abtx-ex991_188.htm

HOUSTON, October 25, 2019 - Allegiance Bancshares, Inc. (NASDAQ: ABTX) ("Allegiance"), the holding company of Allegiance Bank (the "Bank"), today reported net income of $12.0 million and diluted earnings per share of $0.57 for the third quarter 2019 compared to net income of $8.9 million and diluted earnings per share of $0.65 for the third quarter 2018. The third quarter 2019 included $1.4 million of pre-tax severance expense. Net income for the nine months ended September 30, 2019 was $39.0 million, or $1.81 per diluted share, compared to net income of $24.1 million, or $1.77 per diluted share, for the nine months ended September 30, 2018. The nine months ended September 30, 2019 results included $1.4 million of pre-tax severance expense and $1.3 million of pre-tax acquisition and merger-related expenses. The nine months ended September 30, 2018 results included $821 thousand of pre-tax acquisition and merger-related expenses.

“The third quarter was very productive for us and culminated with the completion of a $60 million subordinated debt offering,” said George Martinez, Allegiance’s Chairman and Chief Executive Officer. “Securing this attractive capital, positions us well for future growth,” continued Martinez.

“We are dedicated to taking great care of our customers by building on long-lasting relationships as we help them reach their financial goals. We are also keenly focused on developing new customer relationships and adding to our market share. Our personalized service to all of our customers is what will continue to set us apart as the premier bank in the Houston region and what will continue to drive our long-term financial success. We are in a tremendous position of strength and are encouraged about our prospects for the remainder of the year as we work to leverage our talent and capital to produce improved returns for our shareholders,” concluded Martinez.

Net interest income before the provision for loan losses in the third quarter 2019 increased $16.8 million, or 59.9%, to $44.8 million from $28.0 million for the third quarter 2018 primarily due to a $1.55 billion, or 56.6%, increase in average interest-earning assets for the same period. This increase was mainly due to the Post Oak Bancshares, Inc. acquisition during the fourth quarter of 2018 as well as organic growth for the year-over-year period. Net interest income before provision for loan losses for the third quarter 2019 decreased from $45.6 million in the second quarter 2019. The net interest margin on a tax equivalent basis increased 6 basis points to 4.16% for the third quarter 2019 from 4.10% for the third quarter 2018 and decreased 17 basis points from 4.33% for the second quarter 2019. Core net interest margin on a tax equivalent basis excludes the impact of acquisition accounting adjustments and was 3.97% for the third quarter 2019 compared to 4.07% for the second quarter 2019. Please refer to the non-GAAP reconciliation on page 10.

Noninterest income for the third quarter 2019 was $2.9 million, an increase of $961 thousand, or 49.8%, compared to $1.9 million for the third quarter 2018 and decreased $956 thousand, or 24.9%, compared to $3.8 million for the second quarter 2019. Noninterest income for the second quarter 2019 included $846 thousand of gain on the sale of securities.

Noninterest expense for the third quarter 2019 increased $10.8 million, or 56.6%, to $30.0 million from $19.2 million for the third quarter 2018, and decreased slightly compared to the second quarter 2019. The increase over the prior year quarter was primarily due to additional expenses associated with increased headcount and bank offices from the Post Oak acquisition. Additionally, the third quarter 2019 included $1.4 million of severance expense partially offset by a $676 thousand FDIC Small Bank Assessment Credit.

In the third quarter 2019, Allegiance’s efficiency ratio was 62.88% compared to 61.93% for the second quarter 2019 and 63.95% for the third quarter 2018. Third quarter 2019 annualized returns on average assets, average equity and average tangible equity were 0.98%, 6.73% and 10.33%, respectively, compared to 1.19%, 8.10% and 12.52%, respectively, for the second quarter 2019.

Annualized returns on average assets, average equity and average tangible equity for the third quarter 2018 were 1.18%, 10.80% and 12.40%, respectively.

Net interest income before provision for loan losses for the nine months ended September 30, 2019 increased $52.3 million, or 63.2%, to $135.0 million from $82.7 million for the nine months ended September 30, 2018 primarily due to a $1.56 billion, or 58.4%, increase in average interest-earning assets over the prior year associated with the Post Oak acquisition. The net interest margin on a tax equivalent basis increased 10 basis points to 4.27% for the nine months ended September 30, 2019 from 4.17% for the nine months ended September 30, 2018. Core net interest margin on a tax equivalent basis for the nine months ended September 30, 2019 would have been 4.02%, compared to 4.17% for the nine months ended September 30, 2018. Please refer to the non-GAAP reconciliation on page 10.

Noninterest income for the nine months ended September 30, 2019 was $10.0 million, an increase of $4.6 million, or 86.3%, compared to $5.4 million for the nine months ended September 30, 2018 due primarily to additional noninterest income resulting from the Post Oak acquisition along with the gain on sale of securities.

Noninterest expense for the nine months ended September 30, 2019 increased $33.5 million, or 58.0%, to $91.2 million from $57.7 million for the nine months ended September 30, 2018. The increase in noninterest expense over the nine months ended September 30, 2018 was primarily due to additional expenses associated with increased headcount and bank offices along with merger-related expenses from the Post Oak acquisition. Additionally, the nine months ended 2019 included $1.4 million of severance expense partially offset by a $676 thousand FDIC Small Bank Assessment Credit.

Allegiance’s efficiency ratio decreased from 65.52% for the nine months ended September 30, 2018 to 63.25% for the nine months ended September 30, 2019. For the nine months ended September 30, 2019, returns on average assets, average equity and average tangible equity were 1.09%, 7.36% and 11.35%, respectively, compared to 1.10%, 10.16% and 11.72%, respectively, for the nine months ended September 30, 2018.

Total assets at September 30, 2019 increased $111.6 million to $4.91 billion compared to $4.79 billion at June 30, 2019 and increased $1.87 billion compared to $3.04 billion at September 30, 2018, primarily due to the Post Oak acquisition and organic loan growth.

Total loans at September 30, 2019 increased $28.0 million, or 2.9% (annualized), to $3.89 billion compared to $3.86 billion at June 30, 2019 and increased $1.45 billion, or 59.2%, compared to $2.44 billion at September 30, 2018, primarily due to loans acquired in the Post Oak acquisition. Core loans, which exclude the mortgage warehouse portfolio, increased $37.6 million, or 4.0% (annualized), to $3.85 billion at September 30, 2019 from $3.81 billion at June 30, 2019 and increased $1.46 billion, or 60.9%, from $2.39 billion at September 30, 2018. Excluding loans acquired from Post Oak at acquisition of $1.16 billion, core loans at September 30, 2019 increased $297.4 million, from September 30, 2018.

Deposits at September 30, 2019 increased $36.8 million, or 3.8% (annualized), to $3.90 billion compared to $3.86 billion at June 30, 2019 and increased $1.46 billion, or 60.1%, compared to $2.43 billion at September 30, 2018, primarily related to the Post Oak acquisition.

Nonperforming assets totaled $42.9 million, or 0.88% of total assets, at September 30, 2019, compared to $37.7 million, or 0.79%, of total assets, at June 30, 2019, and $16.9 million, or 0.56% of total assets, at September 30, 2018. The allowance for loan losses was 0.77% of total loans at September 30, 2019, 0.72% of total loans at June 30, 2019 and 0.97% of total loans at September 30, 2018. The decrease in the allowance for loan losses as a percentage of loans from September 30, 2018 reflects the loans acquired in the Post Oak acquisition that were recorded at fair value without an allowance for loan losses at acquisition date.

The provision for loan losses for the third quarter 2019 was $2.6 million, or 0.27% (annualized) of average loans, compared to $1.4 million, or 0.15% (annualized) of average loans, for the second quarter 2019.

Third quarter 2019 net charge-offs were $729 thousand, or 0.07% (annualized) of average loans, compared to net charge-offs of $590 thousand, or 0.06% (annualized) of average loans, for the second quarter 2019 and $245 thousand, or 0.04% (annualized) of average loans, for the third quarter 2018. Net charge-offs for the nine months ended September 30, 2019 were $1.5 million, or 0.18% (annualized) of average loans, compared to net charge-offs for the nine months ended September 30, 2018 of $1.3 million, or 0.08% (annualized) of average loans.

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 10 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 Friday, October 25, 2019 at 9:00 a.m. Central Time (10:00 a.m. Eastern Time) to discuss its third quarter 2019 results. Individuals and investment professionals may participate in the call by dialing (877) 279-2520. The conference ID number is 1986475. 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 September 30, 2019, Allegiance was a $4.91 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 September 30, 2019, 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 may contain forward-looking statements within the meaning of the securities laws that are based on various facts and derived utilizing important 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 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. These and various other risk factors are discussed in Allegiance’s Annual Report on Form 10-K for the fiscal year ended December 31, 2018 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. Allegiance undertakes no 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.

	2019									2018
	September 30			June 30			March 31			December 31			September 30
	(Dollars in thousands)
Cash and cash equivalents	$	300,619		$	232,607		$	258,843		$	268,947		$	191,468
Available for sale securities		353,000			348,173			345,716			337,293			300,115

Total loans		3,886,004			3,857,963			3,806,161			3,708,306			2,440,926
Allowance for loan losses		(29,808	)		(27,940	)		(27,123	)		(26,331	)		(23,586	)
Loans, net		3,856,196			3,830,023			3,779,038			3,681,975			2,417,340

Goodwill		223,642			223,642			223,642			223,125			39,389
Core deposit intangibles, net		23,053			24,231			25,409			26,587			2,688
Premises and equipment, net		67,175			59,690			60,327			41,717			18,970
Other real estate owned		8,333			6,294			1,152			630			1,801
Bank owned life insurance		26,947			26,794			26,639			26,480			22,838
Other assets		46,875			42,757			48,036			48,495			40,930
Total assets	$	4,905,840		$	4,794,211		$	4,768,802		$	4,655,249		$	3,035,539

Noninterest-bearing deposits	$	1,227,839		$	1,173,423		$	1,181,920		$	1,209,300		$	789,705
Interest-bearing deposits		2,669,646			2,687,217			2,598,141			2,453,236			1,644,086
Total deposits		3,897,485			3,860,640			3,780,061			3,662,536			2,433,791

Borrowed funds		159,501			146,998			201,995			225,493			211,569
Subordinated debt		107,771			49,019			48,959			48,899			48,839
Other liabilities		34,775			32,853			34,010			15,337			13,209
Total liabilities		4,199,532			4,089,510			4,065,025			3,952,265			2,707,408

Common stock		20,737			21,147			21,484			21,938			13,397
Capital surplus		529,688			541,979			556,184			571,803			221,762
Retained earnings		149,389			137,342			123,094			112,131			98,968
Accumulated other comprehensive income (loss)		6,494			4,233			3,015			(2,888	)		(5,996	)
Total shareholders’ equity		706,308			704,701			703,777			702,984			328,131
Total liabilities and equity	$	4,905,840		$	4,794,211		$	4,768,802		$	4,655,249		$	3,035,539

	Three Months Ended												Year-to-Date
	2019							2018					2019		2018
	September 30			June 30		March 31		December 31			September 30		September 30		September 30
	(Dollars in thousands, except per share data)
INTEREST INCOME:
Loans, including fees	$	55,790		$	56,016	$	54,189	$	53,272		$	32,988	$	165,995	$	94,951
Securities:													.
Taxable		2,090			1,837		982		844			636		4,909		1,881
Tax-exempt		483			692		1,290		1,445			1,447		2,465		4,357
Deposits in other financial institutions		302			401		688		742			265		1,391		731
Total interest income		58,665			58,946		57,149		56,303			35,336		174,760		101,920

INTEREST EXPENSE:
Demand, money market and savings deposits		4,975			4,513		3,728		3,367			1,248		13,216		3,111
Certificates and other time deposits		6,909			7,008		6,256		5,358			4,051		20,173		10,120
Borrowed funds		1,183			1,118		1,827		1,008			1,272		4,128		3,780
Subordinated debt		761			736		735		732			729		2,232		2,168
Total interest expense		13,828			13,375		12,546		10,465			7,300		39,749		19,179
NET INTEREST INCOME		44,837			45,571		44,603		45,838			28,036		135,011		82,741
Provision for loan losses		2,597			1,407		1,002		2,964			—		5,006		1,284
Net interest income after provision for loan losses		42,240			44,164		43,601		42,874			28,036		130,005		81,457

NONINTEREST INCOME:
Nonsufficient funds fees		168			139		162		190			175		469		565
Service charges on deposit accounts		379			365		325		363			177		1,069		506
Gain on sale of securities		—			846		—		—			—		846	—
Gain (loss) on sales of other real estate and repossessed assets		—			70		1		(429	)		—		71		1
Bank owned life insurance		153			155		159		163			137		467		416
Rebate from correspondent bank		900			884		896		988			613		2,680		1,621
Other		1,289			1,386		1,746		1,059			826		4,421		2,270
Total noninterest income		2,889			3,845		3,289		2,334			1,928		10,023		5,379

NONINTEREST EXPENSE:
Salaries and employee benefits		20,221			19,415		19,684		18,167			12,965		59,320		38,537
Net occupancy and equipment		1,973			2,088		2,078		1,959			1,281		6,139		3,886
Depreciation		822			756		753		802			490		2,331		1,330
Data processing and software amortization		2,058			1,735		1,597		1,485			1,226		5,390		3,635
Professional fees		667			527		599		670			303		1,793		1,339
Regulatory assessments and FDIC insurance		(41	)		802		728		776			505		1,489		1,533
Core deposit intangibles amortization		1,178			1,178		1,178		1,229			195		3,534		586
Communications		455			468		430		416			262		1,353		769
Advertising		449			617		704		704			351		1,770		1,021
Acquisition and merger-related expenses		—			153		1,173		840			196		1,326		821
Other		2,227			2,341		2,191		1,998			1,390		6,759		4,284
Total noninterest expense		30,009			30,080		31,115		29,046			19,164		91,204		57,741
INCOME BEFORE INCOME TAXES		15,120			17,929		15,775		16,162			10,800		48,824		29,095
Provision for income taxes		3,073			3,681		3,097		2,999			1,921		9,851		4,949
NET INCOME	$	12,047		$	14,248	$	12,678	$	13,163		$	8,879	$	38,973	$	24,146

EARNINGS PER SHARE
Basic	$	0.57		$	0.67	$	0.58	$	0.60		$	0.66	$	1.83	$	1.81
Diluted	$	0.57		$	0.66	$	0.58	$	0.59		$	0.65	$	1.81	$	1.77

	Three Months Ended															Year-to-Date
	2019									2018						2019			2018
	September 30			June 30			March 31			December 31			September 30			September 30			September 30
	(Dollars and share amounts in thousands, except per share data)
Net income	$	12,047		$	14,248		$	12,678		$	13,163		$	8,879		$	38,973		$	24,146

Earnings per share, basic	$	0.57		$	0.67		$	0.58		$	0.60		$	0.66		$	1.83		$	1.81
Earnings per share, diluted	$	0.57		$	0.66		$	0.58		$	0.59		$	0.65		$	1.81		$	1.77

Return on average assets^(A)		0.98	%		1.19	%		1.08	%		1.12	%		1.18	%		1.09	%		1.10	%
Return on average equity^(A)		6.73	%		8.10	%		7.27	%		7.49	%		10.80	%		7.36	%		10.16	%
Return on average tangible equity^(A)(B)		10.33	%		12.52	%		11.22	%		11.66	%		12.40	%		11.35	%		11.72	%
Net interest margin (tax equivalent)^(C)		4.16	%		4.33	%		4.31	%		4.45	%		4.10	%		4.27	%		4.17	%
Core net interest margin (tax equivalent)^(B)		3.97	%		4.07	%		4.03	%		4.16	%		4.10	%		4.02	%		4.17	%
Efficiency ratio^(D)		62.88	%		61.93	%		64.97	%		60.30	%		63.95	%		63.25	%		65.52	%

Capital Ratios
Allegiance Bancshares, Inc. (Consolidated)
Equity to assets		14.40	%		14.70	%		14.76	%		15.10	%		10.81	%		14.40	%		10.81	%
Tangible equity to tangible assets^(B)		9.86	%		10.05	%		10.06	%		10.29	%		9.56	%		9.86	%		9.56	%
Estimated common equity tier 1 capital		11.28	%		11.34	%		11.37	%		11.76	%		11.17	%		11.28	%		11.16	%
Estimated tier 1 risk-based capital		11.51	%		11.58	%		11.61	%		12.01	%		11.53	%		11.51	%		11.51	%
Estimated total risk-based capital		14.70	%		13.27	%		13.28	%		13.70	%		13.94	%		14.70	%		13.92	%
Estimated tier 1 leverage capital		10.06	%		10.17	%		10.25	%		10.61	%		10.23	%		10.06	%		10.23	%
Allegiance Bank
Estimated common equity tier 1 capital		12.28	%		12.02	%		11.67	%		11.83	%		11.24	%		12.28	%		11.23	%
Estimated tier 1 risk-based capital		12.28	%		12.02	%		11.67	%		11.83	%		11.24	%		12.28	%		11.23	%
Estimated total risk-based capital		14.01	%		13.71	%		13.34	%		13.53	%		13.65	%		14.01	%		13.64	%
Estimated tier 1 leverage capital		10.73	%		10.57	%		10.31	%		10.45	%		9.98	%		10.73	%		9.98	%

Other Data
Weighted average shares:
Basic		20,981			21,257			21,733			21,908			13,371			21,321			13,320
Diluted		21,256			21,546			22,040			22,210			13,637			21,591			13,605
Period end shares outstanding		20,737			21,147			21,484			21,938			13,397			20,737			13,397
Book value per share	$	34.06		$	33.32		$	32.76		$	32.04		$	24.49		$	34.06		$	24.49
Tangible book value per share^(B)	$	22.16		$	21.60		$	21.17		$	20.66		$	21.35		$	22.16		$	21.35

	Three Months Ended
	September 30, 2019								June 30, 2019								September 30, 2018
	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	$	3,870,205		$	55,790		5.72	%	$	3,819,687		$	56,016		5.88	%	$	2,384,966		$	32,988		5.49	%
Securities		359,392			2,573		2.84	%		350,004			2,529		2.90	%		304,254			2,083		2.72	%
Deposits in other financial institutions and other		55,070			302		2.17	%		63,962			401		2.52	%		47,518			265		2.21	%
Total interest-earning assets		4,284,667		$	58,665		5.43	%		4,233,653		$	58,946		5.58	%		2,736,738		$	35,336		5.12	%
Allowance for loan losses		(28,593	)							(27,125	)							(24,059	)
Noninterest-earning assets		600,004								586,435								276,997
Total assets	$	4,856,078							$	4,792,963							$	2,989,676

Liabilities and Shareholders' Equity
Interest-Bearing Liabilities:
Interest-bearing demand deposits	$	332,652		$	943		1.13	%	$	350,147		$	1,152		1.32	%	$	181,284		$	389		0.85	%
Money market and savings deposits		1,099,937			4,032		1.45	%		994,557			3,361		1.36	%		530,240			859		0.64	%
Certificates and other time deposits		1,269,886			6,909		2.16	%		1,331,955			7,008		2.11	%		896,253			4,051		1.79	%
Borrowed funds		158,358			1,183		2.96	%		155,969			1,118		2.87	%		234,776			1,272		2.15	%
Subordinated debt		51,607			761		5.85	%		48,986			736		6.03	%		48,805			729		5.93	%
Total interest-bearing liabilities		2,912,440		$	13,828		1.88	%		2,881,614		$	13,375		1.86	%		1,891,358		$	7,300		1.53	%

Noninterest-Bearing Liabilities:
Noninterest-bearing demand deposits		1,198,564								1,173,662								761,935
Other liabilities		35,030								32,525								10,179
Total liabilities		4,146,034								4,087,801								2,663,472
Shareholders' equity		710,044								705,162								326,204
Total liabilities and shareholders' equity	$	4,856,078							$	4,792,963							$	2,989,676

Net interest rate spread							3.55	%							3.72	%							3.59	%

Net interest income and margin				$	44,837		4.15	%				$	45,571		4.32	%				$	28,036		4.06	%

Net interest income and net interest margin (tax equivalent)				$	44,924		4.16	%				$	45,684		4.33	%				$	28,292		4.10	%

	Nine Months Ended September 30,
	2019								2018
	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	$	3,812,827		$	165,995		5.82	%	$	2,319,727		$	94,951		5.47	%
Securities		352,074			7,374		2.80	%		310,709			6,238		2.68	%
Deposits in other financial institutions		79,309			1,391		2.34	%		49,205			731		1.99	%
Total interest-earning assets		4,244,210		$	174,760		5.51	%		2,679,641		$	101,920		5.09	%
Allowance for loan losses		(27,500	)							(24,254	)
Noninterest-earning assets		581,932								276,777
Total assets	$	4,798,642							$	2,932,164

Liabilities and Shareholders' Equity
Interest-Bearing Liabilities:
Interest-bearing demand deposits	$	340,310		$	3,058		1.20	%	$	190,228		$	914		0.64	%
Money market and savings deposits		992,349			10,158		1.37	%		534,925			2,197		0.55	%
Certificates and other time deposits		1,301,478			20,173		2.07	%		841,849			10,120		1.61	%
Borrowed funds		198,839			4,128		2.78	%		265,401			3,780		1.90	%
Subordinated debt		49,849			2,232		5.99	%		48,746			2,168		5.95	%
Total interest-bearing liabilities		2,882,825		$	39,749		1.84	%		1,881,149		$	19,179		1.36	%

Noninterest-Bearing Liabilities:
Noninterest-bearing demand deposits		1,179,914								724,493
Other liabilities		28,270								8,742
Total liabilities		4,091,009								2,614,384
Shareholders' equity		707,633								317,780
Total liabilities and shareholders' equity	$	4,798,642							$	2,932,164

Net interest rate spread							3.67	%							3.73	%

Net interest income and margin				$	135,011		4.25	%				$	82,741		4.13	%

Net interest income and net interest margin (tax equivalent)				$	135,413		4.27	%				$	83,551		4.17	%

	Three Months Ended
	2019									2018
	September 30			June 30			March 31			December 31			September 30
	(Dollars in thousands)
Period-end Loan Portfolio:
Commercial and industrial	$	675,055		$	694,516		$	699,471		$	702,037		$	458,434
Mortgage warehouse		36,594			46,171			36,742			48,274			48,876
Real estate:
Commercial real estate (including multi-family residential)		1,859,721			1,830,764			1,771,890			1,650,912			1,161,992
Commercial real estate construction and land development		386,723			368,108			396,162			430,128			298,916
1-4 family residential (including home equity)		695,520			690,961			658,261			649,311			344,342
Residential construction		189,608			183,991			201,314			186,411			117,740
Consumer and other		42,783			43,452			42,321			41,233			10,626
Total loans	$	3,886,004		$	3,857,963		$	3,806,161		$	3,708,306		$	2,440,926

Asset Quality:
Nonaccrual loans	$	34,615		$	31,382		$	32,670		$	32,953		$	14,943
Accruing loans 90 or more days past due		—			—			—			—			—
Total nonperforming loans		34,615			31,382			32,670			32,953			14,943
Other real estate		8,333			6,294			1,152			630			1,801
Other repossessed assets		—			—			—			—			205
Total nonperforming assets	$	42,948		$	37,676		$	33,822		$	33,583		$	16,949

Net charge-offs	$	729		$	590		$	210		$	219		$	245

Nonaccrual loans:
Commercial and industrial	$	8,033		$	9,386		$	11,221		$	10,861		$	6,258
Mortgage warehouse		—			—			—			—			—
Real estate:
Commercial real estate (including multi-family residential)		15,356			18,218			17,531			17,776			5,006
Commercial real estate construction and land development		9,050			1,541			818			974			694
1-4 family residential (including home equity)		1,992			2,074			2,928			3,201			2,985
Residential construction		—			—			—			—			—
Consumer and other		184			163			172			141			—
Total nonaccrual loans	$	34,615		$	31,382		$	32,670		$	32,953		$	14,943

Asset Quality Ratios:
Nonperforming assets to total assets		0.88	%		0.79	%		0.71	%		0.72	%		0.56	%
Nonperforming loans to total loans		0.89	%		0.81	%		0.86	%		0.89	%		0.61	%
Allowance for loan losses to nonperforming loans		86.11	%		89.03	%		83.02	%		79.90	%		157.84	%
Allowance for loan losses to total loans		0.77	%		0.72	%		0.71	%		0.71	%		0.97	%
Net charge-offs to average loans (annualized)		0.07	%		0.06	%		0.02	%		0.02	%		0.04	%

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															Year-to-Date
	2019									2018						2019			2018
	September 30			June 30			March 31			December 31			September 30			September 30			September 30
	(Dollars and share amounts in thousands, except per share data)
Total shareholders' equity	$	706,308		$	704,701		$	703,777		$	702,984		$	328,131		$	706,308		$	328,131
Less: Goodwill and core deposit intangibles, net		246,695			247,873			249,051			249,712			42,077			246,695			42,077
Tangible shareholders’ equity	$	459,613		$	456,828		$	454,726		$	453,272		$	286,054		$	459,613		$	286,054

Shares outstanding at end of period		20,737			21,147			21,484			21,938			13,397			20,737			13,397

Tangible book value per share	$	22.16		$	21.60		$	21.17		$	20.66		$	21.35		$	22.16		$	21.35

Net income	$	12,047		$	14,248		$	12,678		$	13,163		$	8,879		$	38,973		$	24,146

Average shareholders' equity	$	710,044		$	705,162		$	707,666		$	697,303		$	326,204		$	707,633		$	317,780
Less: Average goodwill and core deposit intangibles, net		247,404			248,621			249,277			249,252			42,203			248,427			42,394
Average tangible shareholders’ equity	$	462,640		$	456,541		$	458,389		$	448,051		$	284,001		$	459,206		$	275,386

Return on average tangible equity		10.33	%		12.52	%		11.22	%		11.66	%		12.40	%		11.35	%		11.72	%

Total assets	$	4,905,840		$	4,794,211		$	4,768,802		$	4,655,249		$	3,035,539		$	4,905,840		$	3,035,539
Less: Goodwill and core deposit intangibles, net		246,695			247,873			249,051			249,712			42,077			246,695			42,077
Tangible assets	$	4,659,145		$	4,546,338		$	4,519,751		$	4,405,537		$	2,993,462		$	4,659,145		$	2,993,462

Tangible equity to tangible assets		9.86	%		10.05	%		10.06	%		10.29	%		9.56	%		9.86	%		9.56	%

Net interest income (tax equivalent)	$	44,924		$	45,684		$	44,805		$	46,100		$	28,292		$	135,413		$	83,551
Less: Acquisition accounting adjustments		(2,045	)		(2,755	)		(2,965	)		(3,069	)		—			(7,765	)		—
Core net interest income (tax equivalent)	$	42,879		$	42,929		$	41,840		$	43,031		$	28,292		$	127,648		$	83,551

Average earning assets	$	4,284,667		$	4,233,653		$	4,212,669		$	4,108,645		$	2,736,738		$	4,244,210		$	2,679,641

Net interest margin (tax equivalent)		4.16	%		4.33	%		4.31	%		4.45	%		4.10	%		4.27	%		4.17	%
Core net interest margin (tax equivalent)		3.97	%		4.07	%		4.03	%		4.16	%		4.10	%		4.02	%		4.17	%