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): April 27, 2021
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 April 27, 2021, South Plains Financial, Inc. (the “Company”) issued a press release announcing its financial results for the first quarter ended March 31, 2021. 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 April 27, 2021, officers of the Company will have a conference call with respect to the Company’s financial results for the first quarter ended March 31, 2021. An earnings release slide presentation highlighting the Company’s financial results for the first quarter ended March 31, 2021 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 Item 2.02 and 7.01 of this Current Report on Form 8-K, including Exhibit 99.1 and Exhibit 99.2 hereto, 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 Item 2.02 and 7.01 of this Current Report on Form 8-K, including Exhibit 99.1 and Exhibit 99.2 hereto, 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 April 27, 2021, announcing first quarter 2021 financial results of South Plains Financial, Inc. |
| --- | --- |
| 99.2 | Earnings release slide presentation, dated April 27, 2021 |
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: April 27, 2021 | By: | /s/ Curtis C. Griffith | |
| Curtis C. Griffith | |||
| Chairman and Chief Executive Officer |
Exhibit 99.1
South Plains Financial, Inc. Reports First Quarter 2021 Financial Results
LUBBOCK, Texas, April 27, 2021 (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 March 31, 2021.
First Quarter 2021 Highlights
| ● | Net income for the first quarter of 2021 was $15.2 million, compared to $15.9 million for the fourth quarter of 2020 and $7.1 million for the first quarter of 2020. |
|---|---|
| ● | Diluted earnings per share for the first quarter of 2021 was $0.82, compared to $0.87 for the fourth quarter of 2020 and $0.38 for the first quarter of 2020. |
| --- | --- |
| ● | Pre-tax, pre-provision income (non-GAAP) for the first quarter of 2021 was $19.0 million, compared to $20.0 million for the fourth quarter of 2020 and $15.1 million for<br> the first quarter of 2020. |
| --- | --- |
| ● | Average cost of deposits for the first quarter of 2021 decreased to 29 basis points, compared to 31 basis points for the fourth quarter of 2020 and 65 basis points for<br> the first quarter of 2020. |
| --- | --- |
| ● | The provision for loan losses for the first quarter of 2021 was $89,000, compared to $141,000 for the fourth quarter of 2020 and $6.2 million for the first quarter of<br> 2020. |
| --- | --- |
| ● | Nonperforming assets to total assets were 0.42% at March 31, 2021, compared to 0.45% at December 31, 2020 and 0.28% at March 31, 2020. |
| --- | --- |
| ● | The adjusted (non-GAAP) efficiency ratio for the first quarter of 2021 was 65.76%, compared to 64.19% for the fourth quarter of 2020 and 69.10% for the first quarter of<br> 2020. |
| --- | --- |
| ● | Return on average assets for the first quarter of 2021 was 1.66% annualized, compared to 1.76% annualized for the fourth quarter of 2020 and 0.89% annualized for the<br> first quarter of 2020. |
| --- | --- |
| ● | Tangible book value (non-GAAP) per share was $19.28 as of March 31, 2021, compared to $18.97 per share as of December 31, 2020 and $16.54 per share as of March 31, 2020. |
| --- | --- |
Curtis Griffith, South Plains’ Chairman and Chief Executive Officer, commented, “Through the first quarter of 2021 our local Texas markets continued to recover as the pace of business has started to accelerate, real estate volumes remained strong, and the price of oil continued to rise. We are seeing these improved trends in our customers’ demand for credit and expect loan growth to reaccelerate to a low single digit rate through 2021, excluding Paycheck Protection Program (“PPP”) loans, before returning to mid-single digit growth in 2022 as we continue to expand in our metropolitan markets of Dallas-Fort Worth, Houston and El Paso. Importantly, we will remain disciplined and will not sacrifice our credit standards as we grow the Bank. This discipline has served us well during the COVID-19 pandemic, as can be seen in the credit metrics of our loan portfolio, as our active loan modifications declined to 2.1% of our loan portfolio in the first quarter of 2021 from 2.9% in the fourth quarter of 2020. We remain confident in the credit quality of our loan portfolio and the reserves for loan losses that we have.”
Mr. Griffith continued, “We believe the Bank’s financial position is strong as we have remained disciplined on core expenses as our mortgage volumes have grown, maintained strong liquidity, and are implementing a thoughtful capital allocation strategy to ensure a steady return of capital to our shareholders. During the first quarter of 2021, we continued to repurchase shares under our $10 million share repurchase program and last week our board of directors authorized a 40% increase in our quarterly dividend to $0.07 per share. We also remain committed to our employees, customers and the communities that we serve. Along these lines, we launched our first corporate sustainability report in February 2021 which outlines our commitment to a diverse workforce and board of directors, our goal to reduce our carbon footprint, and our ongoing support to our local communities through increasing employee and Bank engagement. We understand that this is a journey and are excited with the many ways ahead where we can make a positive impact.”
Results of Operations, Quarter Ended March 31, 2021
Net Interest Income
Net interest income was $29.5 million for the first quarter of 2021, compared to $30.4 million for the fourth quarter of 2020 and $30.2 million for the first quarter of 2020. The net interest margin was 3.52% for the first quarter of 2021, compared to 3.64% for the fourth quarter of 2020 and 4.13% for the first quarter of 2020. The average yield on loans was 5.07% for the first quarter of 2021, compared to 5.10% for the fourth quarter of 2020 and 5.76% for the first quarter of 2020. The average cost of deposits was 29 basis points for the first quarter of 2021, representing a two basis point decrease from the fourth quarter of 2020 and a 36 basis point decrease from the first quarter of 2020.
Interest income was $33.0 million for the first quarter of 2021, compared to $34.0 million for the fourth quarter of 2020 and $35.7 million for the first quarter of 2020. Interest income decreased $1.0 million in the first quarter of 2021 from the fourth quarter of 2020 due to lower loan rates and less purchase discount accretion, partially offset by additional fees on Small Business Administration (“SBA”) PPP loans. Interest income decreased by $2.8 million from the first quarter of 2020 primarily due to lower interest rates on loans, securities, and other interest-earning assets, partially offset by growth in average loans, principally from our origination of PPP loans. During the first quarter of 2021, the Company recognized $2.5 million in PPP related SBA fees. At March 31, 2021, there was $5.1 million of deferred fees that have not been accreted to income, the majority of which are expected to be recognized as PPP loans continue to be forgiven by the SBA over the next several quarters.
Interest expense was $3.4 million for the first quarter of 2021, compared to $3.6 million for the fourth quarter of 2020 and $5.5 million for the first quarter of 2020. The decrease in interest expense from the fourth quarter of 2020 was primarily due to lower interest rates paid on interest-bearing deposits, partially offset by growth in average interest-bearing liabilities. The decrease from the first quarter of 2020 was primarily due to lower interest rates paid on interest-bearing liabilities, partially offset by growth in average interest-bearing liabilities. The increase in average interest-bearing liabilities was largely due to growth in deposits and the issuance of $50 million in subordinated notes in September 2020.
Noninterest Income and Noninterest Expense
Noninterest income was $26.5 million for the first quarter of 2021, compared to $26.2 million for the fourth quarter of 2020 and $18.9 million for the first quarter of 2020. The increase from the fourth quarter of 2020 was primarily due to a $1.3 million positive fair value adjustment to the Company’s mortgage servicing rights and a decrease of $1.0 million in income from insurance activities, due to typical seasonality for insurance. The increase in noninterest income for the first quarter of 2021 as compared to the first quarter of 2020 was primarily due to growth of $10.1 million in mortgage banking activities revenue as a result of an additional $219.5 million in mortgage loan originations and a $1.3 million increase in the fair value of the Company’s mortgage servicing rights. This increase was partially offset by a gain on sale of securities of $2.3 million in the first quarter of 2020.
Noninterest expense was $37.1 million for the first quarter of 2021, compared to $36.5 million for the fourth quarter of 2020 and $34.0 million for the first quarter of 2020. The increase from the fourth quarter of 2020 was primarily the result of an increase of $1.2 million in personnel expense related to higher health insurance costs and a change to the lender incentive compensation plan. This increase was partially offset by the decrease of $331 thousand in marketing and business development expense after it had been elevated for the Company’s Permian Basin branches in the fourth quarter of 2020. The increase in noninterest expense for the first quarter of 2021 as compared to the first quarter of 2020 was primarily driven by a $3.5 million increase in personnel expense. This increase was predominantly related to an additional $3.0 million in commissions paid on the higher volume of mortgage loan originations and a rise of $1.0 million in salary and other personnel expenses to support mortgage activities. There was a reduction in other noninterest expenses of $658 thousand during the first quarter of 2021, primarily due to $331 thousand in data conversion expenses and $300 thousand in computer equipment purchased in connection with upgrading the equipment at branches acquired by the Company in November 2019 through the Company’s acquisition of West Texas State Bank as well as at existing branches incurred during the first quarter of 2020.
Loan Portfolio and Composition
Loans held for investment were $2.24 billion as of March 31, 2021, compared to $2.22 billion as of December 31, 2020 and $2.11 billion as of March 31, 2020. The $21.1 million increase during the first quarter of 2021 as compared to the fourth quarter of 2020 was primarily the result of organic net growth of $46.5 million, partially offset by seasonal repayments of $25.4 million in agricultural operating loans. Additionally, there was a net increase of $3.5 million in PPP loans as the Company funded $77.6 million in new PPP loans, partially offset by payments of $74.1 million on PPP loans, during the first quarter of 2021. As of March 31, 2021, loans held for investment increased $133.9 million from March 31, 2020, largely attributable to outstanding PPP loans of $173.5 million as of March 31, 2021, partially offset by the slower loan demand and accelerated repayments experienced during 2020.
Agricultural production loans were $80.5 million as of March 31, 2021, compared to $105.9 million as of December 31, 2020 and $96.8 million as of March 31, 2020. The decrease from the fourth quarter of 2020 is due to typical seasonal repayments on these agricultural production loans.
Deposits and Borrowings
Deposits totaled $3.16 billion as of March 31, 2021, compared to $2.97 billion as of December 31, 2020 and $2.67 billion as of March 31, 2020. Deposits increased $30.5 million, or 1.0%, in the first quarter of 2021 from December 31, 2020. As of March 31, 2021, deposits increased $277.5 million, or 10.3%, from March 31, 2020. The increase in deposits since March 31, 2020 is primarily a result of organic growth as well as existing customers depositing funds received from PPP loan advances, stimulus checks, and generally maintaining higher liquidity in response to the ongoing COVID-19 pandemic.
Noninterest-bearing deposits were $962.2 million as of March 31, 2021, compared to $917.3 million as of December 31, 2020 and $740.9 million as of March 31, 2020. Noninterest-bearing deposits represented 30.5% of total deposits as of March 31, 2021. The change in noninterest-bearing deposit balances at March 31, 2021 compared to December 31, 2020 was an increase of $181.3 million, or 6.1%. The change in noninterest-bearing deposit balances at March 31, 2021 compared to March 31, 2020 was an increase of $489.8 million, or 18.4%. The changes from both compared periods is primarily a result of organic growth as well as existing customers increasing their balances.
The Bank prepaid $50.0 million of advances from the Federal Home Loan Bank of Dallas in March 2021 and there was no related prepayment fee.
Asset Quality
As part of the Bank’s efforts to support its customers and protect the Bank as a result of the COVID-19 pandemic, the Bank has provided borrowers relief by offering varying forms of loan modifications including 90-day payment deferrals, 6-month interest only terms, or in certain select cases periods of longer than 6 months of interest only. As of March 31, 2021, total active loan modifications attributed to COVID-19 were $46.9 million, or 2.1% of the Company’s loan portfolio, down from $64.1 million, or 2.9% of the Company’s loan portfolio, at December 31, 2020. Approximately 95% of these active modified loans at March 31, 2021 are in the hotel portfolio.
The provision for loan losses recorded for the first quarter of 2021 was $89 thousand compared to $141 thousand for the fourth quarter of 2020 and $6.2 million for the first quarter of 2020. The decrease from the first quarter of 2020 is primarily due to the general improvement in the economy, a decline in the amount of loans that are actively under a modification, and a decrease in outstanding loan balances. There is continued uncertainty from the ongoing COVID-19 pandemic and the full extent of the impact on the economy and the Bank’s customers remains unknown at this time. Accordingly, additional provisions for loan losses may be necessary in future periods.
The allowance for loan losses to loans held for investment was 2.01% as of March 31, 2021, compared to 2.05% as of December 31, 2020 and 1.38% as of March 31, 2020. The allowance for loan losses to non-PPP loans held for investment was 2.18% as of March 31, 2021.
The nonperforming assets to total assets ratio as of March 31, 2021 was 0.42%, compared to 0.45% as of December 31, 2020 and 0.28% at March 31, 2020. Annualized net charge-offs were 0.11% for the first quarter of 2021, compared to 0.11% for the fourth quarter of 2020 and 0.25% for the first quarter of 2020.
Conference Call
South Plains will host a conference call to discuss its first quarter 2021 financial results today, April 27, 2021 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 13718209. The replay will be available until May 11, 2021.
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 insurance, 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 Common Share, Tangible Common Equity to Tangible Assets, Adjusted Efficiency Ratio, 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, among other things, the ongoing COVID-19 pandemic and other future events. 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, the extent of the impact of the COVID-19 pandemic on our customers, changes in interest rates, 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 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, 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 | |||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| March 31,<br><br> <br>2021 | December 31,<br><br> <br>2020 | September 30,<br><br> <br>2020 | June 30,<br><br> <br>2020 | March 31,<br><br> <br>2020 | |||||||||||
| Selected Income Statement Data: | |||||||||||||||
| Interest income | $ | 32,982 | $ | 33,984 | $ | 34,503 | $ | 34,007 | $ | 35,737 | |||||
| Interest expense | 3,438 | 3,619 | 3,230 | 3,559 | 5,538 | ||||||||||
| Net interest income | 29,544 | 30,365 | 31,273 | 30,448 | 30,199 | ||||||||||
| Provision for loan losses | 89 | 141 | 6,062 | 13,133 | 6,234 | ||||||||||
| Noninterest income | 26,500 | 26,172 | 31,660 | 24,896 | 18,875 | ||||||||||
| Noninterest expense | 37,057 | 36,504 | 35,993 | 35,207 | 34,011 | ||||||||||
| Income tax expense | 3,738 | 3,968 | 4,147 | 1,389 | 1,746 | ||||||||||
| Net income | 15,160 | 15,924 | 16,731 | 5,615 | 7,083 | ||||||||||
| Per Share Data (Common Stock): | |||||||||||||||
| Net earnings, basic | 0.84 | 0.88 | 0.93 | 0.31 | 0.39 | ||||||||||
| Net earnings, diluted | 0.82 | 0.87 | 0.92 | 0.31 | 0.38 | ||||||||||
| Cash dividends declared and paid | 0.05 | 0.05 | 0.03 | 0.03 | 0.03 | ||||||||||
| Book value | 20.75 | 20.47 | 19.52 | 18.64 | 18.10 | ||||||||||
| Tangible book value | 19.28 | 18.97 | 18.00 | 17.06 | 16.54 | ||||||||||
| Weighted average shares outstanding, basic | 18,069,186 | 18,053,467 | 18,059,174 | 18,061,705 | 18,043,105 | ||||||||||
| Weighted average shares outstanding, dilutive | 18,511,120 | 18,366,129 | 18,256,161 | 18,224,630 | 18,461,922 | ||||||||||
| Shares outstanding at end of period | 18,053,229 | 18,076,364 | 18,059,174 | 18,059,174 | 18,056,014 | ||||||||||
| Selected Period End Balance Sheet Data: | |||||||||||||||
| Cash and cash equivalents | 413,406 | 300,307 | 290,885 | 256,101 | 136,062 | ||||||||||
| Investment securities | 777,208 | 803,087 | 726,329 | 730,674 | 734,791 | ||||||||||
| Total loans held for investment | 2,242,676 | 2,221,583 | 2,288,234 | 2,331,716 | 2,108,805 | ||||||||||
| Allowance for loan losses | 45,019 | 45,553 | 46,076 | 40,635 | 29,074 | ||||||||||
| Total assets | 3,732,894 | 3,599,160 | 3,542,666 | 3,584,532 | 3,216,563 | ||||||||||
| Interest-bearing deposits | 2,193,427 | 2,057,029 | 2,037,743 | 2,006,984 | 1,924,902 | ||||||||||
| Noninterest-bearing deposits | 962,205 | 917,322 | 906,059 | 940,853 | 740,946 | ||||||||||
| Total deposits | 3,155,632 | 2,974,351 | 2,943,802 | 2,947,837 | 2,665,848 | ||||||||||
| Borrowings | 164,553 | 223,532 | 204,704 | 252,430 | 185,265 | ||||||||||
| Total stockholders’ equity | 374,671 | 370,048 | 352,568 | 336,534 | 326,890 | ||||||||||
| Summary Performance Ratios: | |||||||||||||||
| Return on average assets | 1.66 | % | 1.76 | % | 1.88 | % | 0.64 | % | 0.89 | % | |||||
| Return on average equity | 16.51 | % | 17.53 | % | 19.32 | % | 6.81 | % | 9.00 | % | |||||
| Net interest margin ^(1)^ | 3.52 | % | 3.64 | % | 3.82 | % | 3.79 | % | 4.13 | % | |||||
| Yield on loans | 5.07 | % | 5.10 | % | 5.08 | % | 5.06 | % | 5.76 | % | |||||
| Cost of interest-bearing deposits | 0.41 | % | 0.45 | % | 0.50 | % | 0.56 | % | 0.91 | % | |||||
| Efficiency ratio | 65.76 | % | 64.19 | % | 56.90 | % | 63.28 | % | 69.10 | % | |||||
| Summary Credit Quality Data: | |||||||||||||||
| Nonperforming loans | 14,316 | 14,965 | 15,006 | 10,472 | 7,112 | ||||||||||
| Nonperforming loans to total loans held for investment | 0.64 | % | 0.67 | % | 0.66 | % | 0.45 | % | 0.34 | % | |||||
| Other real estate owned | 1,377 | 1,353 | 1,336 | 1,335 | 1,944 | ||||||||||
| Nonperforming assets to total assets | 0.42 | % | 0.45 | % | 0.46 | % | 0.33 | % | 0.28 | % | |||||
| Allowance for loan losses to total loans held for investment | 2.01 | % | 2.05 | % | 2.01 | % | 1.74 | % | 1.38 | % | |||||
| Net charge-offs to average loans outstanding (annualized) | 0.11 | % | 0.11 | % | 0.10 | % | 0.27 | % | 0.25 | % |
| As of and for the quarter ended | |||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| March 31<br><br> <br>2021 | December 31,<br><br> <br>2020 | September 30,<br><br> <br>2020 | June 30,<br><br> <br>2020 | March 31,<br><br> <br>2020 | |||||||||||
| Capital Ratios: | |||||||||||||||
| Total stockholders’ equity to total assets | 10.04 | % | 10.28 | % | 9.95 | % | 9.39 | % | 10.16 | % | |||||
| Tangible common equity to tangible assets | 9.39 | % | 9.60 | % | 9.25 | % | 8.66 | % | 9.37 | % | |||||
| Common equity tier 1 to risk-weighted assets | 13.23 | % | 12.96 | % | 12.49 | % | 10.47 | % | 11.24 | % | |||||
| Tier 1 capital to average assets | 10.35 | % | 10.24 | % | 10.01 | % | 9.60 | % | 10.34 | % | |||||
| Total capital to risk-weighted assets | 19.24 | % | 19.08 | % | 18.67 | % | 14.32 | % | 15.23 | % | |||||
| (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 | ||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| March 31, 2021 | March 31, 2020 | |||||||||||||
| Average<br><br> <br>Balance | Interest<br><br> <br>Income<br><br> <br>Expense | Yield | Average<br><br> <br>Balance | Interest<br><br> <br>Income<br><br> <br>Expense | Yield | |||||||||
| Assets | ||||||||||||||
| Loans, excluding PPP ^(1)^ | $ | 2,163,114 | $ | 26,283 | 4.93 | % | $ | 2,167,015 | $ | 31,055 | 5.76 | % | ||
| Loans - PPP | 179,498 | 2,998 | 6.77 | % | - | - | 0.00 | % | ||||||
| Debt securities - taxable | 545,994 | 2,432 | 1.81 | % | 560,677 | 3,592 | 2.58 | % | ||||||
| Debt securities - nontaxable | 216,695 | 1,481 | 2.77 | % | 78,933 | 501 | 2.55 | % | ||||||
| Other interest-bearing assets | 330,233 | 100 | 0.12 | % | 151,133 | 734 | 1.95 | % | ||||||
| Total interest-earning assets | 3,435,534 | 33,294 | 3.93 | % | 2,957,758 | 35,882 | 4.88 | % | ||||||
| Noninterest-earning assets | 269,612 | 250,659 | ||||||||||||
| Total assets | $ | 3,705,146 | $ | 3,208,417 | ||||||||||
| Liabilities & stockholders’ equity | ||||||||||||||
| NOW, Savings, MMA’s | $ | 1,807,963 | 1,104 | 0.25 | % | $ | 1,545,937 | 2,656 | 0.69 | % | ||||
| Time deposits | 324,381 | 1,053 | 1.32 | % | 353,471 | 1,627 | 1.85 | % | ||||||
| Short-term borrowings | 25,022 | 4 | 0.06 | % | 30,744 | 93 | 1.22 | % | ||||||
| Notes payable & other long-term borrowings | 74,444 | 35 | 0.19 | % | 96,209 | 357 | 1.49 | % | ||||||
| Subordinated debt securities | 75,635 | 1,019 | 5.46 | % | 26,472 | 404 | 6.14 | % | ||||||
| Junior subordinated deferrable interest debentures | 46,393 | 223 | 1.95 | % | 46,393 | 401 | 3.48 | % | ||||||
| Total interest-bearing liabilities | 2,353,838 | 3,438 | 0.59 | % | 2,099,226 | 5,538 | 1.06 | % | ||||||
| Demand deposits | 935,345 | 765,637 | ||||||||||||
| Other liabilities | 43,604 | 27,152 | ||||||||||||
| Stockholders’ equity | 372,359 | 316,402 | ||||||||||||
| Total liabilities & stockholders’ equity | $ | 3,705,146 | $ | 3,208,417 | ||||||||||
| Net interest income | $ | 29,856 | $ | 30,344 | ||||||||||
| Net interest margin ^(2)^ | 3.52 | % | 4.13 | % | ||||||||||
| (1) | Average loan balances include nonaccrual loans and loans held for sale. | |||||||||||||
| --- | --- | |||||||||||||
| (2) | Net interest margin is calculated as the annualized net 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 | ||||||
|---|---|---|---|---|---|---|
| March 31,<br><br> <br>2021 | December 31,<br><br> <br>2020 | |||||
| Assets | ||||||
| Cash and due from banks | $ | 65,204 | $ | 76,146 | ||
| Interest-bearing deposits in banks | 348,202 | 224,161 | ||||
| Federal funds sold | - | — | ||||
| Investment securities | 777,208 | 803,087 | ||||
| Loans held for sale | 125,792 | 111,477 | ||||
| Loans held for investment | 2,242,676 | 2,221,583 | ||||
| Less: Allowance for loan losses | (45,019 | ) | (45,553 | ) | ||
| Net loans held for investment | 2,197,657 | 2,176,030 | ||||
| Premises and equipment, net | 59,211 | 60,331 | ||||
| Goodwill | 19,508 | 19,508 | ||||
| Intangible assets | 7,140 | 7,562 | ||||
| Other assets | 132,972 | 120,858 | ||||
| Total assets | $ | 3,732,894 | $ | 3,599,160 | ||
| Liabilities and Stockholders’ Equity Liabilities | ||||||
| Noninterest bearing deposits | $ | 962,205 | $ | 917,322 | ||
| Interest-bearing deposits | 2,193,427 | 2,057,029 | ||||
| Total deposits | 3,155,632 | 2,974,351 | ||||
| Other borrowings | 42,525 | 101,550 | ||||
| Subordinated debt securities | 75,635 | 75,589 | ||||
| Trust preferred subordinated debentures | 46,393 | 46,393 | ||||
| Other liabilities | 38,038 | 31,229 | ||||
| Total liabilities | 3,358,223 | 3,229,112 | ||||
| Stockholders’ Equity | ||||||
| Common stock | 18,053 | 18,076 | ||||
| Additional paid-in capital | 140,633 | 141,112 | ||||
| Retained earnings | 203,777 | 189,521 | ||||
| Accumulated other comprehensive income (loss) | 12,208 | 21,339 | ||||
| Total stockholders’ equity | 374,671 | 370,048 | ||||
| Total liabilities and stockholders’ equity | $ | 3,732,894 | $ | 3,599,160 |
South Plains Financial, Inc.
Consolidated Statements of Income
(Unaudited)
(Dollars in thousands)
| Three Months Ended | ||||
|---|---|---|---|---|
| March 31,<br><br> <br>2021 | March 31,<br><br> <br>2020 | |||
| Interest income: | ||||
| Loans, including fees | $ | 29,280 | $ | 31,015 |
| Other | 3,702 | 4,722 | ||
| Total Interest income | 32,982 | 35,737 | ||
| Interest expense: | ||||
| Deposits | 2,157 | 4,283 | ||
| Subordinated debt securities | 1,019 | 404 | ||
| Trust preferred subordinated debentures | 223 | 401 | ||
| Other | 39 | 450 | ||
| Total Interest expense | 3,438 | 5,538 | ||
| Net interest income | 29,544 | 30,199 | ||
| Provision for loan losses | 89 | 6,234 | ||
| Net interest income after provision for loan losses | 29,455 | 23,965 | ||
| Noninterest income: | ||||
| Service charges on deposits | 1,573 | 1,983 | ||
| Income from insurance activities | 1,112 | 1,159 | ||
| Mortgage banking activities | 18,816 | 8,753 | ||
| Bank card services and interchange fees | 2,642 | 2,238 | ||
| Net gain on sale of securities | - | 2,318 | ||
| Other | 2,357 | 2,424 | ||
| Total Noninterest income | 26,500 | 18,875 | ||
| Noninterest expense: | ||||
| Salaries and employee benefits | 24,318 | 20,810 | ||
| Net occupancy expense | 3,565 | 3,600 | ||
| Professional services | 1,573 | 1,572 | ||
| Marketing and development | 568 | 768 | ||
| Other | 7,033 | 7,261 | ||
| Total noninterest expense | 37,057 | 34,011 | ||
| Income before income taxes | 18,898 | 8,829 | ||
| Income tax expense | 3,738 | 1,746 | ||
| Net income | $ | 15,160 | $ | 7,083 |
South Plains Financial, Inc.
Loan Composition
(Unaudited)
(Dollars in thousands)
| As of | ||||
|---|---|---|---|---|
| March 31,<br><br> <br>2021 | December 31,<br><br> <br>2020 | |||
| Loans: | ||||
| Commercial Real Estate | $ | 673,985 | $ | 663,344 |
| Commercial - Specialized | 279,389 | 311,686 | ||
| Commercial - General | 531,303 | 518,309 | ||
| Consumer: | ||||
| 1-4 Family Residential | 362,571 | 360,315 | ||
| Auto Loans | 219,977 | 205,840 | ||
| Other Consumer | 67,644 | 67,595 | ||
| Construction | 107,807 | 94,494 | ||
| Total loans held for investment | $ | 2,242,676 | $ | 2,221,583 |
South Plains Financial, Inc.
Deposit Composition
(Unaudited)
(Dollars in thousands)
| As of | ||||
|---|---|---|---|---|
| March 31,<br><br> <br>2021 | December 31,<br><br> <br>2020 | |||
| Deposits: | ||||
| Noninterest-bearing demand deposits | $ | 962,205 | $ | 917,322 |
| NOW & other transaction accounts | 348,156 | 332,829 | ||
| MMDA & other savings | 1,520,943 | 1,398,699 | ||
| Time deposits | 324,328 | 325,501 | ||
| Total deposits | $ | 3,155,632 | $ | 2,974,351 |
South Plains Financial, Inc.
Reconciliation of Non-GAAP Financial Measures (Unaudited)
(Dollars in thousands)
| As of and for the quarter ended | |||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| March 31,<br><br> <br>2021 | December 31,<br><br> <br>2020 | September 30,<br><br> <br>2020 | June 30,<br><br> <br>2020 | March 31,<br><br> <br>2020 | |||||||||||
| Efficiency ratio | |||||||||||||||
| Noninterest expense | $ | 37,057 | $ | 36,504 | $ | 35,993 | $ | 35,207 | $ | 34,011 | |||||
| Net interest income | $ | 29,544 | $ | 30,365 | $ | 31,273 | $ | 30,448 | $ | 30,199 | |||||
| Tax equivalent yield adjustment | 312 | 336 | 322 | 290 | 145 | ||||||||||
| Noninterest income | 26,500 | 26,172 | 31,660 | 24,896 | 18,875 | ||||||||||
| Total income | $ | 56,356 | $ | 56,873 | $ | 63,255 | $ | 55,634 | $ | 49,219 | |||||
| Efficiency ratio | 65.76 | % | 64.19 | % | 56.90 | % | 63.28 | % | 69.10 | % | |||||
| Noninterest expense | $ | 37,057 | $ | 36,504 | $ | 35,993 | $ | 35,207 | $ | 34,011 | |||||
| Less: net loss on sale of securities | - | - | - | - | - | ||||||||||
| Adjusted noninterest expense | $ | 37,057 | $ | 36,504 | $ | 35,993 | $ | 35,207 | $ | 34,011 | |||||
| Total income | $ | 56,356 | $ | 56,873 | $ | 63,255 | $ | 55,634 | $ | 49,219 | |||||
| Less: net gain on sale of securities | - | - | - | - | (2,318 | ) | |||||||||
| Adjusted total income | $ | 56,356 | $ | 56,873 | $ | 63,255 | $ | 55,634 | $ | 46,901 | |||||
| Adjusted efficiency ratio | 65.76 | % | 64.19 | % | 56.90 | % | 63.28 | % | 72.52 | % | |||||
| Pre-tax, pre-provision income | |||||||||||||||
| Net income | $ | 15,160 | $ | 15,924 | $ | 16,731 | $ | 5,615 | $ | 7,083 | |||||
| Income tax expense | 3,738 | 3,968 | 4,147 | 1,389 | 1,746 | ||||||||||
| Provision for loan losses | 89 | 141 | 6,062 | 13,133 | 6,234 | ||||||||||
| Pre-tax, pre-provision income | $ | 18,987 | $ | 20,033 | $ | 26,940 | $ | 20,137 | $ | 15,063 |
South Plains Financial, Inc.
Reconciliation of Non-GAAP Financial Measures (Unaudited)
(Dollars in thousands)
| As of | |||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| March 31,<br><br> <br>2021 | December 31,<br><br> <br>2020 | September 30,<br><br> <br>2020 | June 30,<br><br> <br>2020 | March 31,<br><br> <br>2020 | |||||||||||
| Tangible common equity | |||||||||||||||
| Total common stockholders’ equity | $ | 374,671 | $ | 370,048 | $ | 352,568 | $ | 336,534 | $ | 326,890 | |||||
| Less: goodwill and other intangibles | (26,648 | ) | (27,070 | ) | (27,502 | ) | (28,414 | ) | (28,181 | ) | |||||
| Tangible common equity | $ | 348,023 | $ | 342,978 | $ | 325,066 | $ | 308,120 | $ | 298,709 | |||||
| Tangible assets | |||||||||||||||
| Total assets | $ | 3,732,894 | $ | 3,599,160 | $ | 3,542,666 | $ | 3,584,532 | $ | 3,216,563 | |||||
| Less: goodwill and other intangibles | (26,648 | ) | (27,070 | ) | (27,502 | ) | (28,414 | ) | (28,181 | ) | |||||
| Tangible assets | $ | 3,706,246 | $ | 3,572,090 | $ | 3,515,164 | $ | 3,556,118 | $ | 3,188,382 | |||||
| Shares outstanding | 18,053,229 | 18,076,364 | 18,059,174 | 18,059,174 | 18,056,014 | ||||||||||
| Total stockholders’ equity to total assets | 10.04 | % | 10.28 | % | 9.95 | % | 9.39 | % | 10.16 | % | |||||
| Tangible common equity to tangible assets | 9.39 | % | 9.60 | % | 9.25 | % | 8.66 | % | 9.37 | % | |||||
| Book value per share | $ | 20.75 | $ | 20.47 | $ | 19.52 | $ | 18.64 | $ | 18.10 | |||||
| Tangible book value per share | $ | 19.28 | $ | 18.97 | $ | 18.00 | $ | 17.06 | $ | 16.54 |
Exhibit 99.2
South Plains Financial Earnings Presentation First Quarter, 2021 1
Safe Harbor Statement and Other Disclosures FORWARD-LOOKING STATEMENTSThis presentation contains, and future oral and written statements of South Plains Financial, Inc. (“South Plains” or the “Company”) 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, among other things, 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, local, regional, national and international economic conditions, the extent of the impact of the COVID-19 pandemic, including the impact of actions taken by governmental and regulatory authorities in response to such pandemic, such as the Coronavirus Aid, Relief, and Economic Security Act and subsequent related legislations, and the programs established thereunder, and City Bank’s participation in such programs, volatility of the financial markets, changes in interest rates, 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. Therefore, 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 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 MEASURESManagement believes that certain non-GAAP performance measures used in this presentation provide meaningful information about underlying trends in its business and operations. 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 3 Curtis C. GriffithChairman & Chief Executive Officer Elected to the board of directors of First State Bank of Morton, Texas, in 1972 and employed by it in 1979Elected Chairman of the First State Bank of Morton board in 1984Chairman of the Board of City Bank and the Company since 1993 Steven B. CrockettChief Financial Officer & Treasurer Began his career in public accounting in 1994 by serving for seven years with a local firm in Lubbock, TexasAppointed Chief Financial Officer in 2015Controller of the Bank and the Company for 14 and 5 years respectively Cory T. NewsomPresident Entire banking career with the Company focused on lending and operationsAppointed President and Chief Executive Officer of the Bank in 2008Joined the Board in 2008 Brent A. BatesCity Bank’s Chief Credit Officer Joined City Bank in February 2020Division Credit Officer for Simmons First National CorpEVP and Chief Credit Officer of Southwest Bancorp, Inc.
$3.7 Billion in Total Assets as of March 31, 2021 Parent Company of City Bank, a leading Texas-based community bank headquartered in Lubbock, TX First Quarter 2021 Highlights 4 One of the largest independent banks headquartered in West Texas New Mexico Texas Dallas Bryan /College Station Houston Midland Odessa El Paso Lubbock Ruidoso SanAntonio Ft. Worth Austin Albuquerque Santa Fe SPFI Branches (25)661 FTE Employees as of 3/31/21 Net Income of $15.2 million, compared to $15.9 million in 4Q’20 and $7.1 million in 1Q’20Diluted earnings per share of $0.82, compared to $0.87 in 4Q’20 and $0.38 in 1Q’20Pre-Tax, Pre-Provision income of $19.0 million, compared to $20.0 million in 4Q’20 and $15.1 million in 1Q’20Average cost of deposits declined to 29 bps, compared to 31 bps in 4Q’20 and 65 bps in 1Q’20Provision for loan loss of $89 thousand, compared to $141 thousand in 4Q’20 and $6.2 million in 1Q’20Net Interest Margin of 3.52%, compared to 3.64% in 4Q’20 and 4.13% in 1Q’20 Efficiency ratio was 65.76%, compared to 64.19% in 4Q’20 and 69.10% in 1Q’20Tangible book value per share of $19.28, compared to $18.97 at 12/31/20 and $16.54 at 3/31/20Return on Average Assets (annualized) of 1.66%, compared to 1.76% in 4Q’20 and 0.89% in 1Q’20 NASDAQ: SPFI 1Q'21 Highlights Note: Pre-tax, pre-provision income is a non-GAAP measure. See appendix for the reconciliation to GAAP Source: Company documents
Loan Portfolio 5 Total loans increased $21.1 million compared to 4Q’20Increase in total loans during the quarter was due primarily to:$46.5 million in organic net growth; including $3.5 million in Paycheck Protection Program (“PPP”) loan net growthPartially offset by $25.4 million in pay downs on seasonal agricultural production loans1Q’21 loan yield of 4.93%; a decrease of 18 bps compared to 4Q’20 excluding PPP loans 1Q’21 Highlights Total Loans Held for Investment$ in Millions Source: Company documents
Loan Portfolio 6 Portfolio Composition Loan Portfolio ($ in millions) 3/31/21 Commercial C&D $ 100.4 Residential C&D 172.2 CRE Owner/Occ. 220.7 Other CRE Non Owner/Occ. 438.7 Multi-Family 70.5 C&I 268.6 Agriculture 147.9 1-4 Family 362.6 Auto 220.0 Other Consumer 67.6 PPP 173.5 Total $ 2,242.7 Source: Company documents PPP loans totaled $173.5 million at 3/31/21; includes $77.6 million in 1Q’21 advancesActive loan modifications were 2.1%, or $46.9 million, of total loans at 3/31/21:Decrease from 2.9%, or $64.1 million, at 12/31/20Approximately 95% of these modifications are in the hotel industry 1Q’21 Highlights
DirectEnergy Select Loan Industry Concentration Detail 7 As of March 31, 2021 Hospitality Total operating hospitality loans of $123 million*$17 million in hotels under construction, with unfunded commitments of $7 million84% of balances are to limited service hotels43% of operating hospitality classified; 2% is nonaccrual; < 2.5% are 30 days or more past dueAllowance for Loan and Lease Losses (“ALLL”) on operating hospitality is 8.8%** Does not include loans reported in construction and development Total direct energy loans of $63 million92% support services, 8% upstreamNearly 100% are located in Permian and Palo Duro Basins12% of energy sector classifiedALLL on energy sector is 5.2% Hotels by Geography Source: Company documents Energy Support Services by Type
Mortgage Banking Overview 8 Mortgage Banking Activity$ in Millions 1Q’21 Highlights 101% increase in mortgage loan originations for 1Q’21 to $435 million compared to $216 million for 1Q’20Mortgage servicing rights asset valuation adjustment – positive $1.3 million in 1Q’21, compared to negative $753 thousand in 4Q’20 Source: Company documents
Noninterest Income 9 Noninterest Income$ in Millions 1Q’21 Highlights Noninterest income of $26.5 million, compared to $18.9 million in 1Q’20Revenue from mortgage banking activities of $18.8 million, compared to $8.8 million in 1Q’20Fee income primarily driven by mortgage operations, debit card and other bank service charge income, and income from insurance, trust and investment services business Source: Company documents
Diversified Revenue Stream Three Months Ended March 31, 2021 10 Total Revenues$56.0 million Noninterest Income$26.5 million Source: Company documents
Net Interest Income and Margin 11 Net Interest Income & Margin$ in Millions 1Q’21 Highlights Net interest income of $29.5 million, compared to $30.2 million in 1Q’20The decline as compared to 1Q’20 was a result of:Decrease of 69 bps in loan ratesInterest expense for $50 million of subordinated notes issued in 3Q’20 Partially offset by a decrease of 50 bps in the cost of interest-bearing deposits1Q’21 net interest margin (“NIM”) of 3.52% - decrease of 12 bps compared to 4Q’20:18 bps decline in non-PPP loan yieldExcess liquidity - $90 million growth in average deposits negatively affected NIM 9 bps Source: Company documents
Deposit Portfolio 12 Total Deposits$ in Millions 1Q’21 Highlights Total Deposits of $3.16 billion at 1Q’21, an increase of $181.3 million from 4Q’20Increase in total deposits primarily a result of organic growth as well as existing customers depositing funds received from PPP loan advances, stimulus checks, and generally maintaining higher liquidity in response to the ongoing COVID-19 pandemicCost of interest-bearing deposits declined in 1Q’21 to 41bps from 91bps in 1Q’20Noninterest-bearing deposits represented 30.5% of deposits in 1Q’21, compared to 30.8% in 4Q’20 and 27.8% in 1Q’20 Source: Company documents
Credit Quality 13 1Q’21 Highlights Credit Quality Ratios Minimal provision for loan loss of $89 thousand as the result of modest improvements in the economy and a decline in loans actively under a modificationTotal classified loans decreased $3 million in 1Q’21 as compared to 4Q’20Nonperforming assets and net loans charged-off during the quarter were decreased in 1Q’21 compared to 4Q’20 Net Charge-Offs to Average Loans ALLL to Total Loans HFI Source: Company documents
Investment Securities 14 1Q’21 Highlights Investment Securities totaled $777.2 million at 1Q’21, a decrease of $25.9 million from 4Q’20; primarily from a decrease in the fair value of securities of $18.5 million due to market conditions All municipal bonds are in TexasAll MBS, CMO, and Asset Backed securities are U.S. Government or GSE 1Q’21 Securities Composition $777.2mm Securities & Cash$ in Millions Source: Company documents
Noninterest Expense and Efficiency 15 Noninterest Expense$ in Millions 1Q’21 Highlights Noninterest expense for 1Q’21 increased from 1Q’20 primarily due to:additional $3.0 million in commissions paid on the higher volume of mortgage loan originationsa rise of $1.0 million in salary and other personnel expenses to support mortgage activitiespartially offset by 1Q’20 expenses for conversion expenses and technology upgrades at branches acquired through the acquisition of West Texas State BankManagement continues to focus on reducing fixed expenses to drive improved profitability Source: Company documents
Balance Sheet Highlights$ in Millions Balance Sheet Growth and Development 16 Tangible Book Value Per Share Note: Tangible book value per share is a non-GAAP measure. See appendix for the reconciliation to GAAP Source: Company documents
Strong Capital Base 17 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 Source: Company documents Note: Tangible common equity to tangible assets is a non-GAAP measure. See appendix for the reconciliation to GAAP
Appendix 18
Non-GAAP Financial Measures 19 As of and for the quarter ended March 31,2021 December 31,2020 September 30,2020 June 30,2020 March 31,2020 Efficiency Ratio Noninterest expense $ 37,057 $ 36,504 $ 35,993 $ 35,207 $ 34,011 Net interest income $ 29,544 $ 30,365 $ 31,273 $ 30,448 $ 30,199 Tax equivalent yield adjustment 312 336 322 290 145 Noninterest income 26,500 26,172 31,660 24,896 18,875 Total income $ 56,356 $ 56,873 $ 63,255 $ 55,634 $ 49,219 Efficiency ratio 65.76% 64.19% 56.90% 63.28% 69.10% Noninterest expense $ 37,057 $ 36,504 $ 35,993 $ 35,207 $ 34,011 Less: net loss on sale of securities - - - - - Adjusted noninterest expense 37,057 36,504 35,993 35,207 34,011 Total income $ 56,356 $ 56,873 $ 63,255 $ 55,634 $ 49,219 Less: net gain on sale of securities - - - - (2,318) Adjusted total income $ 56,356 $ 56,873 $ 63,255 $ 53,634 $ 46,901 Adjusted efficiency ratio 65.76% 64.19% 56.90% 63.28% 72.52% Unaudited$ in Thousands Pre-Tax, Pre-Provision Income Net income $ 15,160 $ 15,924 $ 16,731 $ 5,615 $ 7,083 Income tax expense 3,738 3,968 4,147 1,389 1,746 Provision for loan losses 89 141 6,062 13,133 6,234 Pre-tax, pre-provision income $ 18,987 $ 20,033 $ 26,940 $ 20,137 $ 15,063 Source: Company documents
Non-GAAP Financial Measures 20 As of and for the quarter ended March 31,2021 December 31,2020 September 30,2020 June 30,2020 March 31,2020 Tangible common equity Total common stockholders' equity $ 374,671 $ 370,048 $ 352,568 $ 336,534 $ 326,890 Less: goodwill and other intangibles (26,648) (27,070) (27,502) (28,414) (28,181) Tangible common equity $ 348,023 $ 342,978 $ 325,066 $ 308,120 $ 298,709 Tangible assets Total assets $ 3,732,894 $ 3,599,160 $ 3,542,666 $ 3,584,532 $ 3,216,563 Less: goodwill and other intangibles (26,648) (27,070) (27,502) (28,414) (28,181) Tangible assets $ 3,706,246 $ 3,572,090 $ 3,515,164 $ 3,556,118 $ 3,188,382 Shares outstanding 18,053,229 18,076,364 18,059,174 18,059,174 18,056,014 Total stockholders' equity to total assets 10.04% 10.28% 9.95% 9.39% 10.16% Tangible common equity to tangible assets 9.39% 9.60% 9.25% 8.66% 9.37% Book value per share $ 20.75 $ 20.47 $ 19.52 $ 18.64 $ 18.10 Tangible book value per share $ 19.28 $ 18.97 $ 18.00 $ 17.06 $ 16.54 Unaudited$ in Thousands Source: Company documents