HOUSTON, Jan. 28, 2021 (GLOBE NEWSWIRE) -- Allegiance Bancshares, Inc. (NASDAQ: ABTX) (Allegiance), the holding company of Allegiance Bank, today reported net income of $15.9 million and diluted earnings per share of $0.77 for the fourth quarter 2020 compared to net income of $14.0 million and diluted earnings per share of $0.67 for the fourth quarter 2019. Net income for the year ended December 31, 2020 was $45.5 million, or $2.22 per diluted share, compared to $53.0 million, or $2.47 per diluted share, for the year ended December 31, 2019. The year ended December 31, 2020 results were primarily impacted by the increased provision for credit losses in response to COVID-19-related uncertainties in the current economic environment partially offset by increased net interest income.

“We are pleased to report solid quarter and full-year earnings during a very challenging economic environment which has further evidenced the resiliency of our business model,” said Steve Retzloff, Allegiance’s Chief Executive Officer. “Our results reflect several meaningful accomplishments achieved by our team,” continued Retzloff.

“We are extremely proud of the continued hard work and dedication of our Allegiance bankers as our team helped a tremendous number of customers enabling us to post impressive 2020 PPP results for an institution of our size and we expect continued success with the 2021 PPP. As further validation of our outstanding service culture and performance, we received recognition as a Top Workplace in Houston by the Houston Chronicle and this year ranked number six in the large company category with 500 plus employees. We are one of only three companies that has been recognized as a Top Workplace for eleven consecutive years,” commented Retzloff.

“We are also pleased to announce an increase in our quarterly dividend, reflecting our continued commitment to enhancing shareholder value. As Houston’s largest locally-headquartered community bank, we expect to build on our strong core fundamentals. We are excited about the future and look forward to the year ahead where we will embrace the opportunity to remain focused on our customers and the communities we serve,” concluded Retzloff.

Fourth Quarter 2020 Results

Net interest income before the provision for credit losses in the fourth quarter 2020 increased $10.4 million, or 23.3%, to $54.9 million from $44.5 million for the fourth quarter 2019 and increased $3.0 million, or 5.8%, from $51.9 million in the third 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 increased 3 basis points to 4.14% for the fourth quarter 2020 from 4.11% for the fourth quarter 2019 and increased 19 basis points from 3.95% for the third quarter 2020. Excluding the impact of acquisition accounting adjustments, adjusted net interest margin on a tax equivalent basis was 4.12% for the fourth quarter 2020 compared to 3.94% for the fourth quarter 2019 and 3.91% for the third 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 fourth quarter 2020 was $2.0 million, a decrease of $1.4 million, or 40.6%, compared to $3.4 million for the fourth quarter 2019 and an increase of $169 thousand, or 9.1%, compared to $1.9 million for the third quarter 2020. Fourth quarter 2020 noninterest income reflected lower transactional fee income and significantly lower correspondent bank rebates when compared to fourth quarter 2019.

Noninterest expense for the fourth quarter 2020 increased $3.3 million, or 11.3%, to $32.7 million from $29.4 million for the fourth quarter 2019 and increased $184 thousand, or 0.6%, compared to the third quarter 2020.

In the fourth quarter 2020, Allegiance’s efficiency ratio decreased to 57.53% compared to 62.20% for the fourth quarter 2019 and 60.58% for the third quarter 2020. Fourth quarter 2020 annualized returns on average assets, average equity and average tangible equity were 1.05%, 8.38% and 12.32%, respectively, compared to 1.13%, 7.81% and 11.96%, respectively, for the fourth quarter 2019. Annualized returns on average assets, average equity and average tangible equity for the third quarter 2020 were 1.09%, 8.59% and 12.72%, respectively. Return on average tangible equity is a non-GAAP measure. Please refer to the non-GAAP reconciliation on page 11.

Year Ended December 31, 2020 Results

Net interest income before provision for credit losses for the year ended December 31, 2020 increased $23.1 million, or 12.9%, to $202.7 million from $179.5 million for the year ended December 31, 2019 primarily due to a $746.9 million, or 17.5%, 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 14 basis points to 4.08% for the year ended December 31, 2020 from 4.22% for the year ended December 31, 2019. Excluding the impact of acquisition accounting adjustments, the adjusted net interest margin for the year ended December 31, 2020 was 4.02%, compared to 4.00% for the year ended December 31, 2019. Adjusted net interest margin is a non-GAAP measure. Please refer to the non-GAAP reconciliation on page 11.

Noninterest income for the year ended December 31, 2020 was $8.2 million, a decrease of $5.3 million, or 39.2%, compared to $13.4 million for the year ended December 31, 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 year ended December 31, 2020 included $287 thousand of gains on the sale of securities compared to $1.5 million for the year ended December 31, 2019.

Noninterest expense for the year ended December 31, 2020 increased $6.9 million, or 5.7%, to $127.5 million from $120.6 million for the year ended December 31, 2019. The increase in noninterest expense during the year ended December 31, 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 year ended December 31, 2019.

Allegiance’s efficiency ratio decreased from 62.99% for the year ended December 31, 2019 to 60.55% for the year ended December 31, 2020. For the year ended December 31, 2020, returns on average assets, average equity and average tangible equity were 0.81%, 6.22% and 9.33%, respectively, compared to 1.10%, 7.48% and 11.50%, respectively, for the year ended December 31, 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 December 31, 2020 increased $1.06 billion, or 21.2%, to $6.05 billion compared to $4.99 billion at December 31, 2019, primarily due to the origination of PPP loans and growth in the securities portfolio, and increased $82.4 million, or 5.5% (annualized), compared to $5.97 billion at September 30, 2020.

Total loans at December 31, 2020 increased $576.5 million, or 14.7%, to $4.49 billion compared to $3.92 billion at December 31, 2019, primarily due to the origination of $710.2 million of PPP loans, and decreased $100.6 million, or 8.8% (annualized), compared to $4.59 billion at September 30, 2020. Core loans, which exclude the mortgage warehouse portfolio and PPP loans, increased $14.9 million, or 0.4%, to $3.92 billion at December 31, 2020 from $3.91 billion at December 31, 2019 and increased $39.7 million, or 4.1% (annualized), from $3.88 billion at September 30, 2020.

Deposits at December 31, 2020 increased $920.4 million, or 22.6%, to $4.99 billion compared to $4.07 billion at December 31, 2019 and increased $71.1 million, or 5.8% (annualized), compared to $4.92 billion at September 30, 2020.

Asset Quality

Nonperforming assets totaled $38.1 million, or 0.63% of total assets, at December 31, 2020, compared to $36.7 million, or 0.74% of total assets, at December 31, 2019 and $46.8 million, or 0.78% of total assets, at September 30, 2020. Accounting Standards Update (ASU) 2016-13, “Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments” (CECL), was effective for the Company on January 1, 2020; however, Section 4014 of 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 of the impact of COVID-19, the Company chose to delay its implementation of CECL until the fourth quarter of 2020, at which point the standard was adopted retrospectively to January 1, 2020. The allowance for loan losses for the quarter ending December 31, 2020 was calculated under the CECL methodology and as a percentage of total loans was 1.18%. Other quarter-end periods presented for the allowance for loan losses were not restated for CECL adoption and were calculated under the incurred loss methodology. The allowance for loan losses as a percentage of total loans was 0.75% at December 31, 2019 and 1.06% at September 30, 2020.

The provision for credit losses for the fourth quarter 2020 was $4.4 million, or 0.38% (annualized) of average loans, compared to $933 thousand, or 0.10% (annualized) of average loans, for the fourth quarter 2019 and $1.3 million, or 0.12% (annualized) of average loans, for the third quarter 2020 primarily due to economic risks and uncertainties related to the COVID-19 pandemic. The Company’s $21.4 million of increased provision for credit losses during the year ended December 31, 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.

Fourth quarter 2020 net charge-offs were $4.3 million, or 0.37% (annualized) of average loans, an increase from net charge-offs of $1.3 million, or 0.13% (annualized) of average loans, for the fourth quarter 2019 and $291 thousand, or 0.03% (annualized) of average loans, for the third quarter 2020. Net charge-offs for the year ended December 31, 2020 were $8.0 million, or 0.12% (annualized) of average loans, compared to net charge-offs for the year ended December 31, 2019 of $2.8 million, or 0.07% (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 $127.3 million, or 2.8% of total loans, at December 31, 2020, of which $1.4 million were on nonaccrual. At December 31, 2020, restaurant and bar industry loans, excluding PPP loans, totaled $116.7 million, or 2.6%, of total loans, of which $494 thousand were on nonaccrual. At December 31, 2020, the Company’s allowance for loan losses allocated to its hotel portfolio was 3.2% of total hotel loans and its restaurant and bar portfolio was 1.3% of total restaurant and bar loans. The oil and gas portfolio, excluding PPP loans, totaled $74.8 million, or 1.7%, of total loans at December 31, 2020, of which $494 thousand were on nonaccrual. At December 31, 2020, the allowance for loan losses allocated to the oil and gas loan portfolio was 2.3% of total oil and gas loans.

During the year ended December 31, 2020, the Company granted initial principal and interest deferrals on outstanding loan balances to borrowers in connection with the COVID-19 relief provided by the CARES Act and subsequent deferrals upon request and after meeting certain conditions. These deferrals were generally no more than 90 days in duration. As of December 31, 2020, 164 loans with outstanding loan balances of $161.3 million remained on deferral.

Dividend

On January 27, 2021, the Board of Directors of Allegiance declared a cash dividend of $0.12 per share, an increase in the quarterly dividend of 20%, to be paid on March 15, 2021 to all shareholders of record as of February 26, 2021. 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.

Allegiance Bancshares, Inc.

As of December 31, 2020, Allegiance was a $6.05 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 December 31, 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 in Beaumont, just outside of the Houston metropolitan area. Visit www.allegiancebank.com for more information.