Allegiance Bancshares (ABTX) 1 Nov 202020 Q3 Earnings call transcript

Ladies and gentlemen, thank you for standing by. And welcome to the Third Quarter 2020 Allegiance Bancshares, Inc. Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. reminder, is a recorded. As Instructions] this being call [Operator conference to your I like the over would now hand to host. Ms. Courtney Theriot. Ma'am, you may begin.

and and today. call the Company Thank joined the company; Steve operator, thank CEO President all of to you, of Officer of Vitulli, Shanna who Retzloff, of our CEO Vice President Executive call Allegiance Okan be CFO; Akin, President This will President Vice Paul Bank; Executive earnings and and Chief Kuzdzal, Ray morning's led by Egge, of Risk and and Allegiance company Executive Bank; you Vice President have Counsel. the and General

XXX-XXX-XXXX Heather at is earnings risk our factors Robert publicly the last the copy. guidance. for statement associated Management's she website Before by by with we to contained not Reform relating needed, are statements beliefs XXXX as we you Please a that to covered constitute of a everyone about morning's information is for may available be forward-looking some that additional begin, statements change, in guidance all a on release reflection calling the amended. the as text guidance do We about Act Safe we provisions allegiancebank.com see of of if Also intend future forward-looking beliefs subject the the of the in the results, time remind note only give the Harbor page and release such of predictions will Litigation this If that made. forward-looking the defined to statements remarks Securities copy update today is at need statements. Act. at I earnings e-mail or and management's made in to Private

provided have on website. an also investor our We presentation

guide questions. now and the open comments, call time. turn time Although for over remarks, to for not is of for Steve review a this our Retzloff. I conclusion allow will the as it it line At at CEO, available today's our being used is we the

fullest interrupted the third Thanks, Courtney, This interruptions extended call that We're Bank all and since we delay. with recovery thank relates a and that originally program our receiving forecasts further our welcome we is possible our the bank for have only extent impact the supported now. nation's XXXX attendance. been the are everyone virus Recession. our over region through a a likely full our conference as anticipated community segments customers it who to the pandemic economic has pre-existing all XXXX you extend customers. the Allegiance not Great you third as into even call rear-view from our will to as not played mirror to well quarter Otherwise, role PPP businesses but helping conference to and associated at least some of recovery would extended the small hand business in by your in

market PPP over In we Houston X.X% the fact, region's approximate completed the have we MSA, advances. deposit share X% loan though, in an of

the forgiveness through where third by Portal being to September the open with was phase forgiveness submitted during already some customers all with of customer continue closely our We applications these XX. work facing quarter

loan all our are of to further value only we from customer out bankers grading our constructive one reach QX. reached but hearing not approach added building time This relationship. customers our for exemplifies was process, at In a addition, in as virtually extensive them ongoing to late our

lender PR our while employee, of impact. greatest We for every outlook deliver the department central with base fact cautious every are we Though prepared is PR an customer for remaining and active scenarios. optimistic in and left our stress recovery have an who it marketing

Association this very not recently point so been We work a like a efforts. To only named to our of been recognition and We growth. the super and received appreciative their past contributors strategy NXT are but our inclusion. bankers we community proud for of bank are have award for culture customers equity finalist -- XX our top Corporate key top our selfless are Directors as National driving diversity, our commitment and of places to believe to future and

We our are customer experiences value toward unending strong shareholders. continuing committed improvement our long-term an will to performance of excellent for continuous that employee focus build with and

positions. to as non-industry quarter the my remarks, liquidity low improvements emphasizing and business our Allegiance performance on expenses. strong margin our I'll us We strategies capital sheet due as well record charge-offs, per reflect remain ever holding given while with assets uncertainties. maintaining strength cautiously and power interest ongoing earnings earning of is believe Our stronger the and and to ever is results optimistic third the net close record than progress related that our share, than allowance quarter our balance positive we more growing earning we very continuity. These disciplined line ongoing ended nimble the and growth clearly positioned net Bank meaningfully

more positioned achieve accelerating objective of organically our our ever service efficient deliveries market driven than shift to processes growth. and to paperless and We share and are are better

on loan Next, who will results. Ray financial our will results as credit, deposit well followed describe by our as production cover outlook and an Paul

up call questions. will We open for then the

Dave. Thanks,

to on to to During the and our to or result bankers third The as customers effort in portfolio. $X.X XX% relationship loan is effort. on outsized outreach industries, this a our pandemic new development resulted contact outreach their our of get of updates in our representing PPP of with customers quarter, funded scope of billion condition, loans, perspectives customers continue the financial the borrowing affecting continued our how

All a with bankers for two solid subject reopening the rebound quarter, loan by and continued matter bank put while platform, a In of direction. and as loan of saw addition process. our experts most customers treasury that and forgiveness growth, result first lobbies customers our for prepared storms nice offices, guide of a headed class available our the during being of of to originations, deposit named we to our through the were launch the PPP outreach PPP, our core forth levels the new new growth

Our and plan we continuity seamless business working process threat, or we has bankers things of become with with needs, challenges get the have our we minimal run expertise many childcare taking pandemic and of if premise. pandemic entirely the how a ability, to were to including their done our now exhibited school also conduct extraordinary reopenings, customers, Whether on care the storm at serve The disruption uncertainty of and commitment bank the the navigating business. as home, to to execution families. an have technology with

served throughs by and COVID, since drive was be declared a While customers appointment our pandemic. we have

following serves community to reopened Storage state Huston. XX located and have This quarter, bank offices service the county We office even to East and be when the excitement location. lobby a vibrant bank to of announced growing a we our opening so Last our guidelines. do and end and of pandemic, with of XXth full we office XX continue bank and energy what flagship believe there's in the with appropriate

optimal existing make look serve. our our we for franchise opportunities and sure continue We both further the for communities is to footprint expand to

an closing of As this other offices have announced the to Houston, Allegiance area serve our Anton our where in earlier northwest a nearby result, we we permanent customers. located office month

our with loan on efforts very pleased results terms of In the region. impact PPP, our and the eastern we're of

totaling XXXX affecting XX, we jobs. As funded of more September million loans XX,XXX $XXX.X than

further Our to new customers existing has market PPP and provide approach to loans presence. both our customers strengthened

appropriate working the our forgiveness application We PPP, submission of customers to further executing on complete SBA. and now are with the to the forgiveness process for

or for million all we received forgiveness simple While loans terms loans. to less XX,XXX submitted of originated up received. number XXX,XXX those of we XX% Of of are been to XX,XXX, provide less, been for and have To were $XXX increased of pleased with to to having the were are the XXX threshold the XX% or XXX hopeful legislation with application for XXX,XXX. applications loans additional funds recent we're announcement an in and forgiveness will PPP SBA, have approved loans date, totalling,

with number district stand Bank of dollars where several third we providing year-end we SBA in Speaking of September the fiscal and originated. market of seven categories loans funded Allegiance loans results business SBA in continued These a in of terms the both to reflects as extremely SBA XX SBA PPP and report, include in In terms leader our prominence solutions eight recently the of share fifth region. the and Houston SBA, in were published ranked owners gains and pleased Houston

loans, the $XXX end our helping mortgage over loans of the quarterly loan of now through process, during this billion, at amount, also to eligible $X.XX through loans excludes X% to customers which we million, of our I and In on outstanding decrease PPP about at third core total with quarter payment loans results, slight third provided remain deferral the ended core lines will Of or quarter. of million on XX% of a $X.X approximately deferrals $X.XX PPP borrowers core or billion, the the go XX. balances September addition quarter. warehouse assistance

in to quarter, diverse generated, loan ended core million of portfolio. at loans new quarter, $XXX $XXX staff compared fund million $XXX once by again $XXX,XXX. of with $XXX funded million XX, to in loans million a size funded $XXX quarter June quarter first size to quarter and the off the level organic $XXX,XXX, of funded which quarter, quarter an which third million were during XX. the quarter our were balance a new third of second the Paid granular all During $XXX the new continued $XXX XXXX. loans on The million by generated a level in the lending average compared and of and the the our of focus was team building average million reflects September core that XXX,XXX of booked loans average second The loans third of when to

the ending million of have average during rate $XXX had The a experienced and paid charged which rate weighted Carried loans X.XX% weighted quarter by Regarding $XX end X.XX% was rate on core core decreased million our quarter quarter on at rate based XX quarter levels third average All commercial rate total quarter funded average four of points, for of XXXX. X.XX%. and charged capital the mix new working rate core based interest represented as X.XX% X loans basis XXXX was X.XX%. the the XXXX the is loans below on third concentration. advances on June four at commercial quarter owner-occupied X.XX%. The weighted ongoing of funded paydowns which the a compared of in compared average third loans XXX loans, interest and rate indicating the core of funded period the new XX% These our following X.XX%, on weighted second loans term are of represented CRE, to weighted overall of million, XX% loans. loan a average average the X.XX% XXXX, commercial off quarter second at amount, first categories weighted categories: production of loan the commercial average new our weighted CRE, non-owner-occupied rates quarter of commercial for production to

now three due mix being In The quarter COVID basis. was that the terms energy information to posted additional could of risk overall the website type on our our little heightened loan mix link or additional borrower directly gas of base I and Those region like bank, our overall and or categories defined would any and Despite on we to hotel operates loan we some portfolio, slide our gas loans. prices color have changed But midstream regarding our deck oil pandemic. provide provides have have loan a as not be a indirect Houston is segments reserve supports being in restaurant the that oil and or exposure the and portfolio. industry. category to our overall downstream portfolio; loans. largely do the any of upstream to portfolio bar our on

XX% approximately average LTV was XX% As of our expenses in in million this of marketing testing at commercial is real which plus a CRE, or most value, million loans, $XX.X stress of estate approximately portfolio weighted XX.X%. the was C&I. X% recent appraised the XX, and of of million for A overall collateral Of $XXX,XXX funded category the an $X.X test. stress to $XX.X September X.X% increasing $XX.X resulted deficiency million was million, the $XX

X% appraised testing C&D value of Regarding million our which we estate plus loans, in test. was marketing September CRE, resulted the million recent million of hotel X.X most the was at at portfolio, was $XXX.X had regarding of real million real XX% hotel was $XXX bar for and deficiency stress restaurant bar $XXX.X XX, commercial our portfolio $XX million and September we the million $X which stress approximately of loans, $XX.X And at of the to C&I. overall portfolio collateral in weighted C&I. in Of XX.X%. XX% and was an million a million had estate, increasing million million, restaurant of $XXX commercial average C&D $X.X was XX, million LTV A $XX.X and was in $X.X

the test. LTV XX% for XX% in deficiency $X.X million, weighted stress $X.X For the marketing A to appraised the stress approximately a the plus increasing average was CRE, at million in testing of value in recent $XX of collateral resulted X% portfolio most an overall XX.X%. million

including at from from decreased ended rate annualized of quarter, payoffs additional properties, matured during increased assets largest has $XXX,XXX the ORE rules of points ORE $XX.X nonaccrual to X Asset including charge-offs a quarter, of basis second from million $X.X four from million which The remain in These non-accrual was $X.X is of loans second in in increasing of by property. XX to downs land third new quality million, $XXX,XXX $X three $X.X at in similar commercial offs. million a both during quarter payments and $X.X financing The $X.X loans loan downgrades million a experienced bank. ORE points. and $X.X level quarter, end million that from basis quarter total smaller $XX.X with million due compared $XX.X Non-accrual the loans, offset for primarily net the the a was $X.X to Non-performing due quarter million $X.X an XX the was million in manageable relationships. million, $X.X to to million during to and the remaining write for consists of million XX position. in assets. the slightly XX the real net quarter, primarily million non-accrual pending of charge estate million. and partially $X.X The different were relationships, of total to increase

is property, is marketing our largest well we remaining non-performing property. estate residential being These is for industrial million assets $X.X properties and are largest Beaumont. third second The largest the The with in real in $XXX,XXX a property are collateralized. believe the potential properties contract commercial negotiations two Generally, actively sale.

as XX. from total increased as watch loans XX.X%, loans X.XX% of XX.X% terms of X.X% September In X.XX% the at compared September XX, broader at loans reserves to XX. classified for of our of list, quarter our increased at ended to to a percentage June to loans June XX. XX, June compared total X.X% Specific of impaired as loans Criticized at

and at to this ratio levels to is deaths. over accounts higher bearing reported XX.X% non-interest non-interest the Harris the beds XXXX with our as category, The ICU deposits front, statistics Houston deposits savings prior the quarter. to the quarter. of XX%. quarter the total On point up total and we County XX the October at as in increase third U.S., percent and XXX,XXX below million and from the result regards bearing for carried keeping during XXXX, September increase of the well the broader pandemic or above the as quarter and XX for for million money for our $XXX.X ratio seek was year year quarter. balances to quarter in up XXXX tests deposits increase customers, the deposit the was We the by year XX% over over market With third both ago track COVID the continue deposit $XXX.X new occupied total $X.XX PPP XX.X%, in saw in by XX July. and quarter County in second of accounts. Contrary was experiencing ago noose COVID total trends deposit million XX, accounts. the confirmed a as primarily cases billion area, highs peak increased third an record The ago Harris With associated compared positive year and are well during and that patients Non-interest bearing in to primarily were X June

the While and direction, safety. are right on remain in highly health trends headed we our focused

to the and Governor our cautiously for to region, remain recovery quarter, with CFO granular turn over We our portfolio the it Abbott XX%. focused retail to of the most optimistic businesses I resulting increased During medium businesses now progress limit Houston XX% towards profile Paul. economic capacity the diversification from of staying across industries. small while borrower in sized on

million additional third million record third share net the $X.XX and per net XXXX. $XX.X posted million up diluted have pretax, prevision $XXX,XXX, prevision quarter. down Net in to write for income quarter. saw the income expense $X.X in from primarily year of for larger million from income very diluted We're in million for net quarter. quarter, by would million accounting the continued in diluted second earnings $XX.X net the third impact and due effect quarter income of third by second $XXX,XXX lower quarter Pretax the interest $X.X million million in $X.XX acquisition quarter. pre-provision the report X.X% million, ago Total OREO in down, and $XX quarter. income per quarter. million on been OREO $XX.X the $XXX,XXX the come record $XXX,XXX, $X for securities share million to $X.X million, versus income to of impact relative in expense QX Ray. increased decreased or positive a diluted power with Accretion to to per ago quarter total CD $XXX,XXX quarter. and interest increased $XX.X interest we the been share that $XX.X quarter, the quarter Thanks, in income income interest $XX.X The second positive to quarter in per interest million share would for where of accretion total $X.XX $XX from second interest the the the driver third $XX.X in million or during up the write increased $XX,XXX and the and portfolio pleased the Adjusting while our reduced the income quarter, third key to the pretax, for loan compared impact Adjusting in of was total have $X.XX decrease that or by $X.X or our the during year by expense

for This quarter's mark. third in was of average earnings as in for X.XX% balances quarter. compared on this the the would accretion, ago acquisition quarter -- accretion the Yield year mark X.X% accounting on $X in compares million quarter X.XX% second compared X.XX% by with loan quarter, lease quarter both lower the second the loans our ago average and X.XX% impacted loan yield PPP year Adjusting assets for the third and and accretion purchase full the loans quarter. in the in have $XXX,XXX impact quarter, been to X.XX% CD in

would higher lower second the balances year in aforementioned as The and down yield accretion well for as the PPP reflecting X.XX% earning for PPP effect third X.XX% assets assets. quarter, loans, average balances for securities versus in quarter from yield ago second on total quarter. Excluding of the on interest in the quarter, in third been earnings X.XX% loans the have X.XX% quarter the X.XX% income, was the

versus PPP third on quarter would earning loans, in the the quarter. for X.XX% assets Excluding yield have been second X.XX% total

basis quarter year The to funds basis to interest-bearing in continued third and overall of quarter points points XX to second in versus the basis cost XX posted from for points points quarter. liabilities third to second ago of the basis decrease the was Our the cost quarter the basis the XXX points XXX quarter. XXX

the X.XX% yielding PPP our cost We significant industry we average costs expect second lower and in environment. such equivalent are of securities, continue quarter, year Notwithstanding to ago a solid compared have and deliver tax X.XX% maintained to interest lower and the shift current in third pleased we're margin quarter, to really X.X% as in funds loans funding quarter. in of to balance towards mix net improve proud book

related been margin the revenue, interest PPP X.XX% Excluding quarter. and have third would net loans for

and strong forward, net to further loan funding maintain feel to Going on seek a interest discipline well optimize pricing. we margin we positioned maintain as our mix

attributable million increased Otherwise and largely million estate in downs gains quarter that third income by $X.X $X.X QX, non-interest should Total for the increased $X.X was quarter salary other to million on loan the was $XX.X from to $X.X know Our deferred million, the in difference is was from feature to and third related in largely non-interest in quarter-over-quarter. quarter. second second to the differences in between OREO $X.X -- write second million securities the QX quarter non-interest million. compared stable PPP of to of The also million $XX.X third the sale the to This costs the expenses losses benefits loans but real income quarter we of recorded and line quarters. on lowered that quarter. due

on remaining million the million into loans. fee PPP deferred life of in over income we to income that statement yield in individual should approximately costs origination PPP the aggregate origination loans $X.X and we of and $XX note aggregate expect recognize the impact, approximately topic the While

was $X.X quarter. quarter million. individual the XX.XX%, As look quarter in to compared with been payoff of the we year for Note quarter for the to for ratio quarter, the loan we took accelerating to third in posted for efficiency you if forgiveness of third forward Efficiency XX.XX% third for OREO loans, on million and the compared origination the to prior the The would adjust for income SBA ratio the it early fee that second provision write recognition down, remaining provision we experienced quarter we XX.XX%. the $XX.X the losses have were or second XX.XX% cost.

points to our Our XXX $XX basis total year-to-date totaling provisions losses representing on for allowance loan million, brings loans. $XX.X million

to on the loans include acquired loan balances, PPP remaining loan $X loan marked would were to points. the and XXX basis the in exclude plus ending be loans million core mark you allowance If

to to As our call, reported the first third take is incurred quarter we relief and the our X.XX% came and of notwithstanding which OREO allowance Act tangible respectively increase the standard. with implementation XX.XX% we since for year-end approximately and that's in of elected we're in deferred quarter end so CARES value ROCC Quarter book so share the mentioned with $XX.XX, the XX.X% XXXX, came current under we quarter. far. ROAA the which write makes per how line, was an that [Indiscernible] and downs metrics in of CECL, pretty the Bottom proud XXXX the

dividend While and our current that October the All forgiveness for ability and the our power board dividend. position, our strong in to PPP we a about end, To Steve. on recurring feel the couple capital buoyed as well for a navigate maintain XX. quarters. positioned our about brings of revenue I position in strong margin, economic economic now back recognition well our uncertainties, directors confident prospects all, $X.XX were turn as earnings call next COVID over we to accelerated environment, feel by we declared capital will of significant as

numbers. for that open I the turn thanks, operator questions. will With the Paul. over Yeah, now line the to great Really call to

comes Sandler. question from And Instructions] [Operator first our Milsaps from Piper you. Brad Thank

Your is open. line

Hey, good morning, guys.

Brad. morning, Good

margin incremental, the you the as interest you third not like Understand starting on more It of here, taken things, yields. which still of pressure continue a bit got the rate. you kind just as XXXX? side positive of kind extent to all grow but sounds together, detail just the would color start in loan on you you're quarter. always. to and balance saw Appreciate you guys, expect on some little to all net see from probably the tailwind maybe with into to on But pressure move loans, Wanted

Brad. Hey,

did I think floor. pressure there getting we're a is there to may -- and and previous there. little we that be -- we quarter basis might competitive loans I maybe quarter hopeful there that from when we're getting new to feel think pressure the to And the new I a delta a out points little where point a on But we know And what more bit loans XX quarter. still rate -- booked. dropped close start

the a still may were with of the staying not as but quarter, it hopefully the a little level it pleased competitive deals for we we new But with have bit loan very be and more pressure, So nice much originations we're was may pressure. rebound.

from change the test in the everything much A loan during And and too good or on is the whether a in kind feeling, thing stress. that to of us but accelerate get relates signs of But quarter kind can could quarter function growth here lot there of the of the closer stabilization back we be sheet. that earning to of it to guess was our of to of levers which did doing largely profile pressures the will of from kind that similar to guess normal say we I quarter new potential asset second for notwithstanding stair going of forward our We is third drive as move structural protect we're hope kind but normal mix a and that industry to out rest liquidity we're this step margin the quarter, excess it's core be get NIM balance see and we really you is there. And delta nature. in saw The can the as kind feeling we're the really a NIM going to asset with new to can prior of earning the extent normal. to mix. the I there the

in average others XXX And a the $XXX that is weighted quarter of that. said rate hearing million lot numbers. we rare did of in We're some Stevie, pretty terms to and air from of -- third that of

So to our wherever due good focus, we're -- granularity speaking to relatively rate. and get very still able

that Yeah, sort smaller this the the Steve, was guys you you're go draw you a some is up or of that level you risk at the taking sort you're to what out point, paid for is in raised, you the get line sand market. of or there that a there my follow Obviously, just unique. pretty what's below want sort with just taking of of do credits. of kind curious. of guys won't me, is Drew in kind on Yeah,

model there. when going five especially out pricing handle And we're some rates -- some rate seeing of year pretty beyond We're disciplined play handle these not with are some we even offered. the game, probably rates to our that for We're fixed our three, on terms. in type to

the and tackling type kind coming general to think still one And have of winning with lot that probably discussion I So it XXX, if range. something we it. going someone's do, about that a should in or this these, of be of not blocking in

decisioning it's return as well. Yeah, a risk

so loans. out And pricing we we look always at risk, when

item, And quarter to $X Got recognize try the I have with come. PPP right is Paul, you it. of the if I under continue with it. you number? yet margin just to that just this still that million And call, fees housekeeping correctly, just a $XX we're kind million, the into right back But understand

deferred you million. if think of It's probably closer around one in million net I out, $X I to million XX when got $X And want a costs.

under over So the unless left get to we of is remaining reason recognize deferred accelerate. those loans net just what life of was to cost million $XX

X% right. coupon, would And of be the inclusive $X the million

Yes.

Yeah.

And just on then finally, Okay. credit.

payments lot maybe was guys of Just, curious, you do SBA I'm have six percentage where guys what paying, month of if some coming the you impact deferral SBA making kind period kind numbers the is of kind provisioning, lending. portfolio off that of a any maybe on of your you think is behalf going customers how relates of, sort how at that those to forward. of all about if and there of and of

So, you, thank Brad.

far that. So the Yeah, off bulk received payments still coming portfolio gone. so are seeing of actually the September-October of we're our is into is SBA what is being that

holding moneys, that idle received funds, as and bank, been SBA in touch requests well we've -- fairly the But portfolio some in that deferment as support PPP state we're portfolio, payment, the will we So coming seeing are that the deferment they've well. from our the and is portfolio. off overall, through between availability customers with

great, Okay, thanks.

Thank question from you. our Olney Matt And comes Stephens. next from

open. Your is line

of and here? level rate the from expenses run The Thanks. operating

guidance some And, revenue some be that. on really reasonable expenses. line environment. be growth adjusted expenses, from seasonality can we're cognizant But QX just working modest and as OREO number and the to the take challenge as much we would of to expected there's as hold Certainly, that to

on to expenses that follow opportunities question was and kind bigger cut there on back the my to up of just see you expenses. picture was Yeah,

you a thanks. then branch doing that I that to mentioned opportunities for were years, that are there. you've number hire more the know And closing. the of there you Didn't if think been committed still new

in down to little presence. we with producers and the meetings don't it from far hiring we day the -- I'll a as had term, touch where footprints potential don't on we meetings By near or constantly we're But promotions have far see the slow Matt. the long-term, to have do branch lender consolidation markets near even development every further officers considering. in XXXX. throughout we're as in not meetings look, our sure And a regular for maybe consolidation, as did still through both bit not where we -- internal as are term. But hirings -- I day, we're six that talent other two program. every on And having the we make much but we optimal, on September, we plus with --

So this It's target. going we're when It's we talent, investment. will definitely -- just to of down. that make have that slowed for when we much is so strategic opportunities it a not what

have at too, we emphasize capacity embedded that to present of some kind as well staff learning help with our the drive want further growth. We time to

So some into newer of their the to portfolios. the the certainly of still room have some build ones, younger company entries

there's capacity there. So definitely

some Okan comment probably have about.

our beginning with we I of of We that some solution the solution great We've think origination since deployed the the year. are initiatives we funding origination during loan -- adoption that have and employees our our XXXX all to office, customers productivity our deposit where can first saw areas. gains PPP. and in also CIOs through the efficiency from electronic of ongoing -- operational and focusing that's solutions be significant under those fully and be improvements part employed efficiency building We're process a we the in on gains solutions, also going additional functions. and XXXX, expect will these team actually operational productivity they team

And so there's anticipate those some we additional expense from control that initiatives.

originations Right. both chunk bank, customers those big customers. of PPP Ray success PPP the the And converting went we of the that into then the to in How future? about for and growth Steve and loan a new of I outside guess switching should new the gears setting think program -- mentioned

just wanted possible, to say and I about. we should as how early as fast think as that's

management in can organically definitely ratio We loan those of great is -- I are, opportunity. through with outreach. Each like we're really we but one our in see. deposit of them additional seeing move them, for we're all to the detail, lenders. ourselves customers to treasury it's give strongest that of is our to up group mean, kind Ray deposit one touch and that over getting to back of evaluating our terms And grow you core a ratio levels to opportunities loan the it, our

will going would that Matt, conversion on the loan say deposit is be then Yeah, it growth to where just that to the starts side and manifest fee. on the I

really the quarter a got Treasury. to look we're onboarding pandemic since every percentage So numbers those new we've we've full been of of a we to convert our working the customers, customer. solid onboarding, when starting and And PPP customers PPP, business at with has had that's

there loans will that side. those the be getting front first the of bankers is on coming kind and our deposit in from of the So PPP, the step are

as they until us. able guys good -- those get say, testimonials those sources referral from looking for testimonials they actually response And are the a for Even were the they value to to they we're turn are Allegiance.

Okay, me. great. guys. for all Thanks, That's

you. Thank

Raymond question Our from David from next James. comes Feaster

Your open. line is

everybody. morning, good Hey,

David. Hey,

just you you clients going and through much dollars holding from then how XXXX. Deposit been the of PPP as much are management the how read And growth team think go just the from these there? be be might sticky much this in has tremendous. fourth has how curious quarter. we and do deposits cash early been to what's I'm estimates how that And might the be on treasury or still

you just But deposits that and were can So David new maybe certainly on it. PPP, I those -- extrapolate brand on the, -- -- you at something gave to the can when because look we of might are related the some There's customer. different and with be that's like which was balances customer. PPP still bit PPP little of than here existing the something XX% is track new half those the a was those what that about volume we

of have would growth the has of I and deposit that PPP what some our say in then out bank. you. of helps that If been, So most of excess come replacing funds the

factors? then forward? think Okay, think the through reserve two-basis helpful. the Q builds that's we about reserve terms ex-PPP? And already contemplate going that Or maybe how guess implement in in as does pretty CECL? I guess, you You up do I there points grew you much a should expect of fourth we're the you quarter? model of What kind do true another your

reserve go you $XX to year, will -- pretty I'd kind we point a when bill on totaling David. this question, far CECL, got we've around significant Good of million, thus say point. reflecting

in will taking CECL And X/X/XXXX. account quarter. that day We one the also operating will be be into at fourth our under adjustment

our that a guidance we or to so. to what guys number around was XX/XX You third is as about gave recall, relative

are, when you XXXX October. of up XXth to catch the speak. our to of really, what potential a up take or to models true see at to going huge it's say we for I here hard But of the kind predict don't so totality -- where of kind So XXth

we're go be going methodology So as first CECL. XX/XX. based official our run ultimately, with And run, I of model our don't of guess, will see on I there kind being to it a huge true-up. But second

we So to to our so tell not that position predict you be huge really up. true have expectation many reps a But is for don't a right to in now.

just Okay, question. maybe then high got And have it. level a

lessons about of Just you forward? do back. you reinforces have going maybe initiatives peers your think it do here? that you really excited as most model, to to me you're I forward? like going what your this and to environment structure I And you how seems step I'm going what I Maybe learned better your can think position are help your even outperform mean, you kind about or guess what posture curious, allow really just business

our what is PPP, the we've awareness we're we that market about I We've through new I'll converting got staff, let PPP. that those our it's growing day. excited every with -- well lending we're brand opportunity probably have everybody are we customers for extremely David, chime share market, loans. both banks, mean, this some that -- and to third we positioned the being number out in of large and talking here, on in which is by I lendings mean we in in numbers controlled deposit mentioned, that of talked about us is metrics I cranking are that share, bank. out state -- we're mostly third MSA, said mean, PPP and over Steve we're market

hard, we're proud where tremendous there. it sit extremely and where hitting and we're So of opportunity positioned. there's we think And we

add, share longest from we play the out. it's our really to right sit whatever really as market story now in going then to forecast and growth out that's be to anyone hard our is And positioned to that of where going the team. capacity we I well these between feel long get do how as we more there. there's momentum embedded really fair in might us than But referenced have the our for And

at to to it's in over do the regard the there footings, expenses and and as there, well. little accrue we control that it's grow banks to to that a the as improve tuck right with our guys bottom capital just little I things going there, are right management our And the we to mean our talk office continue I'm the performance. as well. any roughly XX%, here little overall here, gains Yeah, in a we're to going year But think, loans incremental me to just need of way grow boring. we're who bit little kind I deposits, that next core more bit see a a

is PPP off. So we that think XXth just known been every And small is a that is customer. now and answer. the better to boring business years better with Bank It's celebrated gave getting the that response we like brand said, and Ray taken our is Allegiance particularly But I XX birthday. the name day, really our

we're encouraged. pretty So

guys. Thanks, great. That's Okay.

[Operator And from Instructions] comes Rodis our from Montgomery. John next Janney, question

open. line Your is

Thanks all Good morning, guys. color. for the

Good morning, John.

First time caller.

Interesting times sure. for

and that portfolio grow asked question function a were about the loan answered. But how questions continue during portfolio, going of what's the my should think we just that sure in to of securities portfolio on But I'm size deposits. forward? guys the and going of most one the you And it's Just on quarter.

liquidity. wear are it to We it, of we We size much -- be the we don't growing it's stands. going but the currently too like function largely of as to this it, grow it asset be don't from to here, extent a and see want do we large to

to And like generational PPP we where securities it we in push of itself We'd rather has now, first if we much to net customer rather the deposits. to kind comes in it the liquidity, -- excess will overall to relates acquisition size would our and years kind shove, actually and do customer it's ago, acquisition we size, putting important excess be of obviously we'd manifesting think that's start optimal. So loans. But to manifesting Two up been is more it. in currently deposits. continue itself that be this grow liquidity that will But is nose much thing Right was loans. the we our too portfolio when business more foremost. -- of we of point of as a kind this overall loans. portfolio. holding while result But the it opportunity put Because excess have good our continue will to it

the really will and sheet well, them and will take serve So our balance we'll accordingly. fit customers

But the investment really that yet us to comes when it say does be pricing. embolden pressure on I disciplined in if liquidity yield that excess deposit to

is team investment aware yields. our well those So, of

improving cost good that. a go do to being We about point. to a of relates kind pretty as of ways have our That's we're assertive it And funds.

driving we're course, Of the not being not improvement. upset applecart. mindful incremental to But

good. just today? one just Sounds thoughts on discussions, topic are what market seeing you there? And question, had of many guys. Have the M&A, the just any other in Thanks, you

wait companies both with other in that A local good of here there's a to just in touch in mode the bankers pandemic, stay a of and on around kind uncertainty. basis. and bank -- everybody's of this during lot due in regular see We kind been past the

late market a a where be probably even maybe there's announce you'll this will conversations XXXX it maybe think to little eating -- up I in to early light So at but, start nothing point. some some see activity 'XX,

does It take to tango. two

how but So function for be of, other side. people on a it are potential it how -- will also the works like who buyers, that not only folks us

just today love smaller listing them. say any we I'd of our if And there's brothers

Sounds you. guys. Thank good

Great

comes question our from next Matthew Olney and with you Thank Stevens.

is line Your open.

Yeah guys.

that a color this quarter. Any Thanks. you was? write provide all. up which you at that guys had can on color Any property down Just the about follow OREO

do this balance is a that which have on process. We're vast able do Not a to our two We of that we But, significantly. a underway being about it other optimistic ORE proper yet. around valuation, we're with world the COVID properties and But pressure bit the a on changed, more history of gas the because has for the of had our negotiations of pieces, to now. OR. lot discipline our the of books changes aware to one It's on part have little just or reduce it, happened majority some a the some right related current kind more hasn't it's the And property. market while things those valuations. it color. large and mark a to oil an on one's the of nature And mean, been I of it.

properties. those at we right again, think experience teaches what be. values we're we those should So, level you on right just the And, now

bounces I $X hotel then in around on non-accrual? any was the think on million loan And that's XQ. it Okay. update the

think well. last a I as amount quarter similar with

though. RevPAR still We challenged. we're of a No properly on lot Houston, that. to Like update like the that feel occupancy reserved is the

particular RevPAR the keep the are increase best bit So we little seeing across property. watching broadly, More of board. hoping that for and for we it a

couple before will challenging it's better. Although doing actually, market in kind But had 'XX it of speaking, Galveston be the get through generally are continues our that summer experts 'XX are to little surge just well, broadly. properties to into and a even that gradual going but other a the or this the more of in hotels be a some rather over locations. improvement tell There us

those you you level numbers I make that your but down level of And from I still up want was right? I right. Okay. in X.XX% remarks, script from to did September loans, the front got I get the criticize of XX But sure of wrote X.XX%. prepared have

it XX. got Page I here.

Matt? So criticized, you say

Criticized? Yes.

X.XX% Yes. from X.XX%.

mostly as far has hotspots And at it. takeaways with you as and that types of notable we change, you it Got credits, linked been is as hotels oil, gas, this about. look quarter any COVID restaurants. And guys or talking were

impacted deferment out is currently portfolio So the our said portfolio of into these the saw hotels, migration hotels. under in portfolio, loans that, XX quarter, look XX this largest overall is you Okan. that we third that is the the we numbers have hotel Having when significantly. In in

LTV at XX%. So our in hotel loans, at underwriting weighted conservative us with is average putting

of portfolio seeing loans. But our criticized we're that's the on So we're closely. amount where most watching this impact

was loss job the -- industry there. hotel The Yeah.

hotel industry is the in and restaurant recovered. Houston are -- very but XX% collateralized. had is according the The lost to jobs bar slowly, so the is recovering actually well data, the restaurant, recovering And -- that restaurant of more more industry actually with it's it's

have up those having the you you some and categories. performance because opened while that C&I, both governor's actually are So CRE in some better

at relatively feel we So in about this time. good both point

Paul, quarter, higher outlook tax the little third what's rate was in Okay. effective the then, the think a bit I rate? on And the tax

going to have little a to our normalized grown. bit it's with preferential But some something think of more securities tax respect a with as a number. get It's 'XX I handle

it. guys. Okay, your all for Thanks help. Appreciate

All right. Matt. Thanks

call session Retzloff over back for closing any that to the like conference. I'd And today's remarks. conclude Steve question does turn answer you. to Thank and our for

in appreciate want your forward your thank time to to We quarter. Allegiance. Just and everybody interest speaking to to you for look and continue next

So thank you very much. Appreciate it.

gentlemen, the participating does conference. program. today's and thank This in you Ladies conclude for

You disconnect. may all