Core loan growth of $112.1 million, or 10.7% (annualized), to $4.32 billion as of June 30, 2022 compared to $4.20 billion as of March 31, 2022 and $355.4 million, or 9.0%, compared to June 30, 2021; core loans exclude Paycheck Protection Program (PPP) loans
Net income and diluted earnings per share of $16.4 million and $0.80 for the second quarter 2022, respectively
Board declared quarterly dividend of $0.14 per share of common stock

HOUSTON, July 29, 2022 (GLOBE NEWSWIRE) -- Allegiance Bancshares, Inc. (NASDAQ:ABTX) (Allegiance), the holding company of Allegiance Bank (the "Bank"), today reported net income of $16.4 million and diluted earnings per share of $0.80 for the second quarter 2022 compared to net income of $22.9 million and diluted earnings per share of $1.12 for the second quarter 2021. Net income for the six months ended June 30, 2022 was $35.1 million, or $1.71 per diluted share, compared to $40.9 million, or $2.01 per diluted share, for the six months ended June 30, 2021. The second quarter and six months ended June 30, 2022 results reflect the decreased impact of PPP loan revenue and included a normalized provision for credit losses compared to the recapture of provision for credit losses during the comparable periods in 2021. Additionally, noninterest expenses were elevated due to acquisition and merger-related expenses related to the pending merger of equals with CBTX, Inc. ("CBTX") and increased operational losses recorded during the three and six months ended June 30, 2022.

"We are pleased with the overall results for the second quarter as we reported another record quarter of loan originations as core loans grew 10.7% (annualized)," said Steve Retzloff, Allegiance's Chief Executive Officer. "Our team remains focused on delivering excellent customer service and our commitment to the communities we serve," continued Retzloff.

"We continue to make significant progress developing the foundation for our pending merger of equals with CBTX. We are excited to have received approval from the Federal Deposit Insurance Corporation and the Texas Department of Banking along with the shareholders of both companies who supported the merger at their respective meetings during the quarter and look forward to continuing to drive and deliver strong performance results for them as a combined institution," concluded Retzloff.

Second Quarter 2022 Results

Net interest income before the provision for credit losses in the second quarter 2022 increased $886 thousand, or 1.6%, to $57.5 million from $56.6 million for the second quarter 2021 and increased $2.3 million, or 4.2%, from $55.2 million for the first quarter 2022. These increases were primarily due to increased interest income on securities partially offset by decreased interest income on loans due to decreased impact of loans within the Small Business Administration Paycheck Protection Program (PPP) and changes in market interest rates. The net interest margin on a tax equivalent basis decreased 49 basis points to 3.53% for the second quarter 2022 from 4.02% for the second quarter 2021 and increased 23 basis points from 3.30% for the first quarter 2022. The decrease in the margin over the prior year was primarily due to the decrease in the average yield on interest-earning assets, driven by decreased PPP revenue recognition and changes in the composition of earnings assets, partially offset by the decrease in funding costs. PPP revenue of $1.4 million was recognized during the three months ended June 30, 2022 compared to the $6.4 million recognized for the three months ended June 30, 2021. The increase in the margin over the prior quarter was primarily due to changes in market interest rates and the composition of earnings assets.

Noninterest income for the second quarter 2022 was $2.7 million, an increase of $431 thousand, or 19.0%, compared to $2.3 million for the second quarter 2021 and a decrease of $1.3 million, or 32.7%, compared to $4.0 million for the first quarter 2022. First quarter 2022 other noninterest income included $1.3 million in income from Small Business Investment Company investments.

Noninterest expense for the second quarter 2022 increased $4.3 million, or 12.8%, to $37.9 million from $33.6 million for the second quarter 2021 and increased $3.4 million, or 9.8%, compared to the first quarter of 2022. These increases in noninterest expense over the prior periods were primarily due to acquisition and merger-related expenses associated with the pending merger with CBTX along with increased operational losses recorded during the second quarter 2022.

In the second quarter 2022, Allegiance's efficiency ratio increased to 62.96% compared to 57.07% for the second quarter 2021 and 58.32% for the first quarter 2022. Second quarter 2022 annualized returns on average assets, average equity and average tangible equity were 0.94%, 8.86% and 13.00%, respectively, compared to 1.42%, 11.87% and 17.20% for the second quarter 2021. Annualized returns on average assets, average equity and average tangible equity for the first quarter 2022 were 1.04%, 9.40% and 13.35%, respectively. Return on average tangible equity is a non-GAAP measure. Please refer to the non-GAAP reconciliation on page 11.

Six Months Ended June 30, 2022 Results

Net interest income before provision for credit losses for the six months ended June 30, 2022 increased $360 thousand, or 0.3%, to $112.7 million from $112.3 million for the six months ended June 30, 2021 primarily due to lower costs related to interest-bearing liabilities and higher interest income from securities and deposits in other financial institutions, partially offset by the decreased impact of PPP loan revenue. The net interest margin on a tax equivalent basis decreased 69 basis points to 3.41% for the six months ended June 30, 2022 from 4.10% for the six months ended June 30, 2021. The decrease in the margin over the prior year was primarily due to the decrease in the average yield on interest-earning assets, driven by decreased PPP revenue recognition and changes in the composition of earnings assets, partially offset by decreased funding costs. PPP revenue of $4.0 million was recognized during the six months ended June 30, 2022 compared to the $13.3 million recognized for the same period in 2021.

Noninterest income for the six months ended June 30, 2022 was $6.7 million, an increase of $2.7 million, or 67.7%, compared to $4.0 million for the six months ended June 30, 2021 due primarily to $1.3 million in income from Small Business Investment Company investments along with increased transactional fee income.

Noninterest expense for the six months ended June 30, 2022 increased $3.9 million, or 5.7%, to $72.4 million from $68.5 million for the six months ended June 30, 2021. The increase in noninterest expense over the six months ended June 30, 2021 was primarily due to acquisition and merger-related expenses associated with the pending merger with CBTX and increased operational losses recorded during 2022.

Allegiance's efficiency ratio increased to 60.66% for the six months ended June 30, 2022 from 58.93% for the six months ended June 30, 2021. For the six months ended June 30, 2022, returns on average assets, average equity and average tangible equity were 0.99%, 9.14% and 13.19%, respectively, compared to 1.30%, 10.75% and 15.65%, respectively, for the six months ended June 30, 2021. Return on average tangible equity is a non-GAAP measure. Please refer to the non-GAAP reconciliation on page 11.

Financial Condition

Total assets at June 30, 2022 increased $223.1 million, or 3.4%, to $6.73 billion compared to $6.51 billion at June 30, 2021 and decreased $417.6 million, or 23.4% (annualized), compared to $7.15 billion at March 31, 2022.

Total loans at June 30, 2022 decreased $111.9 million, or 2.5%, to $4.35 billion compared to $4.46 billion at June 30, 2021, primarily due to paydowns on PPP loans partially offset by organic loan growth, and increased $65.3 million, or 6.1% (annualized) compared to $4.28 billion at March 31, 2022 due to the increase in organic core loans. Core loans, which exclude PPP loans, increased $355.4 million, or 9.0%, to $4.32 billion at June 30, 2022 from $3.96 billion at June 30, 2021 and increased $112.1 million, or 10.7% (annualized), from $4.20 billion at March 31, 2022.

Deposits at June 30, 2022 increased $447.3 million, or 8.2%, to $5.88 billion compared to $5.43 billion at June 30, 2021 and decreased $281.7 million, or 18.3% (annualized), compared to $6.16 billion at March 31, 2022.

Asset Quality

Nonperforming assets totaled $28.2 million, or 0.42% of total assets, at June 30, 2022 compared to $38.0 million, or 0.58% of total assets, at June 30, 2021 and $26.3 million, or 0.37% of total assets at March 31, 2022. The allowance for credit losses on loans as a percentage of total loans was 1.16% at June 30, 2022, 1.11% at June 30, 2021 and 1.15% at March 31, 2022.

The provision for credit losses for the second quarter 2022 was $2.1 million compared to the recapture of provision for credit losses of $2.7 million for the second quarter 2021 and the provision for credit losses of $1.8 million for the first quarter 2022.

Second quarter 2022 net charge-offs were $571 thousand, or 0.05% (annualized) of average loans, an increase of $409 thousand from net charge-offs of $162 thousand, or 0.01% (annualized) of average loans, for the second quarter 2021 and an increase of $254 thousand from $317 thousand, or 0.03% (annualized) of average loans, for the first quarter 2022.

Dividend

The Board of Directors of Allegiance declared a cash dividend on July 28, 2022 of $0.14 per share to be paid on September 15, 2022 to all shareholders of record as of August 31, 2022. The amount and timing of any future dividend payments to shareholders will be subject to the discretion of Allegiance's Board of Directors.

Pending Merger

On November 8, 2021, Allegiance and CBTX jointly announced that they entered into a definitive merger agreement pursuant to which the companies will combine in an all-stock merger of equals. Under the terms of the definitive merger agreement, Allegiance shareholders will receive 1.4184 shares of CBTX, Inc. common stock for each share of Allegiance common stock they own. Following the completion of the merger, we estimate that former Allegiance shareholders will own approximately 54% and former CBTX shareholders will own approximately 46% of the combined company. The companies have received the requisite approvals from the Federal Deposit Insurance Corporation, Texas Department of Banking and both companies' shareholders and, subject to receipt of the approval of the Board of Governors of the Federal Reserve System and the satisfaction or in some cases waiver of the closing conditions, the parties anticipate closing in the third quarter of the year.

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 and webcast on Friday, July 29, 2022 at 9:00 a.m. Central Time (10:00 a.m. Eastern Time) to discuss its second quarter 2022 results. Individuals and investment professionals may participate in the call by registering here. Once registered, a dial in number will be provided along with a unique PIN number. If you need assistance in obtaining a dial-in number, please contact ir@allegiancebank.com or 281-894-3200. Alternatively, a simultaneous audio-only webcast may be accessed via the Investor Relations section of Allegiance's website at www.allegiancebank.com, under Upcoming Events. If you are unable to participate during the live webcast, the webcast will be archived on the Investor Relations section of Allegiance's website at www.allegiancebank.com, under News and Events, Event Calendar, Past Events.

Allegiance Bancshares, Inc.

As of June 30, 2022, Allegiance was a $6.73 billion asset Houston, Texas-based bank holding company. Through its wholly owned subsidiary, Allegiance Bank, Allegiance provides a diversified range of commercial banking services primarily to small- to medium-sized businesses and individual customers in the Houston region. Allegiance's super-community banking strategy was designed to foster strong customer relationships while benefiting from a platform and scale that is competitive with larger local and regional banks. As of June 30, 2022, Allegiance Bank operated 26 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 25 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.

Forward-Looking Statements

Certain statements in this press release which are not historical in nature are intended to be, and are hereby identified as, "forward-looking statements" for purposes of the safe harbor provided by Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended.

These statements include, but are not limited to, statements about the benefits of the proposed merger of Allegiance and CBTX, including future financial and operating results, statements related to the expected timing of the completion of the merger, the combined company's plans, business and growth strategies, objectives, expectations and intentions, and other statements that are not historical facts, including 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. Forward-looking statements may be identified by terminology such as "may," "will," "should," "could," "scheduled," "plans," "intends," "projects," "anticipates," "expects," "believes," "estimates," "potential," "would," or "continue" or negatives of such terms or other comparable terminology.

All forward-looking statements are subject to risks, uncertainties and other factors that may cause the actual results, performance or achievements of Allegiance or CBTX to differ materially from any results expressed or implied by such forward-looking statements. Such factors include, among others: (1) the risk that the cost savings and any revenue synergies from the merger may not be fully realized or may take longer than anticipated to be realized; (2) disruption to the parties' businesses as a result of the pendency of the merger; (3) the occurrence of any event, change or other circumstances that could give rise to the termination of the merger agreement; (4) the risk that the integration of each party's operations will be materially delayed or will be more costly or difficult than expected or that the parties are otherwise unable to successfully integrate each party's businesses into the other's businesses; (5) the amount of the costs, fees, expenses and charges related to the merger; (6) the ability by each party to obtain required regulatory approvals of the merger (and the risk that such approvals may result in the imposition of conditions that could adversely affect the combined company or the expected benefits of the transaction); (7) reputational risk and the reaction of each company's customers, suppliers, employees or other business partners to the merger; (8) the failure of the closing conditions in the merger agreement to be satisfied, or any unexpected delay in closing the merger; (9) the possibility that the merger may be more expensive to complete than anticipated, including as a result of unexpected factors or events; (10) the dilution caused by CBTX's issuance of additional shares of its common stock in the merger; (11) general competitive, economic, political and market conditions; and (12) other factors that may affect future results of Allegiance and CBTX including changes in asset quality and credit risk; the inability to sustain revenue and earnings growth; changes in interest rates and capital markets; inflation; customer borrowing, repayment, investment and deposit practices; the impact, extent and timing of technological changes; capital management activities; and other actions of the Board of Governors of the Federal Reserve System, Federal Deposit Insurance Corporation, the Texas Department of Banking and Office of the Comptroller of the Currency and legislative and regulatory actions and reforms.

Additional factors which could affect future results of Allegiance and CBTX can be found in Allegiance's Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, and Current Reports on Form 8-K, and CBTX's Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, and Current Reports on Form 8-K, in each case filed with the SEC and available on the SEC's website at https://www.sec.gov. Each of Allegiance and CBTX disclaims any obligation and does not intend to update or revise any forward-looking statements contained in this communication, which speak only as of the date hereof, whether as a result of new information, future events or otherwise, except as required by federal securities laws. As forward-looking statements involve significant risks and uncertainties, caution should be exercised against placing undue reliance on such statements.

Allegiance Bancshares, Inc.

Financial Highlights

(Unaudited)

		2022						2021
	June 30			March 31			December 31			September 30			June 30
	(Dollars in thousands)
ASSETS
Cash and due from banks	$	17,547		$	26,629		$	23,961		$	23,903		$	146,397
Interest-bearing deposits at other financial institutions		275,290			672,755			733,548			879,858			564,888
Total cash and cash equivalents		292,837			699,384			757,509			903,761			711,285
Available for sale securities, at fair value		1,709,321			1,790,707			1,773,765			1,211,476			977,282
Loans held for investment		4,348,833			4,283,514			4,220,486			4,289,469			4,460,743
Less: allowance for credit losses on loans		(50,242	)		(49,215	)		(47,940	)		(50,491	)		(49,586	)
Loans, net		4,298,591			4,234,299			4,172,546			4,238,978			4,411,157
Accrued interest receivable		29,882			31,505			33,392			33,523			37,075
Premises and equipment, net		58,482			62,168			63,708			65,140			65,442
Other real estate owned		—			—			—			1,397			1,397
Federal Home Loan Bank stock		4,078			9,376			9,358			8,326			8,234
Bank owned life insurance		28,170			28,374			28,240			28,101			27,976
Goodwill		223,642			223,642			223,642			223,642			223,642
Core deposit intangibles, net		13,156			13,907			14,658			15,482			16,306
Other assets		73,605			56,001			28,136			29,935			28,871
Total assets	$	6,731,764		$	7,149,363		$	7,104,954		$	6,759,761		$	6,508,667
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES:
Deposits:
Noninterest-bearing	$	2,394,719		$	2,353,604		$	2,243,085		$	2,086,683		$	1,973,042
Interest-bearing
Demand		1,016,381			1,070,855			869,984			594,959			553,874
Money market and savings		1,510,008			1,552,853			1,643,745			1,604,222			1,556,920
Certificates and other time		959,524			1,185,015			1,290,825			1,381,014			1,349,522
Total interest-bearing deposits		3,485,913			3,808,723			3,804,554			3,580,195			3,460,316
Total deposits		5,880,632			6,162,327			6,047,639			5,666,878			5,433,358
Accrued interest payable		1,500			3,086			1,753			3,296			1,940
Borrowed funds		—			89,959			89,956			139,954			139,951
Subordinated debt		109,109			108,978			108,847			108,715			108,584
Other liabilities		35,194			33,073			40,291			42,326			35,684
Total liabilities		6,026,435			6,397,423			6,288,486			5,961,169			5,719,517
SHAREHOLDERS' EQUITY:
Common stock		20,154			20,378			20,337			20,218			20,213
Capital surplus		504,165			512,284			510,797			507,948			506,810
Retained earnings		296,477			282,896			267,092			247,966			231,333
Accumulated other comprehensive (loss) income		(115,467	)		(63,618	)		18,242			22,460			30,794
Total shareholders' equity		705,329			751,940			816,468			798,592			789,150
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY	$	6,731,764		$	7,149,363		$	7,104,954		$	6,759,761		$	6,508,667

	Three Months Ended													Six Months Ended
	2022						2021								2022			2021
	June 30			March 31		December 31			September 30		June 30			June 30			June 30
	(Dollars in thousands, except per share data)
INTEREST INCOME:
Loans, including fees	$	53,835		$	52,370	$	56,855		$	58,176	$	57,691		$	106,205		$	115,682
Securities:
Taxable		5,571			5,068		3,933			2,998		2,556			10,639			4,958
Tax-exempt		2,557			2,525		2,526			2,498		2,491			5,082			4,885
Deposits in other financial institutions		877			340		317			221		94			1,217			135
Total interest income		62,840			60,303		63,631			63,893		62,832			123,143			125,660

INTEREST EXPENSE:
Demand, money market and savings deposits		1,859			1,347		1,277			1,267		1,337			3,206			2,821
Certificates and other time deposits		1,922			2,156		2,391			2,583		2,989			4,078			6,654
Borrowed funds		114			186		434			436		469			300			1,008
Subordinated debt		1,463			1,442		1,425			1,441		1,441			2,905			2,883
Total interest expense		5,358			5,131		5,527			5,727		6,236			10,489			13,366
NET INTEREST INCOME		57,482			55,172		58,104			58,166		56,596			112,654			112,294
Provision for credit losses		2,143			1,814		(2,577	)		2,295		(2,679	)		3,957			(2,040	)
Net interest income after provision for credit losses		55,339			53,358		60,681			55,871		59,275			108,697			114,334

NONINTEREST INCOME:
Nonsufficient funds fees		126			116		156			131		94			242			177
Service charges on deposit accounts		560			527		476			425		382			1,087			770
(Loss) gain on sale of securities		(17	)		—		—			—		—			(17	)		49
Loss on sale of other real estate and repossessed assets		—			—		(89	)		—		—			—			(176	)
Bank owned life insurance		342			133		139			125		151			475			290
Debit card and ATM card income		880			819		834			771		761			1,699			1,391
Other		813			2,423		938			647		885			3,236			1,508
Total noninterest income		2,704			4,018		2,454			2,099		2,273			6,722			4,009

NONINTEREST EXPENSE:
Salaries and employee benefits		21,864			22,728		22,918			22,335		22,472			44,592			44,924
Net occupancy and equipment		2,220			2,205		2,194			2,335		2,225			4,425			4,615
Depreciation		1,012			1,033		1,103			1,060		1,057			2,045			2,091
Data processing and software amortization		2,522			2,498		2,264			2,222		2,176			5,020			4,376
Professional fees		662			138		1,008			620		608			800			1,397
Regulatory assessments and FDIC insurance		1,256			1,261		949			883		768			2,517			1,575
Core deposit intangibles amortization		751			751		824			824		824			1,502			1,648
Communications		363			341		395			358		332			704			653
Advertising		483			462		481			481		432			945			730
Other real estate expense		65			59		69			137		229			124			342
Acquisition and merger-related expenses		1,667			451		1,408			603		—			2,118			—
Other		5,039			2,590		3,131			2,438		2,472			7,629			6,163
Total noninterest expense		37,904			34,517		36,744			34,296		33,595			72,421			68,514
INCOME BEFORE INCOME TAXES		20,139			22,859		26,391			23,674		27,953			42,998			49,829
Provision for income taxes		3,702			4,202		4,833			4,614		5,028			7,904			8,894
NET INCOME	$	16,437		$	18,657	$	21,558		$	19,060	$	22,925		$	35,094		$	40,935

EARNINGS PER SHARE
Basic	$	0.81		$	0.92	$	1.06		$	0.94	$	1.13		$	1.72		$	2.03
Diluted	$	0.80		$	0.91	$	1.06		$	0.93	$	1.12		$	1.71		$	2.01

	Three Months Ended															Six Months Ended
		2022						2021									2022			2021
	June 30			March 31			December 31			September 30			June 30			June 30			June 30
	(Dollars and share amounts in thousands, except per share data)
Net income	$	16,437		$	18,657		$	21,558		$	19,060		$	22,925		$	35,094		$	40,935

Earnings per share, basic	$	0.81		$	0.92		$	1.06		$	0.94		$	1.13		$	1.72		$	2.03
Earnings per share, diluted	$	0.80		$	0.91		$	1.06		$	0.93		$	1.12		$	1.71		$	2.01
Dividends per share	$	0.14		$	0.14		$	0.12		$	0.12		$	0.12		$	0.28		$	0.24

Return on average assets^(A)		0.94	%		1.04	%		1.23	%		1.14	%		1.42	%		0.99	%		1.30	%
Return on average equity^(A)		8.86	%		9.40	%		10.60	%		9.45	%		11.87	%		9.14	%		10.75	%
Return on average tangible equity^(A)(B)		13.00	%		13.35	%		15.05	%		13.49	%		17.20	%		13.19	%		15.65	%
Net interest margin (tax equivalent)^(A)(C)		3.53	%		3.30	%		3.57	%		3.90	%		4.02	%		3.41	%		4.10	%
Efficiency ratio^(D)		62.96	%		58.32	%		60.68	%		56.91	%		57.07	%		60.66	%		58.93	%

Capital Ratios
Allegiance Bancshares, Inc.(Consolidated)
Equity to assets		10.48	%		10.52	%		11.49	%		11.81	%		12.12	%		10.48	%		12.12	%
Tangible equity to tangible assets^(B)		7.21	%		7.44	%		8.42	%		8.58	%		8.76	%		7.21	%		8.76	%
Estimated common equity tier 1 capital		12.06	%		12.28	%		12.47	%		12.37	%		12.18	%		12.06	%		12.18	%
Estimated tier 1 risk-based capital		12.26	%		12.49	%		12.69	%		12.60	%		12.41	%		12.26	%		12.41	%
Estimated total risk-based capital		15.47	%		15.76	%		16.08	%		16.13	%		15.98	%		15.47	%		15.98	%
Estimated tier 1 leverage capital		8.65	%		8.37	%		8.53	%		8.76	%		8.56	%		8.65	%		8.56	%
Allegiance Bank
Estimated common equity tier 1 capital		12.51	%		12.48	%		12.63	%		12.81	%		13.03	%		12.51	%		13.03	%
Estimated tier 1 risk-based capital		12.51	%		12.48	%		12.63	%		12.81	%		13.03	%		12.51	%		13.03	%
Estimated total risk-based capital		14.50	%		14.50	%		14.71	%		14.98	%		15.22	%		14.50	%		15.22	%
Estimated tier 1 leverage capital		8.83	%		8.37	%		8.49	%		8.91	%		8.99	%		8.83	%		8.99	%

Other Data
Weighted average shares:
Basic		20,357			20,363			20,260			20,221			20,203			20,360			20,171
Diluted		20,530			20,526			20,423			20,411			20,386			20,522			20,359
Period end shares outstanding		20,154			20,378			20,337			20,218			20,213			20,154			20,213
Book value per share	$	35.00		$	36.90		$	40.15		$	39.50		$	39.04		$	35.00		$	39.04
Tangible book value per share^(B)	$	23.25		$	25.24		$	28.43		$	27.67		$	27.17		$	23.25		$	27.17

(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 credit losses are not part of this calculation.

	Three Months Ended
	June 30, 2022							March 31, 2022							June 30, 2021
	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	$	4,303,714		$	53,835	5.02	%	$	4,231,507		$	52,370	5.02	%	$	4,543,142		$	57,691	5.09	%
Securities		1,778,745			8,128	1.83	%		1,835,618			7,593	1.68	%		876,099			5,047	2.31	%
Deposits in other financial institutions and other		535,546			877	0.66	%		806,583			340	0.17	%		294,188			94	0.13	%
Total interest-earning assets		6,618,005		$	62,840	3.81	%		6,873,708		$	60,303	3.56	%		5,713,429		$	62,832	4.41	%
Allowance for credit losses on loans		(49,290	)						(48,343	)						(52,699	)
Noninterest-earning assets		450,584							432,133							835,801
Total assets	$	7,019,299						$	7,257,498						$	6,496,531

Liabilities and Shareholders' Equity
Interest-Bearing Liabilities:
Interest-bearing demand deposits	$	1,044,493		$	927	0.36	%	$	1,071,010		$	549	0.21	%	$	534,314		$	326	0.24	%
Money market and savings deposits		1,566,376			932	0.24	%		1,584,373			798	0.20	%		1,561,987			1,011	0.26	%
Certificates and other time deposits		1,088,664			1,922	0.71	%		1,245,180			2,156	0.70	%		1,365,881			2,989	0.88	%
Borrowed funds		50,116			114	0.91	%		89,880			186	0.84	%		144,126			469	1.31	%
Subordinated debt		109,045			1,463	5.38	%		108,913			1,442	5.37	%		108,523			1,441	5.33	%
Total interest-bearing liabilities		3,858,694		$	5,358	0.56	%		4,099,356		$	5,131	0.51	%		3,714,831		$	6,236	0.67	%

Noninterest-Bearing Liabilities:
Noninterest-bearing demand deposits		2,382,230							2,312,114							1,968,714
Other liabilities		34,249							41,324							38,183
Total liabilities		6,275,173							6,452,794							5,721,728
Shareholders' equity		744,126							804,704							774,803
Total liabilities and shareholders' equity	$	7,019,299						$	7,257,498						$	6,496,531

Net interest rate spread						3.25	%						3.05	%						3.74	%

Net interest income and margin				$	57,482	3.48	%				$	55,172	3.26	%				$	56,596	3.97	%

Net interest income and net interest margin (tax equivalent)				$	58,238	3.53	%				$	55,922	3.30	%				$	57,287	4.02	%

	Six Months Ended June 30,
		2022							2021
	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	$	4,267,810		$	106,205	5.02	%	$	4,557,016		$	115,682	5.12	%
Securities		1,807,024			15,721	1.75	%		832,884			9,843	2.38	%
Deposits in other financial institutions		670,316			1,217	0.37	%		195,768			135	0.14	%
Total interest-earning assets		6,745,150		$	123,143	3.68	%		5,585,668		$	125,660	4.54	%
Allowance for credit losses on loans		(48,819	)						(53,033	)
Noninterest-earning assets		441,390							798,468
Total assets	$	7,137,721						$	6,331,103

Liabilities and Shareholders' Equity
Interest-Bearing Liabilities:
Interest-bearing demand deposits	$	1,057,678		$	1,476	0.28	%	$	496,399		$	697	0.28	%
Money market and savings deposits		1,575,325			1,730	0.22	%		1,550,620			2,124	0.28	%
Certificates and other time deposits		1,166,490			4,078	0.70	%		1,349,364			6,654	0.99	%
Borrowed funds		69,868			300	0.87	%		149,496			1,008	1.36	%
Subordinated debt		108,979			2,905	5.38	%		108,455			2,883	5.36	%
Total interest-bearing liabilities		3,978,340		$	10,489	0.53	%		3,654,334			13,366	0.74	%

Noninterest-Bearing Liabilities:
Noninterest-bearing demand deposits		2,347,366							1,868,783
Other liabilities		37,767							39,748
Total liabilities		6,363,473							5,562,865
Shareholders' equity		774,248							768,238
Total liabilities and shareholders' equity	$	7,137,721						$	6,331,103

Net interest rate spread						3.15	%						3.80	%

Net interest income and margin				$	112,654	3.37	%				$	112,294	4.05	%

Net interest income and net interest margin (tax equivalent)				$	114,160	3.41	%				$	113,604	4.10	%

	Three Months Ended
		2022						2021
	June 30			March 31			December 31			September 30			June 30
	(Dollars in thousands)
Period-end Loan Portfolio:
Commercial and industrial	$	727,068		$	714,450		$	693,559		$	728,897		$	690,867
Paycheck Protection Program (PPP)		31,855			78,624			145,942			290,028			499,207
Real estate:
Commercial real estate (including multi-family residential)		2,265,155			2,197,502			2,104,621			2,073,521			2,051,516
Commercial real estate construction and land development		450,694			453,473			439,125			382,610			371,732
1-4 family residential (including home equity)		682,066			669,306			685,071			683,919			715,119
Residential construction		155,017			136,760			117,901			104,638			111,956
Consumer and other		36,978			33,399			34,267			25,856			20,346
Total loans	$	4,348,833		$	4,283,514		$	4,220,486		$	4,289,469		$	4,460,743

Asset Quality:
Nonaccrual loans	$	28,225		$	26,275		$	24,127		$	28,369		$	36,643
Accruing loans 90 or more days past due		—			—			—			—			—
Total nonperforming loans		28,225			26,275			24,127			28,369			36,643
Other real estate		—			—			—			1,397			1,397
Total nonperforming assets	$	28,225		$	26,275		$	24,127		$	29,766		$	38,040

Net charge-offs	$	571		$	317		$	1,353		$	450		$	162

Nonaccrual loans:
Commercial and industrial	$	9,145		$	7,809		$	8,358		$	10,247		$	12,949
Real estate:
Commercial real estate (including multi-family residential)		14,409			15,259			12,639			14,629			18,123
Commercial real estate construction and land development		1,511			—			63			53			53
1-4 family residential (including home equity)		3,040			3,065			2,875			3,224			4,839
Residential construction		—			—			—			—			—
Consumer and other		120			142			192			216			679
Total nonaccrual loans	$	28,225		$	26,275		$	24,127		$	28,369		$	36,643

Asset Quality Ratios:
Nonperforming assets to total assets		0.42	%		0.37	%		0.34	%		0.44	%		0.58	%
Nonperforming loans to total loans		0.65	%		0.61	%		0.57	%		0.66	%		0.82	%
Allowance for credit losses on loans to nonperforming loans		178.01	%		187.31	%		198.70	%		177.98	%		135.32	%
Allowance for credit losses on loans to total loans		1.16	%		1.15	%		1.14	%		1.18	%		1.11	%
Net charge-offs to average loans (annualized)		0.05	%		0.03	%		0.13	%		0.04	%		0.01	%

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 and the ratio of tangible equity to tangible assets 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															Six Months Ended
		2022						2021									2022			2021
	June 30			March 31			December 31			September 30			June 30			June 30			June 30
	(Dollars and share amounts in thousands, except per share data)
Total shareholders' equity	$	705,329		$	751,940		$	816,468		$	798,592		$	789,150		$	705,329		$	789,150
Less: Goodwill and core deposit intangibles, net		236,798			237,549			238,300			239,124			239,948			236,798			239,948
Tangible shareholders' equity	$	468,531		$	514,391		$	578,168		$	559,468		$	549,202		$	468,531		$	549,202

Shares outstanding at end of period		20,154			20,378			20,337			20,218			20,213			20,154			20,213

Tangible book value per share	$	23.25		$	25.24		$	28.43		$	27.67		$	27.17		$	23.25		$	27.17

Net income	$	16,437		$	18,657		$	21,558		$	19,060		$	22,925		$	35,094		$	40,935

Average shareholders' equity	$	744,126		$	804,704		$	806,941		$	800,146		$	774,803		$	774,248		$	768,238
Less: Average goodwill and core deposit intangibles, net		237,153			237,925			238,700			239,497			240,331			237,537			240,746
Average tangible shareholders' equity	$	506,973		$	566,779		$	568,241		$	560,649		$	534,472		$	536,711		$	527,492

Return on average tangible equity^(A)		13.00	%		13.35	%		15.05	%		13.49	%		17.20	%		13.19	%		15.65	%

Total assets	$	6,731,764		$	7,149,363		$	7,104,954		$	6,759,761		$	6,508,667		$	6,731,764		$	6,508,667
Less: Goodwill and core deposit intangibles, net		236,798			237,549			238,300			239,124			239,948			236,798			239,948
Tangible assets	$	6,494,966		$	6,911,814		$	6,866,654		$	6,520,637		$	6,268,719		$	6,494,966		$	6,268,719

Tangible equity to tangible assets		7.21	%		7.44	%		8.42	%		8.58	%		8.76	%		7.21	%		8.76	%

(A) Interim periods annualized.

Allegiance Bancshares, Inc.

8847 West Sam Houston Parkway N., Suite 200

Houston, Texas 77040

ir@allegiancebank.com

Allegiance Bancshares, Inc. Reports Second Quarter 2022 Results