☒~~ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934~~

•terminate deposit insurance.

Engaging in unsafe or unsound practices or failing to comply with applicable laws, regulations and supervisory agreements could subject us and our subsidiaries or their officers, directors and institution-affiliated parties to the remedies described above and other sanctions.

The Dodd-Frank Act

On July 21, 2010, the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) was signed into law. The Dodd-Frank Act has had a broad impact on the financial services industry, and ~~imposes~~imposed significant regulatory and compliance requirements, including the designation of certain financial companies as systemically important financial companies; enhanced oversight of credit rating agencies; the imposition of increased capital, leverage, and liquidity requirements; and numerous other provisions designed to improve supervision and oversight of, and strengthen safety and soundness within, the financial services sector.

Additionally, the Dodd-Frank Act established a new framework of authority to conduct systemic risk oversight within the financial system to be distributed among federal regulatory agencies, including the Financial Stability Oversight Council, the Federal Reserve and the FDIC.

~~The following items provide a brief description of certain provisions of the Dodd-Frank Act that are most relevant to the Company and the Bank.~~

•

Source of ~~strength.~~Strength

Under Federal Reserve policy and federal regulations, bank holding companies ~~have historically been~~are required to act as a source of financial and managerial strength to ~~each of~~ their ~~banking subsidiaries, and the Dodd-Frank Act codified this policy as a statutory requirement. As a result of~~subsidiary banks. Under this requirement, Allegiance is expected to commit resources to support the Bank, including at times when Allegiance may not be in ~~the future Allegiance could be required~~a financial position to provide ~~financial assistance~~such resources. Any capital loans by a bank holding company to any of its subsidiary banks are subordinate in right of payment to depositors and to certain other indebtedness of such subsidiary banks. In the ~~Bank should it experience financial distress.~~

•~~Mortgage loan origination.~~ ~~The Dodd-Frank Act authorized~~event of a bank holding company’s bankruptcy, any commitment by the Consumer Financial Protection Bureau (the “CFPB”) to establish certain minimum standards for the origination of residential mortgages, including a determination of the borrower’s ability to repay a residential mortgage loan. Under the Dodd-Frank Act, financial institutions may not make a residential mortgage loan unless they make a “reasonable and good faith determination” that the consumer has a “reasonable ability” to repay the loan. The Dodd-Frank Act allows borrowers to raise certain defenses to foreclosure, but provides a full or partial safe harbor from such defenses for loans that are “qualified mortgages.” The CFPB has promulgated rules to, among other things, specify the types of income and assets that may be considered in the ability to repay determination, the permissible sources for verification and the required methods of calculating the loan’s monthly payments. The rules extend the requirement that creditors verify and document a borrower’s income and assets to include all information that creditors rely on in determining repayment ability. The rules also provide further examples of third party documents that may be relied on for such verification, such as government records and check cashing or funds transfer service receipts. The rules also define “qualified mortgages,” imposing both underwriting standards—for example, a borrower’s debt to income ratio may not exceed 43%—and limits on the terms of their loans. Points and fees are subjectbank holding company to a ~~relatively stringent cap, and~~federal bank regulatory agency to maintain the ~~terms include~~capital of a ~~wide array of payments that may~~subsidiary bank will be ~~made in the course of closing a loan. Certain loans, including interest only loans and negative amortization loans, cannot be qualified mortgages.~~

•~~Risk retention~~. On October 22, 2014, the federal regulators including the Federal Reserve, the FDIC and the SEC issued a final rule in connection with the risk retention requirement mandated by Section 941 of the Dodd-Frank Act. The risk retention requirement generally requires a securitizer to retain no less than 5% of the credit risk in assets it sells into a securitization and prohibits a securitizer from directly or indirectly hedging or otherwise transferring the credit risk that the securitizer is required to retain, subject to limited exemptions. One significant exemption is for securities entirely collateralized by “qualified residential mortgages” (“QRMs”), which are loans deemed to have a lower risk of default. The rule defines QRMs to have the same meaning as the term “qualified mortgage,” as definedassumed by the ~~CFPB. In addition, the rule provides for reduced risk retention requirements for qualifying commercial loan, commercial real estate loan~~bankruptcy trustee and ~~auto loan securitizations.~~

•~~Consumer Financial Protection Bureau.~~ ~~The Dodd-Frank Act created the CFPB, which is tasked with establishing and implementing rules and regulations under certain federal consumer protection laws with respect~~entitled to ~~the conduct~~priority of providers of certain consumer financial products and services. The CFPB has rulemaking authority over many of the statutes governing products and services offered to bank and thrift consumers. For banking organizations with assets of $10 billion or more, the CFPB has exclusive rule-making, examination, and primary enforcement authority under federal consumer financial laws. In addition, the Dodd-Frank Act permits states to adopt consumer protection laws and regulations that are stricter than those regulations promulgated by the CFPB.

•~~Deposit insurance.~~ The Dodd-Frank Act made permanent the general $250 thousand deposit insurance limit for insured deposits. Amendments to the Federal Deposit Insurance Act (the “FDIA”) also revised the assessment base against which an insured depository institution’s deposit insurance premiums paid to the FDIC’s DIF will be calculated. Under the amendments, the assessment base is no longer the institution’s deposit base, but rather its average consolidated total assets less its average tangible equity. Additionally, the Dodd-Frank Act made changes to the minimum designated reserve ratio of the DIF, increasing the minimum from 1.15% to 1.35% of the estimated amount of total insured deposits, and eliminating the requirement that the FDIC pay dividends to depository institutions when the reserve ratio exceeds certain thresholds. The FDIC’s restoration plan was designed to ensure that the

~~fund reserve ratio reached 1.35% by September 30, 2020, as required by the Dodd-Frank Act. In November 2018, the FDIC~~

~~announced that the DIF reserve ratio reached 1.36%. Since the DIF reserve ratio exceeded 1.35% required by the Dodd-Frank Act, the FDIC formally exited the DIF restoration plan.~~

•~~Transactions with affiliates and insiders.~~ The Dodd-Frank Act generally enhanced the restrictions on transactions with affiliates under Section 23A and 23B of the Federal Reserve Act, including an expansion of the definition of “covered transactions” and clarification regarding the amount of time for which collateral requirements regarding covered credit transactions must be satisfied. Insider transaction limitations are expanded through the strengthening of loan restrictions to insiders and the expansion of the types of transactions subject to the various limits, including derivatives transactions, repurchase agreements, reverse repurchase agreements and securities lending or borrowing transactions. Restrictions are also placed on certain asset sales to and from an insider to an institution, including requirements that such sales be on market terms and, in certain circumstances, approved by the institution’s board of directors.

•~~Corporate governance.~~ The Dodd-Frank Act addresses many investor protections, corporate governance and executive compensation matters that will affect most U.S. publicly traded companies, including Allegiance. The Dodd-Frank Act (1) grants shareholders of U.S. publicly traded companies an advisory vote on executive compensation, (2) enhances independence requirements for compensation committee members, (3) requires companies listed on national securities exchanges to adopt incentive-based compensation clawback policies for executive officers and (4) provides the SEC with authority to adopt proxy access rules that would allow shareholders of publicly traded companies to nominate candidates for election as a director and have those nominees included in a company’s proxy materials. For so long as we are an emerging growth company, we may take advantage of the provisions of the Jumpstart Our Business Startups Act (the “JOBS Act”) allowing us to not to seek a non-binding advisory vote on executive compensation.

The requirements of the Dodd-Frank Act still are in the process of being implemented and many of the requirements remain subject to regulations implemented over the course of several years. The manner in which the provisions of the Dodd-Frank Act will be implemented by the various regulatory agencies and through regulations as well as the full extent of the impact such requirements will have on our operations, is unclear.

payment.

The Volcker Rule

The Volcker Rule under the Dodd-Frank Act prohibits banks and their affiliates from engaging in proprietary trading and investing in and sponsoring certain hedge funds and private equity funds. Since neither Allegiance nor the Bank engages in the types of trading or investing covered by the Volcker Rule, the Volcker Rule does not currently have any effect on our operations.

Notice and Approval Requirements Related to Control

Federal and state banking laws impose notice, application, approval or non-objection and ongoing regulatory requirements on any shareholder or other person that controls or seeks to acquire direct or indirect “control” of an FDIC-insured depository institution. These laws include the BHC Act, the Change in Bank Control Act and the Texas Banking Act. Among other things, these laws require regulatory filings by a shareholder or other person that seeks to acquire direct or indirect “control” of an FDIC-insured depository institution. The determination whether a person “controls” a depository institution or its holding company is based on all of the facts and circumstances surrounding the investment. As a general matter, a person is deemed to control a depository institution or other company if the person owns or controls 25% or more of any class of voting stock. Subject to rebuttal, a person may be presumed to control a depository institution or other company if the person owns or controls 10% or more of any class of voting stock and other regulatory criteria are met. Ownership by affiliated persons, or persons acting in concert, is typically aggregated for these purposes.

In ~~addition, except under limited circumstances, bank holding companies are prohibited from acquiring, without prior approval control of any other bank or~~January 2020, the Federal Reserve approved a final rule that clarifies the framework for when a company controls a bank holding company or ~~all or substantially all~~bank under the ~~assets thereof;~~BHCA. In particular, the final rule sets forth tiered presumptions of control in the Federal Reserve’s regulations. Under the BHCA, a company controls a bank holding company if it controls 25 percent or more ~~than 5%~~of any class of voting securities of the bank holding company. A company that controls less than 5 percent of any class of voting ~~shares~~securities of a bank orholding company is presumed not to control the bank holding company. In instances in which a company owns at least 5 percent but less than 25 percent, the Federal Reserve considers the full fact and circumstances of the relationship between the company and the bank holding company ~~that is not already a subsidiary.~~

to determine whether the company controls the bank holding company. As part of its determination as to control, the Federal Reserve considers, among other things, level of ownership of voting and non-voting securities, board representation, business relationships, senior management interlocks, contractual limits on major operational or policy decisions, proxies on issues, threats to dispose of securities and management agreements. The rule also provides several additional examples of presumptions of control and noncontrol, along with various ancillary provisions such as definitions of terms used in the presumptions. The changes in the final rule became effective September 30, 2020.

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Permissible Activities and Investments

Banking laws generally restrict our ability to engage in, or acquire more than 5% of the voting shares of a company engaged in, activities other than those determined by the Federal Reserve to be so closely related to banking as to be a proper incident thereto. The Gramm-Leach-Bliley Financial Modernization Act of 1999 (the “GLB Act”) expanded the scope of permissible activities for a bank holding company that qualifies as a financial holding company. Under the regulations implementing the GLB Act, a financial holding company may engage in additional activities that are financial in nature or incidental or complementary to a financial activity. Those activities include, among other activities, certain insurance and securities activities. Qualifications for becoming a financial holding company include, among other things, meeting certain specified capital standards and achieving certain management ratings in examinations. Under the Dodd-Frank Act, bank holding companies and their subsidiaries must be well-capitalized and well-managed in order for the bank holding company and its nonbank affiliates to engage in the expanded financial activities permissible only for a financial holding company.

The Company has not elected to pursue financial holding company status.

In addition, as a general matter, we must receive prior regulatory approval before establishing or acquiring a depository institution or, in certain cases, a non-bank entity.

The Texas Constitution, as amended in 1986, provides that a Texas-chartered bank has the same rights and privileges that are or may be granted to national banks domiciled in Texas. To the extent that the Texas laws and regulations may have allowed state-chartered banks to engage in a broader range of activities than national banks, the Federal Deposit Insurance Corporation Improvement Act of 1991 (the “FDICIA”), has operated to limit this authority. The FDICIA provides that no state bank or subsidiary thereof may engage as a principal in any activity not permitted for national banks, unless the institution complies with applicable capital requirements and the FDIC determines that the activity poses no significant risk to the DIF of the FDIC. In general, statutory restrictions on the activities of banks are aimed at protecting the safety and soundness of depository institutions.

Branching

Texas law provides that a Texas-chartered bank can establish a branch anywhere in Texas provided that the branch is approved in advance by the TDB. The branch must also be approved by the FDIC. The regulators consider a number of factors, including financial history, capital adequacy, earnings prospects, character of management, needs of the community and consistency with corporate powers. The Dodd-Frank Act permits insured state banks to engage in de novo interstate branching if the laws of the state where the new branch is to be established would permit the establishment of the branch if it were chartered by such state.

Regulatory Capital Requirements and Capital Adequacy

The bank regulators view capital levels as important indicators of an institution’s financial soundness. As a general matter, FDIC-insured depository institutions and their holding companies are required to maintain minimum capital relative to the amount and types of assets they hold. The final supervisory determination on an institution’s capital adequacy is based on the regulator’s assessment of numerous factors. As a bank holding company and a state-chartered non-member bank, the Company and the Bank are subject to both risk-based and leverage regulatory capital requirements.

~~In 1988,~~

The Company and the ~~International Basel Committee on Banking Supervision, a committee of central banks and bank supervisors, (“Basel Committee”),~~Bank are required to comply with applicable capital adequacy standards adopted ~~a capital accord, known as Basel I, which established the framework for risk-based capital guidelines implemented~~ by the ~~U.S. federal bank regulators. Basel II was issued by~~Federal Reserve and the ~~Basel Committee in November 2005, and in 2010, the Basel Committee implemented the revised framework for strengthening international capital and liquidity, referred to as Basel III.~~

~~In July 2013, the federal banking agencies published final capital rules (“Basel~~FDIC (the “Basel III Capital Rules”) effective January 1, 2015 that revised the risk-based and leverage capital requirements and the method for calculating risk-weighted assets to implement, in part, Basel III agreements reached by the Basel Committee and certain provisions of the Dodd-Frank Act. While some provisions are tailored to larger institutions, the. The Basel III Capital Rules, ~~generally apply to all banking organizations, including~~among other things, require the Company ~~and the Bank. In broad terms, the Basel III Capital Rules increased the required quality and quantity~~to maintain an additional capital conservation buffer, composed entirely of ~~the capital base, reduced the range~~Common Equity Tier 1 (“CET1”), of ~~instruments that count as capital and increased the risk-weighted asset assessment for certain types of activities.~~

~~Among other things, the Basel III Capital Rules impact regulatory capital~~2.5%, effectively resulting in minimum ratios of ~~banking organizations in the following manner, which were fully phased in on January 1, 2019: create a new requirement~~(1) CET1 to ~~maintain a ratio of “common equity Tier 1 capital” to total~~ risk-weighted assets of not less than 4.5%; increase the minimum leverage capital ratio to 4.0% for all banking organizations; increase the minimum tier 1 risk-based capital ratio from 4.0% to 6.0%; and maintain the minimum total risk-based capital ratio at 8.0%.

In addition, the Basel III Capital Rules subject a banking organization to certain limitations on capital distributions, equity repurchases and discretionary bonus payments to executive officers if the organization does not maintain a “capital conservation buffer” of common equity7.0%, (2) Tier 1 ~~capital. The implementation~~capital to risk-weighted assets of 8.5%, (3) total capital (that is, Tier 1 plus Tier 2) to risk-weighted assets of 10.5% and (4) Tier 1 capital to average quarterly assets as reported on consolidated financial statements ( known as the “leverage ratio”) of 4.0%. As of December 31, 2021, the Company’s ratio of CET1 to risk-weighted assets was 12.47%, Tier 1 capital to risk-weighted assets was 12.69%, total capital to risk-weighted assets was 16.08% and Tier 1 capital to average tangible quarterly assets was 8.53%.

Banking institutions that fail to meet the effective minimum ratios once the capital conservation buffer ~~began~~is taken into account, as detailed above, will be subject to constraints on ~~January 1, 2016 at the 0.625% level~~capital distributions, including dividends and ~~was phased in over a three-year period (increasing by 0.625% on each subsequent January 1, until it reached 2.5% on January 1, 2019). As fully phased-in, the effect~~share repurchases, and certain discretionary executive compensation. The severity of the ~~capital conservation buffer increases~~constraints depends on the ~~minimum common equity Tier 1 capital ratio to 7.0%,~~amount of the ~~minimum tier 1 risk-based capital ratio to 8.5%~~shortfall and the ~~minimum total risk-based capital ratio to 10.5%~~institution’s “eligible retained income” (that is, four quarter trailing net income, net of distributions and tax effects not reflected in net income).

The Basel III Capital Rules also changed the capital categories for insured depository institutions for purposes of prompt corrective ~~action.~~action as discussed below under “Prompt Corrective Action”. Under the Basel III Capital Rules, to be well capitalized, an insured depository institution is required to maintain a minimum common equity Tier 1 capital ratio of at least 6.5%, a tier 1 ~~risk-based~~risk-

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based capital ratio of at least 8.0%, a total risk-based capital ratio of at least 10.0%, and a leverage capital ratio of at least 5.0%. In addition, the Basel III Capital Rules established more conservative standards for including an instrument in regulatory capital and impose certain deductions from and adjustments to the measure of common equity Tier 1 capital.

Under the Basel III Capital Rules, banking organizations were provided a one-time option in their initial regulatory financial report filed after January 1, 2015, to remove certain components of accumulated other comprehensive income from the computation of common equity regulatory capital. For banking organizations with less than $15 billion in total assets, existing trust preferred securities and cumulative perpetual preferred stock continue to be included in regulatory capital while other instruments are disallowed. The Basel III Capital Rules also provide additional constraints on the inclusion of minority interests, mortgage servicing assets, deferred tax assets and certain investments in the capital of unconsolidated financial institutions in Tier 1 capital, as well as providing stricter risk weighting rules to these assets.

The Basel III Capital Rules also provide stricter rules related to the risk weighting of past due and certain commercial real estate loans, as well as on some equity investment exposures, and replace the existing credit rating approach for determining the risk weighting of securitization exposures with an alternative approach.

The federal banking agencies’ risk-based and leverage ratios are minimum supervisory ratios generally applicable to banking organizations that meet certain specified criteria. The federal bank regulatory agencies may set capital requirements for a particular banking organization that are higher than the minimum ratios when circumstances warrant. Federal Reserve guidelines also provide that banking organizations experiencing internal growth or making acquisitions will be expected to maintain strong capital positions substantially above the minimum supervisory levels, without significant reliance on intangible assets.

In October 2017, the federal bank regulatory agencies issued a notice of proposed rulemaking on simplifications to the final rules (the "simplifications NPR"), a majority of which would apply solely to banking organizations that are not subject to the advanced approaches capital rule. Under the proposed rulemaking, non-advanced approaches banking organizations, such as Allegiance and the Bank, would apply a simpler regulatory capital treatment for mortgage servicing assets, certain deferred tax assets arising from temporary differences, investments in the capital of unconsolidated financial institutions and capital issued by a consolidated subsidiary of a banking organization and held by third parties. In anticipation of issuing the simplifications NPR that would include changes to the regulatory capital treatment discussed above, in August 2017, the federal bank regulatory agencies issued a notice of proposed rulemaking that would extend the current transition provisions for these items for non-advanced approach banking organizations (the “transitions NPR”). The transitions NPR was intended solely to stay the phase-in of certain elements of the capital rules in light of goals stated in the Economic Growth and Regulatory Paperwork Reduction Act report to Congress in March 2017 and in contemplation of the simplifications NPR. In November 2017, the agencies published the final rule adopting the proposals set forth in the transitions NPR thereby extending the regulatory capital treatment that was applicable during 2017 for these items for non-advanced approach banking organizations into 2018 while the simplifications NPR is pending.

In December 2017, the Basel Committee published the last version of the Basel III accord, generally referred to as "Basel IV." The Basel Committee stated that a key objective of the revisions incorporated into the framework is to reduce excessive variability of risk-weighted assets, which will be accomplished by enhancing the robustness and risk sensitivity of the standardized approaches for credit risk and operational risk, which will facilitate the comparability of banks’ capital ratios, constraining the use of internally modeled approaches and complementing the risk-weighted capital ratio with a finalized leverage ratio and a revised and robust capital floor. Leadership of the federal bank regulatory agencies who are tasked with implementing Basel IV supported the revisions. Although it is uncertain at this time, we anticipate some, if not all, of the Basel IV accord may be incorporated into the capital requirements framework applicable to the Company.

On May 24, 2018, the Economic Growth, Regulatory Relief, and Consumer Protection Act (the “EGRRCPA”) amended provisions in the Dodd-Frank Act as well as certain other statutes administered by the federal bank agencies. Section 201 of the EGRRCPA ~~directs~~directed the agencies to develop a community bank leverage ratio of not less than 8% and not more than 10% for qualifying community banks (qualifying community banking organizations). On ~~November 21, 2018,~~September 17, 2019, the ~~federal banking agencies released~~FDIC approved a ~~proposal~~final rule allowing community banks with a leverage capital ratio of at least 9% to ~~simplify the regulatory~~be considered in compliance with Basel III capital requirements ~~for qualifying community banking organizations.~~and exempt from the complex Basel III calculation. Under the ~~proposal,~~final rule, banks ~~and bank holding companies that have~~with less than $10 billion in ~~total consolidated~~ assets ~~that meet risk-based qualifying criteria, and that have a~~may elect the community bank leverage ratio ~~(as defined~~framework if they meet the 9% ratio and if they hold 25% or less of assets in off-balance sheet exposures, and 5% or less of assets in trading assets and liabilities. For institutions that fall below the ~~proposal) of greater than~~ 9% ~~would be eligible~~capital requirement but remain above 8%, the final rule establishes a two-quarter grace period to ~~opt into a community bank leverage ratio framework. Such banking organizations that elect~~either meet the qualifying criteria again or comply with the generally applicable capital rule. We have not elected to use the community bank leverage ratio ~~and~~framework, but may make such an election in the future.

In February 2019, the federal bank regulatory agencies issued a final rule (the “2019 CECL Rule”) that ~~maintain~~revised certain capital regulations to account for changes to credit loss accounting under U.S. GAAP. The 2019 CECL Rule included a ~~community bank leverage ratio~~transition option that allows banking organizations to phase in, over a three-year period, the day-one adverse effects of ~~greater than 9% would not~~adopting a new accounting standard related to the measurement of current expected credit losses (“CECL”) on their regulatory capital ratios (three-year transition option). On January 1, 2020, the Company adopted CECL. Upon adoption of CECL, all loans accounted for under ASC 310-20 were included in the allowance for credit losses methodology, with no offset provided for any remaining fair value marks. In addition, all loans previously accounted for under ASC 310-30 had their credit marks reclassified to be ~~subject to other risk-based and leverage capital requirements and would be considered to have met~~included in the ~~well-capitalized ratio requirements~~allowance for ~~purposes of section 38 of the FDIA and regulations implementing that section, as applicable, and the generally applicable capital requirements under the banking agencies’ capital rule.~~

credit losses.

Prompt Corrective Action

Under the ~~FDIA,~~Federal Deposit Insurance Act (“FDIA”), the federal bank regulatory agencies must take prompt corrective action against undercapitalized U.S. depository institutions. U.S. depository institutions are assigned one of five capital categories: “well capitalized,” “adequately capitalized,” “undercapitalized,” “significantly undercapitalized,” and “critically undercapitalized,” and are subjected to different regulation corresponding to the capital category within which the institution falls. A depository institution is deemed to be “well capitalized” if it has a total risk-based capital ratio of 10.0% or greater, a common equity Tier 1 capital ratio of 6.5% or greater, a Tier 1 risk-based capital ratio of 8.0% or greater, a leverage ratio of 5.0% or greater and the institution is not subject to an order, written agreement, capital directive or prompt corrective action directive to meet and maintain a specific level for any capital measure. A depository institution is deemed to be “adequately capitalized” if it has a total risk-based capital ratio of 8.0% or greater, a common equity Tier 1 capital ratio of 4.5% or greater; a Tier 1 risk-based capital ratio of 6.0% or greater; a leverage ratio of 4.0% or greater; and does not meet the criteria for a “well capitalized” bank. A depository institution is “under-capitalized” if it has a total risk-based capital ratio of less than 8.0%, a common equity Tier 1 capital ratio less than 4.5%, a Tier 1 risk-based capital ratio of less than 6.0% or a leverage ratio of less than 4.0%. Under certain circumstances, a well-capitalized, adequately capitalized or undercapitalized institution may be treated as if the institution were in the next lower capital category. A banking institution that is undercapitalized is required to submit a capital restoration plan. The capital restoration plan will not be accepted by the regulators

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unless each company having control of the undercapitalized institution guarantees the subsidiary’s compliance with the capital restoration plan up to a certain specified amount.

Failure to meet capital guidelines could subject the institution to a variety of enforcement remedies by federal bank regulatory agencies, including: termination of deposit insurance upon notice and hearing, restrictions on certain business activities and appointment of the FDIC as conservator or receiver. As of December 31, ~~2018,~~2021, the Bank met the requirements to be “well capitalized” under the prompt corrective action regulations.

The prompt corrective action regulations do not apply to bank holding companies. However, the Federal Reserve is authorized to take appropriate action at the bank holding company level, based upon the undercapitalized status of the bank holding

company’s depository institution subsidiaries.

Regulatory Limits on Dividends, Distributions and ~~Distributions~~

Repurchases

As a bank holding company, we are subject to certain restrictions on paying dividends under applicable federal and Texas laws and regulations. The Federal Reserve has issued a policy statement that provides that a bank holding company should not pay dividends unless (i) its net income over the last four quarters (net of dividends paid) has been sufficient to fully fund the dividends, (ii) the prospective rate of earnings retention appears to be consistent with the capital needs, asset quality and overall financial condition of the bank holding company and its subsidiaries and (iii) the bank holding company will continue to meet minimum required capital adequacy ratios. Accordingly, a bank holding company should not pay cash dividends that exceed its net income or that can only be funded in ways that weaken the bank holding company’s financial health, such as by borrowing. The Dodd-Frank Act and Basel III capital requirements impose additional restrictions on the ability of banking institutions to pay dividends.

Substantially all of our income, and a principal source of our liquidity, are dividends from the Bank. The ability of the Bank to pay dividends to us is restricted by federal and state laws, regulations and policies.

Capital adequacy requirements serve to limit the amount of dividends that may be paid by the Bank. Under the FDIA, an insured depository institution such as the Bank is prohibited from making capital distributions, including the payment of dividends, if, after making such distribution, the institution would become “undercapitalized.” The FDIC may further restrict the payment of dividends by requiring the Bank to maintain a higher level of capital than would otherwise be required in order to be adequately capitalized for regulatory purposes. Payment of dividends by the Bank also may be restricted at any time at the discretion of the appropriate regulator if it deems the payment to constitute an unsafe and unsound banking practice. As noted above, the capital conservation buffer created under the Basel III ~~capital rules, when fully implemented, may~~Capital Rules could also have the effect of limiting the payment of capital distributions from the Bank.

In July 2019, the federal bank regulators adopted final rules that, among other things, eliminated the standalone prior approval requirement in the capital rules for any repurchase of common stock. In certain circumstances, Allegiance’s repurchases of its common stock may be subject to a prior approval or notice requirement under other regulations, policies or supervisory expectations of the Federal Reserve. Any redemption or repurchase of preferred stock or subordinated debt remains subject to the prior approval of the Federal Reserve.

Reserve Requirements

Pursuant to regulations of the Federal Reserve, all banking organizations are required to maintain average daily reserves at mandated ratios against their transaction accounts. In addition, reserves must be maintained on certain non-personal time deposits. These reserves must be maintained in the form of vault cash or in an account at a Federal Reserve Bank.

Limits on Transactions with Affiliates and Insiders

Insured depository institutions are subject to restrictions on their ability to conduct transactions with affiliates and other related parties. Section 23A of the Federal Reserve Act imposes quantitative limits, qualitative requirements, and collateral requirements on certain transactions by an insured depository institution with, or for the benefit of, its affiliates. Transactions covered by Section 23A include loans, extensions of credit, investment in securities issued by an affiliate and acquisitions of assets from an affiliate. Section 23B of the Federal Reserve Act requires that most types of transactions by an insured depository institution with, or for the benefit of, an affiliate be on terms, substantially the same or at least as favorable to the insured depository institution as if the transaction were conducted with an unaffiliated third party.

~~As noted above, the~~

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The Dodd-Frank Act generally enhances the restrictions on transactions with affiliates under Section 23A and 23B of the Federal Reserve Act, including an expansion of the definition of “covered transactions” and a clarification regarding the amount of time for which collateral requirements regarding covered credit transactions must be satisfied. The ability of the Federal Reserve to grant exemptions from these restrictions is also narrowed by the Dodd-Frank Act, including by requiring coordination with other bank regulators.

The Federal Reserve’s Regulation O imposes restrictions and procedural requirements in connection with the extension of credit by an insured depository institution to directors, executive officers, principal shareholders and their related interests.

Brokered Deposits

The FDIA restricts the use of brokered deposits by certain depository institutions. Under the applicable regulations, a “well capitalized insured depository institution” may solicit and accept, renew or roll over any brokered deposit without restriction. An “adequately capitalized insured depository institution” may not accept, renew or roll over any brokered deposit unless it has applied for and been granted a waiver of this prohibition by the FDIC. An “undercapitalized insured depository institution” may not accept,

renew or roll over any brokered deposit. The FDIC may, on a case-by-case basis and upon application by an adequately capitalized insured depository institution, waive the restriction on brokered deposits upon a finding that the acceptance of brokered deposits does not constitute an unsafe or unsound practice with respect to such institution.

In addition, the FDIA prohibits an insured depository institution from offering interest rates on any deposits significantly higher than the prevailing rate in the bank’s normal market area or nationally (depending upon where the deposits are solicited), unless it is well capitalized or is adequately capitalized and receives a waiver from the FDIC. ~~A depository institution that is adequately capitalized and accepts brokered deposits under a waiver from~~

On December 15, 2020, the FDIC ~~may~~issued a final rule on brokered deposits. The rule aims to clarify and modernize the FDIC’s existing regulatory framework for brokered deposits. Notable aspects of the rule include (1) the establishment of bright-line standards for determining whether an entity meets the statutory definition of “deposit broker”; (2) the identification of a number of business relationships (“designated exceptions”) to which the “primary purpose” exception is automatically applicable; (3) the establishment of a “transparent” application process for entities that seek a “primary purpose” exception, but do not ~~pay~~qualify as a “designated exception”; and (4) the clarification that third parties that have an ~~interest rate on any deposit in excess of 75 basis points over certain prevailing market rates.~~

exclusive deposit-placement arrangement with only one IDI are not considered a “deposit broker.”

Concentrated Commercial Real Estate Lending Guidance

The federal banking agencies, including the FDIC, have promulgated guidance governing financial institutions with concentrations in commercial real estate lending. The guidance provides that a bank has a concentration in commercial real estate lending if (i) total reported loans for construction, land development, and other land represent 100% or more of total capital or (ii) total reported loans secured by multifamily and non-farm residential properties and loans for construction, land development, and other land represent 300% or more of total capital and the bank’s commercial real estate loan portfolio has increased 50% or more during the prior 36 months. Owner-occupied commercial real estate loans are excluded from this second category. If a concentration is present, management must employ heightened risk management practices that address the following key elements: board and management oversight and strategic planning, portfolio management, development of underwriting standards, risk assessment and monitoring through market analysis and stress testing and maintenance of increased capital levels as needed to support the level of commercial real estate lending.

Examination and Examination Fees

The FDIC periodically examines and evaluates state non-member banks. Based on such an evaluation, the Bank, among other things, may be required to revalue its assets and establish specific reserves to compensate for the difference between the Bank’s assessment and that of the FDIC. The TDB also conducts examinations of state banks but may accept the results of a federal examination in lieu of conducting an independent examination. In addition, the FDIC and TDB may elect to conduct a joint examination. The TDB charges fees to recover the costs of examining Texas chartered banks, as well as filing fees for certain applications and other filings. The Dodd-Frank Act provides various agencies with the authority to assess additional supervision fees.

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Deposit Insurance and Deposit Insurance Assessments

The FDIC is an independent federal agency that insures the deposits of federally insured depository institutions up to applicable limits. The FDIC also has certain regulatory, examination and enforcement powers with respect to FDIC-insured institutions. The deposits of the Bank are insured by the FDIC up to applicable limits. As a general matter, the maximum deposit insurance amount is $250 thousand per depositor. FDIC-insured depository institutions are required to pay deposit insurance assessments to the FDIC. The amount of a particular institution’s deposit insurance assessment for institutions with less than $10 billion in assets is based on that institution’s risk classification under an FDIC ~~risk based~~risk-based assessment system. An institution’s risk classification is assigned based on its capital levels and the level of supervisory concern the institution poses to the regulators. Institutions assigned to higher risk categories (that is, institutions that pose a higher risk of loss to the Deposit Insurance Fund) pay assessments at higher rates than institutions that pose a lower risk. ~~As noted above,~~The FDIC has the ~~Dodd-Frank Act changed~~ability to make discretionary adjustments to the ~~way an insured depository institution’s~~total score based upon significant risk factors that are not adequately captured in the calculations.

Under the FDIA, the FDIC may terminate deposit insurance ~~premiums are calculated.~~

upon a finding that the institution has engaged in unsafe and unsound practices, is in an unsafe or unsound condition to continue operations or has violated any applicable law, regulation, rule, order or condition imposed by the FDIC. In addition, the FDIC is authorized to conduct examinations of and require reporting by FDIC-insured institutions.

On June 22, 2020, the FDIC issued a final rule that mitigates the deposit insurance assessment effects of participating in the PPP, the Paycheck Protection Program Liquidity Facility (“PPPLF”) and the Money Market Mutual Fund Liquidity Facility (“MMLF”). Pursuant to the final rule, the FDIC will generally remove the effect of PPP lending in calculating an institutions deposit insurance assessment. The final rule also provides an offset to an institution’s total assessment amount for the increase in its assessment base attributable to participation in the PPP and MMLF.

Depositor Preference

The FDIA provides that, in the event of the “liquidation or other resolution” of an insured depository institution, the claims of depositors of the institution (including the claims of the FDIC as subrogee of insured depositors) and certain claims for administrative expenses of the FDIC as a receiver will have priority over other general unsecured claims against the institution. If the Company invests in or acquires an insured depository institution that fails, insured and uninsured depositors, along with the FDIC, will have priority in payment ahead of unsecured, non-deposit creditors, including the Company, with respect to any extensions of credit they have made to such insured depository institution.

Anti-Money Laundering and OFAC

Under federal law, financial institutions must maintain anti-money laundering programs that include established internal policies, procedures and controls, a designated compliance officer, an ongoing employee training program and testing of the program by an independent audit function. Financial institutions are also prohibited from entering into specified financial transactions and

account relationships and must meet enhanced standards for due diligence and customer identification in their dealings with non-U.S. financial institutions and non-U.S. customers. Financial institutions must take reasonable steps to conduct enhanced scrutiny of account relationships to guard against money laundering and to report any suspicious transactions, and law enforcement authorities have been granted increased access to financial information maintained by financial institutions. Bank regulators routinely examine institutions for compliance with these obligations and they must consider an institution’s compliance with such obligations in connection with the regulatory review of applications, including applications for mergers and acquisitions. The regulatory authorities have imposed cease and desist orders and civil money penalty sanctions against institutions found to be violating these obligations.

The U.S. Department of the Treasury’s Office of Foreign Assets Control (“OFAC”) is responsible for helping to ensure that U.S. entities do not engage in transactions with certain prohibited parties, as defined by various Executive Orders and Acts of Congress. OFAC publishes lists of persons, organizations and countries suspected of aiding, harboring or engaging in terrorist acts, known as Specially Designated Nationals and Blocked Persons. If the Company or the Bank finds a name on any transaction, account or wire transfer that is on an OFAC list, the Company or the Bank must freeze or block such account or transaction, file a suspicious activity report and notify the appropriate authorities.

On January 1, 2021, Congress passed the National Defense Authorization Act for Fiscal Year 2021 (the “NDAA”), which enacted the most significant overhaul of the BSA and related anti-money laundering laws since the Patriot Act. The Anti-Money Laundering Act of 2020 (“AMLA”), which amends the BSA, was included in the NDAA. Among other things, it codifies a risk-based approach to anti-money laundering compliance for financial institutions; requires the U.S. Department of the Treasury to promulgate

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priorities for anti-money laundering and countering the financing of terrorism; requires the development of standards for testing technology and internal processes for BSA compliance; expands enforcement- and investigation-related authority, including increasing available sanctions for certain BSA violations; and expands BSA whistleblower incentives and protections. Notable amendments include (1) significant changes to the collection of beneficial ownership information and the establishment of a beneficial ownership registry, which requires corporate entities (generally, any corporation, LLC, or other similar entity with 20 or fewer employees and annual gross income of $5 million or less) to report beneficial ownership information to FinCEN (which will be maintained by FinCEN and made available upon request to financial institutions); (2) enhanced whistleblower provisions, which provide that one or more whistleblowers who voluntarily provide original information leading to the successful enforcement of violations of the AML laws in any judicial or administrative action brought by the Secretary of the Treasury or the Attorney General resulting in monetary sanctions exceeding $1 million (including disgorgement and interest but excluding forfeiture, restitution, or compensation to victims) will receive not more than 30 percent of the monetary sanctions collected and will receive increased protections; (3) increased penalties for violations of the BSA; (4) improvements to existing information sharing provisions that permit financial institutions to share information relating to SARs with foreign branches, subsidiaries, and affiliates (except those located in China, Russia, or certain other jurisdictions) for the purpose of combating illicit finance risks; and (5) expanded duties and powers of FinCEN. Many of the statutory provisions in the AMLA will require additional rulemakings, reports and other measures, and the impact of the AMLA will depend on, among other things, rulemaking and implementation guidance. In June 2021, the Financial Crimes Enforcement Network, a bureau of the U.S. Department of the Treasury, issued the priorities for anti-money laundering and countering the financing of terrorism policy required under the AMLA. The priorities include: corruption, cybercrime, terrorist financing, fraud, transnational crime, drug trafficking, human trafficking and proliferation financing.

Consumer Laws and Regulations

Banking organizations are subject to numerous laws and regulations intended to protect consumers. These laws include, among others:

•Truth in Lending Act;

•Truth in Savings Act;

•Electronic Funds Transfer Act;

•Expedited Funds Availability Act;

•Equal Credit Opportunity Act;

•Fair and Accurate Credit Transactions Act;

•Fair Housing Act;

•Fair Credit Reporting Act;

•Fair Debt Collection Act;

•Gramm-Leach-Bliley Act;

•Home Mortgage Disclosure Act;

•Right to Financial Privacy Act;

•Real Estate Settlement Procedures Act;

•laws regarding unfair and deceptive acts and practices; and

•usury laws.

Many states and local jurisdictions have consumer protection laws analogous to, and in addition to, those listed above. These federal, state and local laws regulate the manner in which financial institutions deal with customers when taking deposits, making loans or conducting other types of transactions. Failure to comply with these laws and regulations could give rise to regulatory sanctions, customer rescission rights, action by state and local attorneys general and civil or criminal liability.

Consumer Financial Protection Bureau. The Dodd-Frank Act created the Consumer Financial Protection Bureau (the “CFPB”), which is tasked with establishing and implementing rules and regulations under certain federal consumer protection laws with respect to the conduct of providers of certain consumer financial products and services. The CFPB has rulemaking authority over many of the statutes governing products and services offered to bank and thrift consumers. For banking organizations with assets of $10 billion or more, the CFPB has exclusive rule-making, examination and primary enforcement authority under federal consumer financial laws. The creation of the CFPB by the Dodd-Frank Act has led to enhanced enforcement of consumer financial protection laws.

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Mortgage loan origination. The Dodd-Frank Act authorized the CFPB to establish certain minimum standards for the origination of residential mortgages, including a determination of the borrower’s ability to repay a residential mortgage loan. Under the Dodd-Frank Act, financial institutions may not make a residential mortgage loan unless they make a “reasonable and good faith determination” that the consumer has a “reasonable ability” to repay the loan. The Dodd-Frank Act allows borrowers to raise certain defenses to foreclosure, but provides a full or partial safe harbor from such defenses for loans that are “qualified mortgages.” The CFPB has promulgated rules to, among other things, specify the types of income and assets that may be considered in the ability to repay determination, the permissible sources for verification and the required methods of calculating the loan’s monthly payments. The rules extend the requirement that creditors verify and document a borrower’s income and assets to include all information that creditors rely on in determining repayment ability. The rules also provide further examples of third party documents that may be relied on for such verification, such as government records and check cashing or funds transfer service receipts. The rules also define “qualified mortgages,” imposing both underwriting standards—for example, a borrower’s debt to income ratio may not exceed 43%—and limits on the terms of their loans. Points and fees are subject to a relatively stringent cap, and the terms include a wide array of payments that may be made in the course of closing a loan. Certain loans, including interest only loans and negative amortization loans, cannot be qualified mortgages.

The Community Reinvestment Act

The Community Reinvestment Act (the “CRA”) and related regulations are intended to encourage banks to help meet the credit needs of their service areas, including low and moderate-income neighborhoods, consistent with safe and sound operations. The bank

regulators examine and assign each bank a public CRA rating. The CRA requires bank regulators to take into account the bank’s record in meeting the needs of its service area when considering an application by a bank to establish or relocate a branch or to conduct certain mergers or acquisitions. The Federal Reserve is required to consider the CRA records of a bank holding company’s controlled banks when considering an application by the bank holding company to acquire a banking organization or to merge with another bank holding company. When we or the Bank applies for regulatory approval to engage in certain transactions, the regulators will consider the CRA record of target institutions and our depository institution subsidiaries. An unsatisfactory CRA record could substantially delay approval or result in denial of an application. The regulatory agency’s assessment of the institution’s record is made available to the public. The Bank received an overall CRA rating of “satisfactory” on its most recent CRA examination.

In ~~April 2018,~~ December 2019, the ~~U.S. Department~~FDIC and the Office of ~~Treasury~~the Comptroller of the Currency (“OCC”) jointly proposed rules that would significantly change existing CRA regulations. The proposed rules are intended to increase bank activity in low- and moderate-income communities where there is significant need for credit, more responsible lending, greater access to banking services and improvements to critical infrastructure. The proposals change four key areas: (i) clarifying what activities qualify for CRA credit; (ii) updating where activities count for CRA credit; (iii) providing a more transparent and objective method for measuring CRA performance; and (iv) revising CRA-related data collection, record keeping and reporting. However, the Federal Reserve Board did not join the proposed rulemaking. In June 2020, the OCC issued its final CRA rule, effective October 1, 2020, while the FDIC did not finalize any revisions to its CRA rule. In September 2020, the Federal Reserve Board issued an Advance Notice of Proposed Rulemaking (“ANPR”) that invited public comment on an approach to modernize the regulations that implement the CRA by strengthening, clarifying, and tailoring them to reflect the current banking landscape and better meet the core purpose of the CRA. The ANPR sought feedback on ways to evaluate how banks meet the needs of low- and moderate-income communities and address inequities in credit access. In December 2021, the OCC issued a ~~memorandum~~final rule to rescind its June 2020 final rule in favor of working with other agencies to put forward a joint rule. We will continue to evaluate the ~~federal banking regulators with recommended~~impact of any changes to the ~~CRA’s~~regulations implementing ~~regulations~~the CRA and their impact to ~~reduce their complexity and associated burden on banks.~~

our financial condition, results of operations, and/or liquidity, which cannot be predicted at this time.

Incentive Compensation Guidance

The Federal Reserve Board reviews, as part of its regular, risk-focused examination process, the incentive compensation arrangements of banking organizations, such as the Company, that are not “large, complex banking organizations.” These reviews are tailored to each organization based on the scope and complexity of the organization’s activities and the prevalence of incentive compensation arrangements. Deficiencies will be incorporated into the organization’s supervisory ratings, which can affect the organization’s ability to make acquisitions and take other actions. Enforcement actions may be taken against a banking organization if its incentive compensation arrangements, or related risk-management control or governance processes, pose a risk to the organization’s safety and soundness and the organization is not taking prompt and effective measures to correct the deficiencies.

In July 2010, the federal banking agencies issued guidance on incentive compensation policies that applies to all banking organizations supervised by the agencies, including Allegiance and the Bank. Pursuant to the guidance, to be consistent with safety and soundness principles, a banking organization’s incentive compensation arrangements should: (1) provide employees with incentives that appropriately balance risk and reward; (2) be compatible with effective controls and risk management; and (3) be supported by strong corporate governance including active and effective oversight by the banking organization’s board of directors.

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Monitoring methods and processes used by a banking organization should be commensurate with the size and complexity of the organization and its use of incentive compensation.

Section 956 of the Dodd-Frank Act requires the federal bank regulatory agencies and the SEC to establish joint regulations or guidelines prohibiting incentive-based payment arrangements at specified regulated entities that encourage inappropriate risk-taking by providing an executive officer, employee, director or principal shareholder with excessive compensation, fees or benefits or that could lead to material financial loss to the entity. The federal bank regulatory agencies issued such proposed rules in April 2011 and issued a revised proposed rule in June 2016 implementing the requirements and prohibitions set forth in Section 956. The revised proposed rule would apply to all banks, among other institutions, with at least $1 billion in average total consolidated assets, for which it would go beyond the existing guidance to (i) prohibit certain types and features of incentive-based compensation arrangements for senior executive officers, (ii) require incentive-based compensation arrangements to adhere to certain basic principles to avoid a presumption of encouraging inappropriate risk, (iii) require appropriate board or committee oversight, (iv) establish minimum recordkeeping and (v) mandate disclosures to the appropriate federal banking agency.

Cybersecurity

Federal bank regulatory agencies have adopted guidelines for establishing information security standards and cybersecurity programs for implementing safeguards. These guidelines, along with related regulatory materials, increasingly focus on risk management and processes related to information technology and the use of third parties in the provision of financial services. State regulators have also been increasingly active in implementing privacy and cybersecurity standards and regulations. Many states have recently implemented or modified their data breach notification and data privacy requirements, which could apply to us depending on the location of our customers.

Many states, including Texas, have also recently implemented or modified their data breach notification, information security and data privacy requirements. We expect this trend of state-level activity in those areas to continue, and are continually monitoring developments in the states in which our customers are located.

In February 2018, the SEC published interpretive guidance to assist public companies in preparing disclosures about cybersecurity risks and incidents. These SEC guidelines, and any other regulatory guidance, are in addition to notification and disclosure requirements under state and federal banking law and regulations.

The federal banking regulators regularly issue new guidance and standards, and update existing guidance and standards, regarding cybersecurity intended to enhance cyber risk management among financial institutions. Financial institutions are expected to

comply with such guidance and standards and to accordingly develop appropriate security controls and risk management processes. If

we fail to observe such regulatory guidance or standards, we could be subject to various regulatory sanctions, including financial

penalties.

In November 2021, the federal banking agencies adopted a final rule related to computer-security incident reporting. With compliance required by May 1, 2022, the final rule requires banking organizations to notify their primary banking regulator within 36 hours of determining that a “computer-security incident” has materially disrupted or degraded, or is reasonably likely to materially disrupt or degrade, the banking organization’s ability to carry out banking operations or deliver banking products and services to a material portion of its customer base, its businesses and operations that would result in material loss, or its operations that would impact the stability of the United States.

Legislative and Regulatory Responses to the COVID-19 Pandemic

The COVID-19 pandemic continues to create extensive disruptions to the global economy, to businesses, and to the lives of individuals throughout the world. There have been a number of regulatory actions intended to help mitigate the adverse economic impact of the COVID-19 pandemic on borrowers, including several mandates from the bank regulatory agencies, requiring financial institutions to work constructively with borrowers affected by the COVID-19 pandemic. As the current pandemic is ongoing and dynamic in nature, there are many uncertainties related to COVID-19 including, among other things, its severity; the duration of the outbreak; the impact to customers, employees and vendors; the impact to the financial services and banking industry; and the impact to the economy as a whole as well as the effect of actions taken, or that may yet be taken, or inaction by governmental authorities to contain the outbreak or to mitigate its impact (both economic and health-related). In light of the uncertainties and continuing developments discussed herein, the ultimate adverse impact of COVID-19 cannot be reliably estimated at this time, but it has been and is expected to continue to be material. The longer-term potential impact on our business could depend to a large extent on future developments and actions taken by authorities and other entities to contain COVID-19 and its economic impact. Furthermore, the sustainability of the economic recovery observed in 2021 remains unclear and significant volatility could continue for a prolonged

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period as the potential exists for additional variants of COVID-19, including the recent Omicron variant, to impede the global economic recovery and exacerbate geographic differences in the spread of, and response to, COVID-19.

On March 27, 2020, the CARES Act was signed into law. The CARES Act was a $2.2 trillion economic stimulus bill that was intended to provide relief in the wake of the COVID-19 pandemic. Several provisions within the CARES Act led to action from the bank regulatory agencies and there were also separate provisions within the legislation that directly impacted financial institutions. Among other provisions, the CARES Act (i) authorized the Secretary of the Treasury to make loans, loan guarantees and other investments, up to $500 billion, for assistance to eligible businesses, States and municipalities with limited, targeted relief for passenger air carriers, cargo air carriers, and businesses critical to maintaining national security, (ii) created a $349 billion loan program called the Paycheck Protection Program (the “PPP”) for loans to small businesses for, among other things, payroll, group health care benefit costs and qualifying mortgage, rent and utility payments, (iii) provided certain credits against the 2020 personal income tax for eligible individuals and their dependents, (iv) expanded eligibility for unemployment insurance and provides eligible recipients with an additional $600 per week on top of the unemployment amount determined by each State and (v) expanded tele-health services in Medicare. The Paycheck Protection Program and Healthcare Enhancement Act of 2020 (the “PPPHE Act”), was enacted on April 24, 2020. Among other things, the PPPHE Act provided an additional $310 billion of funding for the PPP. The Paycheck Protection Program Flexibility Act of 2020 (the “PPPF Act”) was enacted in June 2020 to modify certain provisions of the PPP, including among other things, establishing a maturity of five years for all loans made after the enactment of the PPPF Act and permitted an extension of the maturity of existing loans to five years if the borrower and lender agree. These regulatory and legislative actions may be expanded, extended and amended as the pandemic and its economic impact continue.

The bank regulatory agencies have encouraged financial institutions to report accurate information to credit bureaus regarding relief provided to borrowers and urged the importance of financial institutions to continue assisting those borrowers impacted by the COVID-19 pandemic. Also, on April 3, 2020, the bank regulatory agencies issued a joint policy statement to facilitate mortgage servicers’ ability to place consumers in short-term payment forbearance programs. This policy statement was followed by a final rule, on June 23, 2020, that made it easier for consumers to transition out of financial hardship caused by the COVID-19 pandemic. The rule made it clear that servicers do not violate Regulation X (which places restrictions and requirements upon lenders, mortgage brokers, or servicers of home loans related to consumers when they apply and receive mortgage loans) by offering certain COVID-19- related loss mitigation options based on an evaluation of limited application information collected from the borrower.

In December 2020, the Bipartisan-Bicameral Omnibus COVID Relief Deal, included as a component of appropriations legislation, was enacted to provide economic stimulus to individuals and businesses in further response to the economic distress caused by the COVID-19 pandemic. Among other things, the legislation (i) authorized payments of $600 for individuals making up to $75,000 per year, (ii) extended the timeframe for enhanced unemployment benefits and (iii) authorized approximately $325 billion for small business relief, including approximately $284 billion for a second round of PPP loans and a new simplified forgiveness procedure for PPP loans of $150,000 or less.

During the first quarter of 2021, President Biden signed a number of executive orders relating to stimulus and relief measures. These orders included, among other things, (i) an extension, through March 31, 2021, of the moratorium on evictions and foreclosures, (ii) an extension, through September 30, 2021, of the deferral of federal student loan payments and interest and (iii) an extension, through June 30, 2021, of certain mortgage forbearance programs and guidelines.

On March 11, 2021, the American Rescue Plan Act of 2021 (the “ARP Act”) was enacted, implementing a $1.9 trillion package of stimulus and relief proposals. Among other things, the ARP Act provided (i) additional funding for the PPP program and an expansion of the program for the benefit of certain nonprofits, (ii) funding for the Small Business Administration (“SBA”) to make targeted grants for restaurants and similar establishments, (iii) direct cash payments of up to $1,400 to individuals, subject to income provisions, (iv) an increase in the maximum annual Child Tax Credit, subject to income limitation provisions, (v) $300 a week in expanded unemployment insurance lasting through September 6, 2021 and made $10,200 in unemployment benefits tax free for households, subject to income limitation provisions, (vi) tax relief making any student loan forgiveness incurred between December 31, 2020, and January 1, 2026 non-taxable income, and (vii) funding to support state and local governments; K-12 schools and higher education; the Centers for Disease Control; public transit; rental assistance; child care; and airline industry workers.

On March 27, 2021, the COVID-19 Bankruptcy Relief Extension Act of 2021 was enacted, extending the bankruptcy relief provisions enacted in the CARES Act of 2020 bill until March 27, 2022. These provisions provide financially distressed small businesses and individuals greater access to bankruptcy relief. We are continuing to monitor the potential development of additional legislation and further actions taken by the U.S. government.

The above mentioned significant fiscal stimulus and monetary policy actions of the U.S. government and Federal Reserve have been contributing factors to an inflationary surge during most of 2021. As a result, in December 2021, the Federal Reserve released projections related to the target range for the federal funds rate that imply three 25 basis point increases in the federal funds

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rate in 2022, followed by three in 2023 and two in 2024; however, there can be no such assurance that any increases in the federal funds rate will occur.

Banks and bank holding companies have been particularly impacted by the COVID-19 pandemic as a result of disruption and volatility in the global capital markets. We are closely monitoring the potential for new laws and regulations impacting lending and funding practices as well as capital and liquidity standards. Such changes could require us to maintain significantly more capital, with common equity as a more predominant component, or manage the composition of our assets and liabilities to comply with formulaic liquidity requirements.

Changes in Laws, Regulations or Policies

Federal, state and local legislators and regulators regularly introduce measures or take actions that would modify the regulatory requirements applicable to banks, their holding companies and other financial institutions. Changes in laws, regulations or regulatory policies could adversely affect the operating environment for us in substantial and unpredictable ways, increase or decrease our cost of doing business, impose new restrictions on the way in which the Company conducts its operations or modify significant operational constraints that might impact the Company’s profitability. Whether new legislation will be enacted and, if enacted, the effect that it, or any implementing regulations, would have on the Company and its subsidiaries’ business, financial condition or results of operations cannot be predicted. A change in laws, regulations or regulatory policies may have a material adverse effect on the Company’s business and results of operations.

Effect on Economic Environment

The policies of regulatory authorities, including the monetary policy of the Federal Reserve, have a significant effect on the operating results of bank holding companies and their subsidiaries. Among the means available to the Federal Reserve to affect the money supply are open market operations in U.S. government securities, changes in the discount rate on member bank borrowings and changes in reserve requirements with respect to deposits. These means are used in varying combinations to influence overall growth and distribution of bank loans, investments and deposits, and their use may affect interest rates charged on loans or paid for deposits. Federal Reserve monetary policies have materially affected the operating results of commercial banks in the past and are expected to continue to do so in the future. The Company cannot predict the nature of future monetary policies and the effect of such policies on its business and earnings.

ITEM 1A. RISK FACTORS

An investment in our common stock involves risks. The following is a description of the material risks and uncertainties that we believe affect our business and an investment in our common stock. Additional risks and uncertainties that we are unaware of, or that we currently deem immaterial, also may become important factors that affect the Company and our business. If any of the risks described in this Annual Report on Form 10-K were to occur, our financial condition, results of operations and cash flows could be materially and adversely affected. In such an event, the value of our common stock could decline and you could lose all or part of your investment.

Risks Related to the Pending Merger with CBTX

The consummation of the merger is contingent upon the satisfaction of a number of conditions, including shareholder and regulatory approvals, that may be outside of the Company’s or CBTX’s control and that the Company and CBTX may be unable to satisfy or obtain or which may delay the consummation of the merger or result in the imposition of conditions that could reduce the anticipated benefits from the merger or cause the parties to abandon the merger.

We face risks and uncertainties related to the proposed merger with CBTX. Before the transactions contemplated in the merger agreement with CBTX can be completed, approvals must be obtained from regulatory authorities, including the Federal Reserve, the FDIC and the Texas Department of Banking, and from our shareholders and CBTX’s shareholders, and all conditions to the closing of the transaction included in the merger agreement must have been satisfied or waived. The required regulatory approvals may impose additional conditions, limitations, obligations or costs on the surviving entity, place restrictions on the conduct of the business of the surviving entity or require changes to the terms of the transactions contemplated by the merger agreement. There can be no assurance that our or CBTX’s regulators will not impose any such additional conditions, limitations, obligations or restrictions, or that they will not have the effect of delaying or preventing the completion of the merger, imposing additional material costs on or materially limiting the revenues of the surviving entity following the merger or otherwise reducing the anticipated benefits of the

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merger.Additionally, the surviving entity will be subject to increased regulatory requirements due to its increased asset size, and the ultimate effect of compliance with those expectations is not yet known.

Uncertainties about the effects of the merger, including reputational risk, may impair our ability to attract, retain and motivate key personnel until the merger is consummated and for a period of time thereafter, and could cause customers and others who work with us to seek to change their existing business relationships with us. It is not unusual for competitors to use mergers as an opportunity to target the merging parties’ customers and to hire certain of their employees. Employee retention may be particularly challenging during the pendency of the merger, as employees may experience uncertainty about their roles with the surviving entity following the merger.

The merger agreement contains provisions that restrict each company's ability to, among other things, initiate, solicit, knowingly encourage or knowingly facilitate, inquiries or proposals with respect to, or, subject to certain exceptions generally related to its board of directors’ exercise of fiduciary duties, engage in any negotiations concerning, or provide any confidential information relating to, any alternative acquisition proposals. These provisions, which include a $32.5 million termination fee payable under certain circumstances, may discourage any potential competing third party having an interest in merging with us from proposing a transaction, or may result in the offer of a lower per share price to merge with us than might otherwise have been proposed.

We may fail to realize all of the anticipated benefits of the merger, or those benefits may take longer to realize than expected. We may also encounter significant difficulties in integrating with CBTX. We and CBTX have operated, and until the completion of the merger will continue to operate, independently, subject to terms of the merger agreement imposing specific limitations on certain actions of each party without the consent of the other party. A significant portion of the anticipated benefit of the merger is attributable to anticipated cost savings from the integration of the two companies and elimination of duplicated costs and business functions. There is no assurance that our businesses can be integrated successfully or that the expected cost reductions can be realized. The integration process may result in the loss of key employees of each company, the loss of customers, reputational harm, the disruption of each company’s ongoing business, inconsistencies in standards, controls, policies and procedures, unexpected integration issues, higher than expected integration costs and an overall post-completion integration process that takes longer than originally anticipated. If we experience difficulties in the integration process, including those listed in the prior sentence, we may fail to realize the anticipated benefits of the merger in a timely manner or at all. The success of the merger will depend on, among other things, the ability of the surviving entity following the merger to operate its businesses in a manner that facilitates growth and realizes cost savings.

The merger agreement may be terminated in accordance with its terms and the merger may not be completed. The merger agreement is subject to a number of conditions which must be fulfilled in order to complete the merger, including the approval of the merger agreement by the Company’s and CBTX’s respective shareholders; the receipt of authorization for listing on the Nasdaq of the shares of CBTX common stock to be issued in the merger; the receipt of all required regulatory approvals; the effectiveness of the registration statement on Form S-4 for the CBTX common stock to be issued in the merger; the absence of any order, injunction, decree or other legal restraint preventing the completion of the merger or making the completion of the merger illegal; subject to certain exceptions, the accuracy of the representations and warranties under the merger agreement; our and CBTX’s performance in all material respects of our and their respective obligations under the merger agreement; and each of our and CBTX’s receipt of a tax opinion to the effect that the merger will qualify as a reorganization within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended. The conditions to the closing of the merger included in the merger agreement may not be fulfilled in a timely manner or at all, and, accordingly, the merger may be delayed or may not be completed.

We and CBTX may elect to terminate the merger agreement under certain circumstances. Among other situations, if the merger is not completed by August 2, 2022, either we or CBTX may choose not to proceed with the merger (unless the failure of the closing to occur by such date was due to the failure of the party seeking to terminate the merger agreement to perform or observe the obligations, covenants and agreements of such party set forth in the merger agreement). We and CBTX can also mutually decide to terminate the merger agreement at any time. If the merger agreement is terminated, under certain circumstances, we may be required to pay a termination fee of $32.5 million to CBTX.

The value to be recognized by our shareholders from the merger is subject to material uncertainties. The merger agreement provides that upon the closing of the merger our shareholders will receive 1.4184 shares of CBTX common stock for each share of our common stock that they own at that time. The exchange rate for the conversion of our common stock into CBTX common stock was set in early November 2021 based upon information available to the boards of directors and financial advisors of each company at that time. The market price of our common stock and of CBTX common stock is subject to substantial fluctuations in response to variety of factors that are inherently unpredictable and outside of our control, including changes in our and CBTX’s business, operations and prospects, and regulatory considerations, the historical and anticipated future financial results of our respective banking operations and general market and economic developments affecting Texas, the United States and international businesses and financial markets. The substantial differences between our business and the business of CBTX will subject our shareholders to new and different risks than

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those with which they are familiar. A period of months may transpire between the date that our shareholders are asked to approve the merger and the date that the merger is consummated, during which time the value of the merger consideration received by our shareholders will continue to fluctuate. As a result, at the time of our special meeting of shareholders to vote to approve the merger agreement, our shareholders will not until the closing of the merger know the precise value of the merger consideration they will receive, which could be materially different than the market value at the time of the merger vote and the market value at the time the exchange ratio was set.

Failure to complete the proposed merger with CBTX could negatively impact our business, financial results and stock price. If the proposed merger is not completed for any reason, our ongoing business may be adversely affected and, without realizing any of the benefits of having completed the merger, we would be subject to a number of related risks, including the following:

•we may be required, under certain circumstances, to pay CBTX a termination fee of $32.5 million under the merger agreement, which may adversely affect the price of our common stock;

•we will have incurred substantial expenses and will be required to pay significant costs relating to the merger, whether or not it is completed, such as legal, accounting, due diligence, financial advisor and printing fees;

•the merger agreement places certain restrictions on the conduct of our business prior to completion of the merger, which may adversely affect our ability to execute certain of our business strategies and cause certain other initiatives to be delayed or abandoned;

•matters relating to the merger require substantial commitments of time and resources by our management team that could have been and could be devoted to the pursuit of other opportunities beneficial to us as an independent company; and

•we may be subject to negative reactions from the financial markets and from our customers and employees that could materially affect our business, financial results and stock price; the market price of our common stock could decline to the extent that current market prices of our common stock reflect a market assumption that the merger will be completed.

Litigation could prevent or delay the closing of the proposed merger or otherwise negatively impact our business and operations. We may be subject to legal proceedings related to the agreed terms of the proposed merger, the manner in which the merger was considered and approved by our board of directors or any failure to complete the merger or perform our obligations under the merger agreement. Such litigation could delay or block the consummation of the merger, have an adverse effect on our financial condition and impose material costs on us or the surviving entity. Any delay in completing the merger could cause us not to realize, or to be delayed in realizing, some or all of the benefits that we expect to achieve if the merger is successfully completed within its expected time frame.

The surviving entity’s future results will suffer if we do not effectively manage our expanded operations following the merger. Following the merger, the size of our business will increase significantly beyond its current size. The future success of the surviving entity depends, in part, upon the ability to manage this expanded business and the increased regulatory requirements, which will pose substantial challenges for management, including challenges related to the management and monitoring of new operations and associated increased costs and complexity. There can be no assurances the surviving entity will be successful or that it will realize the expected operating efficiencies, cost savings and other benefits currently anticipated from the merger.

Risks Related to our Business

The COVID-19 pandemic's impact on our business will depend on future developments, which remain uncertain and cannot be predicted, including the scope and duration of the pandemic and actions taken by governmental authorities, employees and customers in response to the pandemic.

The COVID-19 pandemic continues to create extensive disruptions to the global economy and to the lives of individuals throughout the world. Governments, businesses and the public have taken unprecedented actions to contain the spread of COVID-19 and to mitigate its effects, including quarantines, travel bans, shelter-in-place orders, closures of businesses and schools, fiscal stimulus and legislation designed to deliver monetary aid and other relief. While the scope, duration and full effects of the pandemic are rapidly evolving and not fully known, the pandemic and related efforts to contain it have disrupted global economic activity, adversely affected the functioning of financial markets, impacted interest rates, increased economic and market uncertainty and disrupted trade and supply chains. If these effects continue for a prolonged period or result in sustained economic stress or recession, many of the risk factors identified in this Form 10-K could be exacerbated and such effects could have a material adverse impact on us

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in a number of ways related to credit, collateral, capital, customer demand, funding, liquidity, operations, interest rate risk, human capital and self-insurance.

Key employees and members of their households could become sick from COVID-19, and current and future restrictions on how we operate our bank offices and operational departments could limit our ability to meet customer service expectations and have a material adverse effect on our operations. Additionally, in order to reduce the spread of COVID-19, we have modified our business practices with a portion of our employees working remotely from their homes. As a result, some employees may not choose to return to working full time from the office or may decide to leave the workforce all together, which could adversely affect our business and operations. The continuation of these work-from-home measures also introduces additional operational risk, including that technology in employees’ homes may not be as robust as in our offices and could cause the networks, information systems, applications and other tools available to employees to be more limited or less reliable than in our offices. Increased cybersecurity risk includes increased phishing, malware and other cybersecurity attacks, vulnerability to disruptions of our information technology infrastructure and telecommunications systems for remote operations, increased risk of unauthorized dissemination of confidential information, limited ability to restore the systems in the event of a systems failure or interruption, greater risk of a security breach resulting in destruction or misuse of valuable information and potential impairment of our ability to perform critical functions, including wiring funds, all of which could expose us to risks of data or financial loss, litigation and liability and could seriously disrupt our operations.

Our business concentration in Texas, specifically in the Houston region, imposes risks and may magnify the consequences of any regional or local economic downturn affecting Houston, including any downturn in the energy or real estate sectors.

We conduct our operations almost exclusively in the Houston region. As of December 31, ~~2018,~~2021, the substantial majority of the loans in our loan portfolio were made to borrowers who live and/or conduct business in Texas, and specifically, in the Houston region, and the substantial majority of our secured loans were secured by collateral located in the Houston region. Accordingly, we are significantly exposed to risks associated with a lack of geographic diversification. The economic conditions in the Houston region are dependent on the energy sector generally and the price of oil and gas specifically. Any downturn or adverse development in the energy sector or continued ~~low~~volatility of oil or gas prices could have a material adverse impact on our business, financial condition, results of operations and future prospects. Adverse economic developments, among other things, could negatively affect the volume of loan originations, increase the level of nonperforming assets and charge-offs, increase the rate of foreclosure losses on loans and reduce the value of our loans and loan servicing portfolio. While crude oil prices increased in 2021 relative to 2020, they remained volatile throughout the end of 2021. Any regional or local economic downturn that affects the Houston region or Texas more generally, or our existing borrowers, prospective borrowers or property values in the Company’s market area may affect our profitability more significantly and more adversely than those of our competitors with operations that are less geographically concentrated in the same area.

We may not be able to implement aspects of our growth strategy, which may affect our ability to maintain our historical earnings trends.

The Company’s growth strategy focuses on organic growth, supplemented by strategic acquisitions. The Company may not be able to execute on aspects of its growth strategy to sustain its historical rate of growth or may not be able to grow at all. More specifically, the Company may not be able to generate sufficient new loans and deposits within acceptable risk and expense tolerances, obtain the personnel or funding necessary for additional growth or find suitable acquisition candidates. Various factors, such as economic conditions, ~~in particular,~~ the volatility of oil and gas prices and, in particular, competition, may impede or prohibit the growth of the Company’s operations, the opening of new branches and the consummation of additional acquisitions. Further, the Company may be unable to attract and retain experienced bankers, which could adversely affect its growth. The success of the Company’s growth strategy also depends on its ability to effectively manage growth, which is dependent upon a number of factors, including the Company’s ability to adapt its existing credit, operational, technology and governance infrastructure to accommodate expanded operations. If the Company fails to implement one or more aspects of its growth strategy, the Company may be unable to maintain its historical earnings trends, which could adversely affect its business, financial condition and results of operations.

~~We are dependent~~ Furthermore, the future effects of COVID-19 on ~~our executive officers and other key individuals to continue~~economic activity could negatively affect the implementation of our long-term business strategy and the loss of one or more of these key individuals could curtail our growth and adversely affect our business, financial condition, results of operations and prospects.

Our continued success depends in large part upon the skills, experience and continued service of our executive management team and Board of Directors. Our goals, strategies and continued growth are closely tied to the strengths andfuture banking ~~philosophy of our executive management team,~~products we provide, including our Chairman and Chief Executive Officer, George Martinez, and our President, Steven F. Retzloff. Successful implementation of our business strategy is also dependent in part on the continued service of our bank office presidents. The community involvement and diverse and extensive local business relationships and experiencea decline in the ~~Houston market~~origination of our officers in the Houston region are important to our success. The loss of services of any of these key personnel in the future could have a negative impact on our business because of their skills, years of industry experience and the difficulty of promptly finding qualified replacement personnel who are experienced in the specialized aspects of our business or who have ties to the communities within our market area. Currently, it is generally our policy not to have employment agreements with our officers. While the Company does not anticipate any changes in our executive management team, the unexpected loss of any of these members of management could have a material adverse effect on the Company and our ability to implement our business strategy.

loans.

Our ability to retain bankers and recruit additional successful bankers is critical to the success of our business strategy and any failure to do so could impair our customer relationships and adversely affect our business and results of operations.

Our ability to retain and grow our loans, deposits and fee income depends upon the business generation capabilities, reputation and the relationship management skills of our bankers. If we were to lose the services of any of our bankers, including

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successful bankers employed by an acquired bank, to a competitor or otherwise, the Company may not be able to retain valuable relationships and some of our customers could choose to use the services of a competitor instead of our services.

Furthermore, our ability to replace our current bankers as they age-out of the workforce is limited by the number of qualified applicants available.

Our success and growth strategy also depends on our continued ability to attract and retain experienced loan officers and support staff, as well as other management ~~personnel.~~personnel, including our ability to replace our current loan officers, staff and personnel as they age-out of the workforce. The Company may face difficulties in recruiting and retaining bankers and other personnel of our desired caliber, including as a result of staffing shortages and competition from other financial institutions. Competition for loan officers and other personnel is strong and the Company may not be successful in attracting or retaining the personnel it requires. In particular, many of our competitors are significantly larger with greater financial resources, and may be able to offer more attractive compensation packages and broader career opportunities. Furthermore, our current and potential new personnel may prefer and seek jobs where they can work fully remote. Additionally, the Company may incur significant expenses and expend significant time and resources on training, integration and business development before it is able to determine whether a new loan officer will be profitable or effective. If we are unable to attract and retain successful loan officers and other personnel, or if our loan officers and other personnel fail to meet our expectations in terms of customer relationships and profitability, we may be unable to execute our business strategy and our business, financial condition, results of operations and growth prospects may be negatively affected.

We are dependent on our executive officers and other key individuals to continue the implementation of our long-term business strategy and the loss of one or more of these key individuals could curtail our growth and adversely affect our business, financial condition, results of operations and prospects.

Our continued success depends in large part upon the skills, experience and continued service of our executive management team and Board of Directors. Our goals, strategies and continued growth are closely tied to the strengths and banking philosophy of our executive management team, including our Chief Executive Officer, Steven F. Retzloff, and our President, Ramon A. Vitulli, III. Successful implementation of our business strategy is also dependent in part on the continued service of our bank office presidents. The community involvement and diverse and extensive local business relationships and experience in the Houston market of our officers in the Houston region are important to our success. The loss of services of any of these key personnel in the future could have a negative impact on our business because of their skills, years of industry experience and it may be difficult to find qualified replacement personnel who are experienced in the specialized aspects of our business or who have ties to the communities within our market area. Currently, it is generally our policy to utilize employment agreements only in connection with merger or acquisition activities and not to have long-term employment agreements with our officers. While the Company does not anticipate any changes in our executive management team, the unexpected loss of any of these members of management could have a material adverse effect on the Company and our ability to implement our business strategy.

A key piece of our strategic growth plan involves decision-making authority at the bank office level, and our business, financial condition, results of operations and prospects could be negatively affected if our local teams do not follow our internal policies or are negligent in their decision-making.

We attract and retain our management talent by empowering them to make certain business decisions on a local level. Lending authorities are assigned to bank office presidents and their banking teams based on their level of experience. Additionally, all loan relationships in excess of internal specified maximums are reviewed by ~~the Bank’s Senior Loan Committee,~~a senior level loan committee, comprised of senior management of the Bank. Our local bankers may not follow our internal procedures or otherwise act in our best interests with respect to our decision-making. A failure of our employees to follow our internal policies, or actions taken by our employees that are negligent, could have a material adverse effect on our business, financial condition, results of operations and prospects.

Our strategic growth plan, which includes pursuing acquisitions, could expose the Company to financial, execution and operational risks that could have a material adverse effect on our business, financial condition, results of operations and growth prospects.

The Company has acquired three financial institutions and one branch and intends to continue to pursue a strategy that includes future acquisitions. An acquisition strategy involves significant risks, including the following:

•discovering proper candidates for acquisition;

•incurring time and expense associated with identifying and evaluating potential acquisitions and negotiating potential transactions, resulting in management’s attention being diverted from the operation of our existing business;

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•using inaccurate estimates and judgments to evaluate credit, operations, management, compliance and market risks with respect to the target institution or assets;

•

~~conducting adequate due diligence and managing known and unknown risks and uncertainties;~~

•conducting adequate due diligence and managing known and unknown risks and uncertainties, including compliance and legal matters;

•obtaining necessary regulatory approvals;

•integrating the operations and personnel of the combined businesses, thereby creating an adverse short-term effect on results of operations;

•attracting and retaining qualified management and key personnel, including bankers;

•maintaining asset quality;

•attracting and retaining customers;

•attracting funding to support additional growth within acceptable risk tolerances; and

•maintaining adequate regulatory capital.

The market for acquisition targets is highly competitive, which may adversely affect our ability to find acquisition candidates that fit our strategy and standards. To the extent that we are unable to find suitable acquisition targets, an important component of our growth strategy may not be realized. Acquisitions of financial institutions involve operational risks and uncertainties, such as unknown or contingent liabilities with no available manner of recourse, exposure to unexpected problems such as asset quality, the retention of key employees and customers and other issues that could negatively affect our business. Acquisitions of financial institutions are also subject to regulatory approvals that can result in delays, which in some cases could be for a lengthy period of time or may not be received. The Company may not be able to complete future acquisitions or, if completed, the Company may not be able to successfully integrate the operations, technology platforms, management, products and services of the entities that it acquires or effectively eliminate redundancies. The integration process may also require significant time and attention from our management that would otherwise be directed toward servicing existing business and developing new business. Further, acquisitions typically involve the payment of a premium over book and market values and, therefore, some dilution of our tangible book value and net income per common share may occur in connection with any future acquisition, and the goodwill that the Company currently maintains or may recognize in connection with future transactions may be subject to impairment in future periods.

Challenging market conditions and economic trends have adversely affected the banking industry and could adversely affect our business, financial condition and results of operations.

We are a business operating in the challenging and uncertain financial services environment. The success of our business and operations is sensitive to general business and economic conditions in the U.S. and locally in our industry and market. If the U.S. economy weakens, whether due to the effects of the COVID-19 pandemic or otherwise, and a lack of growth in population, income levels, deposits and business investment in our local market occurs, our growth and profitability from our lending, deposit and asset management services could be constrained. ~~Although economic conditions have improved in recent years, financial~~Financial institutions continue to be affected by volatility in the real estate market in some parts of the country and uncertain regulatory and interest rate conditions. The Company has direct exposure to the residential and commercial real estate market in Texas, particularly in the Houston region, and could be affected by these events.

Uncertain market and economic conditions can make our ability to assess the creditworthiness of customers and estimate the losses in our loan portfolio more complex. Current inflationary trends, if sustained for an extended period of time, could have a negative impact on customers' businesses. Another national economic recession or continued deterioration of conditions in our market could drive losses beyond that which is provided for in our allowance for ~~loan~~credit losses and result in the following consequences, any of which could have a material adverse effect on our business:

•loan delinquencies may ~~rise:~~

rise;

•nonperforming assets and foreclosures may increase;

•demand for our products and services may decline; and

•collateral securing our loans, especially real estate, may decline in value, which could reduce customers’ borrowing power and repayment ability.

Low orand volatile oil and gas prices ~~could~~can have an adverse impact on economic conditions in the U.S. generally and in the Houston region specifically. Declines in real estate values, declines in the volume of home sales and financial stress on borrowers as a result of low oil and gas prices, including job losses, ~~could~~may have an adverse effect on our borrowers orand their customers, which ~~could~~ may

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adversely affect our business, financial condition and results of operations.

The future effects of COVID-19 on economic activity could negatively affect the collateral values associated with our existing loans, our ability to liquidate the real estate collateral securing our residential and commercial real estate loans, our ability to maintain loan origination volume and to obtain additional financing, the future demand for or profitability of our lending and services and the financial condition and credit risk of our customers. Further, in the event of delinquencies, regulatory changes and policies designed to protect borrowers may slow or prevent us from making our business decisions or may result in a delay in our taking certain remediation actions, such as foreclosure. In addition, we have unfunded commitments to extend credit to customers. During challenging economic environments, our customers are more dependent on our credit commitments and increased borrowings under these commitments could adversely impact our liquidity.

The small to medium-sized businesses that the Company lends to may have fewer resources to weather adverse business developments, which may impair a borrower’s ability to repay a loan, and such impairment could adversely affect our results of operations and financial condition.

We focus our business development and marketing strategy primarily on small to medium-sized businesses, which we categorize as commercial borrowing relationships of generally less than $5$8 million of exposure. Small to medium-sized businesses frequently have a smaller market share than their competition, may be more vulnerable to economic downturns, often need substantial additional capital to expand or compete and may experience substantial volatility in operating results, any of which may impair a borrower’s ability to repay a loan. In addition, the success of a small or medium-sized business often depends on the management skills, talents and efforts of one or two people or a small group of people, and the death, disability or resignation of one or more of these people could have a material adverse impact on the business and its ability to repay our loan. If general economic conditions negatively impact the Houston region or Texas and small to medium-sized businesses are adversely affected, or our borrowers are otherwise affected by adverse business developments, our business, financial condition and results of operations may be negatively affected.

If our allowance for ~~loan~~credit losses is not sufficient to cover actual loan losses, our earnings may be affected.

The allowance for ~~loan~~credit losses is a valuation allowance for ~~probable incurred loan~~current expected credit losses. We establish our allowance for ~~loan~~credit losses and maintain it at a level management considers adequate to absorb ~~probable incurred~~expected loan losses in our loan portfolio. The allowance for ~~loan~~credit losses represents our estimate of probable losses in the portfolio at each balance sheet date and is based upon relevant information available to us, such as past loan loss experience, the nature and volume of the portfolio, information about specific borrower situations and estimated collateral values, economic conditions and other factors. Loan losses are charged against the allowance when management believes the uncollectibility of a loan balance is confirmed. Subsequent recoveries, if any, are credited back to the allowance. Our allowance for ~~loan~~credit losses consists of a general component based upon ~~probable incurred but unidentified~~expected losses in the portfolio and a specific component based on individual loans that are ~~considered impaired.~~individually evaluated. In determining the collectability of certain loans, management also considers the fair value of any underlying collateral. The amount ultimately realized may differ from the carrying value of these assets because of economic, operating or other conditions beyond our control, and any such differences may be material.

As of December 31, ~~2018,~~2021, our allowance for ~~loan~~credit losses on loans was ~~$26.3~~$47.9 million, which ~~represents 0.71%~~represented 1.14% of our total loans and ~~79.90%~~198.70% of our total nonperforming loans. As of December 31, ~~2017,~~2020, our allowance for loan losses was ~~$23.6~~$53.2 million, which represented ~~1.04%~~1.18% of our total loans and ~~177.44%~~184.03% of our total nonperforming loans as of the same date. Additional loan losses will likely occur in the future and may occur at a rate greater than the Company has previously experienced. We may be required to take additional provisions for loan losses in the future to further supplement the allowance for ~~loan~~credit losses, either due to ~~management’s decision to do so~~results of the allowance for credit losses model or as required by our banking regulators. In addition, federal and state bank regulatory agencies periodically review our allowance for ~~loan~~credit losses and the value attributed to nonaccrual loans or to real estate acquired through foreclosure. Such regulatory agencies may require the Company to recognize future charge-offs. Their conclusions about the quality of a particular borrower or our entire loan portfolio may be different than ours. Any increase in our allowance for ~~loan~~credit losses or loan charge offs as required by these regulatory agencies could have a negative effect on our results of operations and financial condition. Moreover, additions to the allowance may be necessary based on changes in economic and real estate market conditions, new information regarding existing loans, identification of additional problem loans, accounting rule changes (like those related to ~~the Financial Accounting Standards Board’s rules regarding accounting for current expected credit losses that are not yet effective)~~CECL which became effective on January 1, 2020) and other factors, both within and outside of our management’s control. These additions may require increased provision expense which would negatively impact our results of operations and financial condition.

The acquisition method of accounting requires that acquired loans are initially recorded at fair value at the time of acquisition, which includes an estimate of loan losses expected to be realized over the remaining lives of the loans, and therefore no corresponding allowance for ~~loan~~credit losses is recorded for these loans at acquisition because credit quality, among other elements, was

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considered in the determination of fair value. To the extent that our estimates of fair value are too high, it will incur losses associated with the acquired loans.

As a significant percentage of our loan portfolio is comprised of real estate loans, an adverse change in the economic conditions of the real estate market where we operate could affect real estate values and may result in losses to our business.

As of December 31, ~~2018, $2.92~~2021, $3.35 billion, or ~~78.7%~~79.3%, of our total loans was comprised of loans with real estate as a primary or secondary component of collateral. The real estate collateral provides an alternate source of repayment in the event of default by the borrower and may deteriorate in value over the term of the loan, limiting our ability to realize the full value of the collateral anticipated at the time of the originating loan. A weakening of the real estate market in our primary market area could have an adverse effect on the demand for new loans, the ability of borrowers to repay outstanding loans, the value of real estate and other collateral securing the loans and the value of our business. In addition, the volatility of the real estate market may result in a lower valuation at the time collateral is put on the market for sale. Collateral may have to be sold for less than the outstanding balance of the loan, which could result in losses on such loans. Such declines and losses in real estate values may cause the Company to experience increases in provisions for loan losses and charge-offs, which could adversely affect our profitability.

Our commercial real estate and construction, land development and other land loan portfolios expose us to credit risks that may be greater than the risks related to other types of loans.

As of December 31, ~~2018, $1.65~~2021, $2.10 billion, or ~~44.5%~~49.9%, of our total loans were comprised of commercial real estate loans (including owner-occupied commercial real estate loans) and ~~$430.1~~$439.1 million, or ~~11.6%~~10.4%, of our total loans were comprised of construction, land development and other land loans. Commercial real estate loans generally involve relatively large balances to single borrowers or related groups of borrowers. Repayment of these loans is typically dependent upon income generated, or expected to be generated, by the property securing the loan in amounts sufficient to cover operating expenses and debt service. The availability of such income for repayment may be adversely affected by changes in the economy or local market conditions. These loans expose a lender to greater credit risk than loans secured by other types of collateral because the collateral securing these loans is typically more difficult to liquidate due to the fluctuation of real estate values. Unexpected deterioration in the credit quality of our commercial real estate loan portfolio could require us to increase our allowance for ~~loan~~credit losses, which would reduce our profitability and may have a material adverse effect on our business, financial condition and results of operations.

Real estate construction, land development and other similar land loans involve risks attributable to the fact that loan funds are secured by a project under construction, and the project is of uncertain value prior to our completion. These risks include:

•the viability of the contractor:

•the value of the project being subject to successful completion;

•the contractor’s ability to complete the project, to meet deadlines and time schedules and to stay within our estimates; and

•concentration of such loans with a single contractor and our affiliates.

Real estate construction lending often involves the disbursement of substantial funds with repayment dependent, in part, on the success of the ultimate project rather than the ability of a borrower or guarantor to repay the loan and also presents risks of default in the event of declines in property values or volatility in the real estate market during the construction phase. If we are forced to foreclose on a project prior to completion, we may be unable to recover the entire unpaid portion of the loan. In addition, we may be required to fund additional amounts to complete a project and may have to hold the property for an indeterminate period of time, any of which could adversely affect our business, financial condition and results of operations.

A large portion of our loan portfolio is comprised of commercial and industrial loans secured by receivables, inventory, equipment or other commercial collateral, the deterioration in value of which could increase the potential for future losses.

As of December 31, ~~2018, $702.0~~2021, $693.6 million, or ~~18.9%~~16.4%, of our total loans were comprised of commercial and industrial loans that are typically based on the borrowers’ ability to repay the loans from the cash flow of their businesses. These loans may involve greater risk because the availability of funds to repay each loan depends substantially on the success of the borrower’s business itself and these loans are typically larger in amount, which creates the potential for larger losses on a single loan basis. Commercial and industrial loans are collateralized by general business assets including, among other things, accounts receivable, inventory and equipment and are generally backed by a personal guaranty of the borrower or principal. This collateral may decline in value more rapidly than the Company anticipates, exposing it to increased credit risk. In addition, a portion of our customer base, including customers in the energy and real estate business, may be in industries which are particularly sensitive to commodity prices or market

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fluctuations, such as energy and real estate prices. Accordingly, negative changes in commodity prices and real estate values and liquidity could impair the value of the collateral securing these loans. Significant adverse changes in the economy or local market conditions in which our commercial lending customers operate could cause rapid declines in loan collectability and the values associated with general business assets resulting in inadequate collateral coverage that may expose the Company to credit losses and could adversely affect our business, financial condition and results of operations.

Our SBA lending program, which includes the Paycheck Protection Program (“PPP”), is dependent upon the federal government and our status as a participant in the SBA’s Preferred Lenders Program, and a failure to originate SBA loans in compliance with SBA guidelines could result in losses on the guaranteed portion of our SBA loans.

We have been approved by the Small Business Administration, or SBA, to participate in the SBA’s Preferred Lenders Program. As an SBA Preferred Lender, we enable our clients to obtain SBA loans without being subject to the potentially lengthy SBA approval process necessary for lenders who are not SBA Preferred Lenders. The SBA periodically reviews the lending operations of participating lenders to assess, among other things, whether the lender exhibits prudent risk management. When weaknesses are identified, the SBA may request corrective actions or impose enforcement actions, including revocation of the lender’s Preferred Lender status. If we lose our status as an SBA Preferred Lender, we may lose some or all of our customers to lenders who are SBA Preferred Lenders, which could adversely affect our business, financial condition and results of operations.

In an effort to support our communities during the COVID-19 pandemic, we participated in the SBA’s new 7(a) loan program called the PPP by making loans to small businesses that are subject to the terms and conditions of the PPP. We face increased risks related to non-compliance by us with this new legislation and by borrowers with the terms of the PPP. Additionally, we face risk on PPP loans if there is a deficiency in the manner in which the loan was originated, funded or serviced by us, such as an issue with the eligibility of a borrower to receive a PPP loan or the amount of such loan, which may or may not be related to the ambiguity in the laws, rules and guidance regarding the operation of the PPP. If the SBA determines there is a deficiency, the SBA may deny its liability under the guaranty, reduce the amount of the guaranty, or, if it has already paid under the guaranty, seek recovery of any loss related to the deficiency from us. If borrowers under PPP loans fail to qualify for loan forgiveness, we are at the heightened risk of holding such loans at unfavorable interest rates with no collateral and no guarantors. Through our participation in the PPP, as of December 31, 2021, we had funded over 10,000 PPP loans in excess of $1.08 billion.

As of December 31, ~~2018,~~2021, SBA 7(a) and 504 program loans of ~~$162.4~~$205.6 million comprised ~~4.4%~~4.9% of our loan portfolio,and we intend to grow this segment of our portfolio in the future. PPP loans notwithstanding, SBA lending programs typically guarantee 75.0% of the principal on an underlying loan. If the SBA establishes that a loss on an SBA-guaranteed loan is attributable to significant technical deficiencies in the manner in which the loan was originated, funded or serviced by us, the SBA may seek recovery of the principal loss related to the deficiency from us notwithstanding that a portion of the loan was guaranteed by the SBA, which could adversely affect our business, financial condition and results of operations. While we follow the SBA’s underwriting guidelines, our ability to do so depends on the knowledge and diligence of our employees and the effectiveness of controls we have established. If our employees do not follow the SBA guidelines in originating loans and if our loan review and audit programs fail to identify and rectify such failures, the SBA may reduce or, in some cases, refuse to honor its guarantee obligations and we may incur losses as a result.

The laws, regulations and standard operating procedures that are applicable to SBA loan products may change in the future. We cannot predict the effects of these changes on our business and profitability. Because government regulation greatly affects the business and financial results of all commercial banks and bank holding companies, including our organization, changes in the laws, regulations and procedures applicable to SBA loans could adversely affect our ability to operate profitably. In addition, the aggregate amount of all SBA 7(a) and 504 loan guarantees by the SBA must be approved each fiscal year by the federal government. We cannot predict the amount of SBA 7(a) loan guarantees in any given fiscal year. If the federal government were to reduce the amount of SBA loan guarantees, such reduction could adversely impact our SBA lending program.

A lack of liquidity could adversely affect our operations and jeopardize our business, financial condition and results of operations.

Liquidity is essential to our business. We rely on our ability to generate deposits and effectively manage the repayment and maturity schedules of our loans and investment securities, respectively, to ensure that we have adequate liquidity to fund our operations. An inability to raise funds through deposits, borrowings, the sale of our investment securities, the sale of loans and other sources could have a substantial negative effect on our liquidity. Our most important source of funds is deposits. Deposit balances can decrease when customers perceive alternative investments as providing a better risk/return tradeoff. Furthermore, the portion of our deposit portfolio that is comprised of large uninsured deposits may be more likely to be withdrawn rapidly under adverse economic

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conditions. If customers move money out of bank deposits and into other investments such as money market funds, we would lose a relatively low-cost source of funds, increasing our funding costs and reducing our net interest income and net income.

Other primary sources of funds consist of cash flows from operations, maturities and sales of investment securities and proceeds from the issuance and sale of our equity and debt securities to investors. Additional liquidity is provided by our ability to borrow from the Federal Reserve Bank of Dallas and the Federal Home Loan Bank (the “FHLB”) and our ability to raise brokered deposits. The Company also may borrow funds from third-party lenders, such as other financial institutions. Our access to funding sources in amounts adequate to finance or capitalize our activities, or on terms that are acceptable to us, could be impaired by factors that affect us directly or the financial services industry or economy in general, such as disruptions in the financial markets or negative views and expectations about the prospects for the financial services industry. Our access to funding sources could also be affected by a decrease in the level of our business activity as a result of a downturn in the economy of the Houston region or by one or more adverse regulatory actions against us.

Based on our experience, we believe that our deposit accounts are relatively stable sources of funds. If we increase interest rates paid to retain deposits, our earnings may be adversely affected, which could have an adverse effect on our business, financial condition and results of operations.

Any decline in available funding could adversely impact our ability to originate loans, invest in securities, meet our expenses or fulfill obligations such as repaying our borrowings, funding unfunded commitments or meeting deposit withdrawal demands, any of which could have a material adverse impact on our liquidity, business, financial condition and results of operations.

We may need to raise additional capital in the future, and such capital may not be available when needed or at all.

We may need to raise additional capital, in the form of additional debt or equity, in the future to have sufficient capital resources and liquidity to meet our commitments and fund our business needs and future growth, particularly if the quality of our assets or earnings were to deteriorate significantly. Our ability to raise additional capital, if needed, will depend on, among other things, conditions in the capital markets at that time, which are outside of our control, and our financial condition. Economic conditions and a loss of confidence in financial institutions may increase our cost of funding and limit access to certain customary sources of capital or make such capital only available on unfavorable terms, including interbank borrowings, repurchase agreements and borrowings from the discount window of the Federal Reserve. We may not be able to obtain capital on acceptable terms or at all. Any occurrence that may limit our access to the capital markets, such as a decline in the confidence of debt purchasers, depositors of our bank or counterparties participating in the capital markets or other disruption in capital markets, may adversely affect our capital costs and our ability to raise capital and, in turn, our liquidity. Further, if we need to raise capital in the future, we may have to do so when many other financial institutions are also seeking to raise capital and would then have to compete with those institutions for investors. An inability to raise additional capital on acceptable terms when needed could have a material adverse effect on our business, financial condition and results of operations.

Fluctuations in interest rates may adversely impact our earnings and capital levels and overall results of operations.

Like most financial institutions, our earnings and cash flows depend to a great extent upon the level of our net interest income, or the difference between the interest income we earn on loans, investments and other interest-earning assets, and the interest expense we pay on deposits, borrowings and other interest-bearing liabilities. Therefore, any change in general market interest rates, such as a change in the monetary policy of the Federal Reserve or otherwise, can have a significant effect on our net interest income. The majority of our banking assets are monetary in nature and subject to risk from changes in interest rates. Changes in interest rates can increase or decrease our net interest income, because different types of assets and liabilities may react differently, and at different times, to market interest rate changes. When interest-bearing liabilities mature or reprice more quickly, or to a greater degree than interest-earning assets in a period, an increase in interest rates could reduce net interest income. Similarly, when interest-earning assets mature or reprice more quickly, or to a greater degree than interest-bearing liabilities, falling interest rates could reduce net interest income.

Additionally, an increase in interest rates may, among other things, adversely affect the demand for loans and our ability to originate loans and decrease loan repayment rates. Conversely, a decrease in the general level of interest rates may affect the Company through, among other things, increased prepayments on loan and mortgage-backed securities portfolio and increased competition for deposits. Accordingly, changes in the general level of market interest rates may adversely affect our net yield on interest-earning assets, loan origination volume, loan portfolio and our overall results.

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In March 2020, the Federal Reserve lowered the target range for the federal funds rate to a range from 0 to 0.25 percent, citing concerns about the impact of COVID-19 on markets and stress in the energy sector. Throughout 2021, the Federal Reserve reaffirmed this target range. While rate increases are expected in 2022, a prolonged period of extremely volatile and unstable market conditions would likely increase our funding costs and negatively affect market risk mitigation strategies. Higher income volatility from changes in interest rates and spreads to benchmark indices could cause a loss of future net interest income and a decrease in current fair market values of our assets. Fluctuations in interest rates will impact both the level of income and expense recorded on most of our assets and liabilities and the market value of all interest-earning assets and interest-bearing liabilities, which in turn could have a material adverse effect on our net income, operating results and financial condition.

Although our asset-liability management strategy is designed to control and mitigate exposure to the risks related to changes in market interest rates, those rates are affected by many factors outside of our control, including various governmental and regulatory monetary policies, inflation, recession, changes in unemployment, the money supply, international disorder and instability in domestic and foreign financial markets. Adverse changes in the Federal Reserve interest rate policies or other changes in monetary policies and economic conditions could materially and adversely affect the Company. We may not be able to accurately predict the likelihood, nature and magnitude of those changes or how and to what extent they may affect our business. The Company also may not be able to adequately prepare for or compensate for the consequences of such changes. Any failure to predict and prepare for changes in interest rates or adjust for the consequences of these changes may adversely affect our earnings, capital levels and overall results.

Interest rates on our outstanding financial instruments might be subject to change based on developments related to LIBOR, which could adversely affect our revenue, expenses and the value of those financial instruments.

In 2017, the United Kingdom’s Financial Conduct Authority (the “FCA”), which regulates LIBOR, publicly announced that it intends to stop persuading or compelling banks to submit LIBOR rates after 2021. The Alternative Reference Rates Committee, a steering committee comprised of U.S. financial market participants, selected and the Federal Reserve Bank of New York started in May 2018 to publish the Secured Overnight Finance Rate (“SOFR”) as an alternative to LIBOR. In November 2020, the FCA announced that most tenors of US Dollar LIBOR would continue to be published through June 30, 2023. It is expected that a transition away from the widespread use of LIBOR to alternative rates will continue to occur over the course of the next year. Uncertainty as to the adoption, market acceptance or availability of SOFR or other alternative reference rates may adversely affect the value of LIBOR-based loans and securities in the Company’s portfolio and may impact the availability and cost of hedging instruments and borrowings. The language in the Company’s LIBOR-based contracts and financial instruments has developed over time and may have various events that trigger when a successor index to LIBOR would be selected. If a trigger is satisfied, contracts and financial instruments may give the Company or the calculation agent, as applicable, discretion over the selection of the substitute index for the calculation of interest rates. The implementation of a substitute index for the calculation of interest rates under the Company’s agreements may result in the Company incurring significant expenses in effecting the transition and may result in disputes or litigation with customers over the appropriateness or comparability to LIBOR of the substitute index, any of which could have an adverse effect on the Company’s results of operations.

We could recognize losses on securities held in our securities portfolio, particularly if interest rates increase or economic and market conditions deteriorate.

The Company invests in available for sale securities with the primary objectives of providing a source of liquidity, providing an appropriate return on funds invested, managing interest rate risk, meeting pledging requirements and meeting regulatory capital requirements. As of December 31, ~~2018,~~2021, the amortized cost of our securities portfolio was ~~$340.9 million,~~$1.75 billion, which represented ~~7.3%~~24.6% of total assets. Factors beyond our control, including rate hikes, can significantly influence the fair value of securities in our portfolio and can cause potential adverse changes to the fair value of these securities. For example, fixed-rate securities are generally subject to decreases in market value when interest rates rise. Additional factors include, but are not limited to, rating agency downgrades of the securities, defaults by the issuer or individual borrowers with respect to the underlying securities and continued instability in the credit markets. Any of the foregoing factors could cause other-than-temporary impairment in future periods and result in realized losses. The process for determining whether impairment is other-than-temporary usually requires difficult, subjective judgments about the future financial performance of the issuer and any collateral underlying the security in order to assess the probability of receiving all contractual principal and interest payments on the security. Because of ~~changing~~volatile economic and market conditions affecting interest rates, the financial condition of issuers of the securities and the performance of the underlying collateral, we may recognize realized and/or unrealized losses in future periods, which could have an adverse effect on our business, financial condition and results of operations.

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If the goodwill that we have recorded in connection with a business acquisition becomes impaired, it could require charges to earnings, which would have a negative impact on our financial condition and results of operations.

Goodwill represents the amount by which the cost of an acquisition exceeded the fair value of net assets we acquired in connection with the purchase of another financial institution. The Company reviews goodwill for impairment at least annually, or more frequently if a triggering event occurs which indicates that the carrying value of the asset might be impaired.

The Company determines impairment by comparing the implied fair value of the reporting unit goodwill with the carrying amount of that goodwill. If the carrying amount of the reporting unit goodwill exceeds the implied fair value of that goodwill, an impairment loss is recognized in an amount equal to that excess. Any such adjustments are reflected in our results of operations in the periods in which they become known. AsFactors that could cause an impairment charge include adverse changes to macroeconomic conditions, declines in the profitability of ~~December 31, 2018, our goodwill totaled $223.1 million.~~ the reporting unit or declines in the tangible book value of the reporting unit. While we have not recorded any impairment charges since we initially recorded the goodwill, our future evaluations of goodwill may result in findings of impairment and related write-downs, which may have a material adverse effect on our financial condition and results of operations.

As of December 31, 2021, our goodwill totaled $223.6 million.

We face strong competition to attract and retain customers from other companies that offer banking services, which could impact our business by preventing us from obtaining customers and adversely affecting our future growth and profitability.

We conduct our operations almost exclusively in the Houston region. Many of our competitors offer the same, or a wider variety of, banking services within this market area. These competitors include banks with nationwide operations, regional banks and other community banks. The Company also faces competition from many other types of financial institutions, including savings banks, credit unions, finance companies, mutual funds, insurance companies, brokerage and investment banking firms, asset-based non-bank lenders, financial technology ("fintech") competitors and certain other non-financial entities, such as retail stores that may maintain their own credit programs and certain governmental organizations that may offer more favorable financing or deposit terms than the Company can. In addition, a number of out-of-state financial intermediaries have opened production offices, or otherwise solicit deposits, in our market area. The financial services industry could become even more competitive as a result of legislative, regulatory and technological changes and continued consolidation. In particular, the activity of fintech companies has grown significantly over recent years and is expected to continue to grow. Some fintech companies are not subject to the same regulations as we are, which may allow them to be more competitive. Increased competition from fintech companies and the growth of digital banking may also lead to pricing pressures as competitors offer more low-fee and no-fee products. In addition, as customer preferences and expectations continue to evolve, technology has lowered barriers to entry and made it possible for banks to expand their geographic reach by providing services over the internet and for nonbanks to offer products and services traditionally provided by banks, such as automatic transfer and automatic payment systems. Increased competition in our market may result in reduced loans and deposits, as well as reduced net interest margin, fee income and profitability. Ultimately, the Company may not be able to compete successfully against current and future competitors. If we are unable to attract and retain banking customers, we may be unable to continue to grow our loan and deposit portfolios, and our business, financial condition and results of operations could be adversely affected.

Our ability to compete successfully depends on a number of factors, including, among other things:

•the ability to develop, maintain and build long-term customer relationships based on top quality service, high ethical standards and safe, sound assets;

•the scope, relevance and pricing of products and services offered to meet customer needs and demands;

•the rate at which we introduce new products and services relative to our competitors;

•customer satisfaction with our level of service;

•the ability to expand our market position; and

•industry and general economic trends.

Failure to perform in any of these areas could significantly weaken our competitive position, which could adversely affect our growth and profitability, which, in turn, could adversely affect our business, financial condition and results of operations.

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Catastrophic events other than the COVID-19 pandemic may adversely affect the general economy, financial and capital markets, specific industries and us.

Acts of terrorism, cyber-terrorism, political unrest, war, civil disturbance, armed regional and international hostilities and international responses to ~~weather~~these hostilities, natural disasters (including tornadoes, hurricanes, tropical storms, fires, droughts and floods), global health risks or pandemics or the threat of or perceived potential for these events ~~and other catastrophes that could have an adverse impact on our market's economy, our operations or our customers, any of which~~ could have a negative ~~effect~~impact on us.

Our business continuity and disaster recovery plans may not be successful upon the occurrence of one of these scenarios, and a significant catastrophic event could materially adversely affect our operating results.

Our business is generated primarily from the Houston region, which is susceptible to damage by hurricanes, tropical storms, tornadoes, floods, droughts and other natural disasters and adverse weather. These catastrophic events can disrupt our operations, cause widespread damage to our property, ~~damage,~~our customers' property and property held as collateral and severely depress the local economy in which we operate. These catastrophic events may have an impact on our customers and in turn, on us.

In ~~August 2017,~~addition, these events have had and may continue to have an adverse impact on the U.S. and world economy in general and consumer confidence and spending in particular, which could harm our ~~market area experienced catastrophic flooding~~operations. Any of these events could increase volatility in the U.S. and ~~unprecedented storm damage due~~world financial markets, which could harm our stock price and may limit the capital resources available to ~~Hurricane Harvey. The effect of catastrophic weather events similar to Hurricane Harvey, if they were to occur,~~us and our customers. This could have a ~~materially~~material adverse impact on our ~~financial condition,~~operating results, revenues and costs and may result in increased volatility in the market price of our common stock.

Climate change, and related legislative and regulatory initiatives, have the potential to disrupt our business and adversely impact the operations and ~~business,~~creditworthiness of our customers.

Climate change may lead to more frequent and more extreme weather events, such as ~~well as potentially increase~~prolonged droughts or flooding, tornados, hurricanes, wildfires and extreme seasonal weather, which could disrupt operations at one or more of our ~~exposure to credit losses and liquidity risks. If our market experiences an overall decline as a result of a catastrophic event, demand for loans~~locations and our ~~other~~ability to provide financial products and services to our customers. Such events could ~~be reduced.~~also have a negative effect on the financial status and creditworthiness of our customers, which may decrease revenues and business activities from those customers and increase the credit risk associated with loans and other credit exposures to such customers. In addition, ~~the rates of delinquencies, foreclosures, bankruptcies~~weather disasters, shifts in local climates and ~~losses within our loan portfolio~~other disruptions related to climate change may ~~increase substantially, as uninsured property losses or sustained job interruption or loss may materially impair the ability of borrowers to repay their loans. Moreover,~~adversely affect the value of real ~~estate or other collateral~~properties securing our loans, which could diminish the value of our loan portfolio. Such events may also cause reductions in regional and local economic activity that secures the loans could be materially and adversely affected by a catastrophic event. A natural disaster or other catastrophic event could, therefore, result in decreased revenue and increased loan losses that couldmay have an adverse effect on our ~~business,~~customers, which could limit our ability to raise and invest capital in these areas and communities, each of which could have a material adverse effect on our financial condition and results of operations.

~~Negative public opinion regarding~~

The current and anticipated effects of climate change are creating an increasing level of concern for the ~~Company or failure to maintain our reputation in the community that we serve could adversely affect our business and prevent us from growing our business.~~

As a community bank, our reputation within the community we serve is critical to our success. We have a business strategy to set ourselves apart from our competitors by building strong personal and professional relationships with our customers and by our management and employees being active membersstate of the communities we serve. As such, we strive to enhance our reputation by recruiting, hiring and retaining employees who share our core values of being an integral part of the communities we serve and delivering superior service to our customers. If our reputation is negatively affected by the actions of our employees or otherwise, we may be less successful in attracting new customers, and our business, financial condition, results of operations and prospects could be materially and adversely affected. Further, negative public opinion can expose the Company to litigation and regulatory action as the Company seeks to implement its growth strategy. While we actively work to minimize reputation risk in dealing with our customers, this risk will always be present given the nature of our business.

If the Company fails to maintain an effective system of disclosure controls and procedures and internal controls over financial reporting, the Company may not be able to accurately report its financial results or prevent fraud.

Ensuring that the Company has adequate disclosure controls and procedures, including internal controls over financial reporting, in place so that the Company can produce accurate financial statements on a timely basis is costly and time-consuming and needs to be re-evaluated frequently. Our management is responsible for establishing and maintaining adequate internal control over financial reporting and for evaluating and reporting on our system of internal control. Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. generally accepted accounting principles (“GAAP”). As a public company, we are required to comply with the Sarbanes-Oxley Act and other rules that govern public companies. In particular, we are required to certify our compliance with Section 404 of the Sarbanes-Oxley Act, which requires us to furnish annually a report by management on the effectiveness of our internal control over financial reporting. In addition, unless we remain an emerging growth company and elect additional transitional relief available to emerging growth companies, our independent registered public accounting firm will be required to report on the effectiveness of our internal control over financial reporting.

If we identify material weaknesses in our internal control over financial reporting in the future, if we cannot comply with the requirements of the Sarbanes-Oxley Act in a timely manner or attest that our internal control over financial reporting is effective, or if our independent registered public accounting firm cannot express an opinion as to the effectiveness of our internal control over financial reporting when required, we may not be able to report our financial results accurately and timely.global environment. As a result, ~~investors, counterparties~~political and ~~customers~~social attention to the issue of climate change has increased. The federal and state legislatures and regulatory agencies have proposed and are likely to continue to propose and advance numerous legislative and regulatory initiatives seeking to mitigate the effects of climate change. These agreements and measures may ~~lose confidence~~result in the ~~accuracy~~imposition of taxes and ~~completeness~~fees, the required purchase of ~~our financial reports; our liquidity, access to capital markets and perceptions of our creditworthiness could be adversely affected;~~emission credits, and the ~~market price~~implementation of ~~our common stock could decline.~~significant operational changes. In addition, ~~we could become subject~~the federal banking agencies may address climate-related issues in their agendas in various ways, including by increasing supervisory expectations with respect to ~~investigations~~banks’ risk management practices, accounting for the effects of climate change in stress testing scenarios and systemic risk assessments, revising expectations for credit portfolio concentrations based on climate-related factors, and encouraging investment by banks in climate-related initiatives and lending to communities disproportionately impacted by the ~~stock exchange on which our securities are listed, the SEC, the Federal Reserve, the FDIC, or~~effects of climate change. Each of these initiatives, as well as other ~~regulatory authorities, which could~~similar initiatives, may require ~~additional financial~~us to expend significant capital and ~~management resources. These events could have an adverse effect on our business, financial condition~~incur compliance, operating, maintenance and ~~results of operations.~~

remediation costs.

We are subject to certain operational risks, including ~~but not limited to, customer or employee fraud~~fraudulent activities and data processing system failures and errors.

We are exposed to many types of operational risk, including the risk of ~~fraud~~fraudulent activities by employees and outsiders, clerical recordkeeping errors and transactional errors. Our business is dependent on our employees as well as third-party service providers to process a large number of increasingly complex transactions. We could be materially adversely affected if one of our employees or one of our third-party service providers causes a significant operational breakdown or failure, either as a result of human error or where an individual purposefully sabotages or fraudulently manipulates our operations or systems. Employee or third-party service provider errors and employee or customer misconduct could subject us to financial losses or regulatory sanctions and seriously harm our reputation. Misconduct by an employee or third-party service provider could include hiding unauthorized activities from the Company, improper or unauthorized activities on behalf of our customers or improper use of confidential information. It is not always possible to prevent employee or third-party service provider errors and misconduct, and the precautions the Company takes to prevent

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and detect this activity may not be effective in all cases. Employee or third-party service provider errors could also subject the Company to financial claims for negligence.

The Company maintains a system of internal controls to mitigate against operational risks, including data processing system failures and errors and customer or employee fraud, as well as insurance coverage designed to protect the Company from material losses associated with these risks including losses resulting from any associated business interruption. However, if our internal controls fail to prevent or detect an occurrence, or if any resulting loss is not insured or exceeds applicable insurance limits, it could have a material adverse effect on our business, financial condition and results of operations.

In addition, when we originate loans, we rely upon information supplied by loan applicants and third parties, including the information contained in the loan application, property appraisal and title information, if applicable, and employment and income documentation provided by third parties. If any of this information is misrepresented and such misrepresentation is not detected prior to loan funding, the Company generally bears the risk of loss associated with the misrepresentation. Any of these occurrences could result in a diminished ability to operate our business, potential liability to customers, reputational damage and regulatory intervention, which could negatively impact our business, financial condition and results of operations.

We have a continuing need for technological change, and we may not have the resources to effectively implement new technology, or we may experience operational challenges when implementing new technology.

The financial services industry is changing rapidly, and to remain competitive, we must continue to enhance and improve the functionality and features of our products, services and technologies. In addition to better serving our customers, the effective use of technology increases efficiency and enables financial institutions to reduce costs. Our future success will depend, at least in part, upon our ability to respond to future technological changes and the ability to address the needs of our customers. We address the needs of our customers by using technology to provide products and services that will satisfy customer demands for convenience as well as to create additional efficiencies in our operations as we continue to grow and expand our products and service offerings. We may experience operational challenges as we implement these new technology enhancements or products, which could result in our not fully realizing the anticipated benefits from such new technology or require us to incur significant costs to remedy any such challenges in a timely manner. In addition, complications during a conversion of our core technology platform or implementation or upgrade of any software could negatively impact the experiences or satisfaction of our customers, which could cause those customers to terminate their relationship with us or reduce the amount of business that they do with us, either of which could adversely affect our business, financial condition or results of operations.

Many of our larger competitors have substantially greater resources to invest in technological improvements. Third parties upon which we rely for our technology needs may not be able to develop on a cost-effective basis systems that will enable us to keep pace with such developments. As a result, our competitors may be able to offer additional or superior products compared to those that we will be able to provide, which would put us at a competitive disadvantage. We may lose customers seeking new technology-driven products and services to the extent we are unable to provide such products and services. The ability to keep pace with technological change is important, and the failure to do so could adversely affect our business, financial condition and results of operations.

Our operations could be interrupted if our third-party service providers experience difficulty or terminate their services.

Our operations depend on a number of relationships with third-party service providers who provide services related to, among other things, core systems processing, essential web hosting and other Internet systems, our online banking services, deposit processing and other processing services. Additionally, we are continuing to increase our usage of and reliance on cloud-based third-party service providers. While we have selected these third-party vendors carefully, we do not control their actions. Any complications caused by these third parties, including those resulting from disruptions in communication or internet services provided by a vendor causing us to lose internet access, failure of a vendor to handle current or higher volumes, the mishandling of non-public personal information, cyber-attacks and security breaches at a vendor, failure of a vendor to provide services for any reason or poor performance of services, could adversely affect our ability to deliver products and services to our customers and otherwise conduct our business. If these third-party service providers experience difficulties, including difficulties with the service providers relied on by these third-party service providers, or terminate their services, and we are unable to replace them with other service providers, particularly on a timely basis, our operations could be

interrupted. If an interruption were to continue for a significant period of time, our business, financial condition and results of operations could be adversely affected, perhaps materially. Even if we were able to replace third-party service providers, it may be at a higher cost, which could adversely affect our business, financial condition and results of operations.

~~System failure~~

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As a result of the measures implemented to respond to the pandemic and general staffing shortages, many third parties on which we rely in our business operations, including the appraiser(s) of the real property collateral, vendors that supply essential services such as loan servicers, providers of financial information, systems and analytical tools and providers of electronic payment and settlement systems, and local and federal government agencies, offices and courthouses, may be limited in the availability and access to their services. If the third-party service providers continue to have limited capacities or ~~cybersecurity~~experience staffing shortages for a prolonged period or if additional limitations or potential disruptions in these services materialize, it may negatively affect our operations.

We could be adversely impacted by fraudulent activity, breaches of our ~~network~~information security and cybersecurity attacks.

As a financial institution, we are susceptible to fraudulent activity, information security breaches and cybersecurity-related incidents that may be committed against us, our clients or third-parties with whom we interact and that may result in financial losses or increased costs to us or our clients, disclosure or misuse of confidential information belonging to us or personal or confidential information belonging to our clients, misappropriation of assets and litigation. The occurrence of any of these could ~~subject us to increased operating costs~~also damage our reputation. Our industry has seen increases in electronic fraudulent activity, hacking, security breaches, sophisticated social engineering and cyber-attacks, including within the commercial banking sector, as cyber-criminals have been targeting commercial bank accounts on an increasing basis.

Our business is highly dependent on the security and efficacy of our infrastructure, computer and data management systems, as well as ~~litigation~~those of third-parties with whom we interact or on whom we rely. Our business relies on the secure processing, transmission, storage and retrieval of confidential, proprietary and other ~~potential losses.~~

~~Our~~information in our computer and data management systems and networks and in the computer and data management systems and networks of third-parties. In addition, to access our network, ~~infrastructure could~~products and services, our customers and other third-parties may use personal mobile devices or computing devices that are outside of our network environment and are subject to their own cybersecurity risks. All of these factors increase our risks related to cyber-threats and electronic disruptions.

In addition to well-known risks related to fraudulent activity, which take many forms, such as check “kiting” or fraud, wire fraud and other dishonest acts, information security breaches and cybersecurity-related incidents have become a material risk in the financial services industry. These threats may include fraudulent or unauthorized access to data processing or data storage systems used by us or by our clients, electronic identity theft, “phishing”, account takeover, ransomware, denial or degradation of service attacks and malware or other cyber-attacks.

In recent periods, several governmental agencies and large corporations, including financial service organizations and retail companies, have suffered major data breaches, in some cases exposing not only their confidential and proprietary corporate information, but also sensitive financial and other personal information of their employees, clients or other third-parties, and subjecting those agencies and corporations to potential fraudulent activity and their employees, clients and other third-parties to identity theft and fraudulent activity in their debit card and banking accounts. Therefore, security breaches and cyber-attacks can cause significant increases in operating costs, including the costs of compensating clients and customers for any resulting losses they may incur, and the costs and capital expenditures required to correct the deficiencies in and strengthen the security of data processing and storage systems.

While we invest in systems and processes that are designed to detect and prevent security breaches and cyber-attacks and we conduct periodic tests of our security systems and processes, we may not succeed in anticipating or adequately protecting against or preventing all security breaches and cyber-attacks from occurring. Even the most advanced internal control environment may be vulnerable to ~~hardware~~compromise. Targeted social engineering attacks are becoming more sophisticated and ~~cybersecurity issues. Our operations~~ are ~~dependent upon our ability~~extremely difficult to ~~protect our computer equipment against damage from fire, power loss, telecommunications failure~~prevent. Additionally, the existence of cyber-attacks or a similar catastrophic event. We could also experience a breach by intentional or negligent conduct on the part of employees or other internal sources. Any damage or failure that causes an interruption in our operations could have an adverse effect on our financial condition and results of operations. In addition, our operations are dependent upon our ability to protect our computer systems and network infrastructure, including our digital, mobile and internet banking activities, against damage from physical break-ins, cybersecuritysecurity breaches and other disruptive problems caused by the internet or other users. Such computer break-ins and other disruptions would jeopardize the security of information stored in and transmitted through our computer systems and network infrastructure, which may result in significant liability, damage our reputation and inhibit the use of our internet banking services by current and potential customers. We regularly add additional security measures to our computer systems and network infrastructure to mitigate the possibility of cybersecurity breaches, including firewalls and penetration testing. However, it is difficult or impossible to defend against every risk being posed by changing technologies as well as acts of cyber-crime. Increasing sophistication of cyber criminals and terrorists make keeping upat third-parties with new threats difficult and could result in a system breach. Controls employed by our information technology department and cloud vendors could prove inadequate. A breach of our security that results in unauthorized access to our data, such as vendors, may not be disclosed to us in a timely manner. As cyber-threats continue to evolve, we may be required to expend significant additional resources to continue to modify or enhance our protective measures or to investigate and remediate any information security vulnerabilities or incidents.

As is the case with non-electronic fraudulent activity, cyber-attacks or other information or security breaches, whether directed at us or third-parties, may result in a material loss or have material consequences. Furthermore, the public perception that a cyber-attack on our systems has been successful, whether or not this perception is correct, may damage our reputation with customers and third-parties with whom we do business. A successful penetration or circumvention of system security could cause negative consequences, including loss of customers and business opportunities, disruption to our operations and business, misappropriation or destruction of our confidential information and/or that of our customers, or damage to our customers’ and/or third-parties’ computers or systems, and could expose us to additional regulatory scrutiny and result in a ~~disruption~~violation of applicable privacy laws and other laws, litigation exposure, regulatory fines, penalties or ~~challenges relating to~~intervention, loss of confidence in our ~~daily operations, as well as to data loss, litigation, damages, fines and penalties, significant increases in~~security measures, reputational damage,

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reimbursement or other compensatory costs, additional compliance costs and ~~reputational damage, any of which~~ could ~~have an adverse effect on~~adversely impact our ~~business, financial condition and~~ results of ~~operations.~~

operations, liquidity and financial condition.

We are subject to laws regarding the privacy, information security and protection of personal information and any violation of these laws or another incident involving personal, confidential or proprietary information of individuals could damage our reputation and otherwise adversely affect our operations and financial condition.

Our business requires the collection and retention of large volumes of customer data, including personally identifiable information in various information systems that we maintain and in those maintained by third parties with whom we contract to provide data services. We also maintain important internal company data such as personally identifiable information about our employees and information relating to our operations. We are subject to complex and evolving laws and regulations governing the privacy and protection of personal information of individuals (including customers, employees, suppliers and other third parties). Various state and federal banking regulators and states have also enacted data security breach notification requirements with varying levels of individual, consumer, regulatory or law enforcement notification in certain circumstances in the event of a security breach. Ensuring that our collection, use, transfer and storage of personal information complies with all applicable laws and regulations can increase our costs.

Furthermore, we may not be able to ensure that all of our clients, suppliers, counterparties and other third parties have appropriate controls in place to protect the confidentiality of the information that they exchange with us, particularly where such information is transmitted by electronic means. If personal, confidential or proprietary information of customers or others were to be mishandled or misused (in situations where, for example, such information was erroneously provided to parties who are not permitted to have the information, or where such information was intercepted or otherwise compromised by third parties), we could be exposed to litigation or regulatory sanctions under personal information laws and regulations. Concerns regarding the effectiveness of our measures to safeguard personal information, or even the perception that such measures are inadequate, could cause us to lose customers or potential customers for our products and services and thereby reduce our revenues. Accordingly, any failure or perceived failure to comply with applicable privacy or data protection laws and regulations may subject us to inquiries, examinations and investigations that could result in requirements to modify or cease certain operations or practices or in significant liabilities, fines or penalties, and could damage our reputation and otherwise adversely affect our operations and financial condition.

~~Security breaches at third parties may adversely affect our business.~~

Our customers interact with their own and other third-party systems, which pose operational risks to us. We may be adversely affected by data breaches at retailers and other third parties who maintain data relating to our customers that involve the theft of customer data, including the theft of customers’ debit card, wire transfer and other identifying and/or access information used to make purchases or payments at such retailers and to other third parties. Despite third-party security risks that are beyond our control, we provide certain protections against fraud and attendant losses for unauthorized use of debit cards in order to stay competitive in the marketplace. Offering such protection to customers exposes us to significant expenses and potential losses related to reimbursing our customers for fraud losses, reissuing the compromised cards and increased monitoring for suspicious activity. In the event of a data

~~breach at one or more retailers of considerable magnitude, our business, financial condition and results of operations may be adversely affected.~~

We may be subject to environmental liabilities in connection with the real properties we own and the foreclosure on real estate assets securing our loan portfolio.

In the course of our business, we may acquire real estate in connection with our growth efforts, or we may foreclose on and take title to real estate or otherwise be deemed to be in control of property that serves as collateral on loans we make. As a result, we could be subject to environmental liabilities with respect to those properties. We may be held liable to a governmental entity or to third parties for property damage, personal injury, investigation and clean-up costs incurred by these parties in connection with environmental contamination, or we may be required to investigate or clean up hazardous or toxic substances or chemical releases at a property. The costs associated with investigation or remediation activities could be substantial. In addition, if we are the owner or former owner of a contaminated site, we may be subject to common law claims by third parties based on damages and costs resulting from environmental contamination emanating from the property.

The cost of removal or abatement may substantially exceed the value of the affected properties or the loans secured by those properties; we may not have adequate remedies against the prior owners or other responsible parties; and we may not be able to resell the affected properties either before or after completion of any such removal or abatement procedures. Furthermore, the value of the property as collateral will generally be substantially reduced, or we may elect not to foreclose on the property and, as a result, we may suffer a loss upon collection of the loan. Any significant environmental liabilities could have a material adverse effect on our business, financial condition and results of operations.

Risks Related to our Industry and Regulation

Our business, financial condition, results of operations and future prospects could be adversely affected by the highly regulated environment for bank holding companies and the laws and regulations that govern our operations, corporate governance, executive compensation and accounting principles or changes in any of them.

As a bank holding company, we are subject to extensive examination, supervision and comprehensive regulation by various federal and state agencies that govern almost all aspects of our operations. These laws and regulations are not intended to protect our shareholders. Rather, these laws and regulations are intended to protect customers, depositors, the FDIC's DIF and the overall financial

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stability of the U.S. These laws and regulations, among other matters, prescribe minimum capital requirements, impose limitations on the business activities in which the Company can engage, limit the dividend or distributions that the Bank can pay to the Company, restrict the ability of institutions to guarantee our debt and impose certain specific accounting requirements on the Company that may be more restrictive and may result in greater or earlier charges to earnings or reductions in our capital than GAAP would require. Compliance with these laws and regulations is difficult and costly, and changes to these laws and regulations often impose additional compliance costs. Our failure to comply with these laws and regulations, even if the failure follows good faith efforts to comply or reflects a difference in interpretation, could subject the Company to restrictions on our business activities, fines and other penalties, any of which could adversely affect our results of operations, capital base and the price of our securities. Further, any new laws, rules or regulations could make compliance more difficult or expensive.

State and federal banking agencies periodically conduct examinations of our business, including compliance with laws and regulations, and our failure to comply with any supervisory actions to which it is or becomes subject as a result of such examinations may adversely affect the Company.

Texas and federal banking agencies, including the TDB and the Federal Reserve, periodically conduct examinations of our business, including compliance with laws and regulations. If, as a result of an examination, a Texas or federal banking agency were to determine that the financial condition, capital resources, asset quality, earnings prospects, management, liquidity or other aspects of any of our operations had become unsatisfactory, or that ~~the Company,~~Allegiance, the Bank or their respective management were in violation of any law or regulation, it may take a number of different remedial actions as it deems appropriate. These actions include the power to enjoin “unsafe or unsound” practices, to require affirmative actions to correct any conditions resulting from any violation or practice, to issue an administrative order that can be judicially enforced, to direct an increase in our and/or the Bank’s capital, to restrict our growth, to assess civil monetary penalties against ~~the Company,~~Allegiance, the Bank or their respective officers or directors, to remove officers and directors and, if it is concluded that such conditions cannot be corrected or there is an imminent risk of loss to depositors, to terminate the Bank’s deposit insurance. If we become subject to such regulatory actions, our business, financial condition, results of operations, cash flows and reputation may be negatively impacted.

We may be unable to identify and consummate our new activities and expansion plans and successfully implement our growth strategy, which will require regulatory approvals, and failure to obtain them may restrict our growth.

We intend to continue to grow our business through strategic acquisitions of financial institutions coupled with organic growth. Generally, we must receive state and federal regulatory approval before we can acquire an FDIC-insured depository institution or related business. In determining whether to approve a proposed acquisition, federal banking regulators will consider, among other factors, the effect of the acquisition on competition, our financial condition, liquidity, our future prospects and the impact of the proposal on U.S. financial stability. The regulators also review current and projected capital ratios and levels, the competence, experience and integrity of management and our record of compliance with laws and regulations, the convenience and needs of the communities to be served (including the acquiring institution’s record of compliance under the CRA) and the effectiveness of the acquiring institution in combating money laundering activities. Such regulatory approvals may not be granted on terms that are acceptable to the Company, or at all, or may be granted only after lengthy delay. We may also be required to sell or, in the alternative, commit to retain branches as a condition to receiving regulatory approval, which may not be acceptable to us or, if acceptable to us, may reduce the benefit of any acquisition.

In addition to the acquisition of existing financial institutions, as opportunities arise, we plan to continue de novo branching as a part of our organic growth strategy. De novo branching and any acquisitions carry with them numerous risks, including the inability to obtain all required regulatory approvals. The failure to obtain these regulatory approvals for potential future strategic acquisitions and de novo branches may impact our business plans and restrict our growth.

We face a risk of noncompliance and enforcement action with the Bank Secrecy Act and other anti-money laundering statutes and regulations.

The federal Bank Secrecy Act, the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 and other laws and regulations require financial institutions, among other duties, to institute and maintain an effective anti-money laundering program and file suspicious activity and currency transaction reports as appropriate. The federal Financial Crimes Enforcement Network, established by the U.S. Department of the Treasury (“U.S. Treasury”) to administer the Bank Secrecy Act, is authorized to impose significant civil money penalties for violations of those requirements, and ~~has recently engaged~~engages in coordinated enforcement efforts with the individual federal banking regulators, as well as the U.S. Department of Justice (the “Department of Justice”), Drug Enforcement Administration and Internal Revenue Service. ~~There is also increased scrutiny~~

Table of ~~compliance with the sanctions programs and rules administered and enforced by OFAC.~~

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We provide banking services to customers located outside the United States, primarily in Guatemala. These banking services are primarily deposit accounts, including checking, money market and short term certificates of deposit. As of December 31, ~~2018,~~2021, our deposits from foreign nationals, primarily residents of Guatemala, accounted for ~~less than 5%~~approximately 2% of our total deposits.

In order to comply with regulations, guidelines and examination procedures in this area, we have dedicated significant resources to our anti-money laundering program. If our policies, procedures and systems are deemed deficient, we could be subject to liability, including fines and regulatory actions such as restrictions on our ability to pay dividends and the necessity to obtain regulatory approvals to proceed with certain aspects of our business plans, including acquisitions and de novo branching. Failure to maintain and implement adequate programs to combat money laundering and terrorist financing could also have serious reputational consequences for us.

Failure to comply with economic and trade sanctions or with applicable anti‑corruption laws could have a material adverse impact our business, financial condition and results of operations.

OFAC administers and enforces economic and trade sanctions against targeted foreign countries and regimes, under authority of various laws, including designated foreign countries, nationals and others. We are responsible for, among other things, blocking accounts of and transactions with such persons and countries, prohibiting unlicensed trade and financial transactions with them and reporting blocked transactions after their occurrence. In addition, we are subject to the Foreign Corrupt Practices Act, or the FCPA, which prohibits offering, promising, giving, or authorizing others to give anything of value, either directly or indirectly, to a non‑U.S. government official in order to influence official action or otherwise gain an unfair business advantage. We are also subject to applicable anti‑corruption laws in the jurisdictions in which we may operate. Failure to comply with economic and trade sanctions or with applicable anti‑corruption laws, including the FCPA, could have serious legal and reputational consequences for us.

We are subject to numerous federal and state lending laws designed to protect consumers, including the Community Reinvestment Act and fair lending laws, and failure to comply with these laws could lead to material sanctions and penalties.

The CRA, the Equal Credit Opportunity Act, the Fair Housing Act and other fair lending laws and regulations impose nondiscriminatory lending requirements on financial institutions. The Consumer Financial Protection Bureau, the Department of Justice and other federal and state agencies are responsible for enforcing these laws and regulations. A successful challenge to an institution’s performance under the CRA or fair lending laws and regulations could result in a wide variety of sanctions, including the required payment of damages and civil money penalties, injunctive relief, imposition of restrictions on mergers and acquisitions activity and restrictions on expansion activity. Private parties may also have the ability to challenge an institution’s performance under fair lending laws in private class action litigation.

We may be required to pay significantly higher FDIC deposit insurance assessments in the future, which could adversely affect our earnings.

On September 15, 2020, in response to the decline in the reserve ratio due to extraordinary deposit growth resulting mainly from the COVID-19 pandemic, the FDIC adopted a ~~result of historical economic conditions and the enactment of the Dodd-Frank Act, the FDIC’s current DIF~~ restoration plan ~~is designed~~ to ~~ensure that~~restore the ~~fund~~DIF reserve ratio ~~reaches~~to at least 1.35% within eight years, as required by ~~September 30, 2020.~~the Federal Deposit Insurance Act. At least semi-annually, the FDIC updates its loss and income projections for the fund and, if needed, increases or decreases assessment rates. If any required increase is insufficient for the DIF to meet its funding requirements, further special assessments or increases in deposit insurance premiums may be required.

We are generally unable to control the amount of premiums that we are required to pay for FDIC insurance. If there are additional financial institution failures that affect the DIF, we may be required to pay FDIC premiums higher than current levels. Our regulatory assessments and FDIC insurance costs were ~~$2.3~~$3.4 million and $2.9 million for both of the years ended December 31, ~~2018~~2021 and ~~2017,~~2020, respectively. ~~Any future~~Future additional assessments, increases or required prepayments in FDIC insurance premiums may materially adversely affect our business, financial condition and results of operations.

The Federal Reserve may require Allegiance to commit capital resources to support the Bank.

A bank holding company is required to act as a source of financial and managerial strength to its subsidiary banks and to commit resources to support its subsidiary banks. The Federal Reserve may require a bank holding company to make capital injections into a troubled subsidiary bank and may charge the bank holding company with engaging in unsafe and unsound practices for failure to commit resources to such a subsidiary bank. Under these requirements, in the future, Allegiance could be required to provide financial assistance to the Bank if it experiences financial distress.

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A capital injection may be required at times when our resources are limited and we may be required to borrow the funds to make the required capital injection. In the event of a bank holding company’s bankruptcy, the bankruptcy trustee will assume any commitment by the holding company to a federal bank regulatory agency to maintain the capital of a subsidiary bank. Moreover, bankruptcy law provides that claims based on any such commitment will be entitled to a priority of payment over the claims of the holding company’s general unsecured creditors, including the holders of any note obligations. Thus, any borrowing that must be done by the holding company in order to make the required capital injection becomes more difficult and expensive and will adversely impact the holding company’s business, financial condition and results of operations.

We may be materially and adversely affected by the soundness, creditworthiness and liquidity of other financial institutions.

Financial services institutions are interrelated as a result of trading, clearing, counterparty or other relationships. We have exposure to many different industries and counterparties, and routinely execute transactions with counterparties in the financial services industry, including commercial banks, brokers and dealers, investment banks and other institutional customers. Many of these transactions expose us to credit risk in the event of a default by a counterparty or customer. In addition, our credit risk may be exacerbated when the collateral held by us cannot be realized upon or is liquidated at prices not sufficient to recover the full amount of the credit or derivative exposure due to us. Any such losses could have a material adverse effect on our business, financial condition and results of operations.

Monetary policies and regulations of the Federal Reserve could adversely affect our business, financial condition and results of operations.

In addition to being affected by general economic conditions, our earnings and growth are affected by the policies of the Federal Reserve. An important function of the Federal Reserve is to regulate the U.S. money supply and credit conditions. Among the instruments used by the Federal Reserve to implement these objectives are open market operations in U.S. government securities, adjustments of both the discount rate and the federal funds rate and changes in reserve requirements against bank deposits. These instruments are used in varying combinations to influence overall economic growth and the distribution of credit, bank loans, investments and deposits. Their use also affects interest rates charged on loans or paid on deposits. The monetary policies and regulations of the Federal Reserve have had a significant effect on the operating results of commercial banks in the past and are expected to continue to do so in the future. Although we cannot determine the effects of such policies on us at this time, such policies could have a material adverse effect on our business, financial condition and results of operations.

Risks Related to Allegiance's Common Stock

The market price of Allegiance's common stock could be volatile and may fluctuate significantly, which could cause the value of an investment in Allegiance's common stock to decline.

The market price of Allegiance's common stock could fluctuate substantially due to a variety of factors, many of which are beyond our control, including, but not limited to:

•general economic conditions and overall market fluctuations;

•actual or anticipated fluctuations in our quarterly or annual financial results;

•operating and stock price performance of other companies that investors deem comparable to ours;

•the perception that investment in Texas is unattractive or less attractive during periods of low oil prices;

•

~~announcements by the Company or our competitors of significant acquisitions, dispositions, innovations or new programs and services;~~

•announcements by the Company or our competitors of significant acquisitions, dispositions, innovations or new programs and services;

•the public reaction to our press releases, other public announcements and filings with the SEC;

•the trading volume of Allegiance's common stock;

•changes in dividends and capital returns;

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•changes in governmental monetary policies, including the policies of the Federal Reserve;

•changes in business, legal or regulatory conditions, or other developments affecting participants in our industry, and publicity regarding our business or any of our significant customers or competitors;

•changes in accounting standards, policies, guidance, interpretations or principles; and

•future sales of Allegiance's common stock by the Company, directors, executives and significant shareholders.

The realization of any of the risks described in this “Risk Factors” section could have a material adverse effect on the market price of Allegiance's common stock and cause the value of an investment in Allegiance's common stock to decline. In addition, the stock market has experienced extreme volatility that has often been unrelated to the operating performance of particular companies. These types of broad market fluctuations may adversely affect investor confidence and could affect the trading price of Allegiance's common stock over the short, medium or long term, regardless of our actual performance. In the past, following periods of volatility in the market price of a company’s securities, shareholders have often instituted securities class action litigation. If we were to be involved in a class action lawsuit, we could incur substantial costs and it could divert the attention of senior management and have a material adverse effect on our business, financial condition and results of operations.

~~The obligations associated with being a public company require significant resources and management attention.~~

As a public company, Allegiance faces increased legal, accounting, administrative and other costs and expenses that we did not incur as a private company, particularly after we are no longer an emerging growth company. As a public company, Allegiance is required to:

~~prepare and distribute periodic reports, proxy statements and other shareholder communications in compliance with the federal securities laws and rules;~~

~~expand the roles and duties of Allegiance's Board of Directors and committees thereof;~~

~~maintain an internal audit function;~~

~~institute more comprehensive financial reporting and disclosure compliance procedures;~~

~~involve and retain to a greater degree outside counsel and accountants in the activities listed above;~~

~~enhance Allegiance's investor relations function;~~

~~establish new internal policies, including those relating to trading in our securities and disclosure controls and procedures;~~

~~retain additional personnel;~~

~~comply with the NASDAQ Stock Market listing standards; and~~

~~comply with the Sarbanes-Oxley Act.~~

Allegiance expects these rules and regulations and changes in laws, regulations and standards relating to corporate governance and public disclosure, which have created uncertainty for public companies, to increase legal and financial compliance costs and make some activities more time consuming and costly relative to when Allegiance was not a public company. These laws, regulations and

standards are subject to varying interpretations, in many cases due to their lack of specificity, and, as a result, their application in practice may evolve over time as new guidance is provided by regulatory and governing bodies. This could result in continuing uncertainty regarding compliance matters and higher costs necessitated by ongoing revisions to disclosure and governance practices. Our investment in compliance with existing and evolving regulatory requirements will result in increased administrative expenses and a diversion of management’s time and attention from revenue-generating activities to compliance activities, which could have a material adverse effect on our business, financial condition and results of operations. These increased costs may require that we divert a significant amount of money that we could otherwise use to expand our business and achieve our strategic objectives.

Allegiance may issue shares of preferred stock in the future, which could make it difficult for another company to acquire it or could otherwise adversely affect the rights of the holders of Allegiance's common stock, which could depress the price of our common stock.

Allegiance's amended and restated certificate of formation authorizes it to issue up to 1,000,000 shares of one or more series of preferred stock. Allegiance's Board of Directors, in its sole discretion, has the authority to determine the preferences, limitations and relative rights of shares of preferred stock and to fix the number of shares constituting any series, the designation of such series and the dividend rate for each series, without any further vote or action by Allegiance's shareholders. Allegiance's preferred stock may be issued with voting, liquidation, dividend and other rights superior to the rights of Allegiance's common stock. The potential issuance of preferred stock may delay or prevent a change in control of the Company, discouraging bids for Allegiance's common stock at a premium over the market price, and materially adversely affect the market price and the voting and other rights of the holders of Allegiance's common stock.

~~Allegiance currently has no plans~~

Allegiance’s ability to declare and pay dividends is limited.

Our Board of Directors has approved the payment of quarterly cash dividends on ~~its common stock, so holders of Allegiance's common stock may not receive funds without selling their~~our common stock.

~~We have not paid~~ However, there can be no assurance of whether or when we may pay dividends on our common stock in the ~~past, and do not anticipate paying dividends on our common stock in the foreseeable~~ future. Our ability to pay dividends ~~on our common stock~~ is dependent on the Bank’s ability to pay dividends to it, which is limited by applicable laws and banking regulations. Payments of future dividends, if any, will be declared and paid at the discretion of ~~Allegiance's~~our Board of Directors after taking into account ~~various factors, including~~ our business, operating results and financial condition, current and anticipated cash needs, ~~plans~~plan for expansion and any legal or contractual limitations on our ability to pay dividends. In addition, Allegiance's existing credit agreement restricts our ability to pay dividends.

Allegiance is dependent upon the Bank for cash flow, and the Bank’s ability to make cash distributions is restricted, which could impact Allegiance's ability to satisfy its obligations.

Allegiance's primary tangible asset is the Bank. As such, Allegiance depends upon the Bank for cash distributions (through dividends on the Bank’s stock) that Allegiance uses to pay its operating expenses and satisfy its obligations, including debt obligations. There are numerous laws and banking regulations that limit the Bank’s ability to pay dividends to Allegiance. If the Bank is unable to pay dividends to Allegiance, it will not be able to satisfy its obligations. These statutes and regulations require, among other things, that the Bank maintain certain levels of capital in order to pay a dividend. Further, federal and state banking authorities have the ability to restrict the Bank’s payment of dividends through supervisory action.

Allegiance's corporate governance documents and certain corporate and banking provisions of Texas law applicable to it could have an anti-takeover effect and may delay, make more difficult or prevent an attempted acquisition and other actions.

Allegiance's amended and restated certificate of formation and bylaws contain certain provisions that may have an anti-takeover effect and may delay, discourage or prevent an attempted acquisition or change of control. These provisions include:

•staggered terms for directors, who may be removed from office only for cause;

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•a provision establishing certain advance notice procedures for nomination of candidates for election as directors and for shareholder proposals; and

•a provision that any special meeting of Allegiance's shareholders may be called only by a majority of the Board of Directors, the President or a holder or group of holders of at least 50% of Allegiance shares entitled to vote at the meeting.

Allegiance's amended and restated certificate of formation does not provide for cumulative voting for directors and authorizes the Board of Directors to issue shares of preferred stock without shareholder approval and upon such terms as the Board of Directors may determine. The issuance of Allegiance's preferred stock, while providing desirable flexibility in connection with possible acquisitions, financings and other corporate purposes, could have the effect of making it more difficult for a third party to acquire, or of discouraging a third-party from acquiring, a controlling interest. In addition, certain provisions of Texas law, including a provision

that restricts certain business combinations between a Texas corporation and certain affiliated shareholders, may delay, discourage or prevent an attempted acquisition or change in control.

In addition, banking laws impose notice, approval and ongoing regulatory requirements on any shareholder or other party that seeks to acquire direct or indirect “control” of an FDIC-insured depository institution. These laws include the BHC Act and the Change in Bank Control Act. These laws could delay or prevent an acquisition.

Furthermore, Allegiance's amended and restated certificate of formation provides that the state and federal courts located in Harris County, Texas, the county in which the City of Houston lies, will be the exclusive forum for: (a) any derivative action or proceeding brought on Allegiance's behalf; (b) any action asserting a breach of fiduciary duty; (c) any action asserting a claim against Allegiance arising pursuant to the Texas Business Organizations Code, Allegiance's certificate of formation, or Allegiance's bylaws; or (d) any action asserting a claim against Allegiance that is governed by the internal affairs doctrine. Shareholders of Allegiance are deemed to have notice of and have consented to the provisions of Allegiance's amended and restated certificate of formation related to choice of forum. The choice of forum provision in Allegiance's amended and restated certificate of formation may limit our shareholders’ ability to obtain a favorable judicial forum for disputes with Allegiance. Alternatively, if a court were to find the choice of forum provision contained in Allegiance's amended and restated certificate of formation to be inapplicable or unenforceable in an action, Allegiance may incur additional costs associated with resolving such action in other jurisdictions, which could harm Allegiance's business, operating results and financial condition.

Shareholders may be deemed to be acting in concert or otherwise in control of Allegiance, which could impose notice, approval and ongoing regulatory requirements and result in adverse regulatory consequences for such holders.

Allegiance is a bank holding company regulated by the Federal Reserve. Banking laws impose notice, approval and ongoing regulatory requirements on any shareholder or other party that seeks to acquire direct or indirect “control” of an FDIC-insured depository institution or a company that controls an FDIC-insured depository institution, such as a bank holding company. These laws include the BHC Act and the Change in Bank Control Act. The determination whether an investor “controls” a depository institution or holding company is based on all of the facts and circumstances surrounding the investment.

As a general matter, a party is deemed to control a depository institution or other company if the party (1) owns or controls 25% or more of any class of voting stock of the bank or other company, (2) controls the election of a majority of the directors of the bank or other company or (3) has the power to exercise a controlling influence over the management or policies of the bank or other company. In addition, subject to rebuttal, a party may be presumed to control a depository institution or other company if the investor owns or controls 10% or more of any class of voting stock. Subject to rebuttal, a person may be presumed to control a depository institution or other company if the person owns or controls 10% or more of any class of voting stock and other regulatory criteria are met. Ownership by affiliated ~~parties,~~persons, or ~~parties~~persons acting in concert, is typically aggregated for these purposes. ~~“Acting~~

In January 2020, the Federal Reserve approved a final rule that clarifies the framework for when a company controls a bank holding company or bank under the BHC Act. In particular, the final rule sets forth tiered presumptions of control in ~~concert” generally means knowing participation in~~the Federal Reserve’s regulations. Under the BHC Act, a ~~joint activity~~company controls a bank holding company if it controls 25 percent or ~~parallel action towards~~more of any class of voting securities of the ~~common goal~~bank holding company. A company that controls less than 5 percent of ~~acquiring control~~any class of voting securities of a bank ~~or a parent~~holding company ~~whether or~~is presumed not ~~pursuant~~ to ~~an express agreement. The manner~~control the bank holding company. In instances in which ~~this definition is applied~~a company owns at least 5 percent but less than 25 percent, the Federal Reserve considers the full fact and circumstances of the relationship between the company and the bank holding company to determine whether the company controls the bank holding company. As part of its determination as to control, the Federal Reserve considers, among other things, level of ownership of voting and non-voting securities, board representation, business relationships, senior management interlocks, contractual limits on major operational or policy decisions, proxies on issues, threats to dispose of securities, and management agreements. The rule also provides several additional examples of presumptions of control and noncontrol, along with various ancillary provisions such as definitions of terms used in individual circumstances can vary and cannot always be predicted with certainty. Any shareholder that is deemed to “control” Allegiance for regulatory purposes would become subject to notice, approval and ongoing regulatory requirements and may be subject to adverse regulatory consequences. Potential investors are advised to consult with their legal counsel regarding the ~~applicable regulations and requirements.~~

~~An investment~~presumptions. The changes in ~~Allegiance's common stock is not an insured deposit and is not guaranteed by~~ the ~~FDIC, so investors could lose some or all~~final rule became effective September 30, 2020.

Table of ~~their investment.~~

An investment in Allegiance's common stock is not a bank deposit and, therefore, is not insured against loss or guaranteed by the FDIC, any other deposit insurance fund or by any other public or private entity. An investment in Allegiance's common stock is inherently risky for the reasons described herein. As a result, investors could lose some or all of their investment.

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ITEM 1B. UNRESOLVED STAFF COMMENTS

None.

ITEM 2. PROPERTIES

Our principal executive office is located at 8847 W. Sam Houston Parkway N., Suite 200, Houston, Texas 77040. As of December 31, ~~2018,~~2021, we had 2827 full-service banking locations, with 2726 bank offices ~~and one loan production office~~ located in the Houston metropolitan area and one bank office location in Beaumont, just outside of the Houston metropolitan area. We lease ~~sixteen~~twelve of these bank offices, ~~including~~as well as our executive ~~and loan production offices,~~office, and own the remaining ~~fourteen.~~ fifteen bank offices. We believe that our current facilities are in good condition and adequate to meet our operating needs for the present and immediately foreseeable future.

ITEM 3. LEGAL PROCEEDINGS

From time to time, we are subject to claims and litigation arising in the ordinary course of business. In the opinion of management, we are not party to any legal proceedings the resolution of which we believe would have a material adverse effect on our business, prospects, financial condition, liquidity, results of operation, cash flows or capital levels. However, one or more unfavorable outcomes in any claim or litigation against us could have a material adverse effect for the period in which such claim or litigation is resolved. In addition, regardless of their merits or their ultimate outcomes, such matters are costly, divert management’s attention and may materially adversely affect our reputation, even if resolved in our favor. We intend to defend ourselves vigorously against any future claims or litigation.

ITEM 4. MINE SAFETY DISCLOSURES

~~None.~~

Not applicable.

PART II.

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED SHAREHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Common Stock Market Prices

Allegiance's common stock is listed on the NASDAQ Global Market under the symbol “ABTX.” Quotations of the sales volume and the closing sales prices of the common stock of Allegiance are listed daily in the NASDAQ Global Market’s listings. As of ~~March 6, 2019,~~February 23, 2022, there were ~~21,671,955~~20,367,789 shares outstanding and ~~1,109~~904 shareholders of record of Allegiance's common stock. The closing price per share of common stock on December 31, ~~2018,~~2021, the last trading day of the year, was ~~$32.37.~~

$42.21.

Dividends

~~Historically, Allegiance has not~~

Our Board of Directors paid four quarterly cash dividends of $0.12 on our common stock during 2021 and declared ora quarterly dividend of $0.14 to be paid ~~any dividends on its common stock.~~in the first quarter of 2022. Payments of future dividends, if any, will be at the discretion of Allegiance's Board of Directors after taking into account various factors, including its business, operating results and financial condition, current and anticipated cash needs, plans for expansion and any legal or contractual limitations on Allegiance's ability to pay dividends.

As a bank holding company, Allegiance's ability to pay dividends is affected by the regulations promulgated by and the policies and enforcement powers of the Federal Reserve. In addition, because Allegiance is a holding company, it is dependent upon the payment of dividends by the Bank to Allegiance as its principal source of funds to pay dividends in the future, if any, and to make other payments. The Bank is also subject to various legal, regulatory and other restrictions on its ability to pay dividends and make other distributions and payments to Allegiance. See Item 1. “Business—Regulation and Supervision—Regulatory Limits on Dividends, Distributions and ~~Distributions.~~Repurchases.”

In connection with the F&M Bancshares acquisition, Allegiance assumed junior subordinated debentures that allow it to defer interest payments thereunder for a period of time. To the extent Allegiance elects to defer any interest payments under the junior

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subordinated debentures, Allegiance will be prohibited by the terms of the junior subordinated debentures from making dividend payments on its common stock until it retires the arrearages on the junior subordinated debentures. In addition, Allegiance's existing credit agreement restricts its ability to pay dividends.

Recent Sales of Unregistered Securities

None.

Securities Authorized for Issuance under Equity Compensation Plans

The following table provides information as of December 31, ~~2018,~~2021, regarding the equity compensation plans under which Allegiance’s equity securities are authorized for issuance:


Plan Category	Number of securities to be issued upon exercise of outstanding options, warrants and rights (a)		Weighted-average exercise price of outstanding options, warrants and rights (b)		Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) (c)		Plan Category	Number of securities to be issued upon exercise of outstanding options, warrants and rights (a)	Weighted-average exercise price of outstanding options, warrants and rights (b)		Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) (c)
Equity compensation plans approved by security holders		503,286	$	21.41		539,916	Equity compensation plans approved by security holders	255,464	$	23.62	1,640,745
Equity compensation plans not approved by security holders⁽¹⁾		299,352	$	12.83		—	Equity compensation plans not approved by security holders(1)	27,394	$	14.49	—
Total		802,638				539,916	Total	282,858			1,640,745

~~(1)~~

~~These options were issued under the Post Oak Bancshares, Inc. Stock Option Plan, which was assumed by the Company in connection with the acquisition of Post Oak Bancshares, Inc.~~

(1)These options were issued under the Post Oak Bancshares, Inc. Stock Option Plan, which was assumed by the Company in connection with the acquisition of Post Oak Bancshares, Inc.

Purchases of Equity Securities by the Issuer and Affiliated Purchasers

On ~~September 28, 2018,~~March 31, 2021, our ~~board~~repurchase authorization previously approved on February 26, 2020 expired. During the first quarter of ~~directors~~2021, we repurchased 161,206 shares at a total cost of $5.7 million pursuant to the authorization.

On April 22, 2021, our Board of Directors authorized a stock repurchase program, under which we ~~can~~may repurchase up to one million shares of our ~~outstanding~~ common stock at the discretion of management through ~~October 31, 2019.~~April 30, 2022. Repurchases under this program may be made from time to time through open market purchases, privately negotiated transactions or such other ~~manner~~manners as

will comply with applicable laws and regulations. ~~Under~~We did not repurchase any shares in 2021 pursuant to this ~~program, we repurchased 69,389 shares at a total cost of $2.1 million during the fourth quarter of 2018.~~

authorization.

The following table provides information with respect to purchases made by or on behalf of us or any “affiliated purchaser” (as defined in Rule 10b-18(a)(3) under the Securities Exchange Act of 1934) of our common stock during the fourth quarter of ~~2018.~~

2021.

Period

Total Number of
Shares Purchased

Average Price
Paid Per Share

Total Number of
Shares Purchased as
Part of Publicly
Announced Plans⁽¹⁾

Maximum Number
(or Approximate
Dollar Value) of
Shares That May
Yet Be Purchased
Under the Plans
at the End of
the Period

October 1, 2018 to
   October 31, 2018

—

$
—

—

—

November 1, 2018 to
   November 30, 2018

—

$
—

—

—

December 1, 2018 to
   December 31, 2018

85,389

⁽²⁾
$
30.61

69,389

930,611


Period	Total Number of Shares Purchased(1)	Average Price Paid Per Share
October 1, 2021 to October 31, 2021	—	$	—
November 1, 2021 to November 30, 2021	319	$	39.83
December 1, 2021 to December 31, 2021	1,444	$	42.21

~~(1)~~

~~Pursuant to a repurchase program announced on October 1, 2018, pursuant to which the Company may repurchase up to one million shares through October 31, 2019.~~

(1) The Company acquired 1,763 shares from employees for tax withholding purposes related to vesting of restricted stock grants.

~~(2)~~

~~Includes 15,000 shares purchased by Steven F. Retzloff and 1,000 shares purchased by Paul P. Egge, each of whom may be considered an “affiliated purchaser” under Rule 10b-18(a)(3).~~

Table of Contents

Performance Graph

The performance graph compares the cumulative total shareholder return on Allegiance's common stock for the period beginning at the close of trading on ~~October 8, 2015 (the end of the first day of trading of Allegiance's common stock on the NASDAQ Global Market)~~December 31, 2016 to December 31, ~~2018,~~2021, with the cumulative total return of the S&P 500 Total Return Index and the NASDAQ Bank Index for the same period. Dividend reinvestment has been assumed. The Performance Graph assumes $100 invested on ~~October 8, 2015~~December 31, 2016 in Allegiance's common stock, in the S&P 500 Total Return Index and in the NASDAQ Bank Index. The historical stock price performance for Allegiance's common stock shown on the graph below is not necessarily indicative of future stock performance.

~~$100 invested on 10/8/15 in Allegiance's common stock or 9/30/15~~COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*

Among Allegiance Bancshares, Inc., the S&P 500 Index

and the NASDAQ Bank Index

*$100 invested on December 31, 2016 in Allegiance's common stock or an index, including reinvestment ~~of dividends. Fiscal year ending December 31.~~

October 8,
2015

December 31,
2015

June 30,
2016

December 31,
2016

June 30,
2017

December 31,
2017

June 30,
2018

December 31,
2018

Allegiance Bancshares, Inc.

100.00

102.29

107.61

156.36

165.66

162.85

187.50

140.01

S&P 500

100.00

107.04

111.15

119.84

131.04

146.01

149.88

139.61

NASDAQ Bank

100.00

103.55

100.25

142.33

139.92

150.12

156.12

125.21

ITEM 6. ~~SELECTED~~ ~~FINANCIAL DATA~~

The following table sets forth our selected historical consolidated financial data for the periods and as of the dates indicated. You should read this information together with Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our audited consolidated financial statements and the related notes included elsewhere in this Annual Report on Form 10-K. The selected historical consolidated financial data as of and for the years ended December 31, 2018, 2017 and 2016 are derived from our audited consolidated financial statements, which are included elsewhere in this Annual Report on Form 10-K. The selected historical consolidated financial data as of and for the years ended December 31, 2015 and 2014 (except as otherwise noted below) are derived from our audited consolidated financial statements not included in this Annual Report on Form 10-K. Our historical results for any prior period are not necessarily indicative of future performance.

As of and for the Years Ended December 31,

2018⁽¹⁾

2017

2016⁽²⁾

2015⁽³⁾

2014

(Dollars in thousands, except share and per share data)

Selected Period End Balance Sheet Data:

Cash and cash equivalents

$
268,947

$
182,103

$
142,098

$
148,431

$
167,540

Available for sale securities

337,293

309,615

316,455

165,097

84,962

Loans held for sale

—

—

—

27,887

—

Loans held for investment

3,708,306

2,270,876

1,891,635

1,653,165

1,002,054

Allowance for loan losses

26,331

23,649

17,911

13,098

8,246

Goodwill and intangible assets, net

249,712

42,663

43,444

44,619

12,891

Total assets

4,655,249

2,860,231

2,450,948

2,084,579

1,280,008

Noninterest-bearing deposits

1,209,300

683,110

593,751

620,320

373,795

Interest-bearing deposits

2,453,236

1,530,864

1,276,432

1,138,813

759,889

Total deposits

3,662,536

2,213,974

1,870,183

1,759,133

1,133,684

Total shareholders’ equity

702,984

306,865

279,817

258,490

131,778

Total tangible shareholders' equity⁽⁴⁾

453,272

264,202

236,373

213,871

118,887

Selected Income Statement Data:

Net interest income

$
128,579

$
103,668

$
89,864

$
80,166

$
46,834

Provision for loan losses

4,248

13,188

5,469

5,792

2,150

Net interest income after provision for loan losses

124,331

90,480

84,395

74,374

44,684

Noninterest income

7,713

5,861

7,268

3,992

2,607

Noninterest expense

86,787

69,962

59,258

54,805

33,458

Net income before income taxes

45,257

26,379

32,405

23,561

13,833

Net income

37,309

17,632

22,851

15,786

9,005

Net income attributable to common shareholders⁽⁵⁾

37,309

17,632

22,851

15,227

9,005

Selected Per Share Data:

Earnings per common share, basic

$
2.41

$
1.34

$
1.78

$
1.45

$
1.29

Earnings per common share, diluted

2.37

1.31

1.75

1.43

1.26

Book value per common share

32.04

23.20

21.59

20.17

17.62

Tangible book value per common share⁽⁴⁾

20.66

19.97

18.24

16.69

15.90

Weighted average common shares outstanding, basic

15,484,757

13,124,900

12,873,326

10,470,465

6,978,025

Weighted average common shares outstanding, diluted

15,773,039

13,457,718

13,073,932

10,654,003

7,142,377

Shares outstanding at end of period

21,937,740

13,226,826

12,958,341

12,812,985

7,477,309

As of and for the Years Ended December 31,

2018⁽¹⁾

2017

2016⁽²⁾

2015⁽³⁾

2014

(Dollars in thousands, except share and per share data)

Selected Performance Metrics:

Return on average assets⁽⁶⁾

1.11
%

0.65
%

0.98
%

0.81
%

0.75
%
Return on average common equity⁽⁶⁾

9.02
%

5.92
%

8.36
%

7.43
%

7.73
%
Return on average tangible common equity⁽⁴⁾⁽⁶⁾

11.20
%

6.93
%

9.96
%

9.52
%

8.70
%
Tax equivalent net interest margin⁽⁷⁾

4.27
%

4.34
%

4.37
%

4.68
%

4.31
%
Efficiency ratio⁽⁸⁾

63.68
%

63.89
%

62.34
%

65.27
%

67.79
%
Loans to deposits ratio

101.25
%

102.57
%

101.15
%

95.56
%

88.39
%
Noninterest expense to average assets

2.58
%

2.59
%

2.53
%

2.83
%

2.80
%
Selected Credit Quality Ratios:

��

Nonperforming assets to total assets⁽⁹⁾

0.72
%

0.49
%

0.75
%

0.25
%

0.25
%
Nonperforming loans to total loans⁽¹⁰⁾

0.89
%

0.59
%

0.88
%

0.31
%

0.32
%
Allowance for loan losses to nonperforming loans⁽¹⁰⁾

79.90
%

177.44
%

107.26
%

252.66
%

258.98
%
Allowance for loan losses to total loans

0.71
%

1.04
%

0.95
%

0.78
%

0.82
%
Provision for loan losses to average loans

0.16
%

0.63
%

0.31
%

0.38
%

0.23
%
Net charge-offs to average loans

0.06
%

0.36
%

0.04
%

0.06
%

0.06
%
Capital Ratios:

Common equity Tier 1 capital ratio

11.76
%

10.54
%

11.30
%

11.72
%

N/A

Tier 1 risk-based capital

12.01
%

10.92
%

11.73
%

12.21
%

11.96
%
Total risk-based capital

13.70
%

13.43
%

12.57
%

12.92
%

12.80
%
Leverage capital ratio

10.61
%

9.84
%

10.35
%

11.02
%

9.55
%
Total equity to total assets

15.10
%

10.73
%

11.42
%

12.40
%

10.30
%
Tangible common equity to tangible assets⁽⁴⁾

10.29
%

9.38
%

9.82
%

10.48
%

9.38
%

~~(1)~~

~~We completed the acquisition of Post Oak Bancshares, Inc. on October 1, 2018.~~

[RESERVED]

~~(2)~~

~~We completed the sale of two Central Texas branches acquired from F&M Bancshares during the first quarter of 2016.~~

~~(3)~~

~~We completed the acquisition of F&M Bancshares on January 1, 2015.~~

~~(4)~~

This is a non-GAAP financial measure. See our reconciliation of non-GAAP financial measures presented in the foregoing selected financial information to their most directly comparable GAAP financial measures under the caption Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations—GAAP Reconciliation and Management’s Explanation of Non-GAAP Financial Measures.”

~~(5)~~

On January 1, 2015, we issued shares of Series A and Series B preferred stock, in connection with the acquisition of F&M Bancshares, which had preferred stock outstanding pursuant to the U.S. Treasury’s Troubled Asset Relief Program. We paid $559 thousand in preferred dividends during 2015. On July 15, 2015, we redeemed all of the outstanding shares of Series A and Series B preferred stock with cash on hand for an aggregate redemption price of $11.7 million (which is the sum of the liquidation amount plus accrued and unpaid dividends up to, but excluding, the redemption date).

~~(6)~~

Except as otherwise indicated in this footnote, we calculate our average assets and average common equity for a period by dividing the sum of total assets or total common shareholders’ equity, as the case may be, as of the close of business on each day in the relevant period, by the number of days in the period. We calculate return on average assets by dividing net income for that period by average assets. We calculate return on average common equity for a period by dividing net income attributable to common shareholders for that period by average common equity and average tangible common equity, as the case may be, for that period.

~~(7)~~

~~Net interest margin represents net interest income divided by average interest-earning assets.~~

~~(8)~~

Efficiency ratio 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 (including the sale of the two acquired Central Texas branches). Additionally, taxes and provision for loan losses are not part of this calculation.

~~(9)~~

~~Nonperforming assets include nonaccrual loans, loans past due 90 days or more and still accruing interest, repossessed assets and other real estate.~~

~~(10)~~

~~Nonperforming loans include nonaccrual loans and loans past due 90 days or more and still accruing interest.~~

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following table presents, for the periods indicated, the total dollar amount of average balances, interest income from average interest-earning assets and the annualized resultant yields, as well as the interest expense on average interest-bearing liabilities, expressed in both dollars and rates. Any nonaccruing loans have been included in the table as loans carrying a zero yield.

For the Years Ended December 31,

2018

2017

2016

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⁽¹⁾

$
2,652,355

$
148,223

5.59
%

$
2,081,370

$
110,331

5.30
%

$
1,755,319

$
93,356

5.32
%
Securities

317,329

8,527

2.69
%

324,926

8,445

2.60
%

270,789

6,851

2.53
%
Deposits in other financial
   institutions

70,145

1,473

2.10
%

50,917

662

1.30
%

87,485

571

0.65
%
Total interest-earning assets

3,039,829

$
158,223

5.21
%

2,457,213

$
119,438

4.86
%

2,113,593

$
100,778

4.77
%
Allowance for loan losses

(24,077
)

(20,536
)

(15,200
)

Noninterest-earning assets

349,408

262,549

240,202

Total assets

$
3,365,160

$
2,699,226

$
2,338,595

Liabilities and Shareholders'
   Equity

Interest-Bearing Liabilities:

Interest-bearing demand
   deposits

$
224,210

$
1,834

0.82
%

$
156,527

$
597

0.38
%

$
104,212

$
334

0.32
%
Money market and savings
   deposits

637,722

4,644

0.73
%

536,415

2,562

0.48
%

465,403

2,103

0.45
%
Certificates and other time
   deposits

940,356

15,478

1.65
%

748,086

9,060

1.21
%

648,075

7,044

1.09
%
Borrowed funds

240,952

4,788

1.99
%

269,633

2,922

1.08
%

209,379

945

0.45
%
Subordinated debt

48,776

2,900

5.95
%

11,208

629

5.61
%

9,138

488

5.34
%
      Total interest-bearing
         liabilities

2,092,016

29,644

1.42
%

1,721,869

$
15,770

0.92
%

1,436,207

$
10,914

0.76
%
Noninterest-Bearing
   Liabilities:

Noninterest-bearing demand
   deposits

848,276

672,101

620,701

Other liabilities

11,427

7,629

8,476

      Total liabilities

2,951,719

2,401,599

2,065,384

Shareholders' equity

413,441

297,627

273,211

      Total liabilities and
         shareholders' equity

$
3,365,160

$
2,699,226

$
2,338,595

Net interest rate spread

3.79
%

3.94
%

4.01
%
Net interest income and
   margin⁽²⁾

$
128,579

4.23
%

$
103,668

4.22
%

$
89,864

4.25
%
Net interest income and
   margin (tax equivalent)⁽³⁾

$
129,652

4.27
%

$
106,669

4.34
%

$
92,330

4.37
%

~~(1)~~

~~Includes loans held for sale.~~


	For the Years Ended December 31,
	2021					2020					2019
	Average Balance		Interest Earned/ Interest Paid		Average Yield/ Rate	Average Balance		Interest Earned/ Interest Paid		Average Yield/ Rate	Average Balance		Interest Earned/ Interest Paid		Average Yield/ Rate
	(Dollars in thousands)
Assets
Interest-Earning Assets:
Loans	$	4,422,467	$	230,713	5.22%	$	4,383,375	$	225,959	5.15%	$	3,831,894	$	221,363	5.78%
Securities	1,050,376		21,798		2.08%	588,318		15,538		2.64%	355,233		9,909		2.79%
Deposits in other financial institutions	458,190		673		0.15%	36,945		265		0.72%	74,655		1,635		2.19%
Total interest-earning assets	5,931,033		$	253,184	4.27%	5,008,638		$	241,762	4.83%	4,261,782		$	232,907	5.47%
Allowance for credit losses on loans	(51,513)					(46,680)					(28,129)
Noninterest-earning assets	680,191					675,701					594,981
Total assets	$	6,559,711				$	5,637,659				$	4,828,634
Liabilities and Shareholders' Equity
Interest-Bearing Liabilities:
Interest-bearing demand deposits	$	574,079	$	1,409	0.25%	$	385,482	$	2,045	0.53%	$	345,693	$	4,010	1.16%
Money market and savings deposits	1,571,532		3,956		0.25%	1,316,188		7,326		0.56%	1,037,126		14,297		1.38%
Certificates and other time deposits	1,349,216		11,628		0.86%	1,268,080		21,675		1.71%	1,276,684		26,656		2.09%
Borrowed funds	144,354		1,878		1.30%	197,525		2,183		1.11%	127,138		4,675		3.68%
Subordinated debt	108,588		5,749		5.29%	108,064		5,850		5.41%	64,451		3,732		5.79%
Total interest-bearing liabilities	3,747,769		$	24,620	0.66%	3,275,339		$	39,079	1.19%	2,851,092		$	53,370	1.87%
Noninterest-Bearing Liabilities:
Noninterest-bearing demand deposits	1,983,934					1,593,354					1,194,496
Other liabilities	41,972					37,278					74,777
Total liabilities	5,773,675					4,905,971					4,120,365
Shareholders' equity	786,036					731,688					708,269
Total liabilities and shareholders' equity	$	6,559,711				$	5,637,659				$	4,828,634
Net interest rate spread					3.61%					3.64%					3.60%
Net interest income and margin(1)			$	228,564	3.85%			$	202,683	4.05%			$	179,537	4.21%
Net interest income and margin (tax equivalent)(2)			$	231,315	3.90%			$	204,416	4.08%			$	180,036	4.22%

~~(2)~~

~~The net interest margin is equal to net interest income divided by average interest-earning assets.~~

(1)The net interest margin is equal to net interest income divided by average interest-earning assets.

~~(3)~~

In order to make pretax income and resultant yields on tax-exempt investments and loans comparable to those on taxable investments and loans, a tax-equivalent adjustment has been computed using a federal income tax rate of 21% for the year ended December 31, 2018 and 35% for the years ended December 31, 2017 and 2016 and other applicable effective tax rates.

(2)In order to make pretax income and resultant yields on tax-exempt investments and loans comparable to those on taxable investments and loans, a tax-equivalent adjustment has been computed using a federal income tax rate of 21% for the years ended December 31, 2021, 2020 and 2019 and other applicable effective tax rates.

Table of Contents

The following table presents information regarding the dollar amount of changes in interest income and interest expense for the periods indicated for each major component of interest-earning assets and interest-bearing liabilities and distinguishes between the changes attributable to changes in volume and changes in interest rates. For purposes of this table, changes attributable to both rate and volume that cannot be segregated have been allocated to rate.

For the Years Ended December 31,

2018 vs. 2017

2017 vs. 2016

Increase

Increase

(Decrease)

(Decrease)

Due to Change in

Due to Change in

Volume

Rate

Total

Volume

Rate

Days

Total

(Dollars in thousands)

Interest-Earning assets:

Loans

$
30,268

$
7,625

$
37,893

$
17,294

$
(64
)

$
(255
)

$
16,975

Securities

(198
)

279

81

1,387

226

(19
)

1,594

Deposits in other financial
   institutions

250

562

812

(237
)

330

(2
)

91

Total increase (decrease) in
   interest income

30,320

8,466

38,786

18,444

492

(276
)

18,660

Interest-Bearing liabilities:

   Interest-bearing demand
      deposits

258

979

1,237

169

95

(1
)

263

   Money market and savings
      deposits

484

1,598

2,082

327

138

(6
)

459

   Certificates and other time
      deposits

2,329

4,089

6,418

1,106

929

(19
)

2,016

   Borrowed funds

(311
)

2,177

1,866

275

1,705

(3
)

1,977

   Subordinated debt

2,108

163

2,271

112

30

(1
)

141

    Total increase (decrease) in
        interest expense

4,868

9,006

13,874

1,989

2,897

(30
)

4,856

Increase (decrease) in net
   interest income

$
25,452

$
(540
)

$
24,912

$
16,455

$
(2,405
)

$
(246
)

$
13,804


	For the Years Ended December 31,
	2021 vs. 2020						2020 vs. 2019
	Increase (Decrease) Due to Change in				Total		Increase (Decrease) Due to Change in				Total
	Volume		Rate				Volume		Rate
	(Dollars in thousands)
Interest-Earning assets:
Loans	$	2,640	$	2,114	$	4,754	$	32,552	$	(27,956)	$	4,596
Securities	12,203		(5,943)		6,260		6,502		(873)		5,629
Deposits in other financial institutions	3,022		(2,614)		408		(826)		(544)		(1,370)
Total increase (decrease) in interest income	17,865		(6,443)		11,422		38,228		(29,373)		8,855

Interest-Bearing liabilities:
Interest-bearing demand deposits	1,001		(1,637)		(636)		462		(2,427)		(1,965)
Money market and savings deposits	1,421		(4,791)		(3,370)		3,847		(10,818)		(6,971)
Certificates and other time deposits	1,387		(11,434)		(10,047)		(180)		(4,801)		(4,981)
Borrowed funds	(588)		283		(305)		2,588		(5,080)		(2,492)
Subordinated debt	28		(129)		(101)		2,525		(407)		2,118
Total increase (decrease) in interest expense	3,249		(17,708)		(14,459)		9,242		(23,533)		(14,291)
Increase (decrease) in net interest income	$	14,616	$	11,265	$	25,881	$	28,986	$	(5,840)	$	23,146

Provision for ~~Loan~~Credit Losses

Our allowance for ~~loan~~credit losses is established through charges to income in the form of the provision in order to bring our allowance for ~~loan~~credit losses for various types of financial instruments including loans, securities and unfunded commitments to a level deemed appropriate by management. ~~The allowance for loan losses at December 31, 2018 and December 31, 2017 was $26.3 million and $23.6 million, respectively, representing 0.71% and 1.04% of total loans as of such dates.~~ We recorded a ~~$4.2~~$2.3 million negative provision for ~~loan~~credit losses for the year ended December 31, ~~2018~~2021 compared ~~with $13.2~~to a $27.4 million ~~for the year ended December 31, 2017. The increased~~ provision for the year ended December 31, 2017 was primarily due to an increase in organic loan growth, net charge-offs of $7.5 million, estimated losses related to Hurricane Harvey and an increase of $702 thousand of allowance on impaired loans. The provision for loancredit losses for the year ended December 31, ~~2017 was $13.2 million compared with $5.5 million~~2020. The reversal of provision for credit losses for the year ended December 31, ~~2016.~~

~~Acquired loans are initially recorded at fair value based on a discounted cash flow valuation methodology that considers, among other things, projected default rates, losses given existing defaults~~2021 reflected improvements in economic factors and ~~recovery rates. Loans acquired from Post Oak were initially recorded at fair value and no corresponding allowance for~~lower net charge-offs compared to the elevated provision expense in 2020, which was driven by the life of loan losses ~~was recorded for these loans at acquisition date. We recognized a discount on~~expected within our loan portfolio from the ~~acquired loans which will be prospectively accreted, increasing our basis~~increase in ~~such loans. At December 31, 2018, the balance~~unemployment and other expected economic effects of the ~~acquisition accounting discount was $14.2 million.~~

COVID-19 pandemic.

Noninterest Income

Our primary sources of noninterest income are debit card and ATM card income, service charges on deposit accounts, income earned on bank owned life insurance and nonsufficient funds ~~fees, rebates from our correspondent bank and debit card and ATM card income.~~fees. Noninterest income does not include loan origination fees which are recognized over the life of the related loan as an adjustment to yield using the interest method.

~~Year ended December 31, 2018 compared with the year ended December 31, 2017.~~

Noninterest income totaled ~~$7.7~~$8.6 million for the year ended December 31, ~~2018~~2021 compared to ~~$5.9~~$8.2 million for the year ended December 31, ~~2017,~~2020, an increase of ~~$1.9 million,~~$406 thousand, or

~~31.6%~~ 5.0%. Noninterest income increased in ~~2018~~2021 primarily due to increased debit card and ATM card income partially offset by a decrease in rebates from correspondent bank as a result of the decline in the earnings credit rate and ~~increased noninterest income driven primarily from increased deposit and loan balances, mitigated by losses~~a decrease in gain on ~~other real estate owned during 2018.~~

~~Year ended December 31, 2017~~sale of securities compared ~~with~~to the year ended December 31, ~~2016.~~ ~~Noninterest income totaled $5.9 million for the year ended December 31, 2017 compared to $7.3 million for the year ended December 31, 2016, a decrease~~2020.

Table of ~~$1.4 million, or 19.4%. This decrease was primarily due to the $2.1 million gain, $1.3 million after-tax, on the sale of the two Central Texas branch locations completed during the first quarter 2016.~~

Contents

The following table presents, for the periods indicated, the major categories of noninterest income:


	For the Years Ended December 31,					Increase			For the Years Ended December 31,				Increase				For the Years Ended December 31,				Increase (Decrease)				For the Years Ended December 31,								Increase (Decrease)
	2018			2017		(Decrease)			2017		2016		(Decrease)				2021		2020		Increase (Decrease)						2019						Increase (Decrease)
	(Dollars in thousands)																(Dollars in thousands)
Nonsufficient funds fees	$	755		$	685	$	70		$	685	$	661	$	24		Nonsufficient funds fees	$	464	$	404			$	60			$	404			$	658			$	(254)
Service charges on deposit accounts		869			783		86			783		677		106		Service charges on deposit accounts	1,671		1,530		141				1,530				1,472				58
Gain on sale of branch assets		—			—		—			—		2,050		(2,050	)
Gain on sale of securities		—			18		(18	)		18		30		(12	)	Gain on sale of securities	49		287		(238)				287				1,459				(1,172)
(Loss) gain on sale of other real estate		(428	)		6		(434	)		6		266		(260	)
(Loss) gain on sale of other real estate and other repossessed assets																(Loss) gain on sale of other real estate and other repossessed assets	(265)		(258)		(7)				(258)				26				(284)
Bank owned life insurance income		579			585		(6	)		585		626		(41	)	Bank owned life insurance income	554		582		(28)				582				624				(42)
Debit card and ATM card income		1,331			929		402			929		725		204		Debit card and ATM card income	2,996		2,205		791				2,205				1,984				221
Rebate from correspondent bank		2,609			1,327		1,282			1,327		650		677		Rebate from correspondent bank	200		876		(676)				876				3,580				(2,704)
Other⁽¹⁾		1,998			1,528		470			1,528		1,583		(55	)	Other(1)	2,893		2,530		363				2,530				3,620				(1,090)
Total noninterest income	$	7,713		$	5,861	$	1,852		$	5,861	$	7,268	$	(1,407	)	Total noninterest income	$	8,562	$	8,156	$	406			$	8,156			$	13,423			$	(5,267)

The following table presents information regarding nonperforming assets as of the dates indicated:

As of December 31,

2018

2017

2016

2015

2014

(Dollars in thousands)

Nonaccrual loans:

Loans held for sale

$
—

$
—

$
—

$
209

$
—

Commercial and industrial

10,861

6,437

3,896

2,664

1,527

Mortgage warehouse

—

—

—

—

—

Real estate:

Commercial real estate (including
   multi-family residential)

17,776

6,110

11,663

2,006

1,653

Commercial real estate construction
   and land development

974

—

—

—

—

1-4 family residential
   (including home equity)

3,201

781

217

239

—

Residential construction

—

—

—

—

—

Consumer and other

141

—

12

66

4

Total nonaccrual loans

32,953

13,328

15,788

5,184

3,184

Accruing loans 90 or more days past due

—

—

911

—

—

Total nonperforming loans⁽¹⁾

32,953

13,328

16,699

5,184

3,184

Other real estate

630

365

1,503

—

—

Other repossessed assets

—

205

286

131

—

Total nonperforming assets⁽²⁾

$
33,583

$
13,898

$
18,488

$
5,315

$
3,184

Restructured loans⁽³⁾

$
13,494

$
17,526

$
4,831

$
491

$
—

Nonperforming assets to total assets

0.72
%

0.49
%

0.75
%

0.25
%

0.25
%
Nonperforming loans to total loans

0.89
%

0.59
%

0.88
%

0.31
%

0.32
%

~~(1)~~

~~Nonperforming loans include nonaccrual loans and loans past due 90 days or more and still accruing interest.~~


	As of December 31,
	2021			2020			2019			2018			2017
	(Dollars in thousands)
Nonaccrual loans:
Commercial and industrial	$	8,358		$	10,747		$	8,388		$	10,861		$	6,437

Paycheck Protection Program (PPP)	—			—			—			—			—
Real estate:
Commercial real estate (including multi-family residential)	12,639			10,081			6,741			17,776			6,110
Commercial real estate construction and land development	63			3,011			9,050			974			—
1-4 family residential (including home equity)	2,875			4,525			3,294			3,201			781
Residential construction	—			—			746			—			—
Consumer and other	192			529			152			141			—
Total nonaccrual loans	24,127			28,893			28,371			32,953			13,328
Accruing loans 90 or more days past due	—			—			—			—			—
Total nonperforming loans(1)	24,127			28,893			28,371			32,953			13,328
Other real estate	—			9,196			8,337			630			365
Other repossessed assets	—			—			—			—			205
Total nonperforming assets(2)	$	24,127		$	38,089		$	36,708		$	33,583		$	13,898
Restructured loans(3)	$	9,068		$	12,448		$	19,239		$	13,494		$	17,526
Nonperforming assets to total assets	0.34		%	0.63		%	0.74		%	0.72		%	0.49		%
Nonperforming loans to total loans	0.57		%	0.64		%	0.72		%	0.89		%	0.59		%

~~(2)~~

~~Nonperforming assets include nonaccrual loans, loans past due 90 days or more and still accruing interest, repossessed assets and other real estate.~~

(1)Nonperforming loans include nonaccrual loans and loans past due 90 days or more and still accruing interest.

~~(3)~~

Restructured loans represent the balance at the end of the respective period for those performing loans modified in a troubled debt restructuring that are not already presented as a nonperforming loan.

(2)Nonperforming assets include nonaccrual loans, loans past due 90 days or more and still accruing interest, repossessed assets and other real estate.

(3)Restructured loans represent the balance at the end of the respective period for those performing loans modified in a troubled debt restructuring that are not already presented as a nonperforming loan.

Potential problem loans consist of loans that are performing in accordance with contractual terms but for which management has concerns about the ability of an obligor to continue to comply with repayment terms because of the obligor’s potential operating or financial difficulties. Management monitors these loans closely and reviews their performance on a regular basis. Potential problem loans contain potential weaknesses that could improve, persist or further deteriorate. At December 31, ~~2018~~2021 and ~~2017,~~2020, we had ~~$16.0~~$47.1 million and ~~$17.9~~$32.6 million, respectively, in loans of this type which are not included in any of the nonaccrual or 90 days past due loan categories. At December 31, ~~2018,~~2021, potential problem loans consisted of 2330 credit relationships. Of the total outstanding balance at December 31, ~~2018, 39.6%~~2021, 59.4% related to ~~nine~~six customers in the ~~energy-related~~hotel industry, 19.6% related to two customers in the customer service industry, 15.8% related to three customers in the residential real estate rental industry, 7.5% related to one customer in the manufacturing industry, 5.2% related to one customer in the restaurant industry, 4.3% related to three customers in the commercial services industry, 2.7% related to one customer in the convenience store industry, 3.1%9.6% related to one customer in the commercial real estate ~~development business, 1.2%~~investment industry, 8.3% related to six customers in the energy-related industry, 7.7% related to three customers in the customer service industry, 4.4% related to one customer in the ~~construction material~~event center industry, ~~and 1.0%~~4.3% related to two customers in the ~~trucking~~construction services industry, 3.2% related to four customers with homestead loans, 1.5% related to four customers in the commercial services industry, 1.2% related to two customers in the medical industry and 0.4% related to one customer in the wholesaler industry. Weakness in these organizations’ operating performance, financial condition and borrowing base deficits, ~~for certain energy related credits,~~ among other factors, have caused us to heighten the attention given to these credits. ~~As such, all of the loans identified as potential problem loans at December 31, 2018 were graded as substandard accruing loans.~~ Potential problem loans impact the allocation of our allowance for ~~loan~~credit losses on loans as a result of our risk grade based allocation methodology. See Note 6 – Loans and Allowance for ~~Loan~~Credit Losses in the accompanying consolidated financial statements for details regarding our allowance allocation methodology.

Table of Contents

Nonperforming assets ~~increased $19.7~~decreased $14.0 million to ~~$33.6~~$24.1 million at December 31, ~~2018,~~2021, from ~~$13.9~~$38.1 million at December 31, ~~2017.~~2020. Nonaccrual loans consisted of 8764 separate credits at December 31, ~~2018~~2021 compared to 5069 separate credits at December 31, ~~2017.~~2020. Nonperforming assets were ~~0.91%~~0.57% of total loans at December 31, ~~2018~~2021 compared to ~~0.61%~~0.85% at December 31, ~~2017. Nonaccrual loans at~~2020.

The provisions in the CARES Act included an election to not apply the guidance on accounting for troubled debt restructurings (“TDR”) to loan modifications, such as extensions or deferrals, related to COVID-19. We elected to adopt these provisions of the CARES Act and are following the Interagency Statement on Loan Modifications and Reporting for Financial Institutions Working with Customers Affected by the Coronavirus (Revised) issued by regulatory agencies.

During the years ended December 31, ~~2018, included $5.3~~2021 and 2020, the Company granted principal and interest deferrals on outstanding loan balances to customers affected by the COVID-19 pandemic. Additionally, upon request and after meeting certain conditions, borrowers could be granted additional payment deferrals subsequent to the first deferral. These deferrals were generally no more than 90 days in duration and were not considered troubled debt restructurings. As of December 31, 2021, 13 loans with outstanding loan balances of $18.2 million remained on deferral. If the impact of COVID-19 persists, borrower operations do not improve or if other negative events occur, such modified loans ~~acquired from Post Oak. See Note 2 – Acquisitions in the accompanying consolidated financial statements included elsewhere in this Annual Report on From 10-K for additional~~could transition to potential problem loans or into problem loans.

The following table presents information regarding ~~loans purchased from Post Oak.~~

principal and interest deferrals as of December 31, 2021 associated with loan modifications related to COVID-19:


			Inside of Deferral Period				Outside of Deferral Period				Total Loans That Have Had a Deferral
	Outstanding Loan Balance		Deferred Loan Balance		Percentage of Total Deferrals		Deferred Loan Balance		Percentage of Total Deferrals		Deferred Loan Balance		Percentage of Total Deferrals
	(Dollars in thousands)
Commercial and industrial	$	693,559	$	1,040	5.7	%	$	69,754	9.8	%	$	70,794	9.7	%
Paycheck Protection Program (PPP)	145,942		—		0.0	%	—		0.0	%	—		0.0	%
Real estate:
Commercial real estate (including multi-family residential)	2,104,621		16,851		92.5	%	539,043		76.1	%	555,894		76.5	%
Commercial real estate construction and land development	439,125		95		0.5	%	30,317		4.3	%	30,412		4.2	%
1-4 family residential (including home equity)	685,071		231		1.3	%	67,944		9.6	%	68,175		9.4	%
Residential construction	117,901		—		0.0	%	737		0.1	%	737		0.1	%
Consumer and other	34,267		—		0.0	%	462		0.1	%	462		0.1	%
Total loans	$	4,220,486	$	18,217	100.0	%	$	708,257	100.0	%	$	726,474	100.0	%

Allowance for ~~Loan~~Credit Losses

The allowance for ~~loan~~credit losses is a valuation allowance that is established through charges to earnings in the form of a provision for ~~loan losses.~~ (or reversal of) credit losses calculated in accordance with ASC 326, that is deducted from the amortized cost basis of certain assets to present the net amount expected to be collected. The amount of each allowance account represents management's best estimate of CECL on these financial instruments considering available information, from internal and external sources, relevant to assessing exposure to credit loss over the contractual term of the instrument. Relevant available information includes historical credit loss experience, current conditions and reasonable and supportable forecasts. While historical credit loss experience provides the basis for the estimation of expected credit losses, adjustments to historical loss information may be made for differences in current portfolio-specific risk characteristics, environmental conditions or other relevant factors. While management utilizes its best judgment and information available, the ultimate adequacy of our allowance accounts is dependent upon a variety of factors beyond our control, including the performance of our portfolios, the economy, changes in interest rates and the view of the regulatory authorities toward classification of assets. For additional information regarding critical accounting policies, refer to Note 1 – Nature of Operations and Summary of Significant Accounting and Reporting Policies and Note 6 – Loans and Allowance for Credit Losses in the accompanying notes to consolidated financial statements.

Table of Contents

Allowance for Credit Losses on Loans

The allowance for credit losses on loans represents management’s estimates of current expected credit losses in the Company’s loan portfolio. Pools of loans with similar risk characteristics are collectively evaluated, while loans that no longer share risk characteristics with loan pools are evaluated individually.

The Company retroactively adopted ASC Topic 326 effective January 1, 2020 during the fourth quarter of 2020. Upon adoption of CECL, the Company recognized an increase in allowance for credit losses on loans of $3.1 million with a corresponding decrease in retained earnings (after-tax). Additionally, the Company recognized an increase in the allowance for ~~loan~~credit losses ~~is affected by the following: (1) charge-offs of loans that decrease the allowance, (2) subsequent recoveries~~ on loans ~~previously charged off that increase the allowance and (3) provisions for loan losses charged~~of $2.1 million related to ~~income that increase the allowance.~~

Under accounting standards for business combinations, acquired loans are recorded at fair value on the date of acquisition. This fair value adjustment eliminates any of the seller’s allowance associated with such loans as of the purchase date as any credit exposure associated with such loans is incorporated into the fair value adjustment. A provision for loan losses is recorded for the emergence of new incurred and estimable losses on acquired loans after the acquisition date in excess of the recorded discount.

~~All~~ loans acquired from Post Oak, were recorded at fair value without a carryover of the Post Oak allowance for loan losses. The discount recognized on acquired loans is prospectively accreted, increasing our basis in such loans. Due to acquisition accounting, our allowance for loan losses to total loans may not be comparable to our peers particularly as it relatesdue to the allowance to gross loan percentage and the allowance to nonperforming loans. Recognizing that acquired purchased credit impaired loans have been de minimis, we monitor credit quality trends on a post-acquisition basis with an emphasis on past due, charge-off, classified loan and nonperforming trends. The amountreclassification of ~~discount recorded by the Company on the acquisition date~~PCD discounts as result of ~~the Post Oak acquisition was $17.0 million, or 1.43%, on loans acquired.~~

~~The remaining discount on the balance of acquired loans as of~~adopting CECL. At December 31, ~~2018 was $14.2 million. The discount on purchased loans considers anticipated credit losses on that portfolio; therefore, no~~2021, our allowance for credit losses ~~was established~~ on ~~the acquisition date. The unaccreted discount represents additional protection against potential losses and is presented as a reduction of the recorded investment in the~~ loans ~~rather than an allowance for loan losses. We will continue to look at the portfolio for credit deterioration and establish additional allowances over the remaining discount as needed.~~

~~At December 31, 2018, our allowance for loan losses~~ amounted to ~~$26.3~~$47.9 million, or ~~0.71%~~1.14% of total loans (1.18% excluding PPP loans), compared with ~~$23.6~~$53.2 million, or ~~1.04%~~1.18% of total loans (1.36% excluding PPP loans), as of December 31, 2017. During 2018, our allowance for loan losses as a percentage of loans decreased primarily due to the addition of acquired loans from Post Oak that were recorded at fair value without a carryover of the Post Oak allowance for loan losses.

~~The increase~~2020. This decrease in the allowance for credit losses on loans during 2021 reflected improvements in economic factors compared to increased expected losses during 2020 resulting from a deterioration in forecasted economic conditions and the current and uncertain future impacts associated with the COVID-19 pandemic and volatility in crude oil prices along with the increased level of ~~$2.7 million for~~net charge-offs, the ~~year ended December 31, 2018 as compared to the year ended December 31, 2017 was primarily due to an increase~~deterioration of $4.4 million of allowance on impaired loans partially offset by the reversal in 2018 of the $1.7 million Hurricane Harvey reserve that was established in the year 2017. We believe that the allowance for loan losses at December 31, 2018 was adequate to cover probable incurred losses incredit quality and other changes within the loan portfolio during 2020.

Collective loss estimates are determined by applying reserve factors, designed to estimate current expected credit losses, to amortized cost balances over the remaining contractual life of the collectively evaluated portfolio. Loans with similar risk characteristics are aggregated into homogeneous pools. The allowance for credit losses on loans also includes qualitative adjustments to bring the allowance to the level management believes is appropriate based on factors that have not otherwise been fully accounted for, including adjustments for foresight risk, input imprecision and model imprecision. Credit losses for loans that no longer share risk characteristics with the loan pools are estimated on an individual basis. Individual credit loss estimates are typically performed for nonaccrual loans and modified loans classified as TDRs and are based on one of ~~such date.~~

~~The ratio~~several methods, including the estimated fair value of ~~net charge-offs to average loans outstanding decreased to 0.06% for~~ the ~~year ended December 31, 2018 from 0.36% at December 31, 2017. Net charge-offs decreased $5.9 million during~~underlying collateral, observable market value of similar debt or the ~~year 2018 compared to 2017 primarily due to two commercial loan relationships that experienced financial difficulty in 2017.~~

present value of expected cash flows.

Table of Contents

The following table presents, as of and for the periods indicated, an analysis of the allowance for ~~loan~~credit losses on loans and other related data:


	As of and for the Years Ended December 31,																As of and for the Years Ended December 31,
	2018			2017			2016			2015			2014				2021			2020			2019			2018			2017
	(Dollars in thousands)																(Dollars in thousands)
Average loans outstanding	$	2,652,355		$	2,081,370		$	1,755,319		$	1,525,325		$	917,218		Average loans outstanding	$	4,422,467		$	4,383,375		$	3,831,894		$	2,652,355		$	2,081,370
Gross loans outstanding at end of period		3,708,306			2,270,876			1,891,635			1,681,052			1,002,054		Gross loans outstanding at end of period	4,220,486			4,491,764			3,915,310			3,708,306			2,270,876
Allowance for loan losses at beginning of period		23,649			17,911			13,098			8,246			6,655
Allowance for credit losses on loans at beginning of period																Allowance for credit losses on loans at beginning of period	53,173			29,438			26,331			23,649			17,911
Impact of ASC 326 adoption																Impact of ASC 326 adoption	—			5,225			—			—			—
Provision for loan losses		4,248			13,188			5,469			5,792			2,150		Provision for loan losses	(2,923)			26,543			5,939			4,248			13,188
Charge-offs:																Charge-offs:
Commercial and industrial loans		(2,424	)		(7,673	)		(722	)		(935	)		(567	)	Commercial and industrial loans	(1,579)			(2,938)			(2,688)			(2,424)			(7,673)
Mortgage warehouse		—			—			—			—			—		Mortgage warehouse	—			—			—			—			—
Real estate:																Real estate:
Commercial real estate (including multi-family residential)		(42	)		(124	)		(129	)		—			—		Commercial real estate (including multi-family residential)	(857)			(2,562)			(80)			(42)			(124)
Commercial real estate construction and land development		—			—			—			—			—		Commercial real estate construction and land development	—			(2,573)			(44)			—			—
1-4 family residential (including home equity)		(25	)		—			—			(40	)		—		1-4 family residential (including home equity)	(21)			(351)			(295)			(25)			—
Residential construction		—			—			—			—			—		Residential construction	—			—			—			—			—
Consumer and other		(24	)		(196	)		(49	)		(65	)		(40	)	Consumer and other	(24)			(159)			(34)			(24)			(196)
Total charge-offs for all loan types		(2,515	)		(7,993	)		(900	)		(1,040	)		(607	)	Total charge-offs for all loan types	(2,481)			(8,583)			(3,141)			(2,515)			(7,993)
Recoveries:																Recoveries:
Commercial and industrial loans		847			516			186			52			32		Commercial and industrial loans	164			473			274			847			516
Mortgage warehouse		—			—			—			—			—		Mortgage warehouse	—			—			—			—			—
Real estate:																Real estate:
Commercial real estate (including multi-family residential)		102			3			43			—			—		Commercial real estate (including multi-family residential)	—			72			3			102			3
Commercial real estate construction and land development		—			10			—			18			—		Commercial real estate construction and land development	—			—			—			—			10
1-4 family residential (including home equity)		—			10			10			—			—		1-4 family residential (including home equity)	—			—			—			—			10
Residential construction		—			—			—			24			—		Residential construction	—			—			—			—			—
Consumer and other		—			4			5			6			16		Consumer and other	7			5			32			—			4
Total recoveries for all loan types		949			543			244			100			48		Total recoveries for all loan types	171			550			309			949			543
Net charge-offs		(1,566	)		(7,450	)		(656	)		(940	)		(559	)	Net charge-offs	(2,310)			(8,033)			(2,832)			(1,566)			(7,450)
Allowance for loan losses at end of period	$	26,331		$	23,649		$	17,911		$	13,098		$	8,246
Allowance for loan losses to total loans		0.71	%		1.04	%		0.95	%		0.78	%		0.82	%
Allowance for credit losses on loans at end of period																Allowance for credit losses on loans at end of period	$	47,940		$	53,173		$	29,438		$	26,331		$	23,649
Allowance for credit losses on loans to total loans																Allowance for credit losses on loans to total loans	1.14		%	1.18		%	0.75		%	0.71		%	1.04		%
Net charge-offs to average loans		0.06	%		0.36	%		0.04	%		0.06	%		0.06	%	Net charge-offs to average loans	0.05		%	0.18		%	0.07		%	0.06		%	0.36		%
Allowance for loan losses to nonperforming loans		79.90	%		177.44	%		107.26	%		252.66	%		258.98	%
Allowance for credit losses on loans to nonperforming loans																Allowance for credit losses on loans to nonperforming loans	198.70		%	184.03		%	103.76		%	79.90		%	177.44		%

Our largest source of funds is deposits and our largest use of funds is loans. Our average loans increased $571.0 million, or 27.4%, for the year ended December 31, 2018 compared to the year ended December 31, 2017. We predominantly invest excess deposits in Federal Reserve Bank of Dallas balances, securities, interest-bearing deposits at other banks or other short-term liquid investments until the funds are needed to fund loan growth. Our securities portfolio had a weighted average life of 6.1 years and modified duration of 5.1 years at December 31, 2018, and a weighted average life of 6.5 years and modified duration of 5.5 years at December 31, 2017.

As of December 31, 2018 and December 31, 2017, we had outstanding $1.00 billion and $620.0 million, respectively, in commitments to extend credit and $23.3 million and $17.2 million, respectively, in commitments associated with outstanding standby and performance letters of credit. Since commitments associated with letters of credit and commitments to extend credit may expire unused, the total outstanding may not necessarily reflect the actual future cash funding requirements.

~~As of December 31, 2018, 2017 and 2016, we had no exposure to future cash requirements associated with known uncertainties or capital expenditures of a material nature.~~

As of December 31, 2018, we had cash and cash equivalents of $268.9 million compared with $182.1 million at December 31, 2017, an increase of $86.8 million. This increase in cash and cash equivalents was primarily due to $230.4 million of cash acquired in the Post Oak acquisition.

Capital management consists of providing equity to support our current and future operations. We are subject to capital adequacy requirements imposed by the Federal Reserve and the Bank is subject to capital adequacy requirements imposed by the FDIC. Both the Federal Reserve and the FDIC have adopted risk-based capital requirements for assessing bank holding companies and bank capital adequacy. These standards define capital and establish minimum capital requirements in relation to assets and off-balance sheet exposure, adjusted for credit risk. The risk-based capital standards currently in effect are designed to make regulatory capital requirements more sensitive to differences in risk profiles among bank holding companies and banks, to account for off-balance sheet exposure and to minimize disincentives for holding liquid assets. Assets and off-balance sheet items are assigned to broad risk categories, each with appropriate relative risk weights. The resulting capital ratios represent capital as a percentage of total risk-weighted assets and off-balance sheet items.

The fair value of net assets acquired includes fair value adjustments to certain acquired loans that were not considered impaired as of the acquisition date. The fair value adjustments were determined using discounted contractual cash flows. The following presents details of all loans acquired as of October 1, 2018:

In connection with the Post Oak acquisition, the Company acquired loans both with and without evidence of credit quality deterioration since origination. The acquired loans were initially recorded at fair value with no carryover of any allowance for loan losses. Acquired loans were segregated between those considered to be purchased credit impaired (“PCI”) loans and those without credit impairment at acquisition.

~~The following presents information at the acquisition date for PCI loans acquired in the transaction (dollars in thousands):~~

~~The following table presents information at the acquisition date for non-PCI loans acquired in the transaction (in thousands):~~

The following table presents unaudited pro forma financial information as if the acquisition had occurred at the beginning of 2017. Post Oak’s results of operations were included in the Company’s results beginning October 1, 2018. The pro forma financial information is not necessarily indicative of the results of operations that would have occurred had the transaction been effected on the assumed dates.

To determine pro forma information, the Company adjusted its year ended December 31, 2018 and 2017 historical results to include the historical results for Post Oak for the year ended December 31, 2017 and the nine months ended September 30, 2018.

The pro forma information includes acquisition accounting adjustments to interest on loans, certificates of deposit and subordinated debt, difference in the rate of borrowed funds, amortization of intangibles arising from the transaction and the related income tax effects.

~~Earnings of Post Oak since the acquisition date have not been disclosed as the acquired company was merged into the Company and separate financial information is not readily available.~~

The Company incurred approximately $1.7 million of pre-tax acquisition and merger-related expenses during the year ended December 31, 2018 related to the Post Oak acquisition. The acquisition and merger-related expenses are reflected on the Company’s income statement for 2018 but are excluded from the calculation of pro forma income above.

There were no realized losses on the securities in the portfolio as the Company believes these securities are temporarily impaired due to changes in market interest rates. The majority of the securities in an unrealized loss position are related to the Company's municipal securities.

During 2018, the Company acquired $42.8 million and sold $12.7 million of securities acquired in the Post Oak transaction. No gains or losses were recognized. During 2017, the Company sold $39.1 million in securities and recorded a net gain on the sales of $18 thousand. The Company sold $2.5 million in securities during 2016 and recorded a gain on the sale of $30 thousand.

At December 31, ~~2018~~2021 and ~~2017,~~2020, the Company did not own securities of any one issuer, other than the U.S. government and its agencies, in an amount greater than 10% of the consolidated shareholders’ equity at such respective dates.

~~Changes in the accretable yield for PCI loans for the year ended December 31, 2018 were as follows (in thousands):~~

~~The carrying amount of Non-PCI loans included in the consolidated balance sheet and the related outstanding balance owed at December 31, 2018 are presented in the table below (in thousands).~~

~~Changes in the discount accretion for Non-PCI loans for the years ended December 31, 2018 were as follows (in thousands):~~

~~The following table presents the average recorded investment of impaired loans and interest recognized on impaired loans.~~

~~The average recorded investment of impaired loans for the year ended December 31, 2016 was $22.5 million. Interest income recognized for the year ended December 31, 2016 was $862 thousand.~~

The following table presents ~~the~~ risk ratings by category of ~~loans by class~~loan as of ~~loan at~~ December 31, ~~2017:~~

~~At December 31, 2018, the allowance for loan losses totaled $26.3 million, or 0.71%~~

						Commercial real			Commercial real			1-4 family
	Commercial					estate (including			estate construction			residential													Commercial and industrial		Paycheck Protection Program (PPP)		Commercial real estate (including multi-family residential)		Commercial real estate construction and land development		1-4 family residential (including home equity)		Residential construction		Consumer and other		Total
	and industrial			Mortgage warehouse		multi-family residential)			and land development			(including home equity)			Residential construction			Consumer and other			Total				(Dollars in thousands)
	(Dollars in thousands)
Allowance for credit losses on loans:																								Allowance for credit losses on loans:
Balance December 31, 2020																								Balance December 31, 2020	$	17,738	$	—	$	23,934	$	6,939	$	3,279	$	870	$	413	$	53,173
Provision for credit losses on loans																								Provision for credit losses on loans	306		—		66		(676)		(2,411)		105		(313)		(2,923)
Charge-offs																								Charge-offs	(1,579)		—		(857)		—		(21)		—		(24)		(2,481)
Recoveries																								Recoveries	164		—		—		—		—		—		7		171
Net charge-offs																								Net charge-offs	(1,415)		—		(857)		—		(21)		—		(17)		(2,310)
Balance December 31, 2021																								Balance December 31, 2021	$	16,629	$	—	$	23,143	$	6,263	$	847	$	975	$	83	$	47,940
Allowance for credit losses on loans:																								Allowance for credit losses on loans:
Balance December 31, 2019																								Balance December 31, 2019	$	8,818	$	—	$	11,170	$	4,421	$	3,852	$	1,057	$	120	$	29,438
Impact of ASC 326 adoption																								Impact of ASC 326 adoption	7,022		—		(5,163)		1,630		1,600		(1)		137		5,225
Provision for credit losses on loans																								Provision for credit losses on loans	4,363		—		20,417		3,461		(1,822)		(186)		310		26,543
Charge-offs																								Charge-offs	(2,938)		—		(2,562)		(2,573)		(351)		—		(159)		(8,583)
Recoveries																								Recoveries	473		—		72		—		—		—		5		550
Net charge-offs																								Net charge-offs	(2,465)		—		(2,490)		(2,573)		(351)		—		(154)		(8,033)
Balance December 31, 2020																								Balance December 31, 2020	$	17,738	$	—	$	23,934	$	6,939	$	3,279	$	870	$	413	$	53,173
Allowance for loan losses:																								Allowance for loan losses:
Balance December 31, 2017	$	7,694		$	—	$	10,253		$	2,525		$	2,140		$	942		$	95		$	23,649
Balance December 31, 2018																								Balance December 31, 2018	$	8,351	$	—	$	11,901	$	2,724	$	2,242	$	1,040	$	73	$	26,331
Provision for loan losses		2,234			—		1,588			199			127			98			2			4,248		Provision for loan losses	2,881		—		(654)		1,741		1,905		17		49		5,939
Charge-offs		(2,424	)		—		(42	)		—			(25	)		—			(24	)		(2,515	)	Charge-offs	(2,688)		—		(80)		(44)		(295)		—		(34)		(3,141)
Recoveries		847			—		102			—			—			—			—			949		Recoveries	274		—		3		—		—		—		32		309
Net charge-offs		(1,577	)		—		60			—			(25	)		—			(24	)		(1,566	)	Net charge-offs	(2,414)		—		(77)		(44)		(295)		—		(2)		(2,832)
Balance December 31, 2018	$	8,351		$	—	$	11,901		$	2,724		$	2,242		$	1,040		$	73		$	26,331
Allowance for loan losses:
Balance December 31, 2016	$	5,059		$	—	$	8,950		$	1,217		$	1,876		$	748		$	61		$	17,911
Provision for loan losses		9,792			—		1,424			1,298			254			194			226			13,188
Charge-offs		(7,673	)		—		(124	)		—			—			—			(196	)		(7,993	)
Recoveries		516			—		3			10			10			—			4			543
Net charge-offs		(7,157	)		—		(121	)		10			10			—			(192	)		(7,450	)
Balance December 31, 2017	$	7,694		$	—	$	10,253		$	2,525		$	2,140		$	942		$	95		$	23,649
Allowance for loan losses:
Balance December 31, 2015	$	3,644		$	—	$	5,914		$	1,221		$	1,432		$	820		$	67		$	13,098
Provision for loan losses		1,951			—		3,122			(4	)		434			(72	)		38			5,469
Charge-offs		(722	)		—		(129	)		—			—			—			(49	)		(900	)
Recoveries		186			—		43			—			10			—			5			244
Net charge-offs		(536	)		—		(86	)		—			10			—			(44	)		(656	)
Balance December 31, 2016	$	5,059		$	—	$	8,950		$	1,217		$	1,876		$	748		$	61		$	17,911
Balance December 31, 2019																								Balance December 31, 2019	$	8,818	$	—	$	11,170	$	4,421	$	3,852	$	1,057	$	120	$	29,438

Depreciation expense was ~~$2.1~~$4.3 million for the year ended December 31, ~~2018~~2021 and ~~$1.6~~$3.7 million for ~~each~~the year ended December 31, 2020.

Income tax expense for 2018 was impacted by the reduction in the U.S. federal statutory income tax rate to 21% under the Tax Cuts and Jobs Act, which was enacted on December 22, 2017. During 2017, as a result of the new law, the Company recognized a provisional net tax expense totaling $2.6 million. During 2016, the Company adopted a new accounting standard that requires the income tax effects associated with stock-based compensation to be recognized as a component of income tax expense. The Company recognized net tax benefits related to stock-based compensation totaling $587 thousand in 2018 and $1.1 million in 2017.

~~Year-end deferred taxes are presented in the table below. As a result of the Tax Cuts and Jobs Act enacted on December 22, 2017, deferred~~

A summary of the activity in the stock option plans during the years ended December 31, ~~2018~~2021 and ~~2017~~2020 is set forth below:

Commitments to make loans are generally made for periods of 120 days or less. As of December 31, 2018, the fixed rate loan commitments have interest rates ranging from 1.95% to 8.70% with a weighted average maturity and rate of 2.49 years and 5.26%, respectively.

~~The following table presents a summary of non-cancelable future operating lease commitments as of December 31, 2018 (dollars in thousands):~~

It is expected that in the normal course of business, expiring leases will be renewed or replaced by leases on other property. Rent expense under all noncancelable operating lease obligations aggregated approximately $2.9 million, $2.8 million and $2.7 million for the years ended December 31, 2018, 2017 and 2016, respectively.

To Be Categorized As

Well Capitalized Under

Actual

For Capital
Adequacy
Purposes

Minimum Required
Plus Capital
Conservation Buffer

Prompt Corrective
Action
Provisions

Amount

Ratio

Amount

Ratio

Amount

Ratio

Amount

Ratio

(Dollars in thousands)

ALLEGIANCE BANCSHARES, INC.

(Consolidated)

As of December 31, 2018

Total Capital
   (to risk weighted assets)

$
531,453

13.70
%

$
310,295

8.00
%

$
383,020

9.875
%

N/A

N/A

Common Equity Tier 1 Capital
   (to risk weighted assets)

456,223

11.76
%

174,541

4.50
%

247,266

6.375
%

N/A

N/A

Tier I Capital
   (to risk weighted assets)

465,637

12.01
%

232,721

6.00
%

305,446

7.875
%

N/A

N/A

Tier I Capital
   (to average tangible assets)

465,637

10.61
%

175,621

4.00
%

175,621

4.000
%

N/A

N/A

As of December 31, 2017

Total Capital
   (to risk weighted assets)

$
336,829

13.43
%

$
200,687

8.00
%

$
232,044

9.250
%

N/A

N/A

Common Equity Tier 1 Capital
   (to risk weighted assets)

264,521

10.54
%

112,886

4.50
%

144,244

5.750
%

N/A

N/A

Tier I Capital
   (to risk weighted assets)

273,825

10.92
%

150,515

6.00
%

181,872

7.250
%

N/A

N/A

Tier I Capital
   (to average tangible assets)

273,825

9.84
%

111,274

4.00
%

111,274

4.000
%

N/A

N/A

ALLEGIANCE BANK

As of December 31, 2018

Total Capital
   (to risk weighted assets)

$
524,660

13.53
%

$
310,179

8.00
%

$
382,877

9.875
%

$
387,724

10.00
%
Common Equity Tier 1 Capital
   (to risk weighted assets)

458,844

11.83
%

174,476

4.50
%

247,174

6.375
%

252,021

6.50
%
Tier I Capital
   (to risk weighted assets)

458,844

11.83
%

232,634

6.00
%

305,333

7.875
%

310,179

8.00
%
Tier I Capital
   (to average tangible assets)

458,844

10.45
%

175,552

4.00
%

175,552

4.000
%

219,440

5.00
%
As of December 31, 2017

Total Capital
   (to risk weighted assets)

$
331,872

13.24
%

$
200,596

8.00
%

$
231,939

9.250
%

$
250,745

10.00
%
Common Equity Tier 1 Capital
   (to risk weighted assets)

268,868

10.72
%

112,835

4.50
%

144,179

5.750
%

162,985

6.50
%
Tier I Capital
   (to risk weighted assets)

268,868

10.72
%

150,447

6.00
%

181,790

7.250
%

200,596

8.00
%
Tier I Capital
   (to average tangible assets)

268,868

9.67
%

111,230

4.00
%

111,230

4.000
%

139,037

5.00
%


	Actual				Minimum Required for Capital Adequacy Purposes				Minimum Required Plus Capital Conservation Buffer				To Be Categorize d As Well Capitalized Under Prompt Corrective Action Provisions
	Amount		Ratio		Amount		Ratio		Amount		Ratio		Amount		Ratio
	(Dollars in thousands)
ALLEGIANCE BANCSHARES, INC.
(Consolidated)
As of December 31, 2021
Total Capital (to risk weighted assets)	$	722,010	16.08	%	$	359,214	8.00	%	$	471,468	10.50	%	N/A		N/A
Common Equity Tier 1 Capital (to risk weighted assets)	559,926		12.47	%	202,058		4.50	%	314,312		7.00	%	N/A		N/A
Tier 1 Capital (to risk weighted assets)	569,678		12.69	%	269,410		6.00	%	381,665		8.50	%	N/A		N/A
Tier 1 Capital (to average tangible assets)	569,678		8.53	%	267,286		4.00	%	267,286		4.00	%	N/A		N/A
As of December 31, 2020
Total Capital (to risk weighted assets)	$	642,155	15.71	%	$	327,084	8.00	%	$	429,298	10.50	%	N/A		N/A
Common Equity Tier 1 Capital (to risk weighted assets)	482,643		11.80	%	183,985		4.50	%	286,199		7.00	%	N/A		N/A
Tier 1 Capital (to risk weighted assets)	492,281		12.04	%	245,313		6.00	%	347,527		8.50	%	N/A		N/A
Tier 1 Capital (to average tangible assets)	492,281		8.51	%	231,518		4.00	%	231,518		4.00	%	N/A		N/A

ALLEGIANCE BANK
As of December 31, 2021
Total Capital (to risk weighted assets)	$	659,596	14.71	%	$	358,793	8.00	%	$	470,916	10.50	%	$	448,491	10.00	%
Common Equity Tier 1 Capital (to risk weighted assets)	566,483		12.63	%	201,821		4.50	%	313,944		7.00	%	291,519		6.50	%
Tier 1 Capital (to risk weighted assets)	566,483		12.63	%	269,095		6.00	%	381,217		8.50	%	358,793		8.00	%
Tier 1 Capital (to average tangible assets)	566,483		8.49	%	266,944		4.00	%	266,944		4.00	%	333,680		5.00	%
As of December 31, 2020
Total Capital (to risk weighted assets)	$	635,223	15.55	%	$	326,804	8.00	%	$	428,931	10.50	%	$	408,506	10.00	%
Common Equity Tier 1 Capital (to risk weighted assets)	544,331		13.32	%	183,828		4.50	%	285,954		7.00	%	265,529		6.50	%
Tier 1 Capital (to risk weighted assets)	544,331		13.32	%	245,103		6.00	%	347,230		8.50	%	326,804		8.00	%
Tier 1 Capital (to average tangible assets)	544,331		9.41	%	231,334		4.00	%	231,334		4.00	%	289,167		5.00	%


~~Texas~~	~~26-3564100~~
Texas		26-3564100
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)


Common Stock, par value $1.00 per share	ABTX	NASDAQ Global Market
(Title of each class)	(Trading symbol)	(Name of each exchange on which is registered)


PART I
			Item 1.		Business		1
			Item 1A.		Risk Factors		17
			Item 1B.		Unresolved Staff Comments		38
			Item 2.		Properties		38
			Item 3.		Legal Proceedings		38
			Item 4.		Mine Safety Disclosures		38

PART I II
			~~Item 1.~~		~~Business~~	1
	~~Item 1A.~~	~~Risk Factors~~	14
	~~Item 1B.~~	~~Unresolved Staff Comments~~	30
	~~Item 2.~~	~~Properties~~	30
	~~Item 3.~~	~~Legal Proceedings~~	31
	~~Item 4.~~	~~Mine Safety Disclosures~~	31

~~PART II~~
	Item 5.	Market for Registrant’s Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities		32 38
			Item 6.		~~Selected Financial Data~~[Reserved]		35 40
			Item 7.		Management’s Discussion and Analysis of Financial Condition and Results of Operations		37 40
			Item 7A.		Quantitative and Qualitative Disclosures about Market Risk		66 68
			Item 8.		Financial Statements and Supplementary Data		66 68
			Item 9.		Changes in and Disagreements With Accountants on Accounting and Financial Disclosure		66 68
			Item 9A.		Controls and Procedures		66 69
			Item 9B.		Other Information		66 69

PART III
			Item 10.		Directors, Executive Officers and Corporate Governance		67 70
			Item 11.		Executive Compensation		67 70
			Item 12.		Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters		67 70
			Item 13.		Certain Relationships and Related Transactions, and Director Independence		67 70
			Item 14.		Principal Accounting Fees and Services		67 70

PART IV
			Item 15.		Exhibits and Financial Statement Schedules		68 71
			Item 16.		Form 10-K Summary		69 73
			Signatures				70 74


Acquisition	Date Completed	Acquired Assets		Acquired Loans		Acquired Deposits		Number of Branches
	(Dollars in millions)
Independence Bank, N.A.	November 16, 2013	$	222.1	$	132.4	$	199.4	3
F&M Bancshares, Inc.	January 1, 2015	$	569.7	$	410.2	$	488.9	9*
Post Oak Bancshares, Inc.	October 1, 2018	$	1,490.4	$	1,180.0	$	1,289.6	13
LoweryBank branch	February 1, 2019	$	48.7	$	45.0	$	16.0	1

Institution acquired	Date Completed	Acquired Assets		Acquired Loans		Acquired Deposits		Number of Branches
	(Dollars in millions)
Independence Bank, N.A.	November 16, 2013	$	222.1	$	132.4	$	199.4		3
F&M Bancshares, Inc.	January 1, 2015	$	569.7	$	410.2	$	488.9	9*
Post Oak Bancshares, Inc.	October 1, 2018	$	1,490.4	$	1,180.0	$	1,289.6		13


S			ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


£			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


Number of Full-Time Equivalent Employees	People of Color(1)	Women
594	48%	64%

Period	Total Number of Shares Purchased			Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans⁽¹⁾		Maximum Number (or Approximate Dollar Value) of Shares That May Yet Be Purchased Under the Plans at the End of the Period
October 1, 2018 to October 31, 2018		—		$	—		—		—
November 1, 2018 to November 30, 2018		—		$	—		—		—
December 1, 2018 to December 31, 2018		85,389	⁽²⁾	$	30.61		69,389		930,611

	October 8, 2015		December 31, 2015		June 30, 2016		December 31, 2016		June 30, 2017		December 31, 2017		June 30, 2018		December 31, 2018
Allegiance Bancshares, Inc.		100.00		102.29		107.61		156.36		165.66		162.85		187.50		140.01
S&P 500		100.00		107.04		111.15		119.84		131.04		146.01		149.88		139.61
NASDAQ Bank		100.00		103.55		100.25		142.33		139.92		150.12		156.12		125.21

	As of and for the Years Ended December 31,
	2018⁽¹⁾		2017		2016⁽²⁾		2015⁽³⁾		2014
	(Dollars in thousands, except share and per share data)
Selected Period End Balance Sheet Data:
Cash and cash equivalents	$	268,947	$	182,103	$	142,098	$	148,431	$	167,540
Available for sale securities		337,293		309,615		316,455		165,097		84,962
Loans held for sale		—		—		—		27,887		—
Loans held for investment		3,708,306		2,270,876		1,891,635		1,653,165		1,002,054
Allowance for loan losses		26,331		23,649		17,911		13,098		8,246
Goodwill and intangible assets, net		249,712		42,663		43,444		44,619		12,891
Total assets		4,655,249		2,860,231		2,450,948		2,084,579		1,280,008
Noninterest-bearing deposits		1,209,300		683,110		593,751		620,320		373,795
Interest-bearing deposits		2,453,236		1,530,864		1,276,432		1,138,813		759,889
Total deposits		3,662,536		2,213,974		1,870,183		1,759,133		1,133,684
Total shareholders’ equity		702,984		306,865		279,817		258,490		131,778
Total tangible shareholders' equity⁽⁴⁾		453,272		264,202		236,373		213,871		118,887
Selected Income Statement Data:
Net interest income	$	128,579	$	103,668	$	89,864	$	80,166	$	46,834
Provision for loan losses		4,248		13,188		5,469		5,792		2,150
Net interest income after provision for loan losses		124,331		90,480		84,395		74,374		44,684
Noninterest income		7,713		5,861		7,268		3,992		2,607
Noninterest expense		86,787		69,962		59,258		54,805		33,458
Net income before income taxes		45,257		26,379		32,405		23,561		13,833
Net income		37,309		17,632		22,851		15,786		9,005
Net income attributable to common shareholders⁽⁵⁾		37,309		17,632		22,851		15,227		9,005
Selected Per Share Data:
Earnings per common share, basic	$	2.41	$	1.34	$	1.78	$	1.45	$	1.29
Earnings per common share, diluted		2.37		1.31		1.75		1.43		1.26
Book value per common share		32.04		23.20		21.59		20.17		17.62
Tangible book value per common share⁽⁴⁾		20.66		19.97		18.24		16.69		15.90
Weighted average common shares outstanding, basic		15,484,757		13,124,900		12,873,326		10,470,465		6,978,025
Weighted average common shares outstanding, diluted		15,773,039		13,457,718		13,073,932		10,654,003		7,142,377
Shares outstanding at end of period		21,937,740		13,226,826		12,958,341		12,812,985		7,477,309

	For the Years Ended December 31,
	2018 vs. 2017								2017 vs. 2016
	Increase								Increase
	(Decrease)								(Decrease)
	Due to Change in								Due to Change in
	Volume			Rate			Total		Volume			Rate			Days			Total
	(Dollars in thousands)
Interest-Earning assets:
Loans	$	30,268		$	7,625		$	37,893	$	17,294		$	(64	)	$	(255	)	$	16,975
Securities		(198	)		279			81		1,387			226			(19	)		1,594
Deposits in other financial institutions		250			562			812		(237	)		330			(2	)		91
Total increase (decrease) in interest income		30,320			8,466			38,786		18,444			492			(276	)		18,660

Interest-Bearing liabilities:
Interest-bearing demand deposits		258			979			1,237		169			95			(1	)		263
Money market and savings deposits		484			1,598			2,082		327			138			(6	)		459
Certificates and other time deposits		2,329			4,089			6,418		1,106			929			(19	)		2,016
Borrowed funds		(311	)		2,177			1,866		275			1,705			(3	)		1,977
Subordinated debt		2,108			163			2,271		112			30			(1	)		141
Total increase (decrease) in interest expense		4,868			9,006			13,874		1,989			2,897			(30	)		4,856
Increase (decrease) in net interest income	$	25,452		$	(540	)	$	24,912	$	16,455		$	(2,405	)	$	(246	)	$	13,804


								Earnings Per Share⁽¹⁾
	Interest Income			Net Interest Income		Net Income Attributable to Common Shareholders		Basic		Diluted
	(Dollars in thousands, except per share data)
2018
First quarter	$	32,391		$	26,889	$	7,711	$	0.58	$	0.57
Second quarter		34,193			27,816		7,556		0.57		0.55
Third quarter		35,336			28,036		8,879		0.66		0.65
Fourth quarter		56,303	��		45,838		13,163		0.60		0.59

2017
First quarter	$	27,512		$	24,128	$	6,047	$	0.46	$	0.45
Second quarter		28,987			25,107		5,395		0.41		0.40
Third quarter		30,901			26,997		2,986		0.23		0.22
Fourth quarter		32,038			27,436		3,204		0.24		0.24


	Interest Income		Net Interest Income		Net Income Attributable to Common Shareholders		Earnings Per Share(1)
							Basic		Diluted
	(Dollars in thousands, except per share data)
2021
First quarter	$	62,828	$	55,698	$	18,010	$	0.89	$	0.89
Second quarter	62,832		56,596		22,925		1.13		1.12
Third quarter	63,893		58,166		19,060		0.94		0.93
Fourth quarter	63,631		58,104		21,558		1.06		1.06

2020
First quarter(2)	$	57,452	$	45,025	$	3,516	$	0.17	$	0.17
Second quarter(2)	60,452		50,847		9,907		0.49		0.48
Third quarter(2)	60,811		51,909		16,170		0.79		0.79
Fourth quarter	63,047		54,902		15,941		0.78		0.77

	As of December 31, 2018
			Due After
	Due in		One Year
	One Year		Through		Due After					As of December 31, 2021
	or Less		Five Years		Five Years		Total			Due in One Year or Less		Due After One Year Through Five Years		Due After Five Years Through Fifteen Years		Due After Fifteen Years		Total
	(Dollars in thousands)									(Dollars in thousands)
Commercial and industrial	$	314,719	$	311,977	$	75,341	$	702,037	Commercial and industrial	$	296,120	$	305,836	$	91,603	$	—	$	693,559
Mortgage Warehouse		48,274		—		—		48,274

Paycheck Protection Program (PPP)									Paycheck Protection Program (PPP)	5,645		140,297		—		—		145,942
Real estate:									Real estate:
Commercial real estate (including multi family residential)		228,988		1,008,121		413,803		1,650,912
Commercial real estate (including multi-family residential)									Commercial real estate (including multi-family residential)	282,372		1,217,220		435,746		169,283		2,104,621
Commercial real estate construction and land development		99,692		246,814		83,622		430,128	Commercial real estate construction and land development	111,320		277,389		23,904		26,512		439,125
1-4 family residential (including home equity)		85,143		396,085		168,083		649,311	1-4 family residential (including home equity)	87,515		324,611		121,289		151,656		685,071
Residential construction		126,432		41,526		18,453		186,411	Residential construction	74,994		16,515		26,392		—		117,901
Consumer and other		24,539		16,314		380		41,233	Consumer and other	25,350		8,696		221		—		34,267
Total loans	$	927,787	$	2,020,837	$	759,682	$	3,708,306	Total loans	$	883,316	$	2,290,564	$	699,155	$	347,451	$	4,220,486

Loans with predetermined (fixed) interest rates	$	525,973	$	1,741,140	$	367,746	$	2,634,859	Loans with predetermined (fixed) interest rates	$	558,167	$	2,033,247	$	278,267	$	78,961	$	2,948,642
Loans with floating interest rates		401,814		279,697		391,936		1,073,447	Loans with floating interest rates	325,149		257,317		420,888		268,490		1,271,844
Total loans	$	927,787	$	2,020,837	$	759,682	$	3,708,306	Total loans	$	883,316	$	2,290,564	$	699,155	$	347,451	$	4,220,486

	As of December 31, 2017
			Due After
	Due in		One Year
	One Year		Through		Due After
	or Less		Five Years		Five Years		Total
	(Dollars in thousands)
Commercial and industrial	$	190,585	$	209,797	$	56,747	$	457,129
Mortgage Warehouse		69,456		—		—		69,456
Real estate:
Commercial real estate (including multi- family residential)		126,169		716,868		237,210		1,080,247
Commercial real estate construction and land development		69,291		139,956		34,142		243,389
1-4 family residential (including home equity)		48,109		148,673		104,437		301,219
Residential construction		97,189		2,839		9,088		109,116
Consumer and other		4,325		5,993		2		10,320
Total loans	$	605,124	$	1,224,126	$	441,626	$	2,270,876

Loans with predetermined (fixed) interest rates	$	363,029	$	1,119,854	$	263,847	$	1,746,730
Loans with floating interest rates		242,095		104,272		177,779		524,146
Total loans	$	605,124	$	1,224,126	$	441,626	$	2,270,876

	December 31, 2018
			Gross		Gross
	Amortized		Unrealized		Unrealized			Fair			December 31, 2021
	Cost		Gains		Losses			Value			Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
	(Dollars in thousands)										(Dollars in thousands)
Available for Sale										Available for Sale
U.S. Government and agency securities	$	8,570	$	161	$	(46	)	$	8,685
U.S. government and agency securities										U.S. government and agency securities	$	401,811	$	414	$	(1,674)	$	400,551
Municipal securities		219,068		1,258		(3,541	)		216,785	Municipal securities	468,164		30,483		(1,547)		497,100
Agency mortgage-backed pass-through securities		66,987		237		(1,029	)		66,195	Agency mortgage-backed pass-through securities	307,097		2,075		(6,576)		302,596
Agency collateralized mortgage obligations										Agency collateralized mortgage obligations	443,277		2,026		(4,247)		441,056
Corporate bonds and other		46,303		15		(690	)		45,628	Corporate bonds and other	130,314		2,922		(774)		132,462
Total	$	340,928	$	1,671	$	(5,306	)	$	337,293	Total	$	1,750,663	$	37,920	$	(14,818)	$	1,773,765

	December 31, 2017
			Gross		Gross
	Amortized		Unrealized		Unrealized			Fair			December 31, 2020
	Cost		Gains		Losses			Value			Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
	(Dollars in thousands)										(Dollars in thousands)
Available for Sale										Available for Sale
U.S. Government and agency securities	$	8,507	$	232	$	(24	)	$	8,715
U.S. government and agency securities										U.S. government and agency securities	$	25,545	$	654	$	—	$	26,199
Municipal securities		222,330		2,470		(1,842	)		222,958	Municipal securities	392,586		35,079		(60)		427,605
Agency mortgage-backed pass-through securities		32,014		159		(361	)		31,812	Agency mortgage-backed pass-through securities	167,606		3,829		(146)		171,289
Agency collateralized mortgage obligations										Agency collateralized mortgage obligations	80,182		4,263		(75)		84,370
Corporate bonds and other		46,247		62		(179	)		46,130	Corporate bonds and other	62,124		1,352		(49)		63,427
Total	$	309,098	$	2,923	$	(2,406	)	$	309,615	Total	$	728,043	$	45,177	$	(330)	$	772,890


	December 31, 2018																										December 31, 2021
	Within One Year					After One Year but Within Five Years					After Five Years but Within Ten Years					After Ten Years					Total						Within One Year				After One Year but Within Five Years				After Five Years but Within Ten Years				After Ten Years				Total
	Amount		Yield			Amount		Yield			Amount		Yield			Amount		Yield			Total		Yield				Amount		Yield		Amount		Yield		Amount		Yield		Amount		Yield		Total		Yield
	(Dollars in thousands)																										(Dollars in thousands)
Available for Sale																										Available for Sale
U.S. government and agency securities	$	999		2.37	%	$	5,399		3.30	%	$	—		0.00	%	$	2,172		2.74	%	$	8,570		3.05	%	U.S. government and agency securities	$	4,127	3.25	%	$	249,188	0.80	%	$	22,752	1.29	%	$	125,744	0.98	%	$	401,811	0.91	%
Municipal securities		3,772		2.06	%		37,422		2.03	%		86,391		3.05	%		91,483		3.84	%		219,068		3.19	%	Municipal securities	2,383		3.16	%	5,548		3.63	%	73,369		2.93	%	386,864		3.06	%	468,164		3.05	%
Agency mortgage- backed pass-through securities		—		0.00	%		34		4.05	%		13,466		2.92	%		53,487		3.21	%		66,987		3.15	%
Agency mortgage-backed pass-through securities																										Agency mortgage-backed pass-through securities	—		0.00	%	4,954		2.96	%	4,805		3.21	%	297,338		1.35	%	307,097		1.41	%
Agency collateralized mortgage obligations																										Agency collateralized mortgage obligations	—		0.00	%	11,212		2.80	%	14,020		2.72	%	418,045		1.34	%	443,277		1.42	%
Corporate bonds and other		10,106		2.36	%		30,854		2.56	%		1,000		8.00	%		4,343		4.17	%		46,303		2.78	%	Corporate bonds and other	—		0.00	%	3,000		5.75	%	50,388		4.72	%	76,926		2.33	%	130,314		3.34	%
Total	$	14,877		2.29	%	$	73,709		2.34	%	$	100,857		3.09	%	$	151,485		3.61	%	$	340,928		3.12	%	Total	$	6,510	3.22	%	$	273,902	1.04	%	$	165,334	3.24	%	$	1,304,917	1.88	%	$	1,750,663	1.88	%

	Years Ended December 31,
	2018					2017					2016						For the Years Ended December 31,
	Average		Average			Average		Average			Average		Average				2021				2020				2019
	Balance		Rate			Balance		Rate			Balance		Rate				Average Balance		Average Rate		Average Balance		Average Rate		Average Balance		Average Rate
	(Dollars in thousands)																(Dollars in thousands)
Interest-bearing demand	$	224,210		0.82	%	$	156,527		0.38	%	$	104,212		0.32	%	Interest-bearing demand	$	574,079	0.25	%	$	385,482	0.53	%	$	345,693	1.16	%
Money market and savings		637,722		0.73	%		536,415		0.48	%		465,403		0.45	%	Money market and savings	1,571,532		0.25	%	1,316,188		0.56	%	1,037,126		1.38	%
Certificates and other time		940,356		1.65	%		748,086		1.21	%		648,075		1.09	%	Certificates and other time	1,349,216		0.86	%	1,268,080		1.71	%	1,276,684		2.09	%
Total interest-bearing deposits		1,802,288		1.22	%		1,441,028		0.85	%		1,217,690		0.78	%	Total interest-bearing deposits	3,494,827		0.49	%	2,969,750		1.05	%	2,659,503		1.69	%
Noninterest-bearing deposits		848,276		—			672,101		—			620,701		—		Noninterest-bearing deposits	1,983,934		—		1,593,354		—		1,194,496		—
Total deposits	$	2,650,564		0.83	%	$	2,113,129		0.58	%	$	1,838,391		0.52	%	Total deposits	$	5,478,761	0.31	%	$	4,563,104	0.68	%	$	3,853,999	1.17	%

	As of December 31, 2018
	One Year or Less		More than One Year but Less Than Three Years		Three years or More but Less Than Five Years		Five Years or More		Total
	(Dollars in thousands)
Credit agreement	$	—	$	—	$	—	$	569	$	569
Operating leases		2,559		1,987		3,242		5,126		12,914
Total	$	2,559	$	1,987	$	3,242	$	5,695	$	13,483




	Actual Ratio			Minimum Required for Capital Adequacy Purposes			Minimum Required Plus Capital Conservation Buffer			To Be Categorized As Well Capitalized Under Prompt Corrective Action Provisions				Actual Ratio	Minimum Required for Capital Adequacy Purposes	Minimum Required Plus Capital Conservation Buffer	To Be Categorized As Well Capitalized Under Prompt Corrective Action Provisions
ALLEGIANCE BANCSHARES, INC.													ALLEGIANCE BANCSHARES, INC.
(Consolidated)													(Consolidated)
Total capital (to risk weighted assets)		13.70	%		8.00	%		9.875	%	N/A			Total capital (to risk weighted assets)	16.08%	8.00%	10.50%	N/A
Common equity Tier 1 capital (to risk weighted assets)		11.76	%		4.50	%		6.375	%	N/A			Common equity Tier 1 capital (to risk weighted assets)	12.47%	4.50%	7.00%	N/A
Tier 1 capital (to risk weighted assets)		12.01	%		6.00	%		7.875	%	N/A			Tier 1 capital (to risk weighted assets)	12.69%	6.00%	8.50%	N/A
Tier 1 capital (to average assets)		10.61	%		4.00	%		4.000	%	N/A
Tier 1 capital (to average tangible assets)													Tier 1 capital (to average tangible assets)	8.53%	4.00%	4.00%	N/A

ALLEGIANCE BANK:													ALLEGIANCE BANK:
Total capital (to risk weighted assets)		13.53	%		8.00	%		9.875	%		10.00	%	Total capital (to risk weighted assets)	14.71%	8.00%	10.50%	10.00%
Common equity Tier 1 capital (to risk weighted assets)		11.83	%		4.50	%		6.375	%		6.50	%	Common equity Tier 1 capital (to risk weighted assets)	12.63%	4.50%	7.00%	6.50%
Tier 1 capital (to risk weighted assets)		11.83	%		6.00	%		7.875	%		8.00	%	Tier 1 capital (to risk weighted assets)	12.63%	6.00%	8.50%	8.00%
Tier 1 capital (to average assets)		10.45	%		4.00	%		4.000	%		5.00	%
Tier 1 capital (to average tangible assets)													Tier 1 capital (to average tangible assets)	8.49%	4.00%	4.00%	5.00%

Change in Interest	Percent Change in Net Interest Income		Percent Change in Economic Value of Equity
Rates (Basis Points)	As of December 31, 2018	As of December 31, 2017	As of December 31, 2018	As of December 31, 2017

Change in Interest Rates (Basis Points)					Change in Interest Rates (Basis Points)	Percent Change in Net Interest Income		Percent Change in Economic Value of Equity
						As of December 31, 2021	As of December 31, 2020	As of December 31, 2021	As of December 31, 2020
+300	0.9%	(6.2)%	0.2%	(9.0)%	+300	(0.1)%	(3.9)%	(1.0)%	10.8%
+200	0.9%	(4.1)%	0.9%	(5.4)%	+200	(0.7)%	(3.1)%	1.1%	8.8%
+100	0.6%	(2.2)%	1.0%	(2.3)%	+100	(0.7)%	(1.9)%	1.6%	5.2%
Base	0.0%	0.0%	0.0%	0.0%	Base	0.0%	0.0%	0.0%	0.0%
-100	(1.1)%	(1.9)%	(2.7)%	(1.9)%	-100	(3.5)%	(3.7)%	(3.3)%	(12.9)%

~~Exhibit~~ ~~Number~~	~~Description~~
Exhibit Number		Description
2.1		Agreement and Plan of ~~Reorganization~~Merger, dated November 5 , 2021, by and between Allegiance Bancshares, Inc. and ~~Post Oak Bancshares,~~CBTX, Inc. ~~dated April 30, 2018~~ (incorporated herein by reference to Exhibit 2.1 to the Company's Form 8-K filed on ~~May 1, 2018)~~November 12, 2021)
3.1
~~3.1~~	Amended and Restated Certificate of Formation of Allegiance Bancshares, Inc. (incorporated herein by reference to Exhibit 3.1 to the Company’s Quarterly Report on Form 10-Q filed on ~~November~~August 1, ~~2018~~)2019)
3.2
~~3.2~~	Bylaws of Allegiance Bancshares, Inc. (incorporated herein by reference to Exhibit 3.2 to the Company’s Registration Statement on Form S-1 (Registration No. 333-206536) (the “Registration Statement”)
4.1
~~4.1~~	Specimen Common Stock Certificate (incorporated by reference to Exhibit 4.1 to the Registration ~~Statement)~~Statement
4.2		Description of Securities Registered Pursuant to Section 12 of the Securities Exchange Act of 19 34 (incorporated herein by reference to Exhibit 4.2 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2020)
~~4.2~~ 4.3		Form of Allegiance Bank Fixed-to-Floating Rate Subordinated Note due December 15, 2027 Certificate (incorporated by reference to Exhibit 4.1 to the Company's Current Report on Form 8-K filed on December 14, 2017)
4.4		Subordinated Debt Indenture, dated as of September 20, 2019, between Allegiance Bancshares, Inc. and U.S. Bank National Association, as trustee (incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed on October 1, 2019)
~~10.1~~ 4.5		First Supplemental Indenture, dated as of September 27, 2019, between Allegiance Bancshares, Inc. and U.S. Bank National Association, as trustee (incorporated herein by reference to Exhibit 4.2 to the Company’s Form 8-K filed on October 1, 2019)


4.6		Form of Allegiance Bancshares, Inc. 4.70% Fixed-to-Floating Rate Subordinated Note due 2029 (incorporated by reference to Exhibit A of Exhibit 4.2 to the Company’s Current Report on Form 8-K filed October 1, 2019)
10.1		Tax Allocation Agreement dated April 1, 2013, by and between Allegiance Bancshares, Inc. and Allegiance Bank (f/k/a Allegiance Bank Texas) (incorporated by reference to Exhibit 10.1 to the Registration Statement)
10.2
~~10.2~~	Allegiance Bancshares, Inc. 2015 Amended and Restated Stock Awards and Incentive Plan (including form of awards) (incorporated by reference to Exhibit 10.2 to the Registration Statement)
10.3
~~10.3~~	Credit Agreement dated as of December 22, 2014 by and among Allegiance Bancshares, Inc. and Prosperity Bank (incorporated by reference to Exhibit 10.3 to the Registration Statement)
10.4
~~10.4~~	Form of Director and Officer Indemnification Agreement (incorporated by reference to Exhibit 10.4 to Amendment No. 1 to the Registration Statement)
10.5
~~10.5~~	Amendment to the Allegiance Bancshares, Inc. 2015 Amended and Restated Stock Awards and Incentive Plan (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed on May 24, 2017)
10.6

~~10.6~~	Allegiance Bancshares, Inc. Form of Non-Employee Director Restricted Stock Agreement (incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q filed on May 5, 2017)
10.7
~~10.7~~	Amended and Restated Employee Stock Purchase Plan (incorporated by reference to Exhibit 99.1 to the Company's Registration Statement on Form S-8 ( Registration No. 333-208600))
10.8
~~10.8~~	Amendment to Amended and Restated Employee Stock Purchase Plan (incorporated by reference to Exhibit 10.8 to the Company’s Annual Report on Form 10-K filed on March 9, 2018)
10.9
~~10.9~~	Amendment No. 1 to Credit Agreement, dated as of December 28, 2018, by and among Allegiance Bancshares, Inc. and Prosperity Bank (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on December 31, 2018)
10.10
~~10.10~~	Allegiance Bancshares, Inc. Annual Incentive Plan (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on January 29, 2019)
10.11		Allegiance Bancshares, Inc. 2019 Amended and Restated Stock Awards and Incentive Plan (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed on April 30, 2019)
21.1* 10.12		Allegiance Bancshares, Inc. 2019 Amended and Restated Employee Stock Purchase Plan (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on April 30, 2019)
10.13		Form of Restricted Stock Award Agreement (incorporated by reference to Exhibit 99.2 to the Company's Form S-8 (Registration No. 333-231142))
10.14		Form of Performance Share Unit Agreement (incorporated by reference to Exhibit 99.3 to the Company's Form S-8 (Registration No. 333-231142))
10.15		Form of Restricted Stock Award Agreement for Non-Employee Director (incorporated by reference to Exhibit 99.4 to the Company's Form S-8 (Registration No. 333-231142))
10.16		Change in Control Severance Plan (incorporated herein by reference to Exhibit 10.1 to the Company’s Form 8-K filed on February 4, 2020)
10.17		Form of Voting Agreement (incorporated herein by reference to Exhibit 10.1 to the Company's Form 8-K filed on November 12, 2021 and included as Exhibit A to the Agreement and Plan of Merger filed as Exhibit 2.1 to that report)
10.18		Form of Director Support Agreement (incorporated herein by reference to Exhibit 10.2 to the Company's Form 8-K filed on November 12, 2021 and included as Exhibit B to the Agreement and Plan of Merger filed as Exhibit 2.1 to that report)
21.1*		Subsidiaries of Allegiance Bancshares, Inc.
23.1*
23.1*	Consent of Crowe LLP
31.1*
31.1*	Certification of the Chief Executive Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended
31.2*
31.2*	Certification of the Chief Financial Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended
32.1**
32.1**	Certification of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350, adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2**
32.2**	Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002


101.INS*						Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because XBRL tags are embedded within the Inline XBRL document.
101.SCH*						Inline XBRL Taxonomy Extension Schema Document Exhibit
101.CAL*						Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF*						Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB*						Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE*						Inline XBRL Taxonomy Extension Presentation Linkbase Document


	ALLEGIANCE BANCSHARES, INC.

By:		/s/ ~~George Martinez~~ Steven F. Retzloff
		~~George Martinez~~ Steven F. Retzloff
		~~Chairman and~~ Chief Executive Officer


	December 31,							December 31,
	2018			2017				2021		2020
	(Dollars in thousands, except share data)							(Dollars in thousands, except share data)
ASSETS							ASSETS
Cash and due from banks	$	118,771		$	133,124		Cash and due from banks	$	23,961	$	122,897
Interest-bearing deposits at other financial institutions		150,176			48,979		Interest-bearing deposits at other financial institutions	733,548		299,869
Total cash and cash equivalents		268,947			182,103		Total cash and cash equivalents	757,509		422,766
Available for sale securities, at fair value		337,293			309,615		Available for sale securities, at fair value	1,773,765		772,890
Loans held for investment		3,708,306			2,270,876		Loans held for investment	4,220,486		4,491,764
Less: allowance for loan losses		(26,331	)		(23,649	)
Less: allowance for credit losses on loans							Less: allowance for credit losses on loans	(47,940)		(53,173)
Loans, net		3,681,975			2,247,227		Loans, net	4,172,546		4,438,591
Accrued interest receivable		17,010			12,194		Accrued interest receivable	33,392		40,053
Premises and equipment, net		41,717			18,477		Premises and equipment, net	63,708		70,685
Other real estate owned		630			365		Other real estate owned	—		9,196
Federal Home Loan Bank stock		10,941			12,862		Federal Home Loan Bank stock	9,358		7,756
Bank owned life insurance		26,480			22,422		Bank owned life insurance	28,240		27,686
Goodwill		223,125			39,389		Goodwill	223,642		223,642
Core deposit intangibles, net		26,587			3,274		Core deposit intangibles, net	14,658		17,954
Other assets		20,544			12,303		Other assets	28,136		18,909
TOTAL ASSETS	$	4,655,249		$	2,860,231		TOTAL ASSETS	$	7,104,954	$	6,050,128
LIABILITIES AND SHAREHOLDERS’ EQUITY							LIABILITIES AND SHAREHOLDERS’ EQUITY
LIABILITIES:							LIABILITIES:
Deposits:							Deposits:
Noninterest-bearing	$	1,209,300		$	683,110		Noninterest-bearing	$	2,243,085	$	1,704,567
Interest-bearing							Interest-bearing
Demand		366,905			215,499		Demand	869,984		437,328
Money market and savings		879,840			554,051		Money market and savings	1,643,745		1,499,938
Certificates and other time		1,206,491			761,314		Certificates and other time	1,290,825		1,346,649
Total interest-bearing deposits		2,453,236			1,530,864		Total interest-bearing deposits	3,804,554		3,283,915
Total deposits		3,662,536			2,213,974		Total deposits	6,047,639		4,988,482
Accrued interest payable		2,812			610		Accrued interest payable	1,753		2,701
Borrowed funds		225,493			282,569		Borrowed funds	89,956		155,515
Subordinated debt		48,899			48,659		Subordinated debt	108,847		108,322
Other liabilities		12,525			7,554		Other liabilities	40,291		36,439
Total liabilities		3,952,265			2,553,366		Total liabilities	6,288,486		5,291,459
COMMITMENTS AND CONTINGENCIES (See Note 15)
COMMITMENTS AND CONTINGENCIES (See Note 17)							COMMITMENTS AND CONTINGENCIES (See Note 17)	0		0
SHAREHOLDERS’ EQUITY:							SHAREHOLDERS’ EQUITY:
Preferred stock, $1 par value; 1,000,000 shares authorized; there were no shares issued or outstanding		—			—
Common stock, $1 par value; 80,000,000 shares authorized; 21,937,740 shares outstanding at December 31, 2018 and 13,226,826 shares issued and outstanding at December 31, 2017		21,938			13,227
Preferred stock, $1 par value; 1,000,000 shares authorized; no shares issued or outstanding							Preferred stock, $1 par value; 1,000,000 shares authorized; no shares issued or outstanding	—		—
Common stock, $1 par value; 80,000,000 shares authorized; 20,337,220 shares issued and outstanding at December 31, 2021 and 20,208,323 shares issued and outstanding at December 31, 2020							Common stock, $1 par value; 80,000,000 shares authorized; 20,337,220 shares issued and outstanding at December 31, 2021 and 20,208,323 shares issued and outstanding at December 31, 2020	20,337		20,208
Capital surplus		571,803			218,408		Capital surplus	510,797		508,794
Retained earnings		112,131			74,894		Retained earnings	267,092		195,236
Accumulated other comprehensive (loss) income		(2,888	)		336
Accumulated other comprehensive income							Accumulated other comprehensive income	18,242		34,431
Total shareholders’ equity		702,984			306,865		Total shareholders’ equity	816,468		758,669
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	4,655,249		$	2,860,231		TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	7,104,954	$	6,050,128


													Accumulated Other						Total				Common Stock			Capital Surplus				Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Total Shareholders’ Equity
	Common Stock						Capital			Retained			Comprehensive			Treasury			Shareholders’				Shares	Amount								Accumulated Other Comprehensive Income (Loss)		Total Shareholders’ Equity
	Shares			Amount			Surplus			Earnings			Income (Loss)			Stock			Equity				(Dollars in thousands, except share data)
	(In thousands, except share data)
BALANCE AT JANUARY 1, 2016		12,814,696		$	12,815		$	209,285		$	34,411		$	2,017		$	(38	)	$	258,490
Net income											22,851									22,851
Other comprehensive loss														(5,069	)					(5,069	)
Common stock issued in connection with the exercise of stock options, restricted stock awards and the ESPP		143,645			143			1,863												2,006
Issuance of treasury stock																	38			38
Stock based compensation expense								1,501												1,501
BALANCE AT DECEMBER 31, 2016		12,958,341		$	12,958		$	212,649		$	57,262		$	(3,052	)	$	—		$	279,817
BALANCE AT DECEMBER 31, 2018																						BALANCE AT DECEMBER 31, 2018	21,937,740	$	21,938	Capital Surplus		$	571,803	Retained Earnings		$	112,131	$	(2,888)	$	702,984
Cumulative effect of change in accounting principle related to ASU 2017-08																						Cumulative effect of change in accounting principle related to ASU 2017-08								(1,715)				(1,715)
Total shareholders' equity at beginning of period, as adjusted (See Note 1)																						Total shareholders' equity at beginning of period, as adjusted (See Note 1)	21,937,740	21,938		571,803				110,416		(2,888)		701,269
Net income											17,632									17,632		Net income								52,959				52,959
Other comprehensive income														3,388						3,388		Other comprehensive income										7,788		7,788
Common stock issued in connection with the exercise of stock options, restricted stock awards and the ESPP		268,485			269			3,979												4,248		Common stock issued in connection with the exercise of stock options, restricted stock awards and the ESPP	272,353	272		3,140								3,412
Repurchase of common stock																						Repurchase of common stock	(1,686,277)	(1,686)		(56,977)								(58,663)
Stock based compensation expense								1,780												1,780		Stock based compensation expense				3,100								3,100
BALANCE AT DECEMBER 31, 2017		13,226,826		$	13,227		$	218,408		$	74,894		$	336		$	—		$	306,865
BALANCE AT DECEMBER 31, 2019																						BALANCE AT DECEMBER 31, 2019	20,523,816	$	20,524	$	521,066			$	163,375	$	4,900	$	709,865
Cumulative effect of change in accounting principle related to ASU 2016-13																						Cumulative effect of change in accounting principle related to ASU 2016-13								(5,508)				(5,508)
Total shareholders' equity at beginning of period, as adjusted (See Note 1)																						Total shareholders' equity at beginning of period, as adjusted (See Note 1)	20,523,816	20,524		521,066				157,867		4,900		704,357
Net income																						Net income								45,534				45,534
Other comprehensive income																						Other comprehensive income										29,531		29,531
Cash dividends declared, $0.40 per share																						Cash dividends declared, $0.40 per share								(8,165)				(8,165)
Common stock issued in connection with the exercise of stock options, restricted stock awards and the ESPP																						Common stock issued in connection with the exercise of stock options, restricted stock awards and the ESPP	203,404	203		2,366								2,569
Repurchase of common stock																						Repurchase of common stock	(518,897)	(519)		(18,063)								(18,582)
Stock based compensation expense																						Stock based compensation expense				3,425								3,425
BALANCE AT DECEMBER 31, 2020																						BALANCE AT DECEMBER 31, 2020	20,208,323	$	20,208	$	508,794			$	195,236	$	34,431	$	758,669
Net income											37,309									37,309		Net income								81,553				81,553
Other comprehensive loss														(3,224	)					(3,224	)	Other comprehensive loss										(16,189)		(16,189)
Reclassification of amounts within AOCI to retained earnings due to tax reform											(72	)								(72	)
Cash dividends declared, $0.48 per share																						Cash dividends declared, $0.48 per share								(9,697)				(9,697)
Common stock issued in connection with the exercise of stock options, restricted stock awards and the ESPP		378,023			378			3,372												3,750		Common stock issued in connection with the exercise of stock options, restricted stock awards and the ESPP	290,103	290		3,522								3,812
Common stock issued in connection with the acquisition of Post Oak Bancshares, Inc., net of registration expenses		8,402,010			8,402			350,381												358,783
Repurchase of common stock		(69,389	)		(69	)		(2,043	)											(2,112	)	Repurchase of common stock	(161,206)	(161)		(5,498)								(5,659)
Stock based compensation expense								1,685												1,685		Stock based compensation expense				3,979								3,979
BALANCE AT DECEMBER 31, 2018		21,937,470		$	21,938		$	571,803		$	112,131		$	(2,888	)	$	—		$	702,984
BALANCE AT DECEMBER 31, 2021																						BALANCE AT DECEMBER 31, 2021	20,337,220	$	20,337	$	510,797			$	267,092	$	18,242	$	816,468


	As of January 1, 2020
	As Reported Under ASC Topic 326		Pre-ASC Topic 326 Adoption		Impact of ASC Topic 326 Adoption
	(Dollars in thousands)
Assets:
Allowance for credit losses on loans:
Commercial and industrial	$	15,840	$	8,818	$	7,022
Mortgage warehouse	—		—		—
Paycheck Protection Program (PPP)	—		—		—
Real estate:
Commercial real estate (including multi-family residential)	6,007		11,170		(5,163)
Commercial real estate construction and land development	6,051		4,421		1,630
1-4 family residential (including home equity)	5,452		3,852		1,600
Residential construction	1,056		1,057		(1)
Consumer and other	257		120		137
Allowance for credit losses on loans	$	34,663	$	29,438	$	5,225
Liabilities:
Allowance for credit losses on unfunded commitments	$	3,866	$	—	$	3,866

Fair value of consideration paid:
Common shares issued (8,402,010 shares)	$	350,364
Stock options issued (299,352)		8,639
Cash in lieu of fractional shares		21
Total consideration paid	$	359,024

Fair value of assets acquired:
Cash and cash equivalents	$	230,416
Investment securities		42,779
Loans		1,164,279
Premises and equipment		21,988
Core deposit intangibles		25,128
Other assets		18,078
Total assets acquired	$	1,502,668

Fair value of liabilities assumed:
Deposits	$	1,291,310
Other borrowed funds		30,000
Other liabilities		6,070
Total liabilities assumed		1,327,380
Fair value of net assets acquired	$	175,288
Goodwill resulting from acquisition	$	183,736

	Contractual Balance		Fair Value		Discount
	(Dollars in thousands)
Commercial and industrial	$	221,098	$	217,204	$	(3,894	)
Real estate:
Commercial real estate (including multi-family residential)		450,947		443,512		(7,435	)
Commercial real estate construction and land development		167,386		165,387		(1,999	)
1-4 family residential (including home equity)		288,304		285,099		(3,205	)
Residential construction		23,812		23,812		—
Consumer and other		29,684		29,267		(417	)
Total loans	$	1,181,231	$	1,164,281	$	(16,950	)

Contractually required principal and interest payments	$	28,340
Contractual cash flows not expected to be collected (nonaccretable difference)		3,163
Expected cash flows at acquisition		25,177
Interest component of expected cash flows (accretable yield)		495
Fair value of loans acquired with deterioration of credit quality	$	24,682

Contractually required principal and interest payments	$	1,153,317
Accretable discount		13,293
Fair value at acquisition	$	1,140,024