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LegacyTexas Financial Group, Inc. Reports First Quarter 2019 Earnings

Company Release - 4/23/2019 4:15 PM ET

PLANO, Texas, April 23, 2019 /PRNewswire/ -- LegacyTexas Financial Group, Inc. (Nasdaq: LTXB) (the "Company"), the holding company for LegacyTexas Bank (the "Bank"), today announced net income of $29.1 million for the first quarter of 2019, a decrease of $28.7 million from the fourth quarter of 2018 and an increase of $3.3 million from the first quarter of 2018.  Core (non-GAAP) net income totaled $29.1 million for the first quarter of 2019, down $13.6 million from the fourth quarter of 2018 and up $4.6 million from the first quarter of 2018.*

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 quarter of 2018 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.  See "Supplemental Information- Non-GAAP Financial Measures" at the end of this document.

"We have reported another solid quarter and continue to serve our customers and expand our market share," said President and CEO Kevin Hanigan.  "We look forward to the remainder of the year and are confident we will continue to execute and perform for our customers and shareholders."

First Quarter 2019 Performance Highlights

  • Assets of $9.35 billion generated basic earnings per share for the first quarter of 2019 of $0.61 on a GAAP basis and $0.62 on a core (non-GAAP) basis.*
  • Gross loans held for investment at March 31, 2019, excluding Warehouse Purchase Program loans, grew $154.0 million, or 2.3%, from December 31, 2018, which includes linked-quarter increases in all loan portfolios.
  • Total deposits at March 31, 2019 grew $235.7 million, or 3.4%, from December 31, 2018, which includes linked-quarter increases in interest-bearing demand, time and savings and money market deposits.
  • GAAP and core (non-GAAP) return on average assets for the quarter ended March 31, 2019 was 1.31%, compared to GAAP return on average assets of 1.19% and core (non-GAAP) return on average assets of 1.13% for the quarter ended March 31, 2018.*
  • GAAP and core (non-GAAP) efficiency ratio was 48.66% for the quarter ended March 31, 2019, compared to GAAP efficiency ratio of 47.95% and core (non-GAAP) efficiency ratio of 48.40% for the quarter ended March 31, 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)

Mar 31, 2019


Dec 31, 2018


Mar 31, 2018


(Dollars in thousands, except per share amounts)

Net interest income

$

81,164



$

84,299



$

78,613


Provision for credit losses

9,800





15,663


Non-interest income

9,894



12,264



12,898


Non-interest expense

44,307



42,868



43,879


Income tax expense (benefit)

7,871



(4,074)



6,207


Net income

$

29,080



$

57,769



$

25,762








Basic earnings per common share

$

0.61



$

1.22



$

0.55


Basic core (non-GAAP) earnings per common share1

$

0.62



$

0.91



$

0.52


Weighted average common shares outstanding - basic

47,246,282



47,159,578



46,872,333


Estimated Tier 1 common equity risk-based capital ratio2

10.92

%


11.05

%


9.91

%

Total equity to total assets

12.00

%


12.09

%


11.05

%

Tangible common equity to tangible assets - Non-GAAP1

10.28

%


10.32

%


9.22

%



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 March 31, 2019 was $0.61, a decrease of $0.61 from the fourth quarter of 2018 and an increase of $0.06 from the first quarter of 2018.  Basic core (non-GAAP) earnings per share for the first quarter of 2019 was $0.62, a decrease of $0.29 from the fourth quarter of 2018 and an increase of $0.10 from the first quarter of 2018.

Net Interest Income and Net Interest Margin



For the Quarters Ended

(unaudited)

March 31, 2019


December 31, 2018


March 31, 2018


(Dollars in thousands)

Interest income:






Loans held for investment, excluding Warehouse Purchase Program loans

$

91,360



$

90,273



$

80,348


Warehouse Purchase Program loans

8,771



10,472



10,071


Loans held for sale

170



286



212


Securities

4,526



4,640



4,066


Interest-earning deposit accounts

1,277



1,507



969


Total interest income

$

106,104



$

107,178



$

95,666


Net interest income

$

81,164



$

84,299



$

78,613


Net interest margin

3.89

%


3.98

%


3.85

%

Selected average balances:






Total earning assets

$

8,433,085



$

8,413,462



$

8,252,997


Total loans held for investment

7,528,531



7,454,810



7,343,539


Total securities

670,599



667,939



648,534


Total deposits

6,754,156



6,790,754



6,726,289


Total borrowings

882,061



851,084



877,502


Total non-interest-bearing demand deposits

1,688,937



1,778,681



1,576,792


Total interest-bearing liabilities

5,947,280



5,863,158



6,026,999


Net interest income for the quarter ended March 31, 2019 was $81.2 million, a $3.1 million, or 3.7%, decrease from the fourth quarter of 2018 and a $2.6 million, or 3.2%, increase from the first quarter of 2018.  The $3.1 million decrease from the fourth quarter of 2018 was primarily driven by a change in the mix of deposits, increased average rates on deposits and borrowings and decreased volume in the Warehouse Purchase Program loan portfolio compared to the linked quarter.  Yields earned and rates paid are calculated using the actual number of days in each month over the actual number of days in the year, with the exception of the securities portfolios and the consumer real estate and loans held for sale loan portfolios, which are calculated using 30 days in a month over 360 days in a year.  Accordingly, interest income on certain portfolios, such as the commercial real estate, commercial and industrial and Warehouse Purchase Program loan portfolios, was negatively impacted by the first quarter of 2019 having two fewer days than the fourth quarter of 2018.

Interest income earned on Warehouse Purchase Program loans decreased by $1.7 million from the fourth quarter of 2018, as the average balance decreased by $139.9 million, which was partially offset by increases in interest income earned on consumer real estate and commercial and industrial loans.  Interest income earned on the consumer real estate portfolio increased by $906,000, driven by a $76.4 million linked-quarter increase in the average balance.  The average balance of commercial and industrial loans increased by $63.4 million from the fourth quarter of 2018, resulting in a $185,000 increase in interest income.  A $70.2 million increase in the average balance of the commercial real estate portfolio from the fourth quarter of 2018 was offset by two less days of interest income in the first quarter of 2019, as well as a two basis point decrease in the average yield, resulting in a $92,000 decrease in interest income.

Interest income on loans for the first quarter of 2019 included $255,000 in accretion of purchase accounting fair value adjustments on acquired loans, which primarily consisted of $73,000 on acquired commercial real estate loans, $46,000 on acquired commercial and industrial loans and $135,000 on acquired consumer loans.

The $2.6 million increase in net interest income compared to the first quarter of 2018 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 all loan portfolios with the exception of Warehouse Purchase Program loans and loans held for sale.  The average balance of commercial and industrial loans increased by $183.5 million from the first quarter of 2018, while the average yield earned on this portfolio increased by 71 basis points for the same period, resulting in a $6.0 million increase in interest income.  The average yield earned on the commercial and industrial portfolio for the quarter ended March 31, 2019 was positively impacted by three increases in the Fed Funds rate totaling 75 basis points since March 31, 2018.  The average balance of consumer real estate loans increased by $176.7 million from the first quarter of 2018, while the average yield earned on this portfolio increased by 25 basis points, which led to a $2.9 million increase in interest income.  A $55.1 million increase in the average balance of commercial real estate loans compared to the first quarter of 2018, as well as a nine basis point increase in the average yield, resulted in a $1.4 million increase in interest income.  The average balance of Warehouse Purchase Program loans decreased by $241.3 million from the first quarter of 2018, while the average yield earned on this portfolio increased by 68 basis points, resulting in a $1.3 million decrease in interest income compared to the first quarter of 2018.

Interest expense for the quarter ended March 31, 2019 increased by $2.1 million, or 9.0%, compared to the linked quarter, which was primarily due to higher average deposit and borrowing rates, as well as increases of $73.4 million and $24.6 million in the average balances of time and interest-bearing demand deposits, respectively, compared to the fourth quarter of 2018.  An 11 basis point increase in the average rate paid on savings and money market deposits compared to the linked quarter offset a $44.9 million decrease in the average balance of these deposits.  Interest expense on borrowings increased by $480,000, due to a $31.0 million increase in the average balance of borrowings compared to the fourth quarter of 2018, as well as an 18 basis point increase in the average rate paid on borrowed funds.

Compared to the first quarter of 2018, interest expense for the quarter ended March 31, 2019 increased by $7.9 million, or 46.2%, primarily due to higher average savings, money market and time deposit and borrowing rates, as well as a $343.5 million increase in the average balance of time deposits.  A 38 basis point increase in the average rate paid on savings and money market deposits compared to the first quarter of 2018 offset a $257.4 million decrease in the average balance of these deposits.  A 77 basis point increase in the average rate paid on borrowings compared to the first quarter of 2018, as well as a $4.6 million increase in the average balance, resulted in a $1.7 million year-over-year increase in interest expense on borrowed funds.

The net interest margin for the first quarter of 2019 was 3.89%, a nine basis point decrease from the fourth quarter of 2018 and a four basis point increase from the first quarter of 2018.  The average yield on earning assets for the first quarter of 2019 was 5.09%, a three basis point increase from the fourth quarter of 2018 and a 40 basis point increase from the first quarter of 2018.  The cost of deposits for the first quarter of 2019 was 1.09%, up 12 basis points from the linked quarter and up 36 basis points from the first quarter of 2018.

Non-interest Income

Non-interest income for the first quarter of 2019 was $9.9 million, a $2.4 million, or 19.3%, decrease from the fourth quarter of 2018 and a $3.0 million, or 23.3%, decrease from the first quarter of 2018.  Service charges and other fees decreased by $2.7 million compared to the fourth quarter of 2018, primarily resulting from lower commercial loan fee income (consisting of syndication, arrangement, non-usage and pre-payment fees), as well as decreased debit card interchange, non-sufficient funds and Warehouse Purchase Program income.  Other non-interest income for the first quarter of 2019 included a $21,000 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 $379,000 net increase in the CRA Funds for the fourth quarter of 2018, which was offset by a $366,000 interest payment received from the Internal Revenue Service in the first quarter of 2019 related to a prior year tax refund, as well as a $216,000 linked-quarter increase in interest rate swap fee income.

The $3.0 million decrease in non-interest income from the first quarter of 2018 was primarily due to a $2.2 million decrease in gain (loss) on sale and disposition of assets, primarily due to a $2.3 million insurance settlement received in the first quarter of 2018 related to a misappropriation of approximately $2.5 million in vault cash from one of the former LegacyTexas Bank branches it acquired in 2015.  Service charges and other fees decreased by $672,000 from the first quarter of 2018, which was driven by lower commercial loan fee income, as well as decreased title premium income and Warehouse Purchase Program income.  Net gains on the sale of mortgage loans held for sale during the first quarter of 2019 decreased by $284,000 compared to the same period in 2018, which included gains recognized on $49.1 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 2018 period, compared to $32.6 million for the 2019 period.

Non-interest Expenses

Non-interest expense for the first quarter of 2019 was $44.3 million, up $1.4 million, or 3.4%, from the fourth quarter of 2018 and up $428,000, or 1.0%, from the first quarter of 2018.  Salaries and employee benefits expense increased by $3.1 million from the fourth quarter of 2018, which was driven by higher share-based compensation expense in the 2019 period related to fluctuations in the Company's share price, as well as increased payroll taxes related to Social Security wage base limits starting over at the beginning of the year and higher salary costs attributable to merit increases granted in the first quarter of 2019.  The linked-quarter increase in salaries and employee benefits expense was partially offset by a $736,000 decrease in outside professional services expense, primarily related to lower consulting costs recorded in the 2019 period.  Outside professional services expense for the fourth quarter of 2018 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.  Advertising expense decreased by $398,000 from the fourth quarter of 2018, primarily due to a lower number of events and sponsorships in the first quarter of 2019, while regulatory assessments expense declined by $268,000 on a linked-quarter basis due to a notice of preliminary assessment credit received from the FDIC in the first quarter of 2019, which may reduce future FDIC assessment payments.

The $428,000 increase in non-interest expense from the first quarter of 2018 was primarily due to a $1.2 million increase in data processing expense due to system upgrades, technology refreshments and outsourcing certain segments of its data processing.  The year-over-year increase in data processing expense was partially offset by a $536,000 decline in regulatory assessments expense from the first quarter of 2018, due to the above-mentioned FDIC notice of preliminary assessment credit, as well as a lower assessment rate in the 2019 period.  Additionally, salaries and employee benefits expense decreased by $205,000 from the first quarter of 2018, as the 2018 period included a $1,000 bonus paid to all full-time employees whose salary was under $100,000 (awarded in connection with the enactment of the Tax Cuts and Jobs Act), which resulted in $679,000 of additional salary expense recorded in the first quarter of 2018.  This year-over-year decrease in salaries and employee benefits expense was partially offset by higher salary costs attributable to merit increases granted in the first quarter of 2019, as well as higher share-based compensation expense in the 2019 period related to fluctuations in the Company's share price.

Financial Condition - Loans

Gross loans held for investment at March 31, 2019, excluding Warehouse Purchase Program loans, grew $154.0 million from December 31, 2018, which included growth in all loan portfolios.  At March 31, 2019, commercial real estate and consumer real estate loans increased by $96.0 million and $32.7 million, respectively, from December 31, 2018, while commercial and industrial and construction and land loans increased by $12.9 million and $11.8 million, respectively, for the same period.

Compared to March 31, 2018, gross loans held for investment at March 31, 2019, excluding Warehouse Purchase Program loans, grew $375.6 million, which included growth in all loan portfolios.  Commercial and industrial and consumer real estate loans increased by $103.3 million and $170.7 million, respectively, at March 31, 2019, compared to March 31, 2018, while commercial real estate loans increased by $69.0 million for the same period.  Additionally, construction and land and other consumer loans increased by $30.3 million and $2.4 million, respectively, compared to March 31, 2018.

At March 31, 2019, Warehouse Purchase Program loans increased by $135.8 million compared to December 31, 2018 and by $76.3 million compared to March 31, 2018.

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 $499.8 million at March 31, 2019, down $20.6 million from $520.4 million at December 31, 2018 and down $24.3 million from $524.1 million at March 31, 2018.  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 March 31, 2019, "Midstream and Other" loans had a total outstanding balance of $22.1 million, down $16.0 million from $38.1 million at December 31, 2018 and down $1.1 million from $23.2 million at March 31, 2018.

Financial Condition - Deposits

Total deposits at March 31, 2019 increased by $235.7 million from December 31, 2018, which included growth of $57.7 million and $162.6 million in interest-bearing demand and time deposit balances, respectively.  Additionally, savings and money market deposits increased by $36.4 million from December 31, 2018, while non-interest-bearing demand deposits declined by $21.1 million.

Compared to March 31, 2018, total deposits increased by $123.0 million, which included growth in time and non-interest-bearing demand deposits of $378.5 million and $71.6 million, respectively, while savings and money market and interest-bearing demand deposits decreased by $214.8 million and $112.2 million, respectively.  At March 31, 2019, non-interest-bearing demand deposits totaled 24.8% of total deposits, compared to 24.2% of total deposits at March 31, 2018.

 

Credit Quality



At or For the Quarters Ended

(unaudited)

Mar 31, 2019


Dec 31, 2018


Mar 31, 2018


(Dollars in thousands)

Net charge-offs (recoveries)

$

(263)



$

(1,074)



$

12,428


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

(0.02)

%


(0.07)

%


0.78

%

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

(0.01)



(0.06)



0.68


Provision for credit losses

$

9,800



$



$

15,663


Non-performing loans ("NPLs")

61,028



22,421



49,836


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

0.88

%


0.33

%


0.76

%

NPLs/Total loans held for investment

0.76



0.29



0.66


Non-performing assets ("NPAs")

$

61,810



$

23,754



$

57,996


NPAs to total assets

0.66

%


0.26

%


0.65

%

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

0.89



0.35



0.88


NPAs/Loans held for investment and foreclosed assets

0.77



0.31



0.76


Allowance for loan losses

$

77,530



$

67,428



$

74,508


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

1.12

%


0.99

%


1.13

%

Allowance for loan losses/Total loans held for investment

0.96



0.87



0.98


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

1.16



1.04



1.20


Allowance for loan losses/NPLs

127.04



300.74



149.51




1

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

The Company recorded a provision for credit losses of $9.8 million for the quarter ended March 31, 2019, compared to $15.7 million for the quarter ended March 31, 2018.  The Company did not record a provision for credit losses for the quarter ended December 31, 2018.  The increase in provision expense on a linked-quarter basis was primarily due to a $38.6 million increase in non-performing loans from December 31, 2018, which included a $6.1 million increase in non-performing energy loans and the placement of the Company's only remaining corporate healthcare finance relationship totaling $19.3 million on non-accrual status during the first quarter of 2019.  The increase in non-performing loans from December 31, 2018 also included a $7.4 million personal loan to one of the owners of an energy company that was used to recapitalize the company.  This loan is collateralized by the borrower's stock in the energy company, as well as other personal assets, and was reported at March 31, 2019 as a non-performing loan in the commercial and industrial, excluding energy category.

The decrease in provision expense on a year-over-year basis was primarily due to decreased net charge-offs during the quarter ended March 31, 2019.  Net recoveries totaled $263,000 for the three months ended March 31, 2019, compared to net charge-offs totaling $12.4 million for the three months ended March 31, 2018.

The below table shows criticized (rated "special mention") and classified (rated "substandard" or "doubtful") loans at March 31, 2019, December 31, 2018 and March 31, 2018.


March 31,
2019


December 31,
2018


March 31,
 2018


Linked-Quarter

 Change


Year-over-Year

 Change


(Dollars in thousands)

Commercial real estate

$

20,561



$

17,322



$

19,929



$

3,239



$

632


Commercial and industrial, excluding energy

8,631



7,582



11,037



1,049



(2,406)


Energy

48,434



48,434



27,255





21,179


Consumer

2,761



1,289



1,377



1,472



1,384


Total criticized (all performing)

$

80,387



$

74,627



$

59,598



$

5,760



$

20,789












Commercial real estate

$

1,442



$

1,463



$

3,865



$

(21)



$

(2,423)


Commercial and industrial, excluding energy

1,000



1,019



1,325



(19)



(325)


Energy

46,095



48,260



38,456



(2,165)



7,639


Consumer

1,316



1,445



2,627



(129)



(1,311)


Total classified (performing)

49,853



52,187



46,273



(2,334)



3,580












Commercial real estate

6,623



159



3,748



6,464



2,875


Commercial and industrial, excluding energy

27,395



968



25,037



26,427



2,358


Energy

21,866



15,742



15,418



6,124



6,448


Consumer

5,144



5,552



5,633



(408)



(489)


Total classified (non-performing)

61,028



22,421



49,836



38,607



11,192












Total classified loans

$

110,881



$

74,608



$

96,109



$

36,273



$

14,772


Conference Call

The Company will host an investor conference call to review the results on Wednesday, April 24, 2019 at 8 a.m. Central Time.  Participants may pre-register for the call by visiting http://dpregister.com/10128898 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 #10128898.  This replay will be available until May 24, 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, keep in mind these risks and uncertainties. Undue reliance should not be placed on any forward-looking statement, which speaks only as of the date made. Refer to the Company's 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

March 31,
2019


December 31,
2018


September 30,
2018


June 30,
2018


March 31,
2018

Cash and due from financial institutions

$

55,472



$

60,416



$

64,681



$

60,104



$

51,824


Short-term interest-bearing deposits in other financial institutions

219,051



208,777



189,634



199,807



243,080


Total cash and cash equivalents

274,523



269,193



254,315



259,911



294,904


Securities available for sale, at fair value

479,426



471,746



455,454



445,613



431,413


Securities held to maturity

135,276



146,046



145,148



155,252



156,898


Total securities

614,702



617,792



600,602



600,865



588,311


Loans held for sale

11,380



23,193



22,175



33,548



31,123


Loans held for investment:










Loans held for investment - Warehouse Purchase Program

1,096,160



960,404



1,054,505



1,291,129



1,019,840


Loans held for investment

6,944,731



6,790,723



6,764,052



6,671,139



6,569,123


Gross loans

8,052,271



7,774,320



7,840,732



7,995,816



7,620,086


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

(66,712)



(57,031)



(56,499)



(55,321)



(66,878)


Net loans

7,985,559



7,717,289



7,784,233



7,940,495



7,553,208


FHLB stock and other restricted securities, at cost

56,044



56,226



60,596



66,061



46,842


Bank-owned life insurance

59,377



59,036



58,692



58,345



57,999


Premises and equipment, net

107,684



73,073



72,291



70,893



70,427


Goodwill

178,559



178,559



178,559



178,559



178,559


Other assets

69,624



79,974



73,504



73,957



75,374


Total assets

$

9,346,072



$

9,051,142



$

9,082,792



$

9,249,086



$

8,865,624












LIABILITIES AND SHAREHOLDERS' EQUITY





Non-interest-bearing demand

$

1,752,694



$

1,773,762



$

1,798,109



$

1,721,380



$

1,681,067


Interest-bearing demand

884,494



826,755



780,474



867,323



996,737


Savings and money market

2,492,226



2,455,787



2,562,399



2,580,017



2,707,046


Time

1,948,011



1,785,411



1,638,776



1,712,628



1,569,557


Total deposits

7,077,425



6,841,715



6,779,758



6,881,348



6,954,407


FHLB advances

820,084



825,409



932,317



1,065,941



604,562


Repurchase agreements

37,277



50,340



40,408



41,330



76,610


Subordinated debt

135,135



135,012



134,890



134,767



134,645


Accrued expenses and other liabilities

155,064



104,299



155,820



124,250



115,906


Total liabilities

8,224,985



7,956,775



8,043,193



8,247,636



7,886,130


Common stock

487



485



485



483



483


Additional paid-in capital

625,405



619,983



617,270



611,967



609,046


Retained earnings

508,887



491,948



444,848



409,765



389,653


Accumulated other comprehensive income (loss), net

(2,433)



(6,658)



(11,481)



(9,109)



(7,899)


Unearned Employee Stock Ownership Plan (ESOP) shares

(11,259)



(11,391)



(11,523)



(11,656)



(11,789)


Total shareholders' equity

1,121,087



1,094,367



1,039,599



1,001,450



979,494


Total liabilities and shareholders' equity

$

9,346,072



$

9,051,142



$

9,082,792



$

9,249,086



$

8,865,624


 

LegacyTexas Financial Group, Inc.

Consolidated Quarterly Statements of Income (unaudited)



For the Quarters Ended


First Quarter 2019 Compared to:


Mar 31,
2019


Dec 31,
2018


Sep 30,
2018


Jun 30,
2018


Mar 31,
2018


Fourth Quarter

 2018


First Quarter

2018

Interest and dividend income


(Dollars in thousands)




Loans, including fees

$

100,301



$

101,031



$

102,267



$

98,570



$

90,631



$

(730)


(0.7)

%


$

9,670


10.7

%

Taxable securities

3,602



3,463



3,254



3,132



2,911



139


4.0



691


23.7


Nontaxable securities

343



595



614



641



675



(252)


(42.4)



(332)


(49.2)


Interest-bearing deposits in other financial institutions

1,277



1,507



1,368



1,097



969



(230)


(15.3)



308


31.8


FHLB and Federal Reserve Bank stock and other

581



582



644



551



480



(1)


(0.2)



101


21.0



106,104



107,178



108,147



103,991



95,666



(1,074)


(1.0)



10,438


10.9


Interest expense













Deposits

18,215



16,634



15,077



13,732



12,032



1,581


9.5



6,183


51.4


FHLB advances

4,456



4,000



5,198



4,131



2,680



456


11.4



1,776


66.3


Repurchase agreements and other borrowings

2,269



2,245



2,205



2,199



2,341



24


1.1



(72)


(3.1)



24,940



22,879



22,480



20,062



17,053



2,061


9.0



7,887


46.2


Net interest income

81,164



84,299



85,667



83,929



78,613



(3,135)


(3.7)



2,551


3.2


Provision for credit losses

9,800





2,656



17,478



15,663



9,800


N/M


(5,863)


(37.4)


Net interest income after provision for credit losses

71,364



84,299



83,011



66,451



62,950



(12,935)


(15.3)



8,414


13.4


Non-interest income













Service charges and other fees

7,255



9,923



8,626



8,844



7,927



(2,668)


(26.9)



(672)


(8.5)


Net gain on sale of mortgage loans held for sale

1,525



1,499



1,597



1,668



1,809



26


1.7



(284)


(15.7)


Bank-owned life insurance income

482



482



482



479



447






35


7.8


Net gain (loss) on securities transactions

6





(10)





(128)



6


100.0



134


N/M

Gain (loss) on sale and disposition of assets

(14)



(56)



977



(153)



2,213



42


(75.0)


(2,227)


N/M

Other

640



416



1,555



14



630



224


53.8



10


1.6



9,894



12,264



13,227



10,852



12,898



(2,370)


(19.3)



(3,004)


(23.3)


















Non-interest expense

(Dollars in thousands)


Salaries and employee benefits

26,871



23,728



25,053



24,313



27,076



3,143


13.2



(205)


(0.8)


Advertising

903



1,301



824



1,358



888



(398)


(30.6)



15


1.7


Occupancy and equipment

3,899



3,843



3,960



3,980



3,860



56


1.5



39


1.0


Outside professional services

1,285



2,021



1,151



1,382



1,250



(736)


(36.4)



35


2.8


Regulatory assessments

618



886



750



731



1,154



(268)


(30.2)



(536)


(46.4)


Data processing

5,933



6,168



5,362



5,145



4,703



(235)


(3.8)



1,230


26.2


Office operations

2,335



2,249



2,232



2,224



2,300



86


3.8



35


1.5


Other

2,463



2,672



2,860



3,058



2,648



(209)


(7.8)



(185)


(7.0)



44,307



42,868



42,192



42,191



43,879



1,439


3.4



428


1.0


Income before income tax expense (benefit)

36,951



53,695



54,046



35,112



31,969



(16,744)


(31.2)



4,982


15.6


Income tax expense (benefit)

7,871



(4,074)



11,225



7,275



6,207



11,945


N/M


1,664


26.8


Net income

$

29,080



$

57,769



$

42,821



$

27,837



$

25,762



$

(28,689)


(49.7)

%


$

3,318


12.9

%


N/M - Not meaningful

 

LegacyTexas Financial Group, Inc.

Selected Quarterly Financial Highlights (unaudited)



At or For the Quarters Ended


March 31,
2019


December 31,
2018


March 31,
2018

SHARE DATA:

(Dollars in thousands, except per share amounts)

Weighted average common shares outstanding - basic

47,246,282



47,159,578



46,872,333


Weighted average common shares outstanding - diluted

47,835,693



47,714,421



47,564,587


Shares outstanding at end of period

48,704,070



48,505,261



48,264,966


Income available to common shareholders1

$

28,955



$

57,534



$

25,687


Basic earnings per common share

0.61



1.22



0.55


Basic core (non-GAAP) earnings per common share2

0.62



0.91



0.52


Diluted earnings per common share

0.61



1.21



0.54


Dividends declared per share

0.25



0.22



0.16


Total shareholders' equity

1,121,087



1,094,367



979,494


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

23.02



22.56



20.29


Tangible book value per share - Non-GAAP2

19.35



18.88



16.59


Market value per share for the quarter:






High

43.88



43.59



45.82


Low

33.08



30.46



41.68


Close

37.39



32.09



42.82


KEY RATIOS:






Return on average common shareholders' equity

10.50

%


21.75

%


10.59

%

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

10.50



16.07



10.08


Return on average assets

1.31



2.61



1.19


Core (non-GAAP) return on average assets2

1.31



1.93



1.13


Efficiency ratio (GAAP basis)

48.66



44.39



47.95


Core (non-GAAP) efficiency ratio2

48.66



44.13



48.40


Estimated Tier 1 common equity risk-based capital ratio3

10.92



11.05



9.91


Estimated total risk-based capital ratio3

13.39



13.48



12.49


Estimated Tier 1 risk-based capital ratio3

11.06



11.19



10.06


Estimated Tier 1 leverage ratio3

10.98



10.76



9.64


Total equity to total assets

12.00



12.09



11.05


Tangible equity to tangible assets - Non-GAAP2

10.28



10.32



9.22


Number of employees - full-time equivalent

875



866



851














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


March 31,
2019


December 31,
2018


September 30,
2018


June 30,
2018


March 31,
2018

Loans held for investment:

(Dollars in thousands)

Commercial real estate

$

3,122,726



$

3,026,754



$

3,012,352



$

3,021,148



$

3,053,750


Warehouse Purchase Program

1,096,160



960,404



1,054,505



1,291,129



1,019,840


Commercial and industrial

2,070,715



2,057,791



2,111,510



2,051,955



1,967,443


Construction and land

282,463



270,629



278,278



265,745



252,213


Consumer real estate

1,423,095



1,390,378



1,318,038



1,287,703



1,252,433


Other consumer

45,732



45,171



43,874



44,588



43,284


Gross loans held for investment

$

8,040,891



$

7,751,127



$

7,818,557



$

7,962,268



$

7,588,963


Non-performing assets:









Commercial real estate

$

6,623



$

159



$

3,739



$

3,656



$

3,748


Commercial and industrial

49,261



16,710



7,178



10,225



40,455


Consumer real estate

5,123



5,506



6,617



5,652



5,548


Other consumer

21



46



50



77



85


Total non-performing loans

61,028



22,421



17,584



19,610



49,836


Foreclosed assets

782



1,333



698



7,341



8,160


Total non-performing assets

$

61,810



$

23,754



$

18,282



$

26,951



$

57,996


Total non-performing assets to total assets

0.66

%


0.26

%


0.20

%


0.29

%


0.65

%

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

0.88

%


0.33

%


0.26

%


0.29

%


0.76

%

Total non-performing loans to total loans held for investment

0.76

%


0.29

%


0.22

%


0.25

%


0.66

%

Allowance for loan losses to non-performing loans

127.04

%


300.74

%


377.35

%


328.63

%


149.51

%

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

1.12

%


0.99

%


0.98

%


0.97

%


1.13

%

Allowance for loan losses to total loans held for investment

0.96

%


0.87

%


0.85

%


0.81

%


0.98

%

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

1.16

%


1.04

%


1.03

%


1.02

%


1.20

%











Troubled debt restructured loans ("TDRs"):

(Dollars in thousands)



Performing TDRs:










Commercial real estate

$

134



$

136



$

139



$

141



$

143


Commercial and industrial









1


Consumer real estate

722



788



786



561



574


Other consumer

1



2



4



9



14


Total performing TDRs

$

857



$

926



$

929



$

711



$

732


Non-performing TDRs:2








Commercial real estate

$

29



$

31



$

3,605



$

33



$

35


Commercial and industrial

7,999



661



2,299



2,095



16,183


Consumer real estate

447



467



495



789



890


Other consumer

4



1



2



7



9


Total non-performing TDRs

$

8,479



$

1,160



$

6,401



$

2,924



$

17,117


Allowance for loan losses:








Balance at beginning of period

$

67,428



$

66,354



$

64,445



$

74,508



$

71,301


Provision expense for loans

9,839





2,700



17,600



15,635


Charge-offs

(359)



(2,590)



(922)



(27,737)



(12,527)


Recoveries

622



3,664



131



74



99


Balance at end of period

$

77,530



$

67,428



$

66,354



$

64,445



$

74,508


Net charge-offs (recoveries):







Commercial real estate

$



$



$



$

236



$

3


Commercial and industrial

(463)



(1,355)



537



27,261



12,214


Consumer real estate

3



37



47



(9)



(11)


Other consumer

197



244



207



175



222


Total net charge-offs (recoveries)

$

(263)



$

(1,074)



$

791



$

27,663



$

12,428


Allowance for off-balance sheet lending-related commitments





Provision expense (benefit) for credit losses

$

(39)



$



$

(44)



$

(122)



$

28




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


March 31,
2019


December 31,
2018


September 30,
2018


June 30,
2018


March 31,
2018

Loans:

(Dollars in thousands)

Commercial real estate

$

3,048,087



$

2,977,919



$

3,016,889



$

3,055,139



$

2,993,024


Warehouse Purchase Program

724,070



864,012



1,097,879



1,075,262



965,320


Commercial and industrial

2,088,056



2,024,676



2,088,318



2,002,490



1,904,515


Construction and land

276,642



272,631



271,829



260,560



270,899


Consumer real estate

1,404,292



1,327,912



1,295,353



1,265,751



1,227,556


Other consumer

45,339



44,559



44,508



43,779



44,891


Less: deferred fees and allowance for loan loss

(57,955)



(56,899)



(55,974)



(66,746)



(62,666)


Total loans held for investment

7,528,531



7,454,810



7,758,802



7,636,235



7,343,539


Loans held for sale

15,347



24,279



26,121



29,378



20,988


Securities

670,599



667,939



678,483



667,183



648,534


Overnight deposits

218,608



266,434



272,670



233,335



239,936


Total interest-earning assets

$

8,433,085



$

8,413,462



$

8,736,076



$

8,566,131



$

8,252,997


Deposits:










Interest-bearing demand

$

800,557



$

775,921



$

760,889



$

954,960



$

970,998


Savings and money market

2,487,833



2,532,732



2,654,990



2,578,205



2,745,192


Time

1,776,829



1,703,421



1,683,475



1,632,697



1,433,307


FHLB advances and other borrowings

882,061



851,084



1,154,079



1,018,945



877,502


Total interest-bearing liabilities

$

5,947,280



$

5,863,158



$

6,253,433



$

6,184,807



$

6,026,999












Total assets

$

8,891,059



$

8,850,435



$

9,167,607



$

8,996,036



$

8,682,461


Non-interest-bearing demand deposits

$

1,688,937



$

1,778,681



$

1,752,095



$

1,694,082



$

1,576,792


Total deposits

$

6,754,156



$

6,790,754



$

6,851,449



$

6,859,944



$

6,726,289


Total shareholders' equity

$

1,107,719



$

1,062,331



$

1,022,032



$

994,574



$

973,187












Yields/Rates:










Loans:










Commercial real estate

5.18

%


5.20

%


5.15

%


5.09

%


5.09

%

Warehouse Purchase Program

4.91

%


4.81

%


4.68

%


4.53

%


4.23

%

Commercial and industrial

5.98

%


6.00

%


5.78

%


5.71

%


5.27

%

Construction and land

6.03

%


5.87

%


5.41

%


5.35

%


5.17

%

Consumer real estate

4.81

%


4.81

%


4.67

%


4.66

%


4.56

%

Other consumer

5.88

%


5.80

%


5.81

%


5.74

%


5.62

%

Total loans held for investment

5.38

%


5.37

%


5.22

%


5.16

%


4.98

%

Loans held for sale

4.43

%


4.71

%


4.52

%


4.46

%


4.04

%

Securities

2.70

%


2.78

%


2.66

%


2.59

%


2.51

%

Overnight deposits

2.37

%


2.24

%


1.99

%


1.89

%


1.64

%

Total interest-earning assets

5.09

%


5.06

%


4.92

%


4.87

%


4.69

%

Deposits:










Interest-bearing demand

0.76

%


0.69

%


0.65

%


0.88

%


0.81

%

Savings and money market

1.13

%


1.02

%


0.92

%


0.79

%


0.75

%

Time

2.23

%


2.05

%


1.80

%


1.62

%


1.43

%

FHLB advances and other borrowings

3.09

%


2.91

%


2.55

%


2.49

%


2.32

%

Total interest-bearing liabilities

1.70

%


1.55

%


1.43

%


1.30

%


1.15

%

Net interest spread

3.39

%


3.51

%


3.49

%


3.57

%


3.54

%

Net interest margin

3.89

%


3.98

%


3.90

%


3.93

%


3.85

%

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

1.09

%


0.97

%


0.87

%


0.80

%


0.73

%

 

LegacyTexas Financial Group, Inc.

Supplemental Information- Non-GAAP Financial Measures

(unaudited)



At or For the Quarters Ended


March 31,
2019


December 31,
2018


September 30,
2018


June 30,
2018


March 31,
2018


(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%)





GAAP net income available to common shareholders1

$

28,955



$

57,534



$

42,672



$

27,770



$

25,687


Distributed and undistributed earnings to participating securities1

125



235



149



67



75


GAAP net income

29,080



57,769



42,821



27,837



25,762


(Gain) on one-time tax adjustment2



(15,289)








Expenses related to above tax adjustment



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

$

29,080



$

42,682



$

43,193



$

27,963



$

24,521


Average shares for basic earnings per share

47,246,282


47,159,578


47,105,655


47,000,405



46,872,333


Basic GAAP earnings per share

$

0.61



$

1.22



$

0.91



$

0.59



$

0.55


Basic core (non-GAAP) earnings per share

$

0.62



$

0.91



$

0.92



$

0.59



$

0.52


Average shares for diluted earnings per share

47,835,693


47,714,421


47,755,441


47,618,157



47,564,587


Diluted GAAP earnings per share

$

0.61



$

1.21



$

0.89



$

0.58



$

0.54


Diluted core (non-GAAP) earnings per share

$

0.61



$

0.89



$

0.90



$

0.59



$

0.52


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







GAAP non-interest income

$

9,894



$

12,264



$

13,227



$

10,852



$

12,898


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

$

9,894



$

12,264



$

13,698



$

11,012



$

10,648


GAAP non-interest expense

$

44,307



$

42,868



$

42,192



$

42,191



$

43,879


Expenses related to above tax adjustments



(256)








One-time employee bonus related to tax law change









(679)


Core (non-GAAP) non-interest expense

$

44,307



$

42,612



$

42,192



$

42,191



$

43,200




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

This one-time income tax benefit resulted from tax rate changes and the favorable outcome of the Company's change in its tax method of accounting for its loan portfolio, both related to the December 22, 2017 enactment of the Tax Cuts and Jobs Act.

 


At or For the Quarters Ended


March 31,
2019


December 31,
2018


September 30,
2018


June 30,
2018


March 31,
2018

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

$

44,307



$

42,868



$

42,192



$

42,191



$

43,879


Net interest income plus non-interest income

91,058



96,563



98,894



94,781



91,511


Efficiency ratio - GAAP basis

48.66

%


44.39

%


42.66

%


44.51

%


47.95

%

Core (non-GAAP) efficiency ratio:










Core (non-GAAP) non-interest expense

$

44,307



$

42,612



$

42,192



$

42,191



$

43,200


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

91,058



96,563



99,365



94,941



89,261


Efficiency ratio - core (non-GAAP) basis

48.66

%


44.13

%


42.46

%


44.44

%


48.40

%

Calculation of Tangible Book Value per Share:







Total shareholders' equity

$

1,121,087



$

1,094,367



$

1,039,599



$

1,001,450



$

979,494


Less: Goodwill

(178,559)



(178,559)



(178,559)



(178,559)



(178,559)


Identifiable intangible assets, net

(218)



(245)



(279)



(313)



(347)


Total tangible shareholders' equity

$

942,310



$

915,563



$

860,761



$

822,578



$

800,588


Shares outstanding at end of period

48,704,070


48,505,261


48,491,169


48,311,220



48,264,966


Book value per share - GAAP

$

23.02



$

22.56



$

21.44



$

20.73



$

20.29


Tangible book value per share - Non-GAAP

19.35



18.88



17.75



17.03



16.59


Calculation of Tangible Equity to Tangible Assets:






Total assets

$

9,346,072



$

9,051,142



$

9,082,792



$

9,249,086



$

8,865,624


Less: Goodwill

(178,559)



(178,559)



(178,559)



(178,559)



(178,559)


Identifiable intangible assets, net

(218)



(245)



(279)



(313)



(347)


Total tangible assets

$

9,167,295



$

8,872,338



$

8,903,954



$

9,070,214



$

8,686,718


Equity to assets - GAAP

12.00

%


12.09

%


11.45

%


10.83

%


11.05

%

Tangible equity to tangible assets - Non-GAAP

10.28



10.32



9.67



9.07



9.22


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

Net income

$

29,080



$

57,769



$

42,821



$

27,837



$

25,762


Core (non-GAAP) net income

29,080



42,682



43,193



27,963



24,521


Average total equity

1,107,719



1,062,331



1,022,032



994,574



973,187


Average total assets

8,891,059



8,850,435



9,167,607



8,996,036



8,682,461


Return on average common shareholders' equity

10.50

%


21.75

%


16.76

%


11.20

%


10.59

%

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

10.50



16.07



16.90



11.25



10.08


Return on average assets

1.31



2.61



1.87



1.24



1.19


Core (non-GAAP) return on average assets

1.31



1.93



1.88



1.24



1.13


 

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SOURCE LegacyTexas Financial Group, Inc.