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): October 24, 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, 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 October 24, 2023, South Plains Financial, Inc. (the “Company”) issued a press release announcing its financial results for the third quarter ended September 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 October 24, 2023, officers of the Company will have a conference call with respect to the Company’s financial results for the third quarter ended September 30, 2023. An earnings release slide presentation highlighting the Company’s financial results for the third quarter ended September 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 October 24, 2023, announcing third quarter 2023 financial results of South Plains Financial, Inc. |
| --- | --- |
| 99.2 | Earnings release slide presentation, dated October 24, 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. | ||
|---|---|---|
| Date: October 24, 2023 | By: | /s/ Steven B. Crockett |
| Steven B. Crockett | ||
| --- | ||
| Chief Financial Officer and Treasurer |
Exhibit 99.1
South Plains Financial, Inc. Reports Third Quarter 2023 Financial Results
LUBBOCK, Texas, October 24, 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 September 30, 2023.
Third Quarter 2023 Highlights
| ● | Net income for the third quarter of 2023 was $13.5 million, compared to $29.7 million for the second quarter of 2023 and $15.5 million for the third quarter of 2022. |
|---|---|
| ● | Diluted earnings per share for the third quarter of 2023 was $0.78, compared to $1.71 for the second quarter of 2023 and $0.86 for the third quarter of 2022. Excluding one-time<br> gains net of charges related to the sale of a subsidiary ($22.9 million net of tax) and the loss from repositioning of the securities portfolio ($2.7 million net of tax), second quarter 2023 diluted earnings per share was $0.55. |
| --- | --- |
| ● | Deposits grew $46.1 million, or 1.3%, to $3.62 billion during the third quarter of 2023, as compared to June 30, 2023; an estimated 16%<br> of deposits at September 30, 2023 were uninsured or uncollateralized. |
| --- | --- |
| ● | Average cost of deposits for the third quarter of 2023 was 207 basis points, compared to 169 basis points for the second quarter of 2023 and 52 basis points for the third quarter<br> of 2022. |
| --- | --- |
| ● | Net interest margin, calculated on a tax-equivalent basis, was 3.52% for the third quarter of 2023, compared to 3.65% for the second quarter of 2023. |
| --- | --- |
| ● | Loans held for investment grew $14.5 million, or 1.9% annualized, during the third quarter of 2023, compared to June 30, 2023. |
| --- | --- |
| ● | The provision for credit losses was negative $0.7 million in the third quarter of 2023, compared to $3.7 million in the second quarter of 2023 and negative $0.8 million in the<br> third quarter of 2022. |
| --- | --- |
| ● | Nonperforming assets to total assets were 0.12% at September 30, 2023, compared to 0.51% at June 30, 2023 and 0.20% at September 30, 2022. |
| --- | --- |
| ● | Return on average assets for the third quarter of 2023 was 1.27% annualized, compared to 2.97% annualized for the second quarter of 2023 and 1.53% annualized for the third<br> quarter of 2022. |
| --- | --- |
| ● | Tangible book value (non-GAAP) per share was $21.07 as of September 30, 2023, compared to $21.82 as of June 30, 2023 and $18.61 as of September 30, 2022. |
| --- | --- |
| ● | Liquidity available through borrowing capacity of $1.89 billion with the Federal Home Loan Bank of Dallas, the Federal<br> Reserve Bank of Dallas Discount Window, and access to the Federal Reserve’s Bank Term Funding Program at September 30, 2023. |
| --- | --- |
| ● | Capital ratios at September 30, 2023 were total risk-based capital ratio – 16.82%, Tier 1 risk-based capital ratio – 13.46%, Common Equity Tier 1 risk-based capital ratio –<br> 12.19%, and Tier 1 leverage ratio - 11.13%, and significantly exceeded the minimum regulatory levels necessary to be deemed “well-capitalized” . |
| --- | --- |
Curtis Griffith, South Plains’ Chairman and Chief Executive Officer, commented, “I am very proud of our performance once again this quarter as we delivered net interest income growth despite continued pressure on our funding costs. We have benefited from the strong loan growth delivered during the first half of 2023 combined with a healthy rise in our loan portfolio’s yield, which increased an additional sixteen basis points to 6.10% in the third quarter. We also believe we have ample opportunities to reprice both our commercial loan and indirect auto portfolios over the next year which will continue to drive interest income growth even if our balance sheet only experiences moderate growth given the slowing economy. Importantly, we have not sacrificed credit quality as the credit metrics of our loan portfolio remain strong, evidenced by our nonperforming assets being at their lowest level since before our IPO in 2019. While we continue to deliver solid growth and strong credit metrics, our share price has remained below what we believe to be intrinsic value. As a result, we repurchased 355,000 shares for total proceeds of $9.3 million in the third quarter.”
Results of Operations, Quarter Ended September 30, 2023
Net Interest Income
Net interest income was $35.7 million for the third quarter of 2023, compared to $34.6 million for the second quarter of 2023 and $35.1 million for the third quarter of 2022. Net interest margin, calculated on a tax-equivalent basis, was 3.52% for the third quarter of 2023, compared to 3.65% for the second quarter of 2023 and 3.70% for the third quarter of 2022. The average yield on loans was 6.10% for the third quarter of 2023, compared to 5.94% for the second quarter of 2023 and 5.12% for the third quarter of 2022. The average cost of deposits was 207 basis points for the third quarter of 2023, which is 40 basis points higher than the second quarter of 2023 and 157 basis points higher than the third quarter of 2022.
Interest income was $56.5 million for the third quarter of 2023, compared to $50.8 million for the second quarter of 2023 and $41.1 million for the third quarter of 2022. Interest income increased $5.7 million in the third quarter of 2023 from the second quarter of 2023, which was mainly comprised of an increase of $3.4 million in loan interest income and $2.3 million in interest income on other interest-earning assets. The growth in loan interest income was primarily due to an increase of $111.6 million in average loans outstanding and the rising short-term interest rate environment, as the yield on loans rose 16 basis points. The additional interest income on other interest-earning assets was predominately a result of increased liquidity maintained at the Federal Reserve Bank of Dallas and increased rates. Interest income increased $15.7 million in the third quarter of 2023 compared to the third quarter of 2022. This increase was primarily due to an increase of average loans of $334.5 million and higher market interest rates during the period, resulting in growth of $11.8 million in loan interest income.
Interest expense was $20.8 million for the third quarter of 2023, compared to $16.2 million for the second quarter of 2023 and $6.0 million for the third quarter of 2022. Interest expense increased $4.6 million compared to the second quarter of 2023 and $14.8 million compared to the third 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. Average brokered deposits increased approximately $175 million during the third quarter 2023 from the second quarter 2023.
Noninterest Income and Noninterest Expense
Noninterest income was $12.3 million for the third quarter of 2023, compared to $47.1 million for the second quarter of 2023 and $20.9 million for the third quarter of 2022. The decrease from the second quarter of 2023 was primarily due to the $33.5 million gain on sale of Windmark Insurance Agency, Inc. (“Windmark”) in the second quarter of 2023. Additionally, bank card services and interchange revenue decreased $0.9 million for the third quarter of 2023 compared to the second quarter of 2023, after increasing $1.1 million during the second quarter. The increase in the second quarter was mainly as a result of incentives and rebates received during the period. The decrease in noninterest income for the third quarter of 2023 as compared to the third quarter of 2022 was primarily due to a reduction of $4.8 million in income from insurance activities due to the sale of Windmark and a decrease of $1.7 million in mortgage banking revenues as originations of mortgage loans held for sale declined $50.1 million as mortgage interest rates have risen which has slowed mortgage activity. Additionally, there was $2.1 million of income in legal settlements during the third quarter of 2022.
Noninterest expense was $31.5 million for the third quarter of 2023, compared to $40.5 million for the second quarter of 2023 and $37.4 million for the third quarter of 2022. The $9.0 million decrease from the second quarter of 2023 was largely the result the second quarter having $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 decrease in noninterest expense for the third quarter of 2023 as compared to the third quarter of 2022 was primarily driven by a reduction of $2.9 million in Windmark expenses due to the sale, a reduction of $1.8 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 $2.99 billion as of September 30, 2023, compared to $2.98 billion as of June 30, 2023 and $2.69 billion as of September 30, 2022. The $14.5 million, or 1.9% annualized, increase during the third quarter of 2023 as compared to the second quarter of 2023 occurred primarily in commercial real estate loans, residential mortgage loans, seasonal agricultural loans, and energy loans, partially offset by $16.5 million in loan payoffs of nonperforming credits as detailed below. As of September 30, 2023, loans held for investment increased $303.2 million, or 11.3% year over year, from September 30, 2022, primarily attributable to strong organic loan growth.
Deposits and Borrowings
Deposits totaled $3.62 billion as of September 30, 2023, compared to $3.57 billion as of June 30, 2023 and $3.46 billion as of September 30, 2022. Deposits increased by $46.1 million, or 1.3%, in the third quarter of 2023 from June 30, 2023. As of September 30, 2023, deposits increased $160.1 million, or 4.6% year over year, from September 30, 2022. Noninterest-bearing deposits were $1.05 billion as of September 30, 2023, compared to $1.10 billion as of June 30, 2023 and $1.26 billion as of September 30, 2022. Noninterest-bearing deposits represented 28.9% of total deposits as of September 30, 2023. The quarterly growth in deposits was mainly the result of an increase of $71 million in brokered deposits, partially offset by a decrease of $14 million in public-fund deposits. The year-over-year increase in deposits is primarily a result of growth of $152 million in brokered deposits in the second and third quarters of 2023 given the overall focus on improving liquidity.
Asset Quality
The Company recorded a negative provision for credit losses in the third quarter of 2023 of $0.7 million, compared to $3.7 million in the second quarter of 2023 and a negative provision of $0.8 million in the third quarter of 2022. The negative provision during the third quarter of 2023 was largely attributable to a reduction of $1.3 million in specific reserves, partially offset by organic loan growth and net charge-off activity during the third quarter. The reduction in specific reserves was a result of the full repayment of a $13.3 million nonaccrual relationship in the third quarter. Classified loans declined $16.8 million during the third quarter of 2023 to $50.7 million from $67.4 million at June 30, 2023.
The ratio of allowance for credit losses to loans held for investment was 1.41% as of September 30, 2023, compared to 1.45% as of June 30, 2023 and 1.47% as of September 30, 2022.
The ratio of nonperforming assets to total assets as of September 30, 2023 was 0.12%, compared to 0.51% as of June 30, 2023 and 0.20% at September 30, 2022. Annualized net charge-offs (recoveries) were 0.05% for the third quarter of 2023, compared to 0.05% for the second quarter of 2023 and (0.10)% for the third quarter of 2022. The decrease in nonperforming assets was a result of the full repayment of the $13.3 million relationship noted above and full repayment of a $3.3 million nonperforming relationship during the third quarter.
Capital
Book value per share decreased to $22.39 at September 30, 2023, compared to $23.13 at June 30, 2023. The decrease was primarily driven by a decrease in accumulated other comprehensive income (“AOCI”) and by $9.3 million in share repurchases, partially offset by an increase of $11.3 million of net income after dividends paid. The decrease in AOCI was attributed to the after-tax decline in fair value of our available for sale securities, net of fair value hedges, as a result of significant increases in long-term market interest rates during the period.
Conference Call
South Plains will host a conference call to discuss its third quarter 2023 financial results today, October 24, 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 13741532. The replay will be available until November 7, 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, the impact on us and our customers of a decline in general economic conditions and any regulatory responses thereto; 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; cyber incidents or other failures, disruptions or security breaches; 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, including the sections entitled “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of such documents, and 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 applicable 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 | |||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| September 30,<br><br> <br>2023 | June 30,<br><br> <br>2023 | March 31,<br><br> <br>2023 | December 31,<br><br> <br>2022 | September 30,<br><br> <br>2022 | |||||||||||
| Selected Income Statement Data: | |||||||||||||||
| Interest income | $ | 56,528 | $ | 50,821 | $ | 47,448 | $ | 46,228 | $ | 41,108 | |||||
| Interest expense | 20,839 | 16,240 | 13,133 | 9,906 | 6,006 | ||||||||||
| Net interest income | 35,689 | 34,581 | 34,315 | 36,322 | 35,102 | ||||||||||
| Provision for credit losses | (700 | ) | 3,700 | 1,010 | 248 | (782 | ) | ||||||||
| Noninterest income | 12,277 | 47,112 | 10,691 | 12,676 | 20,937 | ||||||||||
| Noninterest expense | 31,489 | 40,499 | 32,361 | 32,708 | 37,401 | ||||||||||
| Income tax expense | 3,683 | 7,811 | 2,391 | 3,421 | 3,962 | ||||||||||
| Net income | 13,494 | 29,683 | 9,244 | 12,621 | 15,458 | ||||||||||
| Per Share Data (Common Stock): | |||||||||||||||
| Net earnings, basic | 0.80 | 1.74 | 0.54 | 0.74 | 0.89 | ||||||||||
| Net earnings, diluted | 0.78 | 1.71 | 0.53 | 0.71 | 0.86 | ||||||||||
| Cash dividends declared and paid | 0.13 | 0.13 | 0.13 | 0.12 | 0.12 | ||||||||||
| Book value | 22.39 | 23.13 | 21.57 | 20.97 | 20.03 | ||||||||||
| Tangible book value (non-GAAP) | 21.07 | 21.82 | 20.19 | 19.57 | 18.61 | ||||||||||
| Weighted average shares outstanding, basic | 16,842,594 | 17,048,432 | 17,046,713 | 17,007,914 | 17,286,531 | ||||||||||
| Weighted average shares outstanding, dilutive | 17,354,182 | 17,386,515 | 17,560,756 | 17,751,674 | 17,901,899 | ||||||||||
| Shares outstanding at end of period | 16,600,442 | 16,952,072 | 17,062,572 | 17,027,197 | 17,064,640 | ||||||||||
| Selected Period End Balance Sheet Data: | |||||||||||||||
| Cash and cash equivalents | 352,424 | 295,581 | 328,002 | 234,883 | 329,962 | ||||||||||
| Investment securities | 584,969 | 628,093 | 698,579 | 701,711 | 711,412 | ||||||||||
| Total loans held for investment | 2,993,563 | 2,979,063 | 2,788,640 | 2,748,081 | 2,690,366 | ||||||||||
| Allowance for credit losses | 42,075 | 43,137 | 39,560 | 39,288 | 39,657 | ||||||||||
| Total assets | 4,186,440 | 4,150,129 | 4,058,049 | 3,944,063 | 3,992,690 | ||||||||||
| Interest-bearing deposits | 2,574,361 | 2,473,755 | 2,397,115 | 2,255,942 | 2,198,464 | ||||||||||
| Noninterest-bearing deposits | 1,046,253 | 1,100,767 | 1,110,939 | 1,150,488 | 1,262,072 | ||||||||||
| Total deposits | 3,620,614 | 3,574,522 | 3,508,054 | 3,406,430 | 3,460,536 | ||||||||||
| Borrowings | 122,493 | 122,447 | 122,400 | 122,354 | 122,307 | ||||||||||
| Total stockholders’ equity | 371,716 | 392,029 | 367,964 | 357,014 | 341,799 | ||||||||||
| Summary Performance Ratios: | |||||||||||||||
| Return on average assets (annualized) | 1.27 | % | 2.97 | % | 0.95 | % | 1.27 | % | 1.53 | % | |||||
| Return on average equity (annualized) | 14.01 | % | 31.33 | % | 10.34 | % | 14.33 | % | 17.37 | % | |||||
| Net interest margin ^(1)^ | 3.52 | % | 3.65 | % | 3.75 | % | 3.88 | % | 3.70 | % | |||||
| Yield on loans | 6.10 | % | 5.94 | % | 5.78 | % | 5.59 | % | 5.12 | % | |||||
| Cost of interest-bearing deposits | 2.93 | % | 2.45 | % | 2.03 | % | 1.52 | % | 0.82 | % | |||||
| Efficiency ratio | 65.34 | % | 49.39 | % | 71.42 | % | 66.35 | % | 66.38 | % | |||||
| Summary Credit Quality Data: | |||||||||||||||
| Nonperforming loans | 4,783 | 21,039 | 7,579 | 7,790 | 7,834 | ||||||||||
| Nonperforming loans to total loans held for investment | 0.16 | % | 0.71 | % | 0.27 | % | 0.28 | % | 0.29 | % | |||||
| Other real estate owned | 242 | 249 | 202 | 169 | 37 | ||||||||||
| Nonperforming assets to total assets | 0.12 | % | 0.51 | % | 0.19 | % | 0.20 | % | 0.20 | % | |||||
| Allowance for credit losses to total loans held for investment | 1.41 | % | 1.45 | % | 1.42 | % | 1.43 | % | 1.47 | % | |||||
| Net charge-offs (recoveries) to average loans outstanding (annualized) | 0.05 | % | 0.05 | % | 0.09 | % | 0.09 | % | (0.10 | )% |
| As of and for the quarter ended | |||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| September 30<br><br> <br>2023 | June 30,<br><br> <br>2023 | March 31,<br><br> <br>2023 | December 31,<br><br> <br>2022 | September 30,<br><br> <br>2022 | |||||||||||
| Capital Ratios: | |||||||||||||||
| Total stockholders’ equity to total assets | 8.88 | % | 9.45 | % | 9.07 | % | 9.05 | % | 8.56 | % | |||||
| Tangible common equity to tangible assets (non-GAAP) | 8.40 | % | 8.96 | % | 8.54 | % | 8.50 | % | 8.00 | % | |||||
| Common equity tier 1 to risk-weighted assets | 12.19 | % | 12.11 | % | 11.92 | % | 11.81 | % | 11.67 | % | |||||
| Tier 1 capital to average assets | 11.13 | % | 11.67 | % | 11.22 | % | 11.03 | % | 10.95 | % | |||||
| Total capital to risk-weighted assets | 16.82 | % | 16.75 | % | 16.70 | % | 16.58 | % | 16.46 | % | |||||
| (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 | ||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| September 30, 2023 | September 30, 2022 | |||||||||||||
| Average<br><br> <br>Balance | Interest | Yield/Rate | Average<br><br> <br>Balance | Interest | Yield/Rate | |||||||||
| Assets | ||||||||||||||
| Loans | $ | 3,005,699 | $ | 46,250 | 6.10 | % | $ | 2,671,183 | $ | 34,464 | 5.12 | % | ||
| Debt securities - taxable | 561,068 | 5,422 | 3.83 | % | 617,722 | 4,166 | 2.68 | % | ||||||
| Debt securities - nontaxable | 159,577 | 1,054 | 2.62 | % | 215,508 | 1,428 | 2.63 | % | ||||||
| Other interest-bearing assets | 325,201 | 4,031 | 4.92 | % | 293,636 | 1,351 | 1.83 | % | ||||||
| Total interest-earning assets | 4,051,545 | 56,757 | 5.56 | % | 3,798,049 | 41,409 | 4.33 | % | ||||||
| Noninterest-earning assets | 177,216 | 208,135 | ||||||||||||
| Total assets | $ | 4,228,761 | $ | 4,006,184 | ||||||||||
| Liabilities & stockholders’ equity | ||||||||||||||
| NOW, Savings, MMDA’s | $ | 2,223,014 | 16,061 | 2.87 | % | $ | 1,873,786 | 3,514 | 0.74 | % | ||||
| Time deposits | 344,395 | 2,904 | 3.35 | % | 330,133 | 1,023 | 1.23 | % | ||||||
| Short-term borrowings | 3 | - | 0.00 | % | 4 | - | 0.00 | % | ||||||
| Notes payable & other long-term borrowings | - | - | 0.00 | % | - | - | 0.00 | % | ||||||
| Subordinated debt | 76,077 | 1,012 | 5.28 | % | 75,914 | 1,012 | 5.29 | % | ||||||
| Junior subordinated deferrable interest debentures | 46,393 | 862 | 7.37 | % | 46,393 | 457 | 3.91 | % | ||||||
| Total interest-bearing liabilities | 2,689,882 | 20,839 | 3.07 | % | 2,326,230 | 6,006 | 1.02 | % | ||||||
| Demand deposits | 1,071,175 | 1,248,804 | ||||||||||||
| Other liabilities | 85,713 | 78,139 | ||||||||||||
| Stockholders’ equity | 381,991 | 353,011 | ||||||||||||
| Total liabilities & stockholders’ equity | $ | 4,228,761 | $ | 4,006,184 | ||||||||||
| Net interest income | $ | 35,918 | $ | 35,403 | ||||||||||
| Net interest margin ^(2)^ | 3.52 | % | 3.70 | % | ||||||||||
| (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 Nine Months Ended | ||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| September 30, 2023 | September 30, 2022 | |||||||||||||
| Average<br><br> <br>Balance | Interest | Yield/Rate | Average<br><br> <br>Balance | Interest | Yield/Rate | |||||||||
| Assets | ||||||||||||||
| Loans | $ | 2,892,887 | $ | 128,724 | 5.95 | % | $ | 2,567,683 | $ | 99,262 | 5.17 | % | ||
| Debt securities - taxable | 574,159 | 16,027 | 3.73 | % | 592,069 | 10,058 | 2.27 | % | ||||||
| Debt securities - nontaxable | 194,492 | 3,870 | 2.66 | % | 216,951 | 4,315 | 2.66 | % | ||||||
| Other interest-bearing assets | 212,384 | 7,010 | 4.41 | % | 363,659 | 2,213 | 0.81 | % | ||||||
| Total interest-earning assets | 3,873,922 | 155,631 | 5.37 | % | 3,740,362 | 115,848 | 4.14 | % | ||||||
| Noninterest-earning assets | 183,149 | 236,296 | ||||||||||||
| Total assets | $ | 4,057,071 | $ | 3,976,658 | ||||||||||
| Liabilities & stockholders’ equity | ||||||||||||||
| NOW, Savings, MMDA’s | $ | 2,090,250 | 38,529 | 2.46 | % | $ | 1,905,000 | 5,782 | 0.41 | % | ||||
| Time deposits | 309,250 | 6,239 | 2.70 | % | 334,686 | 2,962 | 1.18 | % | ||||||
| Short-term borrowings | 111 | 5 | 6.02 | % | 4 | - | 0.00 | % | ||||||
| Notes payable & other long-term borrowings | - | - | 0.00 | % | - | - | 0.00 | % | ||||||
| Subordinated debt | 76,031 | 3,037 | 5.34 | % | 75,852 | 3,037 | 5.35 | % | ||||||
| Junior subordinated deferrable interest debentures | 46,393 | 2,402 | 6.92 | % | 46,393 | 1,005 | 2.90 | % | ||||||
| Total interest-bearing liabilities | 2,522,035 | 50,212 | 2.66 | % | 2,361,935 | 12,786 | 0.72 | % | ||||||
| Demand deposits | 1,085,345 | 1,174,783 | ||||||||||||
| Other liabilities | 74,865 | 64,639 | ||||||||||||
| Stockholders’ equity | 374,826 | 375,301 | ||||||||||||
| Total liabilities & stockholders’ equity | $ | 4,057,071 | $ | 3,976,658 | ||||||||||
| Net interest income | $ | 105,419 | $ | 103,062 | ||||||||||
| Net interest margin ^(2)^ | 3.64 | % | 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 | ||||||
|---|---|---|---|---|---|---|
| September 30,<br><br> <br>2023 | December 31,<br><br> <br>2022 | |||||
| Assets | ||||||
| Cash and due from banks | $ | 44,583 | $ | 61,613 | ||
| Interest-bearing deposits in banks | 307,841 | 173,270 | ||||
| Securities available for sale | 584,969 | 701,711 | ||||
| Loans held for sale | 20,273 | 30,403 | ||||
| Loans held for investment | 2,993,563 | 2,748,081 | ||||
| Less: Allowance for credit losses | (42,075 | ) | (39,288 | ) | ||
| Net loans held for investment | 2,951,488 | 2,708,793 | ||||
| Premises and equipment, net | 56,391 | 56,337 | ||||
| Goodwill | 19,315 | 19,508 | ||||
| Intangible assets | 2,621 | 4,349 | ||||
| Mortgage servicing assets | 27,749 | 27,474 | ||||
| Other assets | 171,210 | 160,605 | ||||
| Total assets | $ | 4,186,440 | $ | 3,944,063 | ||
| Liabilities and Stockholders’ Equity | ||||||
| Noninterest-bearing deposits | $ | 1,046,253 | $ | 1,150,488 | ||
| Interest-bearing deposits | 2,574,361 | 2,255,942 | ||||
| Total deposits | 3,620,614 | 3,406,430 | ||||
| Subordinated debt | 76,100 | 75,961 | ||||
| Junior subordinated deferrable interest debentures | 46,393 | 46,393 | ||||
| Other liabilities | 71,617 | 58,265 | ||||
| Total liabilities | 3,814,724 | 3,587,049 | ||||
| Stockholders’ Equity | ||||||
| Common stock | 16,600 | 17,027 | ||||
| Additional paid-in capital | 102,633 | 112,834 | ||||
| Retained earnings | 337,076 | 292,261 | ||||
| Accumulated other comprehensive income (loss) | (84,593 | ) | (65,108 | ) | ||
| Total stockholders’ equity | 371,716 | 357,014 | ||||
| Total liabilities and stockholders’ equity | $ | 4,186,440 | $ | 3,944,063 |
South Plains Financial, Inc.
Consolidated Statements of Income
(Unaudited)
(Dollars in thousands)
| Three Months Ended | Nine Months Ended | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| September 30,<br><br> <br>2023 | September 30,<br><br> <br>2022 | September 30,<br><br> <br>2023 | September 30,<br><br> <br>2022 | ||||||||
| Interest income: | |||||||||||
| Loans, including fees | $ | 46,242 | $ | 34,463 | $ | 128,703 | $ | 99,260 | |||
| Other | 10,286 | 6,645 | 26,094 | 15,680 | |||||||
| Total interest income | 56,528 | 41,108 | 154,797 | 114,940 | |||||||
| Interest expense: | |||||||||||
| Deposits | 18,965 | 4,537 | 44,768 | 8,744 | |||||||
| Subordinated debt | 1,012 | 1,012 | 3,037 | 3,037 | |||||||
| Junior subordinated deferrable interest debentures | 862 | 457 | 2,402 | 1,005 | |||||||
| Other | - | - | 5 | - | |||||||
| Total interest expense | 20,839 | 6,006 | 50,212 | 12,786 | |||||||
| Net interest income | 35,689 | 35,102 | 104,585 | 102,154 | |||||||
| Provision for credit losses | (700 | ) | (782 | ) | 4,010 | (2,867 | ) | ||||
| Net interest income after provision for credit losses | 36,389 | 35,884 | 100,575 | 105,021 | |||||||
| Noninterest income: | |||||||||||
| Service charges on deposits | 1,840 | 1,764 | 5,286 | 5,149 | |||||||
| Income from insurance activities | 30 | 4,856 | 1,478 | 8,003 | |||||||
| Mortgage banking activities | 4,602 | 6,287 | 12,146 | 28,593 | |||||||
| Bank card services and interchange fees | 3,157 | 3,156 | 10,156 | 9,856 | |||||||
| Gain on sale of subsidiary | 290 | — | 33,778 | — | |||||||
| Other | 2,358 | 4,874 | 7,236 | 11,868 | |||||||
| Total noninterest income | 12,277 | 20,937 | 70,080 | 63,469 | |||||||
| Noninterest expense: | |||||||||||
| Salaries and employee benefits | 18,709 | 22,927 | 61,400 | 67,620 | |||||||
| Net occupancy expense | 4,111 | 4,132 | 12,246 | 11,902 | |||||||
| Professional services | 1,560 | 2,523 | 4,924 | 7,795 | |||||||
| Marketing and development | 853 | 913 | 2,573 | 2,391 | |||||||
| Other | 6,256 | 6,906 | 23,206 | 21,673 | |||||||
| Total noninterest expense | 31,489 | 37,401 | 104,349 | 111,381 | |||||||
| Income before income taxes | 17,177 | 19,420 | 66,306 | 57,109 | |||||||
| Income tax expense | 3,683 | 3,962 | 13,885 | 11,490 | |||||||
| Net income | $ | 13,494 | $ | 15,458 | $ | 52,421 | $ | 45,619 |
South Plains Financial, Inc.
Loan Composition
(Unaudited)
(Dollars in thousands)
| As of | ||||
|---|---|---|---|---|
| September 30,<br><br> <br>2023 | December 31,<br><br> <br>2022 | |||
| Loans: | ||||
| Commercial Real Estate | $ | 1,046,262 | $ | 919,358 |
| Commercial - Specialized | 366,405 | 327,513 | ||
| Commercial - General | 514,567 | 484,783 | ||
| Consumer: | ||||
| 1-4 Family Residential | 534,511 | 460,124 | ||
| Auto Loans | 316,024 | 321,476 | ||
| Other Consumer | 77,325 | 81,308 | ||
| Construction | 138,469 | 153,519 | ||
| Total loans held for investment | $ | 2,993,563 | $ | 2,748,081 |
South Plains Financial, Inc.
Deposit Composition
(Unaudited)
(Dollars in thousands)
| As of | ||||
|---|---|---|---|---|
| September 30,<br><br> <br>2023 | December 31,<br><br> <br>2022 | |||
| Deposits: | ||||
| Noninterest-bearing deposits | $ | 1,046,253 | $ | 1,150,488 |
| NOW & other transaction accounts | 499,344 | 350,910 | ||
| MMDA & other savings | 1,724,457 | 1,618,833 | ||
| Time deposits | 350,560 | 286,199 | ||
| Total deposits | $ | 3,620,614 | $ | 3,406,430 |
South Plains Financial, Inc.
Reconciliation of Non-GAAP Financial Measures (Unaudited)
(Dollars in thousands)
| For the quarter ended | |||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| September 30,<br><br> <br>2023 | June 30,<br><br> <br>2023 | March 31,<br><br> <br>2023 | December 31,<br><br> <br>2022 | September 30,<br><br> <br>2022 | |||||||||||
| Pre-tax, pre-provision income | |||||||||||||||
| Net income | $ | 13,494 | $ | 29,683 | $ | 9,244 | $ | 12,621 | $ | 15,458 | |||||
| Income tax expense | 3,683 | 7,811 | 2,391 | 3,421 | 3,962 | ||||||||||
| Provision for credit losses | (700 | ) | 3,700 | 1,010 | 248 | (782 | ) | ||||||||
| Pre-tax, pre-provision income | $ | 16,477 | $ | 41,194 | $ | 12,645 | $ | 16,290 | $ | 18,638 | |||||
| Efficiency Ratio | |||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Noninterest expense | $ | 31,489 | $ | 40,499 | $ | 32,361 | $ | 32,708 | $ | 37,401 | |||||
| Net interest income | 35,689 | 34,581 | 34,315 | 36,322 | 35,102 | ||||||||||
| Tax equivalent yield adjustment | 229 | 303 | 302 | 299 | 301 | ||||||||||
| Noninterest income | 12,277 | 47,112 | 10,691 | 12,676 | 20,937 | ||||||||||
| Total income | 48,195 | 81,996 | 45,308 | 49,297 | 56,340 | ||||||||||
| Efficiency ratio | 65.34 | % | 49.39 | % | 71.42 | % | 66.35 | % | 66.38 | % | |||||
| Noninterest expense | $ | 31,489 | $ | 40,499 | $ | 32,361 | $ | 32,708 | $ | 37,401 | |||||
| Less: Windmark transaction and related expenses | — | (4,532 | ) | — | — | — | |||||||||
| Less: net loss on sale of securities | — | (3,409 | ) | — | — | — | |||||||||
| Adjusted noninterest expense | 31,489 | 32,558 | 32,361 | 32,708 | 37,401 | ||||||||||
| Total income | 48,195 | 81,996 | 45,308 | 49,297 | 56,340 | ||||||||||
| Less: gain on sale of Windmark | (290 | ) | (33,488 | ) | — | — | — | ||||||||
| Adjusted total income | 47,905 | 48,508 | 45,308 | 49,297 | 56,340 | ||||||||||
| Adjusted efficiency ratio | 65.73 | % | 67.12 | % | 71.42 | % | 66.35 | % | 66.38 | % | |||||
| As of | |||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | |||
| September 30,<br><br> <br>2023 | June 30,<br><br> <br>2023 | March 31,<br><br> <br>2023 | December 31,<br><br> <br>2022 | September 30,<br><br> <br>2022 | |||||||||||
| Tangible common equity | |||||||||||||||
| Total common stockholders’ equity | $ | 371,716 | $ | 392,029 | $ | 367,964 | $ | 357,014 | $ | 341,799 | |||||
| Less: goodwill and other intangibles | (21,936 | ) | (22,149 | ) | (23,496 | (23,857 | (24,228 | ||||||||
| Tangible common equity | $ | 349,780 | $ | 369,880 | $ | 344,468 | $ | 333,157 | $ | 317,571 | |||||
| Tangible assets | |||||||||||||||
| Total assets | $ | 4,186,440 | $ | 4,150,129 | $ | 4,058,049 | $ | 3,944,063 | $ | 3,992,690 | |||||
| Less: goodwill and other intangibles | (21,936 | ) | (22,149 | ) | (23,496 | (23,857 | (24,228 | ||||||||
| Tangible assets | $ | 4,164,504 | $ | 4,127,980 | $ | 4,034,553 | $ | 3,920,206 | $ | 3,968,462 | |||||
| Shares outstanding | 16,600,442 | 16,952,072 | 17,062,572 | 17,027,197 | 17,064,640 | ||||||||||
| Total stockholders’ equity to total assets | 8.88 | % | 9.45 | % | 9.07 | 9.05 | 8.56 | ||||||||
| Tangible common equity to tangible assets | 8.40 | % | 8.96 | % | 8.54 | 8.50 | 8.00 | ||||||||
| Book value per share | $ | 22.39 | $ | 23.13 | $ | 21.57 | $ | 20.97 | $ | 20.03 | |||||
| Tangible book value per share | $ | 21.07 | $ | 21.82 | $ | 20.19 | $ | 19.57 | $ | 18.61 |
All values are in US Dollars.
Exhibit 99.2
South Plains Financial Third Quarter 2023 Earnings Presentation October 24, 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, the impact on us and our customers of a decline in general economic conditions and any regulatory responses thereto; 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; cyber incidents or other failures, disruptions or security breaches; 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. 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. Additional information regarding these factors 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 U.S. Securities and Exchange Commission (the “SEC”), including the sections entitled "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations“ of such documents, and other documents South Plains files or furnishes with the SEC from time to time. 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 applicable 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
Third Quarter 2023 Highlights Diluted earnings per share for the third quarter was $0.78, compared to $1.71 for the second 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 $14.5 million, or 1.9% annualized, during the third quarter as compared to the second quarter of 2023 Metropolitan market loans grew $40.0 million, or 16.8% annualized, during the third quarter as compared to the second quarter of 2023 and represent 33.2% of the Bank’s total loan portfolio Deposits grew $46.1 million, or 1.3%, during the third quarter as compared to the second quarter of 2023 Net interest margin on a tax-equivalent basis was 3.52% compared to 3.65% for the second quarter of 2023. The provision for credit losses was a negative $0.7 million in the third quarter of 2023, compared to $3.7 million in the second quarter of 2023 Classified loans declined $16.7 million during the third quarter of 2023 to $50.7 from $67.4 million at June 30, 2023 Nonperforming assets to total assets were 0.12% at September 30, 2023, compared to 0.51% at June 30, 2023 4 Source: Company documents Net interest margin is calculated on a tax-equivalent basis Deposit Growth 1.3% Uninsured / Uncollaterized Deposits 16% Net Income $13.5 M EPS - Diluted $0.78 Net Interest Margin (1) (“NIM”) 3.52% Average Yield on Loans 6.10% Organic Loan Growth 1.9% annualized Loans Held for Investment (“HFI”) $2.99 B
Granular Deposit Base & Ample Liquidity Total Borrowing Capacity $1.89 Billion Source: Company documents (1) No securities are currently pledged to this program; amount represents securities available to be pledged Data as of September 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 Includes $89 million of parent company deposits Excludes collateralized public fund deposits SPFI had $1.89 billion of available borrowing capacity, as follows: FHLB of Dallas - $1.09 billion Federal Reserve Bank of Dallas Discount Window - $612 million Federal Reserve’s Bank Term Funding Program (1) - $179 million via the No borrowings utilized from these sources during 3Q'23
Loan Portfolio 3Q'23 Highlights Loans HFI increased $14.5 million from 2Q'23, primarily in commercial real estate loans, residential mortgage loans, seasonal agricultural loans, and energy loans Partially offset by $16.5 million in payoffs of nonperforming loans and a $14.9 million early pay down of one relationship Loans HFI increased $303.2 million from 3Q’22 3Q'23 yield on loans of 6.10%, an increase of 16 bps compared to 2Q’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 3Q'23 Highlights Loans HFI in our Dallas, Houston and El Paso metro markets increased by $40.0 million, or 16.8% annualized, to $994.8 million in 3Q’23, as compared to $954.8 million in Q2’23. Major metropolitan market loan portfolio represents 33.2% of the Bank’s total loans at September 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) Commercial C&D $ 178.9 Residential C&D 239.5 CRE Owner/Occ. 338.5 Other CRE Non Owner/Occ. 543.8 Multi-Family 222.6 C&I 355.2 Agriculture 187.3 1-4 Family 534.5 Auto 316.0 Other Consumer 77.3 Total $ 2,993.6 Fixed vs. Variable Rate 9 Source: Company documents Data as of September 30, 2023
Indirect Auto Overview Indirect Auto Highlights Indirect auto loans totaled $296.1 million Management anticipates a modest reduction of the portfolio over time with improving yields as monthly principal amortization is redeployed into higher rate loans During Q3’23 there were approximately $35 million in repayments Strong credit quality in sector positioned for resiliency across economic cycles: Super Prime Credit (>719): $181.4 million Prime Credit (719-660): $84.2 million Near Prime Credit (659-620): $25.6 million Sub-Prime Credit (619-580): $4.3 million Deep Sub-Prime Credit (<580): $0.7 million Loans past due 30+ days: 27 bps Indirect Auto Credit Breakdown 10 Source: Company documents Data as of September 30, 2023
CRE Portfolio 11 Office Loan Details 6.2% of total loans HFI 30% is owner-occupied Average loan size is $878 thousand Medical offices comprise 11% of office loans CRE Portfolio ($ in millions) 9/30/2023 Property Type Total Multifamily $222.6 Warehouse 197.9 Retail 169.5 Office – Non-Owner Occ 130.6 Hotel 62.5 Restaurant 60.3 Office – Owner Occ 55.4 Convenience Store 42.9 Other 163.2 Total $1,104.9 CRE Sector Breakdown Source: Company documents
CRE Analysis 12 Source: Company documents Note: Balances include loans that are still in the construction and development phase (000's) as of 9/30/2023 Hospitality Office Retail Multi-Family Industrial C Store Restaurant Mini-Storage Segment Total Balance $63,336 $190,561 $178,953 $282,655 $209,507 $42,901 $62,702 $25,615 Segment to Total Loans 2.12% 6.38% 5.99% 9.47% 7.02% 7.02% 2.10% 0.86% Average Balance $2,879 $878 $1,556 $3,533 $923 $923 $980 $883 Owner-Occupied $55,356 $16,604 $74,672 $40,081 $41,960 % Owner-Occupied 29.05% 9.28% 35.64% 93.43% 66.92% % Urban Center 1.35% 11.29% 22.15% 12.68% 20.14% 18.24% 24.14% 0.00% % Urban Non-Center 50.71% 81.29% 72.52% 82.83% 60.10% 72.89% 65.53% 87.34% % Suburban 47.04% 6.83% 1.88% 2.77% 14.59% 8.36% 6.45% 12.05% % Rural 0.14% 0.58% 0.46% 1.72% 0.49% 0.00% 0.00% 0.61% *** Population by Zip Code % Urban CBD >50,000 % Urban Non-CBD 10,000-50,000 % Suburban 2,500-10,000 % Rural >2,500 Data source - American Community Survey - US Census Bureau
Noninterest Income Overview Noninterest Income $ in Millions 3Q'23 Highlights Noninterest income of $12.3 million, compared to $47.1 million in 2Q'23, primarily due to: The $33.5 million gain on sale of Windmark being booked in the second quarter of 2023 Bank card services and interchange revenue decreased $0.9 million for the third quarter of 2023 13 Source: Company documents
Diversified Revenue Stream Nine Months Ended September 30, 2023 Total Revenues $174.7 million Noninterest Income $70.1 million 14 Source: Company documents
Net Interest Income and Margin Net Interest Income & Margin $ in Millions 3Q'23 Highlights Net interest income (“NII”) of $35.7 million, compared to $34.6 million in 2Q’23 3Q'23 NIM of 3.52%, a decrease of 13 bps compared to 2Q'23 Interest income increased $6.0 million in 3Q'23 from 2Q'23, which was mainly comprised of an increase of $3.4 million in loan interest income and $2.6 million in interest income on other interest-earning assets The average yield on loans was 6.10% for 3Q'23, compared to 5.94% for 2Q'23 15 3.54% Source: Company documents
Deposit Portfolio Total Deposits $ in Millions 3Q'23 Highlights Total deposits of $3.64 billion at 3Q'23, an increase of $67.8 million from 2Q’23 Mainly the result of an increase of $71 million in brokered deposits Cost of interest-bearing deposits increased to 2.93% in 3Q'23 from 2.45% in 2Q'23 Average cost of deposits increased to 2.07% as compared to 1.69% in 2Q'23 Noninterest-bearing deposits to total deposits was 28.9% in 3Q'23, compared to 30.8% in 2Q'23 16 Source: Company documents
Credit Quality 3Q'23 Highlights Credit Quality Ratios Net Charge-Offs to Average Loans ACL to Total Loans HFI 17 The Company recorded a negative provision for credit losses of $0.7 million, compared to $3.7 million in 2Q’23 The negative provision was largely attributable to a reduction of $1.3 million in specific reserves, partially offset by loan growth and net charge-off activity during the third quarter Ratio of Allowance for Credit Losses (“ACL”) to loans HFI was 1.41% at 9/30/2023 Source: Company documents
Investment Securities 3Q'23 Highlights Investment securities totaled $585.0 million, a decrease of $43.1 million from 2Q’23 Includes an increase of $30.9 million in the unrealized loss on available for sale securities during 3Q’23, primarily due to increases in market interest rates 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 7.02 years at quarter end 3Q'23 Securities Composition $585 million Securities & Cash $ in Millions 18 Source: Company documents
Noninterest Expense and Efficiency Noninterest Expense $ in Millions 3Q'23 Highlights Noninterest expense for 3Q’23 decreased $9 million from 2Q'23 primarily due to: $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 both recorded in 2Q’23 Adjusted efficiency ratio was 65.7% Will continue to manage expenses to drive profitability 19 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 20 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 21 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. 22
Appendix 23
Non-GAAP Financial Measures Source: Company documents $ in thousands 24 For the quarter ended September 30, 2023 June 30, 2023 March 31, 2023 December 31, 2022 September 30, 2022 Pre-tax, pre-provision income Net income $ 13,494 $ 29,683 $ 9,244 $ 12,621 $ 15,458 Income tax expense 3,683 7,811 2,391 3,421 3,962 Provision for credit losses (700) 3,700 1,010 248 (782) Pre-tax, pre-provision income $ 16,477 $ 41,194 $ 12,645 $ 16,290 $ 18,638 As of September 30, 2023 June 30, 2023 March 31, 2023 December 31, 2022 September 30, 2022 Tangible common equity Total common stockholders’ equity $ 371,716 $ 392,029 $ $ 367,964 $ $ 357,014 $ $ 341,799 Less: goodwill and other intangibles (21,936) (22,149) (23,496) (23,857) (24,228) Tangible common equity $ 349,780 $ 369,880 $ $ 344,468 $ $ 333,157 $ $ 317,571 Tangible assets Total assets $ 4,186,440 $ 4,150,129 $ $ 4,058,049 $ $ 3,944,063 $ $ 3,992,690 Less: goodwill and other intangibles (21,936) (22,149) (23,496) (23,857) (24,228) Tangible assets $ 4,164,504 $ 4,127,980 $ $ 4,034,553 $ $ 3,920,206 $ $ 3,968,462 Shares outstanding 16,600,442 16,952,072 17,062,572 17,027,197 17,064,640 Total stockholders’ equity to total assets 8.88% 9.45% 9.07% 9.05% 8.56% Tangible common equity to tangible assets 8.40% 8.96% 8.54% 8.50% 8.00% Book value per share $ 22.39 $ 23.13 $ 21.57 $ 20.97 $ 20.03 Tangible book value per share $ 21.07 $ 21.82 $ 20.19 $ 19.57 $ 18.61
Non-GAAP Financial Measures Source: Company documents $ in thousands 25 As of and for the quarter ended September 30, 2023 Efficiency Ratio Noninterest expense $ 31,489 Net interest income $ 35,689 Tax equivalent yield adjustment 229 Noninterest income 12,277 Total income $ 48,195 Efficiency ratio 65.34% Noninterest expense $ 31,489 Less: Windmark transaction and related expenses — Less: net loss on sale of securities — Adjusted noninterest expense 31,489 Total income $ 48,195 Less: gain on sale of Windmark (290) Adjusted total income $ 47,905 Adjusted efficiency ratio 65.73%