EX-99.1 2 ex991-q42018_earningsrelea.htm EXHIBIT 99.1 Exhibit
EXHIBIT 99.1

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FOR IMMEDIATE RELEASE
January 22, 2019
Contact: Investor Inquiries:
Kimberly Whitaker
972-801-5871/ShareholderRelations@LegacyTexasFinancialGroup.com
Media Inquiries:
Jennifer Dexter
972-461-7157/Jennifer.Dexter@LegacyTexas.com

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

PLANO, Texas, January 22, 2019 -- LegacyTexas Financial Group, Inc. (Nasdaq: LTXB) (the “Company”), the holding company for LegacyTexas Bank (the “Bank”), today announced net income of $57.8 million for the fourth quarter of 2018, an increase of $14.9 million from the third quarter of 2018 and an increase of $43.1 million from the fourth quarter of 2017. Core (non-GAAP) net income totaled $42.7 million for the fourth quarter of 2018, down $511,000 from the third quarter of 2018 and up $14.5 million from the fourth quarter of 2017.

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

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

Fourth Quarter 2018 Performance Highlights

•
Assets of $9.05 billion generated basic earnings per share for the fourth quarter of 2018 of $1.22 on a GAAP basis and $0.91 on a core (non-GAAP) basis.*

•
GAAP return on average assets improved to an all-time high of 2.61% for the quarter ended December 31, 2018, compared to 1.87% for the quarter ended September 30, 2018, while core (non-GAAP) return on average assets for the quarter ended December 31, 2018 was 1.93%, compared to 1.88% for the quarter ended September 30, 2018.*

•
GAAP efficiency ratio was 44.39% for the quarter ended December 31, 2018, compared to 42.66% for the quarter ended September 30, 2018, while core (non-GAAP) efficiency ratio was 44.13% for the quarter ended December 31, 2018, compared to 42.46% for the quarter ended September 30, 2018.*

•
Gross loans held for investment at December 31, 2018, excluding Warehouse Purchase Program loans, grew $26.7 million from September 30, 2018, which includes linked-quarter increases in commercial real estate, consumer real estate and other consumer loans.

•
Total deposits at December 31, 2018 grew $62.0 million from September 30, 2018, which includes linked-quarter increases in interest-bearing demand and time deposits.

Full Year 2018 Performance Highlights

•
Net income for the year ended December 31, 2018 totaled $154.2 million, an increase of $64.7 million from the year ended December 31, 2017, while core (non-GAAP) net income totaled $138.4 million for the year ended December 31, 2018, up $36.5 million from the year ended December 31, 2017.*

1


•
Basic earnings per share for the year ended December 31, 2018 was $3.27 on a GAAP basis and $2.94 on a core (non-GAAP) basis.*

•
GAAP return on average assets for the year ended December 31, 2018 was 1.73% compared to 1.04% for the year ended December 31, 2017, while core (non-GAAP) return on average assets was 1.55% for the year ended December 31, 2018, compared to 1.18% for the year ended December 31, 2017.*

•
GAAP efficiency ratio improved to 44.83% for the year ended December 31, 2018, compared to 45.17% for the year ended December 31, 2017. Core (non-GAAP) efficiency ratio improved to 44.77% for the year ended December 31, 2018, compared to 45.38% for the year ended December 31, 2017.*

•
Gross loans held for investment at December 31, 2018, excluding Warehouse Purchase Program loans, grew $307.5 million from December 31, 2017, while total deposits increased by $74.0 million for the same period.

*See the section labeled "Supplemental Information- Non-GAAP Financial Measures" at the end of this document.
Financial Highlights
 
At or For the Quarters Ended
(unaudited)
Dec 31, 2018
 
Sep 30, 2018
 
Dec 31, 2017
 
(Dollars in thousands, except per share amounts)
Net interest income
$
84,299

 
$
85,667

 
$
80,199

Provision for credit losses
—

 
2,656

 
3,743

Non-interest income
12,264

 
13,227

 
6,901

Non-interest expense
42,868

 
42,192

 
40,708

Income tax expense (benefit)
(4,074
)
 
11,225

 
27,989

Net income
$
57,769

 
$
42,821

 
$
14,660

 
 
 
 
 
 
Basic earnings per common share
$
1.22

 
$
0.91

 
$
0.31

Basic core (non-GAAP) earnings per common share1
$
0.91

 
$
0.92

 
$
0.60

Weighted average common shares outstanding - basic
47,159,578

 
47,105,655

 
46,729,160

Estimated Tier 1 common equity risk-based capital ratio2
11.05
%
 
10.46
%
 
9.40
%
Total equity to total assets
12.09
%
 
11.45
%
 
10.56
%
Tangible common equity to tangible assets - Non-GAAP1
10.32
%
 
9.67
%
 
8.77
%
1 
See the section labeled "Supplemental Information - Non-GAAP Financial Measures" at the end of this document.
2 
Calculated at the Company level, which is subject to the capital adequacy requirements of the Federal Reserve.

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

2

 
At or For the Years Ended
(unaudited)
Dec 31, 2018
 
Dec 31, 2017
 
(Dollars in thousands,
except per share amounts)
Net interest income
$
332,508

 
$
311,431

Provision for credit losses
35,797

 
39,456

Non-interest income
49,241

 
43,582

Non-interest expense
171,130

 
160,344

Income tax expense
20,633

 
65,719

Net income
$
154,189

 
$
89,494

 
 
 
 
Basic earnings per common share
$
3.27

 
$
1.91

Basic core (non-GAAP) earnings per common share1
$
2.94

 
$
2.19

Weighted average common shares outstanding - basic
47,035,475

 
46,611,780

1 
See the section labeled "Supplemental Information - Non-GAAP Financial Measures" at the end of this document.
Basic earnings per share for the year ended December 31, 2018 was $3.27, an increase of $1.36 from the year ended December 31, 2017. Basic core (non-GAAP) earnings per share for the year ended December 31, 2018 was $2.94, an increase of $0.75 from the year ended December 31, 2017. The reconciliation of non-GAAP measures, which the Company believes facilitates the assessment of its banking operations and peer comparability, is included in tabular form at the end of this release.

Net Interest Income and Net Interest Margin
 
For the Quarters Ended
(unaudited)
December 31, 2018
 
September 30, 2018
 
December 31, 2017
 
(Dollars in thousands)
Interest income:
 
 
 
 
 
Loans held for investment, excluding Warehouse Purchase Program loans 
$
90,273

 
$
89,034

 
$
79,564

Warehouse Purchase Program loans
10,472

 
12,938

 
11,568

Loans held for sale
286

 
295

 
202

Securities
4,640

 
4,512

 
3,979

Interest-earning deposit accounts
1,507

 
1,368

 
798

Total interest income
$
107,178

 
$
108,147

 
$
96,111

Net interest income
$
84,299

 
$
85,667

 
$
80,199

Net interest margin
3.98
%
 
3.90
%
 
3.78
%
Selected average balances:
 
 
 
 
 
Total earning assets
$
8,413,462

 
$
8,736,076

 
$
8,426,339

Total loans held for investment
7,454,810

 
7,758,802

 
7,533,172

Total securities
667,939

 
678,483

 
648,917

Total deposits
6,790,754

 
6,851,449

 
6,759,364

Total borrowings
851,084

 
1,154,079

 
1,007,747

Total non-interest-bearing demand deposits
1,778,681

 
1,752,095

 
1,568,665

Total interest-bearing liabilities
5,863,158

 
6,253,433

 
6,198,446


Net interest income for the quarter ended December 31, 2018 was $84.3 million, a $1.4 million, or 1.6%, decrease from the third quarter of 2018 and a $4.1 million, or 5.1%, increase from the fourth quarter of 2017. The $1.4 million decrease from the third quarter of 2018 was primarily driven by decreased volume in the Warehouse Purchase Program, commercial and industrial and commercial real estate portfolios, as well as increased average rates on deposits and borrowings, which was partially offset by higher average yields earned on loans compared to the third quarter of 2018. Interest income earned on Warehouse Purchase Program loans decreased by $2.5 million from the third quarter of 2018, as the average balance decreased

3

by $233.9 million, which was partially offset by a 13 basis point increase in the average yield compared to the linked quarter. The average balance of commercial and industrial loans decreased by $63.6 million from the third quarter of 2018, while the average yield earned on this portfolio increased by 22 basis points for the same period, resulting in a $175,000 increase in interest income. A five basis point increase in the average yield earned on the commercial real estate portfolio from the third quarter of 2018 partially offset a $39.0 million decline in the average balance, resulting in a $115,000 decrease in interest income. The average yield earned on the consumer real estate portfolio increased by 14 basis points compared to the third quarter of 2018, while the average balance increased by $32.6 million, which drove an $853,000 increase in interest income.

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

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

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

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

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

Non-interest Income

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

4

$1.3 million increase in service charges and other fees compared to the third quarter of 2018, primarily resulting from increased commercial loan fee income (consisting of syndication, arrangement, non-usage and pre-payment fees).

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

Non-interest Expenses

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

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

Financial Condition - Loans

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

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

At December 31, 2018, Warehouse Purchase Program loans decreased by $94.1 million compared to September 30, 2018 and by $360.4 million compared to December 31, 2017.

Reserve-based energy loans, which are secured by deeds of trust on properties containing proven oil and natural gas reserves and included in the Company's commercial and industrial loan portfolio, totaled $520.4 million at December 31, 2018, down $27.0 million from $547.4 million at September 30, 2018 and down $11.3 million from $531.7 million at December 31, 2017.

5

In addition to reserve-based energy loans, the Company has loans categorized as "Midstream and Other," which are typically related to the transmission of oil and natural gas and would only be indirectly impacted by declining commodity prices. At December 31, 2018, "Midstream and Other" loans had a total outstanding balance of $38.1 million, up $3.3 million from $34.8 million at September 30, 2018 and up $22.7 million from $15.4 million at December 31, 2017.

Financial Condition - Deposits

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

Compared to December 31, 2017, total deposits increased by $74.0 million, which included growth in time and non-interest-bearing demand deposits of $418.0 million and $138.1 million, respectively, while savings and money market and interest-bearing demand deposits decreased by $279.5 million and $202.6 million, respectively. At December 31, 2018, non-interest-bearing demand deposits totaled 25.9% of total deposits, compared to 24.2% of total deposits at December 31, 2017.
  
Credit Quality
 
At or For the Quarters Ended
(unaudited)
Dec 31, 2018
 
Sep 30, 2018
 
Dec 31, 2017
 
(Dollars in thousands)
Net charge-offs (recoveries)
$
(1,074
)
 
$
791

 
$
2,643

Net charge-offs (recoveries)/Average loans held for investment, excluding Warehouse Purchase Program loans
(0.07
)%
 
0.05
%
 
0.17
%
Net charge-offs (recoveries)/Average loans held for investment
(0.06
)
 
0.04

 
0.14

Provision for credit losses
$
—

 
$
2,656

 
$
3,743

Non-performing loans ("NPLs")
22,421

 
17,584

 
94,403

NPLs/Total loans held for investment, excluding Warehouse Purchase Program loans
0.33
 %
 
0.26
%
 
1.46
%
NPLs/Total loans held for investment
0.29

 
0.22

 
1.21

Non-performing assets ("NPAs")
$
23,754

 
$
18,282

 
$
102,835

NPAs to total assets
0.26
 %
 
0.20
%
 
1.13
%
NPAs/Loans held for investment and foreclosed assets, excluding Warehouse Purchase Program loans
0.35

 
0.27

 
1.58

NPAs/Loans held for investment and foreclosed assets
0.31

 
0.23

 
1.32

Allowance for loan losses
$
67,428

 
$
66,354

 
$
71,301

Allowance for loan losses/Total loans held for investment, excluding Warehouse Purchase Program loans
0.99
 %
 
0.98
%
 
1.10
%
Allowance for loan losses/Total loans held for investment
0.87

 
0.85

 
0.91

Allowance for loan losses/Total loans held for investment, excluding acquired loans & Warehouse Purchase Program loans1
1.04

 
1.03

 
1.17

Allowance for loan losses/NPLs
300.74

 
377.35

 
75.53

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

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


6

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

 
December 31,
2018
 
September 30,
2018
 
December 31,
2017
 
Linked-Quarter
 Change
 
Year-over-Year
 Change
 
(Dollars in thousands)
Commercial real estate
$
17,322

 
$
16,750

 
$
30,656

 
$
572

 
$
(13,334
)
Commercial and industrial, excluding energy
7,582

 
7,884

 
15,496

 
(302
)
 
(7,914
)
Energy
48,434

 
51,983

 
27,665

 
(3,549
)
 
20,769

Consumer
1,289

 
1,313

 
1,409

 
(24
)
 
(120
)
Total criticized (all performing)
$
74,627

 
$
77,930

 
$
75,226

 
$
(3,303
)
 
$
(599
)
 
 
 
 
 
 
 
 
 
 
Commercial real estate
$
1,463

 
$
1,757

 
$
3,893

 
$
(294
)
 
$
(2,430
)
Commercial and industrial, excluding energy
1,019

 
1,059

 
1,295

 
(40
)
 
(276
)
Energy
48,260

 
40,156

 
11,352

 
8,104

 
36,908

Consumer
1,445

 
1,527

 
2,823

 
(82
)
 
(1,378
)
Total classified performing
52,187

 
44,499

 
19,363

 
7,688

 
32,824

 
 
 
 
 
 
 
 
 
 
Commercial real estate
159

 
3,739

 
4,134

 
(3,580
)
 
(3,975
)
Commercial and industrial, excluding energy
968

 
5,861

 
25,579

 
(4,893
)
 
(24,611
)
Energy
15,742

 
1,317

 
58,424

 
14,425

 
(42,682
)
Consumer
5,552

 
6,667

 
6,266

 
(1,115
)
 
(714
)
Total classified non-performing
22,421

 
17,584

 
94,403

 
4,837

 
(71,982
)
 
 
 
 
 
 
 
 
 
 
Total classified loans
$
74,608

 
$
62,083

 
$
113,766

 
$
12,525

 
$
(39,158
)

Conference Call

The Company will host an investor conference call to review the results on Wednesday, January 23, 2019 at 8 a.m. Central Time. Participants may pre-register for the call by visiting http://dpregister.com/10126732 and will receive a unique PIN, which can be used when dialing in for the call. This will allow attendees to enter the call immediately. Alternatively, participants may call (toll-free) 877-513-4119 at least five minutes prior to the call to be placed into the call by an operator. International participants are asked to call 1-412-902-4148 and participants in Canada are asked to call (toll-free) 1-855-669-9657.

The call and corresponding presentation slides will be webcast live on the home page of the Company's website, www.LegacyTexasFinancialGroup.com. An audio replay will be available one hour after the conclusion of the call at 877-344-7529, Conference #10126732. This replay will be available until February 23, 2019.

  

7

About LegacyTexas Financial Group, Inc.

LegacyTexas Financial Group, Inc. is the holding company for LegacyTexas Bank, a commercially oriented community bank based in Plano, Texas. LegacyTexas Bank operates 42 banking offices in the Dallas/Fort Worth Metroplex and surrounding counties. For more information, please visit www.LegacyTexasFinancialGroup.com or www.LegacyTexas.com.
This document and other filings by LegacyTexas Financial Group, Inc. (the “Company”) with the Securities and Exchange Commission (the “SEC”), as well as press releases or other public or stockholder communications released by the Company, may contain forward-looking statements, including, but not limited to, (i) statements regarding the financial condition, results of operations and business of the Company, (ii) statements about the Company’s plans, objectives, expectations and intentions and other statements that are not historical facts and (iii) other statements identified by the words or phrases “will likely result,”“are expected to,” “will continue,” “is anticipated,” “estimate,” “project,” “intends” or similar expressions that are intended to identify “forward-looking statements”, within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on current beliefs and expectations of the Company’s management and are inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond the Company’s control. In addition, these forward-looking statements are subject to assumptions with respect to future business strategies and decisions that are subject to change.

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

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

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



8

LegacyTexas Financial Group, Inc. Consolidated Balance Sheets (unaudited)
(Dollars in thousands)
ASSETS
December 31,
2018
 
September 30,
2018
 
June 30,
2018
 
March 31,
2018
 
December 31,
2017
Cash and due from financial institutions
$
60,416

 
$
64,681

 
$
60,104

 
$
51,824

 
$
61,713

Short-term interest-bearing deposits in other financial institutions
208,777

 
189,634

 
199,807

 
243,080

 
231,743

Total cash and cash equivalents
269,193

 
254,315

 
259,911

 
294,904

 
293,456

Securities available for sale, at fair value
471,746

 
455,454

 
445,613

 
431,413

 
419,717

Securities held to maturity
146,046

 
145,148

 
155,252

 
156,898

 
173,509

Total securities
617,792

 
600,602

 
600,865

 
588,311

 
593,226

Loans held for sale
23,193

 
22,175

 
33,548

 
31,123

 
16,707

Loans held for investment:
 
 
 
 
 
 
 
 
 
Loans held for investment - Warehouse Purchase Program
960,404

 
1,054,505

 
1,291,129

 
1,019,840

 
1,320,846

Loans held for investment
6,790,723

 
6,764,052

 
6,671,139

 
6,569,123

 
6,483,192

Gross loans
7,774,320

 
7,840,732

 
7,995,816

 
7,620,086

 
7,820,745

Less: allowance for loan losses and deferred fees on loans held for investment
(57,031
)
 
(56,499
)
 
(55,321
)
 
(66,878
)
 
(64,921
)
Net loans
7,717,289

 
7,784,233

 
7,940,495

 
7,553,208

 
7,755,824

FHLB stock and other restricted securities, at cost
56,226

 
60,596

 
66,061

 
46,842

 
64,790

Bank-owned life insurance
59,036

 
58,692

 
58,345

 
57,999

 
57,684

Premises and equipment, net
73,073

 
72,291

 
70,893

 
70,427

 
69,693

Goodwill
178,559

 
178,559

 
178,559

 
178,559

 
178,559

Other assets
79,974

 
73,504

 
73,957

 
75,374

 
72,964

Total assets
$
9,051,142

 
$
9,082,792

 
$
9,249,086

 
$
8,865,624

 
$
9,086,196

 
 
 
 
 
 
 
 
 
 
LIABILITIES AND SHAREHOLDERS’ EQUITY
 
 
 
 
 
 
Non-interest-bearing demand
$
1,773,762

 
$
1,798,109

 
$
1,721,380

 
$
1,681,067

 
$
1,635,622

Interest-bearing demand
826,755

 
780,474

 
867,323

 
996,737

 
1,029,375

Savings and money market
2,455,787

 
2,562,399

 
2,580,017

 
2,707,046

 
2,735,296

Time
1,785,411

 
1,638,776

 
1,712,628

 
1,569,557

 
1,367,390

Total deposits
6,841,715

 
6,779,758

 
6,881,348

 
6,954,407

 
6,767,683

FHLB advances
825,409

 
932,317

 
1,065,941

 
604,562

 
1,043,163

Repurchase agreements
50,340

 
40,408

 
41,330

 
76,610

 
84,676

Subordinated debt
135,012

 
134,890

 
134,767

 
134,645

 
134,522

Accrued expenses and other liabilities
104,299

 
155,820

 
124,250

 
115,906

 
96,278

Total liabilities
7,956,775

 
8,043,193

 
8,247,636

 
7,886,130

 
8,126,322

Common stock
485

 
485

 
483

 
483

 
481

Additional paid-in capital
619,983

 
617,270

 
611,967

 
609,046

 
603,884

Retained earnings
491,948

 
444,848

 
409,765

 
389,653

 
370,858

Accumulated other comprehensive income (loss), net
(6,658
)
 
(11,481
)
 
(9,109
)
 
(7,899
)
 
(3,429
)
Unearned Employee Stock Ownership Plan (ESOP) shares
(11,391
)
 
(11,523
)
 
(11,656
)
 
(11,789
)
 
(11,920
)
Total shareholders’ equity
1,094,367

 
1,039,599

 
1,001,450

 
979,494

 
959,874

Total liabilities and shareholders’ equity
$
9,051,142

 
$
9,082,792

 
$
9,249,086

 
$
8,865,624

 
$
9,086,196



9

LegacyTexas Financial Group, Inc.
Consolidated Quarterly Statements of Income (unaudited)
 
For the Quarters Ended
 
Fourth Quarter 2018 Compared to:
 
Dec 31,
2018
 
Sep 30,
2018
 
Jun 30,
2018
 
Mar 31,
2018
 
Dec 31,
2017
 
Third Quarter
 2018
 
Fourth Quarter
2017
Interest and dividend income
 
(Dollars in thousands)
 
Loans, including fees
$
101,031

 
$
102,267

 
$
98,570

 
$
90,631

 
$
91,334

 
$
(1,236
)
(1.2
)%
 
$
9,697

10.6
 %
Taxable securities
3,463

 
3,254

 
3,132

 
2,911

 
2,819

 
209

6.4

 
644

22.8

Nontaxable securities
595

 
614

 
641

 
675

 
700

 
(19
)
(3.1
)
 
(105
)
(15.0
)
Interest-bearing deposits in other financial institutions
1,507

 
1,368

 
1,097

 
969

 
798

 
139

10.2

 
709

88.8

FHLB and Federal Reserve Bank stock and other
582

 
644

 
551

 
480

 
460

 
(62
)
(9.6
)
 
122

26.5

 
107,178

 
108,147

 
103,991

 
95,666

 
96,111

 
(969
)
(0.9
)
 
11,067

11.5

Interest expense
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Deposits
16,634

 
15,077

 
13,732

 
12,032

 
10,954

 
1,557

10.3

 
5,680

51.9

FHLB advances
4,000

 
5,198

 
4,131

 
2,680

 
2,647

 
(1,198
)
(23.0
)
 
1,353

51.1

Repurchase agreements and other borrowings
2,245

 
2,205

 
2,199

 
2,341

 
2,311

 
40

1.8

 
(66
)
(2.9
)
 
22,879

 
22,480

 
20,062

 
17,053

 
15,912

 
399

1.8

 
6,967

43.8

Net interest income
84,299

 
85,667

 
83,929

 
78,613

 
80,199

 
(1,368
)
(1.6
)
 
4,100

5.1

Provision for credit losses
—

 
2,656

 
17,478

 
15,663

 
3,743

 
(2,656
)
(100.0
)
 
(3,743
)
(100.0
)
Net interest income after provision for credit losses
84,299

 
83,011

 
66,451

 
62,950

 
76,456

 
1,288

1.6

 
7,843

10.3

Non-interest income
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Service charges and other fees
9,923

 
8,626

 
8,844

 
7,927

 
8,124

 
1,297

15.0

 
1,799

22.1

Net gain on sale of mortgage loans held for sale
1,499

 
1,597

 
1,668

 
1,809

 
1,556

 
(98
)
(6.1
)
 
(57
)
(3.7
)
Bank-owned life insurance income
482

 
482

 
479

 
447

 
430

 
—

—

 
52

12.1

Net gain (loss) on securities transactions
—

 
(10
)
 
—

 
(128
)
 
—

 
10

100.0

 
—

—

Gain (loss) on sale and disposition of assets
(56
)
 
977

 
(153
)
 
2,213

 
(3,480
)
 
(1,033
)
N/M
 
3,424

98.4

Other
416

 
1,555

 
14

 
630

 
271

 
(1,139
)
(73.2
)
 
145

53.5

 
12,264

 
13,227

 
10,852

 
12,898

 
6,901

 
(963
)
(7.3
)
 
5,363

77.7


10

 
For the Quarters Ended
 
Fourth Quarter 2018 Compared to:
 
Dec 31,
2018
 
Sep 30,
2018
 
Jun 30,
2018
 
Mar 31,
2018
 
Dec 31,
2017
 
Third Quarter
 2018
 
Fourth Quarter
2017
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Non-interest expense
 
(Dollars in thousands)
 
Salaries and employee benefits
23,728

 
25,053

 
24,313

 
27,076

 
23,126

 
(1,325
)
(5.3
)
 
602

2.6

Advertising
1,301

 
824

 
1,358

 
888

 
1,402

 
477

57.9

 
(101
)
(7.2
)
Occupancy and equipment
3,843

 
3,960

 
3,980

 
3,860

 
3,776

 
(117
)
(3.0
)
 
67

1.8

Outside professional services
2,021

 
1,151

 
1,382

 
1,250

 
1,300

 
870

75.6

 
721

55.5

Regulatory assessments
886

 
750

 
731

 
1,154

 
1,212

 
136

18.1

 
(326
)
(26.9
)
Data processing
6,168

 
5,362

 
5,145

 
4,703

 
4,737

 
806

15.0

 
1,431

30.2

Office operations
2,249

 
2,232

 
2,224

 
2,300

 
2,180

 
17

0.8

 
69

3.2

Other
2,672

 
2,860

 
3,058

 
2,648

 
2,975

 
(188
)
(6.6
)
 
(303
)
(10.2
)
 
42,868

 
42,192

 
42,191

 
43,879

 
40,708

 
676

1.6

 
2,160

5.3

Income before income tax expense (benefit)
53,695

 
54,046

 
35,112

 
31,969

 
42,649

 
(351
)
(0.6
)
 
11,046

25.9

Income tax expense (benefit)
(4,074
)
 
11,225

 
7,275

 
6,207

 
27,989

 
(15,299
)
(136.3
)
 
(32,063
)
(114.6
)
Net income
$
57,769

 
$
42,821

 
$
27,837

 
$
25,762

 
$
14,660

 
$
14,948

34.9
 %
 
$
43,109

294.1
 %
N/M - Not meaningful


11

LegacyTexas Financial Group, Inc.
Selected Quarterly Financial Highlights (unaudited)
 
At or For the Quarters Ended
 
December 31,
2018
 
September 30,
2018
 
December 31,
2017
SHARE DATA:
(Dollars in thousands, except per share amounts)
Weighted average common shares outstanding- basic
47,159,578

 
47,105,655

 
46,729,160

Weighted average common shares outstanding- diluted
47,714,421

 
47,755,441

 
47,290,308

Shares outstanding at end of period
48,505,261

 
48,491,169

 
48,117,390

Income available to common shareholders1
$
57,534

 
$
42,672

 
$
14,613

Basic earnings per common share
1.22

 
0.91

 
0.31

Basic core (non-GAAP) earnings per common share2
0.91

 
0.92

 
0.60

Diluted earnings per common share
1.21

 
0.89

 
0.31

Dividends declared per share
0.22

 
0.16

 
0.16

Total shareholders' equity
1,094,367

 
1,039,599

 
959,874

Common shareholders' equity per share (book value per share)
22.56

 
21.44

 
19.95

Tangible book value per share - Non-GAAP2
18.88

 
17.75

 
16.23

Market value per share for the quarter:
 
 
 
 
 
High
43.59

 
46.86

 
43.03

Low
30.46

 
38.53

 
36.73

Close
32.09

 
42.60

 
42.21

KEY RATIOS:
 
 
 
 
 
Return on average common shareholders' equity
21.75
%
 
16.76
%
 
6.09
%
Core (non-GAAP) return on average common shareholders' equity2
16.07

 
16.90

 
11.69

Return on average assets
2.61

 
1.87

 
0.66

Core (non-GAAP) return on average assets2
1.93

 
1.88

 
1.27

Efficiency ratio (GAAP basis)
44.39

 
42.66

 
46.74

Core (non-GAAP) efficiency ratio2
44.13

 
42.46

 
46.74

Estimated Tier 1 common equity risk-based capital ratio3
11.05

 
10.46

 
9.40

Estimated total risk-based capital ratio3
13.48

 
12.88

 
11.87

Estimated Tier 1 risk-based capital ratio3
11.19

 
10.60

 
9.54

Estimated Tier 1 leverage ratio3
10.76

 
9.83

 
9.17

Total equity to total assets
12.09

 
11.45

 
10.56

Tangible equity to tangible assets - Non-GAAP2
10.32

 
9.67

 
8.77

Number of employees- full-time equivalent
866

 
859

 
853

1 
Net of distributed and undistributed earnings to participating securities.
2 
See the section labeled "Supplemental Information - Non-GAAP Financial Measures" at the end of this document.
3 
Calculated at the Company level, which is subject to the capital adequacy requirements of the Federal Reserve.


12

LegacyTexas Financial Group, Inc.
Selected Full Year Financial Highlights (unaudited)

 
At or For the Years Ended
 
December 31, 2018
 
December 31, 2017
SHARE DATA:
(Dollars in thousands, except per share amounts)
Basic earnings per common share
$
3.27

 
$
1.91

Basic core (non-GAAP) earnings per common share1
2.94

 
2.19

Diluted earnings per common share
3.23

 
1.89

Dividends declared per share
0.70

 
0.61

KEY RATIOS:
 
 
 
Return on average common shareholders' equity
15.22
%
 
9.62
%
Core (non-GAAP) return on average common shareholders' equity1
13.65

 
10.96

Return on average assets
1.73

 
1.04

Core (non-GAAP) return on average assets1
1.55

 
1.18

Efficiency ratio (GAAP basis)
44.83

 
45.17

Core (non-GAAP) efficiency ratio1
44.77

 
45.38

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


13


LegacyTexas Financial Group, Inc.
Selected Loan Data (unaudited)
 
At or for the Quarter Ended
 
December 31,
2018
 
September 30,
2018
 
June 30,
2018
 
March 31,
2018
 
December 31,
2017
Loans held for investment:
(Dollars in thousands)
Commercial real estate
$
3,026,754

 
$
3,012,352

 
$
3,021,148

 
$
3,053,750

 
$
3,019,339

Warehouse Purchase Program
960,404

 
1,054,505

 
1,291,129

 
1,019,840

 
1,320,846

Commercial and industrial
2,057,791

 
2,111,510

 
2,051,955

 
1,967,443

 
1,927,049

Construction and land
270,629

 
278,278

 
265,745

 
252,213

 
277,864

Consumer real estate
1,390,378

 
1,318,038

 
1,287,703

 
1,252,433

 
1,213,434

Other consumer
45,171

 
43,874

 
44,588

 
43,284

 
45,506

Gross loans held for investment
$
7,751,127

 
$
7,818,557

 
$
7,962,268

 
$
7,588,963

 
$
7,804,038

Non-performing assets:
 
 
 
 
 
 
 
 
 
Commercial real estate
$
159

 
$
3,739

 
$
3,656

 
$
3,748

 
$
4,134

Commercial and industrial
16,710

 
7,178

 
10,225

 
40,455

 
84,003

Consumer real estate
5,506

 
6,617

 
5,652

 
5,548

 
6,190

Other consumer
46

 
50

 
77

 
85

 
76

Total non-performing loans
22,421

 
17,584

 
19,610

 
49,836

 
94,403

Foreclosed assets
1,333

 
698

 
7,341

 
8,160

 
8,432

Total non-performing assets
$
23,754

 
$
18,282

 
$
26,951

 
$
57,996

 
$
102,835

Total non-performing assets to total assets
0.26
%
 
0.20
%
 
0.29
%
 
0.65
%
 
1.13
%
Total non-performing loans to total loans held for investment, excluding Warehouse Purchase Program loans
0.33
%
 
0.26
%
 
0.29
%
 
0.76
%
 
1.46
%
Total non-performing loans to total loans held for investment
0.29
%
 
0.22
%
 
0.25
%
 
0.66
%
 
1.21
%
Allowance for loan losses to non-performing loans
300.74
%
 
377.35
%
 
328.63
%
 
149.51
%
 
75.53
%
Allowance for loan losses to total loans held for investment, excluding Warehouse Purchase Program loans
0.99
%
 
0.98
%
 
0.97
%
 
1.13
%
 
1.10
%
Allowance for loan losses to total loans held for investment
0.87
%
 
0.85
%
 
0.81
%
 
0.98
%
 
0.91
%
Allowance for loan losses to total loans held for investment, excluding acquired loans and Warehouse Purchase Program loans 1
1.04
%
 
1.03
%
 
1.02
%
 
1.20
%
 
1.17
%

14

 
At or for the Quarter Ended
 
December 31,
2018
 
September 30,
2018
 
June 30,
2018
 
March 31,
2018
 
December 31,
2017
 
 
 
 
 
 
 
 
 
 
Troubled debt restructured loans ("TDRs"):
 
(Dollars in thousands)
 
 
Performing TDRs:
 
 
 
 
 
 
 
 
 
Commercial real estate
$
136

 
$
139

 
$
141

 
$
143

 
$
145

Commercial and industrial
—

 
—

 
—

 
1

 
2

Consumer real estate
788

 
786

 
561

 
574

 
600

Other consumer
2

 
4

 
9

 
14

 
21

Total performing TDRs
$
926

 
$
929

 
$
711

 
$
732

 
$
768

Non-performing TDRs:2
 
 
 
 
 
 
 
 
 
Commercial real estate
$
31

 
$
3,605

 
$
33

 
$
35

 
$
36

Commercial and industrial
661

 
2,299

 
2,095

 
16,183

 
16,328

Consumer real estate
467

 
495

 
789

 
890

 
916

Other consumer
1

 
2

 
7

 
9

 
14

Total non-performing TDRs
$
1,160

 
$
6,401

 
$
2,924

 
$
17,117

 
$
17,294

Allowance for loan losses:
 
 
 
 
 
 
 
 
 
Balance at beginning of period
$
66,354

 
$
64,445

 
$
74,508

 
$
71,301

 
$
70,044

Provision expense for loans
—

 
2,700

 
17,600

 
15,635

 
3,900

Charge-offs
(2,590
)
 
(922
)
 
(27,737
)
 
(12,527
)
 
(2,840
)
Recoveries
3,664

 
131

 
74

 
99

 
197

Balance at end of period
$
67,428

 
$
66,354

 
$
64,445

 
$
74,508

 
$
71,301

Net charge-offs (recoveries):
 
 
 
 
 
 
 
 
Commercial real estate
$
—

 
$
—

 
$
236

 
$
3

 
$
—

Commercial and industrial
(1,355
)
 
537

 
27,261

 
12,214

 
2,386

Consumer real estate
37

 
47

 
(9
)
 
(11
)
 
36

Other consumer
244

 
207

 
175

 
222

 
221

Total net charge-offs (recoveries)
$
(1,074
)
 
$
791

 
$
27,663

 
$
12,428

 
$
2,643

Allowance for off-balance sheet lending-related commitments
 
 
 
 
 
 
Provision expense (benefit) for credit losses
$
—

 
$
(44
)
 
$
(122
)
 
$
28

 
$
(157
)
1 
Excludes loans acquired in previous bank acquisitions, which were initially recorded at fair value.
2 
Non-performing TDRs are included in the non-performing assets reported above.

15

LegacyTexas Financial Group, Inc.
Average Balances and Yields/Rates (unaudited)
 
For the Quarters Ended
 
December 31,
2018
 
September 30,
2018
 
June 30,
2018
 
March 31,
2018
 
December 31,
2017
Loans:
(Dollars in thousands)
Commercial real estate
$
2,977,919

 
$
3,016,889

 
$
3,055,139

 
$
2,993,024

 
$
3,030,778

Warehouse Purchase Program
864,012

 
1,097,879

 
1,075,262

 
965,320

 
1,162,890

Commercial and industrial
2,024,676

 
2,088,318

 
2,002,490

 
1,904,515

 
1,864,686

Construction and land
272,631

 
271,829

 
260,560

 
270,899

 
287,965

Consumer real estate
1,327,912

 
1,295,353

 
1,265,751

 
1,227,556

 
1,206,371

Other consumer
44,559

 
44,508

 
43,779

 
44,891

 
46,094

Less: deferred fees and allowance for loan loss
(56,899
)
 
(55,974
)
 
(66,746
)
 
(62,666
)
 
(65,612
)
Total loans held for investment
7,454,810

 
7,758,802

 
7,636,235

 
7,343,539

 
7,533,172

Loans held for sale
24,279

 
26,121

 
29,378

 
20,988

 
20,642

Securities
667,939

 
678,483

 
667,183

 
648,534

 
648,917

Overnight deposits
266,434

 
272,670

 
233,335

 
239,936

 
223,608

Total interest-earning assets
$
8,413,462

 
$
8,736,076

 
$
8,566,131

 
$
8,252,997

 
$
8,426,339

Deposits:
 
 
 
 
 
 
 
 
 
Interest-bearing demand
$
775,921

 
$
760,889

 
$
954,960

 
$
970,998

 
$
925,506

Savings and money market
2,532,732

 
2,654,990

 
2,578,205

 
2,745,192

 
2,911,726

Time
1,703,421

 
1,683,475

 
1,632,697

 
1,433,307

 
1,353,467

FHLB advances and other borrowings
851,084

 
1,154,079

 
1,018,945

 
877,502

 
1,007,747

Total interest-bearing liabilities
$
5,863,158

 
$
6,253,433

 
$
6,184,807

 
$
6,026,999

 
$
6,198,446

 
 
 
 
 
 
 
 
 
 
Total assets
$
8,850,435

 
$
9,167,607

 
$
8,996,036

 
$
8,682,461

 
$
8,865,517

Non-interest-bearing demand deposits
$
1,778,681

 
$
1,752,095

 
$
1,694,082

 
$
1,576,792

 
$
1,568,665

Total deposits
$
6,790,754

 
$
6,851,449

 
$
6,859,944

 
$
6,726,289

 
$
6,759,364

Total shareholders' equity
$
1,062,331

 
$
1,022,032

 
$
994,574

 
$
973,187

 
$
963,512

 
 
 
 
 
 
 
 
 
 

16

 
For the Quarters Ended
 
December 31,
2018
 
September 30,
2018
 
June 30,
2018
 
March 31,
2018
 
December 31,
2017
Yields/Rates:
 
 
 
 
 
 
 
 
 
Loans:
 
 
 
 
 
 
 
 
 
Commercial real estate
5.20
%
 
5.15
%
 
5.09
%
 
5.09
%
 
5.05
%
Warehouse Purchase Program
4.81
%
 
4.68
%
 
4.53
%
 
4.23
%
 
3.95
%
Commercial and industrial
6.00
%
 
5.78
%
 
5.71
%
 
5.27
%
 
4.89
%
Construction and land
5.87
%
 
5.41
%
 
5.35
%
 
5.17
%
 
5.04
%
Consumer real estate
4.81
%
 
4.67
%
 
4.66
%
 
4.56
%
 
4.54
%
Other consumer
5.80
%
 
5.81
%
 
5.74
%
 
5.62
%
 
5.67
%
Total loans held for investment
5.37
%
 
5.22
%
 
5.16
%
 
4.98
%
 
4.81
%
Loans held for sale
4.71
%
 
4.52
%
 
4.46
%
 
4.04
%
 
3.92
%
Securities
2.78
%
 
2.66
%
 
2.59
%
 
2.51
%
 
2.45
%
Overnight deposits
2.24
%
 
1.99
%
 
1.89
%
 
1.64
%
 
1.42
%
Total interest-earning assets
5.06
%
 
4.92
%
 
4.87
%
 
4.69
%
 
4.53
%
Deposits:
 
 
 
 
 
 
 
 
 
Interest-bearing demand
0.69
%
 
0.65
%
 
0.88
%
 
0.81
%
 
0.71
%
Savings and money market
1.02
%
 
0.92
%
 
0.79
%
 
0.75
%
 
0.70
%
Time
2.05
%
 
1.80
%
 
1.62
%
 
1.43
%
 
1.21
%
FHLB advances and other borrowings
2.91
%
 
2.55
%
 
2.49
%
 
2.32
%
 
1.95
%
Total interest-bearing liabilities
1.55
%
 
1.43
%
 
1.30
%
 
1.15
%
 
1.02
%
Net interest spread
3.51
%
 
3.49
%
 
3.57
%
 
3.54
%
 
3.51
%
Net interest margin
3.98
%
 
3.90
%
 
3.93
%
 
3.85
%
 
3.78
%
Cost of deposits (including non-interest-bearing demand)
0.97
%
 
0.87
%
 
0.80
%
 
0.73
%
 
0.64
%



17

LegacyTexas Financial Group, Inc.
Supplemental Information- Non-GAAP Financial Measures
(unaudited)
 
At or For the Quarters Ended
 
December 31,
2018
 
September 30,
2018
 
June 30,
2018
 
March 31,
2018
 
December 31,
2017
 
(Dollars in thousands, except per share amounts)
Reconciliation of Core (non-GAAP) to GAAP Net Income and Earnings per Share (calculated net of estimated tax rate of 21%, except as otherwise noted)
 
 
 
 
GAAP net income available to common shareholders1
$
57,534

 
$
42,672

 
$
27,770

 
$
25,687

 
$
14,613

Distributed and undistributed earnings to participating securities1
235

 
149

 
67

 
75

 
47

GAAP net income
57,769

 
42,821

 
27,837

 
25,762

 
14,660

(Gain) loss on one-time tax adjustments2
(15,289
)
 
—

 
—

 
—

 
13,493

Expenses related to above tax adjustments
202

 
—

 
—

 
—

 
—

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

 
372

 
126

 
—

 
—

Insurance settlement proceeds from pre-acquisition fraud
—

 
—

 
—

 
(1,778
)
 
—

One-time employee bonus related to tax law change
—

 
—

 
—

 
537

 
—

Core (non-GAAP) net income
$
42,682

 
$
43,193

 
$
27,963

 
$
24,521

 
$
28,153

Average shares for basic earnings per share
47,159,578

 
47,105,655

 
47,000,405

 
46,872,333

 
46,729,160

Basic GAAP earnings per share
$
1.22

 
$
0.91

 
$
0.59

 
$
0.55

 
$
0.31

Basic core (non-GAAP) earnings per share
$
0.91

 
$
0.92

 
$
0.59

 
$
0.52

 
$
0.60

Average shares for diluted earnings per share
47,714,421

 
47,755,441

 
47,618,157

 
47,564,587

 
47,290,308

Diluted GAAP earnings per share
$
1.21

 
$
0.89

 
$
0.58

 
$
0.54

 
$
0.31

Diluted core (non-GAAP) earnings per share
$
0.89

 
$
0.90

 
$
0.59

 
$
0.52

 
$
0.60

Reconciliation of Core (non-GAAP) to GAAP Non-Interest Income and Non-interest Expense (gross of tax)
 
 
 
 
 
 
GAAP non-interest income
$
12,264

 
$
13,227

 
$
10,852

 
$
12,898

 
$
6,901

Insurance settlement proceeds from pre-acquisition fraud
—

 
—

 
—

 
(2,250
)
 
—

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

 
471

 
160

 
—

 
—

Core (non-GAAP) non-interest income
$
12,264

 
$
13,698

 
$
11,012

 
$
10,648

 
$
6,901

GAAP non-interest expense
$
42,868

 
$
42,192

 
$
42,191

 
$
43,879

 
$
40,708

Expenses related to above tax adjustments
(256
)
 
—

 
—

 
—

 
—

One-time employee bonus related to tax law change
—

 
—

 
—

 
(679
)
 
—

Core (non-GAAP) non-interest expense
$
42,612

 
$
42,192

 
$
42,191

 
$
43,200

 
$
40,708

1Unvested 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.
2These one-time income tax adjustments consist of an adjustment to the Company's deferred tax asset (recorded in the 2017 period), as well as a benefit related to tax rate changes and the favorable outcome of the Company's change in its tax method of accounting for its loan portfolio (recorded in the 2018 period), all related to the December 22, 2017 enactment of the Tax Cuts and Jobs Act.


18

 
At or For the Quarters Ended
 
December 31,
2018
 
September 30,
2018
 
June 30,
2018
 
March 31,
2018
 
December 31,
2017
Reconciliation of Core (non-GAAP) to GAAP Efficiency Ratio (gross of tax)
 
(Dollars in thousands, except per share amounts)
GAAP efficiency ratio:
 
 
 
 
 
 
 
 
 
Non-interest expense
$
42,868

 
$
42,192

 
$
42,191

 
$
43,879

 
$
40,708

Net interest income plus non-interest income
96,563

 
98,894

 
94,781

 
91,511

 
87,100

Efficiency ratio- GAAP basis
44.39
%
 
42.66
%
 
44.51
%
 
47.95
%
 
46.74
%
Core (non-GAAP) efficiency ratio:
 
 
 
 
 
 
 
 
 
Core (non-GAAP) non-interest expense
$
42,612

 
$
42,192

 
$
42,191

 
$
43,200

 
$
40,708

Net interest income plus core (non-GAAP) non-interest income
96,563

 
99,365

 
94,941

 
89,261

 
87,100

Efficiency ratio- core (non-GAAP) basis
44.13
%
 
42.46
%
 
44.44
%
 
48.40
%
 
46.74
%
Calculation of Tangible Book Value per Share:
 
 
 
 
 
 
 
 
Total shareholders' equity
$
1,094,367

 
$
1,039,599

 
$
1,001,450

 
$
979,494

 
$
959,874

Less: Goodwill
(178,559
)
 
(178,559
)
 
(178,559
)
 
(178,559
)
 
(178,559
)
Identifiable intangible assets, net
(245
)
 
(279
)
 
(313
)
 
(347
)
 
(402
)
Total tangible shareholders' equity
$
915,563

 
$
860,761

 
$
822,578

 
$
800,588

 
$
780,913

Shares outstanding at end of period
48,505,261

 
48,491,169

 
48,311,220

 
48,264,966

 
48,117,390

Book value per share- GAAP
$
22.56

 
$
21.44

 
$
20.73

 
$
20.29

 
$
19.95

Tangible book value per share- Non-GAAP
18.88

 
17.75

 
17.03

 
16.59

 
16.23

Calculation of Tangible Equity to Tangible Assets:
 
 
 
 
 
 
 
 
Total assets
$
9,051,142

 
$
9,082,792

 
$
9,249,086

 
$
8,865,624

 
$
9,086,196

Less: Goodwill
(178,559
)
 
(178,559
)
 
(178,559
)
 
(178,559
)
 
(178,559
)
Identifiable intangible assets, net
(245
)
 
(279
)
 
(313
)
 
(347
)
 
(402
)
Total tangible assets
$
8,872,338

 
$
8,903,954

 
$
9,070,214

 
$
8,686,718

 
$
8,907,235

Equity to assets- GAAP
12.09
%
 
11.45
%
 
10.83
%
 
11.05
%
 
10.56
%
Tangible equity to tangible assets- Non-GAAP
10.32

 
9.67

 
9.07

 
9.22

 
8.77

Calculation of Return on Average Assets and Return on Average Equity Ratios (GAAP and Core)
Net income
$
57,769

 
$
42,821

 
$
27,837

 
$
25,762

 
$
14,660

Core (non-GAAP) net income
42,682

 
43,193

 
27,963

 
24,521

 
28,153

Average total equity
1,062,331

 
1,022,032

 
994,574

 
973,187

 
963,512

Average total assets
8,850,435

 
9,167,607

 
8,996,036

 
8,682,461

 
8,865,517

Return on average common shareholders' equity
21.75
%
 
16.76
%
 
11.20
%
 
10.59
%
 
6.09
%
Core (non-GAAP) return on average common shareholders' equity
16.07

 
16.90

 
11.25

 
10.08

 
11.69

Return on average assets
2.61

 
1.87

 
1.24

 
1.19

 
0.66

Core (non-GAAP) return on average assets
1.93

 
1.88

 
1.24

 
1.13

 
1.27



19

 
At or For the Years Ended
 
December 31, 2018

 
December 31, 2017

Reconciliation of Core (non-GAAP) to GAAP Net Income and Earnings per Share (net of estimated tax, except as otherwise noted)
(Dollars in thousands, except per share amounts)
GAAP net income available to common shareholders 1
$
153,692

 
$
89,176

Distributed and undistributed earnings to participating securities 1
497

 
318

GAAP net income
154,189

 
89,494

(Gain) loss on one-time tax adjustments2
(15,289
)
 
13,493

Expenses related to above tax adjustments3
202

 
—

(Gain) loss on sale of branch locations and land 3
498

 
(1,084
)
Insurance settlement proceeds from pre-acquisition fraud 3
(1,778
)
 
—

One-time employee bonus related to tax law change 3
537

 
—

Core (non-GAAP) net income
$
138,359

 
$
101,903

Average shares for basic earnings per share
47,035,475

 
46,611,780

Basic (GAAP) earnings per share
$
3.27

 
$
1.91

Basic core (non-GAAP) earnings per share
$
2.94

 
$
2.19

Average shares for diluted earnings per share
47,653,726

 
47,138,518

Diluted GAAP earnings per share
$
3.23

 
$
1.89

Diluted core (non-GAAP) earnings per share
$
2.90

 
$
2.16

 
 
 
 
Reconciliation of Core (non-GAAP) to GAAP Non-Interest Income and Non-interest Expense (gross of tax)
 
 
GAAP non-interest income
$
49,241

 
$
43,582

Insurance settlement proceeds from pre-acquisition fraud
(2,250
)
 
—

(Gain) loss on sale of branch locations and land
631

 
(1,669
)
Core (non-GAAP) non-interest income
$
47,622

 
$
41,913

GAAP non-interest expense
$
171,130

 
$
160,344

Expenses related to above tax adjustments
(256
)
 
—

One-time employee bonus related to tax law change
(679
)
 
—

Core (non-GAAP) non-interest expense
$
170,195

 
$
160,344

 
 
 
 
Reconciliation of Core (non-GAAP) to GAAP Efficiency Ratio (gross of tax)
 
 
Net interest income
$
332,508

 
$
311,431

GAAP efficiency ratio:
 
 
 
Non-interest expense
$
171,130

 
$
160,344

Net interest income plus non-interest income
381,749

 
355,013

Efficiency ratio- GAAP basis
44.83
%
 
45.17
%
Core (non-GAAP) efficiency ratio:
 
 
 
Core (non-GAAP) non-interest expense
$
170,195

 
$
160,344

Net interest income plus core (non-GAAP) non-interest income
380,130

 
353,344

Efficiency ratio- core (non-GAAP) basis
44.77
%
 
45.38
%
1 
Unvested share-based awards that contain nonforfeitable rights to dividends (whether paid or unpaid) are participating securities and are included in the computation of GAAP earnings per share pursuant to the two-class method described in ASC 260-10-45-60B.
2 
These one-time income tax adjustments consist of an adjustment to the Company's deferred tax asset (recorded in the 2017 period), as well as a benefit related to tax rate changes and the favorable outcome of the Company's change in its tax method of accounting for its loan portfolio (recorded in the 2018 period), all related to the December 22, 2017 enactment of the Tax Cuts and Jobs Act.
3 
2018 amounts calculated net of estimated tax using a tax rate of 21%; 2017 amounts calculated net of estimated tax using a tax rate of 35%.


20

 
At or For the Years Ended
 
December 31, 2018
 
December 31, 2017
 
(Dollars in thousands, except per share amounts)
Calculation of Return on Average Assets and Return on Average Equity Ratios (GAAP and core) (unaudited)
 
 
Net income
$
154,189

 
$
89,494

Core (non-GAAP) net income
138,359

 
101,903

Average total equity
1,013,300

 
929,903

Average total assets
8,925,262

 
8,607,481

Return on average common shareholders' equity
15.22
%
 
9.62
%
Core (non-GAAP) return on average common shareholders' equity
13.65

 
10.96

Return on average assets
1.73

 
1.04

Core (non-GAAP) return on average assets
1.55

 
1.18



21