LegacyTexas Financial Group Inc. (NASDAQ:LTXB) Q4 2017 Earnings Conference Call Transcript

Jan 24, 2018 • 09:00 am ET


LegacyTexas Financial Group Inc. (NASDAQ:LTXB) Q4 2017 Earnings Conference Call Transcript


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Good morning, and welcome to the LegacyTexas 2017 Earnings Call and Webcast. (Operator Instructions) Please note, this event is being recorded.

I would now like to turn the conference over to Scott Almy. Please go ahead.

Scott Almy

Thanks, good morning, everyone, and welcome to the call. (Forward-Looking Cautionary Statements) At this time, if you're logged into our webcast, please refer to the slide presentation available online, including our safe harbor statement on Slide 2. For those joining by phone, please note that the safe harbor statement and presentation are available on our website at legacytexasfinancialgroup.com. All comments made during today's call are subject to that safe harbor statement.

I'm joined this morning by LegacyTexas President and CEO, Kevin Hanigan; and Chief Financial Officer, Mays Davenport. After the presentation, we'll be happy to address questions you may have as time permits.

And with that, I'll turn it over to Kevin.

Kevin Hanigan

Thanks, Scott, and thank you all for dialing into the call this morning. Mays and I will be concise in walking you through our slide deck and then open up the call to entertain your questions.

The fourth quarter was a solid but noisy quarter for the Company. We had a deferred tax write-down related to corporate tax reform and a write-down resulting from a new appraisal on an OREO asset. The deferred tax asset cost us $13 million or $0.29 per share. While fourth quarter loan growth was muted by significant loan payoffs and some delayed loan closings, our warehouse business was particularly strong for the entire fourth quarter and our average loans held for investment for the quarter was very strong at $208 million. On the deposit front, we allowed about $130 million of our highest-cost, high-beta deposits to run off and largely replaced them with non-interest-bearing deposit growth of $107 million.

With that background, let's walk through the slide deck, starting on Page 4. GAAP net income for the quarter totaled $14.7 million, which included a $13.5 million increased tax expense related to our deferred tax asset. Net of this tax expense, core net income was $28.2 million or $0.60 per share. Full year core net income totaled $102 million.

While loans held for investment for Q4 grew only $32 million, our average loans held for investment in Q4 grew by a very strong $208.6 million and fueled a 7 basis point increase in net interest margin to 3.78%. Core efficiency ratio for the year was 45.17% and core ROA for the year was 1.18%. We also mention on Page 4 our estimated effective corporate tax rate for 2018 is 20%, which could drive a nice increase in future earnings.

Turning to Page 5. I note our total deposit growth was muted by about $130 million decline in high-cost financial institution deposits. While these higher-cost deposits declined, we are beginning to see the impact of our efforts to grow non-interest-bearing deposits, which grew by $107 million in the quarter and now represent 24.2% of total deposits versus just 21.7% at