ABTX - Earnings call transcript Q2 2020 | Allegiance Bancshares Inc

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Operator

Ladies and gentlemen, thank you for standing by, and welcome to the Q2 2020 Allegiance Bancshares, Inc. Earnings Conference Call. [Operator Instructions]. I would now like to hand the conference over to your speaker today, Courtney Theriot. Thank you. ma'am. ahead, go Please

Courtney Theriot

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

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

investor website. presentation have on also our We provided an

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

Steven Retzloff

Courtney, all ago, you, listeners, and were of reiterate industry, grapple the with not the like I community we I'm of is all right in united my interests proud when you up even country and Three many a second your all led way banks months on our to delivered. call other It but I only have soon comment, collective needed needed. bankers, they shutdown for welcome stating our would has call. doubling our that Thank effort that our we of Unfortunately, to personal Allegiance big quarter earnings to banking continue the of and have was behind pandemic-related as business challenges. and the community a doing and were entire bold us. and our so from that of community sentiment, been get stepped down and well, that us as aspiration the

but report, relates level been only produce has team Bank as at customers, the As to on up to one of Ray of will Allegiance an our where the to our to performers delivering rolled sleeves community large. outsized not PPP, service, existing our top it

to for Better Business our the Work XXX team. Texas. builds and Bureau the bank food staff strong not with of upon to matching been and a Award provided at named significant our meals recognized those and in will challenge, by to over this Excellence region We already million support Food both distribution opportunities up but be through which need. volunteer also only Top of sense where, due the recently for helps Houston big their in in their we're way have center, We culture also the donation supplementing stepped We're the X Companies for Bank Houston one to our

a lot to have Allegiance is say prove I it. when So of in way, evidence I leading big a

as our gaining that -- circumstances. our over it borrowers. their of customers liquidity feel for the to but the any continue under our performance, the loan-to-value color guarantees we the us position. will schools outreach such commercial management assistance our highlight speak addition our and the past and risk-based and of has month, going the reopening into be proved some but Paul the going of to In and our central capital be and hospitality, and as there's certainly strong the real-time as been particularly been result excellent -- of as be right to position could to NIM providing operational with COVID needed businesses, our in forward. bankers have personal contact on deferrals. believe it Overall, and to our concentrations pandemic oil will was are earnings. categories, frequent about bar elevated into beneficial good pre-provision granularity, as though, ratio the restaurant very of feel We timing relates insight favorable to portfolio our even of particulars will Ray of certain record capital, we provide effort, in hoped uncertainty gas small that the Obviously, and to PPP our I status. to status risk

East a did meaningful. XXXX year-to-date quarter, has that reserve Houston, position. new presence. success have Downtown uncertainties a in not paying over us balance to to able our position margin past Ray the been began had past sheet during continue based and quarter describe. face physical growth and the also office the we build our of just changes which quarters during will strong dividends are several We on previously our pandemic recent of and mix solid better We where and We deposit Both the the opened

pandemic. that we have of successful introduce an to within have best-in-class with who the surrounding that understand We team are work-from-home increase a pleased bank in a the we in very and highly while incubating during area we there the is will discussion over banking fewer the do significantly high an opportunity geography That to growth year. assets said, experienced branches in support similarly that to to we quality have our be for needed asset. service the know additional per opportunities, and that that been is while branch suggests scale, is What end level for the future active our in noncontact fill-in on the status industry of

likely growth We to and also diminishing. recognize will requirements space that staffing increased central support be

as our of usage sounding of of planning work-in-office exceedingly is a the such muffled our of safety constant commitment approach. Our our uncertainty, adroit workflows operation. staff of Though use technology, both we the to and guiding emphasize much employees and continued so customers the hybrids well option has consider our work-from-home, been will as talk masks, evaluation improved for and greater message our and to determinant, sincere deserved. appreciation Amid

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

will the Ray? We questions. open call then for

Ramon Vitulli

Steve. Thanks,

extremely As and $XXX new In while the care over originated accounts, $XXX approach renewed question, a of loan of look core opened that onboarding in including remotely deposit deferrals, million the we ongoing management how record midst legislative hours, of of progressed done. genuine through PPP serve was the sharing loans, did do working with the PPP customers a X,XXX offices designed resources new customers, whatever many were loan in second million of through kept we needed and our the to forgiveness quarter, it? changes. hard, back single during it our loans, another million accomplished serve we to treasury now answer what But bank take $XXX setting to it the process and did the quarter, process putting teamwork, originated bankers with open our quarter, all-hands-on-deck knew of on to dedication how others. desire we is we The long poses to we working our an get

details business office So similar followed second reporting continuity I on bank provide last to results. PPP quarter normal effort, by stats, of our will and our operations quarter,

plan, we We the shifts the have business of working with if aspects as on-premise. of remotely handled entirely pleased of or business the all were continue our execution in working be teams, or we to working continuity bank whether

COVID drive-throughs lobby have and of appointment so we full served service when have via since pandemic, a customers to declared we appropriate, reopened offices do bank to number While guidelines. our continue a was slowly county and following by and state

of excited are opening of of and Houston. announce to area experiencing XXth of Houston located is in Office, history known an residential and rich that business the Steve resurgence End both growth. East very office we East historic mentioned, our as novo, the bank This As a serves End in the de

fabrication located bank job new near million the recently For city funding East office $XX support manufacturing for to community. example, and Maker of in located Houston high-tech companies the new End our Hub in to training develop a approved

incubated that strong deposit have the have a LPO, Palm members via area East in office, Center with relationships we and presence Palm the Several of closing the of East taking more where will Our new East conjunction are presence the in attract loan Houston. End have lending now the ATM. the office to production End located we a already at office the will In End in our community. of bankers we the opening team Center permanent many continue

Houston PPP of also the results the We on our pleased are and impact loan efforts with extremely our region.

jobs. loans million, Since funded affecting million. As end, we totaling an than XXX have of more June quarter additional of X,XXX PPP we more XX,XXX funded than XX, $X approximately loans $XXX

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

continuing warehouse deferrals our results now will provide the $XXX information of were applications and in some our approvals share all size. nature be August been segments to granted Texas, several and quarter result to on For market second million of have the at the $X.XX additional the during Total a of excludes market on in program extension payment additional core including of to of nearly loan X.Xx which over a would And meaning volume we're represents deposit portfolio, for PPP of bank the in the quarter. of PPP results the expected loans go some mortgage aggregate that Texas X.XX% X.XX% our X. I a billion, loans, fundings pandemic. perspective process result loans, compared million lines, PPP ended $XX.X what as as decrease a share of and quarter our our

mortgage successfully the we quarter, the completed in early the full of business. exit warehouse addition, In

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

bar Houston some million deficiency on first portfolio the off have rate mix a core loan upstream, weighted XX% quarter new marketing in $XXX testing funded of the a the approximately weighted was X quarter $XXX loans, portfolio second this marketing provide of represented rate quarter in, Regarding our collateral or could at concentration. loans period weighted funded our commercial categories testing borrower the average average but All CRE, million XXXX. downstream A we X.XX%. category of rate X million, to rate and deficiency weighted June X.XX%, had X.XX% overall gas hotel At loans interest average the restaurant commercial segments average total quarter reserve following below levels weighted like $XX million by being million second the plus category I of XXXX X $XX.X regional $XX interest XXXX, production or CRE, of risk was on categories expenses have new is C&I. the base collateral of on which Carried funded quarter commercial had ongoing expenses rates oil weighted the charge value paid ending and commercial The this and Despite X% would XX% or fourth loans, average gas of overall core that XX, of represented new portfolio, in loan an of amount, first of appraised core for heightened weighted we the have compared average be to and the production is Of largely being X% X.XX%. average core at weighted decreased approximately and to the of is our now million, the The $XX.X approximately X.XX% to due COVID paydowns energy bank, loan for commercial XX, rate LTV points, any March our a million loans of the X.XX% These a Those our the not average our based loans industry. our portfolio. quarter to which X.XX%. on nonowner-occupied $XXX,XXX, recent additional the advances estate which categories. overall $XXX midstream loans in prices resulted X.X% charge as compared quarter experienced for stress indicating XX.X%. end funded XXXX information rate during was pandemic. based the rate quarter of in and defined on oil and that commercial of loans, overall XX% X.XX% CRE, directly Owner-occupied of to the real on exposure second do XX% working most term $XXX,XXX. of operates indirect basis X the loans. our as supports any of and plus capital an was stress was and/or resulted

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

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

In our color added little our was basis. a loans. a mix linked-quarter deck regarding on loan of posted portfolio, loan mix slide The on overall of type the our provides terms website overall changed

environment. second XX ORE rate the the a of and X foreclosures. Nonaccrual $X $XX.X in in of charge-offs both XX ended manageable $XX.X at from of payments, in from The in current These smaller and the a due relationships, from million an now quality and partially net million loan, points and net or basis additional from The hotel a were had prior $XXX,XXX the end quarter nonaccruals by XX issues in periods, basis assets. $XXX,XXX Asset to relationship new million up $X.X been quarter million occupancy downgrades loans million which increase on annualized assets, experienced remained relationships. economic to nonaccrual million is position. to loans in nonaccrual offset during $XXX,XXX from charge-offs the experiencing remaining level including of including due which nonaccrual the $XX.X Nonperforming primarily in was was that increased quarter XX million points. quarter, $X.X $X.X to was totaled during first of total $XX.X $X.X million, quarter, payoffs million increasing X

These million being estate X assets consists a third and smaller ORE The estate real collateralized. and actively X residential a are million West being largest X are believe the second X contract The northwest Generally, negotiations is with in remainder we our for of largest commercial a million. potential of well $XXX,XXX a of X Houston and real properties largest Beaumont. sale. $XX.X Our $X.X totaling property. $X.X currently properties are properties, the commercial are property, nonperforming property in several marketed Houston, industrial

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

front, deposits related keeping borrowers. ago quarter. March XX.X% XX-day at offer to was at noninterest-bearing started With effects total XX%. this the to In above eligible of the our increase track to June XXXX, ratio On borrowing in ago continue the in quarter by noninterest-bearing the in deposit deposit category was PPP the million the second $XXX.X from The as total were we well with Back record $XXX.X customers. on ratio over a year and deferrals our XXXX, in quarter. carried June saw to that, or compared for primarily an XX, accounts. from the deposit during XX, up $XXX.X we up the some over and balances seek million March, accounts XX.X% quarter increase year pandemic items higher and payment associated of second We to first quarter XXXX. XX.X% XX, $XXX.X new result million deposits other customers to of the to increased as our Noninterest-bearing our deposits as million

time X,XXX of billion $X.XX balance with June XX% loan loans. loans were an XX, on deferrals granted of core or aggregate of first As

balance or with loan or deferrals $XXX.X aggregate $XXX deferrals on million leaving XXX regularly billion scheduled deferral. second full. in payment, million granted million or I XX% loan XX approximately loans are of loans XX, made deferrals, $XX categories loans provide had a category. first-time the in that included June are as by July XX% of first the the the while approximately in paid deferrals first-time Not some in will key an X% of still of in were on million $XXX of approximately each that received of in first-time The as deferral follows. numbers $X.XX type have X loans off As

first of of deferrals the and the and bar of investment property, C-store, deferrals X% all all with gas, of percentage C-store total deferrals, bar, deferred; with given X% all deferrals respect XX% to rental The with XX% XX% total of of and with with property a XX% respect of XX% all be XX% deferred; deferred; with deferrals and office the total deferrals total XX% restaurant deferred; total loans of category. deferrals and second deferred; X% X-X of X% percentage and type rental all restaurant of deferrals and will deferred; all XX% to XX% hotel investment oil of of will family with X-X gas loan family, be retail and oil deferred. of total deferrals all with XX% total of of with total of all X% number total within X% office, hotel, deferred; all with Retail,

and of a PPP total existing our we A as gas, Since to loans our to previously as and follows: breakdown both X%; million and XX% existing $XXX hotels, customers be approximately customers as general, and we PPP Texas gas As PPP PPP Houston our X%; hotspots. our made that, bars, can oil categories bar and and in percentage a PPP mentioned, and provided loan PPP of funded high-risk of oil new news of and in hotel loans to Restaurants the loans customers, COVID received we received continue X%. of loans. restaurant is a loan. nearly all say loan,

As reported cases XXX total XX,XXX of total County July XX, and confirmed Harris deaths.

several the have and new including the measures, beds cases XX days, improvement of patients. we past occupied seen by X-day average ICU key the rolling number in COVID Over of

Business direction, remain East is right capacity. has trends a can are End health being returned in others focused XX% when and roads we to restaurants region, near a car. your with becoming in new the on mask Putting our highly situation conducted this headed services Generally, on "we out these and While operate as getting and the our belt ride the an is safety. at by while borrowing when will coping routine buckling products as keeping eye seat approach" expenses. ways the are to customers in on economic finding deliver with traffic

borrower and our these now this during does companies medium-sized of the and times can over granular businesses portfolio as quickly small- these loan Our Paul. strength during I the it provide to be profile address pivot challenges pandemic. turn to nimble to resulting CFO,

Paul Egge

Thanks, Ray.

bottom came $XX.X expense $X.X in diluted in share uncertainty. or significantly line previously relative per million like the referenced, and the quarter, second to risks million which The provision of were diluted results is in and $XX.X As and per $X.XX the to $X.X much COVID-related net up in first the $X.XX impacted due second to million posted quarter million or our diluted income economic share per by share $X.XX the XXXX. quarter first from quarter, down or in

of pleased with underlying While very we bottom operating our results, we trends. are line disappointed with the are many

for the the income such and ago million year that the in million. an record earnings Recall of Adjusting pre-provision by $XX.X the second was that the back pre-provision $XX.X income for decreased pretax pretax million losses posted in in income, quarter quarter have to would items first results million we pre-provision ago million record second for first compared the and to $XX.X $X.X in key million million a drivers the loans and quarter. income in side, Record liability the average on by we nearly income larger income where lower the side was accounting $XXX PPP due cost the of quarter. Net items, as which offset nonrecurring Pretax year additional securities is interest to quarter, adjusted were million quarter our net second $XX.X OREO first Similarly purchase featured interest earnings the increased portfolio the and been quarter. impressive funds quarter for to pretax balances power improved XX.X% on gains net $XX.X in million Key in pretax our million pre-provision On from the $XX.X our first loan accretion. interest second or quarter. asset versus SBA interest partially $X.X driver the pre-provision significantly. impact quarter million was increase and in write-downs, of the $XX in from $XX.X quarter. nonrecurring

interest $XXX,XXX year decreased reduced net quarter. total during decreased So to expense income the total second $XXX,XXX first CD $X accretion quarter. all while $XXX,XXX continued $X.X accretion million, loan income positive in total by quarter second positive of effect by million, $X.X the quarter interest as by increased interest effect by acquisition compared Accretion income impact for total acquisition the The decrease while to ago compared quarter. and in expense $XXX,XXX $X.X the to on increased by a of accounting million accounting million and the a in of first

in loans year the acquisition for yield X.XX% quarter. quarter quarter, accretion, and year ago X.XX% been $XXX,XXX quarter's PPP purchasing ago leaves accounting million and on first X.XX% loan the X.XX%, the in second as balances in impacted compared Yield Adjusting have the in on the the and mark. and the in quarter accretion by both X.XX% X.XX% in accretion the This CD in mark quarter. the first $X.X would lower second was quarter to loans for

assets would to quarter. PPP down from quarter, the the was you year X.XX% were income the the the lower loans, on first if balances as the security X.XX% in second mix. the interest-earning asset and well reflecting exclude second and effect been X.XX% in as for PPP have was of X.XX% on average for loans accretion Total which ago yield quarter, quarter yield Now aforementioned higher earning for balances

total loans, quarter. on were earning you exclude for the X.XX% to been If the yield the have assets would PPP second

basis versus cost XXX in noninterest-bearing XXX first for interest-bearing for of second The part to in XXX basis to and quarter points Our ago cost first versus dramatically decreased XX points quarter second of points balances the in basis funds the liabilities significantly the quarter. points the higher in overall year XXX of was the deposits. basis thanks quarter, basis quarter points

in The impact funds in second Fed improvement quarter March, borrowed actions cost funds. repricing cost quarter's of decrease significant non-maturity of of the the in and full reflects deposit after first a

point our impact taxable net in we the interest to continued won't going but accounting second remained relatively we be the of X.XX% year improvements the over in equivalent X.XX% the to accretion, Notwithstanding dramatic, ago cost repricing gradual and the it such our expect quarter. On the in driven the to more it basis our and X.XX% core relative quarter and of We funds ago quarter. forward, as X.XX% in a shift be of portfolio first in time. by saw from quarter strong a year first proud will excluding second to X.XX% what define and towards as quarter really a PPP saw compared or we we securities, gain quarter in loans are X.XX% mix equivalent significant the as average maintained in balance lower-yielding the margin very have purchase interest taxable stable net NIM, adjusted margin of CD

Excluding to and second PPP the increased quarter. margin loans have revenue, for related net X.XX% interest would actually

for we on the $X.X loan Going pricing. gains as from for quarter net ORE by quarter $XX.X loss noninterest first Total an due for positioned sale first in the estate well PPP manage and write-downs mix interest of Noninterest recorded employee discipline line second in second maintain salary strong deferred in the margin on expense million to $X.X increase $XX.X $XXX,XXX maintain of expenses fees to our primarily deposit lowered the million. decreases the quarter. offset the million $X.X to a recognized quarter. of owned in on and other decreased PPP on million by in the funding quarter the forward, related related quarter, quarter the real million booking compared the expenses quarter. process. that to $X.X overtime sale quarter These securities to was featured Recall lower that second during income we benefits quarter, loan feel was to first in partially the costs of second rebates, lower which correspondent the bank loans the Notable and were million the

expect the and $X.X statement Upon or loans, into income forgiveness of note PPP origination yield aggregate we accelerated. approximately mentioned on the deferred should origination fee impacts, loans million will of in fee over and the life costs income recognize we remaining early While we and recognition topic in just payoff PPP aggregate loans. approximately origination million SBA the $XX costs that be the on of individual income individual to

losses drove quarter, Our XX.XX% improved quarter. our XX.XX% in quarter's revenue for the provision points slightly loans. the second we the the our efficiency you the efficiency losses were write-down, which to loan second first XX.XX%. and it and efficiency quarter of would lower in $XX.X is million million. have representing $XX.X This provision ratio for ratio Note that the expense XXX quarter to quarter, if basis first brings for profiles first we posted to of was decreasing loan year total compared adjust the for than to been the million, the for allowance The XX.XX% for took the OREO $XX improvement prior

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

the elected mentioned take quarter we that relief the of CARES first to the Act, we call, CECL. in the deferred implementation and we came with As

being forward the time losses current with economic we further the the able refine situation the since uncertainty, to loan and to allowance fluid So additional for allowance look reported incurred under is information. with our benefit And is of COVID-XX significant standard.

Our value significant beneficial our COVID-related impacted revenue provisioning forgiveness. stream. unrealized book. significantly economic X.XX%, margins, bottom drive the before respectively. first tangible by from we and that's strong our are gains pretax quarter during by the the loan line PPP pre-provision ROAA was metrics which earnings current which partially we our to X.XX% driven an quarter, impact approximately and from the per second uncertainties, end solid $XX.XX, expect Quarter And securities share a buoyed in came of X% increase ROATCE recurring quarter, for book Notwithstanding

levels also feel or our be to positioned we now To Allegiance back subsidiary. in confident high a that to dividend. end, about call $X.XX feel I on of July near All ability dividend XX. are and modest maintain Bank capital a and of capital the we at our navigate current declared economic a over all, our environment, our consolidated position as Directors fortunate turn all-time will at basis Board we to well Steve. We on the strong and

Steven Retzloff

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

Operator

Instructions]. [Operator

from comes James. David question Feaster Raymond with first Our

David Feaster

have do I what mean just wanted margin. I commentary. you is on core to start And been -- guys out appreciate able Paul, just the to tremendous. I your

on I you the just some going to think guess, was it core asset if as improved like NIM PPP how ex reduce the math have thought about accretion, earning core do is opportunity NIM, going I NIM forward, sounds doing guess, and costs like the deposit further Just forward I'm XXX. a any So right, mix? very the core ex and impressive. leverage you

Paul Egge

going it we're to gradual speak, is the little as of we a prepared quarter in of do the to cost into our the funds. third to be standpoint continue case the of our so quarter that momentum, to the Well, than our cost third protect to continue first in And to ability decrease see it's working likely the for from from was second the Certainly. for our bit to more us that. going mentioned to remarks, And a meaningful But hardest bull quarter. quarter the clearly funds. NIM I be ability

of it into liquidity margin stability asset On excess -- the about that's push to our mix going our half of on we least growth of liquidity good But and at excess and/or relative have on asset impact the side, maintain levels shifts headwind, unknown to our of there balance to still a our be certainly continue maintain feel level particularly ability some and we an try our loan ability strong relates overall pretty the really asset to the To of for to book the extent balance to to to sheet. year. and levels earning yield. on the as degree, relates the back have some side sheet it the will as to loans

David Feaster

between So the reading if potential some I'm lines, flattish, at if not least margin for additional expansion?

Paul Egge

a is trying little knows, we probably hardest our that and I more. expectations, ensure deliver to who And that. we'll think maybe way be the to flattish set

David Feaster

we that math of I it's are the And rates -- to to and you redeferral XXth you XX% redeferral appreciate I'm July. on got Ray, through the think And -- your the is I just how guess all Terrific. as a think like through do I how going mean guess look rate, I you've if data the doing that just I right, the redeferral guess the I deferrals? XX% about how like rates. remaining then sustainable do conversations guess, the how going? forward -- commentary

Ramon Vitulli

Sure.

benchmark. it's I good probably think -- a pretty that the

think you I our giving a overall, date little -- on the risk that that total that July at is few the if bit But was -- XX the higher that portfolio. is seeing a we're that than categories, higher days we're just they're it's ago. from velocity look

bulk were the deferrals reported was the obviously, of end at with granted that think So first -- in of those we I the velocity, April March. what the after of -- deferral tempered big April velocity as

to but think second And that I down. still Okan -- pretty has still so I chime And in. deferrals, about probably it's slowed feel level. wants that early, good

Okan Akin

Yes.

what were documentation is comfortable customer is in be takes in deferrals on stringent working really first second what their to needs at get payments. robust accommodate more deferments revenue same their on an and we second as plan the term is the loans done short make to we the the PPP behind to the ability have time, as much second If to are terms requirements their customer base. from we working place to of of there that deferments a for while aspect effort our the get of it deferrals their were granted customers other to a better granted, more The the the in

the velocity So of second deferment significantly. the that impacts

David Feaster

Okay.

That's color. then from Okay. helpful one And last me. just

the organic then deferral activity on just have was come balances, look growth. utilization thoughts Just distraction. the the program a as huge it loan And Obviously, at I may and down. PPP looks C&I like

thoughts and you accounts to your from activity on forward? growth get thoughts back the lenders of ex organic Just organic just PPP curious, and new and growth originations your forward as bring the some going program can over on origination and going PPP maybe

Ramon Vitulli

Yes.

So the pent-up originations be a third little there a we bit that in from the quarter. normally took we've of second the what see in may and quarter may dip definitely experienced pipeline

And quarter. to looked fourth just elevated still that payoffs too say some as in run happen turn what what levels -- we kind originations growth early I have we're third the quarter the that may we still and payoffs. be think into but do far net it's rate to the what of will of experiencing as has longer of no -- is pipeline become

I pick in sure, the little the first but originations quarter net saw I I'm mean growth what So a you really is, to the in quarter. up second from expect what bit -- David, not do

Operator

from Our Brad Piper with Sandler. next question comes Milsaps

Brad Milsaps

got In have sense? risk makes categories? that some as of of you deferral other from maybe and the you think areas a -- that of cured calculate, are it's do in but bucket to in to you still out guys this still those $XXX-or-so follow-up that there risk to more would have hear remaining hard waiting risky, on the of you deferrals on wanted is just deferrals that less you that I deferral. discussion. piece, first million there, higher be less high some more words, your viewed say The if Ray, would

Ramon Vitulli

a good would -- the the XX. billion think we really $XXX-something-XX granted It's what's rest of And like question. was of again, of that's April deferrals I as a -- on million when looks bulk, function of portfolio. deferral the left No, Yes, granted. the $X.X prior were a

function it's I of not necessarily the and industry. the believe, So a timing,

Brad Milsaps

Got it.

you've left got in [indiscernible] the like It's the So of your book. whatever? customers look hotels kind heard it you've will or already, and rest of like from not

Ramon Vitulli

Sure.

we've deferral second rate look the the should seen, the would think deferral deferral. due -- -- I I second rate come those -- as based will first as out come those on of mean similar what

Brad Milsaps

make understanding the will once -- my SBA up customers? periods that big lot that just where a behalf it. for on much know I of Got from a to over. will have that own -- My expect deferral lending, you how And on government payments Do impact clarity, maybe benefited guys? pick you program does is guys you the the

secondary think of Just next of kind or over repayment you that X about sort source of curious how the months? tertiary

Ramon Vitulli

Sure.

but coming really been those a So payments. around yes, those X we payments, our on have the actually deferral. customer of $XXX $XXX money The And million, receiving million. is It's is non-PPP the months SBA loans. portfolio, experiences deferral, not a SBA

see how thing we those close you hotel, got and are they're every there. day of receiving loans -- and those those care SBA And we the kind risk in keep have of on of to in area So month. doing. been eye those a A restaurant that number

Paul Egge

It's customer. benefit a huge to the underlying

Brad Milsaps

just kind that's kind yes, Paul, numbers to PPP follow of then, correct I the my all make up, just to And what at. piece. Yes, I was on sure have Sure. getting of

give average. left in I through think you on how you much the recognized said you right the around much of fees us $XXX then be income Can recognized you And interest to how quarter dollars? kind have in million as program? you in move

Paul Egge

the interest since due recognized in just so only have booking, and we course, had fee million the timing of $XXX detail in both Sure. -- was I the $X to income the don't the million. And footings, to under quarter. But here. average ultimately, speak, of

loaded quarter, part really So fee interest the first XXXX going maybe to story, story, income quarter. the we're should of the third when going hopefully, of you -- levels drive got and level me, into that the -- forward. income And be a we're on I still feeling fully push that of, quarter forgiveness. is fourth second forward comes and of of the When to average level footings we you're going shove, first to to don't where seeing in I third of quarter the high look pardon to front a going quarter say, expect of forgiveness have the really that meaningful process. interest to bulk really end the

Operator

Matt Stephens comes Our Inc. from Olney next with question

Matthew Olney

Is about assume ask sounds It $XX this to is to considerations for costs wanted the I a rate by the operating good overtime the increased third are for of other of some deferred Great. Or like the expenses. us run there costs XQ to offset about? the were PPP. million some level, think from this quarter? in

Paul Egge

run shoot, a do it's us at look that's I as for to of what than, to to demarcation rate. but line a I'd kind say of better solid

Matthew Olney

Okay. oil the risk Great. your what And gas, they're here then side, the is portfolios? categories also bar, And retail on your talk high CRE concern in that greatest then and are you within these restaurant, some the the credit can you about hotel, peers of categories your focused on. mentioned, including

concerned or total the of you about? X% Can include more around in it's about talk your decided guys, you you that categories you're loans. for portfolio think terms to of I and not why retail X% both

Ramon Vitulli

Matt. Sure,

I'll it over to talk the other items. Okan then about retail, and on me Steve turn Let

So loan third-party show rent. we call type that what are about around retail, about that something is is upon half we that would loans dependent

where properties whole those. we lot single-tenant-type in is half other the of seen haven't deterioration So a

similar not the well. one is it didn't that looks underwrite give on LTV, in include the to our of So centers. coverage also owner-occupied And there as we grouping. the rest in deferral the far debt anchored color the docks with probably rate our And on, categories to guarantees. end additional bucket other part These those those are that mostly the because big there's I portfolio in as of personal think of how we front -- as ratio, going

and of rent, third-party upon dependent you that as is a So that to at what it kind amount. it's retail, entire not broad look and got really

So or the I'll over to Okan turn about Steve it category. other

Okan Akin

those Yes. and oil I'm this a about little of hotels, how is Okan. happy gas to and think we restaurant, derisking bars -- speak and portfolios. happy bit I

CRE look portfolio real be the we our that the commercial of of as the So deferments naturally benefited loans it well estate. all those buckets restaurant for from that those X vast and majority the going by to customers. and secured have supported hotel as you in talked nature at bar, of When PPP the about is earlier

you Our bars at plus are for can stress scenarios that average scenarios CRE absorbable of LTV expenses plus worst-case weighted XX% on those hotel XX%. XX% see testing did and or XX%. both in bank. at And are Ray in discussed losses at Restaurant, losses categories. we is loans the X% impact that the for the X%, the the the potential to

underwriting And that less no have very, look and year Typically, standards keep at restaurant, are SBA as loans. our service past history, mind very when conservative into personal hotel very we coverage, the than in guarantees In instances, we of number to You have these minimal. going debt XXX well. guarantee. a

for In past for restaurants. fact, a end amount the very and hotels of small quarter no the at the due

to those that as restaurants, COVID may deterioration say So see I'd a been have end stands not June potential X portfolio. powerfully keep we some close at that future not areas. eye in for of in these say and of it very And on industries It's the not hotels our in the felt months. impact yet we

we the and are, based all significant in industries understand touched a outreach available all these of they had appropriately covered, one these to with information risk each customer we fact, rate In the quarter borrowers loans. effort on where the where second of were base

optimistic at of Again, $XXX,XXX the quarter. and going this for XX%. the significant charge-offs very on But for regards or category. on not and the act fees to we're it. In these is us is the and C&I, -- customers of be at LTV cautious in again, manageable, $XXX,XXX that every at really one we XX% XX% time, that that them. The is No areas, test key No oil to end if of seeing on deterioration is, XX% the of these single yet. the fact stress past to end to stay we weakness quickly with the personal on so XX%. guarantees about portfolio to And of in see front CRE, XX% remain weighted the CRE average CRE the gas, quarter

rate So in we our from big industry. that The customer expense still are area the that's we've watching them close in business, They're again, outfits. and relatively part, figure again, game base. during a and oil what's and stay information in for PPP of anecdotal as the what they that it's in towards gas. opportunities, closely working risk industry statistical really for And appropriately experiencing lot is have and out things name And hear that helped these customers income on is we're is and most very that quarter. And another the get pay the with touch to going the second been develop. the diversification slower to slow that we control, deferments

Steven Retzloff

look really touch These going of is continue? things about are. there. to from we We in really close Yes. probably out is on add burn close and customers. reached stay -- those we muscle Matt, of of economy people uncertainty to We Obviously, I it's to with the our the just the And muscle, risk will -- And where model long We know branded exercise you an at look -- as the we categories. the this? really quarter. We stay customers. would hotel going start are very that good kind this incurred we so feel experienced. and good of you outreach is this And A How kind hotels. with rated We incurred hotel come go the Steve. will model, we're kind at obviously, exercised loss to things. duration. lot loss we're those feeling -- out forward. they're We're to our of those operators, continue most when with of top-notch these out about last all

-- is are be obviously, some but better so to And duration going they're doing key. others, than probably the

Matthew Olney

under and you're implementation. delaying I day Can remind you know appreciate That's what I helpful method commentary. is loss implemented? would us that. CECL in X that incurred be impact And finally, the you're estimated the the still CECL Okay. once just

Paul Egge

think in X, XXXX, Yes. our We think, digits have about around for was covered it, can the you what I single dollars -- Jan of our millions what But first high would in our quarter call. Jan CECL been. adjustment range

Operator

Instructions]. [Operator

Our Brady next question with Gailey from comes KBW.

Brady Gailey

Any additional expected book from growth the here? in bond

Paul Egge

year-to-date. nothing No. meaningful what we've -- as Not really done as

the and So we make market and most cash incremental in pivot to bond I likely think purchases. have a reinvest incrementally was to market. -- we the and will invested. be as we the actually was extent into liquidity, year-to-date, as quite potentially tougher still little to some made are to the when be we It's of pretty But the bond will we in first look not now. it's going value quarter meaningful But It's flows to just significant don't really, that meaningful. there meaningful going it's as as get

Brady Gailey

low, XX%. seemed rate onetime tax just anything you me, I going And way to about forward, And talked the tax that guys? a there for little that around being Is right then it about the in lastly Was there? for think think rate XX%. nature we still

Paul Egge

way That's to still about it. the think right

Brady Gailey

tax of XQ's And nothing rate abnormal in XX%?

Paul Egge

there. are timing Those are ultimately differentials driven that

I'd So expect tax on in high effective more overall a quarterly rate basis. that XX% teens,

Operator

turn I'd currently further over Retzloff for to time. call back the showing I'm no to Steve remarks. closing at And like questions this

Steven Retzloff

the operator. once We forward Bank. to have and again, Well, Allegiance you And again we thank in we interest comments. speaking your all of future. time other look And to you, in appreciate no

all very have great and third you a thank So much, quarter.

Allegiance Bancshares (ABTX) 2 Aug 202020 Q2 Earnings call transcript