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Allegiance Bancshares, Inc. Reports Second Quarter 2019 Results

Allegiance Bancshares, Inc. Reports Second Quarter 2019 Results
  • Record earnings of $14.2 million and diluted earnings per share of $0.66 for the second quarter 2019

  • Net interest margin increased to 4.33% for the second quarter 2019 from 4.31% for the first quarter 2019 (4.07% for the second quarter 2019 from 4.03% for the first quarter 2019 excluding purchase accounting adjustments on a Non-GAAP basis)

  • Completed share repurchase authorization of one million shares of common stock and approved a new one million share repurchase authorization

HOUSTON, July 26, 2019 (GLOBE NEWSWIRE) -- Allegiance Bancshares, Inc. (ABTX) ("Allegiance"), the holding company of Allegiance Bank (the "Bank"), today reported net income of $14.2 million and diluted earnings per share of $0.66 for the second quarter 2019 compared to $7.6 million and diluted earnings per share of $0.55 for the second quarter 2018. Net income for the six months ended June 30, 2019 was $26.9 million, or $1.24 per diluted share, compared to $15.3 million, or $1.12 per diluted share, for the six months ended June 30, 2018. The six months ended June 30, 2019 and 2018 results included $1.3 million and $625 thousand, respectively, of pre-tax acquisition and merger-related expenses.

“We are extremely pleased with our second quarter results, highlighting a period of execution on our strategic initiatives by Allegiance bankers that resulted in record quarterly earnings of $14.2 million,” said George Martinez, Allegiance’s Chairman and Chief Executive Officer. “Our solid performance was driven by our talented Allegiance bankers, creating new and deepening existing relationships with our customers and achieving great results for our shareholders. In addition, our experienced credit team has made significant progress toward the integration of one credit culture across Allegiance,” continued Martinez.

“We continue to maintain strong asset quality, capital levels and solid operating results, allowing us to invest in opportunities that drive future performance. During the first half of the year, our ongoing recruitment efforts added ten revenue producers as we continue to invest in future organic and market share growth. Additionally, we completed our current stock buyback program of one million shares and authorized a new program of another one million shares, to provide flexibility as we work to optimize our capital structure. We also made the strategic decision to exit the mortgage warehouse lending program which allows us to redirect operational resources to focus on our core lending. All of this points to the confidence we have in our employees and their ongoing ability to succeed in a highly competitive market, serve the growing needs of both customers and businesses of all sizes, and generate solid returns for our shareholders,” concluded Martinez.

Second Quarter 2019 Results

Net interest income before the provision for loan losses in the second quarter 2019 increased $17.8 million, or 63.8%, to $45.6 million from $27.8 million for the second quarter 2018 primarily due to a $1.56 billion, or 58.1%, increase in average interest-earning assets for the same period mainly due to the Post Oak Bancshares, Inc. acquisition during the fourth quarter of 2018 as well as organic growth for the year-over-year period. Net interest income before provision for loan losses for the second quarter 2019 increased from $44.6 million in the first quarter 2019. The net interest margin on a tax equivalent basis increased 12 basis points to 4.33% for the second quarter 2019 from 4.21% for the second quarter 2018 and increased 2 basis points from 4.31% for the first quarter 2019. Excluding the impact of acquisition accounting adjustments, the net interest margin on a tax equivalent basis for the second quarter 2019 would have been 4.07% compared to 4.03% for the first quarter 2019 and 4.18% for the second quarter 2018.

Noninterest income for the second quarter 2019 was $3.8 million, an increase of $2.0 million, or 113.0%, compared to $1.8 million for the second quarter 2018 and increased $556 thousand, or 16.9%, compared to $3.3 million for the first quarter 2019. Noninterest income for the second quarter 2019 included $846 thousand of gain on the sale of securities and noninterest income associated with additional accounts from the Post Oak acquisition.

Noninterest expense for the second quarter 2019 increased $10.2 million, or 51.5%, to $30.1 million from $19.9 million for the second quarter 2018, and decreased $1.0 million, or 3.3%, from $31.1 million for the first quarter 2019. The increase over the prior year quarter was primarily due to additional expenses associated with increased headcount and branches from the Post Oak acquisition.

In the second quarter 2019, Allegiance’s efficiency ratio was 61.93% compared to 64.97% for the first quarter 2019 and 67.05% for the second quarter 2018. Second quarter 2019 annualized returns on average assets, average equity and average tangible equity were 1.19%, 8.10% and 12.52%, respectively, compared to 1.08%, 7.27% and 11.22%, respectively, for the first quarter 2019. Annualized returns on average assets, average equity and average tangible equity for the second quarter 2018 were 1.03%, 9.55% and 11.02%, respectively.

Six Months Ended June 30, 2019 Results

Net interest income before provision for loan losses for the six months ended June 30, 2019 increased $35.5 million, or 64.8%, to $90.2 million from $54.7 million for the six months ended June 30, 2018 primarily due to a $1.57 billion, or 59.3%, increase in average interest-earning assets over the prior year associated with the Post Oak acquisition. The net interest margin on a tax equivalent basis increased 12 basis points to 4.32% for the six months ended June 30, 2019 from 4.20% for the six months ended June 30, 2018. Excluding the impact of acquisition accounting adjustments, the net interest margin for the six months ended June 30, 2019 would have been 4.05%, compared to 4.19% for the six months ended June 30, 2018.

Noninterest income for the six months ended June 30, 2019 was $7.1 million, an increase of $3.7 million, or 106.7%, compared to $3.5 million for the six months ended June 30, 2018 due primarily to additional noninterest income resulting from the Post Oak acquisition along with the gain on sale of securities.

Noninterest expense for the six months ended June 30, 2019 increased $22.6 million, or 58.6%, to $61.2 million from $38.6 million for the six months ended June 30, 2018. The increase in noninterest expense over the six months ended June 30, 2018 was primarily due to additional expenses associated with increased headcount and branches along with merger-related expenses from the Post Oak acquisition.

Allegiance’s efficiency ratio decreased from 66.33% for the six months ended June 30, 2018 to 63.44% for the six months ended June 30, 2019. For the six months ended June 30, 2019, returns on average assets, average equity and average tangible equity were 1.14%, 7.69% and 11.87%, respectively, compared to 1.06%, 9.82% and 11.36%, respectively, for the six months ended June 30, 2018.

Financial Condition

Total assets at June 30, 2019 increased $25.4 million, or 0.5%, to $4.79 billion compared to $4.77 billion at March 31, 2019 and increased $1.83 billion, or 61.6%, compared to $2.97 billion at June 30, 2018, primarily due to the Post Oak acquisition and organic loan growth.

Total loans at June 30, 2019 increased $51.8 million, or 5.4% (annualized), to $3.86 billion compared to $3.81 billion at March 31, 2019 and increased $1.50 billion, or 63.6%, compared to $2.36 billion at June 30, 2018, primarily due to loans acquired in the Post Oak acquisition. Core loans, which exclude the mortgage warehouse portfolio, increased $42.4 million, or 4.5% (annualized), to $3.81 billion at June 30, 2019 from $3.77 billion at March 31, 2019 and increased $1.50 billion, or 65.2%, from $2.31 billion at June 30, 2018. Excluding loans acquired from Post Oak at acquisition of $1.16 billion, core loans at June 30, 2019 increased $344.7 million, from June 30, 2018.

Deposits at June 30, 2019 increased $80.6 million, or 2.1%, to $3.86 billion compared to $3.78 billion at March 31, 2019 and increased $1.55 billion, or 66.9%, compared to $2.31 billion at June 30, 2018, primarily related to the Post Oak acquisition.

Asset Quality

Nonperforming assets totaled $37.7 million, or 0.79% of total assets, at June 30, 2019, compared to $33.8 million, or 0.71%, of total assets, at March 31, 2019, and $14.6 million, or 0.49% of total assets, at June 30, 2018. The allowance for loan losses was 0.72% of total loans at June 30, 2019, 0.71% of total loans at March 31, 2019 and 1.01% of total loans at June 30, 2018. The decrease in the allowance for loan losses as a percentage of loans from June 30, 2018 reflects the loans acquired in the Post Oak acquisition that were recorded at fair value without an allowance for loan losses at acquisition date.

The provision for loan losses for the second quarter 2019 was $1.4 million, or 0.15% (annualized) of average loans, compared to $1.0 million, 0.11% (annualized) of average loans, for the first quarter 2019 and $631 thousand, or 0.11% (annualized) of average loans, for the second quarter 2018.

Second quarter 2019 net charge-offs were $589 thousand, or 0.06% (annualized) of average loans, compared to net charge-offs of $210 thousand, or 0.02% (annualized) of average loans, for the first quarter 2019 and $1.4 million, or 0.25% (annualized) of average loans, for the second quarter 2018. Net charge-offs for the six months ended June 30, 2019 were $799 thousand, or 0.04% (annualized) of average loans, compared to net charge-offs for the six months ended June 30, 2018 of $1.1 million, or 0.06% (annualized) of average loans.

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 Friday, July 26, 2019 at 9:00 a.m. Central Time (10:00 a.m. Eastern Time) to discuss its second quarter 2019 results. Individuals and investment professionals may participate in the call by dialing (877) 279-2520. The conference ID number is 9254608. 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 June 30, 2019, Allegiance was a $4.79 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 June 30, 2019, Allegiance Bank operated 27 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 26 bank offices and one loan production office 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 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,” “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 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, 2018 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)

2019

2018

June 30

March 31

December 31

September 30

June 30

(Dollars in thousands)

Cash and cash equivalents

$

232,607

$

258,843

$

268,947

$

191,468

$

200,645

Available for sale securities

348,173

345,716

337,293

300,115

300,897

Total loans

3,857,963

3,806,161

3,708,306

2,440,926

2,358,675

Allowance for loan losses

(27,940

)

(27,123

)

(26,331

)

(23,586

)

(23,831

)

Loans, net

3,830,023

3,779,038

3,681,975

2,417,340

2,334,844

Goodwill

223,642

223,642

223,125

39,389

39,389

Core deposit intangibles, net

24,231

25,409

26,587

2,688

2,883

Premises and equipment, net

59,690

60,327

41,717

18,970

19,049

Other real estate owned

6,294

1,152

630

1,801

1,710

Bank owned life insurance

26,794

26,639

26,480

22,838

22,701

Other assets

42,757

48,036

48,495

40,930

44,308

Total assets

$

4,794,211

$

4,768,802

$

4,655,249

$

3,035,539

$

2,966,426

Noninterest-bearing deposits

$

1,173,423

$

1,181,920

$

1,209,300

$

789,705

$

749,787

Interest-bearing deposits

2,687,217

2,598,141

2,453,236

1,644,086

1,563,999

Total deposits

3,860,640

3,780,061

3,662,536

2,433,791

2,313,786

Borrowed funds

146,998

201,995

225,493

211,569

275,569

Subordinated debt

49,019

48,959

48,899

48,839

48,779

Other liabilities

32,853

34,010

15,337

13,209

8,404

Total liabilities

4,089,510

4,065,025

3,952,265

2,707,408

2,646,538

Common stock

21,147

21,484

21,938

13,397

13,341

Capital surplus

541,979

556,184

571,803

221,762

220,665

Retained earnings

137,342

123,094

112,131

98,968

90,089

Accumulated other comprehensive
income (loss)

4,233

3,015

(2,888

)

(5,996

)

(4,207

)

Total shareholders’ equity

704,701

703,777

702,984

328,131

319,888

Total liabilities and equity

$

4,794,211

$

4,768,802

$

4,655,249

$

3,035,539

$

2,966,426


Allegiance Bancshares, Inc.
Financial Highlights
(Unaudited)

Three Months Ended

Year-to-Date

2019

2018

2019

2018

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

$

56,016

$

54,189

$

53,272

$

32,988

$

31,846

$

110,205

$

61,963

Securities:

Taxable

1,837

982

844

636

646

2,819

1,245

Tax-exempt

692

1,290

1,445

1,447

1,451

1,982

2,910

Deposits in other financial
institutions

401

688

742

265

250

1,089

466

Total interest income

58,946

57,149

56,303

35,336

34,193

116,095

66,584

INTEREST EXPENSE:

Demand, money market and
savings deposits

4,513

3,728

3,367

1,248

887

8,241

1,863

Certificates and other time
deposits

7,008

6,256

5,358

4,051

3,284

13,264

6,069

Borrowed funds

1,118

1,827

1,008

1,272

1,472

2,945

2,508

Subordinated debt

736

735

732

729

734

1,471

1,439

Total interest expense

13,375

12,546

10,465

7,300

6,377

25,921

11,879

NET INTEREST INCOME

45,571

44,603

45,838

28,036

27,816

90,174

54,705

Provision for loan losses

1,407

1,002

2,964

631

2,409

1,284

Net interest income after provision
for loan losses

44,164

43,601

42,874

28,036

27,185

87,765

53,421

NONINTEREST INCOME:

Nonsufficient funds fees

139

162

190

175

214

301

390

Service charges on deposit
accounts

365

325

363

177

106

690

329

Gain on sale of securities

846

846

Gain (loss) on sales of other real
estate and repossessed assets

70

1

(429

)

1

71

1

Bank owned life insurance

155

159

163

137

138

314

279

Rebate from correspondent bank

884

896

988

613

564

1,780

1,008

Other

1,386

1,746

1,059

826

782

3,132

1,444

Total noninterest income

3,845

3,289

2,334

1,928

1,805

7,134

3,451

NONINTEREST EXPENSE:

Salaries and employee benefits

19,415

19,684

18,167

12,965

12,778

39,099

25,572

Net occupancy and equipment

2,088

2,078

1,959

1,281

1,333

4,166

2,605

Depreciation

756

753

802

490

433

1,509

840

Data processing and software
amortization

1,735

1,597

1,485

1,226

1,356

3,332

2,409

Professional fees

527

599

670

303

567

1,126

1,036

Regulatory assessments and
FDIC insurance

802

728

776

505

494

1,530

1,028

Core deposit intangibles
amortization

1,178

1,178

1,229

195

196

2,356

391

Communications

468

430

416

262

259

898

507

Advertising

617

704

704

351

340

1,321

670

Acquisition and merger-related
expenses

153

1,173

840

196

625

1,326

625

Other

2,341

2,191

1,998

1,390

1,479

4,532

2,894

Total noninterest expense

30,080

31,115

29,046

19,164

19,860

61,195

38,577

INCOME BEFORE INCOME TAXES

17,929

15,775

16,162

10,800

9,130

33,704

18,295

Provision for income taxes

3,681

3,097

2,999

1,921

1,574

6,778

3,028

NET INCOME

$

14,248

$

12,678

$

13,163

$

8,879

$

7,556

$

26,926

$

15,267

EARNINGS PER SHARE

Basic

$

0.67

$

0.58

$

0.60

$

0.66

$

0.57

$

1.25

$

1.15

Diluted

$

0.66

$

0.58

$

0.59

$

0.65

$

0.55

$

1.24

$

1.12


Allegiance Bancshares, Inc.
Financial Highlights
(Unaudited)

Three Months Ended

Year-to-Date

2019

2018

2019

2018

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

$

14,248

$

12,678

$

13,163

$

8,879

$

7,556

$

26,926

$

15,267

Earnings per share, basic

$

0.67

$

0.58

$

0.60

$

0.66

$

0.57

$

1.25

$

1.15

Earnings per share, diluted

$

0.66

$

0.58

$

0.59

$

0.65

$

0.55

$

1.24

$

1.12

Return on average assets(A)

1.19

%

1.08

%

1.12

%

1.18

%

1.03

%

1.14

%

1.06

%

Return on average equity(A)

8.10

%

7.27

%

7.49

%

10.80

%

9.55

%

7.69

%

9.82

%

Return on average tangible
equity(A)(B)

12.52

%

11.22

%

11.66

%

12.40

%

11.02

%

11.87

%

11.36

%

Tax equivalent net interest
margin(C)

4.33

%

4.31

%

4.45

%

4.10

%

4.21

%

4.32

%

4.20

%

Tax equivalent net interest
margin-adjusted for
acquisition accounting
adjustments(D)

4.07

%

4.03

%

4.16

%

4.10

%

4.18

%

4.05

%

4.19

%

Efficiency ratio(E)

61.93

%

64.97

%

60.30

%

63.95

%

67.05

%

63.44

%

66.33

%

Capital Ratios

Allegiance Bancshares, Inc.
(Consolidated)

Equity to assets

14.70

%

14.76

%

15.10

%

10.81

%

10.78

%

14.70

%

10.78

%

Tangible equity to tangible
assets(B)

10.05

%

10.06

%

10.29

%

9.56

%

9.49

%

10.05

%

9.49

%

Estimated common equity
tier 1 capital

11.34

%

11.37

%

11.76

%

11.17

%

10.59

%

11.34

%

10.59

%

Estimated tier 1 risk-based
capital

11.58

%

11.61

%

12.01

%

11.53

%

10.96

%

11.58

%

10.96

%

Estimated total risk-based
capital

13.27

%

13.28

%

13.70

%

13.94

%

13.41

%

13.27

%

13.41

%

Estimated tier 1 leverage
capital

10.17

%

10.25

%

10.61

%

10.23

%

9.78

%

10.17

%

9.78

%

Allegiance Bank

Estimated common equity
tier 1 capital

12.02

%

11.67

%

11.83

%

11.24

%

11.03

%

12.02

%

11.03

%

Estimated tier 1 risk-based
capital

12.02

%

11.67

%

11.83

%

11.24

%

11.03

%

12.02

%

11.03

%

Estimated total risk-based
capital

13.71

%

13.34

%

13.53

%

13.65

%

13.48

%

13.71

%

13.48

%

Estimated tier 1 leverage
capital

10.57

%

10.31

%

10.45

%

9.98

%

9.84

%

10.57

%

9.84

%

Other Data

Weighted average shares:

Basic

21,257

21,733

21,908

13,371

13,327

21,494

13,294

Diluted

21,546

22,040

22,210

13,637

13,634

21,780

13,588

Period end shares outstanding

21,147

21,484

21,938

13,397

13,341

21,147

13,341

Book value per share

$

33.32

$

32.76

$

32.04

$

24.49

$

23.98

$

33.32

$

23.98

Tangible book value per
share(B)

$

21.60

$

21.17

$

20.66

$

21.35

$

20.81

$

21.60

$

20.81

  1. Interim periods annualized.

  2. 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.

  3. Net interest margin represents net interest income divided by average interest-earning assets.

  4. Non-GAAP financial measure. Excludes income recognized on acquisition accounting adjustments of $2.8 million, $3.0 million, $3.1 million, $0 and $147 thousand, respectively, for the three months ended and $5.7 million and $207 thousand, respectively, for the year-to-date.

  5. 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

June 30, 2019

March 31, 2019

June 30, 2018

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