Form 8-K LegacyTexas Financial For: Jul 19
Tweet
Share
E-mailUNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported)
July 19, 2016
LEGACYTEXAS FINANCIAL GROUP, INC.
(Exact name of registrant as specified in its charter)
Maryland | 001-34737 | 27-2176993 | ||
(State or other Jurisdiction of Incorporation) | (Commission File No.) | (I.R.S. Employer Identification No.) | ||
5851 Legacy Circle, Plano, Texas | 75024 | |||
(Address of principal executive offices) | (Zip Code) | |||
Registrant’s telephone number, including area code: (972) 578-5000
N/A
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
o | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
o | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
o | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
o | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
ITEM 2.02 | Results of Operations and Financial Condition |
On July 19, 2016, the Registrant announced second quarter 2016 earnings. The press release is attached to this report as Exhibit 99.1, which is incorporated herein by reference.
ITEM 8.01 | Other Events |
The information set forth in Item 2.02 above, including the contents of the press release attached as Exhibit 99.1, is incorporated by reference into this Item 8.01.
On July 19, 2016, the Registrant issued a press release announcing the declaration of a quarterly cash dividend of $0.15 per share, payable on August 15, 2016, to stockholders of record as of the close of business on August 1, 2016. The press release is attached to this report as Exhibit 99.2, which is incorporated herein by reference.
On Wednesday, July 20, 2016 at 8:00 a.m. Central Time, the Registrant will host an investor conference call and webcast to review their second quarter 2016 financial results. The webcast will include a slide presentation which consists of information regarding the Registrant's operating and growth strategies and financial performance. The presentation materials will be posted on the Registrant's website on July 19, 2016. The presentation materials are attached hereto as Exhibit 99.3, which is incorporated herein by reference.
ITEM 9.01 | Financial Statements and Exhibits |
(d) | Exhibits |
Exhibit 99.1 | Press release announcing second quarter 2016 earnings dated July 19, 2016 |
Exhibit 99.2 | Press release announcing quarterly dividend dated July 19, 2016 |
Exhibit 99.3 | Presentation materials |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned hereunto duly authorized.
LEGACYTEXAS FINANCIAL GROUP, INC. | |||
Date: | July 19, 2016 | By: | /s/ J. Mays Davenport |
J. Mays Davenport, Executive Vice President and Chief Financial Officer | |||
EXHIBIT INDEX
Exhibit No. | Description |
Exhibit 99.1 | Press release announcing second quarter 2016 earnings dated July 19, 2016 |
Exhibit 99.2 | Press release announcing quarterly dividend dated July 19, 2016 |
Exhibit 99.3 | Presentation materials |
EXHIBIT 99.1
FOR IMMEDIATE RELEASE
July 19, 2016
Contact: Investor Inquiries:
Casey Farrell
972-801-5871/[email protected]
Media Inquiries:
Jennifer Dexter
972-461-7157/[email protected]
LegacyTexas Financial Group, Inc. Reports Record Second Quarter 2016 Earnings of $23.2 million
PLANO, Texas, July 19, 2016 -- LegacyTexas Financial Group, Inc. (Nasdaq: LTXB) (the “Company”), the holding company for LegacyTexas Bank (the “Bank”), today announced net income of $23.2 million for the second quarter of 2016, an increase of $1.1 million from the first quarter of 2016, and $3.0 million from the second quarter of 2015.
"We are pleased to report such a fabulous quarter," said President and CEO Kevin Hanigan. "We had record quarterly earnings, despite adding to our energy loan loss reserves. Loan growth of $424 million is also a record for the Company, and our efficiency ratio of 48% is at an all-time best. Our results speak to the strength of the DFW economy and the hard work and dedication of our team in executing on our strategic plan."
Second Quarter 2016 Performance Highlights
• | The Company exceeded $8 billion in assets and earned an annualized return on average assets of 1.20%, which generated basic and diluted earnings per share for the second quarter of 2016 of $0.50. |
• | Efficiency ratio improved to 48.17% for the quarter ended June 30, 2016, compared to 48.96% for the first quarter of 2016 and 51.61% for the second quarter of 2015. |
• | Gross loans held for investment at June 30, 2016, excluding Warehouse Purchase Program loans, grew $423.7 million, or 8.0%, from March 31, 2016, with $338.5 million of growth in commercial real estate and commercial and industrial loans and $74.7 million of growth in consumer real estate loans. |
• | The allowance for loan losses allocated to energy loans at June 30, 2016 totaled $21.9 million, or 4.0% of total energy loans (including both reserve-based and midstream), up $4.5 million ($0.10 per share on a pre-tax basis, $0.06 per share after tax) from $17.4 million at March 31, 2016. |
1
Financial Highlights
At or For the Quarters Ended | |||||||||||
June | March | June | |||||||||
(unaudited) | 2016 | 2016 | 2015 | ||||||||
(Dollars in thousands, except per share amounts) | |||||||||||
Net interest income | $ | 69,354 | $ | 65,351 | $ | 59,821 | |||||
Provision for loan losses | 6,800 | 8,800 | 3,750 | ||||||||
Non-interest income | 13,722 | 14,655 | 11,964 | ||||||||
Non-interest expense | 39,613 | 37,542 | 36,908 | ||||||||
Income tax expense | 13,446 | 11,582 | 10,876 | ||||||||
Net income | $ | 23,217 | $ | 22,082 | $ | 20,251 | |||||
Basic earnings per common share | $ | 0.50 | $ | 0.48 | $ | 0.44 | |||||
Basic core (non-GAAP) earnings per common share1 | $ | 0.50 | $ | 0.43 | $ | 0.44 | |||||
Weighted average common shares outstanding - basic | 46,135,999 | 46,024,250 | 45,760,232 | ||||||||
Estimated Tier 1 common risk-based capital ratio2 | 9.28 | % | 9.50 | % | 10.18 | % | |||||
Total equity to total assets | 10.47 | % | 10.88 | % | 11.65 | % | |||||
Tangible common equity to tangible assets - Non-GAAP 1 | 8.43 | % | 8.69 | % | 9.17 | % | |||||
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 one-time gains and losses on assets and security sales, the net gain on the sale of the Company's insurance subsidiary operations, merger and acquisition costs and certain other items) totaled $23.3 million for the quarter ended June 30, 2016, up $3.4 million from the first quarter of 2016 and up $3.2 million from the second quarter of 2015. Basic earnings per share for the quarter ended June 30, 2016 was $0.50, an increase of $0.02 from the first quarter of 2016 and an increase of $0.06 from the second quarter of 2015. Core earnings per share for the second quarter of 2016 was $0.50, up $0.07 from the first quarter of 2016 and up $0.06 from the second quarter of 2015. 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.
2
Net Interest Income and Net Interest Margin
For the Quarters Ended | |||||||||||
June | March | June | |||||||||
(unaudited) | 2016 | 2016 | 2015 | ||||||||
(Dollars in thousands) | |||||||||||
Interest income: | |||||||||||
Loans held for investment, excluding Warehouse Purchase Program loans | $ | 65,159 | $ | 61,952 | $ | 53,654 | |||||
Warehouse Purchase Program loans | 8,042 | 6,674 | 7,720 | ||||||||
Loans held for sale | 175 | 180 | 177 | ||||||||
Securities | 3,568 | 3,472 | 3,277 | ||||||||
Interest-earning deposit accounts | 392 | 330 | 139 | ||||||||
Total interest income | $ | 77,336 | $ | 72,608 | $ | 64,967 | |||||
Net interest income | $ | 69,354 | $ | 65,351 | $ | 59,821 | |||||
Net interest margin | 3.79 | % | 3.88 | % | 4.06 | % | |||||
Selected average balances: | |||||||||||
Total earning assets | $ | 7,310,579 | $ | 6,732,619 | $ | 5,893,515 | |||||
Total loans held for investment | 6,375,951 | 5,874,775 | 5,089,531 | ||||||||
Total securities | 623,148 | 599,680 | 620,071 | ||||||||
Total deposits | 5,314,821 | 5,168,353 | 4,372,161 | ||||||||
Total borrowings | 1,508,787 | 1,106,577 | 1,112,198 | ||||||||
Total non-interest-bearing demand deposits | 1,194,118 | 1,134,070 | 1,024,108 | ||||||||
Total interest-bearing liabilities | 5,629,490 | 5,140,860 | 4,460,251 | ||||||||
Net interest income for the quarter ended June 30, 2016 was $69.4 million, a $4.0 million increase from the first quarter of 2016 and a $9.5 million increase from the second quarter of 2015. The $4.0 million increase from the linked quarter was primarily due to an increase in interest income on loans, which was driven by increased volume in all loan categories with the exception of construction and land and other consumer loans. The average balance of commercial real estate loans increased by $187.6 million to $2.42 billion from the first quarter of 2016, resulting in a $2.3 million increase in interest income. The average balance of Warehouse Purchase Program loans increased by $190.4 million to $987.2 million from the first quarter of 2016, which was partially offset by a nine basis point decrease in the average yield earned on this portfolio, resulting in a $1.4 million increase in interest income. The average balance of commercial and industrial and consumer real estate loans increased by $82.9 million and $53.3 million, respectively, compared to the first quarter of 2016, leading to increases in interest income of $548,000 and $440,000, respectively.
Interest income on loans for the second quarter of 2016 included $1.1 million in accretion of purchase accounting fair value adjustments on loans acquired through the merger with LegacyTexas Group, Inc., unchanged from the first quarter of 2016. The $1.1 million in accretion income recorded in the second quarter of 2016 includes $294,000 on acquired commercial real estate loans, $174,000 on acquired commercial and industrial loans, $57,000 on acquired construction and land loans and $562,000 on acquired consumer loans. Accretion of purchase accounting fair value adjustments related to the LegacyTexas Group, Inc. acquisition, as well as a smaller amount related to the Highlands Bank acquisition in 2012, contributed six basis points, four basis points and 22 basis points to the average yields on commercial real estate, commercial and industrial and consumer real estate loans, respectively, for the second quarter of 2016, compared to six basis points, five basis points and 21 basis points, respectively, for the first quarter of 2016.
The $9.5 million increase in net interest income, compared to the second quarter of 2015, was primarily due to an $11.8 million increase in interest income on loans, which was driven by increased volume in all loan categories with the exception of other consumer loans. The average balance of commercial real estate loans increased by $566.2 million from the second quarter of 2015, which was partially offset by a 16 basis point year-over-year decrease in the average yield earned on this portfolio, resulting in a $6.4 million increase in interest income. The average balance of commercial and industrial loans increased by $446.6 million from the second quarter of 2015, which was partially offset by a 39 basis point year-over-year decrease in the average yield earned on this portfolio, resulting in a $3.7 million increase in interest income. The average balance of consumer real estate and Warehouse Purchase Program loans increased by $197.3 million and $67.2 million, respectively,
3
compared to the second quarter of 2015, leading to increases in interest income of $1.5 million and $322,000, respectively.
Interest expense for the quarter ended June 30, 2016 increased by $725,000 compared to the linked quarter, which was primarily due to increased volume in time deposits and borrowings compared to the first quarter of 2016. The average balance of time accounts increased by $120.2 million to $1.17 billion from the first quarter of 2016, resulting in a $289,000 increase in interest expense. The average balance of borrowings increased by $402.2 million to $1.51 billion from the first quarter of 2016, resulting in a $425,000 increase in interest expense. The linked-quarter increase in borrowings was primarily related to growth in Warehouse Purchase Program loan balances during the quarter, a portion of which are strategically funded by short-term FHLB advances.
Compared to the second quarter of 2015, interest expense for the quarter ended June 30, 2016 increased by $2.8 million, primarily due to increased volume in all deposit products, including a $359.1 million increase in the average balance of savings and money market deposits and a $330.4 million increase in the average balance of time deposits, which increased interest expense by $570,000 and $675,000, respectively. Interest expense on borrowings increased by $1.5 million compared to the second quarter of 2015, primarily due to the issuance of $75.0 million of fixed-to-floating rate subordinated notes by the Company in November 2015.
The net interest margin for the second quarter of 2016 was 3.79%, a nine basis point decrease from the first quarter of 2016 and a 27 basis point decrease from the second quarter of 2015. Accretion of interest resulting from the merger with LegacyTexas Group, Inc. on January 1, 2015, as well as the 2012 Highlands acquisition, contributed seven basis points to the net interest margin and average yield on earning assets for the quarter ended June 30, 2016, compared to seven basis points for the quarter ended March 31, 2016 and 20 basis points for the quarter ended June 30, 2015. The average yield on earning assets for the second quarter of 2016 was 4.23%, an eight basis point decrease from the first quarter of 2016 and an 18 basis point decrease from the second quarter of 2016. The cost of deposits for the second quarter of 2016 was 0.33%, up one basis point from the linked quarter and up five basis points from the second quarter of 2015.
Non-interest Income
Non-interest income for the second quarter of 2016 was $13.7 million, a $933,000 decrease from the first quarter of 2016 and a $1.8 million increase from the second quarter of 2015. Core non-interest income for the second quarter of 2016, which excludes one-time gains and losses on assets and security sales, the net gain on the sale of the Company's insurance subsidiary operations and certain other items, was $12.7 million, up $1.4 million from the first quarter of 2016 and up $1.0 million from the second quarter of 2015. Gain on sale and disposition of assets for the second quarter of 2016 included a gain of $1.2 million on the sale of the Company's insurance subsidiary operations, compared to $3.9 million in gains recorded in the first quarter of 2016 on the sale of two buildings. Service charges and other fees increased by $746,000 from the first quarter of 2016, which includes a $727,000 increase in title premiums and a $221,000 increase in Warehouse Purchase Program fee income, which was partially offset by a $301,000 decrease in commercial loan fee income (consisting of syndication, arrangement, non-usage and pre-payment fees). The $457,000 increase in other non-interest income compared to the linked quarter was primarily due to $365,000 in swap fee income recorded in the second quarter of 2016 on interest rate derivative positions with our customers, with only $7,000 in comparable income recognized in the first quarter of 2016. Other non-interest income for the second quarter of 2016 included a $237,000 net decrease in the value of investments in community development-oriented private equity funds used for Community Reinvestment Act purposes (the "CRA Funds"), compared to a $530,000 net decrease in the CRA Funds recorded in the first quarter of 2016.
The $1.8 million increase in non-interest income from the second quarter of 2015 was primarily due to an increase of $986,000 in service charges and other fees, which includes a $407,000 increase in title premiums and a $501,000 increase in commercial loan fee income (consisting of syndication, arrangement, non-usage and pre-payment fees). Gain on sale and disposition of assets for the second quarter of 2016 included the $1.2 million gain on the sale of the Company's insurance subsidiary operations discussed above.
Non-interest Expenses
Non-interest expense for the quarter ended June 30, 2016 was $39.6 million, a $2.1 million increase from the first quarter of 2016 and a $2.7 million increase from the second quarter of 2015. Salaries and employee benefits expense increased by $530,000 from the first quarter of 2016, primarily due to a $1.1 million increase in performance-based incentive accruals and commissions related to higher loan production, as well as a $458,000 increase in share-based compensation expense (including expense related to the Company's ESOP) due to the increase in the Company’s average stock price during the second quarter of 2016. The linked-quarter increase in salary expense was partially offset by a $554,000 reduction in payroll taxes, as more employees have reached the wage base limit for Social Security tax for the year, as well as $720,000 in additional deferred
4
salary costs related to loan originations that will be accounted for over the lives of the related loans. Outside professional services expense increased by $411,000 compared to the linked quarter, primarily due to higher consulting and legal expenses, while data processing expense increased by $374,000 for the same period due to increased expense for card processing services. Other non-interest expense increased by $399,000 for the second quarter of 2016 compared to the linked quarter, primarily driven by increases in maintenance costs on foreclosed assets, legal expenses on loans and debit card fraud losses.
The $2.7 million increase in non-interest expense from the second quarter of 2015 was primarily due to a $1.1 million increase in data processing expense related to increased expenses for card processing services and software, as well as a $665,000 increase in other non-interest expense for the same period, primarily due to increased debit card fraud losses in the 2016 period. During 2016, the Company implemented enhanced authorization and fraud prevention procedures to assist in mitigation of future debit card fraud cases. Outside professional services expense for the second quarter of 2016 increased by $602,000 compared to the second quarter of 2015, primarily due to higher consulting and audit expenses in the 2016 period. Salaries and employee benefits expense for the second quarter of 2016 increased by $318,000 compared to the second quarter of 2015, primarily due to an increase in the number of employees in the 2016 period.
Financial Condition - Loans
Gross loans held for investment at June 30, 2016, excluding Warehouse Purchase Program loans, grew $423.7 million from March 31, 2016, which included growth in commercial real estate, commercial and industrial, consumer real estate and construction and land loans. Commercial real estate and commercial and industrial loans at June 30, 2016 increased by $196.1 million and $142.4 million, respectively, from March 31, 2016, and consumer real estate and construction and land loans increased by $74.7 million and $14.4 million, respectively, from March 31, 2016. These increases were partially offset by a decline of $3.9 million in other consumer loans.
Compared to June 30, 2015, gross loans held for investment, excluding Warehouse Purchase Program loans, grew $1.30 billion, which included growth in all loan portfolios with the exception of an $18.4 million decline in other consumer loans. On a year over year basis, commercial real estate and commercial and industrial loans increased by $590.2 million and $474.3 million, respectively. Consumer real estate and construction and land loans increased by $200.8 million and $51.4 million, respectively, from June 30, 2015.
Compared to March 31, 2016 and June 30, 2015, Warehouse Purchase Program loans declined by $48.2 million and $104.6 million, respectively.
Energy loans, which are reported as commercial and industrial loans, totaled $489.1 million at June 30, 2016, up $28.0 million from $461.1 million at March 31, 2016 and up $86.5 million from $402.6 million at June 30, 2015. Substantially all of the loans in the Energy portfolio are reserve-based loans, secured by deeds of trust on properties containing proven oil and natural gas reserves. In addition to the 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, 2016, "Midstream and Other" loans had a total outstanding balance of $54.8 million, down $8.9 million from $63.7 million at March 31, 2016 and up $33.5 million from $21.3 million at June 30, 2015.
Financial Condition - Deposits
Total deposits at June 30, 2016 increased by $319.8 million from March 31, 2016, with all deposit categories growing on a linked-quarter basis. Time and non-interest-bearing demand deposits increased by $206.2 million and $60.9 million, respectively, on a linked-quarter basis, while interest-bearing demand and savings and money market deposits increased by $28.9 million and $23.9 million, respectively, from March 31, 2016.
Compared to June 30, 2015, total deposits increased by $1.09 billion, which includes growth in all deposit categories. On a year over year basis, time deposits and savings and money market deposits increased by $451.3 million and $415.4 million, respectively, while non-interest-bearing demand and interest-bearing demand deposits increased by $151.6 million and $76.6 million, respectively, from June 30, 2015.
5
Credit Quality
At or For the Quarters Ended | |||||||||||
June | March | June | |||||||||
(unaudited) | 2016 | 2016 | 2015 | ||||||||
(Dollars in thousands) | |||||||||||
Net charge-offs | $ | 90 | $ | 409 | $ | 1,159 | |||||
Net charge-offs/Average loans held for investment, excluding Warehouse Purchase Program loans | 0.01 | % | 0.03 | % | 0.11 | % | |||||
Net charge-offs/Average loans held for investment | 0.01 | 0.03 | 0.09 | ||||||||
Provision for loan losses | $ | 6,800 | $ | 8,800 | $ | 3,750 | |||||
Non-performing loans ("NPLs") | 42,851 | 43,496 | 26,850 | ||||||||
NPLs/Total loans held for investment, excluding Warehouse Purchase Program loans | 0.75 | % | 0.83 | % | 0.61 | % | |||||
NPLs/Total loans held for investment | 0.64 | 0.69 | 0.49 | ||||||||
Non-performing assets ("NPAs") | $ | 56,219 | $ | 56,866 | $ | 31,403 | |||||
NPAs to total assets | 0.70 | % | 0.75 | % | 0.47 | % | |||||
NPAs/Loans held for investment and foreclosed assets, excluding Warehouse Purchase Program loans | 0.99 | 1.08 | 0.71 | ||||||||
NPAs/Loans held for investment and foreclosed assets | 0.84 | 0.90 | 0.57 | ||||||||
Allowance for loan losses | $ | 62,194 | $ | 55,484 | $ | 30,867 | |||||
Allowance for loan losses/Total loans held for investment, excluding Warehouse Purchase Program loans | 1.09 | % | 1.05 | % | 0.70 | % | |||||
Allowance for loan losses/Total loans held for investment | 0.93 | 0.88 | 0.56 | ||||||||
Allowance for loan losses/Total loans held for investment, excluding acquired loans & Warehouse Purchase Program loans 1 | 1.26 | 1.25 | 0.98 | ||||||||
Allowance for loan losses/NPLs | 145.14 | 127.56 | 114.96 | ||||||||
1 Excludes loans acquired in the Highlands and LegacyTexas transactions, which were initially recorded at fair value.
The Company recorded a provision for loan losses of $6.8 million for the quarter ended June 30, 2016, a decrease of $2.0 million from the quarter ended March 31, 2016 and an increase of $3.1 million from the quarter ended June 30, 2015. The Company increased qualitative reserve factors applied to the Energy portfolio in the first quarter of 2016 and in the fourth quarter of 2015 due to the impact of continued pressure on the price of oil and gas, and continued to apply the increased qualitative reserve factors to the Energy portfolio in the second quarter of 2016. This ongoing pressure on oil and gas prices resulted in continued economic uncertainty and regulatory concerns surrounding energy loans. Over the past year, risk rating downgrades on energy loans have increased, primarily in the special mention category, which consists entirely of performing loans. The below table shows criticized energy loans at June 30, 2016, March 31, 2016 and June 30, 2015.
June 30, 2016 | March 31, 2016 | Linked-Quarter Change | June 30, 2015 | Year-over-Year Change | |||||||||||||||
(Dollars in thousands) | |||||||||||||||||||
Special Mention (all performing) | $ | 106,060 | $ | 115,199 | $ | (9,139 | ) | $ | 22,161 | $ | 83,899 | ||||||||
Substandard (performing) | 81,482 | 48,088 | 33,394 | 58,591 | 22,891 | ||||||||||||||
Substandard (non-performing) | 26,576 | 25,171 | 1,405 | 5,233 | 21,343 | ||||||||||||||
$ | 214,118 | $ | 188,458 | $ | 25,660 | $ | 85,985 | $ | 128,133 | ||||||||||
The $1.4 million increase in substandard non-performing energy loans from March 31, 2016 was due to one reserve-based energy loan that was placed on non-accrual status during the second quarter of 2016 and is now considered to be impaired. This loan totaling $1.6 million at June 30, 2016 was placed on non-accrual during the spring redetermination process as a result of collateral value declines and deteriorating financial condition due to the ongoing low commodity price environment. At June 30, 2016, the Company set aside a specific reserve of $64,000 on this credit to reflect impairment based on that recent collateral valuation. The $26.6 million in substandard non-performing energy loans reported at June 30, 2016 also included two reserve-
6
based energy relationships that were placed on non-accrual status during the first quarter of 2016 and are considered to be impaired. One relationship totaling $6.2 million at June 30, 2016 is a syndicated credit facility that was modified during the first quarter of 2016 and was considered to be a troubled debt restructuring during the most recent Shared National Credit ("SNC") review, which is a regulatory review conducted by the Federal Reserve Bank, Federal Deposit Insurance Corporation and Office of the Comptroller of the Currency of large syndicated loans of at least $20 million that are shared by three or more supervised institutions. At June 30, 2016, the Company set aside a specific reserve of $87,000 on this relationship to reflect impairment. The second credit totaled $6.7 million at June 30, 2016 and is on non-accrual status as a result of collateral value deterioration due to the ongoing low commodity price environment. At June 30, 2016, the Company set aside a specific reserve of $190,000 on this credit to reflect impairment based on that recent collateral valuation. Additionally, substandard non-performing energy loans reported at June 30, 2016 included a $12.0 million reserve-based credit that has been on non-accrual status since the third quarter of 2015 and, at June 30, 2016, was in the midst of bankruptcy proceedings. As of June 30, 2016, the Company had a specific reserve of $6.5 million on this credit. In July 2016, this credit was resolved through the aforementioned bankruptcy proceedings.
The increase in substandard performing energy loans on a linked-quarter and year-over-year basis, as well as the increase in special mention performing energy loans on a year-over-year basis, resulted from collateral value declines and deteriorating financial condition due to commodity price declines. At June 30, 2016, no special mention or substandard performing energy loans were considered to be impaired, and the Company did not have any specific loss reserves set aside for these loans. The Company continues to take action to improve the risk profile of the criticized energy loans by instituting monthly commitment reductions, obtaining additional collateral, obtaining additional guarantor support and/or requiring additional equity injections or asset sales.
The allowance for loan losses allocated to energy loans at June 30, 2016 totaled $21.9 million, up $4.5 million from $17.4 million at March 31, 2016 and up $17.2 million from $4.7 million at June 30, 2015. In addition to the $6.9 million in specific reserves on the non-performing energy relationships discussed above, these reserve amounts reflect elevated qualitative factors and an increase in energy portfolio balances. Since the inception of our Energy Finance Group, we have maintained a number of risk mitigation techniques, including sound underwriting (reasonable advance rates based on number and diversification of wells), sound policy (requiring hedges on production sales) and conservative collateral valuations (frequent borrowing base determinations at prices below NYMEX posted rates). All borrowing base valuations are performed by experienced and nationally recognized third party firms intimately familiar with the properties and their production history. The Company believes that the level of loan loss reserves for energy loans as of June 30, 2016 is sufficient to cover estimated credit losses in the portfolio based on currently available information; however, future sustained declines in oil pricing could lead to further risk rating downgrades, additional loan loss reserves or losses.
Additionally, the increase in loan loss reserves on a linked-quarter and year-over-year basis resulted from increased organic loan production, as well as loans acquired through the merger with LegacyTexas Group, Inc. that were re-underwritten following completion of the merger, totaling $499.7 million during the second quarter of 2016.
Net charge-offs for the second quarter of 2016 totaled $90,000, a decrease of $319,000 from the first quarter of 2016 and a decrease of $1.1 million from the second quarter of 2015.
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, 2016 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, 2016 and will adjust amounts preliminarily reported, if necessary.
Conference Call
The Company will host an investor conference call to review the results on Wednesday, July 20, 2016 at 8 a.m. Central Time. Participants may pre-register for the call by visiting http://dpregister.com/10088935 and will receive a unique PIN number, 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 #10088935. This replay, as well as the webcast, will be available until August 20, 2016.
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 45 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.
8
LegacyTexas Financial Group, Inc. Consolidated Balance Sheets
June 30, 2016 | March 31, 2016 | December 31, 2015 | September 30, 2015 | June 30, 2015 | |||||||||||||||
(Dollars in thousands) | |||||||||||||||||||
ASSETS | (unaudited) | (unaudited) | (unaudited) | (unaudited) | |||||||||||||||
Cash and due from financial institutions | $ | 59,217 | $ | 55,348 | $ | 53,847 | $ | 47,720 | $ | 48,911 | |||||||||
Short-term interest-bearing deposits in other financial institutions | 363,407 | 261,423 | 561,792 | 193,994 | 143,106 | ||||||||||||||
Total cash and cash equivalents | 422,624 | 316,771 | 615,639 | 241,714 | 192,017 | ||||||||||||||
Securities available for sale, at fair value | 325,042 | 320,866 | 311,708 | 318,219 | 314,040 | ||||||||||||||
Securities held to maturity | 224,452 | 228,576 | 240,433 | 249,838 | 254,526 | ||||||||||||||
Total securities | 549,494 | 549,442 | 552,141 | 568,057 | 568,566 | ||||||||||||||
Loans held for sale | 20,752 | 17,615 | 22,535 | 22,802 | 19,903 | ||||||||||||||
Loans held for investment: | |||||||||||||||||||
Loans held for investment - Warehouse Purchase Program | 980,390 | 1,028,561 | 1,043,719 | 960,377 | 1,084,997 | ||||||||||||||
Loans held for investment | 5,693,047 | 5,269,312 | 5,066,507 | 4,688,826 | 4,394,786 | ||||||||||||||
Gross loans | 6,694,189 | 6,315,488 | 6,132,761 | 5,672,005 | 5,499,686 | ||||||||||||||
Less: allowance for loan losses and deferred fees on loans held for investment | (59,795 | ) | (55,001 | ) | (48,953 | ) | (39,611 | ) | (34,264 | ) | |||||||||
Net loans | 6,634,394 | 6,260,487 | 6,083,808 | 5,632,394 | 5,465,422 | ||||||||||||||
FHLB stock and other restricted securities, at cost | 62,247 | 54,648 | 63,075 | 63,891 | 69,224 | ||||||||||||||
Bank-owned life insurance | 55,853 | 55,535 | 55,231 | 54,920 | 54,614 | ||||||||||||||
Premises and equipment, net | 71,232 | 71,271 | 77,637 | 79,153 | 80,095 | ||||||||||||||
Goodwill | 178,559 | 180,776 | 180,776 | 180,632 | 180,632 | ||||||||||||||
Other assets | 82,602 | 73,196 | 63,633 | 58,082 | 59,054 | ||||||||||||||
Total assets | $ | 8,057,005 | $ | 7,562,126 | $ | 7,691,940 | $ | 6,878,843 | $ | 6,669,624 | |||||||||
LIABILITIES AND SHAREHOLDERS’ EQUITY | |||||||||||||||||||
Non-interest-bearing demand | $ | 1,235,731 | $ | 1,174,816 | $ | 1,170,272 | $ | 1,136,255 | $ | 1,084,146 | |||||||||
Interest-bearing demand | 811,015 | 782,161 | 819,350 | 750,551 | 734,430 | ||||||||||||||
Savings and money market | 2,249,490 | 2,225,611 | 2,209,698 | 1,982,729 | 1,834,075 | ||||||||||||||
Time | 1,326,446 | 1,120,261 | 1,027,391 | 900,515 | 875,132 | ||||||||||||||
Total deposits | 5,622,682 | 5,302,849 | 5,226,711 | 4,770,050 | 4,527,783 | ||||||||||||||
FHLB advances | 1,333,337 | 1,201,632 | 1,439,904 | 1,152,916 | 1,217,305 | ||||||||||||||
Repurchase agreements | 68,049 | 69,079 | 83,269 | 71,643 | 66,172 | ||||||||||||||
Subordinated debt | 85,231 | 85,104 | 84,992 | 11,522 | 11,474 | ||||||||||||||
Other borrowings | 24,894 | — | — | — | — | ||||||||||||||
Accrued expenses and other liabilities | 79,508 | 80,410 | 52,988 | 80,075 | 69,966 | ||||||||||||||
Total liabilities | 7,213,701 | 6,739,074 | 6,887,864 | 6,086,206 | 5,892,700 | ||||||||||||||
Shareholders’ equity | |||||||||||||||||||
Common stock | 476 | 476 | 476 | 476 | 476 | ||||||||||||||
Additional paid-in capital | 580,386 | 578,050 | 576,753 | 573,929 | 571,083 | ||||||||||||||
Retained earnings | 272,454 | 255,908 | 240,496 | 230,720 | 219,493 | ||||||||||||||
Accumulated other comprehensive income (loss), net | 2,918 | 1,841 | (133 | ) | 1,395 | 122 | |||||||||||||
Unearned Employee Stock Ownership Plan (ESOP) shares | (12,930 | ) | (13,223 | ) | (13,516 | ) | (13,883 | ) | (14,250 | ) | |||||||||
Total shareholders’ equity | 843,304 | 823,052 | 804,076 | 792,637 | 776,924 | ||||||||||||||
Total liabilities and shareholders’ equity | $ | 8,057,005 | $ | 7,562,126 | $ | 7,691,940 | $ | 6,878,843 | $ | 6,669,624 | |||||||||
9
LegacyTexas Financial Group, Inc.
Consolidated Quarterly Statements of Income (unaudited)
For the Quarters Ended | Second Quarter 2016 Compared to: | ||||||||||||||||||||||||||||||
Jun 30, 2016 | Mar 31, 2016 | Dec 31, 2015 | Sep 30, 2015 | Jun 30, 2015 | First Quarter 2016 | Second Quarter 2015 | |||||||||||||||||||||||||
Interest and dividend income | (Dollars in thousands) | ||||||||||||||||||||||||||||||
Loans, including fees | $ | 73,376 | $ | 68,806 | $ | 66,054 | $ | 63,025 | $ | 61,551 | $ | 4,570 | 6.6 | % | $ | 11,825 | 19.2 | % | |||||||||||||
Taxable securities | 2,359 | 2,312 | 2,264 | 2,292 | 2,252 | 47 | 2.0 | 107 | 4.8 | ||||||||||||||||||||||
Nontaxable securities | 759 | 774 | 780 | 773 | 724 | (15 | ) | (1.9 | ) | 35 | 4.8 | ||||||||||||||||||||
Interest-bearing deposits in other financial institutions | 392 | 330 | 210 | 137 | 139 | 62 | 18.8 | 253 | 182.0 | ||||||||||||||||||||||
FHLB and Federal Reserve Bank stock and other | 450 | 386 | 274 | 298 | 301 | 64 | 16.6 | 149 | 49.5 | ||||||||||||||||||||||
77,336 | 72,608 | 69,582 | 66,525 | 64,967 | 4,728 | 6.5 | 12,369 | 19.0 | |||||||||||||||||||||||
Interest expense | |||||||||||||||||||||||||||||||
Deposits | 4,422 | 4,122 | 3,569 | 3,382 | 3,049 | 300 | 7.3 | 1,373 | 45.0 | ||||||||||||||||||||||
FHLB advances | 2,103 | 1,673 | 1,466 | 1,606 | 1,774 | 430 | 25.7 | 329 | 18.5 | ||||||||||||||||||||||
Repurchase agreement and other borrowings | 1,457 | 1,462 | 805 | 349 | 323 | (5 | ) | (0.3 | ) | 1,134 | 351.1 | ||||||||||||||||||||
7,982 | 7,257 | 5,840 | 5,337 | 5,146 | 725 | 10.0 | 2,836 | 55.1 | |||||||||||||||||||||||
Net interest income | 69,354 | 65,351 | 63,742 | 61,188 | 59,821 | 4,003 | 6.1 | 9,533 | 15.9 | ||||||||||||||||||||||
Provision for loan losses | 6,800 | 8,800 | 11,200 | 7,515 | 3,750 | (2,000 | ) | (22.7 | ) | 3,050 | 81.3 | ||||||||||||||||||||
Net interest income after provision for loan losses | 62,554 | 56,551 | 52,542 | 53,673 | 56,071 | 6,003 | 10.6 | 6,483 | 11.6 | ||||||||||||||||||||||
Non-interest income | |||||||||||||||||||||||||||||||
Service charges and other fees | 8,927 | 8,181 | 8,041 | 8,195 | 7,941 | 746 | 9.1 | 986 | 12.4 | ||||||||||||||||||||||
Net gain on sale of mortgage loans | 2,250 | 1,580 | 1,899 | 1,944 | 2,121 | 670 | 42.4 | 129 | 6.1 | ||||||||||||||||||||||
Bank-owned life insurance income | 441 | 426 | 432 | 424 | 424 | 15 | 3.5 | 17 | 4.0 | ||||||||||||||||||||||
Gain (loss) on sale of available for sale securities | 65 | — | 17 | (25 | ) | — | 65 | 100.0 | 65 | 100.0 | |||||||||||||||||||||
Gain on sale and disposition of assets | 1,186 | 4,072 | 188 | 228 | 429 | (2,886 | ) | (70.9 | ) | 757 | 176.5 | ||||||||||||||||||||
Other | 853 | 396 | 1,016 | 1,085 | 1,049 | 457 | 115.4 | (196 | ) | (18.7 | ) | ||||||||||||||||||||
13,722 | 14,655 | 11,593 | 11,851 | 11,964 | (933 | ) | (6.4 | ) | 1,758 | 14.7 | |||||||||||||||||||||
10
For the Quarters Ended | Second Quarter 2016 Compared to: | ||||||||||||||||||||||||||||||
Jun 30, 2016 | Mar 31, 2016 | Dec 31, 2015 | Sep 30, 2015 | Jun 30, 2015 | First Quarter 2016 | Second Quarter 2015 | |||||||||||||||||||||||||
Non-interest expense | |||||||||||||||||||||||||||||||
Salaries and employee benefits | 22,867 | 22,337 | 23,374 | 23,633 | 22,549 | 530 | 2.4 | 318 | 1.4 | ||||||||||||||||||||||
Merger and acquisition costs | — | — | — | — | 8 | — | — | (8 | ) | (100.0 | ) | ||||||||||||||||||||
Advertising | 1,035 | 1,036 | 1,140 | 645 | 1,048 | (1 | ) | (0.1 | ) | (13 | ) | (1.2 | ) | ||||||||||||||||||
Occupancy and equipment | 3,779 | 3,691 | 3,592 | 3,622 | 3,838 | 88 | 2.4 | (59 | ) | (1.5 | ) | ||||||||||||||||||||
Outside professional services | 1,227 | 816 | 1,114 | 934 | 625 | 411 | 50.4 | 602 | 96.3 | ||||||||||||||||||||||
Regulatory assessments | 1,330 | 1,133 | 1,266 | 1,026 | 1,146 | 197 | 17.4 | 184 | 16.1 | ||||||||||||||||||||||
Data processing | 3,664 | 3,290 | 3,116 | 2,830 | 2,537 | 374 | 11.4 | 1,127 | 44.4 | ||||||||||||||||||||||
Office operations | 2,541 | 2,468 | 2,773 | 2,879 | 2,652 | 73 | 3.0 | (111 | ) | (4.2 | ) | ||||||||||||||||||||
Other | 3,170 | 2,771 | 2,668 | 2,258 | 2,505 | 399 | 14.4 | 665 | 26.5 | ||||||||||||||||||||||
39,613 | 37,542 | 39,043 | 37,827 | 36,908 | 2,071 | 5.5 | 2,705 | 7.3 | |||||||||||||||||||||||
Income before income tax expense | 36,663 | 33,664 | 25,092 | 27,697 | 31,127 | 2,999 | 8.9 | 5,536 | 17.8 | ||||||||||||||||||||||
Income tax expense | 13,446 | 11,582 | 8,646 | 9,802 | 10,876 | 1,864 | 16.1 | 2,570 | 23.6 | ||||||||||||||||||||||
Net income | $ | 23,217 | $ | 22,082 | $ | 16,446 | $ | 17,895 | $ | 20,251 | $ | 1,135 | 5.1 | % | $ | 2,966 | 14.6 | % | |||||||||||||
11
LegacyTexas Financial Group, Inc.
Selected Financial Highlights (unaudited)
At or For the Quarters Ended | |||||||||||
June 30, 2016 | March 31, 2016 | June 30, 2015 | |||||||||
(Dollars in thousands, except per share amounts) | |||||||||||
SHARE DATA: | |||||||||||
Weighted average common shares outstanding- basic | 46,135,999 | 46,024,250 | 45,760,232 | ||||||||
Weighted average common shares outstanding- diluted | 46,352,141 | 46,152,301 | 46,031,267 | ||||||||
Shares outstanding at end of period | 47,670,440 | 47,645,826 | 47,619,493 | ||||||||
Income available to common shareholders1 | $ | 23,114 | $ | 21,954 | $ | 20,091 | |||||
Basic earnings per common share | 0.50 | 0.48 | 0.44 | ||||||||
Basic core (non-GAAP) earnings per common share2 | 0.50 | 0.43 | 0.44 | ||||||||
Diluted earnings per common share | 0.50 | 0.48 | 0.44 | ||||||||
Dividends declared per share | 0.14 | 0.14 | 0.13 | ||||||||
Total shareholders' equity | 843,304 | 823,052 | 776,924 | ||||||||
Common shareholders' equity per share (book value per share) | 17.69 | 17.27 | 16.32 | ||||||||
Tangible book value per share- Non-GAAP2 | 13.93 | 13.46 | 12.50 | ||||||||
Market value per share for the quarter: | |||||||||||
High | 28.27 | 24.26 | 30.86 | ||||||||
Low | 17.94 | 17.01 | 22.67 | ||||||||
Close | 26.91 | 19.65 | 30.20 | ||||||||
KEY RATIOS: | |||||||||||
Return on average common shareholders' equity | 11.11 | % | 10.79 | % | 10.62 | % | |||||
Core return on average common shareholders' equity2 | 11.15 | 9.72 | 10.55 | ||||||||
Return on average assets | 1.20 | 1.23 | 1.28 | ||||||||
Core return on average assets2 | 1.20 | 1.11 | 1.27 | ||||||||
Efficiency ratio3 | 48.17 | 48.96 | 51.61 | ||||||||
Estimated Tier 1 common equity risk-based capital ratio4 | 9.28 | 9.50 | 10.18 | ||||||||
Estimated total risk-based capital ratio4 | 11.35 | 11.59 | 10.91 | ||||||||
Estimated Tier 1 risk-based capital ratio4 | 9.44 | 9.67 | 10.38 | ||||||||
Estimated Tier 1 leverage ratio4 | 8.91 | 9.34 | 9.91 | ||||||||
Total equity to total assets | 10.47 | 10.88 | 11.65 | ||||||||
Tangible equity to tangible assets- Non-GAAP2 | 8.43 | 8.69 | 9.17 | ||||||||
Number of employees- full-time equivalent | 850 | 850 | 812 | ||||||||
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 by dividing total non-interest expense by net interest income plus non-interest income, excluding gains (losses) on PCI loans and foreclosed and fixed assets, changes in value of the CRA Funds, amortization of intangible assets, gains (losses) from securities transactions, merger and acquisition costs, and gain on sale of insurance subsidiary operations.
4 Calculated at the Company level, which is subject to the capital adequacy requirements of the Federal Reserve.
12
LegacyTexas Financial Group, Inc.
Selected Loan Data (unaudited)
At the Quarter Ended | |||||||||||||||||||
June 30, 2016 | March 31, 2016 | December 31, 2015 | September 30, 2015 | June 30, 2015 | |||||||||||||||
Loans held for investment: | (Dollars in thousands) | ||||||||||||||||||
Commercial real estate | $ | 2,520,431 | $ | 2,324,338 | $ | 2,177,543 | $ | 2,035,631 | $ | 1,930,256 | |||||||||
Warehouse Purchase Program | 980,390 | 1,028,561 | 1,043,719 | 960,377 | 1,084,997 | ||||||||||||||
Commercial and industrial | 1,782,463 | 1,640,042 | 1,612,669 | 1,437,241 | 1,308,168 | ||||||||||||||
Construction and land | 281,936 | 267,543 | 269,708 | 260,433 | 230,582 | ||||||||||||||
Consumer real estate | 1,046,794 | 972,115 | 936,757 | 880,532 | 845,982 | ||||||||||||||
Other consumer | 61,423 | 65,274 | 69,830 | 74,989 | 79,798 | ||||||||||||||
Gross loans held for investment | $ | 6,673,437 | $ | 6,297,873 | $ | 6,110,226 | $ | 5,649,203 | $ | 5,479,783 | |||||||||
Non-performing assets: | |||||||||||||||||||
Commercial real estate | $ | 1,183 | $ | 1,307 | $ | 11,418 | $ | 13,717 | $ | 3,549 | |||||||||
Commercial and industrial | 31,362 | 30,105 | 16,877 | 41,538 | 12,498 | ||||||||||||||
Construction and land | 27 | 31 | 33 | 39 | 141 | ||||||||||||||
Consumer real estate | 10,005 | 11,948 | 9,781 | 10,894 | 10,419 | ||||||||||||||
Other consumer | 274 | 105 | 107 | 225 | 243 | ||||||||||||||
Total non-performing loans | 42,851 | 43,496 | 38,216 | 66,413 | 26,850 | ||||||||||||||
Foreclosed assets | 13,368 | 13,370 | 6,692 | 4,640 | 4,553 | ||||||||||||||
Total non-performing assets | $ | 56,219 | $ | 56,866 | $ | 44,908 | $ | 71,053 | $ | 31,403 | |||||||||
Total non-performing assets to total assets | 0.70 | % | 0.75 | % | 0.58 | % | 1.03 | % | 0.47 | % | |||||||||
Total non-performing loans to total loans held for investment, excluding Warehouse Purchase Program loans | 0.75 | % | 0.83 | % | 0.75 | % | 1.42 | % | 0.61 | % | |||||||||
Total non-performing loans to total loans held for investment | 0.64 | % | 0.69 | % | 0.63 | % | 1.18 | % | 0.49 | % | |||||||||
Allowance for loan losses to non-performing loans | 145.14 | % | 127.56 | % | 123.23 | % | 54.78 | % | 114.96 | % | |||||||||
Allowance for loan losses to total loans held for investment, excluding Warehouse Purchase Program loans | 1.09 | % | 1.05 | % | 0.93 | % | 0.78 | % | 0.70 | % | |||||||||
Allowance for loan losses to total loans held for investment | 0.93 | % | 0.88 | % | 0.77 | % | 0.64 | % | 0.56 | % | |||||||||
Allowance for loan losses to total loans held for investment, excluding acquired loans and Warehouse Purchase Program loans 1 | 1.26 | % | 1.25 | % | 1.14 | % | 1.00 | % | 0.98 | % | |||||||||
13
At the Quarter Ended | |||||||||||||||||||
June 30, 2016 | March 31, 2016 | December 31, 2015 | September 30, 2015 | June 30, 2015 | |||||||||||||||
Troubled debt restructured loans ("TDRs"): | (Dollars in thousands) | ||||||||||||||||||
Performing TDRs: | |||||||||||||||||||
Commercial real estate | $ | 158 | $ | 160 | $ | 161 | $ | 163 | $ | 733 | |||||||||
Commercial and industrial | 7 | 15 | 30 | 266 | 142 | ||||||||||||||
Consumer real estate | 361 | 364 | 368 | 134 | 202 | ||||||||||||||
Other consumer | 39 | 42 | 46 | 1 | 35 | ||||||||||||||
Total performing TDRs | $ | 565 | $ | 581 | $ | 605 | $ | 564 | $ | 1,112 | |||||||||
Non-performing TDRs:2 | |||||||||||||||||||
Commercial real estate | $ | 820 | $ | 938 | $ | 946 | $ | 3,233 | $ | 3,240 | |||||||||
Commercial and industrial | 8,726 | 8,923 | 1,793 | 1,760 | 1,862 | ||||||||||||||
Construction and land | — | — | — | — | 101 | ||||||||||||||
Consumer real estate | 3,603 | 3,625 | 3,393 | 3,808 | 3,608 | ||||||||||||||
Other consumer | 51 | 65 | 75 | 160 | 155 | ||||||||||||||
Total non-performing TDRs | $ | 13,200 | $ | 13,551 | $ | 6,207 | $ | 8,961 | $ | 8,966 | |||||||||
Allowance for loan losses: | |||||||||||||||||||
Balance at beginning of period | $ | 55,484 | $ | 47,093 | $ | 36,382 | $ | 30,867 | $ | 28,276 | |||||||||
Provision expense | 6,800 | 8,800 | 11,200 | 7,515 | 3,750 | ||||||||||||||
Charge-offs | (345 | ) | (581 | ) | (722 | ) | (2,124 | ) | (1,357 | ) | |||||||||
Recoveries | 255 | 172 | 233 | 124 | 198 | ||||||||||||||
Balance at end of period | $ | 62,194 | $ | 55,484 | $ | 47,093 | $ | 36,382 | $ | 30,867 | |||||||||
Net charge-offs (recoveries): | |||||||||||||||||||
Commercial real estate | $ | (3 | ) | $ | (6 | ) | $ | 71 | $ | 6 | $ | 78 | |||||||
Commercial and industrial | (96 | ) | 347 | 317 | 1,626 | 935 | |||||||||||||
Consumer real estate | 61 | (43 | ) | (19 | ) | 100 | 13 | ||||||||||||
Other consumer | 128 | 111 | 120 | 268 | 133 | ||||||||||||||
Total net charge-offs | $ | 90 | $ | 409 | $ | 489 | $ | 2,000 | $ | 1,159 | |||||||||
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. | |||||||||||||||||||
14
LegacyTexas Financial Group, Inc.
Average Balances and Yields/Rates (unaudited)
For the Quarters Ended | |||||||||||||||||||
June 30, 2016 | March 31, 2016 | December 31, 2015 | September 30, 2015 | June 30, 2015 | |||||||||||||||
Loans: | (Dollars in thousands) | ||||||||||||||||||
Commercial real estate | $ | 2,416,288 | $ | 2,228,682 | $ | 2,102,708 | $ | 1,969,031 | $ | 1,850,134 | |||||||||
Warehouse Purchase Program | 987,225 | 796,832 | 777,927 | 845,787 | 920,034 | ||||||||||||||
Commercial and industrial | 1,695,037 | 1,612,125 | 1,502,875 | 1,340,177 | 1,248,447 | ||||||||||||||
Construction and land | 266,968 | 269,691 | 277,597 | 239,567 | 214,038 | ||||||||||||||
Consumer real estate | 1,002,848 | 949,568 | 895,336 | 855,015 | 805,573 | ||||||||||||||
Other consumer | 63,525 | 67,055 | 72,981 | 77,404 | 83,296 | ||||||||||||||
Less: deferred fees and allowance for loan loss | (55,940 | ) | (49,178 | ) | (40,987 | ) | (35,690 | ) | (31,991 | ) | |||||||||
Total loans held for investment | 6,375,951 | 5,874,775 | 5,588,437 | 5,291,291 | 5,089,531 | ||||||||||||||
Loans held for sale | 19,726 | 19,588 | 18,560 | 17,651 | 19,414 | ||||||||||||||
Securities | 623,148 | 599,680 | 631,916 | 648,241 | 620,071 | ||||||||||||||
Overnight deposits | 291,754 | 238,576 | 230,598 | 160,690 | 164,499 | ||||||||||||||
Total interest-earning assets | $ | 7,310,579 | $ | 6,732,619 | $ | 6,469,511 | $ | 6,117,873 | $ | 5,893,515 | |||||||||
Deposits: | |||||||||||||||||||
Interest-bearing demand | $ | 784,741 | $ | 774,798 | $ | 748,176 | $ | 736,142 | $ | 701,592 | |||||||||
Savings and money market | 2,166,002 | 2,209,675 | 2,028,249 | 1,936,090 | 1,806,857 | ||||||||||||||
Time | 1,169,960 | 1,049,810 | 965,131 | 902,186 | 839,604 | ||||||||||||||
FHLB advances and other borrowings | 1,508,787 | 1,106,577 | 1,075,948 | 984,708 | 1,112,198 | ||||||||||||||
Total interest-bearing liabilities | $ | 5,629,490 | $ | 5,140,860 | $ | 4,817,504 | $ | 4,559,126 | $ | 4,460,251 | |||||||||
Total assets | $ | 7,739,015 | $ | 7,157,259 | $ | 6,891,210 | $ | 6,532,738 | $ | 6,315,710 | |||||||||
Non-interest-bearing demand deposits | $ | 1,194,118 | $ | 1,134,070 | $ | 1,198,337 | $ | 1,108,928 | $ | 1,024,108 | |||||||||
Total deposits | $ | 5,314,821 | $ | 5,168,353 | $ | 4,939,893 | $ | 4,683,346 | $ | 4,372,161 | |||||||||
Total shareholders' equity | $ | 835,752 | $ | 818,538 | $ | 800,411 | $ | 786,056 | $ | 762,497 | |||||||||
Yields/Rates: | |||||||||||||||||||
Loans: | |||||||||||||||||||
Commercial real estate | 5.04 | % | 5.05 | % | 5.13 | % | 5.31 | % | 5.20 | % | |||||||||
Warehouse Purchase Program | 3.26 | % | 3.35 | % | 3.33 | % | 3.35 | % | 3.36 | % | |||||||||
Commercial and industrial | 4.36 | % | 4.45 | % | 4.49 | % | 4.48 | % | 4.75 | % | |||||||||
Construction and land | 5.34 | % | 5.35 | % | 5.41 | % | 5.42 | % | 6.25 | % | |||||||||
Consumer real estate | 4.69 | % | 4.77 | % | 4.81 | % | 4.82 | % | 5.11 | % | |||||||||
Other consumer | 5.62 | % | 5.66 | % | 5.63 | % | 5.63 | % | 5.49 | % | |||||||||
Total loans held for investment | 4.59 | % | 4.67 | % | 4.72 | % | 4.75 | % | 4.82 | % | |||||||||
Loans held for sale | 3.55 | % | 3.68 | % | 3.79 | % | 3.94 | % | 3.65 | % | |||||||||
Securities | 2.29 | % | 2.32 | % | 2.10 | % | 2.08 | % | 2.11 | % | |||||||||
Overnight deposits | 0.54 | % | 0.55 | % | 0.36 | % | 0.34 | % | 0.34 | % | |||||||||
Total interest-earning assets | 4.23 | % | 4.31 | % | 4.30 | % | 4.35 | % | 4.41 | % | |||||||||
Deposits: | |||||||||||||||||||
Interest-bearing demand | 0.49 | % | 0.48 | % | 0.47 | % | 0.47 | % | 0.48 | % | |||||||||
Savings and money market | 0.24 | % | 0.24 | % | 0.19 | % | 0.19 | % | 0.17 | % | |||||||||
Time | 0.73 | % | 0.70 | % | 0.71 | % | 0.71 | % | 0.70 | % | |||||||||
15
For the Quarters Ended | |||||||||||||||||||
June 30, 2016 | March 31, 2016 | December 31, 2015 | September 30, 2015 | June 30, 2015 | |||||||||||||||
FHLB advances and other borrowings | 0.94 | % | 1.13 | % | 0.84 | % | 0.79 | % | 0.75 | % | |||||||||
Total interest-bearing liabilities | 0.57 | % | 0.56 | % | 0.48 | % | 0.47 | % | 0.46 | % | |||||||||
Net interest spread | 3.66 | % | 3.75 | % | 3.82 | % | 3.88 | % | 3.95 | % | |||||||||
Net interest margin | 3.79 | % | 3.88 | % | 3.94 | % | 4.00 | % | 4.06 | % | |||||||||
Cost of deposits (including non-interest-bearing demand) | 0.33 | % | 0.32 | % | 0.29 | % | 0.29 | % | 0.28 | % | |||||||||
16
LegacyTexas Financial Group, Inc.
Supplemental Information- Non-GAAP Financial Measures
(unaudited and calculated net of estimated tax)
At or For the Quarters Ended | |||||||||||||||||||
June 30, 2016 | March 31, 2016 | December 31, 2015 | September 30, 2015 | June 30, 2015 | |||||||||||||||
Reconciliation of Core (non-GAAP) to GAAP Net Income and Earnings per Share: | (Dollars in thousands, except per share amounts) | ||||||||||||||||||
GAAP net income available to common shareholders 1 | $ | 23,114 | $ | 21,954 | $ | 16,336 | $ | 17,768 | $ | 20,091 | |||||||||
Distributed and undistributed earnings to participating securities 1 | 103 | 128 | 110 | 127 | 160 | ||||||||||||||
GAAP net income | 23,217 | 22,082 | 16,446 | 17,895 | 20,251 | ||||||||||||||
Merger and acquisition costs | — | — | — | — | 5 | ||||||||||||||
Net (gain) on sale of insurance subsidiary operations 2 | (39 | ) | — | — | — | — | |||||||||||||
One-time (gain) loss on assets | 155 | (2,184 | ) | (133 | ) | (130 | ) | (142 | ) | ||||||||||
(Gain) loss on sale of available for sale securities | (42 | ) | — | (11 | ) | 16 | — | ||||||||||||
Core (non-GAAP) net income | $ | 23,291 | $ | 19,898 | $ | 16,302 | $ | 17,781 | $ | 20,114 | |||||||||
Average shares for basic earnings per share | 46,135,999 | 46,024,250 | 45,939,817 | 45,862,840 | 45,760,232 | ||||||||||||||
GAAP basic earnings per share | $ | 0.50 | $ | 0.48 | $ | 0.36 | $ | 0.39 | $ | 0.44 | |||||||||
Core (non-GAAP) basic earnings per share | $ | 0.50 | $ | 0.43 | $ | 0.35 | $ | 0.39 | $ | 0.44 | |||||||||
Average shares for diluted earnings per share | 46,352,141 | 46,152,301 | 46,267,956 | 46,188,461 | 46,031,267 | ||||||||||||||
GAAP diluted earnings per share | $ | 0.50 | $ | 0.48 | $ | 0.35 | $ | 0.38 | $ | 0.44 | |||||||||
Core (non-GAAP) diluted earnings per share | $ | 0.50 | $ | 0.43 | $ | 0.35 | $ | 0.38 | $ | 0.44 | |||||||||
Calculation of Tangible Book Value per Share: | |||||||||||||||||||
Total shareholders' equity | $ | 843,304 | $ | 823,052 | $ | 804,076 | $ | 792,637 | $ | 776,924 | |||||||||
Less: Goodwill | (178,559 | ) | (180,776 | ) | (180,776 | ) | (180,632 | ) | (180,632 | ) | |||||||||
Identifiable intangible assets, net | (838 | ) | (924 | ) | (1,030 | ) | (1,142 | ) | (1,280 | ) | |||||||||
Total tangible shareholders' equity | $ | 663,907 | $ | 641,352 | $ | 622,270 | $ | 610,863 | $ | 595,012 | |||||||||
Shares outstanding at end of period | 47,670,440 | 47,645,826 | 47,645,826 | 47,640,193 | 47,619,493 | ||||||||||||||
Book value per share- GAAP | $ | 17.69 | $ | 17.27 | $ | 16.88 | $ | 16.64 | $ | 16.32 | |||||||||
Tangible book value per share- Non-GAAP | $ | 13.93 | $ | 13.46 | $ | 13.06 | $ | 12.82 | $ | 12.50 | |||||||||
Calculation of Tangible Equity to Tangible Assets: | |||||||||||||||||||
Total assets | $ | 8,057,005 | $ | 7,562,126 | $ | 7,691,940 | $ | 6,878,843 | $ | 6,669,624 | |||||||||
Less: Goodwill | (178,559 | ) | (180,776 | ) | (180,776 | ) | (180,632 | ) | (180,632 | ) | |||||||||
Identifiable intangible assets, net | (838 | ) | (924 | ) | (1,030 | ) | (1,142 | ) | (1,280 | ) | |||||||||
Total tangible assets | $ | 7,877,608 | $ | 7,380,426 | $ | 7,510,134 | $ | 6,697,069 | $ | 6,487,712 | |||||||||
Equity to assets- GAAP | 10.47 | % | 10.88 | % | 10.45 | % | 11.52 | % | 11.65 | % | |||||||||
Tangible equity to tangible assets- Non-GAAP | 8.43 | % | 8.69 | % | 8.29 | % | 9.12 | % | 9.17 | % | |||||||||
17
At or For the Quarters Ended | |||||||||||||||||||
June 30, 2016 | March 31, 2016 | December 31, 2015 | September 30, 2015 | June 30, 2015 | |||||||||||||||
(Dollars in thousands) | |||||||||||||||||||
Calculation of Return on Average Assets and Return on Average Equity Ratios (GAAP and core) (unaudited) | |||||||||||||||||||
Net income | $ | 23,217 | $ | 22,082 | $ | 16,446 | $ | 17,895 | $ | 20,251 | |||||||||
Core (non-GAAP) net income | 23,291 | 19,898 | 16,302 | 17,781 | 20,114 | ||||||||||||||
Average total equity | 835,752 | 818,538 | 800,411 | 786,056 | 762,497 | ||||||||||||||
Average total assets | 7,739,015 | 7,157,259 | 6,891,210 | 6,532,738 | 6,315,710 | ||||||||||||||
Return on average common shareholders' equity | 11.11 | % | 10.79 | % | 8.22 | % | 9.11 | % | 10.62 | % | |||||||||
Core (non-GAAP) return on average common shareholders' equity | 11.15 | 9.72 | 8.15 | 9.05 | 10.55 | ||||||||||||||
Return on average assets | 1.20 | 1.23 | 0.95 | 1.10 | 1.28 | ||||||||||||||
Core (non-GAAP) return on average assets | 1.20 | 1.11 | 0.95 | 1.09 | 1.27 | ||||||||||||||
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 Represents net income, net of tax adjustment, related to the $1.2 million pre-tax gain on the sale of the Company's insurance subsidiary operations in the second quarter of 2016.
18
EXHIBIT 99.2
FOR IMMEDIATE RELEASE
July 19, 2016
Contact: Investor Inquiries:
Casey Farrell
972-801-5871/[email protected]
Media Inquiries:
Jennifer Dexter
972-461-7157/[email protected]
LegacyTexas Financial Group, Inc. Announces Declaration of
Quarterly Cash Dividend
PLANO, Texas, July 19, 2016 -- LegacyTexas Financial Group, Inc. (Nasdaq: LTXB) (the “Company”), the holding company for LegacyTexas Bank, today announced a quarterly cash dividend of $0.15 per share. The cash dividend is payable on August 15, 2016 to stockholders of record as of the close of business on August 1, 2016.
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 45 banking offices in the Dallas/Fort Worth Metroplex and surrounding counties. For more information, please visit www.legacytexasfinancialgroup.com.
When used in filings by LegacyTexas Financial Group, Inc. (the "Company”) with the Securities and Exchange Commission (the “SEC”), in the Company's press releases or other public or stockholder communications, and in oral statements made with the approval of an authorized executive officer, the words or phrases “will likely result,” “are expected to,” “will continue,” “is anticipated,” “estimate,” “project,” “intends” or similar expressions are intended to identify “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements are subject to certain risks and uncertainties that could cause actual results to differ materially from historical earnings and those presently anticipated or projected, including, among other things: 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 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.
July 20, 2016
EXHIBIT 99.3
Second Quarter 2016
Investor Presentation
2
Safe harbor statement
When used in filings by LegacyTexas Financial Group, Inc. (the "Company”) with the Securities and Exchange Commission (the “SEC”),
in the Company's press releases or other public or stockholder communications, and in oral statements made with the approval of an
authorized executive officer, the words or phrases “will likely result,” “are expected to,” “will continue,” “is anticipated,” “estimate,”
“project,” “intends” or similar expressions are intended to identify “forward-looking statements” within the meaning of the Private
Securities Litigation Reform Act of 1995. Such statements are subject to certain risks and uncertainties that could cause actual
results to differ materially from historical earnings and those presently anticipated or projected, including, among other things: 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 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.
SECOND QUARTER 2016
3
Today’s presenters
SECOND QUARTER 2016
Kevin Hanigan
President and Chief Executive Officer
• CEO and President of LegacyTexas Financial Group, Inc.
• Former Chairman and Chief Executive Officer of Highlands Bancshares in 2010
• Former Chairman and Chief Executive Officer of Guaranty Bank in 2009
• 35+ years of Texas banking experience
Mays Davenport
Executive Vice President, Chief Financial Officer
• Former Executive Vice President at LegacyTexas Bank
• Senior management experience for retail branch, treasury management, human resources, marketing,
mortgage, and wealth advisory functions
• Certified Public Accountant, former national accounting and tax advisory firm experience
• 23+ years of Texas banking experience
4
Profitability
Recent
Recognitions
• Recognized as the #2 Fastest Growing North Texas Company and ranked among the top 100
North Texas Public Companies by Dallas Business Journal
• Awarded 2015 Raymond James Community Bankers Cup-recognizes top 10% of community
banks (with assets between $500 million and $10 billion)
• Rated by S&P Global Market Intelligence as #8 in the 100 best-performing community banks
in 2015 (with assets between $1 billion and $10 billion)
• Named one of 25 KBW "Challenger Banks" who can most effectively challenge large universal
banks for market share
Capital
Key franchise highlights
Quarterly earnings of $23.2 million and basic EPS of $0.50 for Q2 2016
• Return on average assets of 1.2%, return on average equity of 11.1%
• Exceptional loan growth of $423.7 million for Q2 2016 with 8.0% linked quarter growth¹
• Efficiency ratio of 48.2%, improved from 49.0% for Q1 2016
Asset quality
Growth balanced with disciplined underwriting and risk management resulting in strong asset
quality
• NPAs / loans + OREO: 0.99% 1
• NCOs / average loans: 0.01% for Q2 20161
Profitability levered excess capital while maintaining strong capital levels
• TCE / TA2: 8.4%
• Estimated Tier 1 common risk-based capital3: 9.28%
Source: Company Documents
1 Excludes Warehouse Purchase Program loans and loans held for sale
2 See the section labeled "Supplemental Information- Non-GAAP Financial Measures“
3 Calculated at the Company level, which is subject to the capital adequacy requirements of the Federal Reserve
SECOND QUARTER 2016 – FRANCHISE HIGHLIGHTS
5
Source: Company Documents
¹ Based on deposit market share of banks headquartered in Texas
² Includes banks headquartered in the Dallas-Fort Worth-Arlington, TX MSA
North Texas focused
Leading market position
#1
in Collin
County among
independent
banks¹
#2
in Collin
County among
all banks
#3
among Dallas
based banks in
DFW²
SECOND QUARTER 2016 – FRANCHISE HIGHLIGHTS
Employment by industry
42%
8%
3%
4%
13%
1%
5%
9%
7%
6%
2%
Service-providing
Goods-providing
Construction
Manufacturing
Trade, transportation and
utilities
Information
Financial activities
Professional and business
services
Education and health
services
Leisure and hospitality
Other
Source: Bureau of Labor Statistics
Note: Represents latest available data for the Dallas-Fort Worth-Arlington, TX MSA (i.e., data as of
2015Q4)
21 DFW companies in Fortune 500
6
Second quarter highlights
($ in millions except for per share data) Quarter ended
June 30,
2015
March 31,
2016
June 30,
2016 Linked Q ∆ YOY ∆
Selected balance sheet data
Gross loans held for investment1 $ 4,394.8 $ 5,269.3 $ 5,693.0 8.0 % 29.5%
Total deposits 4,527.8 5,302.8 5,622.7 6.0 % 24.2%
Selected profitability data
Net interest income $ 59.8 $ 65.4 $ 69.4 6.1 % 15.9%
NIM 4.06% 3.88% 3.79% -9bps -27bps
Non-interest income $ 12.0 $ 14.7 $ 13.7 (6.4)% 14.7%
Non-interest expense 36.9 37.5 39.6 5.5 % 7.3%
Net income 20.3 22.1 23.2 5.1 % 14.6%
Core net income2 20.1 19.9 23.3 17.1 % 15.8%
Basic EPS 0.44 0.48 0.50 4.2 % 13.6%
Core EPS2 0.44 0.43 0.50 16.3 % 13.6%
Source: Company Documents
1 Excludes Warehouse Purchase Program loans
2 See the section labeled "Supplemental Information- Non-GAAP Financial Measures“
SECOND QUARTER 2016 – QUARTERLY HIGHLIGHTS
7
44.3%
22.7%
8.6%
4.9% 18.4%
1.1%
Originated loans
Acquired from LegacyTexas Group, Inc.
2011Y 2012Y 2013Y 2014Y 2015Y 2016 Q2
$1,228
$1,691
$2,050
$2,634
$3,667
$5,693
$1,400
($ in millions)
Robust commercially focused growth
Source: Company Documents
1 Excludes Warehouse Purchase Program loans
2 Represents balance acquired on January 1, 2015
Gross loans held for investment at June 30, 2016, excluding Warehouse Purchase Program loans,
grew $423.7 million, or 8.0%, from March 31, 2016, with $338.5 million of growth in commercial real
estate and commercial and industrial loans.
As of June 30, 20161
Total Loans HFI1
Quarterly yield on loans held for investment1: 4.84%
SECOND QUARTER 2016 – BALANCE SHEET
Commercial RE
C&I (ex-energy)
Energy
C&D
Consumer RE
Other Consumer
2
$5,067
8
• Reserve-based energy portfolio at
June 30, 2016 consisted of 49% crude
oil reserves and 51% natural gas
reserves
• At June 30, 2016, 44 reserve-based
borrowers and 5 midstream borrowers
• $321 million, or 59%, of our
outstanding energy loans are backed by
private equity firms with significant
capital invested and additional equity
commitments available Permian
Bakken
Eagle Ford
Ark-La-Tex
Mid-Con
Energy lending
Source: Company documents for loans managed by Energy Finance group
R: 000
G: 048
B: 135
R: 111
G: 162
B: 135
SECOND QUARTER 2016 – ENERGY LENDING
Geographic Concentration of
Reserves
Texas Panhandle
Marcellus
Gulf of Mexico
Central/Southern
Louisiana
Other
23%
5%
2%
21%13%
5%
8%
2%
4%
17%
9
31%
8%
61%
2016 2017 2018
47%
35%
12%
60%
48%
18%
85% 84%
49%
78%
86%
73%
1 % of engineered PDP volumes
Source: Company documents for loans managed by Energy Finance group
• Reserve-based loans are almost exclusively first liens, with only a $5 million
commitment to a 2nd lien facility at June 30, 2016
• No unsecured commitments/exposure
• At June 30, 2016, only $3.3 million in outstanding loans to oil field service
companies, of which only $133,000 are criticized
Energy lending
R: 000
G: 048
B: 135
R: 111
G: 162
B: 135
SECOND QUARTER 2016 – ENERGY LENDING
Hedging Percentages at June 30, 2016 compared to
March 31, 2016 with June 30, 2016 Weighted Average Prices1
$63.33 $56.19
$58.78
$3.31 $3.09 $2.89
SNC Breakout of
Reserve-Based Energy Loans
Non-LTXB
Led SNC
LTXB Led SNC Direct and Other
Participations
March 31, 2016 June 30, 2016
Oil Oil
Gas Gas
10
Energy lending
Source: Company documents
Outstanding loan balances and related loan loss reservesSubstandard energy loans
R: 000
G: 048
B: 135
R: 111
G: 162
B: 135
The allowance for loan losses allocated to energy loans at June 30, 2016 totaled $21.9 million,
or 4.0% of total energy loans (including both reserve-based and midstream), up $4.5 million
($0.10 per share on a pre-tax basis, $0.06 per share after tax) from $17.4 million at March 31,
2016.
SECOND QUARTER 2016 – ENERGY LENDING
($ in millions)($ in millions)
Energy
reserves $4.7 $4.9 $12.0 $17.4 $21.9
Reserve-based Reserve %Midstream
$21.3
$31.1
Substandard performing
Substandard non-performing
2015 Q2 2015 Q3 2015 Q4 2016 Q1 2016 Q2
$58.6
$8.1
$38.7
$48.1
$81.5$36.2
$12.1
$25.2
$26.6
$5.2
2015 Q2 2015 Q3 2015 Q4 2016 Q1 2016 Q2
$402.6
$431.4
$459.8 $461.1
$489.1
$64.6 $63.7
$54.8
1.1% 1.1%
2.3%
3.3%
4.0%
11
Collateral Mix of Houston Portfolio
• Continued low LTV in Houston CRE portfolio - 66% for entire Houston portfolio, 70% for energy
corridor only
• Low loan price per square foot - energy corridor ranges $74-$122 with average of $100
• Only one Houston area loss since the 2003 inception of CRE lending in Houston, totaling only $34
thousand
36%
26%
35%
3%
Office
Retail
Multifamily
Other
Commercial Real Estate- Houston
Source: Company Documents
SECOND QUARTER 2016 – BALANCE SHEET
$ in thousands except % data
Total
Houston CRE
Portfolio
Energy Corridor
(all office)
Remainder
Houston
Portfolio
Outstanding Balance at June 30,
2016 $ 465,951 $ 75,486 $ 390,465
% of Houston CRE Portfolio 16% 84%
Weighted Average Debt Service
Coverage 1.79X 1.71X 1.80X
Weighted Average Yield on Debt 11.91% 11.16% 12.07%
12
Originated Deposits
Acquired from LegacyTexas Group, Inc.
Deposit Cost
2011Y 2012Y 2013Y 2014Y 2015Y 2016 Q2
$1,963 $2,178
$2,265
$2,658
$3,599
$5,623
$1,6281.11%
0.54% 0.43% 0.34%
0.29% 0.33%
Total deposits at June 30, 2016 increased by $319.8 million from March 31, 2016, with all deposit
categories growing on a linked-quarter basis. Time and non-interest-bearing demand deposits
increased by $206.2 million and $60.9 million, respectively, on a linked-quarter basis, while
interest-bearing demand and savings and money market deposits increased by $28.9 million and
$23.9 million, respectively, for the same period.
Core funded, low cost deposit base
Source: Company Documents
1 Represents balance acquired on January 1, 2015
($ in millions)
Total Deposits
Cost of deposits: 0.33%
SECOND QUARTER 2016 – BALANCE SHEET
As of June 30, 2016
22.0%
14.4%
40.0%
23.6% Non-interest
bearing-demand
Interest-bearing
demand
Savings and money
market
Time
$5,227
1
13
Solid net interest income growth
Source: Company Documents
Net interest income and NIM
R: 000
G: 048
B: 135
R: 111
G: 162
B: 135
• Net interest income for the second quarter of 2016 increased by $4.0 million, or 6.1%, from the linked quarter
and $9.5 million, or 15.9%, from the second quarter of 2015.
• Net interest margin for the quarter ended June 30, 2016 was 3.79%, a nine basis point decrease from the first
quarter of 2016 and a 27 basis point decrease from the second quarter of 2015. Accretion of purchase
accounting fair value adjustments contributed seven basis points to the net interest margin for the quarter
ended June 30, 2016 and for the quarter ended March 31, 2016. Accretion contributed 20 basis points for the
quarter ended June 30, 2015.
SECOND QUARTER 2016 – INCOME STATEMENT
Net interest income ($mm) NIM
2012Y 2013Y 2014Y 2015Y 2015 Q2 2016 Q2
$116 $118 $133
$241
$60 $69
3.61% 3.71%
3.78%
4.00%
4.06%
3.79%
14
Net interest income Core non-interest income Core non-interest expense Efficiency ratio
2013Y 2014Y 2015Y 2015 Q2 2016 Q2
$118
$133
$241
$60 $69
$21 $21
$45
$12 $13
$88 $87
$150
$37 $40
63.4%
57.0%
52.4% 51.6%
48.2%
• Efficiency ratio improved to 48.17%, compared to 48.96% for the first quarter of 2016 and 51.61% for the
second quarter of 2015.
• Core non-interest income increased by $1.4 million from the linked quarter and by $1.0 million year-over-year.
Core non-interest expense increased by $2.1 million from the first quarter of 2016 and by $2.7 million from
the second quarter of 2015.
Disciplined expense management
SECOND QUARTER 2016 – INCOME STATEMENT
Source: Company Documents
Note: Core non-interest income and core non-interest expense exclude changes in the value of private equity funds, gains (losses) from securities transactions and
fixed assets, net gain on sale of insurance subsidiary operations, goodwill impairment, merger and acquisition costs and one-time payroll costs. Efficiency ratio metrics
exclude the aforementioned items, as well as gain (loss) on foreclosed assets and amortization of intangible assets.
($ in millions)
15
Strong asset quality
Source: Company documents
1 Held for investment, excluding Warehouse Purchase Program loans
NCOs / average loans HFI¹NPAs / loans HFI1 + OREO
R: 000
G: 048
B: 135
R: 111
G: 162
B: 135
• Growth balanced with disciplined underwriting and risk management resulting in strong asset quality
• All of the key credit quality ratios remained strong, with asset quality metrics continuing to compare
favorably to industry
SECOND QUARTER 2016 – ASSET QUALITY
2012Y 2013Y 2014Y 2015Y 2016 Q2
1.72%
1.10%
0.91% 0.89%
0.99%
2012Y 2013Y 2014Y 2015Y 2016 Q2
0.17%
0.10%
0.02%
0.09%
0.01%
16
Prudent capital management
Source: Company documents
1 Calculated at the Company level, which is subject to the capital adequacy requirements of the Federal Reserve
TCE / TA Tier 1 common risk-based¹
Tier 1 leverage¹
• Profitability levered excess capital while maintaining strong capital levels
• In November 2015, the Company completed a public offering of $75.0 million of fixed-to-
floating rate subordinated notes due in 2025, the proceeds of which are being used for general
corporate purposes, potential strategic acquisitions and investments in the Bank as regulatory
capital.
SECOND QUARTER 2016 – CAPITAL
2012Y 2013Y 2014Y 2015Y 2016 Q2
13.5% 14.7% 13.0%
8.3% 8.4%
2012Y 2013Y 2014Y 2015Y 2016 Q2
21.7%
18.2%
15.1%
9.6% 9.3%
2012Y 2013Y 2014Y 2015Y 2016 Q2
14.0% 15.7% 13.9%
9.5% 8.9%
17
Key investment highlights
One of the largest independent Texas financial services companies built
upon a strong customer focus and a long history of serving Texans
Robust loan growth and disciplined expense management
Growth balanced with disciplined underwriting and risk management
resulting in strong asset quality
Capital ratios remain strong; provides dry powder for robust organic growth
SECOND QUARTER 2016 – INVESTMENT HIGHLIGHTS
18
Looking ahead
Expand our Texas footprint and solidify our deep-rooted culture
Focus on growth – organically and through selective acquisitions
Diversify income sources
Prudent and focused expense management
Maintain strong asset quality
Strategic capital deployment
SECOND QUARTER 2016 – LOOKING AHEAD
19
Manifesto
We believe in our customers. Their goals. Their
dreams. Their ambitions for tomorrow.
And since 1952, we’ve been doing whatever it takes to support them as they
advance in business and in life.
We are responsive, accountable, trusted, experts at what we do. And we
listen. Because we believe that true understanding is the first step toward
bold, meaningful results.
Fueled by an independent spirit, inspired by the ingenuity of our customers
and grounded by the values of our community, we are a family like no other.
We are LegacyTexas.
SECOND QUARTER 2016 – OUR VISION
Appendix
21
Supplemental Information – Non-GAAP Financial Measures (unaudited)
At or For the Quarters Ended
June 30,
2016
March 31,
2016
December 31,
2015
September 30,
2015
June 30,
2015
(Dollars in thousands, except per share amounts)
GAAP net income available to common shareholders 1 $23,114 $21,954 $16,336 $17,768 $20,091
Distributed and undistributed earnings to participating securities 1 103 128 110 127 160
Merger and acquisition costs — — — — 5
Net (gain) on sale of insurance subsidiary operations (39) — — — —
One-time (gain) loss on assets 155 (2,184) (133) (130) (142)
(Gain) loss on sale of available-for-sale securities (42) — (11) 16 —
Core (non-GAAP) net income $23,291 $19,898 $16,302 $17,781 $20,114
Average shares for basic earnings per share 46,135,999 46,024,250 45,939,817 45,862,840 45,760,232
GAAP basic earnings per share $0.50 $0.48 $0.36 $0.39 $0.44
Core (non-GAAP) basic earnings per share $0.50 $0.43 $0.35 $0.39 $0.44
Average shares for diluted earnings per share 46,352,141 46,152,301 46,267,956 46,188,461 46,031,267
GAAP diluted earnings per share $0.50 $0.48 $0.35 $0.38 $0.44
Core (non-GAAP) diluted earnings per share $0.50 $0.43 $0.35 $0.38 $0.44
Reconciliation of Core (non-GAAP) to GAAP Net Income and Earnings per Share (net of tax):
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.
At or For the Years Ended
December 31,
2015
December 31,
2014
December 31,
2013
December 31,
2012
December 31,
2011
GAAP net income available to common shareholders 1 $70,382 $30,942 $31,294 $35,135 $26,205
Distributed and undistributed earnings to participating securities 1 534 336 394 106 123
Merger and acquisition costs 1,009 7,071 431 2,683 306
Costs relating to sale of VPM — – – 84 –
One-time payroll and severance costs — 234 436 777 –
One-time (gain) loss on assets 149 319 (574) (1,353) (497)
Goodwill impairment — – – 532 176
(Gain) loss on sale of available-for-sale securities (132) – 115 (659) (4,074)
Core (non-GAAP) net income $71,942 $38,902 $32,096 $37,305 $22,239
Average shares for basic earnings per share 45,847,284 37,919,065 37,589,548 35,879,704 32,219,841
GAAP basic earnings per share $1.54 $0.82 $0.83 $0.98 $0.81
Core (non-GAAP) basic earnings per share $1.57 $1.03 $0.85 $1.04 $0.69
Average shares for diluted earnings per share 46,125,447 38,162,094 37,744,786 35,998,345 32,283,107
GAAP diluted earnings per share $1.53 $0.81 $0.83 $0.98 $0.81
Core (non-GAAP) diluted earnings per share $1.56 $1.02 $0.85 $1.04 $0.69
22
Calculation of Tangible Book Value:
Supplemental Information – Non-GAAP Financial Measures (unaudited)
At or For the Quarters Ended
June 30, 2016 March 31, 2016 December 31, 2015 September 30, 2015 June 30, 2015
(Dollars in thousands, except per share amounts)
Total shareholders' equity $843,304 $823,052 $804,076 $792,637 $776,924
Less: Goodwill (178,559) (180,776) (180,776) (180,632) (180,632)
Less: Identifiable intangible assets, net (838) (924) (1,030) (1,142) (1,280)
Total tangible shareholders' equity $663,907 $641,352 $622,270 $610,863 $595,012
Shares outstanding at end of period 47,670,440 47,645,826 47,645,826 47,640,193 47,619,493
Book value per share- GAAP $17.69 $17.27 $16.88 $16.64 $16.32
Tangible book value per share- Non-GAAP $13.93 $13.46 $13.06 $12.82 $12.50
Calculation of Tangible Equity to Tangible Assets:
Total assets $8,057,005 $7,562,126 $7,691,940 $6,878,843 $6,669,624
Less: Goodwill (178,559) (180,776) (180,776) (180,632) (180,632)
Less: Identifiable intangible assets, net (838) (924) (1,030) (1,142) (1,280)
Total tangible assets $7,877,608 $7,380,426 $7,510,134 $6,697,069 $6,487,712
Equity to assets- GAAP 10.47% 10.88% 10.45% 11.52% 11.65%
Tangible equity to tangible assets- Non-GAAP 8.43% 8.69% 8.29% 9.12% 9.17%
At or For the Years Ended
December 31, 2014 December 31, 2013 December 31, 2012 December 31, 2011
Total shareholders' equity $568,223 $544,460 $520,871 $406,309
Less: Goodwill (29,650) (29,650) (29,650) (818)
Less: Identifiable intangible assets, net (813) (1,239) (1,653) (420)
Total tangible shareholders' equity $537,760 $513,571 $489,568 $405,071
Shares outstanding at end of period 40014851 39,938,816 39,612,911 33,700,399
Book value per share- GAAP $14.20 $13.63 $13.15 $12.06
Tangible book value per share- Non-GAAP $13.44 $12.86 $12.36 $12.02
Calculation of Tangible Equity to Tangible Assets:
Total assets $4,164,114 $3,525,232 $3,663,058 $3,180,578
Less: Goodwill (29,650) (29,650) (29,650) (818)
Less: Identifiable intangible assets, net (813) (1,239) (1,653) (420)
Total tangible assets $4,133,651 $3,494,343 $3,631,755 $3,179,340
Equity to assets- GAAP 13.65% 15.44% 14.22% 12.77%
Tangible equity to tangible assets- Non-GAAP 13.01% 14.70% 13.48% 12.74%
Serious News for Serious Traders! Try StreetInsider.com Premium Free!
You May Also Be Interested In
- Strathmore Announces Change in Board of Directors
- Duolingo Invests in World-Class Motion Design with Acquisition of Animade
- As Private Credit Captures 90% of Lower Middle Market LBO Financing, Abacus Finance Group Expands Its Relationship-Driven Approach to Deliver Certainty of Close
Create E-mail Alert Related Categories
SEC FilingsSign up for StreetInsider Free!
Receive full access to all new and archived articles, unlimited portfolio tracking, e-mail alerts, custom newswires and RSS feeds - and more!
