abtx-ex991

HOUSTON, April 30, 2020 - 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.

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.

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.

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.

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.

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.

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.

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.

	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

	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

	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

	Three Months Ended
	March 31, 2020								December 31, 2019								March 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	$	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	%

	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	%

GAAP Reconciliation and Management’s Explanation of Non-GAAP Financial Measures

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	%