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LegacyTexas Financial Group, Inc. Reports Record Third Quarter 2018 Earnings

Company Release - 10/16/2018 4:15 PM ET

PLANO, Texas, Oct. 16, 2018 /PRNewswire/ -- LegacyTexas Financial Group, Inc. (Nasdaq: LTXB) (the "Company"), the holding company for LegacyTexas Bank (the "Bank"), today announced record net income of $42.8 million for the third quarter of 2018, an increase of $15.0 million from the second quarter of 2018 and an increase of $14.1 million from the third quarter of 2017.

LegacyTexas Financial Group, Inc. is the holding company for LegacyTexas Bank, a commercially oriented community bank based in Plano, Texas. LegacyTexas Bank operates 43 banking offices in the Dallas/Fort Worth Metroplex and surrounding counties. For more information, visit  www.LegacyTexasFinancialGroup.com . (PRNewsFoto/) (PRNewsFoto/LegacyTexas Financial Group, Inc)

"What a fabulous quarter for our company, as we continued to grow our customer base and deliver on our strategic initiatives," said President and CEO Kevin Hanigan.  "By delivering what our customers need, we have produced record levels of earnings and return on assets for our shareholders."

Third Quarter 2018 Performance Highlights

  • Assets of $9.08 billion generated basic earnings per share for the third quarter of 2018 of $0.91 on a GAAP basis and $0.92 on a core (non-GAAP) basis.*
  • Non-performing assets totaled $18.3 million at September 30, 2018, a decline of $8.7 million, or 32.2%, from June 30, 2018. Non-performing loans to total loans held for investment improved to 0.22% at September 30, 2018, compared to 0.25% at June 30, 2018 and 0.99% at September 30, 2017.
  • The Company's efforts to grow non-interest-bearing demand deposits resulted in a linked-quarter increase in these deposits of $76.7 million to $1.80 billion at September 30, 2018. Non-interest-bearing deposits totaled 26.5% of total deposits at September 30, 2018.
  • Return on average assets on an annualized basis improved to an all-time high of 1.87% for the quarter ended September 30, 2018, compared to 1.24% for the quarter ended June 30, 2018, while core (non-GAAP) return on average assets for the quarter ended September 30, 2018 was 1.88%, compared to 1.24% for the quarter ended June 30, 2018.*
  • GAAP efficiency ratio improved to a record 42.66% for the quarter ended September 30, 2018, compared to 44.51% for the quarter ended June 30, 2018, while core (non-GAAP) efficiency ratio improved to 42.46% for the quarter ended September 30, 2018, compared to 44.44% for the quarter ended June 30, 2018.*

*See the section labeled "Supplemental Information- Non-GAAP Financial Measures" at the end of this document.

Financial Highlights



At or For the Quarters Ended

(unaudited)

Sep 30, 2018


Jun 30, 2018


Sep 30, 2017


(Dollars in thousands, except per share amounts)

Net interest income

$

85,667



$

83,929



$

78,964


Provision for credit losses

2,656



17,478



7,157


Non-interest income

13,227



10,852



12,226


Non-interest expense

42,192



42,191



40,295


Income tax expense

11,225



7,275



15,029


Net income

$

42,821



$

27,837



$

28,709








Basic earnings per common share

$

0.91



$

0.59



$

0.61


Basic core (non-GAAP) earnings per common share1

$

0.92



$

0.59



$

0.61


Weighted average common shares outstanding - basic

47,105,655



47,000,405



46,664,233


Estimated Tier 1 common equity risk-based capital ratio2

10.46

%


9.78

%


9.17

%

Total equity to total assets

11.45

%


10.83

%


10.48

%

Tangible common equity to tangible assets - Non-GAAP1

9.67

%


9.07

%


8.67

%



1

See the section labeled "Supplemental Information - Non-GAAP Financial Measures" at the end of this document.

2

Calculated at the Company level, which is subject to the capital adequacy requirements of the Federal Reserve.

Core (non-GAAP) net income (which is net income adjusted for the impact of infrequent or non-recurring items) totaled $43.2 million for the quarter ended September 30, 2018, up $15.2 million from the second quarter of 2018 and up $14.7 million from the third quarter of 2017.  Basic earnings per share for the quarter ended September 30, 2018 was $0.91, an increase of $0.32 from the second quarter of 2018 and an increase of $0.30 from the third quarter of 2017.  Basic core (non-GAAP) earnings per share for the third quarter of 2018 was $0.92, up $0.33 from the second quarter of 2018 and up $0.31 from the third quarter of 2017.  The reconciliation of non-GAAP measures, which the Company believes facilitates the assessment of its banking operations and peer comparability, is included in tabular form at the end of this release.

Net Interest Income and Net Interest Margin


For the Quarters Ended

(unaudited)

September 30, 2018


June 30, 2018


September 30, 2017


(Dollars in thousands)

Interest income:






Loans held for investment, excluding Warehouse Purchase Program loans

$

89,034



$

86,105



$

77,366


Warehouse Purchase Program loans

12,938



12,137



11,493


Loans held for sale

295



328



225


Securities

4,512



4,324



3,855


Interest-earning deposit accounts

1,368



1,097



1,524


Total interest income

$

108,147



$

103,991



$

94,463


Net interest income

$

85,667



$

83,929



$

78,964


Net interest margin

3.90

%


3.93

%


3.71

%

Selected average balances:






Total earning assets

$

8,736,076



$

8,566,131



$

8,451,478


Total loans held for investment

7,758,802



7,636,235



7,331,173


Total securities

678,483



667,183



652,841


Total deposits

6,851,449



6,859,944



6,632,649


Total borrowings

1,154,079



1,018,945



1,178,031


Total non-interest-bearing demand deposits

1,752,095



1,694,082



1,481,654


Total interest-bearing liabilities

6,253,433



6,184,807



6,329,026


Net interest income for the quarter ended September 30, 2018 was $85.7 million, a $1.7 million, or 2.1%, increase from the second quarter of 2018 and a $6.7 million, or 8.5%, increase from the third quarter of 2017.  The $1.7 million increase from the second quarter of 2018 was primarily driven by higher yields earned on all loan portfolios, as well as increased volume in all loan portfolios with the exception of commercial real estate loans and loans held for sale.  The average balance of commercial and industrial loans increased by $85.8 million from the second quarter of 2018, while the average yield earned on this portfolio increased by seven basis points for the same period, resulting in a $1.9 million increase in interest income.  A six basis point increase in the average yield earned on the commercial real estate portfolio from the second quarter of 2018 offset a $38.3 million decline in the average balance of the portfolio, resulting in a $365,000 increase in interest income.  The average balance of the consumer real estate portfolio increased by $29.6 million from the second quarter of 2018, which drove a $367,000 increase in interest income.  The average balance of the construction and land portfolio increased by $11.3 million on a linked-quarter basis, while the average yield earned on this portfolio increased by six basis points from the second quarter of 2018, leading to a $229,000 increase in interest income.  Interest income earned on Warehouse Purchase Program loans increased by $801,000 from the second quarter of 2018, as the average balance increased by $22.6 million and the average yield increased by 15 basis points compared to the linked quarter.

Interest income on loans for the third quarter of 2018 included $330,000 in accretion of purchase accounting fair value adjustments on acquired loans, which primarily consisted of $132,000 on acquired commercial real estate loans, $77,000 on acquired commercial and industrial loans and $120,000 on acquired consumer loans.

The $6.7 million increase in net interest income compared to the third quarter of 2017 was primarily due to a $13.2 million increase in interest income on loans, which was driven by increased volume in the commercial real estate, commercial and industrial and consumer real estate loan portfolios, as well as higher yields earned on all loan portfolios.  The average balance of commercial and industrial loans increased by $237.7 million from the third quarter of 2017, while the average yield earned on this portfolio increased by 78 basis points for the same period, resulting in a $7.1 million increase in interest income.  The average yield earned on the commercial and industrial portfolio for the quarter ended September 30, 2018 was positively impacted by four increases in the Fed Funds rate totaling 100 basis points since September 2017, as well as the resolution of multiple non-performing relationships over the past year.  The average balance of commercial real estate loans increased by $162.5 million from the third quarter of 2017, resulting in a $2.7 million increase in interest income, while the average balance of consumer real estate loans increased by $118.4 million for the same period, which led to a $1.8 million increase in interest income.

Although the average balance of Warehouse Purchase Program loans decreased by $95.0 million from the third quarter of 2017, the average yield earned on this portfolio increased by 86 basis points, resulting in a $1.4 million increase in interest income compared to the third quarter of 2017.

Interest expense for the quarter ended September 30, 2018 increased by $2.4 million, or 12.1%, compared to the linked quarter, which was primarily due to higher average savings and money market deposit, time deposit and borrowing rates, as well as increases of $76.8 million, $50.8 million and $135.1 million in the average balances of savings and money market deposits, time deposits and borrowings, respectively, compared to the second quarter of 2018.  These linked-quarter increases in interest expense were partially offset by lower interest expense on interest-bearing demand deposits, which was due to a 23 basis point decline in the average rate paid on these deposits, as well as a $194.1 million decrease in the average balance.

Compared to the third quarter of 2017, interest expense for the quarter ended September 30, 2018 increased by $7.0 million, primarily due to higher average deposit and borrowing rates, as well as an increase of $265.4 million in the average balance of time deposits.  A $24.0 million decrease in the average balance of borrowings from the third quarter of 2017 was more than offset by a 79 basis point increase in the average rate, resulting in a $2.2 million year-over-year increase in interest expense on borrowed funds.

The net interest margin for the third quarter of 2018 was 3.90%, a three basis point decrease from the second quarter of 2018 and a 19 basis point increase from the third quarter of 2017.  The average yield on earning assets for the third quarter of 2018 was 4.92%, a five basis point increase from the second quarter of 2018 and a 48 basis point increase from the third quarter of 2017.  The cost of deposits for the third quarter of 2018 was 0.87%, up seven basis points from the linked quarter and up 26 basis points from the third quarter of 2017.

Non-interest Income

Non-interest income for the third quarter of 2018 was $13.2 million, a $2.4 million, or 21.9%, increase from the second quarter of 2018 and a $1.0 million, or 8.2%, increase from the third quarter of 2017.  Other non-interest income for the third quarter of 2018 included a $1.5 million net increase in the value of investments in community development-oriented private equity funds used for Community Reinvestment Act purposes (the "CRA Funds"), compared to a $15,000 net decrease in the CRA Funds for the second quarter of 2018.  Gain (loss) on sale and disposition of assets for the third quarter of 2018 included $1.3 million in gains on the sale of foreclosed properties, compared to only $9,000 of comparable gains recorded in the second quarter of 2018, which was partially offset by a $471,000 loss recorded on the anticipated disposition of a leased branch location, with the branch expected to close in the fourth quarter of 2018.  Service charges and other fees decreased by $218,000 from the second quarter of 2018, primarily resulting from decreased title premiums.

The $1.0 million increase in non-interest income from the third quarter of 2017 was primarily due to a $1.4 million increase in other non-interest income, which included the above-mentioned $1.5 million net increase in the value of CRA Funds recorded in the third quarter of 2018, compared to a $134,000 net increase in the CRA funds recorded in the third quarter of 2017.  Gain (loss) on sale and disposition of assets for the third quarter of 2018 included the above-mentioned $1.3 million in gains on the sale of foreclosed properties, compared to a $14,000 comparable loss recorded in the third quarter of 2017.  Service charges and other fees decreased by $665,000 from the third quarter of 2017, which was driven by decreases in title premiums, Warehouse Purchase Program fee income, commercial loan fee income (consisting of syndication, arrangement, non-usage and pre-payment fees) and brokerage income, after the Company discontinued its brokerage services in the third quarter of 2017.  These decreases in service charges and other fees were partially offset by increased commercial account analysis fee and debit card interchange income recorded in the 2018 period.  Net gains on the sale of mortgage loans held for sale during the third quarter of 2018 decreased by $385,000 compared to the third quarter of 2017, which included gains recognized on $52.4 million of one-to four-family mortgage loans that were sold or committed for sale and fair value changes on mortgage derivatives and mortgage fees collected during the third quarter of 2017, compared to $38.7 million for the third quarter of 2018.

Non-interest Expenses

Non-interest expense for the quarter ended September 30, 2018 was $42.2 million, unchanged from the second quarter of 2018 and up $1.9 million, or 4.7%, from the third quarter of 2017.  Salaries and employee benefits expense increased by $740,000 from the second quarter of 2018, driven by an increase in performance incentive accruals based on decreased non-performing assets, increased share-based compensation expenses, and lower deferred salary costs related to loan originations that will be accounted for over the lives of the related loans.  These increases in salaries and employee benefits expense were partially offset by lower health care costs, severance costs, and commissions related to lower mortgage loan production recorded during the third quarter of 2018.  Data processing expense increased by $217,000 from the second quarter of 2018 due to system upgrades, which was offset by decreased advertising expense of $534,000, decreased outside professional services expense of $231,000 and decreased other non-interest expense of $198,000, which was primarily due to lower lending and foreclosed property expenses.

The $1.9 million increase in non-interest expense from the third quarter of 2017 was primarily due to a $1.1 million increase in data processing expense as the Company has outsourced certain segments of its data processing operations and invested in system upgrades.  This outsourcing cost was partially offset by a reduction in full-time equivalent employees in the technology area.  Salaries and employee benefits expense increased by $878,000 from the third quarter of 2017, which was driven by an increase in performance incentive accruals based on decreased non-performing assets, increased share-based compensation expenses, and lower deferred salary costs related to loan originations that will be accounted for over the lives of the related loans.  These increases in salaries and employee benefits expense were partially offset by lower health care costs, severance costs, and commissions related to lower mortgage loan production during the third quarter of 2018.  Occupancy and equipment expense increased by $661,000 from the third quarter of 2017 primarily due to an early termination fee collected from a tenant in the third quarter of 2017 that was not repeated in the current period.  These increases were partially offset by decreases from the third quarter of 2017 in regulatory assessments expense of $261,000, advertising expense of $156,000, and office operations expense of $146,000.

Financial Condition - Loans

Gross loans held for investment at September 30, 2018, excluding Warehouse Purchase Program loans, grew $92.9 million from June 30, 2018, which included growth in commercial and industrial, consumer real estate, and construction and land loans.  At September 30, 2018, commercial and industrial and consumer real estate loans increased by $59.6 million and $30.3 million, respectively, from June 30, 2018, while construction and land loans increased by $12.5 million for the same period.  These increases were partially offset by linked-quarter declines of $8.8 million and $714,000 in commercial real estate and other consumer loans, respectively.

Compared to September 30, 2017, gross loans held for investment, excluding Warehouse Purchase Program loans, grew $378.5 million, which included growth in commercial and industrial and consumer real estate loans.  Commercial and industrial and consumer real estate loans increased by $269.2 million and $120.1 million, respectively, at September 30, 2018, compared to September 30, 2017.  These increases were partially offset by declines of $4.3 million, $4.2 million and $2.4 million in construction and land, commercial real estate, and other consumer loans, respectively, compared to September 30, 2017.

At September 30, 2018, Warehouse Purchase Program loans decreased by $236.6 million compared to June 30, 2018 and by $305.7 million compared to September 30, 2017.

Reserve-based energy loans, which are secured by deeds of trust on properties containing proven oil and natural gas reserves and included in the Company's commercial and industrial loan portfolio, totaled $547.4 million at September 30, 2018, up  $60.6 million from $486.8 million at June 30, 2018 and up $20.6 million from $526.8 million at September 30, 2017.  In addition to reserve-based energy loans, the Company has loans categorized as "Midstream and Other," which are typically related to the transmission of oil and natural gas and would only be indirectly impacted by declining commodity prices.  At September 30, 2018, "Midstream and Other" loans had a total outstanding balance of $34.8 million, up $6.1 million from $28.7 million at June 30, 2018 and up $7.0 million from $27.8 million at September 30, 2017.

Financial Condition - Deposits

Total deposits at September 30, 2018 decreased by $101.6 million from June 30, 2018, which included declines of $86.8 million, $73.9 million and $17.6 million in interest-bearing demand, time, and savings and money market balances, respectively.  These declines were partially offset by growth of $76.7 million in non-interest-bearing demand deposits from June 30, 2018.

Compared to September 30, 2017, total deposits increased by $19.4 million, which included growth in time and non-interest-bearing demand deposits of $264.8 million and $269.1 million, respectively, while savings and money market and interest-bearing demand deposits decreased by $405.3 million and $109.2 million, respectively, from September 30, 2017.

Credit Quality


At or For the Quarters Ended

(unaudited)

Sep 30, 2018


Jun 30, 2018


Sep 30, 2017


(Dollars in thousands)

Net charge-offs

$

791



$

27,663



$

12,347


Net charge-offs/Average loans held for investment, excluding Warehouse Purchase Program loans

0.05

%


1.69

%


0.78

%

Net charge-offs/Average loans held for investment

0.04



1.45



0.67


Provision for credit losses

$

2,656



$

17,478



$

7,157


Non-performing loans ("NPLs")

17,584



19,610



76,915


NPLs/Total loans held for investment, excluding Warehouse Purchase Program loans

0.26

%


0.29

%


1.20

%

NPLs/Total loans held for investment

0.22



0.25



0.99


Non-performing assets ("NPAs")

$

18,282



$

26,951



$

90,500


NPAs to total assets

0.20

%


0.29

%


1.00

%

NPAs/Loans held for investment and foreclosed assets, excluding Warehouse Purchase Program loans

0.27



0.40



1.41


NPAs/Loans held for investment and foreclosed assets

0.23



0.34



1.17


Allowance for loan losses

$

66,354



$

64,445



$

70,044


Allowance for loan losses/Total loans held for investment, excluding Warehouse Purchase Program loans

0.98

%


0.97

%


1.10

%

Allowance for loan losses/Total loans held for investment

0.85



0.81



0.90


Allowance for loan losses/Total loans held for investment, excluding acquired loans & Warehouse Purchase Program loans1

1.03



1.02



1.17


Allowance for loan losses/NPLs

377.35



328.63



91.07




1

Excludes loans acquired in previous bank acquisitions, which were initially recorded at fair value.

The Company recorded a provision for credit losses of $2.7 million for the quarter ended September 30, 2018, a decrease of $14.8 million from the quarter ended June 30, 2018 and a decrease of $4.5 million from the quarter ended September 30, 2017.  The decrease in provision expense on a linked-quarter and year-over-year basis was primarily due to decreased charge-offs during the quarter ended September 30, 2018.  Net charge-offs totaled $791,000 for the three months ended September 30, 2018, down $26.9 million from the three months ended June 30, 2018 and down $11.6 million from the three months ended September 30, 2017.  Non-performing assets at September 30, 2018 totaled $18.3 million, down $8.7 million from June 30, 2018, primarily due to the sale of a foreclosed medical facility in the third quarter of 2018, which generated a $1.3 million gain.

The below table shows criticized (rated "special mention") and classified (rated "substandard" or "doubtful") loans at September 30, 2018, June 30, 2018 and September 30, 2017.


September 30,
2018


June 30,
2018


September 30,
 2017


Linked-Quarter

 Change


Year-over-Year

 Change


(Dollars in thousands)

Commercial real estate

$

16,750



$

25,540



$

28,187



$

(8,790)



$

(11,437)


Commercial and industrial, excluding energy

7,884



11,065



16,300



(3,181)



(8,416)


Energy

51,983



24,975



27,754



27,008



24,229


Consumer

1,313



1,501



1,491



(188)



(178)


Total criticized (all performing)

$

77,930



$

63,081



$

73,732



$

14,849



$

4,198












Commercial real estate

$

1,757



$

3,846



$

7,094



$

(2,089)



$

(5,337)


Commercial and industrial, excluding energy

1,059



1,234



14,516



(175)



(13,457)


Energy

40,156



28,804



25,589



11,352



14,567


Consumer

1,527



1,993



2,391



(466)



(864)


Total classified performing

44,499



35,877



49,590



8,622



(5,091)












Commercial real estate

3,739



3,656



4,064



83



(325)


Commercial and industrial, excluding energy

5,861



8,860



14,548



(2,999)



(8,687)


Energy

1,317



1,365



51,012



(48)



(49,695)


Consumer

6,667



5,729



7,291



938



(624)


Total classified non-performing

17,584



19,610



76,915



(2,026)



(59,331)












Total classified loans

$

62,083



$

55,487



$

126,505



$

6,596



$

(64,422)


Conference Call

The Company will host an investor conference call to review the results on Wednesday, October 17, 2018 at 8 a.m. Central Time. Participants may pre-register for the call by visiting http://dpregister.com/10123554 and will receive a unique PIN which can be used when dialing in for the call.  This will allow attendees to enter the call immediately.  Alternatively, participants may call (toll-free) 877-513-4119 at least five minutes prior to the call to be placed into the call by an operator.  International participants are asked to call 1-412-902-4148 and participants in Canada are asked to call (toll-free) 855-669-9657.

The call and corresponding presentation slides will be webcast live on the home page of the Company's website, www.LegacyTexasFinancialGroup.com.  An audio replay will be available one hour after the conclusion of the call at 877-344-7529, Conference #10123554.  This replay will be available until November 17, 2018.

About LegacyTexas Financial Group, Inc.

LegacyTexas Financial Group, Inc. is the holding company for LegacyTexas Bank, a commercially oriented community bank based in Plano, Texas. LegacyTexas Bank operates 43 banking offices in the Dallas/Fort Worth Metroplex and surrounding counties. For more information, please visit www.LegacyTexasFinancialGroup.com or www.LegacyTexas.com.

This document and other filings by LegacyTexas Financial Group, Inc. (the "Company") with the Securities and Exchange Commission (the "SEC"), as well as press releases or other public or stockholder communications released by the Company, may contain forward-looking statements, including, but not limited to, (i) statements regarding the financial condition, results of operations and business of the Company, (ii) statements about the Company's plans, objectives, expectations and intentions and other statements that are not historical facts and (iii) other statements identified by the words or phrases "will likely result," "are expected to," "will continue," "is anticipated," "estimate," "project," "intends" or similar expressions that are intended to identify "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995.  These forward-looking statements are based on current beliefs and expectations of the Company's management and are inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond the Company's control.  In addition, these forward-looking statements are subject to assumptions with respect to future business strategies and decisions that are subject to change.

The following factors, among others, could cause actual results to differ materially from the anticipated results or other expectations expressed in the forward-looking statements: the expected cost savings, synergies and other financial benefits from acquisition or disposition transactions might not be realized within the expected time frames or at all and costs or difficulties relating to integration matters might be greater than expected; changes in economic conditions; legislative changes; changes in policies by regulatory agencies; fluctuations in interest rates; the risks of lending and investing activities, including changes in the level and direction of loan delinquencies and write-offs and changes in estimates of the adequacy of the allowance for loan losses; the Company's ability to access cost-effective funding; fluctuations in real estate values and both residential and commercial real estate market conditions; demand for loans and deposits in the Company's market area; fluctuations in the price of oil, natural gas and other commodities; competition; changes in management's business strategies; changes in the regulatory and tax environments in which the Company operates, including the impact of the "Tax Cuts and Jobs Act" (the "TCJA") on the Company's deferred tax asset, and the anticipated impact of the TCJA on the Company's future earnings; and other factors set forth in the Company's filings with the SEC.

The factors listed above could materially affect the Company's financial performance and could cause the Company's actual results for future periods to differ materially from any opinions or statements expressed with respect to future periods in any current statements.

The Company does not undertake - and specifically declines any obligation - to publicly release the result of any revisions which may be made to any forward-looking statements to reflect events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events.  When considering forward-looking statements, you should keep in mind these risks and uncertainties. You should not place undue reliance on any forward-looking statement, which speaks only as of the date made. You should refer to our periodic and current reports filed with the SEC for specific risks that could cause actual results to be significantly different from those expressed or implied by any forward-looking statements.


 

LegacyTexas Financial Group, Inc. Consolidated Balance Sheets (unaudited)


(Dollars in thousands)

ASSETS

September 30,
2018


June 30,
2018


March 31,
2018


December 31,
2017


September 30,
2017

Cash and due from financial institutions

$

64,681



$

60,104



$

51,824



$

61,713



$

58,776


Short-term interest-bearing deposits in other financial institutions

189,634



199,807



243,080



231,743



268,567


Total cash and cash equivalents

254,315



259,911



294,904



293,456



327,343


Securities available for sale, at fair value

455,454



445,613



431,413



419,717



410,450


Securities held to maturity

145,148



155,252



156,898



173,509



180,968


Total securities

600,602



600,865



588,311



593,226



591,418


Loans held for sale

22,175



33,548



31,123



16,707



25,955


Loans held for investment:










Loans held for investment - Warehouse Purchase Program

1,054,505



1,291,129



1,019,840



1,320,846



1,360,219


Loans held for investment

6,764,052



6,671,139



6,569,123



6,483,192



6,385,602


Gross loans

7,840,732



7,995,816



7,620,086



7,820,745



7,771,776


Less: allowance for loan losses and deferred fees on loans held for investment

(56,499)



(55,321)



(66,878)



(64,921)



(64,632)


Net loans

7,784,233



7,940,495



7,553,208



7,755,824



7,707,144


FHLB stock and other restricted securities, at cost

60,596



66,061



46,842



64,790



50,333


Bank-owned life insurance

58,692



58,345



57,999



57,684



57,383


Premises and equipment, net

72,291



70,893



70,427



69,693



70,052


Goodwill

178,559



178,559



178,559



178,559



178,559


Other assets

73,504



73,957



75,374



72,964



86,380


Total assets

$

9,082,792



$

9,249,086



$

8,865,624



$

9,086,196



$

9,068,612












LIABILITIES AND SHAREHOLDERS' EQUITY







Non-interest-bearing demand

$

1,798,109



$

1,721,380



$

1,681,067



$

1,635,622



$

1,529,052


Interest-bearing demand

780,474



867,323



996,737



1,029,375



889,627


Savings and money market

2,562,399



2,580,017



2,707,046



2,735,296



2,967,672


Time

1,638,776



1,712,628



1,569,557



1,367,390



1,374,017


Total deposits

6,779,758



6,881,348



6,954,407



6,767,683



6,760,368


FHLB advances

932,317



1,065,941



604,562



1,043,163



998,146


Repurchase agreements

40,408



41,330



76,610



84,676



81,073


Subordinated debt

134,890



134,767



134,645



134,522



134,400


Accrued expenses and other liabilities

155,820



124,250



115,906



96,278



144,533


Total liabilities

8,043,193



8,247,636



7,886,130



8,126,322



8,118,520


Common stock

485



483



483



481



480


Additional paid-in capital

617,270



611,967



609,046



603,884



598,820


Retained earnings

444,848



409,765



389,653



370,858



363,890


Accumulated other comprehensive income (loss), net

(11,481)



(9,109)



(7,899)



(3,429)



(1,045)


Unearned Employee Stock Ownership Plan (ESOP) shares

(11,523)



(11,656)



(11,789)



(11,920)



(12,053)


Total shareholders' equity

1,039,599



1,001,450



979,494



959,874



950,092


Total liabilities and shareholders' equity

$

9,082,792



$

9,249,086



$

8,865,624



$

9,086,196



$

9,068,612



 

LegacyTexas Financial Group, Inc.

Consolidated Quarterly Statements of Income (unaudited)



For the Quarters Ended


Third Quarter 2018 Compared to:


Sep 30,
2018


Jun 30,
2018


Mar 31,
2018


Dec 31,
2017


Sep 30,
2017


Second Quarter

 2018


Third Quarter

2017

Interest and dividend income


(Dollars in thousands)


Loans, including fees

$

102,267



$

98,570



$

90,631



$

91,334



$

89,084



$

3,697


3.8

%


$

13,183


14.8

%

Taxable securities

3,254



3,132



2,911



2,819



2,694



122


3.9



560


20.8


Nontaxable securities

614



641



675



700



713



(27)


(4.2)



(99)


(13.9)


Interest-bearing deposits in other financial institutions

1,368



1,097



969



798



1,524



271


24.7



(156)


(10.2)


FHLB and Federal Reserve Bank stock and other

644



551



480



460



448



93


16.9



196


43.8



108,147



103,991



95,666



96,111



94,463



4,156


4.0



13,684


14.5


Interest expense















Deposits

15,077



13,732



12,032



10,954



10,271



1,345


9.8



4,806


46.8


FHLB advances

5,198



4,131



2,680



2,647



2,944



1,067


25.8



2,254


76.6


Repurchase agreements and other borrowings

2,205



2,199



2,341



2,311



2,284



6


0.3



(79)


(3.5)



22,480



20,062



17,053



15,912



15,499



2,418


12.1



6,981


45.0


Net interest income

85,667



83,929



78,613



80,199



78,964



1,738


2.1



6,703


8.5


Provision for credit losses

2,656



17,478



15,663



3,743



7,157



(14,822)


(84.8)



(4,501)


(62.9)


Net interest income after provision for credit losses

83,011



66,451



62,950



76,456



71,807



16,560


24.9



11,204


15.6


Non-interest income















Service charges and other fees

8,626



8,844



7,927



8,124



9,291



(218)


(2.5)



(665)


(7.2)


Net gain on sale of mortgage loans held for sale

1,597



1,668



1,809



1,556



1,982



(71)


(4.3)



(385)


(19.4)


Bank-owned life insurance income

482



479



447



430



435



3


0.6



47


10.8


Net gain (loss) on securities transactions

(10)





(128)





(20)



(10)


N/M



10


50.0


Gain (loss) on sale and disposition of assets

977



(153)



2,213



(3,480)



352



1,130


N/M



625


N/M


Other

1,555



14



630



271



186



1,541


N/M



1,369


N/M



13,227



10,852



12,898



6,901



12,226



2,375


21.9



1,001


8.2


















Non-interest expense


(Dollars in thousands)


Salaries and employee benefits

25,053



24,313



27,076



23,126



24,175



740


3.0



878


3.6


Advertising

824



1,358



888



1,402



980



(534)


(39.3)



(156)


(15.9)


Occupancy and equipment

3,960



3,980



3,860



3,776



3,299



(20)


(0.5)



661


20.0


Outside professional services

1,151



1,382



1,250



1,300



1,230



(231)


(16.7)



(79)


(6.4)


Regulatory assessments

750



731



1,154



1,212



1,011



19


2.6



(261)


(25.8)


Data processing

5,362



5,145



4,703



4,737



4,287



217


4.2



1,075


25.1


Office operations

2,232



2,224



2,300



2,180



2,378



8


0.4



(146)


(6.1)


Other

2,860



3,058



2,648



2,975



2,935



(198)


(6.5)



(75)


(2.6)



42,192



42,191



43,879



40,708



40,295



1




1,897


4.7


Income before income tax expense

54,046



35,112



31,969



42,649



43,738



18,934


53.9



10,308


23.6


Income tax expense

11,225



7,275



6,207



27,989



15,029



3,950


54.3



(3,804)


(25.3)


Net income

$

42,821



$

27,837



$

25,762



$

14,660



$

28,709



$

14,984


53.8

%


$

14,112


49.2

%


N/M - Not meaningful


 

LegacyTexas Financial Group, Inc.

Selected Quarterly Financial Highlights (unaudited)



At or For the Quarters Ended


September 30,
2018


June 30,
2018


September 30,
2017

SHARE DATA:

(Dollars in thousands, except per share amounts)

Weighted average common shares outstanding- basic

47,105,655



47,000,405



46,664,233


Weighted average common shares outstanding- diluted

47,755,441



47,618,157



47,158,729


Shares outstanding at end of period

48,491,169



48,311,220



48,040,059


Income available to common shareholders1

$

42,672



$

27,770



$

28,617


Basic earnings per common share

0.91



0.59



0.61


Basic core (non-GAAP) earnings per common share2

0.92



0.59



0.61


Diluted earnings per common share

0.89



0.58



0.61


Dividends declared per share

0.16



0.16



0.15


Total shareholders' equity

1,039,599



1,001,450



950,092


Common shareholders' equity per share (book value per share)

21.44



20.73



19.78


Tangible book value per share - Non-GAAP2

17.75



17.03



16.05


Market value per share for the quarter:






High

46.86



43.92



39.92


Low

38.53



38.80



34.87


Close

42.60



39.02



39.92


KEY RATIOS:






Return on average common shareholders' equity

16.76

%


11.20

%


12.21

%

Core (non-GAAP) return on average common shareholders' equity2

16.90



11.25



12.11


Return on average assets

1.87



1.24



1.29


Core (non-GAAP) return on average assets2

1.88



1.24



1.28


Efficiency ratio (GAAP basis)

42.66



44.51



44.19


Core (non-GAAP) efficiency ratio2

42.46



44.44



44.37


Estimated Tier 1 common equity risk-based capital ratio3

10.46



9.78



9.17


Estimated total risk-based capital ratio3

12.88



12.14



11.61


Estimated Tier 1 risk-based capital ratio3

10.60



9.93



9.32


Estimated Tier 1 leverage ratio3

9.83



9.56



9.01


Total equity to total assets

11.45



10.83



10.48


Tangible equity to tangible assets - Non-GAAP2

9.67



9.07



8.67


Number of employees- full-time equivalent

859



847



864
















1

Net of distributed and undistributed earnings to participating securities.

2

See the section labeled "Supplemental Information - Non-GAAP Financial Measures" at the end of this document.

3

Calculated at the Company level, which is subject to the capital adequacy requirements of the Federal Reserve.

 

LegacyTexas Financial Group, Inc.

Selected Loan Data (unaudited)



At or for the Quarter Ended


September 30,
2018


June 30,
2018


March 31,
2018


December 31,
2017


September 30,
2017

Loans held for investment:

(Dollars in thousands)

Commercial real estate

$

3,012,352



$

3,021,148



$

3,053,750



$

3,019,339



$

3,016,533


Warehouse Purchase Program

1,054,505



1,291,129



1,019,840



1,320,846



1,360,219


Commercial and industrial

2,111,510



2,051,955



1,967,443



1,927,049



1,842,345


Construction and land

278,278



265,745



252,213



277,864



282,536


Consumer real estate

1,318,038



1,287,703



1,252,433



1,213,434



1,197,911


Other consumer

43,874



44,588



43,284



45,506



46,277


Gross loans held for investment

$

7,818,557



$

7,962,268



$

7,588,963



$

7,804,038



$

7,745,821


Non-performing assets:










Commercial real estate

$

3,739



$

3,656



$

3,748



$

4,134



$

4,064


Commercial and industrial

7,178



10,225



40,455



84,003



65,560


Consumer real estate

6,617



5,652



5,548



6,190



7,175


Other consumer

50



77



85



76



116


Total non-performing loans

17,584



19,610



49,836



94,403



76,915


Foreclosed assets

698



7,341



8,160



8,432



13,585


Total non-performing assets

$

18,282



$

26,951



$

57,996



$

102,835



$

90,500


Total non-performing assets to total assets

0.20

%


0.29

%


0.65

%


1.13

%


1.00

%

Total non-performing loans to total loans held for investment, excluding Warehouse Purchase Program loans

0.26

%


0.29

%


0.76

%


1.46

%


1.20

%

Total non-performing loans to total loans held for investment

0.22

%


0.25

%


0.66

%


1.21

%


0.99

%

Allowance for loan losses to non-performing loans

377.35

%


328.63

%


149.51

%


75.53

%


91.07

%

Allowance for loan losses to total loans held for investment, excluding Warehouse Purchase Program loans

0.98

%


0.97

%


1.13

%


1.10

%


1.10

%

Allowance for loan losses to total loans held for investment

0.85

%


0.81

%


0.98

%


0.91

%


0.90

%

Allowance for loan losses to total loans held for investment, excluding acquired loans and Warehouse Purchase Program loans 1

1.03

%


1.02

%


1.20

%


1.17

%


1.17

%











Troubled debt restructured loans ("TDRs"):


(Dollars in thousands)



Performing TDRs:










Commercial real estate

$

139



$

141



$

143



$

145



$

147


Commercial and industrial





1



2




Consumer real estate

786



561



574



600



263


Other consumer

4



9



14



21



20


Total performing TDRs

$

929



$

711



$

732



$

768



$

430


Non-performing TDRs:2










Commercial real estate

$

3,605



$

33



$

35



$

36



$

37


Commercial and industrial

2,299



2,095



16,183



16,328



7,984


Consumer real estate

495



789



890



916



1,343


Other consumer

2



7



9



14



25


Total non-performing TDRs

$

6,401



$

2,924



$

17,117



$

17,294



$

9,389


Allowance for loan losses:










Balance at beginning of period

$

64,445



$

74,508



$

71,301



$

70,044



$

75,091


Provision expense for loans

2,700



17,600



15,635



3,900



7,300


Charge-offs

(922)



(27,737)



(12,527)



(2,840)



(12,496)


Recoveries

131



74



99



197



149


Balance at end of period

$

66,354



$

64,445



$

74,508



$

71,301



$

70,044


Net charge-offs (recoveries):









Commercial real estate

$



$

236



$

3



$



$


Commercial and industrial

537



27,261



12,214



2,386



12,215


Consumer real estate

47



(9)



(11)



36



(10)


Other consumer

207



175



222



221



142


Total net charge-offs

$

791



$

27,663



$

12,428



$

2,643



$

12,347


Allowance for off-balance sheet lending-related commitments







Provision expense (benefit) for credit losses

$

(44)



$

(122)



$

28



$

(157)



$

(143)




1

Excludes loans acquired in previous bank acquisitions, which were initially recorded at fair value.

2

Non-performing TDRs are included in the non-performing assets reported above.


 

LegacyTexas Financial Group, Inc.

Average Balances and Yields/Rates (unaudited)



For the Quarters Ended


September 30,
2018


June 30,
2018


March 31,
2018


December 31,
2017


September 30,
2017

Loans:

(Dollars in thousands)

Commercial real estate

$

3,016,889



$

3,055,139



$

2,993,024



$

3,030,778



$

2,854,343


Warehouse Purchase Program

1,097,879



1,075,262



965,320



1,162,890



1,192,920


Commercial and industrial

2,088,318



2,002,490



1,904,515



1,864,686



1,850,645


Construction and land

271,829



260,560



270,899



287,965



279,189


Consumer real estate

1,295,353



1,265,751



1,227,556



1,206,371



1,176,955


Other consumer

44,508



43,779



44,891



46,094



47,169


Less: deferred fees and allowance for loan loss

(55,974)



(66,746)



(62,666)



(65,612)



(70,048)


Total loans held for investment

7,758,802



7,636,235



7,343,539



7,533,172



7,331,173


Loans held for sale

26,121



29,378



20,988



20,642



23,154


Securities

678,483



667,183



648,534



648,917



652,841


Overnight deposits

272,670



233,335



239,936



223,608



444,310


Total interest-earning assets

$

8,736,076



$

8,566,131



$

8,252,997



$

8,426,339



$

8,451,478


Deposits:










Interest-bearing demand

$

760,889



$

954,960



$

970,998



$

925,506



$

875,097


Savings and money market

2,654,990



2,578,205



2,745,192



2,911,726



2,857,790


Time

1,683,475



1,632,697



1,433,307



1,353,467



1,418,108


FHLB advances and other borrowings

1,154,079



1,018,945



877,502



1,007,747



1,178,031


Total interest-bearing liabilities

$

6,253,433



$

6,184,807



$

6,026,999



$

6,198,446



$

6,329,026












Total assets

$

9,167,607



$

8,996,036



$

8,682,461



$

8,865,517



$

8,889,914


Non-interest-bearing demand deposits

$

1,752,095



$

1,694,082



$

1,576,792



$

1,568,665



$

1,481,654


Total deposits

$

6,851,449



$

6,859,944



$

6,726,289



$

6,759,364



$

6,632,649


Total shareholders' equity

$

1,022,032



$

994,574



$

973,187



$

963,512



$

940,606












Yields/Rates:










Loans:










Commercial real estate

5.15

%


5.09

%


5.09

%


5.05

%


5.06

%

Warehouse Purchase Program

4.68

%


4.53

%


4.23

%


3.95

%


3.82

%

Commercial and industrial

5.78

%


5.71

%


5.27

%


4.89

%


5.00

%

Construction and land

5.41

%


5.35

%


5.17

%


5.04

%


5.16

%

Consumer real estate

4.67

%


4.66

%


4.56

%


4.54

%


4.54

%

Other consumer

5.81

%


5.74

%


5.62

%


5.67

%


5.64

%

Total loans held for investment

5.22

%


5.16

%


4.98

%


4.81

%


4.81

%

Loans held for sale

4.52

%


4.46

%


4.04

%


3.92

%


3.89

%

Securities

2.66

%


2.59

%


2.51

%


2.45

%


2.36

%

Overnight deposits

1.99

%


1.89

%


1.64

%


1.42

%


1.36

%

Total interest-earning assets

4.92

%


4.87

%


4.69

%


4.53

%


4.44

%

Deposits:










Interest-bearing demand

0.65

%


0.88

%


0.81

%


0.71

%


0.67

%

Savings and money market

0.92

%


0.79

%


0.75

%


0.70

%


0.68

%

Time

1.80

%


1.62

%


1.43

%


1.21

%


1.10

%

FHLB advances and other borrowings

2.55

%


2.49

%


2.32

%


1.95

%


1.76

%

Total interest-bearing liabilities

1.43

%


1.30

%


1.15

%


1.02

%


0.97

%

Net interest spread

3.49

%


3.57

%


3.54

%


3.51

%


3.47

%

Net interest margin

3.90

%


3.93

%


3.85

%


3.78

%


3.71

%

Cost of deposits (including non-interest-bearing demand)

0.87

%


0.80

%


0.73

%


0.64

%


0.61

%


 

LegacyTexas Financial Group, Inc.

Supplemental Information- Non-GAAP Financial Measures

(unaudited)



At or For the Quarters Ended


September 30,
2018


June 30,
2018


March 31,
2018


December 31,
2017


September 30,
2017


(Dollars in thousands, except per share amounts)

Reconciliation of Core (non-GAAP) to GAAP Net Income and Earnings per Share (net of estimated tax, except as otherwise noted)







GAAP net income available to common shareholders1

$

42,672



$

27,770



$

25,687



$

14,613



$

28,617


Distributed and undistributed earnings to participating securities1

149



67



75



47



92


GAAP net income

42,821



27,837



25,762



14,660



28,709


Insurance settlement proceeds from pre-acquisition fraud2





(1,778)






One-time employee bonus related to tax law change2





537






(Gain) loss on one-time tax adjustments3







13,493




(Gain) loss on sale of branch locations and land2

372



126







(237)


Core (non-GAAP) net income

$

43,193



$

27,963



$

24,521



$

28,153



$

28,472


Average shares for basic earnings per share

47,105,655


47,000,405


46,872,333


46,729,160



46,664,233


Basic GAAP earnings per share

$

0.91



$

0.59



$

0.55



$

0.31



$

0.61


Basic core (non-GAAP) earnings per share

$

0.92



$

0.59



$

0.52



$

0.60



$

0.61


Average shares for diluted earnings per share

47,755,441


47,618,157


47,564,587


47,290,308



47,158,729


Diluted GAAP earnings per share

$

0.89



$

0.58



$

0.54



$

0.31



$

0.61


Diluted core (non-GAAP) earnings per share

$

0.90



$

0.59



$

0.52



$

0.60



$

0.60


Reconciliation of Core (non-GAAP) to GAAP Non-Interest Income and Non-interest Expense (gross of tax)







GAAP non-interest income

$

13,227



$

10,852



$

12,898



$

6,901



$

12,226


Insurance settlement proceeds from pre-acquisition fraud





(2,250)






(Gain) loss on sale of branch locations and land

471



160







(365)


Core (non-GAAP) non-interest income

$

13,698



$

11,012



$

10,648



$

6,901



$

11,861


GAAP non-interest expense

$

42,192



$

42,191



$

43,879



$

40,708



$

40,295


One-time employee bonus related to tax law change





(679)






Core (non-GAAP) non-interest expense

$

42,192



$

42,191



$

43,200



$

40,708



$

40,295




1

Unvested share-based awards that contain nonforfeitable rights to dividends (whether paid or unpaid) are participating securities and are included in the computation of GAAP earnings per share pursuant to the two-class method described in ASC 260-10-45-60B.

2

2018 amounts calculated net of estimated tax using a tax rate of 21%; 2017 amount calculated net of estimated tax using a tax rate of 35%.

3

This one-time income tax expense adjustment consists of an adjustment to the Company's deferred tax asset related to the December 22, 2017 enactment of the Tax Cuts and Jobs Act.

 


At or For the Quarters Ended


September 30,
2018


June 30,
2018


March 31,
2018


December 31,
2017


September 30,
2017

Reconciliation of Core (non-GAAP) to GAAP Efficiency Ratio (gross of tax)


(Dollars in thousands)



GAAP efficiency ratio:










Non-interest expense

$

42,192



$

42,191



$

43,879



$

40,708



$

40,295


Net interest income plus non-interest income

98,894



94,781



91,511



87,100



91,190


Efficiency ratio- GAAP basis

42.66

%


44.51

%


47.95

%


46.74

%


44.19

%

Core (non-GAAP) efficiency ratio:










Core (non-GAAP) non-interest expense

$

42,192



$

42,191



$

43,200



$

40,708



$

40,295


Net interest income plus core (non-GAAP) non-interest income

99,365



94,941



89,261



87,100



90,825


Efficiency ratio- core (non-GAAP) basis

42.46

%


44.44

%


48.40

%


46.74

%


44.37

%

Calculation of Tangible Book Value per Share:









Total shareholders' equity

$

1,039,599



$

1,001,450



$

979,494



$

959,874



$

950,092


Less: Goodwill

(178,559)



(178,559)



(178,559)



(178,559)



(178,559)


Identifiable intangible assets, net

(279)



(313)



(347)



(402)



(463)


Total tangible shareholders' equity

$

860,761



$

822,578



$

800,588



$

780,913



$

771,070


Shares outstanding at end of period

48,491,169



48,311,220



48,264,966



48,117,390



48,040,059


Book value per share- GAAP

$

21.44



$

20.73



$

20.29



$

19.95



$

19.78


Tangible book value per share- Non-GAAP

17.75



17.03



16.59



16.23



16.05


Calculation of Tangible Equity to Tangible Assets:









Total assets

$

9,082,792



$

9,249,086



$

8,865,624



$

9,086,196



$

9,068,612


Less: Goodwill

(178,559)



(178,559)



(178,559)



(178,559)



(178,559)


Identifiable intangible assets, net

(279)



(313)



(347)



(402)



(463)


Total tangible assets

$

8,903,954



$

9,070,214



$

8,686,718



$

8,907,235



$

8,889,590


Equity to assets- GAAP

11.45

%


10.83

%


11.05

%


10.56

%


10.48

%

Tangible equity to tangible assets- Non-GAAP

9.67



9.07



9.22



8.77



8.67


Calculation of Return on Average Assets and Return on Average Equity Ratios (GAAP and Core)

Net income

$

42,821



$

27,837



$

25,762



$

14,660



$

28,709


Core (non-GAAP) net income

43,193



27,963



24,521



28,153



28,472


Average total equity

1,022,032



994,574



973,187



963,512



940,606


Average total assets

9,167,607



8,996,036



8,682,461



8,865,517



8,889,914


Return on average common shareholders' equity

16.76

%


11.20

%


10.59

%


6.09

%


12.21

%

Core (non-GAAP) return on average common shareholders' equity

16.90



11.25



10.08



11.69



12.11


Return on average assets

1.87



1.24



1.19



0.66



1.29


Core (non-GAAP) return on average assets

1.88



1.24



1.13



1.27



1.28


 

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SOURCE LegacyTexas Financial Group, Inc.