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LegacyTexas Financial Group, Inc. Reports Fourth Quarter and Full Year 2018 Earnings

Company Release - 1/22/2019 4:15 PM ET

PLANO, Texas, Jan. 22, 2019 /PRNewswire/ -- LegacyTexas Financial Group, Inc. (Nasdaq: LTXB) (the "Company"), the holding company for LegacyTexas Bank (the "Bank"), today announced net income of $57.8 million for the fourth quarter of 2018, an increase of $14.9 million from the third quarter of 2018 and an increase of $43.1 million from the fourth quarter of 2017.  Core (non-GAAP) net income totaled $42.7 million for the fourth quarter of 2018, down $511,000 from the third quarter of 2018 and up $14.5 million from the fourth 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 42 banking offices in the Dallas/Fort Worth Metroplex and surrounding counties. For more information, visit  www.LegacyTexasFinancialGroup.com . (PRNewsFoto/) (PRNewsFoto/LegacyTexas Financial Group, Inc)

Net income for the fourth quarters of 2018 and 2017 was impacted by one-time tax adjustments related to the December 22, 2017 enactment of the Tax Cuts and Jobs Act.  The 2018 period was positively impacted by a $15.3 million tax benefit related to tax rate changes and the favorable outcome of the Company's change in its tax method of accounting for its loan portfolio, while the 2017 period was negatively impacted by $13.5 million in tax expense related to an adjustment to the Company's deferred tax asset.  See "Supplemental Information- Non-GAAP Financial Measures" at the end of this document.

"We are pleased to have closed out 2018 by reporting record earnings of $57.8 million for the fourth quarter," said President and CEO Kevin Hanigan.  "We also had record annual earnings of $154.2 million.  Our outstanding financial results reflect the commitment our employees have to the execution of our strategy and to serving the needs of our customers and communities."

Fourth Quarter 2018 Performance Highlights

  • Assets of $9.05 billion generated basic earnings per share for the fourth quarter of 2018 of $1.22 on a GAAP basis and $0.91 on a core (non-GAAP) basis.*
  • GAAP return on average assets improved to an all-time high of 2.61% for the quarter ended December 31, 2018, compared to 1.87% for the quarter ended September 30, 2018, while core (non-GAAP) return on average assets for the quarter ended December 31, 2018 was 1.93%, compared to 1.88% for the quarter ended September 30, 2018.*
  • GAAP efficiency ratio was 44.39% for the quarter ended December 31, 2018, compared to 42.66% for the quarter ended September 30, 2018, while core (non-GAAP) efficiency ratio was 44.13% for the quarter ended December 31, 2018, compared to 42.46% for the quarter ended September 30, 2018.*
  • Gross loans held for investment at December 31, 2018, excluding Warehouse Purchase Program loans, grew $26.7 million from September 30, 2018, which includes linked-quarter increases in commercial real estate, consumer real estate and other consumer loans.
  • Total deposits at December 31, 2018 grew $62.0 million from September 30, 2018, which includes linked-quarter increases in interest-bearing demand and time deposits.

Full Year 2018 Performance Highlights

  • Net income for the year ended December 31, 2018 totaled $154.2 million, an increase of $64.7 million from the year ended December 31, 2017, while core (non-GAAP) net income totaled $138.4 million for the year ended December 31, 2018, up $36.5 million from the year ended December 31, 2017.*
  • Basic earnings per share for the year ended December 31, 2018 was $3.27 on a GAAP basis and $2.94 on a core (non-GAAP) basis.*
  • GAAP return on average assets for the year ended December 31, 2018 was 1.73% compared to 1.04% for the year ended December 31, 2017, while core (non-GAAP) return on average assets was 1.55% for the year ended December 31, 2018, compared to 1.18% for the year ended December 31, 2017.*
  • GAAP efficiency ratio improved to 44.83% for the year ended December 31, 2018, compared to 45.17% for the year ended December 31, 2017. Core (non-GAAP) efficiency ratio improved to 44.77% for the year ended December 31, 2018, compared to 45.38% for the year ended December 31, 2017.*
  • Gross loans held for investment at December 31, 2018, excluding Warehouse Purchase Program loans, grew $307.5 million from December 31, 2017, while total deposits increased by $74.0 million for the same period.

*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)

Dec 31, 2018


Sep 30, 2018


Dec 31, 2017


(Dollars in thousands, except per share amounts)

Net interest income

$

84,299



$

85,667



$

80,199


Provision for credit losses



2,656



3,743


Non-interest income

12,264



13,227



6,901


Non-interest expense

42,868



42,192



40,708


Income tax expense (benefit)

(4,074)



11,225



27,989


Net income

$

57,769



$

42,821



$

14,660








Basic earnings per common share

$

1.22



$

0.91



$

0.31


Basic core (non-GAAP) earnings per common share1

$

0.91



$

0.92



$

0.60


Weighted average common shares outstanding - basic

47,159,578



47,105,655



46,729,160


Estimated Tier 1 common equity risk-based capital ratio2

11.05

%


10.46

%


9.40

%

Total equity to total assets

12.09

%


11.45

%


10.56

%

Tangible common equity to tangible assets - Non-GAAP1

10.32

%


9.67

%


8.77

%


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.

Basic earnings per share for the quarter ended December 31, 2018 was $1.22, an increase of $0.31 from the third quarter of 2018 and an increase of $0.91 from the fourth quarter of 2017.  Basic core (non-GAAP) earnings per share for the fourth quarter of 2018 was $0.91, a decrease of $0.01 from the third quarter of 2018 and an increase of $0.31 from the fourth quarter of 2017.


At or For the Years Ended

(unaudited)

Dec 31, 2018


Dec 31, 2017


(Dollars in thousands,

except per share amounts)

Net interest income

$

332,508



$

311,431


Provision for credit losses

35,797



39,456


Non-interest income

49,241



43,582


Non-interest expense

171,130



160,344


Income tax expense

20,633



65,719


Net income

$

154,189



$

89,494






Basic earnings per common share

$

3.27



$

1.91


Basic core (non-GAAP) earnings per common share1

$

2.94



$

2.19


Weighted average common shares outstanding - basic

47,035,475



46,611,780



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

Basic earnings per share for the year ended December 31, 2018 was $3.27, an increase of $1.36 from the year ended December 31, 2017.  Basic core (non-GAAP) earnings per share for the year ended December 31, 2018 was $2.94, an increase of $0.75 from the year ended December 31, 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)

December 31, 2018


September 30, 2018


December 31, 2017


(Dollars in thousands)

Interest income:






Loans held for investment, excluding Warehouse Purchase Program loans

$

90,273



$

89,034



$

79,564


Warehouse Purchase Program loans

10,472



12,938



11,568


Loans held for sale

286



295



202


Securities

4,640



4,512



3,979


Interest-earning deposit accounts

1,507



1,368



798


Total interest income

$

107,178



$

108,147



$

96,111


Net interest income

$

84,299



$

85,667



$

80,199


Net interest margin

3.98

%


3.90

%


3.78

%

Selected average balances:






Total earning assets

$

8,413,462



$

8,736,076



$

8,426,339


Total loans held for investment

7,454,810



7,758,802



7,533,172


Total securities

667,939



678,483



648,917


Total deposits

6,790,754



6,851,449



6,759,364


Total borrowings

851,084



1,154,079



1,007,747


Total non-interest-bearing demand deposits

1,778,681



1,752,095



1,568,665


Total interest-bearing liabilities

5,863,158



6,253,433



6,198,446


Net interest income for the quarter ended December 31, 2018 was $84.3 million, a $1.4 million, or 1.6%, decrease from the third quarter of 2018 and a $4.1 million, or 5.1%, increase from the fourth quarter of 2017.  The $1.4 million decrease from the third quarter of 2018 was primarily driven by decreased volume in the Warehouse Purchase Program, commercial and industrial and commercial real estate portfolios, as well as increased average rates on deposits and borrowings, which was partially offset by higher average yields earned on loans compared to the third quarter of 2018.  Interest income earned on Warehouse Purchase Program loans decreased by $2.5 million from the third quarter of 2018, as the average balance decreased by $233.9 million, which was partially offset by a 13 basis point increase in the average yield compared to the linked quarter.  The average balance of commercial and industrial loans decreased by $63.6 million from the third quarter of 2018, while the average yield earned on this portfolio increased by 22 basis points for the same period, resulting in a $175,000 increase in interest income.  A five basis point increase in the average yield earned on the commercial real estate portfolio from the third quarter of 2018 partially offset a $39.0 million decline in the average balance, resulting in a $115,000 decrease in interest income.  The average yield earned on the consumer real estate portfolio increased by 14 basis points compared to the third quarter of 2018, while the average balance increased by $32.6 million, which drove an $853,000 increase in interest income.

Interest income on loans for the fourth quarter of 2018 included $358,000 in accretion of purchase accounting fair value adjustments on acquired loans, which primarily consisted of $120,000 on acquired commercial real estate loans, $59,000 on acquired commercial and industrial loans and $178,000 on acquired consumer loans.

The $4.1 million increase in net interest income compared to the fourth quarter of 2017 was primarily due to a $9.7 million increase in interest income on loans, which was driven by higher yields earned on all loan portfolios, as well as increased volume in the commercial and industrial and consumer real estate loan portfolios.  The average balance of commercial and industrial loans increased by $160.0 million from the fourth quarter of 2017, while the average yield earned on this portfolio increased by 111 basis points for the same period, resulting in a $7.6 million increase in interest income.  The average yield earned on the commercial and industrial portfolio for the quarter ended December 31, 2018 was positively impacted by four increases in the Fed Funds rate totaling 100 basis points since December 31, 2017, as well as the resolution of multiple non-performing relationships over the past year.  The average balance of consumer real estate loans increased by $121.5 million from the fourth quarter of 2017, while the average yield earned on this portfolio increased by 27 basis points, which led to a $2.3 million increase in interest income.  A 15 basis point increase in the average yield earned on the commercial real estate portfolio compared to the fourth quarter of 2017 offset a $52.9 million decrease in the average balance of commercial real estate loans, resulting in a $433,000 increase in interest income.  The average balance of Warehouse Purchase Program loans decreased by $298.9 million from the fourth quarter of 2017, while the average yield earned on this portfolio increased by 86 basis points, resulting in a $1.1 million decrease in interest income compared to the fourth quarter of 2017.

Interest expense for the quarter ended December 31, 2018 increased by $399,000, or 1.8%, compared to the linked quarter, which was primarily due to higher average deposit and borrowing rates, as well as increases of $19.9 million and $15.0 million in the average balances of time and interest-bearing demand deposits, respectively, compared to the third quarter of 2018.  A ten basis point increase in the average rate paid on savings and money market deposits compared to the linked quarter offset a $122.3 million decrease in the average balance of these deposits.  Interest expense on borrowings compared to the third quarter of 2018 decreased by $1.2 million, due to a $303.0 million decrease in the average balance of borrowings compared to the linked quarter, which was partially offset by a 36 basis point increase in the average rate paid on borrowed funds.

Compared to the fourth quarter of 2017, interest expense for the quarter ended December 31, 2018 increased by $7.0 million, primarily due to higher average savings and money market, time deposit and borrowing rates, as well as a $350.0 million increase in the average balance of time deposits.  A 32 basis point increase in the average rate paid on savings and money market deposits compared to the fourth quarter of 2017 offset a $379.0 million decrease in the average balance of these deposits.  A $156.7 million decrease in the average balance of borrowings from the fourth quarter of 2017 was more than offset by a 96 basis point increase in the average rate, resulting in a $1.3 million year-over-year increase in interest expense on borrowed funds.

The net interest margin for the fourth quarter of 2018 was 3.98%, an eight basis point increase from the third quarter of 2018 and a 20 basis point increase from the fourth quarter of 2017.  The average yield on earning assets for the fourth quarter of 2018 was 5.06%, a 14 basis point increase from the third quarter of 2018 and a 53 basis point increase from the fourth quarter of 2017.  The cost of deposits for the fourth quarter of 2018 was 0.97%, up ten basis points from the linked quarter and up 33 basis points from the fourth quarter of 2017.

Non-interest Income

Non-interest income for the fourth quarter of 2018 was $12.3 million, a $1.0 million, or 7.3%, decrease from the third quarter of 2018 and a $5.4 million, or 77.7%, increase from the fourth quarter of 2017.  Other non-interest income for the fourth quarter of 2018 included a $379,000 net increase in the value of investments in community development-oriented private equity funds used for Community Reinvestment Act purposes (the "CRA Funds"), down from a $1.5 million net increase in the CRA Funds for the third 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, which were partially offset by a $471,000 loss recorded in the third quarter of 2018 on the disposition of a leased branch location, with no comparable gains or losses recorded in the fourth quarter of 2018.  These declines in other non-interest income and gain (loss) on sale and disposition of assets were partially offset by a $1.3 million increase in service charges and other fees compared to the third quarter of 2018, primarily resulting from increased commercial loan fee income (consisting of syndication, arrangement, non-usage and pre-payment fees).

The $5.4 million increase in non-interest income from the fourth quarter of 2017 was primarily due to a $3.9 million write-down on a foreclosed property recorded in gain (loss) on sale and disposition of assets during the fourth quarter of 2017, with no comparable losses recorded in the fourth quarter of 2018.  Service charges and other fees increased by $1.8 million from the fourth quarter of 2017, which was driven by higher commercial loan fee income, commercial account analysis fee income and debit card interchange income recorded in the 2018 period.

Non-interest Expenses

Non-interest expense for the fourth quarter of 2018 was $42.9 million, up $676,000, or 1.6%, from the third quarter of 2018 and up $2.2 million, or 5.3%, from the fourth quarter of 2017.  Outside professional services expense increased by $870,000 from the third quarter of 2018, primarily related to higher consulting costs recorded in the 2018 period, which included $256,000 in expenses related to a $15.3 million one-time tax benefit recorded in the fourth quarter of 2018 stemming from the December 2017 enactment of the Tax Cuts and Jobs Act.  Data processing expense increased by $806,000 from the third quarter of 2018 due to system upgrades and technology refreshments, while advertising expense increased by $477,000 for the same period, primarily due to a higher number of events and sponsorships in the fourth quarter of 2018.  These increased operating expenses were partially offset by a $1.3 million decrease in salaries and employee benefits expense compared to the third quarter of 2018, which was driven by lower share-based compensation expense in the 2018 period related to fluctuations in the Company's share price, as well as an increase in performance incentive accruals recorded in the third quarter of 2018 that was not repeated in the fourth quarter of 2018.  These decreases in salaries and employee benefits expense from the linked quarter were partially offset by higher health care costs compared to the third quarter of 2018.

The $2.2 million increase in non-interest expense from the fourth quarter of 2017 was primarily due to a $1.4 million increase in data processing expense due to system upgrades, technology refreshments and outsourcing certain segments of its data processing.  Outside professional services expense increased by $721,000 from the fourth quarter of 2017, primarily related to higher consulting costs recorded in the 2018 period, which included $256,000 in expenses related to a $15.3 million one-time tax benefit recorded in the fourth quarter of 2018 stemming from the December 2017 enactment of the Tax Cuts and Jobs Act.  Salaries and employee benefits expense increased by $602,000 from the fourth quarter of 2017, which was driven by an increase in performance incentive accruals in the 2018 period based on a decreased level of non-performing assets, as well as merit increases awarded in the 2018 period.  These year-over-year increases in salaries and employee benefits expense were partially offset by lower share-based compensation expense in the 2018 period related to fluctuations in the Company's share price. These increased operating expenses were partially offset by decreases from the fourth quarter of 2017 in regulatory assessments expense of $326,000 and other non-interest expense of $303,000, which was primarily related to lower miscellaneous lending expenses.

Financial Condition - Loans

Gross loans held for investment at December 31, 2018, excluding Warehouse Purchase Program loans, grew $26.7 million from September 30, 2018, which included growth in commercial real estate, consumer real estate, and other consumer loans.  At December 31, 2018, commercial real estate and consumer real estate loans increased by $14.4 million and $72.3 million, respectively, from September 30, 2018, while other consumer loans increased by $1.3 million for the same period.  These increases were partially offset by linked-quarter declines of $53.7 million and $7.6 million in commercial and industrial and construction and land loans, respectively.

Compared to December 31, 2017, gross loans held for investment, excluding Warehouse Purchase Program loans, grew $307.5 million, which included growth in commercial real estate, commercial and industrial and consumer real estate loans.  Commercial and industrial and consumer real estate loans increased by $130.7 million and $176.9 million, respectively, at December 31, 2018, compared to December 31, 2017, while commercial real estate loans increased by $7.4 million for the same period.  These increases were partially offset by declines of $7.2 million and $335,000 in construction and land and other consumer loans, respectively, compared to December 31, 2017.

At December 31, 2018, Warehouse Purchase Program loans decreased by $94.1 million compared to September 30, 2018 and by $360.4 million compared to December 31, 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 $520.4 million at December 31, 2018, down  $27.0 million from $547.4 million at September 30, 2018 and down $11.3 million from $531.7 million at December 31, 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 December 31, 2018, "Midstream and Other" loans had a total outstanding balance of $38.1 million, up $3.3 million from $34.8 million at September 30, 2018 and up $22.7 million from $15.4 million at December 31, 2017.

Financial Condition - Deposits

Total deposits at December 31, 2018 increased by $62.0 million from September 30, 2018, which included growth of $46.3 million and $146.6 million in interest-bearing demand and time deposit balances, respectively.  These increases were partially offset by declines of $106.6 million and $24.3 million in savings and money market and non-interest-bearing demand deposits, respectively, from September 30, 2018.

Compared to December 31, 2017, total deposits increased by $74.0 million, which included growth in time and non-interest-bearing demand deposits of $418.0 million and $138.1 million, respectively, while savings and money market and interest-bearing demand deposits decreased by $279.5 million and $202.6 million, respectively.  At December 31, 2018, non-interest-bearing demand deposits totaled 25.9% of total deposits, compared to 24.2% of total deposits at December 31, 2017.

Credit Quality



At or For the Quarters Ended

(unaudited)

Dec 31, 2018


Sep 30, 2018


Dec 31, 2017


(Dollars in thousands)

Net charge-offs (recoveries)

$

(1,074)



$

791



$

2,643


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

(0.07)

%


0.05

%


0.17

%

Net charge-offs (recoveries)/Average loans held for investment

(0.06)



0.04



0.14


Provision for credit losses

$



$

2,656



$

3,743


Non-performing loans ("NPLs")

22,421



17,584



94,403


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

0.33

%


0.26

%


1.46

%

NPLs/Total loans held for investment

0.29



0.22



1.21


Non-performing assets ("NPAs")

$

23,754



$

18,282



$

102,835


NPAs to total assets

0.26

%


0.20

%


1.13

%

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

0.35



0.27



1.58


NPAs/Loans held for investment and foreclosed assets

0.31



0.23



1.32


Allowance for loan losses

$

67,428



$

66,354



$

71,301


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

0.99

%


0.98

%


1.10

%

Allowance for loan losses/Total loans held for investment

0.87



0.85



0.91


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

1.04



1.03



1.17


Allowance for loan losses/NPLs

300.74



377.35



75.53



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

The Company did not record a provision for credit losses for the quarter ended December 31, 2018, compared to provision expense of $2.7 million for the quarter ended September 30, 2018 and $3.7 million for the quarter ended December 31, 2017.  The decrease in provision expense on a linked-quarter and year-over-year basis was primarily due to decreased net charge-offs during the quarter ended December 31, 2018.  Net recoveries totaled $1.1 million for the three months ended December 31, 2018, compared to net charge-offs totaling $791,000 for the three months ended September 30, 2018 and $2.6 million for the three months ended December 31, 2017.

The below table shows criticized (rated "special mention") and classified (rated "substandard" or "doubtful") loans at December 31, 2018, September 30, 2018 and December 31, 2017.


December 31,

2018


September 30,

2018


December 31,

 2017


Linked-Quarter

 Change


Year-over-Year

 Change


(Dollars in thousands)

Commercial real estate

$

17,322



$

16,750



$

30,656



$

572



$

(13,334)


Commercial and industrial, excluding energy

7,582



7,884



15,496



(302)



(7,914)


Energy

48,434



51,983



27,665



(3,549)



20,769


Consumer

1,289



1,313



1,409



(24)



(120)


Total criticized (all performing)

$

74,627



$

77,930



$

75,226



$

(3,303)



$

(599)












Commercial real estate

$

1,463



$

1,757



$

3,893



$

(294)



$

(2,430)


Commercial and industrial, excluding energy

1,019



1,059



1,295



(40)



(276)


Energy

48,260



40,156



11,352



8,104



36,908


Consumer

1,445



1,527



2,823



(82)



(1,378)


Total classified performing

52,187



44,499



19,363



7,688



32,824












Commercial real estate

159



3,739



4,134



(3,580)



(3,975)


Commercial and industrial, excluding energy

968



5,861



25,579



(4,893)



(24,611)


Energy

15,742



1,317



58,424



14,425



(42,682)


Consumer

5,552



6,667



6,266



(1,115)



(714)


Total classified non-performing

22,421



17,584



94,403



4,837



(71,982)












Total classified loans

$

74,608



$

62,083



$

113,766



$

12,525



$

(39,158)


Conference Call

The Company will host an investor conference call to review the results on Wednesday, January 23, 2019 at 8 a.m. Central Time.  Participants may pre-register for the call by visiting http://dpregister.com/10126732 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) 1-855-669-9657.

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 #10126732.  This replay will be available until February 23, 2019.

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 42 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

December 31,

2018


September 30,

2018


June 30,

2018


March 31,

2018


December 31,

2017

Cash and due from financial institutions

$

60,416



$

64,681



$

60,104



$

51,824



$

61,713


Short-term interest-bearing deposits in other financial institutions

208,777



189,634



199,807



243,080



231,743


Total cash and cash equivalents

269,193



254,315



259,911



294,904



293,456


Securities available for sale, at fair value

471,746



455,454



445,613



431,413



419,717


Securities held to maturity

146,046



145,148



155,252



156,898



173,509


Total securities

617,792



600,602



600,865



588,311



593,226


Loans held for sale

23,193



22,175



33,548



31,123



16,707


Loans held for investment:










Loans held for investment - Warehouse Purchase Program

960,404



1,054,505



1,291,129



1,019,840



1,320,846


Loans held for investment

6,790,723



6,764,052



6,671,139



6,569,123



6,483,192


Gross loans

7,774,320



7,840,732



7,995,816



7,620,086



7,820,745


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

(57,031)



(56,499)



(55,321)



(66,878)



(64,921)


Net loans

7,717,289



7,784,233



7,940,495



7,553,208



7,755,824


FHLB stock and other restricted securities, at cost

56,226



60,596



66,061



46,842



64,790


Bank-owned life insurance

59,036



58,692



58,345



57,999



57,684


Premises and equipment, net

73,073



72,291



70,893



70,427



69,693


Goodwill

178,559



178,559



178,559



178,559



178,559


Other assets

79,974



73,504



73,957



75,374



72,964


Total assets

$

9,051,142



$

9,082,792



$

9,249,086



$

8,865,624



$

9,086,196












LIABILITIES AND SHAREHOLDERS' EQUITY







Non-interest-bearing demand

$

1,773,762



$

1,798,109



$

1,721,380



$

1,681,067



$

1,635,622


Interest-bearing demand

826,755



780,474



867,323



996,737



1,029,375


Savings and money market

2,455,787



2,562,399



2,580,017



2,707,046



2,735,296


Time

1,785,411



1,638,776



1,712,628



1,569,557



1,367,390


Total deposits

6,841,715



6,779,758



6,881,348



6,954,407



6,767,683


FHLB advances

825,409



932,317



1,065,941



604,562



1,043,163


Repurchase agreements

50,340



40,408



41,330



76,610



84,676


Subordinated debt

135,012



134,890



134,767



134,645



134,522


Accrued expenses and other liabilities

104,299



155,820



124,250



115,906



96,278


Total liabilities

7,956,775



8,043,193



8,247,636



7,886,130



8,126,322


Common stock

485



485



483



483



481


Additional paid-in capital

619,983



617,270



611,967



609,046



603,884


Retained earnings

491,948



444,848



409,765



389,653



370,858


Accumulated other comprehensive income (loss), net

(6,658)



(11,481)



(9,109)



(7,899)



(3,429)


Unearned Employee Stock Ownership Plan (ESOP) shares

(11,391)



(11,523)



(11,656)



(11,789)



(11,920)


Total shareholders' equity

1,094,367



1,039,599



1,001,450



979,494



959,874


Total liabilities and shareholders' equity

$

9,051,142



$

9,082,792



$

9,249,086



$

8,865,624



$

9,086,196


 

LegacyTexas Financial Group, Inc.

Consolidated Quarterly Statements of Income (unaudited)



For the Quarters Ended


Fourth Quarter 2018 Compared to:


Dec 31,

2018


Sep 30,

2018


Jun 30,

2018


Mar 31,

2018


Dec 31,

2017


Third Quarter

 2018


Fourth Quarter

2017

Interest and dividend income


(Dollars in thousands)


Loans, including fees

$

101,031



$

102,267



$

98,570



$

90,631



$

91,334



$

(1,236)


(1.2)

%


$

9,697


10.6

%

Taxable securities

3,463



3,254



3,132



2,911



2,819



209


6.4



644


22.8


Nontaxable securities

595



614



641



675



700



(19)


(3.1)



(105)


(15.0)


Interest-bearing deposits in other financial institutions

1,507



1,368



1,097



969



798



139


10.2



709


88.8


FHLB and Federal Reserve Bank stock and other

582



644



551



480



460



(62)


(9.6)



122


26.5



107,178



108,147



103,991



95,666



96,111



(969)


(0.9)



11,067


11.5


Interest expense















Deposits

16,634



15,077



13,732



12,032



10,954



1,557


10.3



5,680


51.9


FHLB advances

4,000



5,198



4,131



2,680



2,647



(1,198)


(23.0)



1,353


51.1


Repurchase agreements and other borrowings

2,245



2,205



2,199



2,341



2,311



40


1.8



(66)


(2.9)



22,879



22,480



20,062



17,053



15,912



399


1.8



6,967


43.8


Net interest income

84,299



85,667



83,929



78,613



80,199



(1,368)


(1.6)



4,100


5.1


Provision for credit losses



2,656



17,478



15,663



3,743



(2,656)


(100.0)



(3,743)


(100.0)


Net interest income after provision for credit losses

84,299



83,011



66,451



62,950



76,456



1,288


1.6



7,843


10.3


Non-interest income















Service charges and other fees

9,923



8,626



8,844



7,927



8,124



1,297


15.0



1,799


22.1


Net gain on sale of mortgage loans held for sale

1,499



1,597



1,668



1,809



1,556



(98)


(6.1)



(57)


(3.7)


Bank-owned life insurance income

482



482



479



447



430






52


12.1


Net gain (loss) on securities transactions



(10)





(128)





10


100.0





Gain (loss) on sale and disposition of assets

(56)



977



(153)



2,213



(3,480)



(1,033)


N/M



3,424


98.4


Other

416



1,555



14



630



271



(1,139)


(73.2)



145


53.5



12,264



13,227



10,852



12,898



6,901



(963)


(7.3)



5,363


77.7


















Non-interest expense


(Dollars in thousands)


Salaries and employee benefits

23,728



25,053



24,313



27,076



23,126



(1,325)


(5.3)



602


2.6


Advertising

1,301



824



1,358



888



1,402



477


57.9



(101)


(7.2)


Occupancy and equipment

3,843



3,960



3,980



3,860



3,776



(117)


(3.0)



67


1.8


Outside professional services

2,021



1,151



1,382



1,250



1,300



870


75.6



721


55.5


Regulatory assessments

886



750



731



1,154



1,212



136


18.1



(326)


(26.9)


Data processing

6,168



5,362



5,145



4,703



4,737



806


15.0



1,431


30.2


Office operations

2,249



2,232



2,224



2,300



2,180



17


0.8



69


3.2


Other

2,672



2,860



3,058



2,648



2,975



(188)


(6.6)



(303)


(10.2)



42,868



42,192



42,191



43,879



40,708



676


1.6



2,160


5.3


Income before income tax expense (benefit)

53,695



54,046



35,112



31,969



42,649



(351)


(0.6)



11,046


25.9


Income tax expense (benefit)

(4,074)



11,225



7,275



6,207



27,989



(15,299)


(136.3)



(32,063)


(114.6)


Net income

$

57,769



$

42,821



$

27,837



$

25,762



$

14,660



$

14,948


34.9

%


$

43,109


294.1

%


N/M - Not meaningful

 

LegacyTexas Financial Group, Inc.

Selected Quarterly Financial Highlights (unaudited)



At or For the Quarters Ended


December 31,

2018


September 30,

2018


December 31,

2017

SHARE DATA:

(Dollars in thousands, except per share amounts)

Weighted average common shares outstanding- basic

47,159,578



47,105,655



46,729,160


Weighted average common shares outstanding- diluted

47,714,421



47,755,441



47,290,308


Shares outstanding at end of period

48,505,261



48,491,169



48,117,390


Income available to common shareholders1

$

57,534



$

42,672



$

14,613


Basic earnings per common share

1.22



0.91



0.31


Basic core (non-GAAP) earnings per common share2

0.91



0.92



0.60


Diluted earnings per common share

1.21



0.89



0.31


Dividends declared per share

0.22



0.16



0.16


Total shareholders' equity

1,094,367



1,039,599



959,874


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

22.56



21.44



19.95


Tangible book value per share - Non-GAAP2

18.88



17.75



16.23


Market value per share for the quarter:






High

43.59



46.86



43.03


Low

30.46



38.53



36.73


Close

32.09



42.60



42.21


KEY RATIOS:






Return on average common shareholders' equity

21.75

%


16.76

%


6.09

%

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

16.07



16.90



11.69


Return on average assets

2.61



1.87



0.66


Core (non-GAAP) return on average assets2

1.93



1.88



1.27


Efficiency ratio (GAAP basis)

44.39



42.66



46.74


Core (non-GAAP) efficiency ratio2

44.13



42.46



46.74


Estimated Tier 1 common equity risk-based capital ratio3

11.05



10.46



9.40


Estimated total risk-based capital ratio3

13.48



12.88



11.87


Estimated Tier 1 risk-based capital ratio3

11.19



10.60



9.54


Estimated Tier 1 leverage ratio3

10.76



9.83



9.17


Total equity to total assets

12.09



11.45



10.56


Tangible equity to tangible assets - Non-GAAP2

10.32



9.67



8.77


Number of employees- full-time equivalent

866



859



853



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 Full Year Financial Highlights (unaudited)



At or For the Years Ended


December 31, 2018


December 31, 2017

SHARE DATA:

(Dollars in thousands, except per share amounts)

Basic earnings per common share

$

3.27



$

1.91


Basic core (non-GAAP) earnings per common share1

2.94



2.19


Diluted earnings per common share

3.23



1.89


Dividends declared per share

0.70



0.61


KEY RATIOS:




Return on average common shareholders' equity

15.22

%


9.62

%

Core (non-GAAP) return on average common shareholders' equity1

13.65



10.96


Return on average assets

1.73



1.04


Core (non-GAAP) return on average assets1

1.55



1.18


Efficiency ratio (GAAP basis)

44.83



45.17


Core (non-GAAP) efficiency ratio1

44.77



45.38



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

 

LegacyTexas Financial Group, Inc.

Selected Loan Data (unaudited)



At or for the Quarter Ended


December 31,

2018


September 30,

2018


June 30,

2018


March 31,

2018


December 31,

2017

Loans held for investment:

(Dollars in thousands)

Commercial real estate

$

3,026,754



$

3,012,352



$

3,021,148



$

3,053,750



$

3,019,339


Warehouse Purchase Program

960,404



1,054,505



1,291,129



1,019,840



1,320,846


Commercial and industrial

2,057,791



2,111,510



2,051,955



1,967,443



1,927,049


Construction and land

270,629



278,278



265,745



252,213



277,864


Consumer real estate

1,390,378



1,318,038



1,287,703



1,252,433



1,213,434


Other consumer

45,171



43,874



44,588



43,284



45,506


Gross loans held for investment

$

7,751,127



$

7,818,557



$

7,962,268



$

7,588,963



$

7,804,038


Non-performing assets:










Commercial real estate

$

159



$

3,739



$

3,656



$

3,748



$

4,134


Commercial and industrial

16,710



7,178



10,225



40,455



84,003


Consumer real estate

5,506



6,617



5,652



5,548



6,190


Other consumer

46



50



77



85



76


Total non-performing loans

22,421



17,584



19,610



49,836



94,403


Foreclosed assets

1,333



698



7,341



8,160



8,432


Total non-performing assets

$

23,754



$

18,282



$

26,951



$

57,996



$

102,835


Total non-performing assets to total assets

0.26

%


0.20

%


0.29

%


0.65

%


1.13

%

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

0.33

%


0.26

%


0.29

%


0.76

%


1.46

%

Total non-performing loans to total loans held for investment

0.29

%


0.22

%


0.25

%


0.66

%


1.21

%

Allowance for loan losses to non-performing loans

300.74

%


377.35

%


328.63

%


149.51

%


75.53

%

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

0.99

%


0.98

%


0.97

%


1.13

%


1.10

%

Allowance for loan losses to total loans held for investment

0.87

%


0.85

%


0.81

%


0.98

%


0.91

%

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

1.04

%


1.03

%


1.02

%


1.20

%


1.17

%











Troubled debt restructured loans ("TDRs"):


(Dollars in thousands)



Performing TDRs:










Commercial real estate

$

136



$

139



$

141



$

143



$

145


Commercial and industrial







1



2


Consumer real estate

788



786



561



574



600


Other consumer

2



4



9



14



21


Total performing TDRs

$

926



$

929



$

711



$

732



$

768


Non-performing TDRs:2










Commercial real estate

$

31



$

3,605



$

33



$

35



$

36


Commercial and industrial

661



2,299



2,095



16,183



16,328


Consumer real estate

467



495



789



890



916


Other consumer

1



2



7



9



14


Total non-performing TDRs

$

1,160



$

6,401



$

2,924



$

17,117



$

17,294


Allowance for loan losses:










Balance at beginning of period

$

66,354



$

64,445



$

74,508



$

71,301



$

70,044


Provision expense for loans



2,700



17,600



15,635



3,900


Charge-offs

(2,590)



(922)



(27,737)



(12,527)



(2,840)


Recoveries

3,664



131



74



99



197


Balance at end of period

$

67,428



$

66,354



$

64,445



$

74,508



$

71,301


Net charge-offs (recoveries):









Commercial real estate

$



$



$

236



$

3



$


Commercial and industrial

(1,355)



537



27,261



12,214



2,386


Consumer real estate

37



47



(9)



(11)



36


Other consumer

244



207



175



222



221


Total net charge-offs (recoveries)

$

(1,074)



$

791



$

27,663



$

12,428



$

2,643


Allowance for off-balance sheet lending-related commitments







Provision expense (benefit) for credit losses

$



$

(44)



$

(122)



$

28



$

(157)



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


December 31,

2018


September 30,

2018


June 30,

2018


March 31,

2018


December 31,

2017

Loans:

(Dollars in thousands)

Commercial real estate

$

2,977,919



$

3,016,889



$

3,055,139



$

2,993,024



$

3,030,778


Warehouse Purchase Program

864,012



1,097,879



1,075,262



965,320



1,162,890


Commercial and industrial

2,024,676



2,088,318



2,002,490



1,904,515



1,864,686


Construction and land

272,631



271,829



260,560



270,899



287,965


Consumer real estate

1,327,912



1,295,353



1,265,751



1,227,556



1,206,371


Other consumer

44,559



44,508



43,779



44,891



46,094


Less: deferred fees and allowance for loan loss

(56,899)



(55,974)



(66,746)



(62,666)



(65,612)


Total loans held for investment

7,454,810



7,758,802



7,636,235



7,343,539



7,533,172


Loans held for sale

24,279



26,121



29,378



20,988



20,642


Securities

667,939



678,483



667,183



648,534



648,917


Overnight deposits

266,434



272,670



233,335



239,936



223,608


Total interest-earning assets

$

8,413,462



$

8,736,076



$

8,566,131



$

8,252,997



$

8,426,339


Deposits:










Interest-bearing demand

$

775,921



$

760,889



$

954,960



$

970,998



$

925,506


Savings and money market

2,532,732



2,654,990



2,578,205



2,745,192



2,911,726


Time

1,703,421



1,683,475



1,632,697



1,433,307



1,353,467


FHLB advances and other borrowings

851,084



1,154,079



1,018,945



877,502



1,007,747


Total interest-bearing liabilities

$

5,863,158



$

6,253,433



$

6,184,807



$

6,026,999



$

6,198,446












Total assets

$

8,850,435



$

9,167,607



$

8,996,036



$

8,682,461



$

8,865,517


Non-interest-bearing demand deposits

$

1,778,681



$

1,752,095



$

1,694,082



$

1,576,792



$

1,568,665


Total deposits

$

6,790,754



$

6,851,449



$

6,859,944



$

6,726,289



$

6,759,364


Total shareholders' equity

$

1,062,331



$

1,022,032



$

994,574



$

973,187



$

963,512












Yields/Rates:










Loans:










Commercial real estate

5.20

%


5.15

%


5.09

%


5.09

%


5.05

%

Warehouse Purchase Program

4.81

%


4.68

%


4.53

%


4.23

%


3.95

%

Commercial and industrial

6.00

%


5.78

%


5.71

%


5.27

%


4.89

%

Construction and land

5.87

%


5.41

%


5.35

%


5.17

%


5.04

%

Consumer real estate

4.81

%


4.67

%


4.66

%


4.56

%


4.54

%

Other consumer

5.80

%


5.81

%


5.74

%


5.62

%


5.67

%

Total loans held for investment

5.37

%


5.22

%


5.16

%


4.98

%


4.81

%

Loans held for sale

4.71

%


4.52

%


4.46

%


4.04

%


3.92

%

Securities

2.78

%


2.66

%


2.59

%


2.51

%


2.45

%

Overnight deposits

2.24

%


1.99

%


1.89

%


1.64

%


1.42

%

Total interest-earning assets

5.06

%


4.92

%


4.87

%


4.69

%


4.53

%

Deposits:










Interest-bearing demand

0.69

%


0.65

%


0.88

%


0.81

%


0.71

%

Savings and money market

1.02

%


0.92

%


0.79

%


0.75

%


0.70

%

Time

2.05

%


1.80

%


1.62

%


1.43

%


1.21

%

FHLB advances and other borrowings

2.91

%


2.55

%


2.49

%


2.32

%


1.95

%

Total interest-bearing liabilities

1.55

%


1.43

%


1.30

%


1.15

%


1.02

%

Net interest spread

3.51

%


3.49

%


3.57

%


3.54

%


3.51

%

Net interest margin

3.98

%


3.90

%


3.93

%


3.85

%


3.78

%

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

0.97

%


0.87

%


0.80

%


0.73

%


0.64

%

 

LegacyTexas Financial Group, Inc.

Supplemental Information- Non-GAAP Financial Measures

(unaudited)



At or For the Quarters Ended


December 31,

2018


September 30,

2018


June 30,

2018


March 31,

2018


December 31,

2017


(Dollars in thousands, except per share amounts)

Reconciliation of Core (non-GAAP) to GAAP Net Income and Earnings per Share (calculated net of estimated tax rate of 21%, except as otherwise noted)





GAAP net income available to common shareholders1

$

57,534



$

42,672



$

27,770



$

25,687



$

14,613


Distributed and undistributed earnings to participating securities1

235



149



67



75



47


GAAP net income

57,769



42,821



27,837



25,762



14,660


(Gain) loss on one-time tax adjustments2

(15,289)









13,493


Expenses related to above tax adjustments

202










(Gain) loss on sale of branch locations and land



372



126






Insurance settlement proceeds from pre-acquisition fraud







(1,778)




One-time employee bonus related to tax law change







537




Core (non-GAAP) net income

$

42,682



$

43,193



$

27,963



$

24,521



$

28,153


Average shares for basic earnings per share

47,159,578


47,105,655


47,000,405


46,872,333



46,729,160


Basic GAAP earnings per share

$

1.22



$

0.91



$

0.59



$

0.55



$

0.31


Basic core (non-GAAP) earnings per share

$

0.91



$

0.92



$

0.59



$

0.52



$

0.60


Average shares for diluted earnings per share

47,714,421


47,755,441


47,618,157


47,564,587



47,290,308


Diluted GAAP earnings per share

$

1.21



$

0.89



$

0.58



$

0.54



$

0.31


Diluted core (non-GAAP) earnings per share

$

0.89



$

0.90



$

0.59



$

0.52



$

0.60


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







GAAP non-interest income

$

12,264



$

13,227



$

10,852



$

12,898



$

6,901


Insurance settlement proceeds from pre-acquisition fraud







(2,250)




(Gain) loss on sale of branch locations and land



471



160






Core (non-GAAP) non-interest income

$

12,264



$

13,698



$

11,012



$

10,648



$

6,901


GAAP non-interest expense

$

42,868



$

42,192



$

42,191



$

43,879



$

40,708


Expenses related to above tax adjustments

(256)










One-time employee bonus related to tax law change







(679)




Core (non-GAAP) non-interest expense

$

42,612



$

42,192



$

42,191



$

43,200



$

40,708



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          These one-time income tax adjustments consist of an adjustment to the Company's deferred tax asset (recorded in the 2017 period), as well as a benefit related to tax rate changes and the favorable outcome of the Company's change in its tax method of accounting for its loan portfolio (recorded in the 2018 period), all related to the December 22, 2017 enactment of the Tax Cuts and Jobs Act.

 


At or For the Quarters Ended


December 31,

2018


September 30,

2018


June 30,

2018


March 31,

2018


December 31,

2017

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


(Dollars in thousands, except per share amounts)

GAAP efficiency ratio:










Non-interest expense

$

42,868



$

42,192



$

42,191



$

43,879



$

40,708


Net interest income plus non-interest income

96,563



98,894



94,781



91,511



87,100


Efficiency ratio- GAAP basis

44.39

%


42.66

%


44.51

%


47.95

%


46.74

%

Core (non-GAAP) efficiency ratio:










Core (non-GAAP) non-interest expense

$

42,612



$

42,192



$

42,191



$

43,200



$

40,708


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

96,563



99,365



94,941



89,261



87,100


Efficiency ratio- core (non-GAAP) basis

44.13

%


42.46

%


44.44

%


48.40

%


46.74

%

Calculation of Tangible Book Value per Share:









Total shareholders' equity

$

1,094,367



$

1,039,599



$

1,001,450



$

979,494



$

959,874


Less: Goodwill

(178,559)



(178,559)



(178,559)



(178,559)



(178,559)


Identifiable intangible assets, net

(245)



(279)



(313)



(347)



(402)


Total tangible shareholders' equity

$

915,563



$

860,761



$

822,578



$

800,588



$

780,913


Shares outstanding at end of period

48,505,261


48,491,169


48,311,220


48,264,966



48,117,390


Book value per share- GAAP

$

22.56



$

21.44



$

20.73



$

20.29



$

19.95


Tangible book value per share- Non-GAAP

18.88



17.75



17.03



16.59



16.23


Calculation of Tangible Equity to Tangible Assets:









Total assets

$

9,051,142



$

9,082,792



$

9,249,086



$

8,865,624



$

9,086,196


Less: Goodwill

(178,559)



(178,559)



(178,559)



(178,559)



(178,559)


Identifiable intangible assets, net

(245)



(279)



(313)



(347)



(402)


Total tangible assets

$

8,872,338



$

8,903,954



$

9,070,214



$

8,686,718



$

8,907,235


Equity to assets- GAAP

12.09

%


11.45

%


10.83

%


11.05

%


10.56

%

Tangible equity to tangible assets- Non-GAAP

10.32



9.67



9.07



9.22



8.77


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

Net income

$

57,769



$

42,821



$

27,837



$

25,762



$

14,660


Core (non-GAAP) net income

42,682



43,193



27,963



24,521



28,153


Average total equity

1,062,331



1,022,032



994,574



973,187



963,512


Average total assets

8,850,435



9,167,607



8,996,036



8,682,461



8,865,517


Return on average common shareholders' equity

21.75

%


16.76

%


11.20

%


10.59

%


6.09

%

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

16.07



16.90



11.25



10.08



11.69


Return on average assets

2.61



1.87



1.24



1.19



0.66


Core (non-GAAP) return on average assets

1.93



1.88



1.24



1.13



1.27


 


At or For the Years Ended


December 31, 2018


December 31, 2017

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

(Dollars in thousands, except per share
amounts)

GAAP net income available to common shareholders 1

$

153,692



$

89,176


Distributed and undistributed earnings to participating securities 1

497



318


GAAP net income

154,189



89,494


(Gain) loss on one-time tax adjustments2

(15,289)



13,493


Expenses related to above tax adjustments3

202




(Gain) loss on sale of branch locations and land 3

498



(1,084)


Insurance settlement proceeds from pre-acquisition fraud 3

(1,778)




One-time employee bonus related to tax law change 3

537




Core (non-GAAP) net income

$

138,359



$

101,903


Average shares for basic earnings per share

47,035,475



46,611,780


Basic (GAAP) earnings per share

$

3.27



$

1.91


Basic core (non-GAAP) earnings per share

$

2.94



$

2.19


Average shares for diluted earnings per share

47,653,726



47,138,518


Diluted GAAP earnings per share

$

3.23



$

1.89


Diluted core (non-GAAP) earnings per share

$

2.90



$

2.16






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



GAAP non-interest income

$

49,241



$

43,582


Insurance settlement proceeds from pre-acquisition fraud

(2,250)




(Gain) loss on sale of branch locations and land

631



(1,669)


Core (non-GAAP) non-interest income

$

47,622



$

41,913


GAAP non-interest expense

$

171,130



$

160,344


Expenses related to above tax adjustments

(256)




One-time employee bonus related to tax law change

(679)




Core (non-GAAP) non-interest expense

$

170,195



$

160,344






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



Net interest income

$

332,508



$

311,431


GAAP efficiency ratio:




Non-interest expense

$

171,130



$

160,344


Net interest income plus non-interest income

381,749



355,013


Efficiency ratio- GAAP basis

44.83

%


45.17

%

Core (non-GAAP) efficiency ratio:




Core (non-GAAP) non-interest expense

$

170,195



$

160,344


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

380,130



353,344


Efficiency ratio- core (non-GAAP) basis

44.77

%


45.38

%



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

These one-time income tax adjustments consist of an adjustment to the Company's deferred tax asset (recorded in the 2017 period), as well as a benefit related to tax rate changes and the favorable outcome of the Company's change in its tax method of accounting for its loan portfolio (recorded in the 2018 period), all related to the December 22, 2017 enactment of the Tax Cuts and Jobs Act.

3

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

 


At or For the Years Ended


December 31, 2018


December 31, 2017


(Dollars in thousands, except per share
amounts)

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



Net income

$

154,189



$

89,494


Core (non-GAAP) net income

138,359



101,903


Average total equity

1,013,300



929,903


Average total assets

8,925,262



8,607,481


Return on average common shareholders' equity

15.22

%


9.62

%

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

13.65



10.96


Return on average assets

1.73



1.04


Core (non-GAAP) return on average assets

1.55



1.18


 

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SOURCE LegacyTexas Financial Group, Inc.