Allegiance Bancshares (ABTX) 31 Jul 212021 Q2 Earnings call transcript

Good day, and thank you for standing by. Welcome to the Allegiance Bancshares, Inc.

Second Quarter 2021 Earnings 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. Instructions]. [Operator that be advised conference today's be recorded. may Please Instructions]. [Operator hand over Courtney to I would of conference to like today, now one the your Theriot. speakers ahead. go Please

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

Before the statements a if note management's harbor about page risk change. the safe see beliefs provisions information obligation disclaim covered the for at at forward-looking XXXX the Private intend be may give publicly and last factors release, in available we morning's that is for law. Also the that everyone associated today earnings allegiancebank.com which we is except required the in is statements. to additional statements, as all be need this guidance of Litigation the text any as results, as We update forward-looking website any subject are such by some remind on statements Reform Act with act. that defined the in such beliefs made, Please time to of amended. our future remarks guidance Securities begin, to We of of the by constitute I contained to forward-looking made forward-looking statements reflection about only statement

our Investor Presentation We also have on website. an provided

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

really we call, everyone, our Welcome, to Courtney. appreciate you, your conference and Thank attendance.

we by relationships income in company in highlighted $XX.X closely the proceed the due success past allowance share, this or process. continue this some our the to as assess great PPP year, earnings quarter share million was book PPP factors model, also for loan is as the drive notwithstanding outsized feel We to and our tangible core the benefited press for our release diluted morning, the second we continued associated XX.X% quarter's monitor release repurchases. of over a net dividends fees our share of loan with about recognition which per and from the part our having $X.XX increased Also, in that resulted As for per allowance for record given another losses. value and with from $X.XX economic of

level customer level Our Ray efforts. service also model PPP through top-tier Allegiance absolute place a through an that has high results describe, been survey both acquisitions, proven has It due separate customer at of our to and itself completed of customer the the satisfaction. recently where will recognized from

noninterest-bearing deposits months, grown XX.X%, at XX of the significantly past ending Over have quarter by the XX.X%. the mix deposits with second

in addition, steady a cost to reflect our are of In quarter, the environment. in disciplined our funds continuing second through decline we approach due current to the rate

loyalty housing as growing the to pipelines continued a to higher management recently competitive broader remain the a economy, now quality, rebounding notables loan excellent With terms, Beaumont loan few value. purchasing that well territory. market positive officers prerequisites are we are will with customers our steady see believe provide an that shareholders high and an is culture, pricing much We through bank strong well managers asset which treasury on brand experiencing services and excellent capital, Allegiance and growing liquidity, continue of production. volumes are Houston such posture and the glad build relationship Our and region focused from oil to into index prices, of extraordinary

to this however, the recognize the are region to market ours business largest bank be we clearly proven serve Texas present focused a do, opportunities a Texas, on community community of While that may possesses geographies pleased that bank effectively for like independent we favorable owner. other ability

and I'll Houston integral families. formation youth stakeholders, assistance serves new banking compelling Food initiatives fundraising initiatives, many our deliver. financial effort community options a low-income and University, Texas for active housing for minded advocator local our that, disadvantaged review Ray at at volunteerism operational Bank, and of financial to to our community by our With cover and detailed results. other all is program turn These includes more value to provide including followed Paul, it Allegiance support of for results, the of and evidence model who the over that able will of affordable support Finally, the which the Southern

Thanks, the to have that contribution. Steve. to employees time down feedback stories, service while bankers, culture about wire or to a friendliness mile service and bankers of These describing the PPP extraordinary our of going customers working track to pandemic, From loans are the facilitating we from facing uncertainties extra all whether shared keep our our speak provide. time, with our the

listening heading extremely banking produced ability percentile our feedback mentioned, retain launched has in certainly from clients in negative recently pipeline attract million. and in range proactive Net in us experience, reported placing and ever to that been contributed healthy on or and experience be industry. that positive first we XXX record originations the to that customer into totaling our an report to XXX, Steve to This effort Customer survey. bankers NPS loan launch, As our are can we pleased XX drives April level XXX second has quarter broader $XXX of the score the the the a Promoter an NPS to since Score, exceeding

are steady, are see core our has from market the those of treasury that terms from leading further as are nice our PPP originations the advantage potential in remained of core positioned take for now to for quarter the success to with new to growth remain indicator customers share reflecting presented new in as onboarding customers. was continue the momentum of well had new of growth originations the starting to opportunity which net management coming our ever loan and We bank. loan And back growth. that loan is our We and clients strong, outsized half

our Moving operating during million increase loans, results. which core ended at of billion, quarter. PPP $X.XX $XX.X loans, Total an now excludes quarter the second to quarterly the

quarter compared lending core new $XXX on first a compared were loans loans core that $XXX weighted $XXX experienced paydowns the of first X.XX% basis period million, million the at rate charge new the Paid paid X.XX%. at and to Carried end was million in had a the funded to by ending mentioned weighted quarter of quarter and our when million average and team rate of which as million of loans March rate of X.XX% March at average Our quarter quarter were loans XXXX. second of XXXX. million a average the previously off average core XX. core compared weighted in, loans by compared weighted a The X the advances X.XX% loans core new charged $XXX the fourth during in second All rate quarter rate generated, million $XXX in X.XX% core average XX funded X.XX%, staff core a $XXX million $XXX the quarter. loans interest of weighted charged the loans of on of $XXX to of points, funded to the The of XX, of to which a off booked rate level were of average weighted overall $XXX on X.XX%. million new quarter first core to level June decreased X.XX%

Over portfolio. pandemic. prices the and bar few and categories we hotel heightened the past being have in our COVID portfolio, oil energy restaurant and loan Those our several have our that provided information on due quarters, portfolio risk to gas could

to performance funded LTV portfolio. on our hotel portfolio. average At While the XX.X% or test stress X.XX% in totaled XX% portfolio plus the A loans, million CRE. $X the to our we will we with keep the time marketing it a a of a to on close see categories, result eye these in take more June XX, $XXX X% weighted return hotel shortfall categorized code in pre a continue $XXX of in on would feel to million LTV, that's expenses million

addition the charge-offs basis $XX,XXX up first million both quarter Nonaccrual quarter of from in We property upgrades end $XXX,XXX a nonaccrual second in and welcome $X.X $XX.X for relationships. was compared million aggregate, ORE, $X.X moved remained which a at position. to offset additions X ADR, additional Nonperforming relationships, the quarter payoffs, quarter, ended $X.X to of of and and smaller the $X.X some loans $XX.X The back coming accrual. which asset assets, $X.X one from additions, million, on $X.X estate, ORE a increased of manageable in XX totaled million million are net with by increased real from in and due improvement $X.X occupancy $X.X total $XXX,XXX payments, of an news. million $X.X from to $XXX,XXX primarily the other including $XXX,XXX retail hospitality in to property. comprised X assets. quarter million, points quality In during primarily seeing to remaining the our in in in partially the million was the XX million placed during is million $X due to increase loans residential million to

quarter properties. basis an Our point. at X of of X now were ORE comprised for Charge-offs the residential minimal annualized rate is

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

in we in million deposits total On by the over $XXX from saw the year deposit the quarter. million quarter front, quarter first increase $XX up second the and ago an

XX,XXX We accounts. continue the and from in as the of growth June strong of XX.X% of our the with result months increase, XX%. that recovered market primarily of jobs record pandemic. of the Adding XX ratio With now the months quarter. XX noninterest-bearing has housing was in remains now that, lost PPP The well occupancy associated deposit deposits of ago deposits X multifamily carried to has year with supply balances the to onset noninterest-bearing terms homes, while for Houston the for in at to accounts for the higher March area XX% first jobs compared lows the solid quarter-to-date year, XX.X% XX.X% single-family hit our see total customers as contributed to new in

by and CFO, I to Our over the out customers and the pipeline to encouraged to now bankers forward second remainder our are year. look prospects, we it meeting loan and healthy our carrying quarter the with momentum from of turn were the Paul.

Ray. Thanks,

are XXXX. or in $X.XX per proud earnings net of We share second diluted quarter and the $X.XX or per $X.XX income to quarter in or diluted quarter with diluted of record share of share another first report million as million the compared $X.X to million per $XX.X $XX

PPP loans. lower driven million without record net provision results million, the us during $XXX,XXX income revenue a earnings losses, represent still on again, pleased expense that quarter quarter. decrease improved lower negative Accordingly, our decreased into to would negative during and we part credit by by to noninterest recognized PPP are record that the was to branch for income the Improved income, first year these quarter ago a nonrecurring loss. million the Total an million note million to and provision, pre-provision expense expense pre-provision of we first closure. driven PPP recognized the interest key or interest $XX.X million funding was quarter. for the $XX.X quarter costs, asset first related from second the to million during $XX.X While $XX.X net from loans $X.X quarter. quarter, partially offset the to in by saw Interest were pretax compared the had driver pretax record $X.X represented for about million in $XXX,XXX due in second to revenue Recall expenses quarter, $XX.X a due related in X.X% that $X.X income increase a at the in second to first the in primarily quarter, quarter write-down quarter and power as in the quarter, fee a we compared the a interest lower prior slightly by revenue where for

during of should income relating we X.XX% quarter to for of I as total year-to-date. deferred million that after PPP year fee yield million PPP the on, X.XX% second and recognizing to in as a quarter end, income the note net approximately had $XX.X loans the of million yield that Total compared ago net and quarter. of moving was for quarter $XX Before remaining first $X.X on the quarter loans X.XX% into first

quarter. within loans revenue, for our and in quarter second for XX as quarter cost significant interest-bearing continue XXX in principally interest earning the quarter, a PPP in asset first basis for Excluding second driven points would quarter CD points PPP the higher downwards to and that of securities the to quarter for the have ago assets basis loan respect liabilities X.XX% basis year a on the cash expense, was XX from the growing yield the With quarter. for and track mix for second as of includes overall versus and for loans X.XX% second basis well balances quarter year funds basis points interest-earning reflecting X.XX% the X.XX% quarter, total points Total on and down from in related first the points repricing. XX first year been quarter, of yield by first to ago quarter, The ago X.XX% X.XX% was cost XX the the proportion loans.

forward, in driven see repricing CD expect going We improvement funding our continued costs and by continued optimization. to

the So interest the X.XX% and quarter. in for of expense net significant compared in fee PPP income shift interest ago quarter quarter recognition, with our and to offsetting margin first of net the the in lower QX earning assets, help composition a X.XX% taxable in X.X% as the was equivalent year our

and would balances related X.XX% revenue, quarter. been loan second the have margin first quarter interest X.XX% PPP the Excluding from net for in

being pricing. positioned been to relatively and to quarter year continue drag increase strong asset first line, part resulting net efficiency maintaining if Going difference loan core mix we to potential XX.XX%, exclude well decreased we the see funding interest aforementioned do million expectations. quarter. But XX.XX% to and optimizing composition to $XX.X on Noninterest the in liquidity forward, earning margin Total as quarter we through the our a feel maintain efficiency to income noninterest excess NIM the expense the on for the the the decreased was up as a have changes million our in we $XX.X items for on first $X.X the the discipline ratio no note second to quarter XX.XX% a quarter-over-quarter, to on positive improved and from the first increasing quarter. The quarter first during write-downs write-downs for XX.XX% ORE the were expense to taken Thanks of nonrecurring would the asset $X.X other to first loss in is due took second quarter. compared prior a from and to $X.X the million to in few loss million quarter. small in primarily compared the quarter, the quarter saw to second in due compared for first nonrecurring million estate the small there $XXX,XXX sale asset ratio quarter. primarily the our to from the that All you an real

a of recorded provision the expectations negative million in credit of We during allowance credit. model. to for on Moving our losses quarter, credit improving for $X.X reflective

all-time share again Quarter quarter to of since We $X.X ago momentum which, our at and tremendous loans. book and last both with all-time over to XX.X% share value. able tangible well or on bigger PPP line, at that very gets to an credit and over losses makes shareholder highs. from than positioned over billion PPP liquidity X.XX% ever drive and respectively, value mentioned, non increase at on Houston's ended be loans turn levels metrics forward for Steve end, million, The on XX.X%, representing core per market points old the we It largest second was basis continue say half the to and Entering never continue approximately and notwithstanding bottom half. dividends $XX.X the $XX.XX, capital quarter, to near ROAA we in the for as repurchases XXX to our feel year. assets or community ROATCE year and of will came basis back to now look bank. XXX at XXXX, quarter franchise better building are allowance share call adding representing Our success to Steve. second I profitability, points total the the

Thank With to over will that, open the turn questions. line operator I now you, for to Paul. call the the

[Operator Instructions].

of question Our the comes with Gailey KBW. Brady first line from

a So do thinking in about portfolio? bond continues to But in quarter. excess book use couple we know When cash buildup saw the does more the of in that for continued that kind as continue grew the quarter. next bond aggressively this you grow? cash I quarters the to putting of start

think it in all meaningful the portfolio. about risk time, take really the industry want but We we to bond don't

that extent the staying net bond do effectively, But So doesn't short drive a variable which pretty taking securities rate to portfolio. get more rate interest really -- duration It we against to we've amount portfolio, of incrementally interest through growing which meaningful meaningful interest it have but or but it the really reflects and been we're been invested. we want more income, risk

it traded, into used to It's sense. any back the pulled doesn't buybacks But stock how now mid-XXs. the look XX. you quarter. there appear over to then And if That share has Yes. in makes the be at be

about reengaging where stock in level this repurchase plan you think a at point? guys have the at Should before. you guys that's share think we purchased I

like really We are feel capital for valuable repurchases management. share tool a

is supporting things with possibilities Our M&A loan to loan and and capital, capital. growth of of maintain amount and be highest And of lines. best that and for we to secondarily, flexibility use forth going want course, those growth a put on meaningful then

either repurchases to are be preferred maintain definitely cash in going high or our a But inorganic when share we yes, the we is arsenal. that growth So -- want at usage through -- of to clearly the have yes. time, opportunities same of level organic

quarters, ex at of single-digit are the if back banks kind the for loan growth finally mean look low core of kind in the we PPP going XXXX. you me, of level. you then year I lot accelerating And loans, forward? talking and couple growing as been I in into guys last about should growth guys have for of mean, of half we think get this you a How about

of Well, we were see back momentum the growth similar the saw the into year, the on in of looks this second half carry quarter, -- pipeline and some X nice think into quarters but we going we pipeline next the we a and the quarter. was -- did that were will the strong. Those originations strong

we quarters. think I quarter, that back up in single-digit X second the of half we what about, that, into you're in higher what saw we first Brady, So we get talking than the the if what should into can tick

the sort After the production really pipeline PPP, We're pleased the distracted and basically by no of longer from that. staff. were they with the

about there out very the distracted calls them by good So feel PPP longer our we're and shaking making seeing team no those bushes.

Olney Stephens. of next Matt question from the line comes with our And

were mentioned remarks, on start think that few a take we note bit fee you the the that. side and than recent you to little on the fees for Paul, Anything I detail were and there Want rate. a can prepared items should in of. run us higher

XX% small with probably delineation. nothing and the meaningful. with card What is merit the low building the broke out this the grow a quarter. there. base, trend we're to fee we've didn't time got being that our and year-over-year we're it's first or a interchange card but here for ATM line that that really income We track they proud Really, to happy grown number the listed income so on new as of great on and debit addition respect extremely going breakout They it's on we're Really from were record able financials.

in itself the noninterest still side, more a our all albeit to the of income like room it that's manifesting meaningful all, got on go trend we make mix revenue to So we profile.

deposit continue in Any lower room on And move how costs, that? color a bit Great. to is more those Okay. remaining interest-bearing on the XQ. much within quite

it we've in more I higher going But a but non-maturity There's the it off on manifest function rates. gradual this rate is down in largely growing, the mean you're room. CD ultimately, to of measured of most really, and see been line, working CDs rolling comes and rates the we've level environment, and of as being approach rates more we on that to liquidity down any the sheet and disciplined especially have, everything exception highly that out been how relates overall the walking with got. have balance we it there sheet itself pricing, that

got about we've to room go still, measured some still but be want So it. we're to

base. So nature our to apple deposit relates not of as upset the to it cart the

Sure.

then expenses. And of million, question came $XX.X core we a Okay. in number. think Paul, on last I kind operating around

line are was think thoughts here I pretty on quarter. expenses? from guidance the What much with operating from last your that in

hold We're line. working to the

things opportunistic a line going that. that like the pleased stuff and profit to driven but sit that there. plays line to in do And there's And has and with slightly decent that hold -- kind on performance we're like at And we're upwards. to has try But the to growth for that what been zones so, least the sits doing we posture. function is the maintaining ever variability line, into the of that guidance focused growth. about definitely some potential some prior ticket a can certain sharing bank strong be So feel ultimately, of of about pretty to bottom position There's goal that still we're guidance. we what's

to be things we're definitely in good So there's it manage while about we that are trying there overall. up pushing how it

Instructions]. [Operator

with Piper Sandler. comes Graham Dick question next line of from Our the

have in M&A. trying deals effective quarter each of been recently here this available? to And attracting they arena as So from I quarter you'll by maybe guess, and in in the try just guys disruption how region. just M&A how add there's accelerate, I'm -- past probably in some start get up I'm over wondering only caused But lenders obviously, Texas become as picking you many quality a to the been sense

Sure.

the So actually lenders, quarter, as -- last so we far for did we last hires external -- not quarter. as

First one. quarter, hired we

Although our some quarter that. which last quarter, we did We've onboarded have has internally we expect hires. actually new proud lender we're next of development of and one really a promotions -- month. already program, is X off this from expect with lender month, of that more couple started a and this But

were from one program hires, think lender in talking promotions So at a type rate. run of maybe be we as that. mentioned, you the some time, it It's development I internal also of the from in will but our combination And one month probably market, producer our some external not homegrown both a category. about disruption

depending how able to I to helpful. you That's guess, pullback think months wondering on And a seen something might are I next just think I'm more basically, be Okay. broadly going bank you stocks over Great. I -- if but get just then, line And XX over expectations, in for M&A, XX seller the guys. guess. conversations on you the recently, obviously,

We're and locally. talking there out the meeting always with folks

bit if arise. little the We beyond territory have an opportunities looking a in even interest

with over obviously, But kind and the active. a opportunity it. think day a of joining our for capital sellers provide has will we you value. on their gain We've us. to to I -- time the them always market great accomplish pulled And be say, we're little has And to focus like been continue So bit. be we got value XXX think in back

So company I think are we've But we're certainly got that rightsized. active. the interested right flexibility and in

let's it haven't We way. put that door, that shut

And looks guess, Just All thing have you what what the get I a were Great. last guess one quarter? the idea for of the is, in PPP better loans average balance for quick can the then right. guys I a just sheet here. number we Do like. me

million. $XXX was It thing. Sure

Our Stephens. question question next with a from Matt follow-up Olney is

And on Just there between M&A Beaumont, to how curious markets. Allegiance want much Texas it the Houston the question. to extend back that South like and appetite South of markets? footprint I'm footprints the in Texas beyond the circle seems is kind

It's to manufacturing the of player in gauge have and an outside of hard inventory in interest. look appetite. $X.X issue. There's this then largest to this I'm candidates inventory and the guy, level at old an as available there's look inventory it -- you I region, There's or We're and an a region. market, an degree of billion, at

are think you looking shelves I at. So options your if obviously better expand the that you're

prudent the or needed just to a -- it's so we nibbling simple matter process. bit want to that just consider little and that maybe terms but very other I And it's a regions away, about scale conversation careful we a have. think of be it's getting But any consistent and we're certainly a in there quickly

It's Let's that and for growing certainly a looking interest think put could it deals that just there's bank. -- advantage process the and way. other I at

turn And I like the any for conference this Steve to no questions remarks. I'm Retzloff further at further to over would time. And back showing

everybody's about really where great bank. are. once we Well, a again, value. create appreciate We the feel interest commitment We've in and to got perform

So speak quarter. and again next thank we'll to you you,

today's conference for you concludes Thank This participating. call.

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