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Category: Stock Market and Legacy Texas
Date: 7 October 2019 Stock Price: $36.75 We take a look at the 2nd quarter earnings report of their 2019 fiscal year of LegacyTexas Financial Group, the holding company of LegacyTexas Bank, which has 42 branches in the Dallas/Fort Worth area and surrounding counties.
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About LegacyTexas Financial Group
LegacyTexas Financial Group, Inc. is the holding company for LegacyTexas Bank, a commercially oriented community bank based in Plano, Texas. LegacyTexas Bank operates 42 banking offices in the Dallas/Fort Worth Metroplex and surrounding counties
Overview of LegacyTexas' latest earnings report
- Interest and dividend income: $114.077 million (up from $103.991 million for the same quarter of the previous year)
- Interest and dividend income increased by 9.7% over the last 12 months
- Net income: $26.983 million (down from $27.837 million for the same quarter of the previous year)
- Diluted earnings per share: $0.56 (down from $0.58 for the same quarter of the previous year)
- PE ratio: 19.1
- Dividend declared: $0.25
- Dividend yield: 2.32%
- Diluted weighted-average shares outstanding: 47.923 million (up from 47.618 million for the same quarter of the previous year)
- Return on average common shareholders' equity: 9.52%
- Core (non-GAAP) return on average common shareholders' equity :10.18%
- Return on average assets: 1.13%
- Efficiency ratio (GAAP basis): 48.60%
- Total equity to total assets: 11.50%
LegacyTexas' management commentary on the results and business outlook
PLANO, Texas, July 24, 2019 /PRNewswire/ -- LegacyTexas Financial Group, Inc. (Nasdaq: LTXB) (the "Company"), the holding company for LegacyTexas Bank (the "Bank"), today announced net income of $27.0 million for the second quarter of 2019, a decrease of $2.1 million from the first quarter of 2019 and a decrease of $854,000 from the second quarter of 2018. Core (non-GAAP) net income totaled $28.8 million for the second quarter of 2019, down $231,000 from the first quarter of 2019 and up $886,000 from the second quarter of 2018. See "Supplemental Information- Non-GAAP Financial Measures" at the end of this document.
On June 17, 2019, the Company and Prosperity Bancshares, Inc.® ("Prosperity") jointly announced the signing of a definitive merger agreement pursuant to which the Company will merge with Prosperity. Under the terms of the merger agreement, shareholders of the Company will receive 0.5280 shares of Prosperity common stock and $6.28 cash for each share of Company common stock. The completion of the transaction is subject to certain conditions, including the approval by the Company shareholders and Prosperity shareholders and customary regulatory approvals. For additional information regarding the Company's proposed merger with Prosperity, see the Company's Current Report filed on Form 8-K with the SEC on June 17, 2019.
"We continue to grow our franchise and serve our customers and communities," said President and CEO Kevin Hanigan. "We grew loans by $581.9 million (including Warehouse Purchase Program) in the second quarter, while our non-interest-bearing deposits grew by $94.5 million. Additionally, the talented bankers at both LegacyTexas and Prosperity Bank have begun the process of preparing for the merger of the two banks, which we hope to consummate in the fourth quarter of 2019."
The Company recorded a provision for credit losses of $16.1 million for the quarter ended June 30, 2019, compared to $9.8 million for the quarter ended March 31, 2019 and $17.5 million for the quarter ended June 30, 2018. The increase in provision expense on a linked-quarter basis was primarily due to increased specific reserves allocated to the Company's one remaining corporate healthcare finance relationship, which totaled $19.9 million at June 30, 2019, and the Company's impaired energy loans, which totaled $19.9 million at June 30, 2019. These impaired corporate healthcare finance and energy loans have been included in the estimated pre-tax gross credit mark of $175.0 million that was disclosed as an assumption in the merger with Prosperity, as reported in the Company's investor presentation filed under a Current Report on Form 8-K with the SEC on June 17, 2019.
On June 17, 2019, the Company and Prosperity Bancshares, Inc.® ("Prosperity") jointly announced the signing of a definitive merger agreement pursuant to which the Company will merge with Prosperity. Under the terms of the merger agreement, shareholders of the Company will receive 0.5280 shares of Prosperity common stock and $6.28 cash for each share of Company common stock. The completion of the transaction is subject to certain conditions, including the approval by the Company shareholders and Prosperity shareholders and customary regulatory approvals. For additional information regarding the Company's proposed merger with Prosperity, see the Company's Current Report filed on Form 8-K with the SEC on June 17, 2019.
"We continue to grow our franchise and serve our customers and communities," said President and CEO Kevin Hanigan. "We grew loans by $581.9 million (including Warehouse Purchase Program) in the second quarter, while our non-interest-bearing deposits grew by $94.5 million. Additionally, the talented bankers at both LegacyTexas and Prosperity Bank have begun the process of preparing for the merger of the two banks, which we hope to consummate in the fourth quarter of 2019."
The Company recorded a provision for credit losses of $16.1 million for the quarter ended June 30, 2019, compared to $9.8 million for the quarter ended March 31, 2019 and $17.5 million for the quarter ended June 30, 2018. The increase in provision expense on a linked-quarter basis was primarily due to increased specific reserves allocated to the Company's one remaining corporate healthcare finance relationship, which totaled $19.9 million at June 30, 2019, and the Company's impaired energy loans, which totaled $19.9 million at June 30, 2019. These impaired corporate healthcare finance and energy loans have been included in the estimated pre-tax gross credit mark of $175.0 million that was disclosed as an assumption in the merger with Prosperity, as reported in the Company's investor presentation filed under a Current Report on Form 8-K with the SEC on June 17, 2019.
LegacyTexas (NASDAQ: LTXB) stock price history
The image below, obtained from Google, shows the stock price history of LegacyTexas over the last 5 years. And it's been a very good time for LegacyTexas stockholders.5 years ago the stock was trading at around $24.10 a stock and its currently trading at $43 a stock. That's a strong return of 78.4% provided to LegacyTexas stockholders over the last 5 years. The stock of LegacyTexas is trading at a lot closer to its 52 week high of $44.22 than it is to its 52 week low of $30.19 which to us is a clear indication that the short term sentiment and momentum of LegacyTexas' stock is very positive at this point in time.
LegacyTexas (NASDAQ: LTXB) latest stock valuation
So what is LegacyTexas stock worth based on the release of their latest earnings report? Based on the group's latest earnings provided our valuation model provides a target (full value) price at $39.10 a LegacyTexas stock. We therefore believe that the stock is undervalued.
We usually suggest long term fundamental or value investors look to enter into a stock at least 10% below our target (full value) price which in this case is $39.10. Thus we see a good entry point into LegacyTexas stock at $35.20 or below. Since LegacyTexas is trading close to this suggested entry point we rate LegacyTexas stock a buy
We usually suggest long term fundamental or value investors look to enter into a stock at least 10% below our target (full value) price which in this case is $39.10. Thus we see a good entry point into LegacyTexas stock at $35.20 or below. Since LegacyTexas is trading close to this suggested entry point we rate LegacyTexas stock a buy