LegacyTexas Financial Group, Inc. Reports First Quarter 2017 Earnings

Apr 18, 2017

PLANO, Texas, April 18, 2017 /PRNewswire/ -- LegacyTexas Financial Group, Inc. (Nasdaq: LTXB) (the "Company"), the holding company for LegacyTexas Bank (the "Bank"), today announced net income of $18.2 million for the first quarter of 2017, a decrease of $7.1 million from the fourth quarter of 2016 and $3.9 million from the first quarter of 2016.  Net income for the first quarter of 2017 included a provision for credit losses totaling $22.3 million, which resulted from the charge-off of a $16.4 million interest in a large syndicated credit.

"We produced a strong quarter that was highlighted with very strong net interest income, despite the seasonal decline in Warehouse Purchase Program loans," said President and CEO Kevin Hanigan. "Loans held for investment, excluding Warehouse, grew $200 million and operating expenses remained relatively flat compared to last quarter, producing a record low 44.8% efficiency ratio. However, our performance during the quarter was obviously overshadowed by the increased provision expense related to a syndicated health care credit that we charged off. While our remaining exposure to corporate healthcare is only $60 million in funded loans, we have strategically decided to shut down our origination of these credits going forward.  We believe that business fundamentals and local economy remain favorable for our Company, and we expect to continue executing on our strategic plan.  The earning power of our company remains strong."  

First Quarter 2017 Performance Highlights

  • Net income for the first quarter of 2017 included a $2.5 million increase in net interest income compared to the fourth quarter of 2016, despite a $3.1 million reduction in interest income on Warehouse Purchase Program loans related to decreased volume during the quarter.
  • Efficiency ratio improved to 44.83% for the quarter ended March 31, 2017, compared to 45.79% for the quarter ended December 31, 2016, as non-interest expense for the quarter remained nearly flat, with a linked-quarter increase of only $204,000.
  • Gross loans held for investment at March 31, 2017, excluding Warehouse Purchase Program loans, grew $199.8 million from December 31, 2016, while total deposits grew $14.2 million for the same period.
  • Company assets totaled $8.44 billion, which generated basic earnings per share for the first quarter of 2017 of $0.39 on a GAAP basis and $0.37 on a core (non-GAAP) basis.

 

Financial Highlights



At or For the Quarters Ended

(unaudited)

Mar 31, 2017


Dec 31, 2016


Mar 31, 2016


(Dollars in thousands, except per share amounts)

Net interest income

$

76,548



$

74,084



$

65,351


Provision for credit losses

22,301



7,833



8,800


Non-interest income

12,130



12,277



14,655


Non-interest expense

39,752



39,548



37,542


Income tax expense

8,435



13,675



11,582


Net income

$

18,190



$

25,305



$

22,082








Basic earnings per common share

$

0.39



$

0.54



$

0.48


Basic core (non-GAAP) earnings per common share1

$

0.37



$

0.55



$

0.42


Weighted average common shares outstanding - basic

46,453,658



46,346,053



46,024,250


Estimated Tier 1 common risk-based capital ratio2

9.29

%


9.13

%


9.50

%

Total equity to total assets

10.67

%


10.59

%


10.88

%

Tangible common equity to tangible assets - Non-GAAP1

8.73

%


8.63

%


8.69

%


1  

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

2   

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

 

Core (non-GAAP) net income (which is net income adjusted for the impact of infrequent or non-recurring items) totaled $17.3 million for the quarter ended March 31, 2017, down $8.0 million from the fourth quarter of 2016 and $2.2 million from the first quarter of 2016.  Basic earnings per share for the quarter ended March 31, 2017 was $0.39, a decrease of $0.15 from the fourth quarter of 2016 and $0.09 from the first quarter of 2016.  Basic core earnings per share for the first quarter of 2017 was $0.37, down $0.18 from the fourth quarter of 2016 and $0.05 from the first quarter of 2016.


Net Interest Income and Net Interest Margin



For the Quarters Ended

(unaudited)

Mar 31, 2017


Dec 31, 2016


Mar 31, 2016


(Dollars in thousands)

Interest income:






Loans held for investment, excluding Warehouse Purchase Program loans

$

76,956



$

71,090



$

61,952


Warehouse Purchase Program loans

6,025



9,112



6,674


Loans held for sale

122



192



180


Securities

3,701



3,410



3,472


Interest-earning deposit accounts

732



693



330


Total interest income

$

87,536



$

84,497



$

72,608


Net interest income

$

76,548



$

74,084



$

65,351


Net interest margin

4.00

%


3.68

%


3.90

%

Selected average balances:






Total earning assets

$

7,734,253



$

8,011,431



$

6,732,619


Total loans held for investment

6,759,556



6,886,696



5,874,775


Total securities

629,366



620,775



599,680


Total deposits

6,163,863



6,282,454



5,168,353


Total borrowings

1,040,835



1,201,004



1,106,577


Total non-interest-bearing demand deposits

1,341,315



1,349,561



1,134,070


Total interest-bearing liabilities

5,863,383



6,133,897



5,140,860


 

Net interest income for the quarter ended March 31, 2017 was $76.5 million, a $2.5 million increase from the fourth quarter of 2016 and an $11.2 million increase from the first quarter of 2016.  The $2.5 million increase from the linked quarter was primarily due to an increase in interest income on loans, which was driven by increased volume in the commercial and industrial, commercial real estate and consumer real estate portfolios, as well as the amortization of a discount recorded in the fourth quarter of 2016 on a purchased energy loan, of which $4.7 million was completely amortized to interest income during the first quarter of 2017.  The amortization of this discount positively impacted the yield on commercial and industrial loans for the first quarter of 2017 by 96 basis points, while the average balance of commercial and industrial loans increased by $133.2 million to $1.97 billion from the fourth quarter of 2016, resulting in a $4.9 million increase in interest income.  The average balance of commercial real estate loans increased by $125.2 million to $2.72 billion from the fourth quarter of 2016, resulting in a $916,000 increase in interest income.

The average balance of Warehouse Purchase Program loans decreased by $403.4 million to $697.3 million from the fourth quarter of 2016, resulting in a $3.1 million decrease in interest income, which reflects the seasonal slowdown typically experienced with Warehouse Purchase Program loans during the first quarter of the year.  Interest income earned on consumer real estate loans increased by $292,000 for the same period due to a $38.5 million linked-quarter increase in the average balance.

Interest income on loans for the first quarter of 2017 included $943,000 in accretion of purchase accounting fair value adjustments on acquired loans, which includes $385,000 on acquired commercial real estate loans, $157,000 on acquired commercial and industrial loans, $21,000 on acquired construction and land loans and $380,000 on acquired consumer loans.  Accretion of purchase accounting fair value adjustments on acquired loans contributed six basis points, three basis points and 11 basis points to the average yields on commercial real estate, commercial and industrial and consumer real estate loans, respectively, for the first quarter of 2017, compared to four basis points, three basis points and 13 basis points, respectively, for the fourth quarter of 2016. 

The $11.2 million increase in net interest income compared to the first quarter of 2016 was primarily due to a $14.3 million increase in interest income on loans, which was driven by increased volume in the commercial real estate, commercial and industrial and consumer real estate portfolios.  The average balance of commercial real estate loans increased by $495.5 million from the first quarter of 2016, resulting in a $5.8 million increase in interest income.  The average balance of commercial and industrial loans increased by $357.6 million from the first quarter of 2016, resulting in an $8.3 million increase in interest income, which also included the impact of the amortized loan discount discussed above.  The average balance of consumer real estate loans increased by $141.1 million compared to the first quarter of 2016, which was partially offset by a 23 basis point decline in the average yield earned on that portfolio compared to the prior year period, leading to a $1.1 million increase in interest income.

Interest expense for the quarter ended March 31, 2017 increased by $575,000 compared to the linked quarter, which was primarily due to higher average rates paid on interest-bearing demand,  savings, money market and time products, as well as a $16.4 million increase in the average balance of interest-bearing demand deposits compared to the fourth quarter of 2016.  The average balance of savings and money market accounts decreased by $34.0 million to $2.65 billion from the fourth quarter of 2016, which was offset by a seven basis point increase in the average rate, resulting in a $377,000 increase in interest expense, while the average balance of time deposits decreased by $92.8 million to $1.31 billion for the same period, resulting in a $68,000 decrease in interest expense.  The decrease in interest expense on time deposits compared to the fourth quarter of 2016 was partially offset by a five basis point linked-quarter increase in the rate paid. A $160.2 million decrease in the average balance of borrowings from the fourth quarter of 2016 was more than offset by a 29 basis point increase in the average rate, resulting in a $199,000 increase in interest expense on borrowed funds.

Compared to the first quarter of 2016, interest expense for the quarter ended March 31, 2017 increased by $3.7 million, primarily due to higher average rates and increased volume in all deposit products.  The average balance of savings and money market deposits increased by $443.2 million and the average balance of time deposits increased by $264.8 million compared to the first quarter of 2016, while the average rates paid on these deposits increased by 22 basis points and 20 basis points, respectively, compared to the prior year period.  These increases in volume and rate on savings and money market and time deposits increased interest expense compared to the first quarter of 2016 by $1.7 million and $1.1 million, respectively.  A $65.7 million decrease in the average balance of borrowings from the first quarter of 2016 was more than offset by a 37 basis point increase in the average rate, resulting in a $743,000 increase in interest expense on borrowed funds.

The net interest margin for the first quarter of 2017 was 4.00%, a 32 basis point increase from the fourth quarter of 2016 and a ten basis point increase from the first quarter of 2016.  Approximately 24 basis points of the net interest margin for the quarter ended March 31, 2017 was related to the amortization of the purchased loan discount discussed above.  Accretion of interest resulting from the merger with LegacyTexas Group, Inc. on January 1, 2015, as well as the 2012 Highlands acquisition, contributed five basis points to the net interest margin and average yield on earning assets for the quarter ended March 31, 2017, compared to four basis points for the quarter ended December 31, 2016 and seven basis points for the quarter ended March 31, 2016.  The average yield on earning assets for the first quarter of 2017 was 4.58%, a 38 basis point increase from the fourth quarter of 2016 and a 25 basis point increase from the first quarter of 2016.  The cost of deposits for the first quarter of 2017 was 0.47%, up four basis points from the linked quarter and up 15 basis points from the first quarter of 2016.


Non-interest Income

Non-interest income for the first quarter of 2017 was $12.1 million, a $147,000 decrease from the fourth quarter of 2016 and a $2.5 million decrease from the first quarter of 2016.  Gain (loss) on sale and disposition of assets for the first quarter of 2017 included a gain of $1.3 million resulting from the sale of a parcel of land, compared to a loss of $407,000 recorded in the fourth quarter of 2016 on the sale of a foreclosed property.  Service charges and other fees decreased by $1.5 million from the fourth quarter of 2016, which was primarily due to a $683,000 reduction in commercial loan fee income (consisting of syndication, arrangement, non-usage and pre-payment fees) and a $695,000 incentive payment received from Mastercard in the fourth quarter of 2016 that was not repeated in the first quarter of 2017.  The Company recognized $1.6 million in net gains on the sale of mortgage loans held for sale during the first quarter of 2017, which includes the gain recognized on $39.6 million of one-to four-family mortgage loans that were sold or committed for sale during the first quarter of 2017, fair value changes on mortgage derivatives and mortgage fees collected, compared to $2.0 million in comparable net gains recorded during the fourth quarter of 2016 on $57.8 million of one-to four-family mortgage loans sold or committed for sale.

The $2.5 million decrease in non-interest income from the first quarter of 2016 was primarily due to a gain of $3.9 million recorded in the first quarter of 2016 on the sale of two buildings, compared to the above-discussed $1.3 million gain on the sale of a parcel of land recorded in the first quarter of 2017.  Service charges and other fees increased by $250,000, which was driven by a $281,000 increase in commercial loan fee income (consisting of syndication, arrangement, non-usage and pre-payment fees).


Non-interest Expenses

Non-interest expense for the quarter ended March 31, 2017 was $39.8 million, a $204,000 increase from the fourth quarter of 2016 and a $2.2 million increase from the first quarter of 2016.  Salaries and employee benefits expense increased by $998,000 from the fourth quarter of 2016, which was driven by increased payroll taxes related to Social Security tax wage base limits and higher salary costs related to additional staff and merit increases in the first quarter of 2017.  Performance incentive accruals were also higher during the 2017 period, as these accruals were reduced in the fourth quarter of 2016 related to an increase in non-performing loans.  These increases in salaries and employee benefits expense were partially offset by reduced health care costs and share-based compensation expense compared to the fourth quarter of 2016.  Regulatory assessment expense decreased by $331,000 compared to the quarter ended December 31, 2016, due to a lower assessment rate, while office operations and advertising expenses also decreased by $248,000 and $222,000, respectively, compared to the linked quarter.

The $2.2 million increase in non-interest expense from the first quarter of 2016 was primarily due to a $2.1 million increase in salaries and employee benefits expense, which was driven by additional staff and merit increases, as well as increases in performance incentive accruals, payroll taxes and share-based compensation expense.  Data processing expense increased by $605,000 compared to the first quarter of 2016 primarily due to increased costs for system upgrades to enhance customer service and increase operating efficiency.  These increases in salaries and employee benefits expense and data processing expense were partially offset by a $246,000 decline in other non-interest expense due to lower debit card fraud losses in the 2017 period, as well as a $219,000 decline in advertising costs compared to the first quarter of 2016.


Financial Condition - Loans

Gross loans held for investment at March 31, 2017, excluding Warehouse Purchase Program loans, grew $199.8 million from December 31, 2016, which included growth in commercial real estate, commercial and industrial and consumer real estate loans.  Commercial real estate and commercial and industrial loans at March 31, 2017 increased by $116.0 million and $57.2 million, respectively, from December 31, 2016, and consumer real estate loans increased by $34.5 million for the same period.  These linked-quarter increases were partially offset by a $4.6 million decline in construction and land loans. 

Compared to March 31, 2016, gross loans held for investment at March 31, 2017, excluding Warehouse Purchase Program loans, grew $996.0 million, which included growth in all loan portfolios with the exception of a $14.6 million decline in other consumer loans.  On a year over year basis, commercial real estate and commercial and industrial loans increased by $462.1 million and $388.3 million, respectively.  Consumer real estate and construction and land loans increased by $137.3 million and $22.7 million, respectively, from March 31, 2016. 

At March 31, 2017, Warehouse Purchase Program loans decreased by $208.4 million compared to December 31, 2016 and by $181.6 million compared to March 31, 2016. 

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 $504.0 million at March 31, 2017, down $23.2 million from $527.2 million at December 31, 2016 and up $42.9 million from $461.1 million at March 31, 2016.  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 from declining commodity prices.  At March 31, 2017, "Midstream and Other" loans had a total outstanding balance of $43.1 million, up $4.1 million from $39.0 million at December 31, 2016 and down $20.6 million from $63.7 million at March 31, 2016.

Financial Condition - Deposits

Total deposits at March 31, 2017 increased by $14.2 million from December 31, 2016, with non-interest-bearing demand deposits increasing by $65.7 million and time deposits increasing by $9.5 million on a linked-quarter basis. These increases were partially offset by declines in savings and money market and interest-bearing demand balances, which decreased by $30.8 million and $30.2 million, respectively, on a linked-quarter basis.

Compared to March 31, 2016, total deposits increased by $1.08 billion, which includes growth in all deposit categories.  On a year over year basis, savings and money market deposits and time deposits increased by $453.9 million and $257.1 million, respectively, while non-interest-bearing demand and interest-bearing demand deposits increased by $274.8 million and $90.9 million, respectively, from March 31, 2016.


Credit Quality



At or For the Quarters Ended

(unaudited)

Mar 31, 2017


Dec 31, 2016


Mar 31, 2016


(Dollars in thousands)

Net charge-offs

$

16,620



$

242



$

409


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

1.10

%


0.02

%


0.03

%

Net charge-offs/Average loans held for investment

0.98



0.01



0.03


Provision for credit losses

$

22,301



$

7,833



$

8,800


Non-performing loans ("NPLs")

107,404



111,389



43,496


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

1.71

%


1.84

%


0.83

%

NPLs/Total loans held for investment

1.51



1.56



0.69


Non-performing assets ("NPAs")

$

121,058



$

122,227



$

56,866


NPAs to total assets

1.43

%


1.46

%


0.75

%

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

1.93



2.01



1.08


NPAs/Loans held for investment and foreclosed assets

1.70



1.71



0.90


Allowance for loan losses

$

70,656



$

64,576



$

55,484


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

1.13

%


1.06

%


1.05

%

Allowance for loan losses/Total loans held for investment

0.99



0.91



0.88


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

1.23



1.18



1.25


Allowance for loan losses/NPLs

65.79



57.97



127.56




1  

Excludes loans acquired in the Highlands and LegacyTexas transactions, which were initially recorded at fair value.

 

The Company recorded a provision for credit losses of $22.3 million for the quarter ended March 31, 2017, an increase of $14.5 million from the quarter ended December 31, 2016 and $13.5 million from the quarter ended March 31, 2016.  The increase in provision expense on a linked-quarter and year-over-year basis was primarily due to a $16.4 million charge-off recorded during the first quarter of 2017 on the sale of a note at a deep discount after the borrower experienced liquidity constraints during the first quarter of 2017 that challenged its ongoing viability. This charged-off relationship was part of the Company's corporate healthcare finance portfolio, which is reported on the balance sheet as commercial and industrial loans and totaled $59.7 million at March 31, 2017.  One other relationship in the corporate healthcare finance portfolio totaling $11.4 million was considered to be impaired and rated as substandard at March 31, 2017.  At this time, the Company is no longer originating corporate healthcare finance loans.

The below table shows criticized and classified loans at March 31, 2017, December 31, 2016 and March 31, 2016. 


March 31,

2017


December 31,

2016


March 31,

 2016


Linked-Quarter

 Change


Year-over-Year

 Change


(Dollars in thousands)

Commercial real estate

$

7,906



$

7,972



$

16,353



$

(66)



$

(8,447)


Commercial and industrial, excluding energy

21,190



13,316



33,518



7,874



(12,328)


Energy

72,026



141,794



115,199



(69,768)



(43,173)


Consumer

1,541



2,120



3,023



(579)



(1,482)


Total criticized (all performing)

$

102,663



$

165,202



$

168,093



$

(62,539)



$

(65,430)












Commercial real estate

$

8,382



$

8,445



$

13,879



$

(63)



$

(5,497)


Commercial and industrial, excluding energy

7,517



17,215



3,414



(9,698)



4,103


Energy





48,088





(48,088)


Construction and land

84



86



91



(2)



(7)


Consumer

2,269



2,362



3,274



(93)



(1,005)


Total classified performing

18,252



28,108



68,746



(9,856)



(50,494)












Commercial real estate

4,337



5,196



1,308



(859)



3,029


Commercial and industrial, excluding energy

19,219



19,088



4,934



131



14,285


Energy

75,284



67,576



25,171



7,708



50,113


Construction and land

310



11,385



31



(11,075)



279


Consumer

8,443



8,342



12,215



101



(3,772)


Total classified non-performing

107,593



111,587



43,659



(3,994)



63,934












Total classified loans

$

125,845



$

139,695



$

112,405



$

(13,850)



$

13,440


 

The allowance for loan losses allocated to energy and corporate healthcare finance loans at March 31, 2017 totaled $18.7 million and $7.2 million, respectively.  Non-performing loans at March 31, 2017 declined by $4.0 million from December 31, 2016, primarily due to an $11.1 million decrease in construction and land non-performing loans related to the resolution of a relationship with a residential home builder.  After various lots and homes were liquidated, paying down the credit facility, the Company foreclosed on the majority of the remaining partially completed homes in the first quarter of 2017, which resulted in a net charge-off of $418,000.


Subsequent Events

The Company is required, under generally accepted accounting principles, to evaluate subsequent events through the filing of its consolidated financial statements for the quarter ended March 31, 2017 on Form 10-Q.  As a result, the Company will continue to evaluate the impact of any subsequent events on critical accounting assumptions and estimates made as of March 31, 2017 and will adjust amounts preliminarily reported, if necessary.

Conference Call

The Company will host an investor conference call to review these results on Wednesday, April 19, 2017 at 8 a.m. Central Time.  Participants may pre-register for the call by visiting http://dpregister.com/10104965 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 #10104965.   This replay, as well as the webcast, will be available until May 19, 2017.

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 44 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 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



March 31,

2017


December 31,

2016


September 30,

2016


June 30,

2016


March 31,

2016


(Dollars in thousands)

ASSETS

(unaudited)




(unaudited)


(unaudited)


(unaudited)

Cash and due from financial institutions

$

60,073



$

59,823



$

63,598



$

59,217



$

55,348


Short-term interest-bearing deposits in other financial institutions

294,955



229,389



214,289



363,407



261,423


Total cash and cash equivalents

355,028



289,212



277,887



422,624



316,771


Securities available for sale, at fair value

381,831



354,515



433,603



325,042



320,866


Securities held to maturity

200,541



210,387



220,919



224,452



228,576


Total securities

582,372



564,902



654,522



549,494



549,442


Loans held for sale

19,315



21,279



23,184



20,752



17,615


Loans held for investment:










Loans held for investment - Warehouse Purchase Program

846,973



1,055,341



1,345,818



980,390



1,028,561


Loans held for investment

6,265,263



6,065,423



5,757,224



5,693,047



5,269,312


Gross loans

7,131,551



7,142,043



7,126,226



6,694,189



6,315,488


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

(67,834)



(66,827)



(54,557)



(59,795)



(55,001)


Net loans

7,063,717



7,075,216



7,071,669



6,634,394



6,260,487


FHLB stock and other restricted securities, at cost

43,156



43,266



54,850



62,247



54,648


Bank-owned life insurance

56,768



56,477



56,169



55,853



55,535


Premises and equipment, net

72,312



74,226



72,325



71,232



71,271


Goodwill

178,559



178,559



178,559



178,559



180,776


Other assets

84,630



80,397



74,029



82,602



73,196


Total assets

$

8,436,542



$

8,362,255



$

8,440,010



$

8,057,005



$

7,562,126












LIABILITIES AND SHAREHOLDERS' EQUITY







Non-interest-bearing demand

$

1,449,656



$

1,383,951



$

1,375,883



$

1,235,731



$

1,174,816


Interest-bearing demand

873,085



903,314



848,564



811,015



782,161


Savings and money market

2,679,538



2,710,307



2,442,434



2,249,490



2,225,611


Time

1,377,367



1,367,904



1,461,194



1,326,446



1,120,261


Total deposits

6,379,646



6,365,476



6,128,075



5,622,682



5,302,849


FHLB advances

830,195



833,682



1,134,318



1,333,337



1,201,632


Repurchase agreements

76,880



86,691



75,138



68,049



69,079


Subordinated debt

134,155



134,032



134,083



85,231



85,104


Other borrowings







24,894




Accrued expenses and other liabilities

115,749



57,009



101,551



79,508



80,410


Total liabilities

7,536,625



7,476,890



7,573,165



7,213,701



6,739,074


Shareholders' equity










Common stock

479



479



478



476



476


Additional paid-in capital

590,722



589,408



583,800



580,386



578,050


Retained earnings

323,085



310,641



292,510



272,454



255,908


Accumulated other comprehensive income (loss), net

(2,051)



(2,713)



2,639



2,918



1,841


Unearned Employee Stock Ownership Plan (ESOP) shares

(12,318)



(12,450)



(12,582)



(12,930)



(13,223)


Total shareholders' equity

899,917



885,365



866,845



843,304



823,052


Total liabilities and shareholders' equity

$

8,436,542



$

8,362,255



$

8,440,010



$

8,057,005



$

7,562,126


 

LegacyTexas Financial Group, Inc.

Consolidated Quarterly Statements of Income (unaudited)



For the Quarters Ended


First Quarter 2017 Compared to:


Mar 31, 2017


Dec 31, 2016


Sep 30, 2016


Jun 30, 2016


Mar 31, 2016


Fourth Quarter

 2016


First Quarter

2016

Interest and dividend income

(Dollars in thousands)

Loans, including fees

$

83,103



$

80,394



$

78,966



$

73,376



$

68,806



$

2,709


3.4

%


$

14,297


20.8

%

Taxable securities

2,562



2,269



2,314



2,359



2,312



293


12.9



250


10.8


Nontaxable securities

755



756



763



759



774



(1)


(0.1)



(19)


(2.5)


Interest-bearing deposits in other financial institutions

732



693



463



392



330



39


5.6



402


121.8


FHLB and Federal Reserve Bank stock and other

384



385



405



450



386



(1)


(0.3)



(2)


(0.5)



87,536



84,497



82,911



77,336



72,608



3,039


3.6



14,928


20.6


Interest expense
















Deposits

7,110



6,734



5,756



4,422



4,122



376


5.6



2,988


72.5


FHLB advances

1,632



1,526



1,865



2,103



1,673



106


6.9



(41)


(2.5)


Repurchase agreements and other borrowings

2,246



2,153



1,810



1,457



1,462



93


4.3



784


53.6



10,988



10,413



9,431



7,982



7,257



575


5.5



3,731


51.4


Net interest income

76,548



74,084



73,480



69,354



65,351



2,464


3.3



11,197


17.1


Provision for credit losses

22,301



7,833



3,467



6,800



8,800



14,468


184.7



13,501


153.4


Net interest income after provision for credit losses

54,247



66,251



70,013



62,554



56,551



(12,004)


(18.1)



(2,304)


(4.1)


Non-interest income
















Service charges and other fees

8,431



9,912



9,670



8,927



8,181



(1,481)


(14.9)



250


3.1


Net gain on sale of mortgage loans held for sale

1,628



2,012



2,383



2,250



1,580



(384)


(19.1)



48


3.0


Bank-owned life insurance income

422



436



441



441



426



(14)


(3.2)



(4)


(0.9)


Net gain (loss) on securities transactions

(19)



(6)



(3)



65





(13)


216.7



(19)


N/M

Gain (loss) on sale and disposition of assets

1,399



(412)



(1,490)



1,186



4,072



1,811


N/M


(2,673)


(65.6)


Other

269



335



276



853



396



(66)


(19.7)



(127)


(32.1)



12,130



12,277



11,277



13,722



14,655



(147)


(1.2)



(2,525)


(17.2)



































































































For the Quarters Ended


First Quarter 2017 Compared to:


Mar 31,
2017


Dec 31,
2016


Sep 30,
2016


Jun 30,
2016


Mar 31,
2016


Fourth Quarter
2016


First Quarter
2016

Non-interest expense

(Dollars in thousands)

Salaries and employee benefits

24,444



23,446



23,918



22,867



22,337



998


4.3



2,107


9.4


Advertising

817



1,039



751



1,035



1,036



(222)


(21.4)



(219)


(21.1)


Occupancy and equipment

3,654



3,715



3,822



3,779



3,691



(61)


(1.6)



(37)


(1.0)


Outside professional services

1,156



889



940



1,227



816



267


30.0



340


41.7


Regulatory assessments

985



1,316



1,169



1,330



1,133



(331)


(25.2)



(148)


(13.1)


Data processing

3,895



3,991



3,989



3,664



3,290



(96)


(2.4)



605


18.4


Office operations

2,276



2,524



2,368



2,541



2,468



(248)


(9.8)



(192)


(7.8)


Other

2,525



2,628



2,717



3,170



2,771



(103)


(3.9)



(246)


(8.9)



39,752



39,548



39,674



39,613



37,542



204


0.5



2,210


5.9


Income before income tax expense

26,625



38,980



41,616



36,663



33,664



(12,355)


(31.7)



(7,039)


(20.9)


Income tax expense

8,435



13,675



14,399



13,446



11,582



(5,240)


(38.3)



(3,147)


(27.2)


Net income

$

18,190



$

25,305



$

27,217



$

23,217



$

22,082



$

(7,115)


(28.1)%



$

(3,892)


(17.6)%




N/M- Not meaningful

 

LegacyTexas Financial Group, Inc.

Selected Quarterly Financial Highlights (unaudited)



At or For the Quarters Ended


March 31,
 2017


December 31,
 2016


March 31,
 2016

SHARE DATA:

(Dollars in thousands, except per share amounts)

Weighted average common shares outstanding- basic

46,453,658



46,346,053



46,024,250


Weighted average common shares outstanding- diluted

47,060,306



46,873,215



46,152,301


Shares outstanding at end of period

47,940,133



47,876,198



47,645,826


Income available to common shareholders1

$

18,111



$

25,174



$

21,954


Basic earnings per common share

0.39



0.54



0.48


Basic core (non-GAAP) earnings per common share2

0.37



0.55



0.42


Diluted earnings per common share

0.38



0.54



0.48


Dividends declared per share

0.15



0.15



0.14


Total shareholders' equity

899,917



885,365



823,052


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

18.77



18.49



17.27


Tangible book value per share- Non-GAAP2

15.03



14.75



13.46


Market value per share for the quarter:






High

44.19



43.81



24.26


Low

38.41



31.59



17.01


Close

39.90



43.06



19.65


KEY RATIOS:






Return on average common shareholders' equity

8.08

%


11.50

%


10.79

%

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

7.71



11.50



9.56


Return on average assets

0.89



1.20



1.23


Core (non-GAAP) return on average assets2

0.85



1.20



1.09


Efficiency ratio (GAAP basis)

44.83



45.79



46.92


Core (non-GAAP) efficiency ratio2

45.50



45.79



49.32


Estimated Tier 1 common equity risk-based capital ratio3

9.29



9.13



9.50


Estimated total risk-based capital ratio3

11.93



11.71



11.59


Estimated Tier 1 risk-based capital ratio3

9.44



9.28



9.67


Estimated Tier 1 leverage ratio3

9.19



8.73



9.34


Total equity to total assets

10.67



10.59



10.88


Tangible equity to tangible assets- Non-GAAP2

8.73



8.63



8.69


Number of employees- full-time equivalent

865



885



850














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 the Quarter Ended


March 31,
2017


December 31,
2016


September 30,
2016


June 30,
2016


March 31,
2016

Loans held for investment:

(Dollars in thousands)

Commercial real estate

$

2,786,477



$

2,670,455



$

2,533,404



$

2,520,431



$

2,324,338


Warehouse Purchase Program

846,973



1,055,341



1,345,818



980,390



1,028,561


Commercial and industrial

2,028,347



1,971,160



1,812,558



1,782,463



1,640,042


Construction and land

290,258



294,894



307,734



281,936



267,543


Consumer real estate

1,109,459



1,074,923



1,046,397



1,046,794



972,115


Other consumer

50,722



53,991



57,131



61,423



65,274


Gross loans held for investment

$

7,112,236



$

7,120,764



$

7,103,042



$

6,673,437



$

6,297,873


Non-performing assets:










Commercial real estate

$

4,337



$

5,195



$

5,336



$

1,183



$

1,307


Commercial and industrial

94,503



86,664



28,282



31,362



30,105


Construction and land

310



11,385



27



27



31


Consumer real estate

7,193



7,987



7,051



10,005



11,948


Other consumer

1,061



158



169



274



105


   Total non-performing loans

107,404



111,389



40,865



42,851



43,496


Foreclosed assets

13,654



10,838



13,460



13,368



13,370


   Total non-performing assets

$

121,058



$

122,227



$

54,325



$

56,219



$

56,866


Total non-performing assets to total assets

1.43

%


1.46

%


0.64

%


0.70

%


0.75

%

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

1.71

%


1.84

%


0.71

%


0.75

%


0.83

%

Total non-performing loans to total loans held for investment

1.51

%


1.56

%


0.58

%


0.64

%


0.69

%

Allowance for loan losses to non-performing loans

65.79

%


57.97

%


140.26

%


145.14

%


127.56

%

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

1.13

%


1.06

%


1.00

%


1.09

%


1.05

%

Allowance for loan losses to total loans held for investment

0.99

%


0.91

%


0.81

%


0.93

%


0.88

%

Allowance for loan losses to total loans held for investment, excluding acquired loans and Warehouse Purchase Program loans1

1.23

%


1.18

%


1.12

%


1.26

%


1.25

%

Troubled debt restructured loans ("TDRs"):


Performing TDRs:










Commercial real estate

$

152



$

154



$

156



$

158



$

160


Commercial and industrial







7



15


Consumer real estate

267



269



271



361



364


Other consumer

27



31



35



39



42


   Total performing TDRs

$

446



$

454



$

462



$

565



$

581


Non-performing TDRs:2










Commercial real estate

$

40



$

808



$

813



$

820



$

938


Commercial and industrial

23,338



9,181



8,700



8,726



8,923


Consumer real estate

1,618



1,669



1,725



3,603



3,625


Other consumer

38



43



50



51



65


   Total non-performing TDRs

$

25,034



$

11,701



$

11,288



$

13,200



$

13,551


Allowance for loan losses:










Balance at beginning of period

$

64,576



$

57,318



$

62,194



$

55,484



$

47,093


   Provision expense for loans

22,700



7,500



2,300



6,800



8,800


   Charge-offs

(17,246)



(367)



(7,566)



(345)



(581)


   Recoveries

626



125



390



255



172


Balance at end of period

$

70,656



$

64,576



$

57,318



$

62,194



$

55,484


Net charge-offs (recoveries):










Commercial real estate

$

(189)



$

(5)



$

72



$

(3)



$

(6)


Commercial and industrial

16,490



34



6,989



(96)



347


Construction and land

418










Consumer real estate

23



20



(40)



61



(43)


Other consumer

(122)



193



155



128



111


   Total net charge-offs

$

16,620



$

242



$

7,176



$

90



$

409


Allowance for off-balance sheet lending-related commitments










Provision expense (benefit) for credit losses

$

(399)



$

333



$

1,167



$



$



Excludes loans acquired in the Highlands and LegacyTexas 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 Quarter Ended


March 31,
2017



December 31,
2016



September 30,
2016



June 30,
2016



March 31,
2016


Loans:

(Dollars in thousands)

Commercial real estate

$

2,724,167



$

2,599,006



$

2,548,202



$

2,416,288



$

2,228,682


Warehouse Purchase Program

697,316



1,100,723



1,131,959



987,225



796,832


Commercial and industrial

1,969,766



1,836,519



1,710,387



1,695,037



1,612,125


Construction and land

290,856



300,460



290,930



266,968



269,691


Consumer real estate

1,090,700



1,052,231



1,055,801



1,002,848



949,568


Other consumer

52,655



56,480



59,212



63,525



67,055


Less: deferred fees and allowance for loan loss

(65,904)



(58,723)



(54,485)



(55,940)



(49,178)


Total loans held for investment

6,759,556



6,886,696



6,742,006



6,375,951



5,874,775


Loans held for sale

12,667



22,509



18,132



19,726



19,588


Securities

629,366



620,775



637,294



623,148



599,680


Overnight deposits

332,664



481,451



343,906



291,754



238,576


Total interest-earning assets

$

7,734,253



$

8,011,431



$

7,741,338



$

7,310,579



$

6,732,619


Deposits:










Interest-bearing demand

$

855,075



$

838,631



$

821,516



$

784,741



$

774,798


Savings and money market

2,652,866



2,686,847



2,414,974



2,166,002



2,209,675


Time

1,314,607



1,407,415



1,372,424



1,169,960



1,049,810


FHLB advances and other borrowings

1,040,835



1,201,004



1,333,438



1,508,787



1,106,577


Total interest-bearing liabilities

$

5,863,383



$

6,133,897



$

5,942,352



$

5,629,490



$

5,140,860












Total assets

$

8,172,072



$

8,445,209



$

8,176,612



$

7,739,015



$

7,157,259


Non-interest-bearing demand deposits

$

1,341,315



$

1,349,561



$

1,283,434



$

1,194,118



$

1,134,070


Total deposits

$

6,163,863



$

6,282,454



$

5,892,348



$

5,314,821



$

5,168,353


Total shareholders' equity

$

900,118



$

880,250



$

860,142



$

835,752



$

818,538












Yields/Rates:










Loans:










Commercial real estate

5.05

%


5.05

%


5.19

%


5.07

%


5.08

%

Warehouse Purchase Program

3.50

%


3.29

%


3.26

%


3.28

%


3.37

%

Commercial and industrial

5.40

%


4.63

%


4.47

%


4.38

%


4.47

%

Construction and land

5.18

%


5.08

%


5.21

%


5.37

%


5.37

%

Consumer real estate

4.54

%


4.60

%


4.71

%


4.69

%


4.77

%

Other consumer

5.51

%


5.66

%


5.65

%


5.65

%


5.69

%

Total loans held for investment

4.97

%


4.64

%


4.65

%


4.61

%


4.69

%

Loans held for sale

3.85

%


3.41

%


3.46

%


3.55

%


3.68

%

Securities

2.35

%


2.20

%


2.19

%


2.29

%


2.32

%

Overnight deposits

0.89

%


0.57

%


0.54

%


0.54

%


0.56

%

Total interest-earning assets

4.58

%


4.20

%


4.27

%


4.25

%


4.33

%

Deposits:










Interest-bearing demand

0.53

%


0.50

%


0.49

%


0.50

%


0.48

%

Savings and money market

0.46

%


0.39

%


0.33

%


0.24

%


0.24

%

Time

0.91

%


0.86

%


0.80

%


0.73

%


0.71

%

FHLB advances and other borrowings

1.51

%


1.22

%


1.10

%


0.95

%


1.14

%

Total interest-bearing liabilities

0.76

%


0.68

%


0.63

%


0.57

%


0.57

%

Net interest spread

3.82

%


3.52

%


3.64

%


3.68

%


3.76

%

Net interest margin

4.00

%


3.68

%


3.78

%


3.81

%


3.90

%

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

0.47

%


0.43

%


0.39

%


0.33

%


0.32

%

 

LegacyTexas Financial Group, Inc.

Supplemental Information- Non-GAAP Financial Measures

(unaudited)


At or For the Quarters Ended


March 31,
 2017


December 31,
 2016


September 30,
 2016


June 30,
 2016


March 31,
 2016

Reconciliation of Core (non-GAAP) to GAAP Net Income and Earnings per Share (calculated net of estimated tax rate of 35%, except as otherwise noted)

(Dollars in thousands, except per share amounts)

GAAP net income available to common shareholders1

$

18,111



$

25,174



$

27,084



$

23,114



$

21,954


Distributed and undistributed earnings to participating securities1

79



131



133



103



128


GAAP net income

18,190



25,305



27,217



23,217



22,082


Net (gain) on sale of insurance subsidiary operations2







(39)




(Gain) on sale of branch locations and land

(847)









(2,529)


Loss on sale of FHA loan portfolio





969






Core (non-GAAP) net income

$

17,343



$

25,305



$

28,186



$

23,178



$

19,553


Average shares for basic earnings per share

46,453,658


46,346,053


46,227,734


46,135,999



46,024,250


Basic GAAP earnings per share

$

0.39



$

0.54



$

0.59



$

0.50



$

0.48


Basic core (non-GAAP) earnings per share

$

0.37



$

0.55



$

0.61



$

0.50



$

0.42


Average shares for diluted earnings per share

47,060,306


46,873,215


46,546,532


46,352,141



46,152,301


Diluted GAAP earnings per share

$

0.38



$

0.54



$

0.58



$

0.50



$

0.48


Diluted core (non-GAAP) earnings per share

$

0.37



$

0.54



$

0.61



$

0.50



$

0.42


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










GAAP non-interest income

$

12,130



$

12,277



$

11,277



$

13,722



$

14,655


Net (gain) on sale of insurance subsidiary operations







(1,181)




(Gain) loss on sale of branch locations and land

(1,304)









(3,891)


Loss on sale of FHA loan portfolio





1,491






Core (non-GAAP) non-interest income

$

10,826



$

12,277



$

12,768



$

12,541



$

10,764




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

Calculated net of tax on extraordinary gain totaling $1.1 million.




At or For the Quarters Ended


March 31,
 2017


December 31,
 2016


September 30,
 2016


June 30,
 2016


March 31,
 2016

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

(Dollars in thousands)

GAAP efficiency ratio:










Non-interest expense

$

39,752



$

39,548



$

39,674



$

39,613



$

37,542


Net interest income plus non-interest income

88,678



86,361



84,757



83,076



80,006


Efficiency ratio- GAAP basis

44.83

%


45.79

%


46.81

%


47.68

%


46.92

%

Core (non-GAAP) efficiency ratio:










Non-interest expense

$

39,752



$

39,548



$

39,674



$

39,613



$

37,542


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

87,374



86,361



86,248



81,895



76,115


Efficiency ratio- core (non-GAAP) basis

45.50

%


45.79

%


46.00

%


48.37

%


49.32

%











Calculation of Tangible Book Value per Share:









Total shareholders' equity

$

899,917



$

885,365



$

866,845



$

843,304



$

823,052


Less: Goodwill

(178,559)



(178,559)



(178,559)



(178,559)



(180,776)


Identifiable intangible assets, net

(585)



(665)



(752)



(838)



(924)


Total tangible shareholders' equity

$

720,773



$

706,141



$

687,534



$

663,907



$

641,352


Shares outstanding at end of period

47,940,133


47,876,198


47,773,160


47,670,440



47,645,826












Book value per share- GAAP

$

18.77



$

18.49



$

18.15



$

17.69



$

17.27


Tangible book value per share- Non-GAAP

15.03



14.75



14.39



13.93



13.46












Calculation of Tangible Equity to Tangible Assets:









Total assets

$

8,436,542



$

8,362,255



$

8,440,010



$

8,057,005



$

7,562,126


Less: Goodwill

(178,559)



(178,559)



(178,559)



(178,559)



(180,776)


Identifiable intangible assets, net

(585)



(665)



(752)



(838)



(924)


Total tangible assets

$

8,257,398



$

8,183,031



$

8,260,699



$

7,877,608



$

7,380,426












Equity to assets- GAAP

10.67

%


10.59

%


10.27

%


10.47

%


10.88

%

Tangible equity to tangible assets- Non-GAAP

8.73



8.63



8.32



8.43



8.69



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

Net income

$

18,190



$

25,305



$

27,217



$

23,217



$

22,082


Core (non-GAAP) net income

17,343



25,305



28,186



23,178



19,553


Average total equity

900,118



880,250



860,142



835,752



818,538


Average total assets

8,172,072



8,445,209



8,176,612



7,739,015



7,157,259


Return on average common shareholders' equity

8.08

%


11.50

%


12.66

%


11.11

%


10.79

%

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

7.71



11.50



13.11



11.09



9.56


Return on average assets

0.89



1.20



1.33



1.20



1.23


Core (non-GAAP) return on average assets

0.85



1.20



1.38



1.20



1.09


 

 

 

SOURCE LegacyTexas Financial Group, Inc.

For further information: Investor Inquiries: Casey Farrell, 972-801-5871/ShareholderRelations@LegacyTexasFinancialGroup.com; Media Inquiries: Jennifer Dexter, 972-461-7157/Jennifer.Dexter@LegacyTexas.com


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