ABTX Allegiance Bancshares Inc

Allegiance Bancshares, Inc. (NASDAQ: ABTX) (Allegiance), the holding company of Allegiance Bank (the “Bank”), today reported net income of $3.5 million and diluted earnings per share of $0.17 for the first quarter 2020 compared to net income of $12.7 million and diluted earnings per share of $0.58 for the first quarter 2019.  The first quarter 2020 results were primarily driven by the increased provision expense in response to COVID-19-related uncertainties in the current economic environment and write-downs in other real estate owned.

“While first quarter earnings were negatively impacted by the broader economic risks and uncertainties relating to the COVID-19 pandemic, the true story for the quarter was the phenomenal effort and execution of our entire team at Allegiance Bank under unprecedented conditions” said Steve Retzloff, Allegiance’s Chief Executive Officer.  “We enter the second quarter very well-positioned to navigate potential challenges related to the evolving COVID-19 and economic situation.  Our capital is very strong, our loan portfolio is granular and well-collateralized, and our people remain dedicated to providing extraordinary service to our customers, albeit remotely when appropriate,” commented Retzloff.

“Our pre-existing pandemic response plan enabled us to quickly respond to the situation and fulfill our commitment to providing a safe environment for our customers and employees.  Implementation strategies have included social distancing, acquisition of a pre-arranged supply of laptops that allow for an extensive work-from-home program, drive-thru only service, evaluating and responding to customer needs and a more recent show of strength as we processed thousands of Paycheck Protection Program applications for both existing and new customers.  The extraordinary dedication of our employees has been remarkable,” continued Retzloff.

First Quarter 2020 Results

Net interest income before the provision for loan losses in the first quarter 2020 increased $422 thousand, or 0.9%, to $45.0 million from $44.6 million for the first quarter 2019 and from $44.5 million in the fourth quarter 2019.  These increases were primarily due to changes in the volume and relative mix of the underlying assets and liabilities as well as lower costs related to interest-bearing liabilities.  The net interest margin on a tax equivalent basis decreased 16 basis points to 4.15% for the first quarter 2020 from 4.31% for the first quarter 2019 and increased 4 basis points from 4.11% for the fourth quarter 2019.  Core net interest margin on a tax equivalent basis excludes the impact of acquisition accounting adjustments and was 4.04% for the first quarter 2020 compared to 4.03% for the first quarter 2019 and 3.94% for the fourth quarter 2019.  Please refer to the non-GAAP reconciliation on page 9.

Noninterest income for the first quarter 2020 was $2.7 million, a decrease of $564 thousand, or 17.1%, compared to $3.3 million for the first quarter 2019 and a decrease of $675 thousand, or 19.9%, compared to $3.4 million for the fourth quarter 2019.  Noninterest income for the first quarter 2020 and the fourth quarter 2019 included $194 thousand and $613 thousand, respectively, of gains on the sale of securities.

Noninterest expense for the first quarter 2020 increased $1.3 million, or 4.1%, to $32.4 million from $31.1 million for the first quarter 2019 and increased $3.0 million, or 10.1%, compared to the fourth quarter 2019.  Noninterest expense for the first quarter 2020 included $2.2 million of other real estate write-downs.

In the first quarter 2020, Allegiance’s efficiency ratio was 68.13% compared to 62.20% for the fourth quarter 2019 and 64.97% for the first quarter 2019.  First quarter 2020 annualized returns on average assets, average equity and average tangible equity were 0.29%, 1.98% and 3.02%, respectively, compared to 1.13%, 7.81% and 11.96%, respectively, for the fourth quarter 2019.  Annualized returns on average assets, average equity and average tangible equity for the first quarter 2019 were 1.08%, 7.27% and 11.22%, respectively. Return on average tangible equity is a non-GAAP measure.  Please refer to the non-GAAP reconciliation on page 9. 

Financial Condition

Total assets at March 31, 2020 increased $9.8 million to $5.00 billion compared to $4.99 billion at December 31, 2019 and increased $233.6 million compared to $4.77 billion at March 31, 2019, primarily due to organic loan growth.

Total loans at March 31, 2020 increased $40.2 million, or 4.1% (annualized), to $3.96 billion compared to $3.92 billion at December 31, 2019 and increased $149.4 million, or 3.9%, compared to $3.81 billion at March 31, 2019, primarily due to organic loan growth.  Core loans, which exclude the mortgage warehouse portfolio, increased $47.4 million, or 4.9% (annualized), to $3.95 billion at March 31, 2020 from $3.91 billion at December 31, 2019 and increased $185.1 million, or 4.9%, from $3.77 billion at March 31, 2019.

Loans with oil and gas industry exposure totaled $80.7 million, or 2.0%, of total loans at March 31, 2020, of which $826 thousand were on nonaccrual.  At March 31, 2020, the Company’s allowance for loan losses allocated to its total oil and gas loan portfolio was 1.5% of total oil and gas loans.

In addition, at March 31, 2020, loan balances in the hotel and restaurant and bar industries was $133.0 million, or 3.4%, of total loans, and $101.3 million, or 2.6%, of total loans, respectively.  At March 31, 2020, there were no hotel loans on nonaccrual and there were $794 thousand restaurant and bar loans on nonaccrual.  At March 31, 2020, the Company’s allowance for loan losses allocated to its hotel portfolio was 1.0% of total hotel loans and its restaurant and bar portfolio was 1.2% of total restaurant and bar loans.

The Company had executed 1,563 principal and interest deferrals on outstanding loan balances of $838.1 million, as of April 26, 2020, in connection with the COVID-19 relief provided by the CARES Act. These deferrals were generally no more than 90 days in duration.

Deposits at March 31, 2020 decreased $114.5 million, or 11.3% (annualized), to $3.95 billion compared to $4.07 billion at December 31, 2019 and increased $173.5 million, or 4.6%, compared to $3.78 billion at March 31, 2019.

Asset Quality

Nonperforming assets totaled $34.2 million, or 0.68% of total assets, at March 31, 2020, compared to $36.7 million, or 0.74% of total assets, at December 31, 2019, and $33.8 million, or 0.71% of total assets, at March 31, 2019.  The allowance for loan losses was 0.95% of total loans at March 31, 2020, 0.75% of total loans at December 31, 2019 and 0.71% of total loans at March 31, 2019.  Accounting Standards Update (ASU) 2016-13, “Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments” (CECL), became effective for the Company on January 1, 2020.  On March 27, 2020, the CARES Act included an option for entities to delay the implementation of CECL until the earlier of the termination date of the national emergency declaration by the President or December 31, 2020.  Due to the uncertainty on the economy from COVID-19, the Company chose to delay its implementation of CECL and recorded its provision for loan losses under the incurred loss model that existed prior to CECL.

The provision for loan losses for the first quarter 2020 was $11.0 million, or 1.12% (annualized) of average loans, compared to $933 thousand, or 0.10% (annualized) of average loans, for the fourth quarter 2019 and $1.0 million, or 0.11% (annualized) of average loans for the first quarter 2019 primarily due to economic risks and uncertainties related to the COVID-19 pandemic.  The increase in the Company’s provision for loan losses in the first quarter of 2020 compared to prior quarters reflects overall growth in the loan portfolio; increased level of charge-offs; and increasing uncertainty surrounding unemployment, the economic impact caused by COVID-19 and the economic effects related to the recent sharp decline in crude oil prices.

First quarter 2020 net charge-offs were $2.9 million, or 0.30% (annualized) of average loans, compared to net charge-offs of $1.3 million, or 0.13% (annualized) of average loans, for the fourth quarter 2019 and $210 thousand, or 0.02% (annualized) of average loans, for the first quarter 2019.

Dividend

On April 23, 2020, the Board of Directors of Allegiance declared a cash dividend of $0.10 per share to be paid on June 15, 2020 to all shareholders of record as of May 29, 2020.  The amount and timing of any future dividend payments to shareholders will be subject to the discretion of Allegiance’s Board of Directors.

GAAP Reconciliation of Non-GAAP Financial Measures

Allegiance’s management uses certain non-GAAP financial measures to evaluate its performance.  Please refer to the GAAP Reconciliation and Management’s Explanation of Non-GAAP Financial Measures on page 9 of this earnings release for a reconciliation of these non-GAAP financial measures.

Conference Call

As previously announced, Allegiance’s management team will host a conference call on Thursday, April 30, 2020 at 9:00 a.m. Central Time (10:00 a.m. Eastern Time) to discuss its first quarter 2020 results.  Individuals and investment professionals may participate in the call by dialing (877) 279-2520.  The conference ID number is 9575797.  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 Bancshares, Inc.

As of March 31, 2020, Allegiance was a $5.00 billion asset Houston, Texas-based bank holding company.  Through its wholly owned subsidiary, Allegiance Bank, Allegiance provides a diversified range of commercial banking services primarily to small to medium-sized businesses and individual customers in the Houston region.  Allegiance’s super-community banking strategy was designed to foster strong customer relationships while benefiting from a platform and scale that is competitive with larger local and regional banks.  As of March 31, 2020, Allegiance Bank operated 27 full-service banking locations in the Houston region, which we define as the Houston-The Woodlands-Sugar Land and Beaumont-Port Arthur metropolitan statistical areas, with 26 bank offices and one loan production office in the Houston metropolitan area and one bank office location in Beaumont, just outside of the Houston metropolitan area.  Visit www.allegiancebank.com for more information.

“Safe Harbor” Statement under the Private Securities Litigation Reform Act of 1995

This release contains forward-looking statements within the meaning of the securities laws that are derived utilizing assumptions, present expectations, estimates and projections about Allegiance and its subsidiaries.  Statements preceded by, followed by or that otherwise include the words “believes,” “expects,” “continues,” “anticipates,” “intends,” “projects,” “estimates,” “potential,” “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 expected 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.  Additionally, the impact of the COVID-19 pandemic is rapidly evolving and its future effects on Allegiance are difficult to predict.  These and various other risk factors are discussed in Allegiance’s Annual Report on Form 10-K for the fiscal year ended December 31, 2019 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.  Because of these uncertainties, readers should not place undue reliance on any forward-looking statement.  Allegiance disclaims any 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.

Allegiance Bancshares, Inc.8847 West Sam Houston Parkway N., Suite 200Houston, Texas 77040ir@allegiancebank.com

Allegiance Bancshares, Inc.Financial Highlights(Unaudited)

		2020				2019
		March 31				December 31				September 30				June 30				March 31
		(Dollars in thousands)
ASSETS
Cash and due from banks		$	156,700			$	213,347			$	246,312			$	170,850			$	169,975
Interest-bearing deposits at other financial  institutions			18,189				132,901				54,307				61,757				88,868
Total cash and cash equivalents			174,889				346,248				300,619				232,607				258,843
Available for sale securities, at fair value			508,250				372,545				353,000				348,173				345,716
Loans held for investment			3,955,546				3,915,310				3,886,004				3,857,963				3,806,161
Less: allowance for loan losses			(37,511	)			(29,438	)			(29,808	)			(27,940	)			(27,123	)
Loans, net			3,918,035				3,885,872				3,856,196				3,830,023				3,779,038
Accrued interest receivable			17,203				15,468				15,201				16,508				16,194
Premises and equipment, net			66,798				66,790				67,175				59,690				60,327
Other real estate owned			12,617				8,337				8,333				6,294				1,152
Federal Home Loan Bank stock			12,798				6,242				14,138				8,866				14,365
Bank owned life insurance			27,255				27,104				26,947				26,794				26,639
Goodwill			223,642				223,642				223,642				223,642				223,642
Core deposit intangibles, net			20,886				21,876				23,053				24,231				25,409
Other assets			20,056				18,530				17,536				17,383				17,477
Total assets		$	5,002,429			$	4,992,654			$	4,905,840			$	4,794,211			$	4,768,802
LIABILITIES AND SHAREHOLDERS’  EQUITY
LIABILITIES:
Deposits:
Noninterest-bearing		$	1,217,532			$	1,252,232			$	1,227,839			$	1,173,423			$	1,181,920
Interest-bearing
Demand			341,524				367,278				340,754				390,067				328,961
Money market and savings			1,110,631				1,258,008				1,114,233				995,467				901,773
Certificates and other time			1,283,887				1,190,583				1,214,659				1,301,683				1,367,407
Total interest-bearing deposits			2,736,042				2,815,869				2,669,646				2,687,217				2,598,141
Total deposits			3,953,574				4,068,101				3,897,485				3,860,640				3,780,061
Accrued interest payable			3,821				4,326				4,915				3,531				4,511
Borrowed funds			190,506				75,503				159,501				146,998				201,995
Subordinated debt			107,930				107,799				107,771				49,019				48,959
Other liabilities			40,005				27,060				29,860				29,322				29,499
Total liabilities			4,295,836				4,282,789				4,199,532				4,089,510				4,065,025
SHAREHOLDERS’ EQUITY:
Common stock			20,355				20,524				20,737				21,147				21,484
Capital surplus			513,894				521,066				529,688				541,979				556,184
Retained earnings			164,858				163,375				149,389				137,342				123,094
Accumulated other comprehensive  income			7,486				4,900				6,494				4,233				3,015
Total shareholders’ equity			706,593				709,865				706,308				704,701				703,777
TOTAL LIABILITIES AND  SHAREHOLDERS’ EQUITY		$	5,002,429			$	4,992,654			$	4,905,840			$	4,794,211			$	4,768,802

Allegiance Bancshares, Inc.Financial Highlights(Unaudited)

		Three Months Ended
		2020				2019
		March 31				December 31				September 30				June 30				March 31
		(Dollars in thousands, except per share data)
INTEREST INCOME:
Loans, including fees		$	54,624			$	55,368			$	55,790			$	56,016			$	54,189
Securities:
Taxable			2,087				2,066				2,090				1,837				982
Tax-exempt			546				469				483				692				1,290
Deposits in other financial  institutions			195				244				302				401				688
Total interest income			57,452				58,147				58,665				58,946				57,149
INTEREST EXPENSE:
Demand, money market and  savings deposits			4,364				5,091				4,975				4,513				3,728
Certificates and other time  deposits			6,084				6,483				6,909				7,008				6,256
Borrowed funds			506				547				1,183				1,118				1,827
Subordinated debt			1,473				1,500				761				736				735
Total interest expense			12,427				13,621				13,828				13,375				12,546
NET INTEREST INCOME			45,025				44,526				44,837				45,571				44,603
Provision for loan losses			10,990				933				2,597				1,407				1,002
Net interest income after provision  for loan losses			34,035				43,593				42,240				44,164				43,601
NONINTEREST INCOME:
Nonsufficient funds fees			169				189				168				139				162
Service charges on deposit  accounts			457				403				379				365				325
Gain on sale of securities			194				613				—				846				—
(Loss) gain on sales of other real  estate and repossessed assets			(69	)			(45	)			—				70				1
Bank owned life insurance			151				157				153				155				159
Rebate from correspondent bank			493				900				900				884				896
Other			1,330				1,183				1,289				1,386				1,746
Total noninterest income			2,725				3,400				2,889				3,845				3,289
NONINTEREST EXPENSE:
Salaries and employee benefits			19,781				18,273				20,221				19,415				19,684
Net occupancy and equipment			1,907				1,994				1,973				2,114				2,098
Depreciation			866				861				822				756				753
Data processing and software  amortization			1,826				2,120				2,058				1,709				1,577
Professional fees			573				540				667				527				599
Regulatory assessments and  FDIC insurance			632				216				(41	)			802				728
Core deposit intangibles  amortization			990				1,177				1,178				1,178				1,178
Communications			417				486				455				468				430
Advertising			521				597				449				617				704
Acquisition and merger-related  expenses			—				—				—				153				1,173
Other			4,888				3,167				2,227				2,341				2,191
Total noninterest expense			32,401				29,431				30,009				30,080				31,115
INCOME BEFORE INCOME  TAXES			4,359				17,562				15,120				17,929				15,775
Provision for income taxes			843				3,576				3,073				3,681				3,097
NET INCOME		$	3,516			$	13,986			$	12,047			$	14,248			$	12,678
EARNINGS PER SHARE
Basic		$	0.17			$	0.68			$	0.57			$	0.67			$	0.58
Diluted		$	0.17			$	0.67			$	0.57			$	0.66			$	0.58

Allegiance Bancshares, Inc.Financial Highlights(Unaudited)

		Three Months Ended
		2020				2019
		March 31				December 31				September 30				June 30				March 31
		(Dollars and share amounts in thousands, except per share data)
Net income		$	3,516			$	13,986			$	12,047			$	14,248			$	12,678
Earnings per share, basic		$	0.17			$	0.68			$	0.57			$	0.67			$	0.58
Earnings per share, diluted		$	0.17			$	0.67			$	0.57			$	0.66			$	0.58
Return on average assets(A)			0.29	%			1.13	%			0.98	%			1.19	%			1.08	%
Return on average equity(A)			1.98	%			7.81	%			6.73	%			8.10	%			7.27	%
Return on average tangible  equity(A)(B)			3.02	%			11.96	%			10.33	%			12.52	%			11.22	%
Net interest margin   (tax equivalent)(C)			4.15	%			4.11	%			4.16	%			4.33	%			4.31	%
Core net interest margin  (tax equivalent)(B)			4.04	%			3.94	%			3.97	%			4.07	%			4.03	%
Efficiency ratio(D)			68.13	%			62.20	%			62.88	%			61.93	%			64.97	%
Capital Ratios
Allegiance Bancshares, Inc.  (Consolidated)
Equity to assets			14.12	%			14.22	%			14.40	%			14.70	%			14.76	%
Tangible equity to tangible  assets(B)			9.71	%			9.78	%			9.86	%			10.05	%			10.06	%
Estimated common equity  tier 1 capital			11.16	%			11.42	%			11.28	%			11.34	%			11.37	%
Estimated tier 1 risk-based   capital			11.40	%			11.66	%			11.51	%			11.58	%			11.61	%
Estimated total risk-based  capital			14.73	%			14.83	%			14.70	%			13.27	%			13.28	%
Estimated tier 1 leverage  capital			9.89	%			10.02	%			10.06	%			10.17	%			10.25	%
Allegiance Bank
Estimated common equity  tier 1 capital			12.60	%			12.67	%			12.28	%			12.02	%			11.67	%
Estimated tier 1 risk-based  capital			12.60	%			12.67	%			12.28	%			12.02	%			11.67	%
Estimated total risk-based  capital			14.50	%			14.39	%			14.01	%			13.71	%			13.34	%
Estimated tier 1 leverage  capital			10.94	%			10.89	%			10.73	%			10.57	%			10.31	%
Other Data
Weighted average shares:
Basic			20,411				20,652				20,981				21,257				21,733
Diluted			20,690				20,930				21,256				21,546				22,040
Period end shares  outstanding			20,355				20,524				20,737				21,147				21,484
Book value per share		$	34.71			$	34.59			$	34.06			$	33.32			$	32.76
Tangible book value per  share(B)		$	22.70			$	22.62			$	22.16			$	21.60			$	21.17

1. Interim periods annualized.
2. Refer to the calculation of these non-GAAP financial measures and a reconciliation to their most directly comparable GAAP financial measures on page 9 of this Earnings Release.
3. Net interest margin represents net interest income divided by average interest-earning assets.
4. Represents total noninterest expense divided by the sum of net interest income plus noninterest income, excluding net gains and losses on the sale of loans, securities and assets. Additionally, taxes and provision for loan losses are not part of this calculation.

Allegiance Bancshares, Inc.Financial Highlights(Unaudited)

		Three Months Ended
		March 31, 2020												December 31, 2019												March 31, 2019
		Average Balance				Interest Earned/ Interest Paid				AverageYield/ Rate				Average Balance				Interest Earned/ Interest Paid				AverageYield/ Rate				Average Balance				Interest Earned/ Interest Paid				AverageYield/ Rate
		(Dollars in thousands)
Assets
Interest-Earning Assets:
Loans		$	3,933,291			$	54,624				5.59	%		$	3,888,476			$	55,368				5.65	%		$	3,747,234			$	54,189				5.86	%
Securities			388,721				2,633				2.72	%			364,605				2,535				2.76	%			346,686				2,272				2.66	%
Deposits in other financial  institutions and other			50,711				195				1.55	%			54,947				244				1.76	%			118,749				688				2.35	%
Total interest-earning assets			4,372,723			$	57,452				5.28	%			4,308,028			$	58,147				5.35	%			4,212,669			$	57,149				5.50	%
Allowance for loan losses			(28,718	)											(29,997	)											(26,760	)
Noninterest-earning assets			602,778												639,601												559,763
Total assets		$	4,946,783											$	4,917,632											$	4,745,672
Liabilities and  Shareholders' Equity
Interest-Bearing Liabilities:
Interest-bearing demand  deposits		$	363,326			$	846				0.94	%		$	361,666			$	952				1.04	%		$	338,193			$	963				1.16	%
Money market and savings  deposits			1,168,541				3,518				1.21	%			1,169,996				4,139				1.40	%			880,138				2,765				1.27	%
Certificates and other time  deposits			1,193,427				6,084				2.05	%			1,203,110				6,483				2.14	%			1,302,958				6,256				1.95	%
Borrowed funds			140,999				506				1.44	%			86,372				547				2.51	%			283,566				1,827				2.61	%
Subordinated debt			107,865				1,473				5.49	%			107,782				1,500				5.52	%			48,925				735				6.09	%
Total interest-bearing  liabilities			2,974,158			$	12,427				1.68	%			2,928,926			$	13,621				1.85	%			2,853,780			$	12,546				1.78	%
Noninterest-Bearing  Liabilities:
Noninterest-bearing demand  deposits			1,225,888												1,237,770												1,167,172
Other liabilities			33,202												40,781												17,054
Total liabilities			4,233,248												4,207,477												4,038,006
Shareholders' equity			713,535												710,155												707,666
Total liabilities and  shareholders' equity		$	4,946,783											$	4,917,632											$	4,745,672
Net interest rate spread											3.60	%											3.50	%											3.72	%
Net interest income and margin						$	45,025				4.14	%						$	44,526				4.10	%						$	44,603				4.29	%
Net interest income and net  interest margin (tax equivalent)						$	45,152				4.15	%						$	44,623				4.11	%						$	44,805				4.31	%

Allegiance Bancshares, Inc.Financial Highlights(Unaudited)

		Three Months Ended
		2020				2019
		March 31				December 31				September 30				June 30				March 31
		(Dollars in thousands)
Period-end Loan Portfolio:
Commercial and industrial		$	702,267			$	689,360			$	675,055			$	694,516			$	699,471
Mortgage warehouse			1,051				8,304				36,594				46,171				36,742
Real estate:
Commercial real estate (including  multi-family residential)			1,951,080				1,873,782				1,859,721				1,830,764				1,771,890
Commercial real estate construction and  land development			378,987				410,471				386,723				368,108				396,162
1-4 family residential (including home equity)			704,212				698,957				695,520				690,961				658,261
Residential construction			177,025				192,515				189,608				183,991				201,314
Consumer and other			40,924				41,921				42,783				43,452				42,321
Total loans		$	3,955,546			$	3,915,310			$	3,886,004			$	3,857,963			$	3,806,161
Asset Quality:
Nonaccrual loans		$	21,621			$	28,371			$	34,615			$	31,382			$	32,670
Accruing loans 90 or more days past due			—				—				—				—				—
Total nonperforming loans			21,621				28,371				34,615				31,382				32,670
Other real estate			12,617				8,337				8,333				6,294				1,152
Other repossessed assets			—				—				—				—				—
Total nonperforming assets		$	34,238			$	36,708			$	42,948			$	37,676			$	33,822
Net charge-offs		$	2,917			$	1,303			$	729			$	590			$	210
Nonaccrual loans:
Commercial and industrial		$	8,669			$	8,388			$	8,033			$	9,386			$	11,221
Mortgage warehouse			—				—				—				—				—
Real estate:
Commercial real estate (including  multi-family residential)			7,024				6,741				15,356				18,218				17,531
Commercial real estate construction and  land development			1,958				9,050				9,050				1,541				818
1-4 family residential (including home equity)			2,845				3,294				1,992				2,074				2,928
Residential construction			982				746				—				—				—
Consumer and other			143				152				184				163				172
Total nonaccrual loans		$	21,621			$	28,371			$	34,615			$	31,382			$	32,670
Asset Quality Ratios:
Nonperforming assets to total assets			0.68	%			0.74	%			0.88	%			0.79	%			0.71	%
Nonperforming loans to total loans			0.55	%			0.72	%			0.89	%			0.81	%			0.86	%
Allowance for loan losses to nonperforming loans			173.49	%			103.76	%			86.11	%			89.03	%			83.02	%
Allowance for loan losses to total loans			0.95	%			0.75	%			0.77	%			0.72	%			0.71	%
Net charge-offs to average loans (annualized)			0.30	%			0.13	%			0.07	%			0.06	%			0.02	%

Allegiance Bancshares, Inc.GAAP Reconciliation and Management’s Explanation of Non-GAAP Financial Measures(Unaudited)

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 and  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 share, return on average tangible equity, the ratio of tangible equity to tangible assets and core net interest margin on a tax equivalent basis for internal planning and forecasting purposes. 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.

		Three Months Ended
		2020				2019
		March 31				December 31				September 30				June 30				March 31
		(Dollars and share amounts in thousands, except per share data)
Total shareholders' equity		$	706,593			$	709,865			$	706,308			$	704,701			$	703,777
Less:  Goodwill and core  deposit intangibles, net			244,528				245,518				246,695				247,873				249,051
Tangible shareholders’  equity		$	462,065			$	464,347			$	459,613			$	456,828			$	454,726
Shares outstanding at end of  period			20,355				20,524				20,737				21,147				21,484
Tangible book value per share		$	22.70			$	22.62			$	22.16			$	21.60			$	21.17
Net income		$	3,516			$	13,986			$	12,047			$	14,248			$	12,678
Average shareholders' equity		$	713,535			$	710,155			$	710,044			$	705,162			$	707,666
Less:  Average goodwill and  core deposit intangibles, net			245,007				246,154				247,404				248,621				249,277
Average tangible  shareholders’ equity		$	468,528			$	464,001			$	462,640			$	456,541			$	458,389
Return on average  tangible equity			3.02	%			11.96	%			10.33	%			12.52	%			11.22	%
Total assets		$	5,002,429			$	4,992,654			$	4,905,840			$	4,794,211			$	4,768,802
Less: Goodwill and core  deposit intangibles, net			244,528				245,518				246,695				247,873				249,051
Tangible assets		$	4,757,901			$	4,747,136			$	4,659,145			$	4,546,338			$	4,519,751
Tangible equity to tangible  assets			9.71	%			9.78	%			9.86	%			10.05	%			10.06	%
Net interest income  (tax equivalent)		$	45,152			$	44,623			$	44,924			$	45,684			$	44,805
Less: Acquisition accounting  adjustments			(1,259	)			(1,860	)			(2,045	)			(2,755	)			(2,965	)
Core net interest  income (tax equivalent)		$	43,893			$	42,763			$	42,879			$	42,929			$	41,840
Average earning assets		$	4,372,723			$	4,308,028			$	4,284,667			$	4,233,653			$	4,212,669
Net interest margin  (tax equivalent)			4.15	%			4.11	%			4.16	%			4.33	%			4.31	%
Core net interest margin  (tax equivalent)			4.04	%			3.94	%			3.97	%			4.07	%			4.03	%