LegacyTexas Financial Group, Inc. Reports Record Second Quarter 2017 Earnings of $27.9 million

Jul 18, 2017

PLANO, Texas, July 18, 2017 /PRNewswire/ -- LegacyTexas Financial Group, Inc. (Nasdaq: LTXB) (the "Company"), the holding company for LegacyTexas Bank (the "Bank"), today announced record net income of $27.9 million for the second quarter of 2017, an increase of $9.7 million from the first quarter of 2017 and $4.7 million from the second quarter of 2016.

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, visit  www.LegacyTexasFinancialGroup.com . (PRNewsFoto/) (PRNewsFoto/LegacyTexas Financial Group, Inc)

"We are pleased to report record net income of $27.9 million for the quarter," said President and CEO Kevin Hanigan.  "We continue to grow our customer base and market share in the Dallas/Fort Worth Metroplex. Our team grew loans and deposits and controlled expenses, resulting in a very strong return on average assets of 1.32%."

Second Quarter 2017 Performance Highlights

  • Company assets of $8.97 billion generated basic earnings per share for the second quarter of 2017 of $0.60 on both a GAAP and core (non-GAAP) basis.
  • Gross loans held for investment at June 30, 2017, excluding Warehouse Purchase Program loans, grew $144.0 million from March 31, 2017, while total deposits grew $182.9 million for the same period.
  • Warehouse Purchase Program loans of $1.26 billion at June 30, 2017, an increase of $409.8 million from March 31, 2017, generated a $2.2 million increase in interest income on a linked-quarter basis.
  • Efficiency ratio remained low at 44.96% for the quarter ended June 30, 2017, compared to 44.83% for the quarter ended March 31, 2017.
  • Return on average assets for the quarter ended June 30, 2017 was 1.32%, compared to 0.89% for the quarter ended March 31, 2017, and 1.20% for the quarter ended June 30, 2016.
  • Interest income on loans increased $814,000 on a linked-quarter basis to $83.9 million for the second quarter of 2017. Excluding the amortization of a $4.7 million discount on a purchased energy loan in the first quarter, interest income on loans increased $5.5 million on a linked-quarter basis.

 

Financial Highlights



At or For the Quarters Ended

(unaudited)

Jun 30, 2017


Mar 31, 2017


Jun 30, 2016


(Dollars in thousands, except per share amounts)

Net interest income

$

75,720



$

76,548



$

69,354


Provision for credit losses

6,255



22,301



6,800


Non-interest income

12,325



12,130



13,722


Non-interest expense

39,589



39,752



39,613


Income tax expense

14,266



8,435



13,446


Net income

$

27,935



$

18,190



$

23,217








Basic earnings per common share

$

0.60



$

0.39



$

0.50


Basic core (non-GAAP) earnings per common share1

$

0.60



$

0.37



$

0.50


Weighted average common shares outstanding - basic

46,596,467



46,453,658



46,135,999


Estimated Tier 1 common equity risk-based capital ratio2

8.92

%


9.29

%


9.28

%

Total equity to total assets

10.31

%


10.67

%


10.47

%

Tangible common equity to tangible assets - Non-GAAP1

8.49

%


8.73

%


8.43

%



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 $27.9 million for the quarter ended June 30, 2017, up $10.6 million from the first quarter of 2017 and $4.8 million from the second quarter of 2016.  Basic earnings per share for the quarter ended June 30, 2017 was $0.60, an increase of $0.21 from the first quarter of 2017 and $0.10 from the second quarter of 2016.  Basic core earnings per share for the second quarter of 2017 was $0.60, up $0.23 from the first quarter of 2017 and $0.10 from the second quarter of 2016.

Net Interest Income and Net Interest Margin



For the Quarters Ended

(unaudited)

Jun 30, 2017


Mar 31, 2017


Jun 30, 2016


(Dollars in thousands)

Interest income:






Loans held for investment, excluding Warehouse Purchase Program loans

$

75,432



$

76,956



$

65,159


Warehouse Purchase Program loans

8,260



6,025



8,042


Loans held for sale

225



122



175


Securities

3,875



3,701



3,568


Interest-earning deposit accounts

955



732



392


Total interest income

$

88,747



$

87,536



$

77,336


Net interest income

$

75,720



$

76,548



$

69,354


Net interest margin

3.77

%


4.00

%


3.81

%

Selected average balances:






Total earning assets

$

8,052,636



$

7,734,253



$

7,310,579


Total loans held for investment

7,060,044



6,759,556



6,375,951


Total securities

645,605



629,366



623,148


Total deposits

6,319,171



6,163,863



5,314,821


Total borrowings

1,142,998



1,040,835



1,508,787


Total non-interest-bearing demand deposits

1,410,566



1,341,315



1,194,118


Total interest-bearing liabilities

6,051,603



5,863,383



5,629,490


Net interest income for the quarter ended June 30, 2017 was $75.7 million, an $828,000 decrease from the first quarter of 2017 and a $6.4 million increase from the second quarter of 2016.  The first quarter of 2017 included amortization of a $4.7 million discount on a purchased energy loan that was not repeated in the second quarter of 2017.  Interest income, excluding this discount, increased by $5.5 million, which was partially offset by increases in interest expense paid on deposits and FHLB advances of $1.2 million and $795,000, respectively.  The linked-quarter increase in loan interest income was driven by increased volume in all loan portfolios with the exception of construction and land and other consumer loans.  The average yield earned on commercial and industrial loans for the first quarter of 2017 was increased by the above-mentioned amortization of a $4.7 million discount on a purchased energy loan, which positively impacted the average yield on commercial and industrial loans for the first quarter of 2017 by 96 basis points, an impact that was not repeated in the second quarter of 2017.  The average balance of commercial real estate loans increased by $57.3 million to $2.78 billion from the first quarter of 2017, resulting in a $1.3 million increase in interest income, while the average balance of commercial and industrial loans increased by $26.1 million to $2.00 billion from the first quarter of 2017, partially offsetting the 77 basis point linked-quarter decline in the average yield due to the discount amortization discussed above.

The average balance of Warehouse Purchase Program loans increased by $198.7 million to $896.0 million from the first quarter of 2017, resulting in a $2.2 million increase in interest income, while interest income earned on consumer real estate loans increased by $543,000 for the same period due to a $36.0 million linked-quarter increase in the average balance.

Interest income on loans for the second quarter of 2017 included $874,000 in accretion of purchase accounting fair value adjustments on acquired loans, which includes $233,000 on acquired commercial real estate loans, $155,000 on acquired commercial and industrial loans, $19,000 on acquired construction and land loans and $467,000 on acquired consumer loans.  Accretion of purchase accounting fair value adjustments on acquired loans contributed five basis points, four basis points and 15 basis points to the average yields on commercial real estate, commercial and industrial and consumer real estate loans, respectively, for the second quarter of 2017, compared to six basis points, three basis points and 11 basis points, respectively, for the first quarter of 2017. 

The $6.4 million increase in net interest income compared to the second quarter of 2016 was primarily due to a $10.5 million increase in interest income on loans, which was driven by increased volume in all loan portfolios with the exception of Warehouse Purchase Program and other consumer loans.  The average balance of commercial real estate loans increased by $365.2 million from the second quarter of 2016, resulting in a $4.8 million increase in interest income.  The average balance of commercial and industrial loans increased by $300.8 million from the second quarter of 2016, resulting in a $4.6 million increase in interest income.  The average balance of consumer real estate loans increased by $123.9 million compared to the second quarter of 2016, leading to a $1.2 million increase in interest income. Despite a $91.2 million decline in the average balance compared to the prior year period, interest income on Warehouse Purchase Program loans increased by $218,000 due to a 42 basis point increase in the average yield earned for the second quarter of 2017, compared to the same quarter last year.

Interest expense for the quarter ended June 30, 2017 increased by $2.0 million compared to the linked quarter, which was primarily due to higher average deposit rates, as well as increases of $50.4 million and $41.1 million in the average balances of savings and money market and time deposits, respectively, compared to the first quarter of 2017.  A $102.2 million increase in the average balance of borrowings and a 13 basis point increase in the average rate paid for borrowings from the first quarter of 2017 resulted in a $790,000 increase in interest expense on borrowed funds.

Compared to the second quarter of 2016, interest expense for the quarter ended June 30, 2017 increased by $5.0 million, primarily due to higher average deposit rates and increased volume in all deposit products.  The average balance of savings and money market and time deposits increased by $537.3 million and $185.7 million, respectively, compared to the second quarter of 2016, while the average rates paid on these deposits increased by 32 basis points and 26 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 second quarter of 2016 by $2.5 million and $1.2 million, respectively.  The average rate paid on interest-bearing demand deposits increased by eight basis points compared to the second quarter of 2016, while the average balance of interest-bearing demand deposits increased by $64.9 million for the same period.  A $365.8 million decrease in the average balance of borrowings from the second quarter of 2016 was more than offset by a 69 basis point increase in the average rate, resulting in a $1.1 million increase in interest expense on borrowed funds.

The net interest margin for the second quarter of 2017 was 3.77%, a 23 basis point decrease from the first quarter of 2017 and a four basis point decrease from the second 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 June 30, 2017, compared to five basis points for the quarter ended March 31, 2017 and seven basis points for the quarter ended June 30, 2016.  The average yield on earning assets for the second quarter of 2017 was 4.42%, a 16 basis point decrease from the first quarter of 2017 and a 17 basis point increase from the second quarter of 2016.  The cost of deposits for the second quarter of 2017 was 0.53%, up six basis points from the linked quarter and up 20 basis points from the second quarter of 2016.

Non-interest Income

Non-interest income for the second quarter of 2017 was $12.3 million, a $195,000 increase from the first quarter of 2017 and a $1.4 million decrease from the second quarter of 2016.  Service charges and other fees increased by $1.5 million from the first quarter of 2017, which was primarily due to a $671,000 increase in commercial loan fee income (consisting of syndication, arrangement, non-usage and pre-payment fees), a $288,000 increase in Warehouse Purchase Program fee income, a $214,000 increase in debit card interchange income, and a $122,000 increase in title premiums.  The Company recognized $2.2 million in net gains on the sale of mortgage loans held for sale during the second quarter of 2017, which includes the gain recognized on $56.4 million of one-to four-family mortgage loans that were sold or committed for sale during the second quarter of 2017, fair value changes on mortgage derivatives and mortgage fees collected, compared to $1.6 million in comparable net gains recorded during the first quarter of 2017 on $39.6 million of one-to four-family mortgage loans sold or committed for sale.  Gain (loss) on sale and disposition of assets for the second quarter of 2017 included a $139,000 gain on the sale of foreclosed properties, compared to a gain of $1.3 million resulting from the sale of a parcel of land in the first quarter of 2017. 

The $1.4 million decrease in non-interest income from the second quarter of 2016 was primarily due to a $1.2 million decrease in other non-interest income and a $1.0 million decrease in gain (loss) on sale and disposition of assets.  Other non-interest income included $642,000 in income recorded in the second quarter of 2016 from insurance activities, which was not repeated in the second quarter of 2017 due to the sale of the Company's insurance subsidiary operations in the second quarter of 2016.  Also, other non-interest income for the second quarter of 2016 included $365,000 in swap fee income recorded on interest rate derivative positions with our customers, with only $2,000 of swap fee income recognized in the second quarter of 2017.  Gain (loss) on sale and disposition of assets decreased by $1.0 million from the second quarter of 2016, primarily due to a gain of $1.2 million on the sale of the Company's insurance subsidiary in the second quarter of 2016, which was not repeated in the second quarter of 2017.  A $969,000 year-over-year increase in service charges and fees, which was driven by a $691,000 increase in commercial loan fee income (consisting of syndication, arrangement, non-usage and pre-payment fees) and a $234,000 increase in Warehouse Purchase Program fee income, partially offset these decreases.

Non-interest Expenses

Non-interest expense for the quarter ended June 30, 2017 was $39.6 million, a $163,000 decrease from the first quarter of 2017 and a $24,000 decrease from the second quarter of 2016.  Salaries and employee benefits expense decreased by $1.1 million from the first quarter of 2017, which was driven by a reduction in payroll taxes, as more employees have reached the wage base limit for Social Security tax for the year, as well as increased deferred salary costs related to loan originations that will be accounted for over the lives of the related loans.  These linked-quarter decreases in salaries and employee benefits expense were partially offset by an increase in variable incentives paid as a result of the above-mentioned $56.4 million of one-to four-family mortgage loans that were sold or committed for sale during the second quarter of 2017, as well as an increase in share-based compensation expense related to new stock awards granted at the end of the first quarter and during the second quarter of 2017.  Compared to the first quarter of 2017, advertising expense increased by $362,000 due to a higher number of events and sponsorships during the second quarter of 2017, while regulatory assessments expense increased by $286,000 due to a higher assessment rate in the second quarter of 2017.

The $24,000 decrease in non-interest expense from the second quarter of 2016 was primarily related to a $562,000 decline in other non-interest expense due to lower debit card fraud losses in the 2017 period, as well as decreases in office operations and occupancy and equipment expenses.  These decreases were partially offset by a $524,000 increase in salaries and employee benefits expense compared to the 2016 period, which was driven by additional staff and merit increases, as well as increases in health care costs and share-based compensation expense related to new stock awards granted in the 2017 period. Data processing expense increased by $213,000 compared to the second quarter of 2016 primarily due to increased costs for system upgrades to enhance customer service and increase operating efficiency.

Financial Condition - Loans

Gross loans held for investment at June 30, 2017, excluding Warehouse Purchase Program loans, grew $144.0 million from March 31, 2017, which included growth in commercial real estate, commercial and industrial and consumer real estate loans.  Commercial real estate and commercial and industrial loans at June 30, 2017 increased by $31.0 million and $91.3 million, respectively, from March 31, 2017, and consumer real estate loans increased by $44.9 million for the same period.  These linked-quarter increases were partially offset by a $20.2 million decline in construction and land loans. 

Compared to June 30, 2016, gross loans held for investment at June 30, 2017, excluding Warehouse Purchase Program loans, grew $716.2 million, which included growth in commercial real estate, commercial and industrial and consumer real estate loans.  On a year-over-year basis, commercial real estate, commercial and industrial, and consumer real estate loans increased by $297.0 million, $337.2 million, and $107.6 million, respectively.  These year-over-year increases were partially offset by declines of $11.9 million and $13.7 million in construction and land and other consumer loans, respectively. 

At June 30, 2017, Warehouse Purchase Program loans increased by $409.8 million compared to March 31, 2017 and by $276.4 million compared to June 30, 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 $515.5 million at June 30, 2017, up $11.5 million from $504.0 million at March 31, 2017 and up $26.4 million from $489.1 million at June 30, 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 June 30, 2017, "Midstream and Other" loans had a total outstanding balance of $30.4 million, down $12.7 million from $43.1 million at March 31, 2017 and down $24.4 million from $54.8 million at June 30, 2016.

Financial Condition - Deposits

Total deposits at June 30, 2017 increased by $182.9 million from March 31, 2017, which included growth in all deposit categories. Time and non-interest-bearing demand deposits increased by $83.1 million and $73.2 million, respectively, on a comparative basis, while interest-bearing demand and savings and money market balances increased by $20.5 million and $6.1 million, respectively.

Compared to June 30, 2016, total deposits increased by $939.8 million, which includes growth in all deposit categories.  Savings and money market deposits and time deposits increased by $436.1 million and $134.0 million, respectively, while non-interest-bearing demand and interest-bearing demand deposits increased by $287.1 million and $82.5 million, respectively, from June 30, 2016.

Credit Quality



At or For the Quarters Ended

(unaudited)

Jun 30, 2017


Mar 31, 2017


Jun 30, 2016


(Dollars in thousands)

Net charge-offs

$

1,765



$

16,620



$

90


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

0.11

%


1.10

%


0.01

%

Net charge-offs/Average loans held for investment

0.10



0.98



0.01


Provision for credit losses

$

6,255



$

22,301



$

6,800


Non-performing loans ("NPLs")

99,196



107,404



42,851


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

1.55

%


1.71

%


0.75

%

NPLs/Total loans held for investment

1.29



1.51



0.64


Non-performing assets ("NPAs")

$

112,479



$

121,058



$

56,219


NPAs to total assets

1.25

%


1.43

%


0.70

%

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

1.75



1.93



0.99


NPAs/Loans held for investment and foreclosed assets

1.46



1.70



0.84


Allowance for loan losses

$

75,091



$

70,656



$

62,194


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

1.17

%


1.13

%


1.09

%

Allowance for loan losses/Total loans held for investment

0.98



0.99



0.93


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

1.26



1.23



1.26


Allowance for loan losses/NPLs

75.70



65.79



145.14




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 $6.3 million for the quarter ended June 30, 2017, a decrease of $16.0 million from the quarter ended March 31, 2017 and $545,000 from the quarter ended June 30, 2016.  The decrease in provision expense on a linked-quarter 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 $44.1 million at June 30, 2017. At this time, the Company is no longer originating corporate healthcare finance loans.

The below table shows criticized (rated "special mention") and classified (rated "substandard" or "doubtful") loans at June 30, 2017, March 31, 2017 and June 30, 2016. 


June 30,
2017


March 31,
2017


June 30,
2016


Linked-Quarter
Change


Year-over-Year
Change


(Dollars in thousands)

Commercial real estate

$

28,598



$

7,906



$

8,925



$

20,692



$

19,673


Commercial and industrial, excluding energy

18,771



21,190



25,011



(2,419)



(6,240)


Energy

59,608



72,026



106,060



(12,418)



(46,452)


Consumer

1,514



1,541



2,811



(27)



(1,297)


Total criticized (all performing)

$

108,491



$

102,663



$

142,807



$

5,828



$

(34,316)












Commercial real estate

$

6,822



$

8,382



$

14,222



$

(1,560)



$

(7,400)


Commercial and industrial, excluding energy

8,470



7,517



8,257



953



213


Energy





81,482





(81,482)


Construction and land

82



84



90



(2)



(8)


Consumer

2,423



2,458



3,516



(35)



(1,093)


Total classified performing

17,797



18,441



107,567



(644)



(89,770)












Commercial real estate

4,201



4,337



1,183



(136)



3,018


Commercial and industrial, excluding energy

13,193



19,219



4,786



(6,026)



8,407


Energy

74,406



75,284



26,576



(878)



47,830


Construction and land



310



27



(310)



(27)


Consumer

7,396



8,254



10,279



(858)



(2,883)


Total classified non-performing

99,196



107,404



42,851



(8,208)



56,345












Total classified loans

$

116,993



$

125,845



$

150,418



$

(8,852)



$

(33,425)


The allowance for loan losses allocated to energy and corporate healthcare finance loans at June 30, 2017 totaled $24.6 million and $4.7 million, respectively.  Classified loans at June 30, 2017 declined by $8.9 million from March 31, 2017, while a $33.7 million decline in classified energy loans drove a $33.4 million decrease in classified loans compared to the same period last year.

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 June 30, 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 June 30, 2017 and will adjust amounts preliminarily reported, if necessary.

Conference Call

The Company will also host an investor conference call to review the results on Wednesday, July 19, 2017 at 8 a.m. Central Time.  Participants may pre-register for the call by visiting http://dpregister.com/10110220 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) 1-877-513-4119 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 1-877-344-7529, Conference #10110220.   This replay, as well as the webcast, will be available until August 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



June 30,
2017


March 31,
2017


December 31,
2016


September 30,
2016


June 30,
2016


(Dollars in thousands)

ASSETS

(unaudited)


(unaudited)




(unaudited)


(unaudited)

Cash and due from financial institutions

$

61,989



$

60,073



$

59,823



$

63,598



$

59,217


Short-term interest-bearing deposits in other financial institutions

256,251



294,955



229,389



214,289



363,407


Total cash and cash equivalents

318,240



355,028



289,212



277,887



422,624


Securities available for sale, at fair value

397,957



381,831



354,515



433,603



325,042


Securities held to maturity

191,578



200,541



210,387



220,919



224,452


Total securities

589,535



582,372



564,902



654,522



549,494


Loans held for sale

19,374



19,315



21,279



23,184



20,752


Loans held for investment:










Loans held for investment - Warehouse Purchase Program

1,256,742



846,973



1,055,341



1,345,818



980,390


Loans held for investment

6,409,259



6,265,263



6,065,423



5,757,224



5,693,047


  Gross loans

7,685,375



7,131,551



7,142,043



7,126,226



6,694,189


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

(70,642)



(67,834)



(66,827)



(54,557)



(59,795)


Net loans

7,614,733



7,063,717



7,075,216



7,071,669



6,634,394


FHLB stock and other restricted securities, at cost

56,618



43,156



43,266



54,850



62,247


Bank-owned life insurance

57,078



56,768



56,477



56,169



55,853


Premises and equipment, net

71,068



72,312



74,226



72,325



71,232


Goodwill

178,559



178,559



178,559



178,559



178,559


Other assets

84,544



84,630



80,397



74,029



82,602


Total assets

$

8,970,375



$

8,436,542



$

8,362,255



$

8,440,010



$

8,057,005












LIABILITIES AND SHAREHOLDERS' EQUITY







Non-interest-bearing demand

$

1,522,856



$

1,449,656



$

1,383,951



$

1,375,883



$

1,235,731


Interest-bearing demand

893,544



873,085



903,314



848,564



811,015


Savings and money market

2,685,627



2,679,538



2,710,307



2,442,434



2,249,490


Time

1,460,479



1,377,367



1,367,904



1,461,194



1,326,446


Total deposits

6,562,506



6,379,646



6,365,476



6,128,075



5,622,682


FHLB advances

1,151,682



830,195



833,682



1,134,318



1,333,337


Repurchase agreements

73,433



76,880



86,691



75,138



68,049


Subordinated debt

134,277



134,155



134,032



134,083



85,231


Other borrowings









24,894


Accrued expenses and other liabilities

123,194



115,749



57,009



101,551



79,508


  Total liabilities

8,045,092



7,536,625



7,476,890



7,573,165



7,213,701


Shareholders' equity










Common stock

480



479



479



478



476


Additional paid-in capital

595,730



592,159



589,408



583,800



580,386


Retained earnings

342,384



321,648



310,641



292,510



272,454


Accumulated other comprehensive income (loss), net

(1,125)



(2,051)



(2,713)



2,639



2,918


Unearned Employee Stock Ownership Plan (ESOP) shares

(12,186)



(12,318)



(12,450)



(12,582)



(12,930)


  Total shareholders' equity

925,283



899,917



885,365



866,845



843,304


  Total liabilities and shareholders' equity

$

8,970,375



$

8,436,542



$

8,362,255



$

8,440,010



$

8,057,005


 

LegacyTexas Financial Group, Inc.

Consolidated Quarterly Statements of Income (unaudited)



For the Quarters Ended



Second Quarter 2017 Compared to:


Jun 30,
2017


Mar 31,
2017


Dec 31,
2016


Sep 30,
2016


Jun 30,
2016


First Quarter
2017 


Second Quarter
2016

Interest and dividend income

(Dollars in thousands)

Loans, including fees

$

83,917



$

83,103



$

80,394



$

78,966



$

73,376



$

814


1.0

%


$

10,541


14.4

%

Taxable securities

2,725



2,562



2,269



2,314



2,359



163


6.4



366


15.5


Nontaxable securities

739



755



756



763



759



(16)


(2.1)



(20)


(2.6)


Interest-bearing deposits in other financial institutions

955



732



693



463



392



223


30.5



563


143.6


FHLB and Federal Reserve Bank stock and other

411



384



385



405



450



27


7.0



(39)


(8.7)



88,747



87,536



84,497



82,911



77,336



1,211


1.4



11,411


14.8


Interest expense
















Deposits

8,359



7,110



6,734



5,756



4,422



1,249


17.6



3,937


89.0


FHLB advances

2,427



1,632



1,526



1,865



2,103



795


48.7



324


15.4


Repurchase agreements and other borrowings

2,241



2,246



2,153



1,810



1,457



(5)


(0.2)



784


53.8



13,027



10,988



10,413



9,431



7,982



2,039


18.6



5,045


63.2


Net interest income

75,720



76,548



74,084



73,480



69,354



(828)


(1.1)



6,366


9.2


Provision for credit losses

6,255



22,301



7,833



3,467



6,800



(16,046)


(72.0)



(545)


(8.0)


Net interest income after provision for credit losses

69,465



54,247



66,251



70,013



62,554



15,218


28.1



6,911


11.0


Non-interest income
















Service charges and other fees

9,896



8,431



9,912



9,670



8,927



1,465


17.4



969


10.9


Net gain on sale of mortgage loans held for sale

2,156



1,628



2,012



2,383



2,250



528


32.4



(94)


(4.2)


Bank-owned life insurance income

440



422



436



441



441



18


4.3



(1)


(0.2)


Net gain (loss) on securities transactions



(19)



(6)



(3)



65



19


N/M



(65)


N/M


Gain (loss) on sale and disposition of assets

157



1,399



(412)



(1,490)



1,186



(1,242)


(88.8)



(1,029)


(86.8)


Other

(324)



269



335



276



853



(593)


N/M



(1,177)


N/M



12,325



12,130



12,277



11,277



13,722



195


1.6



(1,397)


(10.2)


















Non-interest expense

(Dollars in thousands)

Salaries and employee benefits

23,391



24,444



23,446



23,918



22,867



(1,053)


(4.3)



524


2.3


Advertising

1,179



817



1,039



751



1,035



362


44.3



144


13.9


Occupancy and equipment

3,656



3,654



3,715



3,822



3,779



2


0.1



(123)


(3.3)


Outside professional services

1,203



1,156



889



940



1,227



47


4.1



(24)


(2.0)


Regulatory assessments

1,271



985



1,316



1,169



1,330



286


29.0



(59)


(4.4)


Data processing

3,877



3,895



3,991



3,989



3,664



(18)


(0.5)



213


5.8


Office operations

2,404



2,276



2,524



2,368



2,541



128


5.6



(137)


(5.4)


Other

2,608



2,525



2,628



2,717



3,170



83


3.3



(562)


(17.7)



39,589



39,752



39,548



39,674



39,613



(163)


(0.4)



(24)


(0.1)


Income before income tax expense

42,201



26,625



38,980



41,616



36,663



15,576


58.5



5,538


15.1


Income tax expense

14,266



8,435



13,675



14,399



13,446



5,831


69.1



820


6.1


Net income

$

27,935



$

18,190



$

25,305



$

27,217



$

23,217



$

9,745


53.6

%


$

4,718


20.3

%


N/M - Not meaningful

 

LegacyTexas Financial Group, Inc.

Selected Quarterly Financial Highlights (unaudited)



At or For the Quarters Ended


June 30,
2017


March 31,
2017


June 30,
2016

SHARE DATA:

(Dollars in thousands, except per share amounts)

Weighted average common shares outstanding- basic

46,596,467



46,453,658



46,135,999


Weighted average common shares outstanding- diluted

47,005,554



47,060,306



46,352,141


Shares outstanding at end of period

48,009,379



47,940,133



47,670,440


Income available to common shareholders1

$

27,837



$

18,111



$

23,114


Basic earnings per common share

0.60



0.39



0.50


Basic core (non-GAAP) earnings per common share2

0.60



0.37



0.50


Diluted earnings per common share

0.59



0.38



0.50


Dividends declared per share

0.15



0.15



0.14


Total shareholders' equity

925,283



899,917



843,304


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

19.27



18.77



17.69


Tangible book value per share- Non-GAAP2

15.54



15.03



13.93


Market value per share for the quarter:






High

40.18



44.19



28.27


Low

35.22



38.41



17.94


Close

38.13



39.90



26.91


KEY RATIOS:






Return on average common shareholders' equity

12.22

%


8.08

%


11.11

%

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

12.22



7.71



11.09


Return on average assets

1.32



0.89



1.20


Core (non-GAAP) return on average assets2

1.32



0.85



1.20


Efficiency ratio (GAAP basis)

44.96



44.83



47.68


Core (non-GAAP) efficiency ratio2

44.96



45.50



48.37


Estimated Tier 1 common equity risk-based capital ratio3

8.92



9.29



9.28


Estimated total risk-based capital ratio3

11.43



11.93



11.35


Estimated Tier 1 risk-based capital ratio3

9.06



9.44



9.44


Estimated Tier 1 leverage ratio3

9.14



9.19



8.91


Total equity to total assets

10.31



10.67



10.47


Tangible equity to tangible assets - Non-GAAP2

8.49



8.73



8.43


Number of employees- full-time equivalent

862



865



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


June 30,
2017


March 31,
2017


December 31,
2016


September 30,
2016


June 30,
2016

Loans held for investment:

(Dollars in thousands)

Commercial real estate

$

2,817,443



$

2,786,477



$

2,670,455



$

2,533,404



$

2,520,431


Warehouse Purchase Program

1,256,742



846,973



1,055,341



1,345,818



980,390


Commercial and industrial

2,119,678



2,028,347



1,971,160



1,812,558



1,782,463


Construction and land

270,050



290,258



294,894



307,734



281,936


Consumer real estate

1,154,353



1,109,459



1,074,923



1,046,397



1,046,794


Other consumer

47,735



50,722



53,991



57,131



61,423


  Gross loans held for investment

$

7,666,001



$

7,112,236



$

7,120,764



$

7,103,042



$

6,673,437


Non-performing assets:










Commercial real estate

$

4,201



$

4,337



$

5,195



$

5,336



$

1,183


Commercial and industrial

87,599



94,503



86,664



28,282



31,362


Construction and land



310



11,385



27



27


Consumer real estate

7,265



7,193



7,987



7,051



10,005


Other consumer

131



1,061



158



169



274


  Total non-performing loans

99,196



107,404



111,389



40,865



42,851


Foreclosed assets

13,283



13,654



10,838



13,460



13,368


  Total non-performing assets

$

112,479



$

121,058



$

122,227



$

54,325



$

56,219


Total non-performing assets to total assets

1.25

%


1.43

%


1.46

%


0.64

%


0.70

%

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

1.55

%


1.71

%


1.84

%


0.71

%


0.75

%

Total non-performing loans to total loans held for investment

1.29

%


1.51

%


1.56

%


0.58

%


0.64

%

Allowance for loan losses to non-performing loans

75.70

%


65.79

%


57.97

%


140.26

%


145.14

%

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

1.17

%


1.13

%


1.06

%


1.00

%


1.09

%

Allowance for loan losses to total loans held for investment

0.98

%


0.99

%


0.91

%


0.81

%


0.93

%

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

1.26

%


1.23

%


1.18

%


1.12

%


1.26

%

Troubled debt restructured loans ("TDRs"):


(Dollars in thousands)



Performing TDRs:










Commercial real estate

$

150



$

152



$

154



$

156



$

158


Commercial and industrial









7


Consumer real estate

265



267



269



271



361


Other consumer

23



27



31



35



39


  Total performing TDRs

$

438



$

446



$

454



$

462



$

565


Non-performing TDRs:2










Commercial real estate

$

39



$

40



$

808



$

813



$

820


Commercial and industrial

22,946



23,338



9,181



8,700



8,726


Consumer real estate

1,401



1,618



1,669



1,725



3,603


Other consumer

31



38



43



50



51


  Total non-performing TDRs

$

24,417



$

25,034



$

11,701



$

11,288



$

13,200


Allowance for loan losses:










Balance at beginning of period

$

70,656



$

64,576



$

57,318



$

62,194



$

55,484


  Provision expense for loans

6,200



22,700



7,500



2,300



6,800


  Charge-offs

(2,160)



(17,246)



(367)



(7,566)



(345)


  Recoveries

395



626



125



390



255


Balance at end of period

$

75,091



$

70,656



$

64,576



$

57,318



$

62,194


Net charge-offs (recoveries):










Commercial real estate

$



$

(189)



$

(5)



$

72



$

(3)


Commercial and industrial

1,350



16,490



34



6,989



(96)


Construction and land

(75)



418








Consumer real estate

5



23



20



(40)



61


Other consumer

485



(122)



193



155



128


  Total net charge-offs

$

1,765



$

16,620



$

242



$

7,176



$

90


Allowance for off-balance sheet lending-related commitments







Provision expense (benefit) for credit losses

$

55



$

(399)



$

333



$

1,167



$




1

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 Quarters Ended


June 30,
2017


March 31,
2017


December 31,
2016


September 30,
2016


June 30,
2016

Loans:





(Dollars in thousands)


Commercial real estate

$

2,781,472



$

2,724,167



$

2,599,006



$

2,548,202



$

2,416,288



Warehouse Purchase Program

896,018



697,316



1,100,723



1,131,959



987,225



Commercial and industrial

1,995,882



1,969,766



1,836,519



1,710,387



1,695,037



Construction and land

278,986



290,856



300,460



290,930



266,968


Consumer real estate

1,126,744



1,090,700



1,052,231



1,055,801



1,002,848


Other consumer

49,721



52,655



56,480



59,212



63,525


Less: deferred fees and allowance for loan loss

(68,779)



(65,904)



(58,723)



(54,485)



(55,940)


Total loans held for investment

7,060,044



6,759,556



6,886,696



6,742,006



6,375,951


Loans held for sale

22,581



12,667



22,509



18,132



19,726


Securities

645,605



629,366



620,775



637,294



623,148


Overnight deposits

324,406



332,664



481,451



343,906



291,754


  Total interest-earning assets

$

8,052,636



$

7,734,253



$

8,011,431



$

7,741,338



$

7,310,579



Deposits:














Interest-bearing demand

$

849,633



$

855,075



$

838,631



$

821,516



$

784,741



Savings and money market

2,703,291



2,652,866



2,686,847



2,414,974



2,166,002


Time

1,355,681



1,314,607



1,407,415



1,372,424



1,169,960


FHLB advances and other borrowings

1,142,998



1,040,835



1,201,004



1,333,438



1,508,787


  Total interest-bearing liabilities

$

6,051,603



$

5,863,383



$

6,133,897



$

5,942,352



$

5,629,490















Total assets

$

8,491,696



$

8,172,072



$

8,445,209



$

8,176,612



$

7,739,015



Non-interest-bearing demand deposits

$

1,410,566



$

1,341,315



$

1,349,561



$

1,283,434



$

1,194,118



Total deposits

$

6,319,171



$

6,163,863



$

6,282,454



$

5,892,348



$

5,314,821



Total shareholders' equity

$

914,564



$

900,118



$

880,250



$

860,142



$

835,752


















Yields/Rates:















Loans:















Commercial real estate

5.08

%


5.05

%


5.05

%


5.19

%


5.07

%

Warehouse Purchase Program

3.70

%


3.50

%


3.29

%


3.26

%


3.28

%

Commercial and industrial

4.63

%


5.40

%


4.63

%


4.47

%


4.38

%

Construction and land

5.12

%


5.18

%


5.08

%


5.21

%


5.37

%

Consumer real estate

4.59

%


4.54

%


4.60

%


4.71

%


4.69

%

Other consumer

5.57

%


5.51

%


5.66

%


5.65

%


5.65

%

Total loans held for investment

4.75

%


4.97

%


4.64

%


4.65

%


4.61

%

Loans held for sale

3.99

%


3.85

%


3.41

%


3.46

%


3.55

%

Securities

2.40

%


2.35

%


2.20

%


2.19

%


2.29

%

Overnight deposits

1.18

%


0.89

%


0.57

%


0.54

%


0.54

%

  Total interest-earning assets

4.42

%


4.58

%


4.20

%


4.27

%


4.25

%

Deposits:















Interest-bearing demand

0.58

%


0.53

%


0.50

%


0.49

%


0.50

%

Savings and money market

0.56

%


0.46

%


0.39

%


0.33

%


0.24

%

Time

0.99

%


0.91

%


0.86

%


0.80

%


0.73

%

FHLB advances and other borrowings

1.64

%


1.51

%


1.22

%


1.10

%


0.95

%

  Total interest-bearing liabilities

0.86

%


0.76

%


0.68

%


0.63

%


0.57

%

Net interest spread

3.56

%


3.82

%


3.52

%


3.64

%


3.68

%

Net interest margin

3.77

%


4.00

%


3.68

%


3.78

%


3.81

%

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

0.53

%


0.47

%


0.43

%


0.39

%


0.33

%

















 


LegacyTexas Financial Group, Inc.

Supplemental Information- Non-GAAP Financial Measures

(unaudited)






At or For the Quarters Ended



June 30,
2017


March 31,
2017


December 31,
2016


September 30,
2016


June 30,
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

$

27,837


$

18,111


$

25,174


$

27,084


$

23,114


Distributed and undistributed earnings to participating securities1

98


79


131


133


103

GAAP net income

27,935


18,190


25,305


27,217


23,217

Net (gain) on sale of insurance subsidiary operations2





(39)

(Gain) on sale of branch locations and land


(847)




Loss on sale of FHA loan portfolio




969


Core (non-GAAP) net income

$

27,935


$

17,343


$

25,305


$

28,186


$

23,178


Average shares for basic earnings per share

46,596,467


46,453,658


46,346,053


46,227,734


46,135,999

Basic GAAP earnings per share

$

0.60


$

0.39


$

0.54


$

0.59


$

0.50


Basic core (non-GAAP) earnings per share

$

0.60


$

0.37


$

0.55


$

0.61


$

0.50


Average shares for diluted earnings per share

47,005,554


47,060,306


46,873,215


46,546,532


46,352,141

Diluted GAAP earnings per share

$

0.59


$

0.38


$

0.54


$

0.58


$

0.50


Diluted core (non-GAAP) earnings per share

$

0.59


$

0.37


$

0.54


$

0.61


$

0.50


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















GAAP non-interest income

$

12,325


$

12,130


$

12,277


$

11,277


$

13,722


Net (gain) on sale of insurance subsidiary operations





(1,181)

(Gain) loss on sale of branch locations and land


(1,304)




Loss on sale of FHA loan portfolio




1,491


Core (non-GAAP) non-interest income

$

12,325


$

10,826


$

12,277


$

12,768


$

12,541




















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



June 30,
2017


March 31,
2017


December 31,
2016


September 30,
2016


June 30,
2016


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

(Dollars in thousands)


GAAP efficiency ratio:





















  Non-interest expense

$

39,589



$

39,752



$

39,548



$

39,674



$

39,613



Net interest income plus non-interest income

88,045



88,678



86,361



84,757




83,076


Efficiency ratio- GAAP basis

44.96

%


44.83

%


45.79

%


46.81

%



47.68

%

Core (non-GAAP) efficiency ratio:
















Non-interest expense

$

39,589



$

39,752



$

39,548



$

39,674



$

39,613



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

88,045



87,374



86,361



86,248




81,895


Efficiency ratio- core (non-GAAP) basis

44.96

%


45.50

%


45.79

%


46.00

%



48.37

%











Calculation of Tangible Book Value per Share:








Total shareholders' equity

$

925,283



$

899,917



$

885,365



$

866,845



$

843,304


Less: Goodwill

(178,559)



(178,559)



(178,559)



(178,559)




(178,559)


Identifiable intangible assets, net

(524)



(585)



(665)



(752)




(838)


Total tangible shareholders' equity

$

746,200



$

720,773



$

706,141



$

687,534



$

663,907


Shares outstanding at end of period

48,009,379



47,940,133



47,876,198



47,773,160




47,670,440












Book value per share- GAAP

$

19.27



$

18.77



$

18.49



$

18.15



$

17.69


Tangible book value per share- Non-GAAP

15.54



15.03



14.75



14.39




13.93





















Calculation of Tangible Equity to Tangible Assets:








Total assets

$

8,970,375



$

8,436,542



$

8,362,255



$

8,440,010



$

8,057,005


Less: Goodwill

(178,559)



(178,559)



(178,559)



(178,559)




(178,559)


Identifiable intangible assets, net

(524)



(585)



(665)



(752)




(838)


Total tangible assets

$

8,791,292



$

8,257,398



$

8,183,031



$

8,260,699



$

7,877,608






















Equity to assets- GAAP

10.31

%


10.67

%


10.59

%


10.27

%



10.47

%

Tangible equity to tangible assets- Non-GAAP

8.49



8.73



8.63



8.32




8.43


















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









Net income

$

27,935



$

18,190



$

25,305



$

27,217



$

23,217


Core (non-GAAP) net income

27,935



17,343



25,305



28,186




23,178


Average total equity

914,564



900,118



880,250



860,142




835,752


Average total assets

8,491,696



8,172,072



8,445,209



8,176,612




7,739,015


Return on average common shareholders' equity

12.22

%


8.08

%


11.50

%


12.66

%



11.11

%

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

12.22



7.71



11.50



13.11




11.09


Return on average assets

1.32



0.89



1.20



1.33




1.20


Core (non-GAAP) return on average assets

1.32



0.85



1.20



1.38




1.20























 

 

SOURCE LegacyTexas Financial Group, Inc.

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


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