8-K
SOUTH PLAINS FINANCIAL, INC. (SPFI)
UNITED 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 25, 2023
South Plains Financial, Inc.
(Exact name of registrant as specified in its charter)
| Texas | 001-38895 | 75-2453320 |
|---|---|---|
| (State or other jurisdiction of incorporation) | (Commission File Number) | (IRS Employer Identification No.) |
| 5219 City Bank Parkway<br><br> <br>Lubbock,<br> Texas | 79407 | |
| --- | --- | |
| (Address of principal executive offices) | (Zip Code) |
(806) 792-7101
(Registrant’s telephone number, including area code)
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:
| ☐ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
|---|---|
| ☐ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| --- | --- |
| ☐ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| --- | --- |
| ☐ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
| --- | --- |
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
|---|---|---|
| Common Stock, par value $1.00 per share | SPFI | The Nasdaq Stock Market LLC |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☒
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
| Item 2.02 | Results of Operations and Financial Condition. |
|---|
On July 25, 2023, South Plains Financial, Inc. (the “Company”) issued a press release announcing its financial results for the second quarter ended June 30, 2023. A copy of the Company’s press release covering such announcement and certain other matters is furnished as Exhibit 99.1 to this Current Report on Form 8-K.
| Item 7.01 | Regulation FD Disclosure. |
|---|
On July 25, 2023, officers of the Company will have a conference call with respect to the Company’s financial results for the second quarter ended June 30, 2023. An earnings release slide presentation highlighting the Company’s financial results for the second quarter ended June 30, 2023 is furnished as Exhibit 99.2 to this Current Report on Form 8-K. This earnings release slide presentation will also be available on the Company’s website, www.spfi.bank, under the “News & Events” section.
In accordance with General Instruction B.2 of Form 8-K, the information in Items 2.02 and 7.01 of this Current Report on Form 8-K, including Exhibit 99.1 and Exhibit 99.2 furnished herewith, shall not be deemed “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section. The information in Items 2.02 and 7.01 of this Current Report on Form 8-K, including Exhibit 99.1 and Exhibit 99.2 furnished herewith, shall not be incorporated by reference into any filing or other document pursuant to the Exchange Act or the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such filing or document.
| Item 9.01 | Financial Statements and Exhibits. |
|---|---|
| (d) | Exhibits. |
| --- | --- |
| 99.1 | Press release, dated July 25, 2023, announcing second quarter 2023 financial results of South Plains Financial, Inc. |
| --- | --- |
| 99.2 | Earnings release slide presentation, dated July 25, 2023. |
| 104 | Cover Page Interactive Data File (formatted as Inline XBRL). |
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.
| SOUTH PLAINS FINANCIAL, INC. | ||
|---|---|---|
| Dated: July 25, 2023 | By: | /s/ Steven B. Crockett |
| Steven B. Crockett | ||
| --- | ||
| Chief Financial Officer and Treasurer |
Exhibit 99.1
South Plains Financial, Inc. Reports Second Quarter 2023 Financial Results
LUBBOCK, Texas, July 25, 2023 (GLOBE NEWSWIRE) – South Plains Financial, Inc. (NASDAQ:SPFI) (“South Plains” or the “Company”), the parent company of City Bank (“City Bank” or the “Bank”), today reported its financial results for the quarter ended June 30, 2023.
Second Quarter 2023 Highlights
| ● | Net income for the second quarter of 2023 was $29.7 million, compared to $9.2 million for the first quarter of 2023 and $15.9 million for the second quarter of 2022. |
|---|---|
| ● | Diluted earnings per share for the second quarter of 2023 was $1.71, compared to $0.53 for the first quarter of 2023 and $0.88 for the second quarter of 2022. |
| --- | --- |
| ● | Excluding one-time gains net of charges related to the sale of Windmark ($22.9 million net of tax) and the loss from repositioning of the securities portfolio ($2.7 million net<br> of tax), second quarter 2023 diluted earnings per share was $0.55 |
| --- | --- |
| ● | Deposits grew $66.5 million, or 1.9%, to $3.57 billion during the second quarter of 2023, as compared to March 31, 2023; an estimated 16% of deposits at June 30, 2023 were<br> uninsured or uncollateralized. |
| --- | --- |
| ● | Average cost of deposits for the second quarter of 2023 was 169 basis points, compared to 136 basis points for the first quarter of 2023 and 27 basis points for the second<br> quarter of 2022. |
| --- | --- |
| ● | Net interest margin, calculated on a tax-equivalent basis, was 3.65% for the second quarter of 2023, compared to 3.75% for the first quarter of 2023. |
| --- | --- |
| ● | Loans held for investment grew $190.4 million, or 6.8%, during the second quarter of 2023, compared to March 31, 2023. |
| --- | --- |
| ● | Provision for credit losses was $3.7 million in the second quarter of 2023, compared to $1.0 million in the first quarter of 2023 and no provision for the second quarter of<br> 2022. |
| --- | --- |
| ● | Nonperforming assets to total assets were 0.51% at June 30, 2023, compared to 0.19% at March 31, 2023 and 0.20% at June 30, 2022. |
| --- | --- |
| ● | Return on average assets for the second quarter of 2023 was 2.97% annualized, compared to 0.95% annualized for the first quarter of 2023 and 1.60% annualized for the second<br> quarter of 2022. |
| --- | --- |
| ● | Tangible book value (non-GAAP) per share was $21.82 as of June 30, 2023, compared to $20.19 as of March 31, 2023 and $19.50 as of June 30, 2022. |
| --- | --- |
| ● | Liquidity - available borrowing capacity of $1.82 billion through the Federal Home Loan Bank of Dallas, the Federal Reserve’s Discount Window, and access to the Federal<br> Reserve’s Bank Term Funding Program at June 30, 2023. |
| --- | --- |
| ● | Capital - total risk-based capital ratio – 16.75%, Tier 1 risk-based capital ratio – 13.37%, Common Equity Tier 1 risk-based capital ratio – 12.11%, and Tier 1 leverage ratio -<br> 11.68%, all at June 30, 2023 and significantly exceeding the minimum regulatory levels necessary to be deemed “well-capitalized.” |
| --- | --- |
| ● | As previously announced, on April 1, 2023, the sale of City Bank’s formerly wholly owned subsidiary, Windmark Insurance Agency, Inc. (“Windmark”) to Alliant Insurance Services<br> in an all cash transaction was completed. |
| --- | --- |
Curtis Griffith, South Plains’ Chairman and Chief Executive Officer, commented, “Our second quarter results demonstrate the strength of the Bank and the resiliency of our markets as we maintained core deposits while our non-interest bearing deposits remained relatively steady, which is quite an accomplishment in this challenging environment. Additionally, we were able to maintain our net interest margin at March’s level of 3.65% through the second quarter as higher loan yields are offsetting the rise in our cost of funds. We have also maintained a strong liquidity and capital position which was further bolstered by the sale of Windmark in April. Given the large one-time gain that was recognized, we made the strategic decision to sell $56 million of securities having recorded a realized loss of $3.4 million. We believe this was a tax efficient transaction which will boost our earnings in future quarters as we have reinvested the proceeds into higher yielding loans through the quarter. While we continue to deliver strong results, we believe our shares are trading below intrinsic value. As a result, our board of directors authorized a $15 million stock repurchase program in May and we subsequently bought back approximately 113,000 shares during the remainder of the quarter.”
Results of Operations, Quarter Ended June 30, 2023
Net Interest Income
Net interest income was $34.6 million for the second quarter of 2023, compared to $34.3 million for the first quarter of 2023 and $37.1 million for the second quarter of 2022. Net interest margin, calculated on a tax-equivalent basis, was 3.65% for the second quarter of 2023, compared to 3.75% for the first quarter of 2023 and 4.02% for the second quarter of 2022. The average yield on loans was 5.94% for the second quarter of 2023, compared to 5.78% for the first quarter of 2023 and 5.57% for the second quarter of 2022. The average cost of deposits was 169 basis points for the second quarter of 2023, which is 33 basis points higher than the first quarter of 2023 and 142 basis points higher than the second quarter of 2022.
Interest income was $50.8 million for the second quarter of 2023, compared to $47.4 million for the first quarter of 2023 and $40.8 million for the second quarter of 2022. Interest income increased $3.4 million in the second quarter of 2023 from the first quarter of 2023, which was mainly comprised of an increase of $3.3 million in loan interest income. The growth in loan interest income was primarily due to an increase of $115.2 million in average loans outstanding and the rising short-term interest rate environment, as the yield on loans rose 16 basis points. Interest income increased $10.1 million in the second quarter of 2023 compared to the second quarter of 2022. This increase was primarily due to an increase of average loans of $344.8 million and higher market interest rates during the period, partially offset by $4.4 million of interest income received related to four credits for the recovery of interest on previously charged-off credits, purchase discount principal recovery, and prepayment penalties during the second quarter of 2022.
Interest expense was $16.2 million for the second quarter of 2023, compared to $13.1 million for the first quarter of 2023 and $3.6 million for the second quarter of 2022. Interest expense increased $3.1 million compared to the first quarter of 2023 and $12.6 million compared to the second quarter of 2022, primarily as a result of significantly rising short-term interest rates on interest-bearing liabilities, with the increase being mainly comprised of interest expense on deposits. Additionally, interest-bearing deposits have grown during both of the period comparisons.
Noninterest Income and Noninterest Expense
Noninterest income was $47.1 million for the second quarter of 2023, compared to $10.7 million for the first quarter of 2023 and $18.8 million for the second quarter of 2022. The increase from the first quarter of 2023 was primarily due to the $33.5 million gain on sale of Windmark and an increase of $3.0 million in mortgage banking activities revenue, partially offset by a reduction of $1.4 million in income from insurance activities due to the sale of Windmark. The increase in mortgage banking activities revenues was mainly the result of a $400 thousand fair value write-up of the mortgage servicing rights portfolio compared to the write-down of $2.0 million in the first quarter of 2023 and an increase of $45.9 million in mortgage loans originated for sale. Additionally, bank card services and interchange revenue increased $1.1 million for the second quarter of 2023 compared to the first quarter of 2022 mainly as a result of continued growth in customer card usage and incentives received during the period. The increase in noninterest income for the second quarter of 2023 as compared to the second quarter of 2022 was primarily due to the $33.5 million gain on sale of Windmark noted above, partially offset by a reduction of $1.5 million in income from insurance activities due to the sale of Windmark and a decrease of $3.4 million in mortgage banking revenues as originations of mortgage loans held for sale declined $74.5 million.
Noninterest expense was $40.5 million for the second quarter of 2023, compared to $32.4 million for the first quarter of 2023 and $36.1 million for the second quarter of 2022. The $8.1 million increase from the first quarter of 2023 was largely the result of $4.5 million in personnel and transaction expenses as part of the Windmark sale plus related incentive compensation and a $3.4 million loss on the sale of securities. The increase in noninterest expense for the second quarter of 2023 as compared to the second quarter of 2022 was primarily driven by the $4.5 million in Windmark transaction and related personnel expenses, the $3.4 million loss on sale of securities, partially offset by a reduction of $1.1 million in mortgage personnel costs due to the decline in mortgage loan originations and a decrease of $759 thousand in legal expenses incurred largely as a result of a vendor dispute, which was resolved and accounted for by the end of 2022.
Loan Portfolio and Composition
Loans held for investment were $2.98 billion as of June 30, 2023, compared to $2.79 billion as of March 31, 2023 and $2.58 billion as of June 30, 2022. The $190.4 million, or 6.8%, increase during the second quarter of 2023 as compared to the first quarter of 2023 remained relationship-focused and occurred primarily in commercial real estate loans, residential mortgage loans, seasonal agricultural loans, and energy loans. As of June 30, 2023, loans held for investment increased $398.6 million, or 15.4% year over year, from June 30, 2022, primarily attributable to strong organic loan growth.
Deposits and Borrowings
Deposits totaled $3.57 billion as of June 30, 2023, compared to $3.51 billion as of March 31, 2023 and $3.43 billion as of June 30, 2022. Deposits increased by $66.5 million, or 1.9%, in the second quarter of 2023 from March 31, 2023. As of June 30, 2023, deposits increased $148.7 million, or 4.3% year over year, from June 30, 2022. Noninterest-bearing deposits were $1.10 billion as of June 30, 2023, compared to $1.11 billion as of March 31, 2023 and $1.20 billion as of June 30, 2022. Noninterest-bearing deposits represented 30.8% of total deposits as of June 30, 2023. The quarterly growth in deposits was mainly the result of an increase of $81 million in brokered deposits, partially offset by a reduction of $67 million in our public fund deposits. The year-over-year increase in deposits is primarily a result of the noted growth in the second quarter of 2023 and the overall focus on liquidity.
Asset Quality
The Company recorded a provision for credit losses in the second quarter of 2023 of $3.7 million, compared to $1.0 million in the first quarter of 2023 and no provision in the second quarter of 2022. The provision during the second quarter of 2023 was largely attributable to growth in loans held for investment and an increase of $1.3 million in specific reserves. The change in specific reserves was primarily related to a $13.3 million previously-classified relationship that was placed on nonaccrual in May 2023. Classified loans declined $3.5 million during the second quarter of 2023 to $67.4 from $70.9 million at March 31, 2023.
The ratio of allowance for credit losses to loans held for investment was 1.45% as of June 30, 2023, compared to 1.42% as of March 31, 2023 and 1.54% as of June 30, 2022.
The ratio of nonperforming assets to total assets as of June 30, 2023 was 0.51%, compared to 0.19% as of March 31, 2023 and 0.20% at June 30, 2022. Annualized net charge-offs (recoveries) were 0.05% for the second quarter of 2023, compared to 0.09% for the first quarter of 2023 and (0.02)% for the second quarter of 2022. The increase in nonperforming assets was a result of the $13.3 million relationship noted above.
Capital
Book value per share increased to $23.13 at June 30, 2023, compared to $21.57 at March 31, 2023. The growth was driven by an increase of $27.5 million of net income after dividends paid, partially offset by $2.5 million in share repurchases.
Conference Call
South Plains will host a conference call to discuss its second quarter 2023 financial results today, July 25, 2023, at 5:00 p.m., Eastern Time. Investors and analysts interested in participating in the call are invited to dial 1-877-407-9716 (international callers please dial 1-201-493-6779) approximately 10 minutes prior to the start of the call. A live audio webcast of the conference call and conference materials will be available on the Company’s website at https://www.spfi.bank/news-events/events.
A replay of the conference call will be available within two hours of the conclusion of the call and can be accessed on the investor section of the Company’s website as well as by dialing 1-844-512-2921 (international callers please dial 1-412-317-6671). The pin to access the telephone replay is 13739671. The replay will be available until August 8, 2023.
About South Plains Financial, Inc.
South Plains is the bank holding company for City Bank, a Texas state-chartered bank headquartered in Lubbock, Texas. City Bank is one of the largest independent banks in West Texas and has additional banking operations in the Dallas, El Paso, Greater Houston, the Permian Basin, and College Station, Texas markets, and the Ruidoso, New Mexico market. South Plains provides a wide range of commercial and consumer financial services to small and medium-sized businesses and individuals in its market areas. Its principal business activities include commercial and retail banking, along with investment, trust and mortgage services. Please visit https://www.spfi.bank for more information.
Non-GAAP Financial Measures
Some of the financial measures included in this press release are not measures of financial performance recognized in accordance with generally accepted accounting principles in the United States (“GAAP”). These non-GAAP financial measures include Tangible Book Value Per Share, Tangible Common Equity to Tangible Assets, and Pre-Tax, Pre-Provision Income. The Company believes these non-GAAP financial measures provide both management and investors a more complete understanding of the Company’s financial position and performance. These non-GAAP financial measures are supplemental and are not a substitute for any analysis based on GAAP financial measures.
We classify a financial measure as being a non-GAAP financial measure if that financial measure excludes or includes amounts, or is subject to adjustments that have the effect of excluding or including amounts, that are included or excluded, as the case may be, in the most directly comparable measure calculated and presented in accordance with GAAP as in effect from time to time in the United States in our statements of income, balance sheets or statements of cash flows. Not all companies use the same calculation of these measures; therefore, this presentation may not be comparable to other similarly titled measures as presented by other companies.
A reconciliation of non-GAAP financial measures to GAAP financial measures is provided at the end of this press release.
Available Information
The Company routinely posts important information for investors on its web site (under www.spfi.bank and, more specifically, under the News & Events tab at www.spfi.bank/news-events/press-releases). The Company intends to use its web site as a means of disclosing material non-public information and for complying with its disclosure obligations under Regulation FD (Fair Disclosure) promulgated by the U.S. Securities and Exchange Commission (the “SEC”). Accordingly, investors should monitor the Company’s web site, in addition to following the Company’s press releases, SEC filings, public conference calls, presentations and webcasts.
The information contained on, or that may be accessed through, the Company’s web site is not incorporated by reference into, and is not a part of, this document.
Forward Looking Statements
This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements reflect South Plains’ current views with respect to future events and South Plains’ financial performance. Any statements about South Plains’ expectations, beliefs, plans, predictions, forecasts, objectives, assumptions or future events or performance are not historical facts and may be forward-looking. These statements are often, but not always, made through the use of words or phrases such as “anticipate,” “believes,” “can,” “could,” “may,” “predicts,” “potential,” “should,” “will,” “estimate,” “plans,” “projects,” “continuing,” “ongoing,” “expects,” “intends” and similar words or phrases. South Plains cautions that the forward-looking statements in this press release are based largely on South Plains’ expectations and are subject to a number of known and unknown risks and uncertainties that are subject to change based on factors which are, in many instances, beyond South Plains’ control. Factors that could cause such changes include, but are not limited to, general economic conditions, potential recession in the United States and our market areas, the impacts related to or resulting from recent bank failures and any continuation of the recent uncertainty in the banking industry, including the associated impact to the Company and other financial institutions of any regulatory changes or other mitigation efforts taken by government agencies in response thereto, increased competition for deposits and related changes in deposit customer behavior, changes in market interest rates, the persistence of the current inflationary environment in the United States and our market areas, the uncertain impacts of ongoing quantitative tightening and current and future monetary policies of the Board of Governors of the Federal Reserve System, the effects of declines in housing prices in the United States and our market areas, increases in unemployment rates in the United States and our market areas, declines in commercial real estate prices, uncertainty regarding United States fiscal debt and budget matters, severe weather, natural disasters, acts of war or terrorism or other external events, regulatory considerations, competition and market expansion opportunities, changes in non-interest expenditures or in the anticipated benefits of such expenditures, and changes in applicable laws and regulations. Additional information regarding these risks and uncertainties to which South Plains’ business and future financial performance are subject is contained in South Plains’ most recent Annual Report on Form 10-K and Quarterly Reports on Form 10-Q on file with the SEC, and other documents South Plains files with the SEC from time to time. South Plains urges readers of this press release to review the “Risk Factors” section of our most recent Annual Report on Form 10-K, as well as the “Risk Factors” section of other documents South Plains files or furnishes with the SEC from time to time, which are available on the SEC’s website, www.sec.gov. Actual results, performance or achievements could differ materially from those contemplated, expressed, or implied by the forward-looking statements due to additional risks and uncertainties of which South Plains is not currently aware or which it does not currently view as, but in the future may become, material to its business or operating results. Due to these and other possible uncertainties and risks, the Company can give no assurance that the results contemplated in the forward-looking statements will be realized and readers are cautioned not to place undue reliance on the forward-looking statements contained in this press release. Any forward-looking statements presented herein are made only as of the date of this press release, and South Plains does not undertake any obligation to update or revise any forward-looking statements to reflect changes in assumptions, new information, the occurrence of unanticipated events, or otherwise, except as required by law. All forward-looking statements, express or implied, included in the press release are qualified in their entirety by this cautionary statement.
| Contact: | Mikella Newsom, Chief Risk Officer and Secretary |
|---|---|
| (866) 771-3347 | |
| investors@city.bank |
Source: South Plains Financial, Inc.
South Plains Financial, Inc.
Consolidated Financial Highlights - (Unaudited)
(Dollars in thousands, except share data)
| As of and for the quarter ended | |||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| June 30,<br><br> <br>2023 | March 31,<br><br> <br>2023 | December 31,<br><br> <br>2022 | September 30,<br><br> <br>2022 | June 30,<br><br> <br>2022 | |||||||||||
| Selected Income Statement Data: | |||||||||||||||
| Interest income | $ | 50,821 | $ | 47,448 | $ | 46,228 | $ | 41,108 | $ | 40,752 | |||||
| Interest expense | 16,240 | 13,133 | 9,906 | 6,006 | 3,647 | ||||||||||
| Net interest income | 34,581 | 34,315 | 36,322 | 35,102 | 37,105 | ||||||||||
| Provision for credit losses | 3,700 | 1,010 | 248 | (782 | ) | - | |||||||||
| Noninterest income | 47,112 | 10,691 | 12,676 | 20,937 | 18,835 | ||||||||||
| Noninterest expense | 40,499 | 32,361 | 32,708 | 37,401 | 36,056 | ||||||||||
| Income tax expense | 7,811 | 2,391 | 3,421 | 3,962 | 4,001 | ||||||||||
| Net income | 29,683 | 9,244 | 12,621 | 15,458 | 15,883 | ||||||||||
| Per Share Data (Common Stock): | |||||||||||||||
| Net earnings, basic | 1.74 | 0.54 | 0.74 | 0.89 | 0.91 | ||||||||||
| Net earnings, diluted | 1.71 | 0.53 | 0.71 | 0.86 | 0.88 | ||||||||||
| Cash dividends declared and paid | 0.13 | 0.13 | 0.12 | 0.12 | 0.11 | ||||||||||
| Book value | 23.13 | 21.57 | 20.97 | 20.03 | 20.91 | ||||||||||
| Tangible book value (non-GAAP) | 21.82 | 20.19 | 19.57 | 18.61 | 19.50 | ||||||||||
| Weighted average shares outstanding, basic | 17,048,432 | 17,046,713 | 17,007,914 | 17,286,531 | 17,490,706 | ||||||||||
| Weighted average shares outstanding, dilutive | 17,386,515 | 17,560,756 | 17,751,674 | 17,901,899 | 18,020,548 | ||||||||||
| Shares outstanding at end of period | 16,952,072 | 17,062,572 | 17,027,197 | 17,064,640 | 17,417,094 | ||||||||||
| Selected Period End Balance Sheet Data: | |||||||||||||||
| Cash and cash equivalents | 295,581 | 328,002 | 234,883 | 329,962 | 375,690 | ||||||||||
| Investment securities | 628,093 | 698,579 | 701,711 | 711,412 | 763,943 | ||||||||||
| Total loans held for investment | 2,979,063 | 2,788,640 | 2,748,081 | 2,690,366 | 2,580,493 | ||||||||||
| Allowance for credit losses | 43,137 | 39,560 | 39,288 | 39,657 | 39,785 | ||||||||||
| Total assets | 4,150,129 | 4,058,049 | 3,944,063 | 3,992,690 | 3,974,724 | ||||||||||
| Interest-bearing deposits | 2,473,755 | 2,397,115 | 2,255,942 | 2,198,464 | 2,230,105 | ||||||||||
| Noninterest-bearing deposits | 1,100,767 | 1,110,939 | 1,150,488 | 1,262,072 | 1,195,732 | ||||||||||
| Total deposits | 3,574,522 | 3,508,054 | 3,406,430 | 3,460,536 | 3,425,837 | ||||||||||
| Borrowings | 122,447 | 122,400 | 122,354 | 122,307 | 122,261 | ||||||||||
| Total stockholders’ equity | 392,029 | 367,964 | 357,014 | 341,799 | 364,222 | ||||||||||
| Summary Performance Ratios: | |||||||||||||||
| Return on average assets (annualized) | 2.97 | % | 0.95 | % | 1.27 | % | 1.53 | % | 1.60 | % | |||||
| Return on average equity (annualized) | 31.33 | % | 10.34 | % | 14.33 | % | 17.37 | % | 16.96 | % | |||||
| Net interest margin ^(1)^ | 3.65 | % | 3.75 | % | 3.88 | % | 3.70 | % | 4.02 | % | |||||
| Yield on loans | 5.94 | % | 5.78 | % | 5.59 | % | 5.12 | % | 5.57 | % | |||||
| Cost of interest-bearing deposits | 2.45 | % | 2.03 | % | 1.52 | % | 0.82 | % | 0.42 | % | |||||
| Efficiency ratio | 49.39 | % | 71.42 | % | 66.35 | % | 66.38 | % | 64.11 | % | |||||
| Summary Credit Quality Data: | |||||||||||||||
| Nonperforming loans | 21,039 | 7,579 | 7,790 | 7,834 | 7,889 | ||||||||||
| Nonperforming loans to total loans held for investment | 0.71 | % | 0.27 | % | 0.28 | % | 0.29 | % | 0.31 | % | |||||
| Other real estate owned | 249 | 202 | 169 | 37 | 59 | ||||||||||
| Nonperforming assets to total assets | 0.51 | % | 0.19 | % | 0.20 | % | 0.20 | % | 0.20 | % | |||||
| Allowance for credit losses to total loans held for investment | 1.45 | % | 1.42 | % | 1.43 | % | 1.47 | % | 1.54 | % | |||||
| Net charge-offs (recoveries) to average loans outstanding (annualized) | 0.05 | % | 0.09 | % | 0.09 | % | (0.10 | )% | (0.02 | )% |
| As of and for the quarter ended | |||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| June 30<br><br> <br>2023 | March 31,<br><br> <br>2023 | December 31,<br><br> <br>2022 | September 30,<br><br> 2022 | June 30,<br><br> <br>2022 | |||||||||||
| Capital Ratios: | |||||||||||||||
| Total stockholders’ equity to total assets | 9.45 | % | 9.07 | % | 9.05 | % | 8.56 | % | 9.16 | % | |||||
| Tangible common equity to tangible assets (non-GAAP) | 8.96 | % | 8.54 | % | 8.50 | % | 8.00 | % | 8.60 | % | |||||
| Common equity tier 1 to risk-weighted assets | 12.11 | % | 11.92 | % | 11.81 | % | 11.67 | % | 12.24 | % | |||||
| Tier 1 capital to average assets | 11.68 | % | 11.22 | % | 11.03 | % | 10.95 | % | 10.93 | % | |||||
| Total capital to risk-weighted assets | 16.75 | % | 16.70 | % | 16.58 | % | 16.46 | % | 17.32 | % | |||||
| (1) | Net interest margin is calculated as the annual net interest income, on a fully tax-equivalent basis, divided by average interest-earning assets. | ||||||||||||||
| --- | --- |
South Plains Financial, Inc.
Average Balances and Yields - (Unaudited)
(Dollars in thousands)
| For the Three Months Ended | ||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| June 30, 2023 | June 30, 2022 | |||||||||||||
| Average Balance | Interest | Yield/Rate | Average<br><br> <br>Balance | Interest | Yield/Rate | |||||||||
| Assets | ||||||||||||||
| Loans | $ | 2,894,087 | $ | 42,872 | 5.94 | % | $ | 2,549,264 | $ | 35,420 | 5.57 | % | ||
| Debt securities - taxable | 575,983 | 5,365 | 3.74 | % | 637,814 | 3,538 | 2.22 | % | ||||||
| Debt securities - nontaxable | 210,709 | 1,403 | 2.67 | % | 217,023 | 1,439 | 2.66 | % | ||||||
| Other interest-bearing assets | 149,996 | 1,484 | 3.97 | % | 329,869 | 658 | 0.80 | % | ||||||
| Total interest-earning assets | 3,830,775 | 51,124 | 5.35 | % | 3,733,970 | 41,055 | 4.41 | % | ||||||
| Noninterest-earning assets | 182,752 | 238,575 | ||||||||||||
| Total assets | $ | 4,013,527 | $ | 3,972,545 | ||||||||||
| Liabilities & stockholders’ equity | ||||||||||||||
| NOW, Savings, MMDA’s | $ | 2,059,182 | 12,484 | 2.43 | % | $ | 1,903,452 | 1,357 | 0.29 | % | ||||
| Time deposits | 299,358 | 1,949 | 2.61 | % | 334,819 | 960 | 1.15 | % | ||||||
| Short-term borrowings | 325 | 5 | 6.17 | % | 4 | - | 0.00 | % | ||||||
| Notes payable & other long-term borrowings | - | - | 0.00 | % | - | - | 0.00 | % | ||||||
| Subordinated debt | 76,031 | 1,013 | 5.34 | % | 75,845 | 1,013 | 5.36 | % | ||||||
| Junior subordinated deferrable interest debentures | 46,393 | 789 | 6.82 | % | 46,393 | 317 | 2.74 | % | ||||||
| Total interest-bearing liabilities | 2,481,289 | 16,240 | 2.63 | % | 2,360,513 | 3,647 | 0.62 | % | ||||||
| Demand deposits | 1,075,514 | 1,171,454 | ||||||||||||
| Other liabilities | 76,727 | 64,933 | ||||||||||||
| Stockholders’ equity | 379,997 | 375,645 | ||||||||||||
| Total liabilities & stockholders’ equity | $ | 4,013,527 | $ | 3,972,545 | ||||||||||
| Net interest income | $ | 34,884 | $ | 37,408 | ||||||||||
| Net interest margin ^(2)^ | 3.65 | % | 4.02 | % | ||||||||||
| (1) | Average loan balances include nonaccrual loans and loans held for sale. | |||||||||||||
| --- | --- | |||||||||||||
| (2) | Net interest margin is calculated as the annualized net interest income, on a fully tax-equivalent basis, divided by average interest-earning assets. | |||||||||||||
| --- | --- |
South Plains Financial, Inc.
Average Balances and Yields - (Unaudited)
(Dollars in thousands)
| For the Six Months Ended | ||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| June 30, 2023 | June 30, 2022 | |||||||||||||
| Average<br><br> <br>Balance | Interest | Yield/Rate | Average<br><br> <br>Balance | Interest | Yield/Rate | |||||||||
| Assets | ||||||||||||||
| Loans | $ | 2,836,482 | $ | 82,474 | 5.86 | % | $ | 2,515,934 | $ | 64,799 | 5.19 | % | ||
| Debt securities - taxable | 580,705 | 10,605 | 3.68 | % | 579,243 | 5,892 | 2.05 | % | ||||||
| Debt securities - nontaxable | 211,950 | 2,815 | 2.68 | % | 217,672 | 2,887 | 2.67 | % | ||||||
| Other interest-bearing assets | 155,976 | 2,979 | 3.85 | % | 398,670 | 862 | 0.44 | % | ||||||
| Total interest-earning assets | 3,785,113 | 98,873 | 5.27 | % | 3,711,519 | 74,440 | 4.04 | % | ||||||
| Noninterest-earning assets | 186,114 | 250,376 | ||||||||||||
| Total assets | $ | 3,971,227 | $ | 3,961,895 | ||||||||||
| Liabilities & stockholders’ equity | ||||||||||||||
| NOW, Savings, MMDA’s | $ | 2,023,869 | 22,468 | 2.24 | % | $ | 1,920,609 | 2,268 | 0.24 | % | ||||
| Time deposits | 291,677 | 3,335 | 2.31 | % | 336,962 | 1,939 | 1.16 | % | ||||||
| Short-term borrowings | 165 | 5 | 6.11 | % | 4 | - | 0.00 | % | ||||||
| Notes payable & other long-term borrowings | - | - | 0.00 | % | - | - | 0.00 | % | ||||||
| Subordinated debt | 76,008 | 2,025 | 5.37 | % | 75,822 | 2,025 | 5.39 | % | ||||||
| Junior subordinated deferrable interest debentures | 46,393 | 1,540 | 6.69 | % | 46,393 | 548 | 2.38 | % | ||||||
| Total interest-bearing liabilities | 2,438,112 | 29,373 | 2.43 | % | 2,379,790 | 6,780 | 0.57 | % | ||||||
| Demand deposits | 1,092,429 | 1,137,771 | ||||||||||||
| Other liabilities | 69,443 | 57,887 | ||||||||||||
| Stockholders’ equity | 371,243 | 386,447 | ||||||||||||
| Total liabilities & stockholders’ equity | $ | 3,971,227 | $ | 3,961,895 | ||||||||||
| Net interest income | $ | 69,500 | $ | 67,660 | ||||||||||
| Net interest margin ^(2)^ | 3.70 | % | 3.68 | % | ||||||||||
| (1) | Average loan balances include nonaccrual loans and loans held for sale. | |||||||||||||
| --- | --- | |||||||||||||
| (2) | Net interest margin is calculated as the annualized net interest income, on a fully tax-equivalent basis, divided by average interest-earning assets. | |||||||||||||
| --- | --- |
South Plains Financial, Inc.
Consolidated Balance Sheets
(Unaudited)
(Dollars in thousands)
| As of | ||||||
|---|---|---|---|---|---|---|
| June 30,<br><br> <br>2023 | December 31,<br><br> <br>2022 | |||||
| Assets | ||||||
| Cash and due from banks | $ | 64,497 | $ | 61,613 | ||
| Interest-bearing deposits in banks | 231,084 | 173,270 | ||||
| Securities available for sale | 628,093 | 701,711 | ||||
| Loans held for sale | 22,158 | 30,403 | ||||
| Loans held for investment | 2,979,063 | 2,748,081 | ||||
| Less: Allowance for credit losses | (43,137 | ) | (39,288 | ) | ||
| Net loans held for investment | 2,935,926 | 2,708,793 | ||||
| Premises and equipment, net | 56,416 | 56,337 | ||||
| Goodwill | 19,315 | 19,508 | ||||
| Intangible assets | 2,834 | 4,349 | ||||
| Mortgage servicing assets | 26,658 | 27,474 | ||||
| Other assets | 163,148 | 160,605 | ||||
| Total assets | $ | 4,150,129 | $ | 3,944,063 | ||
| Liabilities and Stockholders’ Equity | ||||||
| Noninterest-bearing deposits | $ | 1,100,767 | $ | 1,150,488 | ||
| Interest-bearing deposits | 2,473,755 | 2,255,942 | ||||
| Total deposits | 3,574,522 | 3,406,430 | ||||
| Subordinated debt | 76,054 | 75,961 | ||||
| Junior subordinated deferrable interest debentures | 46,393 | 46,393 | ||||
| Other liabilities | 61,131 | 58,265 | ||||
| Total liabilities | 3,758,100 | 3,587,049 | ||||
| Stockholders’ Equity | ||||||
| Common stock | 16,952 | 17,027 | ||||
| Additional paid-in capital | 111,133 | 112,834 | ||||
| Retained earnings | 325,772 | 292,261 | ||||
| Accumulated other comprehensive income (loss) | (61,828 | ) | (65,108 | ) | ||
| Total stockholders’ equity | 392,029 | 357,014 | ||||
| Total liabilities and stockholders’ equity | $ | 4,150,129 | $ | 3,944,063 |
South Plains Financial, Inc.
Consolidated Statements of Income
(Unaudited)
(Dollars in thousands)
| Three Months Ended | Six Months Ended | ||||||||
|---|---|---|---|---|---|---|---|---|---|
| June 30,<br><br> <br>2023 | June 30,<br><br> <br>2022 | June 30,<br><br> <br>2023 | June 30,<br><br> <br>2022 | ||||||
| Interest income: | |||||||||
| Loans, including fees | $ | 42,864 | $ | 35,419 | $ | 82,461 | $ | 64,797 | |
| Other | 7,957 | 5,333 | 15,808 | 9,035 | |||||
| Total interest income | 50,821 | 40,752 | 98,269 | 73,832 | |||||
| Interest expense: | |||||||||
| Deposits | 14,433 | 2,317 | 25,803 | 4,207 | |||||
| Subordinated debt | 1,013 | 1,013 | 2,025 | 2,025 | |||||
| Junior subordinated deferrable interest debentures | 789 | 317 | 1,540 | 548 | |||||
| Other | 5 | - | 5 | - | |||||
| Total interest expense | 16,240 | 3,647 | 29,373 | 6,780 | |||||
| Net interest income | 34,581 | 37,105 | 68,896 | 67,052 | |||||
| Provision for credit losses | 3,700 | - | 4,710 | (2,085 | ) | ||||
| Net interest income after provision for credit losses | 30,881 | 37,105 | 64,186 | 69,137 | |||||
| Noninterest income: | |||||||||
| Service charges on deposits | 1,745 | 1,612 | 3,446 | 3,385 | |||||
| Income from insurance activities | 37 | 1,577 | 1,448 | 3,147 | |||||
| Mortgage banking activities | 5,258 | 8,669 | 7,544 | 22,306 | |||||
| Bank card services and interchange fees | 4,043 | 3,478 | 6,999 | 6,700 | |||||
| Gain on sale of subsidiary | 33,488 | — | 33,488 | — | |||||
| Other | 2,541 | 3,499 | 4,878 | 6,994 | |||||
| Total noninterest income | 47,112 | 18,835 | 57,803 | 42,532 | |||||
| Noninterest expense: | |||||||||
| Salaries and employee benefits | 23,437 | 21,990 | 42,691 | 44,693 | |||||
| Net occupancy expense | 4,303 | 4,033 | 8,135 | 7,770 | |||||
| Professional services | 1,716 | 2,647 | 3,364 | 5,272 | |||||
| Marketing and development | 784 | 758 | 1,720 | 1,478 | |||||
| Other | 10,259 | 6,628 | 16,950 | 14,767 | |||||
| Total noninterest expense | 40,499 | 36,056 | 72,860 | 73,980 | |||||
| Income before income taxes | 37,494 | 19,884 | 49,129 | 37,689 | |||||
| Income tax expense | 7,811 | 4,001 | 10,202 | 7,528 | |||||
| Net income | $ | 29,683 | $ | 15,883 | $ | 38,927 | $ | 30,161 |
South Plains Financial, Inc.
Loan Composition
(Unaudited)
(Dollars in thousands)
| As of | ||||
|---|---|---|---|---|
| June 30,<br><br> <br>2023 | December 31,<br><br> <br>2022 | |||
| Loans: | ||||
| Commercial Real Estate | $ | 1,006,909 | $ | 919,358 |
| Commercial - Specialized | 355,252 | 327,513 | ||
| Commercial - General | 551,096 | 484,783 | ||
| Consumer: | ||||
| 1-4 Family Residential | 522,472 | 460,124 | ||
| Auto Loans | 318,126 | 321,476 | ||
| Other Consumer | 79,795 | 81,308 | ||
| Construction | 145,413 | 153,519 | ||
| Total loans held for investment | $ | 2,979,063 | $ | 2,748,081 |
South Plains Financial, Inc.
Deposit Composition
(Unaudited)
(Dollars in thousands)
| As of | ||||
|---|---|---|---|---|
| June 30,<br><br> <br>2023 | December 31,<br><br> <br>2022 | |||
| Deposits: | ||||
| Noninterest-bearing deposits | $ | 1,100,767 | $ | 1,150,488 |
| NOW & other transaction accounts | 400,779 | 350,910 | ||
| MMDA & other savings | 1,751,029 | 1,618,833 | ||
| Time deposits | 321,947 | 286,199 | ||
| Total deposits | $ | 3,574,522 | $ | 3,406,430 |
South Plains Financial, Inc.
Reconciliation of Non-GAAP Financial Measures (Unaudited)
(Dollars in thousands)
| For the quarter ended | |||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| June 30,<br><br> <br>2023 | March 31, <br><br> 2023 | December 31,<br><br> <br>2022 | September 30,<br><br> <br>2022 | June 30,<br><br> <br>2022 | |||||||||||
| Pre-tax, pre-provision income | |||||||||||||||
| Net income | $ | 29,683 | $ | 9,244 | $ | 12,621 | $ | 15,458 | $ | 15,883 | |||||
| Income tax expense | 7,811 | 2,391 | 3,421 | 3,962 | 4,001 | ||||||||||
| Provision for credit losses | 3,700 | 1,010 | 248 | -782 | — | ||||||||||
| Pre-tax, pre-provision income | $ | 41,194 | $ | 12,645 | $ | 16,290 | $ | 18,638 | $ | 19,884 | |||||
| Efficiency Ratio | |||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Noninterest expense | $ | 40,499 | $ | 32,361 | $ | 32,708 | $ | 37,401 | $ | 36,056 | |||||
| Net interest income | 34,581 | 34,315 | 36,322 | 35,102 | 37,105 | ||||||||||
| Tax equivalent yield adjustment | 303 | 302 | 299 | 301 | 303 | ||||||||||
| Noninterest income | 47,112 | 10,691 | 12,676 | 20,937 | 18,835 | ||||||||||
| Total income | 81,996 | 45,308 | 49,297 | 56,340 | 56,243 | ||||||||||
| Efficiency ratio | 49.39 | % | 71.42 | % | 66.35 | % | 66.38 | % | 64.11 | % | |||||
| Noninterest expense | $ | 40,499 | $ | 32,361 | $ | 32,708 | $ | 37,401 | $ | 36,056 | |||||
| Less: Windmark transaction and related expenses | (4,532 | ) | — | — | — | — | |||||||||
| Less: net loss on sale of securities | (3,409 | ) | — | — | — | — | |||||||||
| Adjusted noninterest expense | 32,558 | 32,361 | 32,708 | 37,401 | 36,056 | ||||||||||
| Total income | 81,996 | 45,308 | 49,297 | 56,340 | 56,243 | ||||||||||
| Less: gain on sale of Windmark | (33,488 | ) | — | — | — | — | |||||||||
| Adjusted total income | 48,508 | 45,308 | 49,297 | 56,340 | 56,243 | ||||||||||
| Adjusted efficiency ratio | 67.12 | % | 71.42 | % | 66.35 | % | 66.38 | % | 64.11 | % | |||||
| As of | |||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | |||
| June 30,<br><br> <br>2023 | March 31,<br><br> <br>2023 | December 31,<br><br> <br>2022 | September 30,<br><br> <br>2022 | June 30,<br><br> <br>2022 | |||||||||||
| Tangible common equity | |||||||||||||||
| Total common stockholders’ equity | $ | 392,029 | $ | 367,964 | $ | 357,014 | $ | 341,799 | $ | 364,222 | |||||
| Less: goodwill and other intangibles | (22,149 | ) | (23,496 | ) | (23,857 | (24,228 | (24,620 | ||||||||
| Tangible common equity | $ | 369,880 | $ | 344,468 | $ | 333,157 | $ | 317,571 | $ | 339,602 | |||||
| Tangible assets | |||||||||||||||
| Total assets | $ | 4,150,129 | $ | 4,058,049 | $ | 3,944,063 | $ | 3,992,690 | $ | 3,974,724 | |||||
| Less: goodwill and other intangibles | (22,149 | ) | (23,496 | ) | (23,857 | (24,228 | (24,620 | ||||||||
| Tangible assets | $ | 4,127,980 | $ | 4,034,553 | $ | 3,920,206 | $ | 3,968,462 | $ | 3,950,104 | |||||
| Shares outstanding | 16,952,072 | 17,062,572 | 17,027,197 | 17,064,640 | 17,417,094 | ||||||||||
| Total stockholders’ equity to total assets | 9.45 | % | 9.07 | % | 9.05 | 8.56 | 9.16 | ||||||||
| Tangible common equity to tangible assets | 8.96 | % | 8.54 | % | 8.50 | 8.00 | 8.60 | ||||||||
| Book value per share | $ | 23.13 | $ | 21.57 | $ | 20.97 | $ | 20.03 | $ | 20.91 | |||||
| Tangible book value per share | $ | 21.82 | $ | 20.19 | $ | 19.57 | $ | 18.61 | $ | 19.50 |
All values are in US Dollars.
Exhibit 99.2
South Plains Financial Second Quarter 2023 Earnings Presentation July 25, 2023
Safe Harbor Statement and Other Disclosures FORWARD-LOOKING STATEMENTS This presentation contains, and future oral and written statements of South Plains Financial, Inc. (“South Plains” or the “Company” or “SPFI”) and City Bank (“City Bank” or the “Bank”) may contain, statements about future events that constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements reflect South Plains’ current views with respect to future events and South Plains’ financial performance. Any statements about South Plains’ expectations, beliefs, plans, predictions, forecasts, objectives, assumptions or future events or performance are not historical facts and may be forward-looking. These statements are often, but not always, made through the use of words or phrases such as “anticipate,” “believes,” “can,” “could,” “may,” “predicts,” “potential,” “should,” “will,” “estimate,” “plans,” “projects,” “continuing,” “ongoing,” “expects,” “intends” and similar words or phrases. Forward-looking statements include, but are not limited to: (i) projections and estimates of revenues, expenses, income or loss, earnings or loss per share, and other financial items, (ii) statements of plans, objectives and expectations of South Plains or its management, (iii) statements of future economic performance, and (iv) statements of assumptions underlying such statements. Forward-looking statements should not be relied on because they involve known and unknown risks, uncertainties and other factors, some of which are beyond the control of South Plains and City Bank. These risks, uncertainties and other factors may cause the actual results, performance, and achievements of South Plains and City Bank to be materially different from the anticipated future results, performance or achievements expressed in, or implied by, the forward-looking statements. Factors that could cause such differences include, but are not limited to, general economic conditions, potential recession in the United States and our market areas, the impacts related to or resulting from recent bank failures and any continuation of the recent uncertainty in the banking industry, including the associated impact to the Company and other financial institutions of any regulatory changes or other mitigation efforts taken by government agencies in response thereto, increased competition for deposits and related changes in deposit customer behavior, changes in market interest rates, the persistence of the current inflationary environment in the United States and our market areas, the uncertain impacts of ongoing quantitative tightening and current and future monetary policies of the Board of Governors of the Federal Reserve System, the effects of declines in housing prices in the Unites States and our market areas, increases in unemployment rates in the United States and our market areas, declines in commercial real estate prices, uncertainty regarding United States fiscal debt and budget matters, severe weather, natural disasters, acts of war or terrorism or other external events, regulatory considerations, competition and market expansion opportunities, changes in non-interest expenditures or in the anticipated benefits of such expenditures, the receipt of required regulatory approvals, changes in non-performing assets and charge-offs, adequacy of loan loss reserves, changes in tax laws, current or future litigation, regulatory examinations or other legal and/or regulatory actions, the impact of any tariffs, terrorist threats and attacks, acts of war or threats thereof or other pandemics. Due to these and other possible uncertainties and risks, South Plains can give no assurance that the results contemplated in the forward-looking statements will be realized and readers are cautioned not to place undue reliance on the forward-looking statements contained in this presentation. For more information about these factors, please see South Plains’ reports filed with or furnished to the U.S. Securities and Exchange Commission (the “SEC”), including South Plains’ most recent Annual Report on Form 10-K and Quarterly Reports on Form 10-Q on file with the SEC, including the sections entitled "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations." Further, any forward-looking statement speaks only as of the date on which it is made and South Plains undertakes no obligation to update or revise any forward-looking statement to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence of unanticipated events, except as required by law. All forward-looking statements, express or implied, herein are qualified in their entirety by this cautionary statement. NON-GAAP FINANCIAL MEASURES Management believes that certain non-GAAP performance measures used in this presentation provide meaningful information about underlying trends in its business and operations and provide both management and investors a more complete understanding of the Company’s financial position and performance. Non-GAAP financial measures should be viewed in addition to, and not as an alternative for, SPFI’s reported results prepared in accordance with GAAP. Numbers in this presentation may not sum due to rounding. 2
Today’s Speakers Curtis C. Griffith Chairman & Chief Executive Officer Elected to the board of directors of First State Bank of Morton, Texas, in 1972 and employed by it in 1979 Elected Chairman of the First State Bank of Morton board in 1984 Chairman of the Board of City Bank and the Company since 1993 Steven B. Crockett Chief Financial Officer & Treasurer Appointed Chief Financial Officer in 2015 Previously Controller of City Bank and the Company for 14 and 5 years respectively Began career in public accounting in 1994 by serving for seven years with a local firm in Lubbock, Texas Cory T. Newsom President Entire banking career with the Company focused on lending and operations Appointed President and Chief Executive Officer of the Bank in 2008 Joined the Board in 2008 3
Second Quarter 2023 Highlights Diluted earnings per share for the second quarter was $1.71, compared to $0.53 for the first quarter of 2023 Excluding one-time gains and charges related to the sale of Windmark Insurance Agency, Inc. (“Windmark”) and the repositioning of the securities portfolio, second quarter diluted earnings per share was $0.55 Loans grew $190.4 million, or 6.8%, during the second quarter as compared to the first quarter of 2023 Deposits grew $66.5 million, or 1.9%, during the second quarter as compared to the first quarter of 2023 Net Interest Margin held steady from March 2023 levels at 3.65% as higher loan yields offset the rise in deposit costs Completed the sale of Windmark for $35.5 million on April 1, 2023 Offset a portion of the Windmark gain through the strategic sale of $56 million of our investment securities resulting in a realized loss of $3.4 million. Reinvested those proceeds in higher yielding loans which will be accretive in subsequent quarters Recorded a $3.7 million provision for credit losses in the second quarter due to strong organic loan growth and $1.3 million in specific reserves for a previously-classified credit relationship totaling $13.3 million that was placed on nonaccrual in May 2023 Classified loans declined $3.5 million during the second quarter to $67.4 million from $70.9 million at March 31, 2023 Deposit Growth 1.9% Uninsured / Uncollaterized Deposits 16% Net Income $29.7 M EPS - Diluted $1.71 Net Interest Margin (1) (“NIM”) 3.65% Average Yield on Loans 5.94% 4 Source: Company documents Net interest margin is calculated on a tax-equivalent basis Organic Loan Growth 6.8% Loans Held for Investment (“HFI”) $2.98 B
Granular Deposit Base & Ample Liquidity Total Borrowing Capacity $1.82 Billion Source: Company documents (1) No securities are currently pledged to this program; amount represents securities available to be pledged Data as of June 30, 2023 5 Total Deposit Base Breakdown Average deposit account size is approximately $36 thousand City Bank’s percentage of estimated uninsured or uncollateralized deposits is 16% of total deposits Total of $577 million Includes $98 million of parent company deposits Excludes collateralized public fund deposits SPFI had $1.82 billion of available borrowing capacity, as follows: $1.01 billion with FHLB of Dallas $612 million through the Federal Reserve’s Discount Window $200 million via the Federal Reserve’s Bank Term Funding Program (1) No borrowings utilized during 2Q'23
Loan Portfolio 2Q'23 Highlights Loans HFI increased $190.4 million from 1Q'23, primarily due to organic net loan growth Organic net loan growth was primarily driven by increases in commercial real estate, residential mortgage and energy loans Loans HFI increased $398.2 million from 2Q’22 2Q'23 yield on loans of 5.94%, an increase of 16 bps compared to 1Q'23 Total Loans HFI $ in Millions Source: Company documents 6
Attractive Markets Poised for Organic Growth El Paso Basin Dallas / Ft. Worth Population of 865,000+ Adjacent in proximity to Juarez, Mexico’s growing industrial center and an estimated population of 1.5 million people Home to four universities including The University of Texas at El Paso Focus on commercial real estate lending Largest MSA in Texas and fourth largest in the nation Steadily expanding population that accounts for over 26% of the state’s population MSA with the largest job growth in 2022 (+5.9%) Attractive location for companies interested in relocating to more efficient economic environments Focus on commercial real estate lending Houston Second largest MSA in Texas and fifth largest in the nation Total Non-Farm Employment was up 5.6% in 2022 compared to 2021 Called the “Energy Capital of the World,” the area also boasts the world’s largest medical center and second busiest port in the U.S Focus on commercial real estate lending Lubbock Basin Population in excess of 320,000 with major industries in agribusiness, education, and trade among others Home of Texas Tech University – enrollment of 40,000 students Focus on community bank approach and expanding local relationships 7
Metropolitan Loan Growth 2Q'23 Highlights Loans HFI in our Dallas, Houston and El Paso metro markets increased 7.3% in 2Q'23 as compared to 1Q’23 Major metropolitan market loan portfolio represents 32% of Bank’s total loans at June 30, 2023 Total Metropolitan Loans $ in Millions 8 5.00% Source: Company documents Source: Company documents The Bank defines its “major metropolitan markets” to include Dallas, Houston and El Paso, Texas
Loan HFI Portfolio Loan Mix Loan Portfolio ($ in millions) 6/30/23 Commercial C&D $ 164.3 Residential C&D 244.0 CRE Owner/Occ. 343.3 Other CRE Non Owner/Occ. 529.8 Multi-Family 214.3 C&I 393.6 Agriculture 169.4 1-4 Family 522.5 Auto 318.1 Other Consumer 79.8 Total $ 2,979.10 Fixed vs. Variable Rate at 6/30/23 9 Source: Company documents
CRE Portfolio 10 Office Highlights 6.1% of total loans HFI 29% is owner-occupied Average loan size is $864 thousand Medical offices comprise 11% of office loans CRE Portfolio ($ in millions) 6/30/2023 Property Type Total Multifamily $214.3 Warehouse 201.4 Retail 163.3 Office – Non-Owner Occ 129.2 Hotel 63.8 Restaurant 62.0 Office – Owner Occ 53.0 Convenience Store 43.2 Other 157.2 Total $1,087.4 CRE Sector Breakdown Source: Company documents
Indirect Auto Overview Indirect Auto Highlights Indirect auto loans totaled $297.9 million Disciplined underwriting approach, management anticipates a modest reduction of the portfolio over time while improving yields Strong credit quality in sector positioned for resiliency across economic cycles: Super Prime Credit (>719): $183.7 million Prime Credit (719-660): $83.8 million Near Prime Credit (659-620): $25.1 million Sub-Prime Credit (619-580): $4.8 million Deep Sub-Prime Credit (<580): $0.6 million Loans past due 30+ days: 35 bps Indirect Auto Credit Breakdown 11 Source: Company documents Data as of June 30, 2023
Noninterest Income Overview Noninterest Income $ in Millions 2Q'23 Highlights Noninterest income of $47.1 million, compared to $10.7 million in 1Q'23, primarily due to: The $33.5 million gain on sale of Windmark on April 1, 2023 An increase of $3.0 million in mortgage banking activities revenue Partially offset by a reduction of $1.4 million in income from insurance activities due to the sale of Windmark 12 Source: Company documents
Diversified Revenue Stream Six Months Ended June 30, 2023 Total Revenues $81.7 million Noninterest Income $47.1 million 13 Source: Company documents
Net Interest Income and Margin Net Interest Income & Margin $ in Millions 2Q'23 Highlights Net interest income (“NII”) of $34.6 million, compared to $34.3 million in 1Q'23 2Q'23 NIM of 3.65%, a decrease of 10 bps compared to 1Q’23, though stable from March ‘23 Interest income increased $3.4 million 2Q’23 from 1Q’23, primarily due to an increase of $3.3 million in loan interest income, largely offset by an increase of $3.1 million in interest expense The average yield on loans was 5.94% for 2Q'23, compared to 5.78% for 1Q'23 14 3.54% Source: Company documents
Deposit Portfolio Total Deposits $ in Millions 2Q'23 Highlights Total deposits of $3.57 billion at 2Q'23, an increase of $66.5 million from 1Q'23 Growth in deposits was driven by an $81 million increase in brokered deposits Partially offset by a $67 million decline in public funds Cost of interest-bearing deposits increased to 2.45% in 2Q'23 from 2.03% in 1Q'23 Average cost of deposits was 169 bps as compared to 136 bps in 1Q'23 Noninterest-bearing deposits to total deposits was 30.8% in 2Q'23, compared to 31.7% in 1Q'23 15 Source: Company documents
Credit Quality 2Q'23 Highlights Credit Quality Ratios Net Charge-Offs to Average Loans ACL to Total Loans HFI 16 The Company recorded a provision for credit losses of $3.7 million in 2Q'23, compared to $1 million in 1Q'23 The provision was for loan growth and $1.3 million for specific reserves on one previously classified credit relationship that was placed on nonaccrual status in 2Q’23 Ratio of Allowance for Credit Losses (“ACL”) to loans HFI was 1.45% at 6/30/2023 Source: Company documents
Investment Securities 2Q'23 Highlights Investment securities totaled $628 million at June 30, 2023, a decrease of $70.5 million from March 31, 2023 The decrease was largely the result of a strategic sale of $56 million of investment securities during the period All municipal bonds are in Texas All MBS, CMO, and Asset Backed securities are U.S. Government or GSE Duration of the securities portfolio was 6.92 years at quarter end 2Q'23 Securities Composition $698.6 million Securities & Cash $ in Millions 17 Source: Company documents
Noninterest Expense and Efficiency Noninterest Expense $ in Millions 2Q'23 Highlights Noninterest expense for 2Q’23 increased $8.1 million from 1Q'23 primarily due to: $4.5 million in transaction expenses and related incentive-based compensation from the Windmark sale Realized a loss of $3.4 million on the strategic sale of investment securities Adjusted efficiency ratio was 67.1% Will continue to manage expenses to drive profitability 18 Source: Company documents Note: Adjusted efficiency ratio is a non-GAAP measure. See appendix for the reconciliation of non-GAAP measures to GAAP
Balance Sheet Growth and Development Balance Sheet Highlights $ in Millions Tangible Book Value Per Share Note: Tangible book value per share is a non-GAAP measure. See appendix for the reconciliation of non-GAAP measures to GAAP 19 Source: Company documents
Strong Capital Base Tangible Common Equity to Tangible Assets Ratio Common Equity Tier 1 Ratio Tier 1 Capital to Average Assets Ratio Total Capital to Risk-Weighted Assets Ratio 20 Source: Company documents Note: Tangible common equity to tangible assets ratio is a non-GAAP measure. See appendix for the reconciliation of non-GAAP measures to GAAP
SPFI’s Core Purpose and Values Align: Centered on Relationship-Based Business Our Core Purpose is: To use the power of relationships to help people succeed and live better HELP [ALL STAKEHOLDERS] SUCCEED Employees great benefits and opportunities to grow and make a difference. Customers personalized advice and solutions to achieve their goals. Partners responsive, trusted win-win partnerships enabling both parties to succeed together. Shareholders share in the prosperity and performance of the Bank. THE POWER OF RELATIONSHIPS At SPFI, we build lifelong, trusted relationships so you know you always have someone in your corner that understands you, cares about you, and stands ready to help. LIVE BETTER We want to help everyone live better. At the end of the day, we do what we do to help enhance lives. We create a great place to work, help people achieve their goals, and invest generously in our communities because there’s nothing more rewarding than helping people succeed and live better. 21
Appendix 22
Non-GAAP Financial Measures Source: Company documents $ in thousands 23 For the quarter ended March 31, 2023 December 31, 2022 September 30, 2022 June 30, 2022 March 31, 2022 Pre-tax, pre-provision income Net income $ 9,244 $ 12,621 $ 15,458 $ 15,883 $ 14,278 Income tax expense 2,391 3,421 3,962 4,001 3,527 Provision for credit losses 1,010 248 (782) - (2,085) Pre-tax, pre-provision income $ 12,645 $ 16,290 $ 18,638 $ 19,884 $ 15,720 As of March 31, 2023 December 31, 2022 September 30, 2022 June 30, 2022 March 31, 2022 Tangible common equity Total common stockholders’ equity $ 367,964 $ 357,014 $ $ 341,799 $ $ 364,222 $ $ 387,068 Less: goodwill and other intangibles (23,496) (23,857) (24,228) (24,620) (25,011) Tangible common equity $ 344,468 $ 333,157 $ $ 317,571 $ $ 339,602 $ $ 362,057 Tangible assets Total assets $ 4,058,049 $ 3,944,063 $ $ 3,992,690 $ $ 3,974,724 $ $ 3,999,744 Less: goodwill and other intangibles (23,496) (23,857) (24,228) (24,620) (25,011) Tangible assets $ 4,034,553 $ 3,920,206 $ $ 3,968,462 $ $ 3,950,104 $ $ 3,974,733 Shares outstanding 17,062,572 17,027,197 17,064,640 17,417,094 17,673,407 Total stockholders’ equity to total assets 9.07% 9.05% 8.56% 9.16% 9.68% Tangible common equity to tangible assets 8.54% 8.50% 8.00% 8.60% 9.11% Book value per share $ 21.57 $ 20.97 $ 20.03 $ 20.91 $ 21.90 Tangible book value per share $ 20.19 $ 19.57 $ 18.61 $ 19.50 $ 20.49
Non-GAAP Financial Measures Source: Company documents $ in thousands 24 As of and for the quarter ended June 30, 2023 Efficiency Ratio Noninterest expense $ 40,499 Net interest income $ 34,581 Tax equivalent yield adjustment 303 Noninterest income 47,112 Total income $ 81,996 Efficiency ratio 49.39% Noninterest expense $ 40,499 Less: Windmark transaction related expenses (4,532) Less: net loss on sale of securities (3,409) Adjusted noninterest expense 32,558 Total income $ 81,996 Less: gain on sale of Windmark (33,488) Adjusted total income $ 48,508 Adjusted efficiency ratio 67.12%