"We are extremely proud of our consistently strong loan growth, even in the wake of the Hurricane.  Our provision expense was elevated this quarter in part due to immediate uncertainty in the Houston economy and estimated losses related to Hurricane Harvey.  Additionally, during the quarter, we charged off one energy-related loan relationship we had been monitoring for some time.  We performed a thorough assessment of the impact of the Hurricane on our customers as well as the adequacy of the allowance for loan losses for our current portfolio," added George Martinez.

Net interest income before provision for loan losses in the third quarter 2017 increased $3.6 million, or 15.3%, to $27.0 million from $23.4 million for the third quarter 2016 primarily due to organic loan growth.  Net interest income before provision for loan losses in the third quarter 2017 increased $1.9 million, or 7.5%, from $25.1 million in the second quarter 2017.  The net interest margin on a tax equivalent basis decreased 2 basis points to 4.37% for the third quarter 2017 from 4.39% for the third quarter 2016 and increased 8 basis points from 4.29% for the second quarter 2017.

Net interest income before provision for loan losses for the nine months ended September 30, 2017 increased $9.8 million, or 14.7%, to $76.2 million from $66.4 million for the nine months ended September 30, 2016 primarily due to organic loan growth and an increase in the securities portfolio.  The net interest margin on a tax equivalent basis decreased 5 basis points to 4.34% for the nine months ended September 30, 2017 from 4.39% for the nine months ended September 30, 2016.

Noninterest income for the nine months ended September 30, 2017 was $4.3 million, a decrease of $1.5 million, or 26.1%, compared to $5.8 million for the nine months ended September 30, 2016. The nine months ended September 30, 2016 included a pre-tax gain of $2.1 million on the sale of two Central Texas branch locations that were sold in order to focus on the Houston MSA. Excluding the gain on the sale of these branches, noninterest income would have increased $538 thousand, or 14.4%, for the nine months ended September 30, 2017 compared to the nine months ended September 30, 2016.

For the nine months ended September 30, 2017, annualized returns on average assets, average equity and average tangible equity were 0.73%, 6.55% and 7.67%, respectively, compared to 0.99%, 8.40% and 10.03%, respectively, for the nine months ended September 30, 2016. Excluding the gain on the sale of the two Central Texas branch locations during the first quarter 2016, the annualized returns on average assets, average equity and average tangible equity for the nine months ended September 30, 2016 would have been 0.92%, 7.75% and 9.24%, respectively.

Total loans at September 30, 2017 increased $370.8 million, or 20.3%, to $2.20 billion compared to $1.83 billion at September 30, 2016 and increased $86.9 million, or 4.1%, compared to $2.11 billion at June 30, 2017. These increases were due to strong organic loan growth within the Bank's loan portfolio. Core loans, which exclude the mortgage warehouse portfolio, increased $363.3 million, or 20.7%, to $2.12 billion at September 30, 2017 from $1.75 billion at September 30, 2016 and increased $76.8 million, or 3.8%, from $2.04 billion at June 30, 2017.

The provision for loan losses for the third quarter 2017 was $6.9 million, or 1.28% (annualized) of average loans, compared to $2.2 million, or 0.49% (annualized) of average loans, for the third quarter 2016, and $3.0 million, or 0.59% (annualized) of average loans, for the second quarter 2017. The provision for loan losses for the nine months ended September 30, 2017 was $11.3 million, or 0.74% (annualized) of average loans, compared to $4.6 million, or 0.35% (annualized) of average loans for the nine months ended September 30, 2016.

Third quarter 2017 net charge-offs were $4.2 million, or 0.78% (annualized) of average loans, compared to net recoveries of $54 thousand, for the third quarter 2016, and $684 thousand, or 0.13% (annualized) of average loans, for the second quarter 2017. Net charge-offs for the nine months ended September 30, 2017 were $5.4 million, or 0.36% (annualized) of average loans, compared to $482 thousand, or 0.04% (annualized) of average loans for the nine months ended September 30, 2016.

As previously announced, Allegiance's management team will host a conference call on Tuesday, October 24, 2017 at 9:00 a.m. Central Time (10:00 a.m. Eastern Time) to discuss its third quarter 2017 results. Individuals and investment professionals may participate in the call by dialing (877) 279-2520. The conference ID number is 95345409.  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 is a $2.81 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 Houston metropolitan area-based small to medium-sized businesses and individual customers. 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.  Allegiance Bank operates 16 full-service banking locations and one loan production office in the Houston metropolitan area. Visit www.allegiancebank.com for more information.

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," "anticipates," "intends," "projects," "estimates," "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, 2016 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.

(A)  Interim periods annualized.
(B)  Refer to the calculation of these non-GAAP financial measures and a reconciliation to their most directly comparable GAAP financial measures on page 10 of this Earnings Release.
(C)  Net interest margin represents net interest income divided by average interest-earning assets.
(D)  Represents noninterest expense divided by the sum of net interest income plus noninterest income, excluding net gains and losses on the sale of branch assets, loans and securities.  Additionally, taxes and provision for loan losses are not part of this calculation.

Allegiance's management uses certain non−GAAP (generally accepted accounting principles) financial measures to evaluate its performance. Allegiance believes that these non-GAAP financial measures provide meaningful supplemental information regarding its performance.  Allegiance believes that management and investors benefit from referring to these non-GAAP financial measures in assessing Allegiance's performance and when planning, forecasting, analyzing and comparing past, present and future periods. Specifically, Allegiance reviews tangible book value per common share, return on average tangible common equity and the ratio of tangible common equity to tangible assets for internal planning and forecasting purposes. Additionally, Allegiance excluded the one time sale of two Central Texas branch locations during the first quarter 2016 as noted within the narrative, as Allegiance believes this transaction was not indicative of its recurring operating results. Allegiance has included in this Earnings Release information relating to these non-GAAP financial measures for the applicable periods presented.  These non-GAAP measures should not be considered in isolation or as a substitute for the most directly comparable or other financial measures calculated in accordance with GAAP. Moreover, the manner in which Allegiance calculates the non-GAAP financial measures may differ from that of other companies reporting measures with similar names.