 464,347     $ 459,613     $ 510,504     $ 459,613  
                                                       
Shares outstanding at end of
period
  20,445       20,431       20,355       20,524       20,737       20,445       20,737  
                                                       
Tangible book value per share $ 24.97     $ 24.11     $ 22.70     $ 22.62     $ 22.16     $ 24.97     $ 22.16  
                                                       
Net income $ 16,170     $ 9,907     $ 3,516     $ 13,986     $ 12,047     $ 29,593     $ 38,973  
                                                       
Average shareholders' equity $ 748,647     $ 723,104     $ 713,535     $ 710,155     $ 710,044     $ 728,502     $ 707,633  
Less: Average goodwill and
core deposit intangibles, net
  243,015       244,010       245,007       246,154       247,404       244,007       248,427  
Average tangible
shareholders’ equity
$ 505,632     $ 479,094     $ 468,528     $ 464,001     $ 462,640     $ 484,495     $ 459,206  
                                                       
Return on average
tangible equity
  12.72 %     8.32 %     3.02 %     11.96 %     10.33 %     8.16 %     11.35 %
                                                       
Total assets $ 5,967,751     $ 5,836,881     $ 5,002,429     $ 4,992,654     $ 4,905,840     $ 5,967,751     $ 4,905,840  
Less: Goodwill and core
deposit intangibles, net
  242,549       243,538       244,528       245,518       246,695       242,549       246,695  
Tangible assets $ 5,725,202     $ 5,593,343     $ 4,757,901     $ 4,747,136     $ 4,659,145     $ 5,725,202     $ 4,659,145  
                                                       
Tangible equity to tangible
assets
  8.92 %     8.81 %     9.71 %     9.78 %     9.86 %     8.92 %     9.86 %
                                                       
Net interest income
(tax equivalent)
$ 52,446     $ 51,342     $ 45,152     $ 44,623     $ 44,924     $ 148,939     $ 135,413  
Less: Acquisition accounting
adjustments
  (598 )     (665 )     (1,259 )     (1,860 )     (2,045 )     (2,522 )     (7,765 )
Adjusted net interest
income (tax equivalent)
$ 51,848     $ 50,677     $ 43,893     $ 42,763     $ 42,879     $ 146,417     $ 127,648  
                                                       
Average earning assets $ 5,281,517     $ 5,037,414     $ 4,372,723     $ 4,308,028     $ 4,284,667     $ 4,898,621     $ 4,244,210  
                                                       
Net interest margin
(tax equivalent)
  3.95 %     4.10 %     4.15 %     4.11 %     4.16 %     4.06 %     4.27 %
Adjusted net interest margin
(tax equivalent)
  3.91 %     4.05 %     4.04 %     3.94 %     3.97 %     3.99 %     4.02 %


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

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Source: Allegiance Bancshares, Inc.

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