Allegiance Bancshares, Inc. (NASDAQ: ABTX) (Allegiance), the holding company of Allegiance Bank (the "Bank"), today reported net income of $15.9 million and diluted earnings per share of $0.77 for the fourth quarter 2020 compared to net income of $14.0 million and diluted earnings per share of $0.67 for the fourth quarter 2019. Net income for the year ended December 31, 2020 was $45.5 million, or $2.22 per diluted share, compared to $53.0 million, or $2.47 per diluted share, for the year ended December 31, 2019.   The year ended December 31, 2020 results were primarily impacted by the increased provision for credit losses in response to COVID-19-related uncertainties in the current economic environment partially offset by increased net interest income.

“We are pleased to report solid quarter and full-year earnings during a very challenging economic environment which has further evidenced the resiliency of our business model,” said Steve Retzloff, Allegiance’s Chief Executive Officer. “Our results reflect several meaningful accomplishments achieved by our team,” continued Retzloff.

“We are extremely proud of the continued hard work and dedication of our Allegiance bankers as our team helped a tremendous number of customers enabling us to post impressive 2020 PPP results for an institution of our size and we expect continued success with the 2021 PPP. As further validation of our outstanding service culture and performance, we received recognition as a Top Workplace in Houston by the Houston Chronicle and this year ranked number six in the large company category with 500 plus employees. We are one of only three companies that has been recognized as a Top Workplace for eleven consecutive years,” commented Retzloff.

“We are also pleased to announce an increase in our quarterly dividend, reflecting our continued commitment to enhancing shareholder value. As Houston’s largest locally-headquartered community bank, we expect to build on our strong core fundamentals. We are excited about the future and look forward to the year ahead where we will embrace the opportunity to remain focused on our customers and the communities we serve,” concluded Retzloff.

Fourth Quarter 2020 Results

Net interest income before the provision for credit losses in the fourth quarter 2020 increased $10.4 million, or 23.3%, to $54.9 million from $44.5 million for the fourth quarter 2019 and increased $3.0 million, or 5.8%, from $51.9 million in the third 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 increased 3 basis points to 4.14% for the fourth quarter 2020 from 4.11% for the fourth quarter 2019 and increased 19 basis points from 3.95% for the third quarter 2020. Excluding the impact of acquisition accounting adjustments, adjusted net interest margin on a tax equivalent basis was 4.12% for the fourth quarter 2020 compared to 3.94% for the fourth quarter 2019 and 3.91% for the third 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 fourth quarter 2020 was $2.0 million, a decrease of $1.4 million, or 40.6%, compared to $3.4 million for the fourth quarter 2019 and an increase of $169 thousand, or 9.1%, compared to $1.9 million for the third quarter 2020. Fourth quarter 2020 noninterest income reflected lower transactional fee income and significantly lower correspondent bank rebates when compared to fourth quarter 2019.  

Noninterest expense for the fourth quarter 2020 increased $3.3 million, or 11.3%, to $32.7 million from $29.4 million for the fourth quarter 2019 and increased $184 thousand, or 0.6%, compared to the third quarter 2020.

In the fourth quarter 2020, Allegiance’s efficiency ratio decreased to 57.53% compared to 62.20% for the fourth quarter 2019 and 60.58% for the third quarter 2020. Fourth quarter 2020 annualized returns on average assets, average equity and average tangible equity were 1.05%, 8.38% and 12.32%, 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 third quarter 2020 were 1.09%, 8.59% and 12.72%, respectively. Return on average tangible equity is a non-GAAP measure. Please refer to the non-GAAP reconciliation on page 11.

Year Ended December 31, 2020 Results

Net interest income before provision for credit losses for the year ended December 31, 2020 increased $23.1 million, or 12.9%, to $202.7 million from $179.5 million for the year ended December 31, 2019 primarily due to a $746.9 million, or 17.5%, 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 14 basis points to 4.08% for the year ended December 31, 2020 from 4.22% for the year ended December 31, 2019. Excluding the impact of acquisition accounting adjustments, the adjusted net interest margin for the year ended December 31, 2020 was 4.02%, compared to 4.00% for the year ended December 31, 2019. Adjusted net interest margin is a non-GAAP measure. Please refer to the non-GAAP reconciliation on page 11.

Noninterest income for the year ended December 31, 2020 was $8.2 million, a decrease of $5.3 million, or 39.2%, compared to $13.4 million for the year ended December 31, 2019 due primarily to significantly lower correspondent bank rebates and losses on the sales of other real estate owned of $258 thousand. Additionally, noninterest income for the year ended December 31, 2020 included $287 thousand of gains on the sale of securities compared to $1.5 million for the year ended December 31, 2019.

Noninterest expense for the year ended December 31, 2020 increased $6.9 million, or 5.7%, to $127.5 million from $120.6 million for the year ended December 31, 2019. The increase in noninterest expense during the year ended December 31, 2020 was primarily due to $4.1 million of other real estate write-downs partially offset by having no merger-related expenses incurred compared to $1.3 million during the year ended December 31, 2019.

Allegiance’s efficiency ratio decreased from 62.99% for the year ended December 31, 2019 to 60.55% for the year ended December 31, 2020. For the year ended December 31, 2020, returns on average assets, average equity and average tangible equity were 0.81%, 6.22% and 9.33%, respectively, compared to 1.10%, 7.48% and 11.50%, respectively, for the year ended December 31, 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 December 31, 2020 increased $1.06 billion, or 21.2%, to $6.05 billion compared to $4.99 billion at December 31, 2019, primarily due to the origination of PPP loans and growth in the securities portfolio, and increased $82.4 million, or 5.5% (annualized), compared to $5.97 billion at September 30, 2020.

Total loans at December 31, 2020 increased $576.5 million, or 14.7%, to $4.49 billion compared to $3.92 billion at December 31, 2019, primarily due to the origination of $710.2 million of PPP loans, and decreased $100.6 million, or 8.8% (annualized), compared to $4.59 billion at September 30, 2020. Core loans, which exclude the mortgage warehouse portfolio and PPP loans, increased $14.9 million, or 0.4%, to $3.92 billion at December 31, 2020 from $3.91 billion at December 31, 2019 and increased $39.7 million, or 4.1% (annualized), from $3.88 billion at September 30, 2020.

Deposits at December 31, 2020 increased $920.4 million, or 22.6%, to $4.99 billion compared to $4.07 billion at December 31, 2019 and increased $71.1 million, or 5.8% (annualized), compared to $4.92 billion at September 30, 2020.

Asset Quality

Nonperforming assets totaled $38.1 million, or 0.63% of total assets, at December 31, 2020, compared to $36.7 million, or 0.74% of total assets, at December 31, 2019 and $46.8 million, or 0.78% of total assets, at September 30, 2020. Accounting Standards Update (ASU) 2016-13, “Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments” (CECL), was effective for the Company on January 1, 2020; however, Section 4014 of 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 of the impact of COVID-19, the Company chose to delay its implementation of CECL until the fourth quarter of 2020, at which point the standard was adopted retrospectively to January 1, 2020. The allowance for loan losses for the quarter ending December 31, 2020 was calculated under the CECL methodology and as a percentage of total loans was 1.18%. Other quarter-end periods presented for the allowance for loan losses were not restated for CECL adoption and were calculated under the incurred loss methodology. The allowance for loan losses as a percentage of total loans was 0.75% at December 31, 2019 and 1.06% at September 30, 2020.

The provision for credit losses for the fourth quarter 2020 was $4.4 million, or 0.38% (annualized) of average loans, compared to $933 thousand, or 0.10% (annualized) of average loans, for the fourth quarter 2019 and $1.3 million, or 0.12% (annualized) of average loans, for the third quarter 2020 primarily due to economic risks and uncertainties related to the COVID-19 pandemic. The Company’s $21.4 million of increased provision for credit losses during the year ended December 31, 2020 compared to the same period in 2019 reflects the uncertainty surrounding unemployment, the economic impact caused by COVID-19 and the economic effects related to the sustained lower crude oil prices.

Fourth quarter 2020 net charge-offs were $4.3 million, or 0.37% (annualized) of average loans, an increase from net charge-offs of $1.3 million, or 0.13% (annualized) of average loans, for the fourth quarter 2019 and $291 thousand, or 0.03% (annualized) of average loans, for the third quarter 2020. Net charge-offs for the year ended December 31, 2020 were $8.0 million, or 0.12% (annualized) of average loans, compared to net charge-offs for the year ended December 31, 2019 of $2.8 million, or 0.07% (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 $127.3 million, or 2.8% of total loans, at December 31, 2020, of which $1.4 million were on nonaccrual. At December 31, 2020, restaurant and bar industry loans, excluding PPP loans, totaled $116.7 million, or 2.6%, of total loans, of which $494 thousand were on nonaccrual. At December 31, 2020, the Company’s allowance for loan losses allocated to its hotel portfolio was 3.2% 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 $74.8 million, or 1.7%, of total loans at December 31, 2020, of which $494 thousand were on nonaccrual. At December 31, 2020, the allowance for loan losses allocated to the oil and gas loan portfolio was 2.3% of total oil and gas loans.

During the year ended December 31, 2020, the Company granted initial principal and interest deferrals on outstanding loan balances to borrowers in connection with the COVID-19 relief provided by the CARES Act and subsequent deferrals upon request and after meeting certain conditions. These deferrals were generally no more than 90 days in duration. As of December 31, 2020, 164 loans with outstanding loan balances of $161.3 million remained on deferral.  

Dividend

On January 27, 2021, the Board of Directors of Allegiance declared a cash dividend of $0.12 per share, an increase in the quarterly dividend of 20%, to be paid on March 15, 2021 to all shareholders of record as of February 26, 2021. 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, January 28, 2021 at 9:00 a.m. Central Time (10:00 a.m. Eastern Time) to discuss its fourth quarter and year-end 2020 results. Individuals and investment professionals may participate in the call by dialing (877) 279-2520. The conference ID number is 6884418. 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 December 31, 2020, Allegiance was a $6.05 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 December 31, 2020, Allegiance Bank operated 28 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 27 bank offices in the Houston metropolitan area and one bank office 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 Reports on Form 10-Q for the quarters ended March 31, 2020, June 30, 2020 and September 30, 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  
    December 31     September 30     June 30     March 31     December 31  
    (Dollars in thousands)  
ASSETS                                        
Cash and due from banks   $ 122,897     $ 327,416     $ 237,585     $ 156,700     $ 213,347  
Interest-bearing deposits at other financial institutions     299,869       19,732       28,815       18,189       132,901  
Total cash and cash equivalents     422,766       347,148       266,400       174,889       346,248  
Available for sale securities, at fair value     772,890       663,301       618,751       508,250       372,545  
Loans held for investment     4,491,764       4,592,362       4,583,656       3,955,546       3,915,310  
Less: allowance for loan losses     (53,173 )     (48,698 )     (47,642 )     (37,511 )     (29,438 )
Loans, net     4,438,591       4,543,664       4,536,014       3,918,035       3,885,872  
Accrued interest receivable     40,053       36,996       32,795       17,203       15,468  
Premises and equipment, net     70,685       69,887       67,229       66,798       66,790  
Other real estate owned     9,196       8,876       11,847       12,617       8,337  
Federal Home Loan Bank stock     7,756       9,716       14,844       12,798       6,242  
Bank owned life insurance     27,686       27,542       27,398       27,255       27,104  
Goodwill     223,642       223,642       223,642       223,642       223,642  
Core deposit intangibles, net     17,954       18,907       19,896       20,886       21,876  
Other assets     18,909       18,072       18,065       20,056       18,530  
Total assets   $ 6,050,128     $ 5,967,751     $ 5,836,881     $ 5,002,429     $ 4,992,654  
LIABILITIES AND SHAREHOLDERS’ EQUITY                                        
LIABILITIES:                                        
Deposits:                                        
Noninterest-bearing   $ 1,704,567     $ 1,772,700     $ 1,754,128     $ 1,217,532     $ 1,252,232  
Interest-bearing                                        
Demand     437,328       409,137       375,353       341,524       367,278  
Money market and savings     1,499,938       1,483,370       1,270,437       1,110,631       1,258,008  
Certificates and other time     1,346,649       1,252,159       1,300,793       1,283,887       1,190,583  
Total interest-bearing deposits     3,283,915       3,144,666       2,946,583       2,736,042       2,815,869  
Total deposits     4,988,482       4,917,366       4,700,711       3,953,574       4,068,101  
Accrued interest payable     2,701       3,082       3,293       3,821       4,326  
Borrowed funds     155,515       155,512       255,509       190,506       75,503  
Subordinated debt     108,322       108,191       108,061       107,930       107,799  
Other liabilities     36,439       30,547       33,164       40,005       27,060  
Total liabilities     5,291,459       5,214,698       5,100,738       4,295,836       4,282,789  
SHAREHOLDERS’ EQUITY:                                        
Common stock     20,208       20,445       20,431       20,355       20,524  
Capital surplus     508,794       516,151       515,045       513,894       521,066  
Retained earnings     195,236       186,866       172,723       164,858       163,375  
Accumulated other comprehensive income     34,431       29,591       27,944       7,486       4,900  
Total shareholders’ equity     758,669       753,053       736,143       706,593       709,865  
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY   $ 6,050,128     $ 5,967,751     $ 5,836,881     $ 5,002,429     $ 4,992,654  
                                         

Allegiance Bancshares, Inc.Financial Highlights(Unaudited)

    Three Months Ended     Year-to-Date  
    2020     2019     2020     2019  
    December 31     September 30     June 30     March 31     December 31     December 31     December 31  
    (Dollars in thousands, except per share data)  
INTEREST INCOME:                                                        
Loans, including fees   $ 58,496     $ 56,418     $ 56,421     $ 54,624     $ 55,368     $ 225,959     $ 221,363  
Securities:                                                        
Taxable     2,203       2,095       1,842       2,087       2,066       8,227       6,975  
Tax-exempt     2,316       2,280       2,169       546       469       7,311       2,934  
Deposits in other financial institutions     32       18       20       195       244       265       1,635  
Total interest income     63,047       60,811       60,452       57,452       58,147       241,762       232,907  
                                                         
INTEREST EXPENSE:                                                        
Demand, money market and savings deposits     1,621       1,657       1,729       4,364       5,091       9,371       18,307  
Certificates and other time deposits     4,507       5,239       5,845       6,084       6,483       21,675       26,656  
Borrowed funds     557       558       562       506       547       2,183       4,675  
Subordinated debt     1,460       1,448       1,469       1,473       1,500       5,850       3,732  
Total interest expense     8,145       8,902       9,605       12,427       13,621       39,079       53,370  
NET INTEREST INCOME     54,902       51,909       50,847       45,025       44,526       202,683       179,537  
Provision for credit losses     4,368       1,347       10,669       10,990       933       27,374       5,939  
Net interest income after provision for credit losses     50,534       50,562       40,178       34,035       43,593       175,309       173,598  
                                                         
NONINTEREST INCOME:                                                        
Nonsufficient funds fees     100       75       60       169       189       404       658  
Service charges on deposit accounts     405       325       343       457       403       1,530       1,472  
Gain on sale of securities                 93       194       613       287       1,459  
Gain (loss) on sales of other real estate and repossessed assets           117       (306 )     (69 )     (45 )     (258 )     26  
Bank owned life insurance     144       144       143       151       157       582       624  
Rebate from correspondent bank     196       98       89       493       900       876       3,580  
Other     1,174       1,091       1,140       1,330       1,183       4,735       5,604  
Total noninterest income     2,019       1,850       1,562       2,725       3,400       8,156       13,423  
                                                         
NONINTEREST EXPENSE:                                                        
Salaries and employee benefits     21,003       20,034       19,334       19,781       18,273       80,152       77,593  
Net occupancy and equipment     2,079       2,057       1,926       1,907       1,994       7,969       8,179  
Depreciation     1,019       946       885       866       861       3,716       3,192  
Data processing and software amortization     2,107       2,125       1,934       1,826       2,120       7,992       7,464  
Professional fees     999       756       800       573       540       3,128       2,333  
Regulatory assessments and FDIC insurance     810       875       609       632       216       2,926       1,705  
Core deposit intangibles amortization     953       989       990       990       1,177       3,922       4,711  
Communications     225       355       390       417       486       1,387       1,839  
Advertising     347       327       370       521       597       1,565       2,367  
Other real estate expense     382       2,017       114       2,649       164       5,162       614  
Acquisition and merger-related expenses                                         1,326  
Other     2,825       2,084       2,427       2,239       3,003       9,575       9,312  
Total noninterest expense     32,749       32,565       29,779       32,401       29,431       127,494       120,635  
INCOME BEFORE INCOME TAXES     19,804       19,847       11,961       4,359       17,562       55,971       66,386  
Provision for income taxes     3,863       3,677       2,054       843       3,576       10,437       13,427  
NET INCOME   $ 15,941     $ 16,170     $ 9,907     $ 3,516     $ 13,986     $ 45,534     $ 52,959  
                                                         
EARNINGS PER SHARE                                                        
Basic   $ 0.78     $ 0.79     $ 0.49     $ 0.17     $ 0.68     $ 2.23     $ 2.50  
Diluted   $ 0.77     $ 0.79     $ 0.48     $ 0.17     $ 0.67     $ 2.22     $ 2.47  

Allegiance Bancshares, Inc.Financial Highlights(Unaudited)

    Three Months Ended     Year-to-Date  
    2020     2019     2020     2019  
    December 31     September 30     June 30     March 31     December 31     December 31     December 31  
    (Dollars and share amounts in thousands, except per share data)  
Net income   $ 15,941     $ 16,170     $ 9,907     $ 3,516     $ 13,986     $ 45,534     $ 52,959  
                                                         
Earnings per share, basic   $ 0.78     $ 0.79     $ 0.49     $ 0.17     $ 0.68     $ 2.23     $ 2.50  
Earnings per share, diluted   $ 0.77     $ 0.79     $ 0.48     $ 0.17     $ 0.67     $ 2.22     $ 2.47  
                                                         
Return on average assets(A)     1.05 %     1.09 %     0.71 %     0.29 %     1.13 %     0.81 %     1.10 %
Return on average equity(A)     8.38 %     8.59 %     5.51 %     1.98 %     7.81 %     6.22 %     7.48 %
Return on average tangible equity(A)(B)     12.32 %     12.72 %     8.32 %     3.02 %     11.96 %     9.33 %     11.50 %
Net interest margin (tax equivalent)(C)     4.14 %     3.95 %     4.10 %     4.15 %     4.11 %     4.08 %     4.22 %
Adjusted net interest margin (tax equivalent)(B)     4.12 %     3.91 %     4.05 %     4.04 %     3.94 %     4.02 %     4.00 %
Efficiency ratio(D)     57.53 %     60.58 %     56.92 %     68.13 %     62.20 %     60.55 %     62.99 %
                                                         
Capital Ratios                                                        
Allegiance Bancshares, Inc. (Consolidated)                                                        
Equity to assets     12.54 %     12.62 %     12.61 %     14.12 %     14.22 %     12.54 %     14.22 %
Tangible equity to tangible assets(B)     8.90 %     8.92 %     8.81 %     9.71 %     9.78 %     8.90 %     9.78 %
Estimated common equity tier 1 capital     11.80 %     11.73 %     11.36 %     11.15 %     11.42 %     11.80 %     11.42 %
Estimated tier 1 risk-based capital     12.04 %     11.96 %     11.60 %     11.38 %     11.66 %     12.04 %     11.66 %
Estimated total risk-based capital     15.71 %     15.56 %     15.17 %     14.72 %     14.83 %     15.71 %     14.83 %
Estimated tier 1 leverage capital     8.51 %     8.70 %     8.83 %     9.89 %     10.02 %     8.51 %     10.02 %
Allegiance Bank                                                        
Estimated common equity tier 1 capital     13.32 %     13.25 %     12.84 %     12.58 %     12.67 %     13.32 %     12.67 %
Estimated tier 1 risk-based capital     13.32 %     13.25 %     12.84 %     12.58 %     12.67 %     13.32 %     12.67 %
Estimated total risk-based capital     15.55 %     15.41 %     14.97 %     14.48 %     14.39 %     15.55 %     14.39 %
Estimated tier 1 leverage capital     9.41 %     9.64 %     9.77 %     10.94 %     10.89 %     9.41 %     10.89 %
                                                         
Other Data                                                        
Weighted average shares:                                                        
Basic     20,396       20,439       20,414       20,411       20,652       20,415       21,152  
Diluted     20,575       20,532       20,514       20,690       20,930       20,546       21,424  
Period end shares outstanding     20,208       20,445       20,431       20,355       20,524       20,208       20,524  
Book value per share   $ 37.54     $ 36.83     $ 36.03     $ 34.71     $ 34.59     $ 37.54     $ 34.59  
Tangible book value per share(B)   $ 25.59     $ 24.97     $ 24.11     $ 22.70     $ 22.62     $ 25.59     $ 22.62  

(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  
    December 31, 2020     September 30, 2020     December 31, 2019  
    Average Balance     Interest Earned/ Interest Paid     Average Yield/ Rate     Average Balance     Interest Earned/ Interest Paid     Average Yield/ Rate     Average Balance     Interest Earned/ Interest Paid     Average Yield/ Rate  
    (Dollars in thousands)  
Assets                                                                        
Interest-Earning Assets:                                                                        
Loans   $ 4,569,210     $ 58,496       5.09 %   $ 4,594,333     $ 56,418       4.89 %   $ 3,888,476     $ 55,368       5.65 %
Securities     701,233       4,519       2.56 %     667,008       4,375       2.61 %     364,605       2,535       2.76 %
Deposits in other financial institutions and other     58,664       32       0.22 %     20,176       18       0.35 %     54,947       244       1.76 %
Total interest-earning assets     5,329,107     $ 63,047       4.71 %     5,281,517     $ 60,811       4.58 %     4,308,028     $ 58,147       5.35 %
Allowance for loan losses     (53,260 )                     (47,593 )                     (29,997 )                
Noninterest-earning assets     783,200                       679,750                       639,601                  
Total assets   $ 6,059,047                     $ 5,913,674                     $ 4,917,632                  
                                                                         
Liabilities and Shareholders' Equity                                                                        
Interest-Bearing Liabilities:                                                                        
Interest-bearing demand deposits   $ 430,145     $ 386       0.36 %   $ 394,612     $ 392       0.40 %   $ 361,666     $ 952       1.04 %
Money market and savings deposits     1,513,816       1,235       0.32 %     1,409,969       1,265       0.36 %     1,169,996       4,139       1.40 %
Certificates and other time deposits     1,284,181       4,507       1.40 %     1,291,536       5,239       1.61 %     1,203,110       6,483       2.14 %
Borrowed funds     157,687       557       1.41 %     171,804       558       1.29 %     86,372       547       2.51 %
Subordinated debt     108,259       1,460       5.37 %     108,130       1,448       5.33 %     107,782       1,500       5.52 %
Total interest-bearing liabilities     3,494,088     $ 8,145       0.93 %     3,376,051     $ 8,902       1.05 %     2,928,926     $ 13,621       1.85 %
                                                                         
Noninterest-Bearing Liabilities:                                                                        
Noninterest-bearing demand deposits     1,766,826                       1,752,404                       1,237,770                  
Other liabilities     41,434                       36,572                       40,781                  
Total liabilities     5,302,348                       5,165,027                       4,207,477                  
Shareholders' equity     756,699                       748,647                       710,155                  
Total liabilities and shareholders' equity   $ 6,059,047                     $ 5,913,674                     $ 4,917,632                  
                                                                         
Net interest rate spread                     3.78 %                     3.53 %                     3.50 %
                                                                         
Net interest income and margin           $ 54,902       4.10 %           $ 51,909       3.91 %           $ 44,526       4.10 %
                                                                         
Net interest income and net interest margin (tax equivalent)           $ 55,477       4.14 %           $ 52,446       3.95 %           $ 44,623       4.11 %
                                                                         

Allegiance Bancshares, Inc.Financial Highlights(Unaudited)

    Years Ended December 31,  
    2020     2019  
    Average Balance     Interest Earned/ Interest Paid     Average Yield/ Rate     Average Balance     Interest Earned/ Interest Paid     Average Yield/ Rate  
    (Dollars in thousands)  
Assets                                                
Interest-Earning Assets:                                                
Loans   $ 4,383,375     $ 225,959       5.15 %   $ 3,831,894     $ 221,363       5.78 %
Securities     588,318       15,538       2.64 %     355,233       9,909       2.79 %
Deposits in other financial institutions     36,945       265       0.72 %     74,655       1,635       2.19 %
Total interest-earning assets     5,008,638     $ 241,762       4.83 %     4,261,782     $ 232,907       5.47 %
Allowance for loan losses     (46,680 )                     (28,129 )                
Noninterest-earning assets     675,701                       594,981                  
Total assets   $ 5,637,659                     $ 4,828,634                  
                                                 
Liabilities and Shareholders' Equity                                                
Interest-Bearing Liabilities:                                                
Interest-bearing demand deposits   $ 385,482     $ 2,045       0.53 %   $ 345,693     $ 4,010       1.16 %
Money market and savings deposits     1,316,188       7,326       0.56 %     1,037,126       14,297       1.38 %
Certificates and other time deposits     1,268,080       21,675       1.71 %     1,276,684       26,656       2.09 %
Borrowed funds     197,525       2,183       1.11 %     127,138       4,675       3.68 %
Subordinated debt     108,064       5,850       5.41 %     64,451       3,732       5.79 %
Total interest-bearing liabilities     3,275,339     $ 39,079       1.19 %     2,851,092     $ 53,370       1.87 %
                                                 
Noninterest-Bearing Liabilities:                                                
Noninterest-bearing demand deposits     1,593,354                       1,194,496                  
Other liabilities     37,278                       74,777                  
Total liabilities     4,905,971                       4,120,365                  
Shareholders' equity     731,688                       708,269                  
Total liabilities and shareholders' equity   $ 5,637,659                     $ 4,828,634                  
                                                 
Net interest rate spread                     3.64 %                     3.60 %
                                                 
Net interest income and margin           $ 202,683       4.05 %           $ 179,537       4.21 %
                                                 
Net interest income and net interest margin (tax equivalent)           $ 204,416       4.08 %           $ 180,036       4.22 %
                                                 

Allegiance Bancshares, Inc.Financial Highlights(Unaudited)

    Three Months Ended  
    2020     2019  
    December 31     September 30     June 30     March 31     December 31  
    (Dollars in thousands)  
Period-end Loan Portfolio:                                        
Commercial and industrial   $ 667,079     $ 650,634     $ 651,430     $ 702,267     $ 689,360  
Mortgage warehouse                       1,051       8,304  
Paycheck Protection Program (PPP)     569,901       710,234       695,772              
Real estate:                                        
Commercial real estate (including multi-family residential)     1,999,877       1,971,228       1,956,116       1,951,080       1,873,782  
Commercial real estate construction and land development     367,213       376,877       386,865       378,987       410,471  
1-4 family residential (including home equity)     737,605       716,565       703,513       704,212       698,957  
Residential construction     127,522       148,056       171,656       177,025       192,515  
Consumer and other     22,567       18,768       18,304       40,924       41,921  
Total loans   $ 4,491,764     $ 4,592,362     $ 4,583,656     $ 3,955,546     $ 3,915,310  
                                         
Asset Quality:                                        
Nonaccrual loans   $ 28,893     $ 37,928     $ 33,223     $ 21,621     $ 28,371  
Accruing loans 90 or more days past due                              
Total nonperforming loans     28,893       37,928       33,223       21,621       28,371  
Other real estate     9,196       8,876       11,847       12,617       8,337  
Other repossessed assets                              
Total nonperforming assets   $ 38,089     $ 46,804     $ 45,070     $ 34,238     $ 36,708  
                                         
Net charge-offs   $ 4,287     $ 291     $ 538     $ 2,917     $ 1,303  
                                         
Nonaccrual loans:                                        
Commercial and industrial   $ 10,747     $ 13,171     $ 12,578     $ 8,669     $ 8,388  
Mortgage warehouse                              
Real estate:                                        
Commercial real estate (including multi-family residential)     10,081       15,849       16,127       7,024       6,741  
Commercial real estate construction and land development     3,011       3,085       53       1,958       9,050  
1-4 family residential (including home equity)     4,525       4,263       3,434       2,845       3,294  
Residential construction           876       898       982       746  
Consumer and other     529       684       133       143       152  
Total nonaccrual loans   $ 28,893     $ 37,928     $ 33,223     $ 21,621     $ 28,371  
                                         
Asset Quality Ratios:                                        
Nonperforming assets to total assets     0.63 %     0.78 %     0.77 %     0.68 %     0.74 %
Nonperforming loans to total loans     0.64 %     0.83 %     0.72 %     0.55 %     0.72 %
Allowance for loan losses to nonperforming loans     184.03 %     128.40 %     143.40 %     173.49 %     103.76 %
Allowance for loan losses to total loans     1.18 %     1.06 %     1.04 %     0.95 %     0.75 %
Net charge-offs to average loans (annualized)     0.37 %     0.03 %     0.05 %     0.30 %     0.13 %

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  
  December 31     September 30     June 30     March 31     December 31     December 31     December 31  
  (Dollars and share amounts in thousands, except per share data)  
Total shareholders' equity $ 758,669     $ 753,053     $ 736,143     $ 706,593     $ 709,865     $ 758,669     $ 709,865  
Less: Goodwill and core deposit intangibles, net   241,596       242,549       243,538       244,528       245,518       241,596       245,518  
Tangible shareholders’ equity $ 517,073     $ 510,504     $ 492,605     $ 462,065     $ 464,347     $ 517,073     $ 464,347  
                                                       
Shares outstanding at end of period   20,208       20,445       20,431       20,355       20,524       20,208       20,524  
                                                       
Tangible book value per share $ 25.59     $ 24.97     $ 24.11     $ 22.70     $ 22.62     $ 25.59     $ 22.62  
                                                       
Net income $ 15,941     $ 16,170     $ 9,907     $ 3,516     $ 13,986     $ 45,534     $ 52,959  
                                                       
Average shareholders' equity $ 756,699     $ 748,647     $ 723,104     $ 713,535     $ 710,155     $ 731,688     $ 708,269  
Less: Average goodwill and core deposit intangibles, net   242,043       243,015       244,010       245,007       246,154       243,513       247,854  
Average tangible shareholders’ equity $ 514,656     $ 505,632     $ 479,094     $ 468,528     $ 464,001     $ 488,175     $ 460,415  
                                                       
Return on average tangible equity   12.32 %     12.72 %     8.32 %     3.02 %     11.96 %     9.33 %     11.50 %
                                                       
Total assets $ 6,050,128     $ 5,967,751     $ 5,836,881     $ 5,002,429     $ 4,992,654     $ 6,050,128     $ 4,992,654  
Less: Goodwill and core deposit intangibles, net   241,596       242,549       243,538       244,528       245,518       241,596       245,518  
Tangible assets $ 5,808,532     $ 5,725,202     $ 5,593,343     $ 4,757,901     $ 4,747,136     $ 5,808,532     $ 4,747,136  
                                                       
Tangible equity to tangible assets   8.90 %     8.92 %     8.81 %     9.71 %     9.78 %     8.90 %     9.78 %
                                                       
Net interest income (tax equivalent) $ 55,477     $ 52,446     $ 51,342     $ 45,152     $ 44,623     $ 204,416     $ 180,036  
Less: Acquisition accounting adjustments   (342 )     (598 )     (665 )     (1,259 )     (1,860 )     (2,864 )     (9,625 )
Adjusted net interest income (tax equivalent) $ 55,135     $ 51,848     $ 50,677     $ 43,893     $ 42,763     $ 201,552     $ 170,411  
                                                       
Average earning assets $ 5,329,107     $ 5,281,517     $ 5,037,414     $ 4,372,723     $ 4,308,028     $ 5,008,638     $ 4,261,782  
                                                       
Net interest margin (tax equivalent)   4.14 %     3.95 %     4.10 %     4.15 %     4.11 %     4.08 %     4.22 %
Adjusted net interest margin (tax equivalent)   4.12 %     3.91 %     4.05 %     4.04 %     3.94 %     4.02 %     4.00 %

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