ABTX Allegiance Bancshares Inc

Allegiance Bancshares, Inc. (NASDAQ: ABTX) (Allegiance), the holding company of Allegiance Bank (the "Bank"), today reported net income of $9.9 million and diluted earnings per share of $0.48 for the second quarter 2020 compared to net income of $14.2 million and diluted earnings per share of $0.66 for the second quarter 2019.  Net income for the six months ended June 30, 2020 was $13.4 million, or $0.65 per diluted share, compared to $26.9 million, or $1.24 per diluted share, for the six months ended June 30, 2019.  The second quarter and six months ended June 30, 2020 results were primarily driven by the increased provision for loan losses in response to COVID-19-related uncertainties in the current economic environment partially offset by increased net interest income. 

"We are pleased with our second quarter 2020 earnings performance, especially in light of the impact of the coronavirus on our economy," said Steve Retzloff, Allegiance’s Chief Executive Officer. “Allegiance finished the quarter on a solid foundation of record pre-tax, pre-provision earnings, strong capital ratios, and a great liquidity position. We believe that we are well-positioned in light of today’s economic uncertainties and remain a strong resource for those we serve,” commented Retzloff.

“Our team of extraordinary bankers and small business lenders worked tirelessly around the clock to deploy the SBA’s Paycheck Protection Program ('PPP') to support our small business community. I am incredibly proud of the Bank’s ability to deliver on our commitment to help our customers - all while making many changes to how and where we all work. Allegiance reinforces the unique and valuable role a community bank offers to the businesses it serves as our bankers helped our customers and new borrowers secure funding for over 5,800 loans totaling over $695 million and will continue to do more until the PPP program expires. In turn, Allegiance collected a weighted average fee of 3.75% on the PPP loans to be recognized over the life of the loans.  Allegiance was committed to supporting its customers from the start of the process and will continue to be committed throughout the entire forgiveness journey,” continued Retzloff.

“As community bankers, we have a responsibility to support the health and welfare of our customers, communities and employees throughout this unprecedented time. Allegiance donated $150,000 and issued a $100,000 matching grant as well as committed volunteers to support the Houston Food Bank that will help provide one million meals across its Houston footprint. Small businesses are the mainstay of our business in the Houston region and we have been honored to serve their needs during this challenging economic environment. We continue to work diligently to build shareholder value by utilizing our strong capital position to support our customers and the communities we serve with outstanding customer service to keep Houston strong,” concluded Retzloff.

Second Quarter 2020 Results

Net interest income before the provision for loan losses in the second quarter 2020 increased $5.3 million, or 11.6%, to $50.8 million from $45.6 million for the second quarter 2019 and increased $5.8 million, or 12.9%, from $45.0 million in the first quarter 2020.  These increases were primarily due to changes in the volume and relative mix of the underlying assets and liabilities, the impact of PPP loans as well as lower costs on interest-bearing liabilities.  The net interest margin on a tax equivalent basis decreased 23 basis points to 4.10% for the second quarter 2020 from 4.33% for the second quarter 2019 and decreased 5 basis points from 4.15% for the first quarter 2020. Excluding the impact of acquisition accounting adjustments, adjusted net interest margin on a tax equivalent basis was 4.05% for the second quarter 2020 compared to 4.07% for the second quarter 2019 and 4.04% for the first quarter 2020. Adjusted net interest margin is a non-GAAP measure. Please refer to the non-GAAP reconciliation on page 11.

Noninterest income for the second quarter 2020 was $1.6 million, a decrease of $2.3 million, or 59.4%, compared to $3.8 million for the second quarter 2019 and a decrease of $1.2 million, or 42.7%, compared to $2.7 million for the first quarter 2020.  Noninterest income for the second quarter 2020, first quarter 2020 and second quarter 2019 included $93 thousand, $194 thousand and $846 thousand, respectively, of gains on the sale of securities. Second quarter 2020 noninterest income reflected lower transactional fee income, significantly lower correspondent bank rebates and included a loss on the sale of other real estate owned of $306 thousand.

Noninterest expense for the second quarter 2020 decreased $301 thousand, or 1.0%, to $29.8 million from $30.1 million for the second quarter 2019 and decreased $2.6 million, or 8.1%, compared to the first quarter 2020. Noninterest expense for the first quarter 2020 included $2.2 million of other real estate write-downs.

In the second quarter 2020, Allegiance’s efficiency ratio was 56.92% compared to 68.13% for the first quarter 2020 and 61.93% for the second quarter 2019.  Second quarter 2020 annualized returns on average assets, average equity and average tangible equity were 0.71%, 5.51% and 8.32%, respectively, compared to 0.29%, 1.98% and 3.02%, respectively, for the first quarter 2020.  Annualized returns on average assets, average equity and average tangible equity for the second quarter 2019 were 1.19%, 8.10% and 12.52%, respectively. Return on average tangible equity is a non-GAAP measure. Please refer to the non-GAAP reconciliation on page 11. 

Six Months Ended June 30, 2020 Results

Net interest income before provision for loan losses for the six months ended June 30, 2020 increased $5.7 million, or 6.3%, to $95.9 million from $90.2 million for the six months ended June 30, 2019 primarily due to a $481.4 million, or 11.4%, increase in average interest-earning assets over the prior year, the impact of PPP loans as well as lower costs related to interest-bearing liabilities. The net interest margin on a tax equivalent basis decreased 20 basis points to 4.12% for the six months ended June 30, 2020 from 4.32% for the six months ended June 30, 2019. Excluding the impact of acquisition accounting adjustments, the adjusted net interest margin for the six months ended June 30, 2020 was 4.04%, compared to 4.05% for the six months ended June 30, 2019. Adjusted net interest margin is a non-GAAP measure. Please refer to the non-GAAP reconciliation on page 11.

Noninterest income for the six months ended June 30, 2020 was $4.3 million, a decrease of $2.8 million, or 39.9%, compared to $7.1 million for the six months ended June 30, 2019 due primarily to significantly lower correspondent bank rebates and losses on the sales of other real estate owned of $375 thousand. Additionally, noninterest income for the first six months of 2020 and 2019 included $287 thousand and $846 thousand, respectively, of gains on the sale of securities. 

Noninterest expense for the six months ended June 30, 2020 increased $985 thousand, or 1.6%, to $62.2 million from $61.2 million for the six months ended June 30, 2019.  The increase in noninterest expense over the six months ended June 30, 2019 was primarily due to $2.2 million of other real estate write-downs during the first quarter of 2020 partially offset by the decrease in merger-related expenses incurred during the first six months of 2019.

Allegiance’s efficiency ratio decreased from 63.44% for the six months ended June 30, 2019 to 62.26% for the six months ended June 30, 2020. For the six months ended June 30, 2020, returns on average assets, average equity and average tangible equity were 0.51%, 3.76% and 5.70%, respectively, compared to 1.14%, 7.69% and 11.87%, respectively, for the six months ended June 30, 2019. Return on average tangible equity is a non-GAAP measure. Please refer to the non-GAAP reconciliation on page 11. 

Financial Condition

Total assets at June 30, 2020 increased $834.5 million, or 66.7% (annualized), to $5.84 billion compared to $5.00 billion at March 31, 2020 and increased $1.04 billion, or 21.7%, compared to $4.79 billion at June 30, 2019, primarily due to the origination of PPP loans and growth in the securities portfolio.

Total loans at June 30, 2020 increased $628.1 million, or 63.5% (annualized), to $4.58 billion compared to $3.96 billion at March 31, 2020 and increased $725.7 million, or 18.8%, compared to $3.86 billion at June 30, 2019, primarily due to the origination of $695.8 million of PPP loans and organic loan growth. Core loans, which exclude the mortgage warehouse portfolio and PPP loans, decreased $66.6 million, or 6.7% (annualized), to $3.89 billion at June 30, 2020 from $3.95 billion at March 31, 2020 and increased $76.1 million, or 2.0%, from $3.81 billion at June 30, 2019.

Deposits at June 30, 2020 increased $747.1 million, or 75.6% (annualized), to $4.70 billion compared to $3.95 billion at March 31, 2020 and increased $840.1 million, or 21.8%, compared to $3.86 billion at June 30, 2019.

Asset Quality

Nonperforming assets totaled $45.1 million, or 0.77% of total assets, at June 30, 2020, compared to $34.2 million, or 0.68% of total assets, at March 31, 2020, and $37.7 million, or 0.79% of total assets, at June 30, 2019. The allowance for loan losses was 1.04% of total loans at June 30, 2020, 0.95% of total loans at March 31, 2020 and 0.72% of total loans at June 30, 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 second quarter 2020 was $10.7 million, or 0.97% (annualized) of average loans, compared to $11.0 million, or 1.12% (annualized) of average loans, for the first quarter 2020 and $1.4 million, or 0.15% (annualized) of average loans for the second 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 second quarter of 2020 compared to prior quarters reflects the uncertainty surrounding unemployment, the economic impact caused by COVID-19 and the economic effects related to the sustained lower crude oil prices.

Second quarter 2020 net charge-offs were $538 thousand, or 0.05% (annualized) of average loans, a decrease from net charge-offs of $2.9 million, or 0.30% (annualized) of average loans, for the first quarter 2020 and $590 thousand, or 0.06% (annualized) of average loans, for the second quarter 2019.  Net charge-offs for the six months ended June 30, 2020 were $3.5 million, or 0.17% (annualized) of average loans, compared to net charge-offs for the six months ended June 30, 2019 of $799 thousand, or 0.04% (annualized) of average loans.

The Company believes the largest risks within its loan portfolio are in the hotel, restaurant and bar and oil and gas portfolios. Loan balances in the hotel industry, excluding PPP loans, totaled $134.0 million, or 2.9% of total loans, at June 30, 2020, of which $7.1 million were on nonaccrual. At June 30, 2020, restaurant and bar industry loans, excluding PPP loans, totaled $111.3 million, or 2.4%, of total loans, of which $695 thousand were on nonaccrual. At June 30, 2020, the Company’s allowance for loan losses allocated to its hotel portfolio was 1.3% of total hotel loans and its restaurant and bar portfolio was 1.3% of total restaurant and bar loans. The oil and gas portfolio, excluding PPP loans, totaled $74.7 million, or 1.6%, of total loans at June 30, 2020, of which $788 thousand were on nonaccrual. At June 30, 2020, the allowance for loan losses allocated to the oil and gas loan portfolio was 2.1% of total oil and gas loans.

As of June 30, 2020, the Company executed 2,111 principal and interest deferrals on outstanding loan balances of $1.19 billion with associated accrued interest of $16.4 million to borrowers in connection with the COVID-19 relief provided by the CARES Act. Additionally, upon request and after meeting certain conditions, borrowers could be granted a second payment deferral subsequent to the first deferral. The Company processed second payment deferrals for 129 loans with outstanding loan balances of $100.1 million and associated accrued interest of $1.4 million through July 24, 2020. These deferrals were generally no more than 90 days in duration.

Dividend

On July 23, 2020, the Board of Directors of Allegiance declared a cash dividend of $0.10 per share to be paid on September 15, 2020 to all shareholders of record as of August 31, 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 11 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, July 30, 2020 at 9:00 a.m. Central Time (10:00 a.m. Eastern Time) to discuss its second quarter 2020 results. Individuals and investment professionals may participate in the call by dialing (877) 279-2520. The conference ID number is 1791298.  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 June 30, 2020, Allegiance was a $5.84 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 June 30, 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 Quarterly Report on Form 10-Q for the quarter ended March 31, 2020 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.Financial Highlights(Unaudited)

		2020								2019
		June 30				March 31				December 31				September 30				June 30
		(Dollars in thousands)
ASSETS
Cash and due from banks		$	237,585			$	156,700			$	213,347			$	246,312			$	170,850
Interest-bearing deposits at other financial  institutions			28,815				18,189				132,901				54,307				61,757
Total cash and cash equivalents			266,400				174,889				346,248				300,619				232,607
Available for sale securities, at fair value			618,751				508,250				372,545				353,000				348,173
Loans held for investment			4,583,656				3,955,546				3,915,310				3,886,004				3,857,963
Less: allowance for loan losses			(47,642	)			(37,511	)			(29,438	)			(29,808	)			(27,940	)
Loans, net			4,536,014				3,918,035				3,885,872				3,856,196				3,830,023
Accrued interest receivable			32,795				17,203				15,468				15,201				16,508
Premises and equipment, net			67,229				66,798				66,790				67,175				59,690
Other real estate owned			11,847				12,617				8,337				8,333				6,294
Federal Home Loan Bank stock			14,844				12,798				6,242				14,138				8,866
Bank owned life insurance			27,398				27,255				27,104				26,947				26,794
Goodwill			223,642				223,642				223,642				223,642				223,642
Core deposit intangibles, net			19,896				20,886				21,876				23,053				24,231
Other assets			18,065				20,056				18,530				17,536				17,383
Total assets		$	5,836,881			$	5,002,429			$	4,992,654			$	4,905,840			$	4,794,211
LIABILITIES AND SHAREHOLDERS’  EQUITY
LIABILITIES:
Deposits:
Noninterest-bearing		$	1,754,128			$	1,217,532			$	1,252,232			$	1,227,839			$	1,173,423
Interest-bearing
Demand			375,353				341,524				367,278				340,754				390,067
Money market and savings			1,270,437				1,110,631				1,258,008				1,114,233				995,467
Certificates and other time			1,300,793				1,283,887				1,190,583				1,214,659				1,301,683
Total interest-bearing deposits			2,946,583				2,736,042				2,815,869				2,669,646				2,687,217
Total deposits			4,700,711				3,953,574				4,068,101				3,897,485				3,860,640
Accrued interest payable			3,293				3,821				4,326				4,915				3,531
Borrowed funds			255,509				190,506				75,503				159,501				146,998
Subordinated debt			108,061				107,930				107,799				107,771				49,019
Other liabilities			33,164				40,005				27,060				29,860				29,322
Total liabilities			5,100,738				4,295,836				4,282,789				4,199,532				4,089,510
SHAREHOLDERS’ EQUITY:
Common stock			20,431				20,355				20,524				20,737				21,147
Capital surplus			515,045				513,894				521,066				529,688				541,979
Retained earnings			172,723				164,858				163,375				149,389				137,342
Accumulated other comprehensive  income			27,944				7,486				4,900				6,494				4,233
Total shareholders’ equity			736,143				706,593				709,865				706,308				704,701
TOTAL LIABILITIES AND  SHAREHOLDERS’ EQUITY		$	5,836,881			$	5,002,429			$	4,992,654			$	4,905,840			$	4,794,211

Allegiance Bancshares, Inc.Financial Highlights(Unaudited)

		Three Months Ended																				Year-to-Date
		2020								2019												2020				2019
		June 30				March 31				December 31				September 30				June 30				June 30				June 30
		(Dollars in thousands, except per share data)
INTEREST INCOME:
Loans, including fees		$	56,421			$	54,624			$	55,368			$	55,790			$	56,016			$	111,045			$	110,205
Securities:
Taxable			1,842				2,087				2,066				2,090				1,837				3,929				2,819
Tax-exempt			2,169				546				469				483				692				2,715				1,982
Deposits in other financial   institutions			20				195				244				302				401				215				1,089
Total interest income			60,452				57,452				58,147				58,665				58,946				117,904				116,095
INTEREST EXPENSE:
Demand, money market and    savings deposits			1,729				4,364				5,091				4,975				4,513				6,093				8,241
Certificates and other time    deposits			5,845				6,084				6,483				6,909				7,008				11,929				13,264
Borrowed funds			562				506				547				1,183				1,118				1,068				2,945
Subordinated debt			1,469				1,473				1,500				761				736				2,942				1,471
Total interest expense			9,605				12,427				13,621				13,828				13,375				22,032				25,921
NET INTEREST INCOME			50,847				45,025				44,526				44,837				45,571				95,872				90,174
Provision for loan losses			10,669				10,990				933				2,597				1,407				21,659				2,409
Net interest income after provision  for loan losses			40,178				34,035				43,593				42,240				44,164				74,213				87,765
NONINTEREST INCOME:
Nonsufficient funds fees			60				169				189				168				139				229				301
Service charges on deposit    accounts			343				457				403				379				365				800				690
Gain on sale of securities			93				194				613				—				846				287				846
(Loss) gain on sales of other real    estate and repossessed assets			(306	)			(69	)			(45	)			—				70				(375	)			71
Bank owned life insurance			143				151				157				153				155				294				314
Rebate from correspondent bank			89				493				900				900				884				582				1,780
Other			1,140				1,330				1,183				1,289				1,386				2,470				3,132
Total noninterest income			1,562				2,725				3,400				2,889				3,845				4,287				7,134
NONINTEREST EXPENSE:
Salaries and employee benefits			19,334				19,781				18,273				20,221				19,415				39,115				39,099
Net occupancy and equipment			1,926				1,907				1,994				1,973				2,114				3,833				4,166
Depreciation			885				866				861				822				756				1,751				1,509
Data processing and software    amortization			1,934				1,826				2,120				2,058				1,709				3,760				3,332
Professional fees			800				573				540				667				527				1,373				1,126
Regulatory assessments and    FDIC insurance			609				632				216				(41	)			802				1,241				1,530
Core deposit intangibles    amortization			990				990				1,177				1,178				1,178				1,980				2,356
Communications			390				417				486				455				468				807				898
Advertising			370				521				597				449				617				891				1,321
Acquisition and merger-related    expenses			—				—				—				—				153				—				1,326
Other			2,541				4,888				3,167				2,227				2,341				7,429				4,532
Total noninterest expense			29,779				32,401				29,431				30,009				30,080				62,180				61,195
INCOME BEFORE INCOME  TAXES			11,961				4,359				17,562				15,120				17,929				16,320				33,704
Provision for income taxes			2,054				843				3,576				3,073				3,681				2,897				6,778
NET INCOME		$	9,907			$	3,516			$	13,986			$	12,047			$	14,248			$	13,423			$	26,926
EARNINGS PER SHARE
Basic		$	0.49			$	0.17			$	0.68			$	0.57			$	0.67			$	0.66			$	1.25
Diluted		$	0.48			$	0.17			$	0.67			$	0.57			$	0.66			$	0.65			$	1.24

Allegiance Bancshares, Inc.Financial Highlights(Unaudited)

		Three Months Ended																				Year-to-Date
		2020								2019												2020				2019
		June 30				March 31				December 31				September 30				June 30				June 30				June 30
		(Dollars and share amounts in thousands, except per share data)
Net income		$	9,907			$	3,516			$	13,986			$	12,047			$	14,248			$	13,423			$	26,926
Earnings per share, basic		$	0.49			$	0.17			$	0.68			$	0.57			$	0.67			$	0.66			$	1.25
Earnings per share, diluted		$	0.48			$	0.17			$	0.67			$	0.57			$	0.66			$	0.65			$	1.24
Return on average assets(A)			0.71	%			0.29	%			1.13	%			0.98	%			1.19	%			0.51	%			1.14	%
Return on average equity(A)			5.51	%			1.98	%			7.81	%			6.73	%			8.10	%			3.76	%			7.69	%
Return on average tangible  equity(A)(B)			8.32	%			3.02	%			11.96	%			10.33	%			12.52	%			5.70	%			11.87	%
Net interest margin  (tax equivalent)(C)			4.10	%			4.15	%			4.11	%			4.16	%			4.33	%			4.12	%			4.32	%
Adjusted net interest margin  (tax equivalent)(B)			4.05	%			4.04	%			3.94	%			3.97	%			4.07	%			4.04	%			4.05	%
Efficiency ratio(D)			56.92	%			68.13	%			62.20	%			62.88	%			61.93	%			62.26	%			63.44	%
Capital Ratios
Allegiance Bancshares, Inc.   (Consolidated)
Equity to assets			12.61	%			14.12	%			14.22	%			14.40	%			14.70	%			12.61	%			14.70	%
Tangible equity to tangible   assets(B)			8.81	%			9.71	%			9.78	%			9.86	%			10.05	%			8.81	%			10.05	%
Estimated common equity   tier 1 capital			11.36	%			11.15	%			11.42	%			11.28	%			11.34	%			11.36	%			11.34	%
Estimated tier 1 risk-based   capital			11.60	%			11.38	%			11.66	%			11.51	%			11.58	%			11.60	%			11.58	%
Estimated total risk-based   capital			15.17	%			14.72	%			14.83	%			14.70	%			13.27	%			15.17	%			13.27	%
Estimated tier 1 leverage   capital			8.83	%			9.89	%			10.02	%			10.06	%			10.17	%			8.83	%			10.17	%
Allegiance Bank
Estimated common equity   tier 1 capital			12.84	%			12.58	%			12.67	%			12.28	%			12.02	%			12.84	%			12.02	%
Estimated tier 1 risk-based   capital			12.84	%			12.58	%			12.67	%			12.28	%			12.02	%			12.84	%			12.02	%
Estimated total risk-based   capital			14.97	%			14.48	%			14.39	%			14.01	%			13.71	%			14.97	%			13.71	%
Estimated tier 1 leverage   capital			9.77	%			10.94	%			10.89	%			10.73	%			10.57	%			9.77	%			10.57	%
Other Data
Weighted average shares:
Basic			20,414				20,411				20,652				20,981				21,257				20,413				21,494
Diluted			20,514				20,690				20,930				21,256				21,546				20,572				21,780
Period end shares  outstanding			20,431				20,355				20,524				20,737				21,147				20,431				21,147
Book value per share		$	36.03			$	34.71			$	34.59			$	34.06			$	33.32			$	36.03			$	33.32
Tangible book value per  share(B)		$	24.11			$	22.70			$	22.62			$	22.16			$	21.60			$	24.11			$	21.60

(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 11 of this Earnings Release.(C) Net interest margin represents net interest income divided by average interest-earning assets.(D) 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
		June 30, 2020												March 31, 2020												June 30, 2019
		AverageBalance				InterestEarned/InterestPaid				AverageYield/Rate				AverageBalance				InterestEarned/InterestPaid				AverageYield/Rate				AverageBalance				InterestEarned/InterestPaid				AverageYield/Rate
		(Dollars in thousands)
Assets
Interest-Earning Assets:
Loans		$	4,425,036			$	56,421				5.13	%		$	3,933,291			$	54,624				5.59	%		$	3,819,687			$	56,016				5.88	%
Securities			594,205				4,011				2.71	%			388,721				2,633				2.72	%			350,004				2,529				2.90	%
Deposits in other financial  institutions and other			18,173				20				0.44	%			50,711				195				1.55	%			63,962				401				2.52	%
Total interest-earning assets			5,037,414			$	60,452				4.83	%			4,372,723			$	57,452				5.28	%			4,233,653			$	58,946				5.58	%
Allowance for loan losses			(41,334	)											(28,718	)											(27,125	)
Noninterest-earning assets			637,608												602,778												586,435
Total assets		$	5,633,688											$	4,946,783											$	4,792,963
Liabilities and  Shareholders' Equity
Interest-Bearing Liabilities:
Interest-bearing demand  deposits		$	353,252			$	421				0.48	%		$	363,326			$	846				0.94	%		$	350,147			$	1,152				1.32	%
Money market and savings  deposits			1,169,225				1,308				0.45	%			1,168,541				3,518				1.21	%			994,557				3,361				1.36	%
Certificates and other time  deposits			1,302,743				5,845				1.80	%			1,193,427				6,084				2.05	%			1,331,955				7,008				2.11	%
Borrowed funds			320,332				562				0.71	%			140,999				506				1.44	%			155,969				1,118				2.87	%
Subordinated debt			107,998				1,469				5.47	%			107,865				1,473				5.49	%			48,986				736				6.03	%
Total interest-bearing  liabilities			3,253,550			$	9,605				1.19	%			2,974,158			$	12,427				1.68	%			2,881,614			$	13,375				1.86	%
Noninterest-Bearing  Liabilities:
Noninterest-bearing demand  deposits			1,624,641												1,225,888												1,173,662
Other liabilities			32,393												33,202												32,525
Total liabilities			4,910,584												4,233,248												4,087,801
Shareholders' equity			723,104												713,535												705,162
Total liabilities and   shareholders' equity		$	5,633,688											$	4,946,783											$	4,792,963
Net interest rate spread											3.64	%											3.60	%											3.72	%
Net interest income and margin						$	50,847				4.06	%						$	45,025				4.14	%						$	45,571				4.32	%
Net interest income and net  interest margin (tax equivalent)						$	51,342				4.10	%						$	45,152				4.15	%						$	45,684				4.33	%

Allegiance Bancshares, Inc.Financial Highlights(Unaudited)

		Six Months Ended June 30,
		2020												2019
		AverageBalance				InterestEarned/InterestPaid				AverageYield/ Rate				AverageBalance				InterestEarned/InterestPaid				AverageYield/ Rate
		(Dollars in thousands)
Assets
Interest-Earning Assets:
Loans		$	4,179,164			$	111,045				5.34	%		$	3,783,662			$	110,205				5.87	%
Securities			491,463				6,644				2.72	%			348,354				4,801				2.78	%
Deposits in other financial institutions			34,442				215				1.26	%			91,628				1,089				2.40	%
Total interest-earning assets			4,705,069			$	117,904				5.04	%			4,223,644			$	116,095				5.54	%
Allowance for loan losses			(35,026	)											(26,944	)
Noninterest-earning assets			619,315												572,748
Total assets		$	5,289,358											$	4,769,448
Liabilities and Shareholders' Equity
Interest-Bearing Liabilities:
Interest-bearing demand deposits		$	358,289			$	1,267				0.71	%		$	344,203			$	2,115				1.24	%
Money market and savings deposits			1,168,883				4,826				0.83	%			937,664				6,126				1.32	%
Certificates and other time deposits			1,248,085				11,929				1.92	%			1,317,536				13,264				2.03	%
Borrowed funds			230,666				1,068				0.93	%			219,415				2,945				2.71	%
Subordinated debt			107,931				2,942				5.48	%			48,956				1,471				6.06	%
Total interest-bearing liabilities			3,113,854			$	22,032				1.42	%			2,867,774			$	25,921				1.82	%
Noninterest-Bearing Liabilities:
Noninterest-bearing demand deposits			1,425,265												1,170,435
Other liabilities			31,919												24,832
Total liabilities			4,571,038												4,063,041
Shareholders' equity			718,320												706,407
Total liabilities and shareholders' equity		$	5,289,358											$	4,769,448
Net interest rate spread											3.62	%											3.72	%
Net interest income and margin						$	95,872				4.10	%						$	90,174				4.31	%
Net interest income and net interest  margin (tax equivalent)						$	96,493				4.12	%						$	90,489				4.32	%

Allegiance Bancshares, Inc.Financial Highlights(Unaudited)

		Three Months Ended
		2020								2019
		June 30				March 31				December 31				September 30				June 30
		(Dollars in thousands)
Period-end Loan Portfolio:
Commercial and industrial		$	651,430			$	702,267			$	689,360			$	675,055			$	694,516
Mortgage warehouse			—				1,051				8,304				36,594				46,171
Paycheck Protection Program (PPP)			695,772				—				—				—				—
Real estate:
Commercial real estate (including    multi-family residential)			1,956,116				1,951,080				1,873,782				1,859,721				1,830,764
Commercial real estate construction and    land development			386,865				378,987				410,471				386,723				368,108
1-4 family residential (including home equity)			703,513				704,212				698,957				695,520				690,961
Residential construction			171,656				177,025				192,515				189,608				183,991
Consumer and other			18,304				40,924				41,921				42,783				43,452
Total loans		$	4,583,656			$	3,955,546			$	3,915,310			$	3,886,004			$	3,857,963
Asset Quality:
Nonaccrual loans		$	33,223			$	21,621			$	28,371			$	34,615			$	31,382
Accruing loans 90 or more days past due			—				—				—				—				—
Total nonperforming loans			33,223				21,621				28,371				34,615				31,382
Other real estate			11,847				12,617				8,337				8,333				6,294
Other repossessed assets			—				—				—				—				—
Total nonperforming assets		$	45,070			$	34,238			$	36,708			$	42,948			$	37,676
Net charge-offs		$	538			$	2,917			$	1,303			$	729			$	590
Nonaccrual loans:
Commercial and industrial		$	12,578			$	8,669			$	8,388			$	8,033			$	9,386
Mortgage warehouse			—				—				—				—				—
Real estate:
Commercial real estate (including    multi-family residential)			16,127				7,024				6,741				15,356				18,218
Commercial real estate construction and    land development			53				1,958				9,050				9,050				1,541
1-4 family residential (including home equity)			3,434				2,845				3,294				1,992				2,074
Residential construction			898				982				746				—				—
Consumer and other			133				143				152				184				163
Total nonaccrual loans		$	33,223			$	21,621			$	28,371			$	34,615			$	31,382
Asset Quality Ratios:
Nonperforming assets to total assets			0.77	%			0.68	%			0.74	%			0.88	%			0.79	%
Nonperforming loans to total loans			0.72	%			0.55	%			0.72	%			0.89	%			0.81	%
Allowance for loan losses to nonperforming loans			143.40	%			173.49	%			103.76	%			86.11	%			89.03	%
Allowance for loan losses to total loans			1.04	%			0.95	%			0.75	%			0.77	%			0.72	%
Net charge-offs to average loans (annualized)			0.05	%			0.30	%			0.13	%			0.07	%			0.06	%

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 adjusted 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																				Year-to-Date
	2020								2019												2020				2019
	June 30				March 31				December 31				September 30				June 30				June 30				June 30
	(Dollars and share amounts in thousands, except per share data)
Total shareholders' equity	$	736,143			$	706,593			$	709,865			$	706,308			$	704,701			$	736,143			$	704,701
Less:  Goodwill and core  deposit intangibles, net		243,538				244,528				245,518				246,695				247,873				243,538				247,873
Tangible shareholders’  equity	$	492,605			$	462,065			$	464,347			$	459,613			$	456,828			$	492,605			$	456,828
Shares outstanding at end of  period		20,431				20,355				20,524				20,737				21,147				20,431				21,147
Tangible book value per share	$	24.11			$	22.70			$	22.62			$	22.16			$	21.60			$	24.11			$	21.60
Net income	$	9,907			$	3,516			$	13,986			$	12,047			$	14,248			$	13,423			$	26,926
Average shareholders' equity	$	723,104			$	713,535			$	710,155			$	710,044			$	705,162			$	718,320			$	706,407
Less: Average goodwill and  core deposit intangibles, net		244,010				245,007				246,154				247,404				248,621				244,508				248,947
Average tangible  shareholders’ equity	$	479,094			$	468,528			$	464,001			$	462,640			$	456,541			$	473,812			$	457,460
Return on average  tangible equity		8.32	%			3.02	%			11.96	%			10.33	%			12.52	%			5.70	%			11.87	%
Total assets	$	5,836,881			$	5,002,429			$	4,992,654			$	4,905,840			$	4,794,211			$	5,836,881			$	4,794,211
Less: Goodwill and core  deposit intangibles, net		243,538				244,528				245,518				246,695				247,873				243,538				247,873
Tangible assets	$	5,593,343			$	4,757,901			$	4,747,136			$	4,659,145			$	4,546,338			$	5,593,343			$	4,546,338
Tangible equity to tangible  assets		8.81	%			9.71	%			9.78	%			9.86	%			10.05	%			8.81	%			10.05	%
Net interest income  (tax equivalent)	$	51,342			$	45,152			$	44,623			$	44,924			$	45,684			$	96,493			$	90,489
Less: Acquisition accounting  adjustments		(669	)			(1,259	)			(1,860	)			(2,045	)			(2,755	)			(1,928	)			(5,720	)
Adjusted net interest  income (tax equivalent)	$	50,673			$	43,893			$	42,763			$	42,879			$	42,929			$	94,565			$	84,768
Average earning assets	$	5,037,414			$	4,372,723			$	4,308,028			$	4,284,667			$	4,233,653			$	4,705,069			$	4,223,644
Net interest margin  (tax equivalent)		4.10	%			4.15	%			4.11	%			4.16	%			4.33	%			4.12	%			4.32	%
Adjusted net interest margin  (tax equivalent)		4.05	%			4.04	%			3.94	%			3.97	%			4.07	%			4.04	%			4.05	%

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