Attention Seeking Stock: LegacyTexas Financial Group Inc. (NASDAQ: LTXB)

Charles Barnes

I am Charles Barnes and I focus on breaking news stories and ensuring we (“Import Tourism”) offer timely reporting on some of the most recent stories released through market wires about “Financial” sector.

I have formerly spent over 3 years as a trader in U.S. Stock Market and is now semi-stepped down. I work on a full time basis for Import Tourism specializing in quicker moving active shares with a short term view on investment opportunities and trends.

Address: 3819 Sun Valley Road, George, WA 98824, USA
Phone: (+1) 509-785-0774
Email: charlesbarnes@importtourism.com
Charles Barnes

PLANO, Texas, June 28, 2019 – Shares of LegacyTexas Financial Group Inc. (NASDAQ: LTXB) gained 0.37% to $40.75. The stock grabbed the investor’s attention and traded 419.309K shares as compared to its average daily volume of 460.59K shares. The stock’s institutional ownership stands at 86.90%.

LegacyTexas Financial Group, Inc. (LTXB), the holding company for LegacyTexas Bank, recently declared net income of $29.10M for the first quarter of 2019, a decrease of $28.70M from the fourth quarter of 2018 and a boost of $3.30M from the first quarter of 2018.  Core (non-GAAP) net income totaled $29.10M for the first quarter of 2019, down $13.60M from the fourth quarter of 2018 and up $4.60M from the first quarter of 2018.

Net income for the fourth quarter of 2018 was positively influenced by a $15.30M 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.

Net interest income for the quarter ended March 31, 2019 was $81.20M, a $3.10M, or 3.7%, decrease from the fourth quarter of 2018 and a $2.60M, or 3.2%, increase from the first quarter of 2018.  The $3.10M decrease from the fourth quarter of 2018 was mainly driven by a change in the mix of deposits, increased average rates on deposits and borrowings and reduced volume in the Warehouse Purchase Program loan portfolio contrast to the linked quarter.  Yields earned and rates paid are calculated using the actual number of days in each month over the actual number of days in the year, with the exception of the securities portfolios and the consumer real estate and loans held for sale loan portfolios, which are calculated using 30 days in a month over 360 days in a year.  Accordingly, interest income on certain portfolios, such as the commercial real estate, commercial and industrial and Warehouse Purchase Program loan portfolios, was negatively influenced by the first quarter of 2019 having two fewer days than the fourth quarter of 2018.

Interest income earned on Warehouse Purchase Program loans reduced by $1.70M from the fourth quarter of 2018, as the average balance reduced by $139.90M, which was partially offset by increases in interest income earned on consumer real estate and commercial and industrial loans.  Interest income earned on the consumer real estate portfolio increased $906.0K, driven by a $76.40M linked-quarter increase in the average balance.  The average balance of commercial and industrial loans increased $63.40M from the fourth quarter of 2018, resulting in a $185.0K increase in interest income. A $70.20M increase in the average balance of the commercial real estate portfolio from the fourth quarter of 2018 was offset by two less days of interest income in the first quarter of 2019, as well as a two basis point decrease in the average yield, resulting in a $92.0K decrease in interest income.

Interest income on loans for the first quarter of 2019 included $255.0K in accretion of purchase accounting fair value adjustments on attained loans, which mainly consisted of $73.0K on attained commercial real estate loans, $46.0K on attained commercial and industrial loans and $135.0K on attained consumer loans.

The $2.60M increase in net interest income contrast to the first quarter of 2018 was mainly because of a $9.70M increase in interest income on loans, which was driven by higher yields earned on all loan portfolios, as well as increased volume in all loan portfolios with the exception of Warehouse Purchase Program loans and loans held for sale.  The average balance of commercial and industrial loans increased $183.50M from the first quarter of 2018, while the average yield earned on this portfolio increased by 71 basis points for the same period, resulting in a $6.00M increase in interest income.  The average yield earned on the commercial and industrial portfolio for the quarter ended March 31, 2019 was positively influenced by three increases in the Fed Funds rate totaling 75 basis points since March 31, 2018.  The average balance of consumer real estate loans increased $176.70M from the first quarter of 2018, while the average yield earned on this portfolio increased by 25 basis points, which led to a $2.90M increase in interest income.  A $55.10M increase in the average balance of commercial real estate loans contrast to the first quarter of 2018, as well as a nine basis point increase in the average yield, resulted in a $1.40M increase in interest income.  The average balance of Warehouse Purchase Program loans reduced by $241.30M from the first quarter of 2018, while the average yield earned on this portfolio increased by 68 basis points, resulting in a $1.30M decrease in interest income contrast to the first quarter of 2018.

Interest expense for the quarter ended March 31, 2019 increased by $2.10M, or 9.0%, contrast to the linked quarter, which was mainly because of higher average deposit and borrowing rates, as well as increases of $73.40M and $24.60M in the average balances of time and interest-bearing demand deposits, respectively, contrast to the fourth quarter of 2018.  An 11 basis point increase in the average rate paid on savings and money market deposits contrast to the linked quarter offset a $44.90M decrease in the average balance of these deposits.  Interest expense on borrowings increased by $480.0K, because of a $31.00M increase in the average balance of borrowings contrast to the fourth quarter of 2018, as well as an 18 basis point increase in the average rate paid on borrowed funds.

Contrast to the first quarter of 2018, interest expense for the quarter ended March 31, 2019 increased by $7.90M, or 46.2%, mainly because of higher average savings, money market and time deposit and borrowing rates, as well as a $343.50M increase in the average balance of time deposits.  A 38 basis point increase in the average rate paid on savings and money market deposits contrast to the first quarter of 2018 offset a $257.40M decrease in the average balance of these deposits.  A 77 basis point increase in the average rate paid on borrowings contrast to the first quarter of 2018, as well as a $4.60M increase in the average balance, resulted in a $1.70M year-over-year increase in interest expense on borrowed funds.

Non-interest Income

Non-interest income for the first quarter of 2019 was $9.90M, a $2.40M, or 19.3%, decrease from the fourth quarter of 2018 and a $3.00M, or 23.3%, decrease from the first quarter of 2018.  Service charges and other fees reduced by $2.70M contrast to the fourth quarter of 2018, mainly resulting from lower commercial loan fee income (consisting of syndication, arrangement, non-usage and pre-payment fees), as well as reduced debit card interchange, non-sufficient funds and Warehouse Purchase Program income.  Other non-interest income for the first quarter of 2019 included a $21.0K net increase in the value of investments in community development-oriented private equity funds used for Community Reinvestment Act purposes (the “CRA Funds”), down from a $379.0K net increase in the CRA Funds for the fourth quarter of 2018, which was offset by a $366.0K interest payment received from the Internal Revenue Service in the first quarter of 2019 related to a prior year tax refund, as well as a $216.0K linked-quarter increase in interest rate swap fee income.

The $3.00M decrease in non-interest income from the first quarter of 2018 was mainly because of a $2.20M decrease in gain (loss) on sale and disposition of assets, mainly because of a $2.30M insurance settlement received in the first quarter of 2018 related to a misappropriation of about $2.50M in vault cash from one of the former LegacyTexas Bank branches it attained in 2015.  Service charges and other fees reduced by $672.0K from the first quarter of 2018, which was driven by lower commercial loan fee income, as well as reduced title premium income and Warehouse Purchase Program income.  Net gains on the sale of mortgage loans held for sale during the first quarter of 2019 reduced by $284.0K contrast to the same period in 2018, which included gains recognized on $49.10M of one-to-four family mortgage loans that were sold or committed for sale and fair value changes on mortgage derivatives and mortgage fees collected during the 2018 period, contrast to $32.60M for the 2019 period.

Non-interest Expenses

Non-interest expense for the first quarter of 2019 was $44.30M, up $1.40M, or 3.4%, from the fourth quarter of 2018 and up $428.0K, or 1.0%, from the first quarter of 2018.  Salaries and employee benefits expense increased by $3.10M from the fourth quarter of 2018, which was driven by higher share-based compensation expense in the 2019 period related to fluctuations in the Company’s share price, as well as increased payroll taxes related to Social Security wage base limits starting over at the starting of the year and higher salary costs attributable to merit increases granted in the first quarter of 2019.  The linked-quarter increase in salaries and employee benefits expense was partially offset by a $736.0K decrease in outside professional services expense, mainly related to lower consulting costs recorded in the 2019 period.  Outside professional services expense for the fourth quarter of 2018 included $256.0K in expenses related to a $15.30M one-time tax benefit recorded in the fourth quarter of 2018 stemming from the December 2017 enactment of the Tax Cuts and Jobs Act.  Advertising expense reduced by $398.0K from the fourth quarter of 2018, mainly because of a lower number of events and sponsorships in the first quarter of 2019, while regulatory assessments expense declined by $268.0K on a linked-quarter basis because of a notice of preliminary assessment credit received from the FDIC in the first quarter of 2019, which may reduce future FDIC assessment payments.

The $428.0K increase in non-interest expense from the first quarter of 2018 was mainly because of a $1.20M increase in data processing expense because of system upgrades, technology refreshments and outsourcing certain segments of its data processing.  The year-over-year increase in data processing expense was partially offset by a $536.0K decline in regulatory assessments expense from the first quarter of 2018, because of the above-mentioned FDIC notice of preliminary assessment credit, as well as a lower assessment rate in the 2019 period.  In Addition To, salaries and employee benefits expense reduced by $205.0K from the first quarter of 2018, as the 2018 period included a $1.0K bonus paid to all full-time employees whose salary was under $100.0K (awarded in connection with the enactment of the Tax Cuts and Jobs Act), which resulted in $679.0K of additional salary expense recorded in the first quarter of 2018.  This year-over-year decrease in salaries and employee benefits expense was partially offset by higher salary costs attributable to merit increases granted in the first quarter of 2019, as well as higher share-based compensation expense in the 2019 period related to fluctuations in the Company’s share price.

Financial Condition – Loans

Gross loans held for investment at March 31, 2019, excluding Warehouse Purchase Program loans, grew $154.00M from December 31, 2018, which included growth in all loan portfolios.  At March 31, 2019, commercial real estate and consumer real estate loans increased by $96.00M and $32.70M, respectively, from December 31, 2018, while commercial and industrial and construction and land loans increased by $12.90M and $11.80M, respectively, for the same period.

Contrast to March 31, 2018, gross loans held for investment at March 31, 2019, excluding Warehouse Purchase Program loans, grew $375.60M, which included growth in all loan portfolios.  Commercial and industrial and consumer real estate loans increased by $103.30M and $170.70M, respectively, at March 31, 2019, contrast to March 31, 2018, while commercial real estate loans increased by $69.00M for the same period.  In Addition To, construction and land and other consumer loans increased by $30.30M and $2.40M, respectively, contrast to March 31, 2018.

At March 31, 2019, Warehouse Purchase Program loans increased $135.80M contrast to December 31, 2018 and by $76.30M contrast to March 31, 2018.

Financial Condition – Deposits

Total deposits at March 31, 2019 increased $235.70M from December 31, 2018, which included growth of $57.70M and $162.60M in interest-bearing demand and time deposit balances, respectively.  Moreover, savings and money market deposits increased by $36.40M from December 31, 2018, while non-interest-bearing demand deposits declined by $21.10M.

Contrast to March 31, 2018, total deposits increased by $123.00M, which included growth in time and non-interest-bearing demand deposits of $378.50M and $71.60M, respectively, while savings and money market and interest-bearing demand deposits reduced by $214.80M and $112.20M, respectively.  At March 31, 2019, non-interest-bearing demand deposits totaled 24.8% of total deposits, contrast to 24.2% of total deposits at March 31, 2018.

Credit Quality

The Company recorded a provision for credit losses of $9.80M for the quarter ended March 31, 2019, contrast to $15.70M for the quarter ended March 31, 2018.  The Company did not record a provision for credit losses for the quarter ended December 31, 2018.  The increase in provision expense on a linked-quarter basis was mainly because of a $38.60M increase in non-performing loans from December 31, 2018, which included a $6.10M increase in non-performing energy loans and the placement of the Company’s only remaining corporate healthcare finance relationship totaling $19.30M on non-accrual status during the first quarter of 2019.  The increase in non-performing loans from December 31, 2018 also included a $7.40M personal loan to one of the owners of an energy company that was used to recapitalize the company.  This loan is collateralized by the borrower’s stock in the energy company, as well as other personal assets, and was reported at March 31, 2019 as a non-performing loan in the commercial and industrial, excluding energy category.

LTXB has a market value of $1.98B while its EPS was booked as $2.97 in the last 12 months. The stock has 48.81M shares outstanding. Beta value of the company was 1.52; beta is used to measure riskiness of the security. Analyst recommendation for this stock stands at 2.20.

Charles Barnes

Charles Barnes

I am Charles Barnes and I focus on breaking news stories and ensuring we (“Import Tourism”) offer timely reporting on some of the most recent stories released through market wires about “Financial” sector. I have formerly spent over 3 years as a trader in U.S. Stock Market and is now semi-stepped down. I work on a full time basis for Import Tourism specializing in quicker moving active shares with a short term view on investment opportunities and trends. Address: 3819 Sun Valley Road, George, WA 98824, USA Phone: (+1) 509-785-0774 Email: charlesbarnes@importtourism.com