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): January 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,<br> Texas | 79407 | |
| --- | --- | |
| (Address of principal executive offices) | (Zip Code) |
(806) 792-7101
(Registrant’s telephone number, including area code)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| ☐ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
|---|---|
| ☐ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| --- | --- |
| ☐ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| --- | --- |
| ☐ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
| --- | --- |
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
|---|---|---|
| Common Stock, par value $1.00 per share | SPFI | The Nasdaq Stock Market LLC |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☒
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
| Item 2.02 | Results of Operations and Financial Condition. |
|---|
On January 27, 2021, South Plains Financial, Inc. (the “Company”) issued a press release announcing its financial results for the fourth quarter and year ended December 31, 2020. 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 January 27, 2021, officers of the Company will have a conference call with respect to the Company’s financial results for the fourth quarter and year ended December 31, 2020. An earnings release slide presentation highlighting the Company’s financial results for the fourth quarter and year ended December 31, 2020 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, 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 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 January 27, 2021, announcing fourth quarter and year-end 2020 financial results of South Plains Financial, Inc. |
| --- | --- |
| 99.2 | Earnings release slide presentation, dated January 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: January 27, 2021 | By: | /s/ Curtis C. Griffith |
| Curtis C. Griffith | ||
| Chairman and Chief Executive Officer |
Exhibit 99.1
South Plains Financial, Inc. Reports Fourth Quarter and Year-End 2020 Financial Results
LUBBOCK, Texas, January 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 and year ended December 31, 2020.
Fourth Quarter 2020 Highlights
| ● | Net income for the fourth quarter of 2020 was $15.9 million, compared to $16.7 million for the third quarter of 2020 and $10.1 million for the fourth quarter of<br> 2019. |
|---|---|
| ● | Diluted earnings per share for the fourth quarter of 2020 was $0.87, compared to $0.92 for the third quarter of 2020 and $0.55 for the fourth quarter of 2019. |
| --- | --- |
| ● | Pre-tax, pre-provision income (non-GAAP) for the fourth quarter of 2020 was $20.0 million, compared to $26.9 million for the third quarter of 2020 and $13.7 million<br> for the fourth quarter of 2019. |
| --- | --- |
| ● | Average cost of deposits for the fourth quarter of 2020 decreased to 31 basis points, compared to 34 basis points for the third quarter of 2020 and 76 basis points<br> for the fourth quarter of 2019. |
| --- | --- |
| ● | The provision for loan losses for the fourth quarter of 2020 was $141,000, compared to $6.1 million for the third quarter of 2020 and $896,000 for the fourth<br> quarter of 2019. |
| --- | --- |
| ● | Nonperforming assets to total assets were 0.45% at December 31, 2020, compared to 0.46% at September 30, 2020 and 0.24% at December 31, 2019. |
| --- | --- |
| ● | Return on average assets for the fourth quarter of 2020 was 1.76% annualized, compared to 1.88% annualized for the third quarter of 2020 and 1.32% annualized for<br> the fourth quarter of 2019. |
| --- | --- |
Full Year 2020 Highlights
| ● | $3.6 billion in total assets at December 31, 2020, compared to $3.2 billion at December 31, 2019. |
|---|---|
| ● | Full year net income of $45.4 million in 2020, compared to $29.2 million in 2019. |
| --- | --- |
| ● | Diluted earnings per share of $2.47 in 2020, compared to $1.71 in 2019. |
| --- | --- |
| ● | Efficiency ratio of 63.0% in 2020, compared to 75.3% in 2019. |
| --- | --- |
| ● | Tangible book value (non-GAAP) per share of $18.97 at December 31, 2020, compared to $15.46 at December 31, 2019. |
| --- | --- |
| ● | Return on average assets of 1.31% for the full year 2020, compared to 1.04% for 2019. |
| --- | --- |
| ● | Issued $50 million of subordinated notes in September 2020. |
| --- | --- |
Curtis Griffith, South Plains’ Chairman and Chief Executive Officer, commented, “While this past year presented our Company with unprecedented challenges as a result of the global COVID-19 pandemic, I could not be more pleased with the performance of our employees and their commitment to both the Bank and our customers. Our strong financial results for the fourth quarter and full year 2020 would not have been possible without their tireless efforts. We continue to weather the economic storm caused by the ongoing COVID-19 pandemic and ended the year in a strong financial position highlighted by our well-capitalized balance sheet and the improving credit metrics of our loan portfolio. This can be seen in our active loan modifications, which were 2.9% of our total portfolio at December 31, 2020, which is a decline from 5.4% at September 30, 2020. We believe our proactive approach to managing our credit combined with our Enterprise Risk Management system has enabled our team to effectively manage a difficult environment and positioned the Company to take advantage of opportunities in the year ahead as we strive to grow the Bank both organically and through strategic acquisitions.”
Mr. Griffith continued, “Looking at our results in more detail, we delivered pre-tax, pre-provision income of $20.0 million in the fourth quarter of 2020, representing 46% growth as compared to $13.7 million in the fourth quarter of 2019. We also grew book value per share to $20.47 at December 31, 2020, a rise of 21% as compared to book value per share of $16.98 at December 31, 2019. Importantly, we are delivering this growth while maintaining a strict discipline on expenses as can be seen in our efficiency ratio, which was 64.2% in the fourth quarter of 2020 as compared to 69.7% in the fourth quarter of 2019. Additionally, our annualized return on average assets increased to 1.76% in the fourth quarter of 2020 as compared to 1.32% in the fourth quarter of 2019. A clear focus of our team has been to scale the Bank while delivering returns in line or better to our peer group over time. While we have more work to do in order to achieve our goal, I am very pleased with the progress that our team achieved this past year.”
Results of Operations, Quarter Ended December 31, 2020
Net Interest Income
Net interest income was $30.4 million for the fourth quarter of 2020, compared to $28.6 million for the fourth quarter of 2019 and $31.3 million for the third quarter of 2020.
Interest income was $34.0 million for the fourth quarter of 2020, compared to $34.8 million for the fourth quarter of 2019 and $34.5 million for the third quarter of 2020. Interest and fees on loans decreased by $429,000 from the fourth quarter of 2019 due to a decrease of 68 basis points in loan rates as a result of the decline in the interest rate environment experienced in the first quarter of 2020, partially offset by growth of $256.7 million in average loans, primarily from the Small Business Administration (“SBA”) Paycheck Protection Program (“PPP”) loans that were originated largely in the second quarter of 2020. Interest income decreased slightly in the fourth quarter of 2020 from the third quarter of 2020 due to a decline of 17 basis points in non-PPP loan rates and a decline of $55.9 million in average loans, partially offset by the additional interest and fees on PPP loans. The PPP loans yielded 5.02% during the fourth quarter of 2020, which includes accretion of the related SBA lender fees for processing PPP loans during the quarter. As of December 31, 2020, the Company has originated approximately 2,100 PPP loans, totaling $218 million, and has received $7.8 million in PPP related SBA fees. These fees are deferred and then accreted into interest income over the life of the applicable loans. During the fourth quarter of 2020, the Company recognized $2.0 million in PPP related SBA fees. The Company expects that the majority of PPP loans will be forgiven over the next several quarters. At December 31, 2020, there was $4.1 million of deferred fees that have not been accreted to income.
Interest expense was $3.6 million for the fourth quarter of 2020, compared to $6.1 million for the fourth quarter of 2019 and $3.2 million for the third quarter of 2020. The decrease from the fourth quarter of 2019 was primarily due to a decrease in the interest rate paid on interest-bearing liabilities of 58 basis points, partially offset by an increase of $262.2 million in average interest-bearing liabilities. The increase in average interest-bearing liabilities was largely due to growth in deposits from PPP loan funding and other government stimulus payments and programs as well as organic growth and the issuance of $50.0 million in subordinated notes on September 29, 2020. Additionally, the decrease in the rate paid on interest-bearing liabilities was the result of the decline in the overall rate environment experienced in the first quarter of 2020. The increase in interest expense from the third quarter of 2020 was primarily due to the interest expense on the $50.0 million in subordinated notes issued on September 29, 2020, partially offset by a decrease in the interest rate paid on interest-bearing deposits.
The average cost of deposits was 31 basis points for the fourth quarter of 2020, representing a 45 basis point decrease from the fourth quarter of 2019 and a three basis point decrease from the third quarter of 2020.
The net interest margin was 3.64% for the fourth quarter of 2020, compared to 4.03% for the fourth quarter of 2019 and 3.82% for the third quarter of 2020.
Noninterest Income and Noninterest Expense
Noninterest income was $26.2 million for the fourth quarter of 2020, compared to $16.7 million for the fourth quarter of 2019 and $31.7 million for the third quarter of 2020. The increase in noninterest income for the fourth quarter of 2020 as compared to the fourth quarter of 2019 was primarily due to growth of $10.3 million in mortgage banking activities revenue as a result of an additional $271.6 million in mortgage loan originations. Additionally, there was a decrease in income from insurance activities of $782,000 in the fourth quarter of 2020 related to the effect of adoption of the revenue recognition standard for quarterly reporting in 2020, with a higher amount of income now being recognized in the third quarter compared to being recognized in the fourth quarter in previous years. The decrease from the third quarter of 2020 was primarily due to a reduction of $4.5 million in mortgage banking activities revenue as a result of lower interest rate lock commitments in the fourth quarter and a decrease of $1.1 million in income from insurance activities.
Noninterest expense was $36.5 million for the fourth quarter of 2020, compared to $31.7 million for the fourth quarter of 2019 and $36.0 million for the third quarter of 2020. The increase in noninterest expense as compared to the fourth quarter of 2019 was primarily driven by a $3.8 million increase in personnel expense. This increase was predominantly related to an additional $3.7 million in commissions paid on the higher volume of mortgage loan originations. Appraisal expenses, principally for the Company’s mortgage operations, increased $517,000 related to the growth in mortgage production. Net occupancy expenses increased $499,000 primarily from the completion of the Company’s acquisition of West Texas State Bank in the middle of the fourth quarter of 2019 as well as additional locations for mortgage operations. The increase from the third quarter of 2020 was primarily the result of a recovery of $303,000 of legal expenses from the previously disclosed settlement of a lawsuit in September 2020. Additionally, there was increased marketing and business development in the Company’s Permian Basin branches in the fourth quarter of 2020.
Loan Portfolio and Composition
Loans held for investment were $2.22 billion as of December 31, 2020, compared to $2.29 billion as of September 30, 2020 and $2.14 billion as of December 31, 2019. The $66.7 million decrease during the fourth quarter of 2020 as compared to the third quarter of 2020 was primarily the result of $41.8 million in forgiveness and paydowns on PPP loans, seasonal paydowns of $28.0 million in agricultural operating loans, and the early payoff of a $16.0 million state and municipality loan, offset by organic loan growth. As of December 31, 2020, loans held for investment increased $78.0 million from December 31, 2019, largely attributable to the PPP loans primarily funded in the second quarter of 2020, partially offset by the slower loan demand and accelerated paydowns experienced during 2020.
The Economic Aid Act, signed into law on December 27, 2020, authorized an additional $284.5 billion in new PPP funding and extends the authority of lenders to make PPP loans through March 31, 2021. The Company intends to participate in the new round of the PPP.
Agricultural production loans were $105.9 million as of December 31, 2020, compared to $133.9 million as of September 30, 2020 and $131.2 million as of December 31, 2019. The Company did not experience the typical historical increase in seasonal fundings on these agricultural production loans during the third quarter of 2020, primarily as a result of drought conditions or damaged crops and where the borrower received crop insurance proceeds to pay down the loans.
Deposits and Borrowings
Deposits totaled $2.97 billion as of December 31, 2020, compared to $2.94 billion as of September 30, 2020 and $2.70 billion as of December 31, 2019. Deposits increased $30.5 million, or 1.0%, in the fourth quarter of 2020 from September 30, 2020. As of December 31, 2020, deposits increased $277.5 million, or 10.3%, from December 31, 2019. The increase in deposits since December 31, 2019 is primarily a result of organic growth as well as existing customers increasing their balances.
Noninterest-bearing deposits were $917.3 million as of December 31, 2020, compared to $906.1 million as of September 30, 2020 and $790.9 million as of December 31, 2019. Noninterest-bearing deposits represented 30.8% of total deposits as of December 31, 2020. The increase in noninterest-bearing deposit balances at December 31, 2020 compared to September 30, 2020 was $11.3 million, or 1.2%. The increase in noninterest-bearing deposit balances at December 31, 2020 compared to December 31, 2019 was $126.4 million, or 16.0%, and is primarily a result of organic growth as well as existing customers increasing their balances.
The Bank has utilized its lines of credit with the Federal Home Loan Bank of Dallas (the “FHLB”) and the Federal Reserve Bank of Dallas to supplement funding for origination of PPP loans as needed. This included borrowing $75.0 million from the FHLB for a three month term. This borrowing matured in July 2020 and was repaid in full.
On September 29, the Company issued $50.0 million in fixed-to-floating rate subordinated notes due in 2030. These notes bear interest at a fixed rate of 4.50% for the first five years, and the interest rate will reset quarterly thereafter to the then current three-month Secured Overnight Financing Rate, as published by the Federal Reserve Bank of New York, plus 438 basis points.
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 December 31, 2020, total active loan modifications attributed to COVID-19 were $64.1 million, or 2.9% of the Company’s loan portfolio, down from $124.0 million, or 5.4% of the Company’s loan portfolio, at September 30, 2020. Approximately 95% of the active modified loans at December 31, 2020 are interest only periods longer than 6 months, primarily in the hotel portfolio.
The provision for loan losses recorded for the fourth quarter of 2020 was $141,000 compared to $896,000 for the fourth quarter of 2019 and $6.1 million for the third quarter of 2020. The decrease from the third quarter of 2020 is a result of a modest 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 2.05% as of December 31, 2020, compared to 2.01% as of September 30, 2020 and 1.13% as of December 31, 2019. The allowance for loan losses to non-PPP loans held for investment was 2.22% as of December 31, 2020.
The nonperforming assets to total assets ratio as of December 31, 2020 was 0.45%, compared to 0.46% as of September 30, 2020 and 0.24% at December 31, 2019.
Annualized net charge-offs were 0.11 % for the fourth quarter of 2020, compared to 0.10% for the third quarter of 2020 and 0.17% for the fourth quarter of 2019.
Conference Call
South Plains will host a conference call to discuss its fourth quarter and year-end 2020 financial results today, January 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 13714991. The replay will be available until February 10, 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 and Eastern New Mexico markets. 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 and Quarterly Reports on Form 10-Q on file with the SEC, and other documents South Plains files with the SEC from time to time. South Plains urges readers of this press release to review the “Risk Factors” section of our most recent Annual Report on Form 10-K Quarterly Reports on Form 10-Q, 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 | |||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| December 31,<br><br> <br>2020 | September 30,<br><br> <br>2020 | June 30,<br><br> <br>2020 | March 31,<br><br> <br>2020 | December 31,<br><br> <br>2019 | |||||||||||
| Selected Income Statement Data: | |||||||||||||||
| Interest income | $ | 33,984 | $ | 34,503 | $ | 34,007 | $ | 35,737 | $ | 34,764 | |||||
| Interest expense | 3,619 | 3,230 | 3,559 | 5,538 | 6,140 | ||||||||||
| Net interest income | 30,365 | 31,273 | 30,448 | 30,199 | 28,624 | ||||||||||
| Provision for loan losses | 141 | 6,062 | 13,133 | 6,234 | 896 | ||||||||||
| Noninterest income | 26,172 | 31,660 | 24,896 | 18,875 | 16,740 | ||||||||||
| Noninterest expense | 36,504 | 35,993 | 35,207 | 34,011 | 31,714 | ||||||||||
| Income tax expense | 3,968 | 4,147 | 1,389 | 1,746 | 2,645 | ||||||||||
| Net income | 15,924 | 16,731 | 5,615 | 7,083 | 10,109 | ||||||||||
| Per Share Data (Common Stock): | |||||||||||||||
| Net earnings, basic | 0.88 | 0.93 | 0.31 | 0.39 | 0.56 | ||||||||||
| Net earnings, diluted | 0.87 | 0.92 | 0.31 | 0.38 | 0.55 | ||||||||||
| Cash dividends declared and paid | 0.05 | 0.03 | 0.03 | 0.03 | 0.03 | ||||||||||
| Book value | 20.47 | 19.52 | 18.64 | 18.10 | 16.98 | ||||||||||
| Tangible book value | 18.97 | 18.00 | 17.06 | 16.54 | 15.46 | ||||||||||
| Weighted average shares outstanding, basic | 18,053,467 | 18,059,174 | 18,061,705 | 18,043,105 | 18,010,065 | ||||||||||
| Weighted average shares outstanding, dilutive | 18,366,129 | 18,256,161 | 18,224,630 | 18,461,922 | 18,415,656 | ||||||||||
| Shares outstanding at end of period | 18,076,364 | 18,059,174 | 18,059,174 | 18,056,014 | 18,036,115 | ||||||||||
| Selected Period End Balance Sheet Data: | |||||||||||||||
| Cash and cash equivalents | 300,307 | 290,885 | 256,101 | 136,062 | 158,099 | ||||||||||
| Investment securities | 803,087 | 726,329 | 730,674 | 734,791 | 707,650 | ||||||||||
| Total loans held for investment | 2,221,583 | 2,288,234 | 2,331,716 | 2,108,805 | 2,143,623 | ||||||||||
| Allowance for loan losses | 45,553 | 46,076 | 40,635 | 29,074 | 24,197 | ||||||||||
| Total assets | 3,599,160 | 3,542,666 | 3,584,532 | 3,216,563 | 3,237,167 | ||||||||||
| Interest-bearing deposits | 2,057,029 | 2,037,743 | 2,006,984 | 1,924,902 | 1,905,936 | ||||||||||
| Noninterest-bearing deposits | 917,322 | 906,059 | 940,853 | 740,946 | 790,921 | ||||||||||
| Total deposits | 2,974,351 | 2,943,802 | 2,947,837 | 2,665,848 | 2,696,857 | ||||||||||
| Borrowings | 223,532 | 204,704 | 252,430 | 185,265 | 205,030 | ||||||||||
| Total stockholders’ equity | 370,048 | 352,568 | 336,534 | 326,890 | 306,182 | ||||||||||
| Summary Performance Ratios: | |||||||||||||||
| Return on average assets | 1.76 | % | 1.88 | % | 0.64 | % | 0.89 | % | 1.32 | % | |||||
| Return on average equity | 17.53 | % | 19.32 | % | 6.81 | % | 9.00 | % | 13.25 | % | |||||
| Net interest margin ^(1)^ | 3.64 | % | 3.82 | % | 3.79 | % | 4.13 | % | 4.03 | % | |||||
| Yield on loans | 5.10 | % | 5.08 | % | 5.06 | % | 5.76 | % | 5.79 | % | |||||
| Cost of interest-bearing deposits | 0.45 | % | 0.50 | % | 0.56 | % | 0.91 | % | 1.06 | % | |||||
| Efficiency ratio | 64.19 | % | 56.90 | % | 63.28 | % | 69.10 | % | 69.71 | % | |||||
| Summary Credit Quality Data: | |||||||||||||||
| Nonperforming loans | 14,965 | 15,006 | 10,472 | 7,112 | 6,045 | ||||||||||
| Nonperforming loans to total loans held for investment | 0.67 | % | 0.66 | % | 0.45 | % | 0.34 | % | 0.28 | % | |||||
| Other real estate owned | 1,353 | 1,336 | 1,335 | 1,944 | 1,883 | ||||||||||
| Nonperforming assets to total assets | 0.45 | % | 0.46 | % | 0.33 | % | 0.28 | % | 0.24 | % | |||||
| Allowance for loan losses to total loans held for investment | 2.05 | % | 2.01 | % | 1.74 | % | 1.38 | % | 1.13 | % | |||||
| Net charge-offs to average loans outstanding (annualized) | 0.11 | % | 0.10 | % | 0.27 | % | 0.25 | % | 0.17 | % |
| As of and for the quarter ended | |||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| December 31<br><br> <br>2020 | September 30,<br><br> <br>2020 | June 30,<br><br> <br>2020 | March 31,<br><br> <br>2020 | December 31,<br><br> <br>2019 | |||||||||||
| Capital Ratios: | |||||||||||||||
| Total stockholders’ equity to total assets | 10.28 | % | 9.95 | % | 9.39 | % | 10.16 | % | 9.46 | % | |||||
| Tangible common equity to tangible assets | 9.60 | % | 9.25 | % | 8.66 | % | 9.37 | % | 8.69 | % | |||||
| Common equity tier 1 to risk-weighted assets | 12.96 | % | 12.49 | % | 10.47 | % | 11.24 | % | 11.06 | % | |||||
| Tier 1 capital to average assets | 10.24 | % | 10.01 | % | 9.60 | % | 10.34 | % | 10.74 | % | |||||
| Total capital to risk-weighted assets | 19.08 | % | 18.67 | % | 14.32 | % | 15.23 | % | 14.88 | % | |||||
| (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 | ||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| December 31, 2020 | December 31, 2019 | |||||||||||||
| 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)^ | $ | 2,157,510 | $ | 27,712 | 5.11 | % | $ | 2,095,238 | $ | 30,602 | 5.79 | % | ||
| Loans - PPP | 194,413 | 2,452 | 5.02 | % | - | - | 0.00 | % | ||||||
| Debt securities - taxable | 554,480 | 2,567 | 1.84 | % | 426,074 | 2,789 | 2.60 | % | ||||||
| Debt securities - nontaxable | 207,453 | 1,452 | 2.78 | % | 52,376 | 442 | 3.35 | % | ||||||
| Other interest-bearing assets | 242,241 | 137 | 0.22 | % | 259,829 | 1,064 | 1.62 | % | ||||||
| Total interest-earning assets | 3,356,097 | 34,320 | 4.07 | % | 2,833,517 | 34,897 | 4.89 | % | ||||||
| Noninterest-earning assets | 252,574 | 199,350 | ||||||||||||
| Total assets | $ | 3,608,671 | $ | 3,032,867 | ||||||||||
| Liabilities & stockholders’ equity | ||||||||||||||
| NOW, Savings, MMA’s | $ | 1,720,778 | 1,138 | 0.26 | % | $ | 1,474,185 | 3,149 | 0.85 | % | ||||
| Time deposits | 323,921 | 1,196 | 1.47 | % | 336,859 | 1,687 | 1.99 | % | ||||||
| Short-term borrowings | 18,344 | 2 | 0.04 | % | 18,650 | 64 | 1.36 | % | ||||||
| Notes payable & other long-term borrowings | 75,000 | 40 | 0.21 | % | 95,217 | 401 | 1.67 | % | ||||||
| Subordinated debt securities | 75,572 | 1,013 | 5.33 | % | 26,472 | 403 | 6.04 | % | ||||||
| Junior subordinated deferrable interest debentures | 46,393 | 230 | 1.97 | % | 46,393 | 436 | 3.73 | % | ||||||
| Total interest-bearing liabilities | 2,260,008 | 3,619 | 0.64 | % | 1,997,776 | 6,140 | 1.22 | % | ||||||
| Demand deposits | 942,799 | 708,308 | ||||||||||||
| Other liabilities | 44,556 | 24,178 | ||||||||||||
| Stockholders’ equity | 361,308 | 302,605 | ||||||||||||
| Total liabilities & stockholders’ equity | $ | 3,608,671 | $ | 3,032,867 | ||||||||||
| Net interest income | $ | 30,701 | $ | 28,757 | ||||||||||
| Net interest margin ^(2)^ | 3.64 | % | 4.03 | % | ||||||||||
| (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.
Average Balances and Yields - (Unaudited)
(Dollars in thousands)
| For the Twelve Months Ended | ||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| December 31, 2020 | December 31, 2019 | |||||||||||||
| 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)^ | $ | 2,181,118 | $ | 116,753 | 5.35 | % | $ | 1,997,783 | $ | 117,074 | 5.86 | % | ||
| Loans - PPP | 144,514 | 5,130 | 3.55 | % | - | - | 0.00 | % | ||||||
| Debt securities - taxable | 547,107 | 11,852 | 2.17 | % | 317,947 | 8,608 | 2.71 | % | ||||||
| Debt securities - nontaxable | 158,482 | 4,489 | 2.83 | % | 37,232 | 1,289 | 3.46 | % | ||||||
| Other interest-bearing assets | 184,262 | 1,100 | 0.60 | % | 284,031 | 6,412 | 2.26 | % | ||||||
| Total interest-earning assets | 3,215,483 | 139,324 | 4.33 | % | 2,636,993 | 133,383 | 5.06 | % | ||||||
| Noninterest-earning assets | 249,536 | 182,967 | ||||||||||||
| Total assets | $ | 3,465,019 | $ | 2,819,960 | ||||||||||
| Liabilities & stockholders’ equity | ||||||||||||||
| NOW, Savings, MMA’s | $ | 1,653,088 | 6,337 | 0.38 | % | $ | 1,448,320 | 16,436 | 1.13 | % | ||||
| Time deposits | 331,623 | 5,557 | 1.68 | % | 319,811 | 6,055 | 1.89 | % | ||||||
| Short-term borrowings | 19,404 | 104 | 0.54 | % | 16,231 | 290 | 1.79 | % | ||||||
| Notes payable & other long-term borrowings | 107,045 | 558 | 0.52 | % | 95,054 | 2,024 | 2.13 | % | ||||||
| Subordinated debt securities | 38,747 | 2,223 | 5.74 | % | 26,786 | 1,616 | 6.03 | % | ||||||
| Junior subordinated deferrable interest debentures | 46,393 | 1,167 | 2.52 | % | 46,393 | 1,946 | 4.19 | % | ||||||
| Total interest-bearing liabilities | 2,196,300 | 15,946 | 0.73 | % | 1,952,595 | 28,367 | 1.45 | % | ||||||
| Demand deposits | 888,653 | 570,428 | ||||||||||||
| Other liabilities | 41,573 | 29,891 | ||||||||||||
| Stockholders’ equity | 338,493 | 267,046 | ||||||||||||
| Total liabilities & stockholders’ equity | $ | 3,465,019 | $ | 2,819,960 | ||||||||||
| Net interest income | $ | 123,378 | $ | 105,016 | ||||||||||
| Net interest margin ^(2)^ | 3.84 | % | 3.98 | % | ||||||||||
| (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 | ||||||
|---|---|---|---|---|---|---|
| December 31,<br><br> <br>2020 | December 31,<br><br> <br>2019 | |||||
| Assets | ||||||
| Cash and due from banks | $ | 76,146 | $ | 56,246 | ||
| Interest-bearing deposits in banks | 224,161 | 101,853 | ||||
| Federal funds sold | - | — | ||||
| Investment securities | 803,087 | 707,650 | ||||
| Loans held for sale | 111,477 | 49,035 | ||||
| Loans held for investment | 2,221,583 | 2,143,623 | ||||
| Less: Allowance for loan losses | (45,553 | ) | (24,197 | ) | ||
| Net loans held for investment | 2,176,030 | 2,119,426 | ||||
| Premises and equipment, net | 60,331 | 61,873 | ||||
| Goodwill | 19,508 | 18,757 | ||||
| Intangible assets | 7,562 | 8,632 | ||||
| Other assets | 120,858 | 113,695 | ||||
| Total assets | $ | 3,599,160 | $ | 3,237,167 | ||
| Liabilities and Stockholders’ Equity Liabilities | ||||||
| Noninterest bearing deposits | $ | 917,322 | $ | 790,921 | ||
| Interest-bearing deposits | 2,057,029 | 1,905,936 | ||||
| Total deposits | 2,974,351 | 2,696,857 | ||||
| Other borrowings | 101,550 | 132,165 | ||||
| Subordinated debt securities | 75,589 | 26,472 | ||||
| Trust preferred subordinated debentures | 46,393 | 46,393 | ||||
| Other liabilities | 31,229 | 29,098 | ||||
| Total liabilities | 3,229,112 | 2,930,985 | ||||
| Stockholders’ Equity | ||||||
| Common stock | 18,076 | 18,036 | ||||
| Additional paid-in capital | 141,112 | 140,492 | ||||
| Retained earnings | 189,521 | 146,696 | ||||
| Accumulated other comprehensive income (loss) | 21,339 | 958 | ||||
| Total stockholders’ equity | 370,048 | 306,182 | ||||
| Total liabilities and stockholders’ equity | $ | 3,599,160 | $ | 3,237,167 |
South Plains Financial, Inc.
Consolidated Statements of Income
(Unaudited)
(Dollars in thousands)
| Three Months Ended | Twelve Months Ended | |||||||
|---|---|---|---|---|---|---|---|---|
| December 31,<br><br> <br>2020 | December 31,<br><br> <br>2019 | December 31,<br><br> <br>2020 | December 31,<br><br> <br>2019 | |||||
| Interest income: | ||||||||
| Loans, including fees | $ | 30,133 | $ | 30,562 | $ | 121,733 | $ | 116,904 |
| Other | 3,851 | 4,202 | 16,498 | 16,038 | ||||
| Total Interest income | 33,984 | 34,764 | 138,231 | 132,942 | ||||
| Interest expense: | ||||||||
| Deposits | 2,334 | 4,836 | 11,894 | 22,491 | ||||
| Subordinated debt securities | 1,013 | 403 | 2,223 | 1,616 | ||||
| Trust preferred subordinated debentures | 230 | 436 | 1,167 | 1,946 | ||||
| Other | 42 | 465 | 662 | 2,314 | ||||
| Total Interest expense | 3,619 | 6,140 | 15,946 | 28,367 | ||||
| Net interest income | 30,365 | 28,624 | 122,285 | 104,575 | ||||
| Provision for loan losses | 141 | 896 | 25,570 | 2,799 | ||||
| Net interest income after provision for loan losses | 30,224 | 27,728 | 96,715 | 101,776 | ||||
| Noninterest income: | ||||||||
| Service charges on deposits | 1,861 | 2,144 | 7,032 | 8,129 | ||||
| Income from insurance activities | 2,160 | 2,942 | 7,644 | 7,016 | ||||
| Mortgage banking activities | 16,925 | 6,617 | 65,042 | 25,126 | ||||
| Bank card services and interchange fees | 2,845 | 2,419 | 10,035 | 8,692 | ||||
| Other | 2,381 | 2,618 | 9,532 | 7,670 | ||||
| Total Noninterest income | 26,172 | 16,740 | 101,603 | 56,633 | ||||
| Noninterest expense: | ||||||||
| Salaries and employee benefits | 23,117 | 19,348 | 89,220 | 75,392 | ||||
| Net occupancy expense | 3,762 | 3,263 | 14,658 | 13,572 | ||||
| Professional services | 1,612 | 2,165 | 6,322 | 7,334 | ||||
| Marketing and development | 899 | 742 | 3,088 | 3,017 | ||||
| Other | 7,114 | 6,196 | 28,427 | 22,393 | ||||
| Total noninterest expense | 36,504 | 31,714 | 141,715 | 121,708 | ||||
| Income before income taxes | 19,892 | 12,754 | 56,603 | 36,701 | ||||
| Income tax expense (benefit) | 3,968 | 2,645 | 11,250 | 7,481 | ||||
| Net income | $ | 15,924 | $ | 10,109 | $ | 45,353 | $ | 29,220 |
South Plains Financial, Inc.
Loan Composition
(Unaudited)
(Dollars in thousands)
| As of | ||||
|---|---|---|---|---|
| December 31,<br><br> <br>2020 | December 31,<br><br> <br>2019 | |||
| Loans: | ||||
| Commercial Real Estate | $ | 663,344 | $ | 658,195 |
| Commercial - Specialized | 311,686 | 309,505 | ||
| Commercial - General | 518,309 | 441,398 | ||
| Consumer: | ||||
| 1-4 Family Residential | 360,315 | 362,796 | ||
| Auto Loans | 205,840 | 215,209 | ||
| Other Consumer | 67,595 | 74,000 | ||
| Construction | 94,494 | 82,520 | ||
| Total loans held for investment | $ | 2,221,583 | $ | 2,143,623 |
South Plains Financial, Inc.
Deposit Composition
(Unaudited)
(Dollars in thousands)
| As of | ||||
|---|---|---|---|---|
| December 31,<br><br> <br>2020 | December 31,<br><br> <br>2019 | |||
| Deposits: | ||||
| Noninterest-bearing demand deposits | $ | 917,322 | $ | 790,921 |
| NOW & other transaction accounts | 332,829 | 318,379 | ||
| MMDA & other savings | 1,398,699 | 1,231,534 | ||
| Time deposits | 325,501 | 356,023 | ||
| Total deposits | $ | 2,974,351 | $ | 2,696,857 |
South Plains Financial, Inc.
Reconciliation of Non-GAAP Financial Measures (Unaudited)
(Dollars in thousands)
| As of and for the quarter ended | |||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| December 31,<br><br> <br>2020 | September 30,<br><br> <br>2020 | June 30,<br><br> <br>2020 | March 31,<br><br> <br>2020 | December 31,<br><br> <br>2019 | |||||||||||
| Efficiency ratio | |||||||||||||||
| Noninterest expense | $ | 36,504 | $ | 35,993 | $ | 35,207 | $ | 34,011 | $ | 31,714 | |||||
| Net interest income | $ | 30,365 | $ | 31,273 | $ | 30,448 | $ | 30,199 | $ | 28,624 | |||||
| Tax equivalent yield adjustment | 336 | 322 | 290 | 145 | 133 | ||||||||||
| Noninterest income | 26,172 | 31,660 | 24,896 | 18,875 | 16,740 | ||||||||||
| Total income | $ | 56,873 | $ | 63,255 | $ | 55,634 | $ | 49,219 | $ | 45,497 | |||||
| Efficiency ratio | 64.19 | % | 56.90 | % | 63.28 | % | 69.10 | % | 69.71 | % | |||||
| Noninterest expense | $ | 36,504 | $ | 35,993 | $ | 35,207 | $ | 34,011 | $ | 31,714 | |||||
| Less: net loss on sale of securities | - | - | - | - | (27 | ) | |||||||||
| Adjusted noninterest expense | $ | 36,504 | $ | 35,993 | $ | 35,207 | $ | 34,011 | $ | 31,687 | |||||
| Total income | $ | 56,873 | $ | 63,255 | $ | 55,634 | $ | 49,219 | $ | 45,497 | |||||
| Less: net gain on sale of securities | - | - | - | (2,318 | ) | - | |||||||||
| Adjusted total income | $ | 56,873 | $ | 63,255 | $ | 55,634 | $ | 46,901 | $ | 45,497 | |||||
| Adjusted efficiency ratio | 64.19 | % | 56.90 | % | 63.28 | % | 72.52 | % | 69.65 | % | |||||
| Pre-tax, pre-provision income | |||||||||||||||
| Net income | $ | 15,924 | $ | 16,731 | $ | 5,615 | $ | 7,083 | $ | 10,109 | |||||
| Income tax expense | 3,968 | 4,147 | 1,389 | 1,746 | 2,645 | ||||||||||
| Provision for loan losses | 141 | 6,062 | 13,133 | 6,234 | 896 | ||||||||||
| Pre-tax, pre-provision income | $ | 20,033 | $ | 26,940 | $ | 20,137 | $ | 15,063 | $ | 13,650 |
South Plains Financial, Inc.
Reconciliation of Non-GAAP Financial Measures (Unaudited)
(Dollars in thousands)
| As of | ||||||
|---|---|---|---|---|---|---|
| December 31,<br><br> <br>2020 | December 31,<br><br> <br>2019 | |||||
| Tangible common equity | ||||||
| Total common stockholders’ equity | $ | 370,048 | $ | 306,182 | ||
| Less: goodwill and other intangibles | (27,070 | ) | (27,389 | ) | ||
| Tangible common equity | $ | 342,978 | $ | 278,793 | ||
| Tangible assets | ||||||
| Total assets | $ | 3,599,160 | $ | 3,237,167 | ||
| Less: goodwill and other intangibles | (27,070 | ) | (27,389 | ) | ||
| Tangible assets | $ | 3,572,090 | $ | 3,209,778 | ||
| Shares outstanding | 18,076,364 | 18,036,115 | ||||
| Total stockholders’ equity to total assets | 10.28 | % | 9.46 | % | ||
| Tangible common equity to tangible assets | 9.60 | % | 8.69 | % | ||
| Book value per share | $ | 20.47 | $ | 16.98 | ||
| Tangible book value per share | $ | 18.97 | $ | 15.46 |
Exhibit 99.2
South Plains Financial Earnings Presentation Fourth Quarter, 2020 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, including our estimated financial results for the quarter and year ended December 31, 2020, (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, 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 SEC, including 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." 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.
$3.6 Billion in Total Assets as of December 31, 2020 Parent Company of City Bank, a leading Texas-based community bank headquartered in Lubbock, TX Fourth Quarter and Full Year 2020 Highlights 4 Net Income of $15.9 million, compared to $16.7 million in 3Q’20 and $10.1 million in 4Q’19Diluted earnings per share of $0.87, compared to $0.92 in Q3’20 and $0.55 in 4Q’19Pre-Tax, Pre-Provision income of $20.0 million, compared to $26.9 million in 3Q’20 and $13.7 million in 4Q’19Provision for loan loss of $141 thousand, compared to $6.1 million in Q3’20 and $896 thousand in 4Q’19Average cost of deposits declined 3 bps to 31 bps, compared to 34 bps in 3Q’20 and 98 bps in 4Q’19 Net Interest Margin of 3.64%, compared to 3.82% in 3Q’20 and 4.03% in 4Q’19 NASDAQ: SPFI 4Q'20 Highlights 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)653 FTE Employees Note: Pre-tax, pre-provision income is a non-GAAP measure. See appendix for the reconciliation to GAAP as of Dec. 31, 2020 Source: Company documents Full Year 2020 Highlights $3.6 billion in total assets, compared to $3.2 billion at 12/31/19Net Income of $45.4 million, compared to $29.2 million in 2019Diluted earnings per share of $2.47, compared to $1.71 in 2019Efficiency ratio of 63.0%, compared to 75.3% in 2019Tangible Book value per share of $18.97 at year end 2020, compared to $15.46 at year end 2019 Return on Average Assets of 1.31%, compared to 1.04% in 2019
2020 Highlights 5 Source: Company documents Annual Trends$ in Millions Tangible Book Value Per Share Efficiency Ratio Total Assets Pre-Tax, Pre-Provision Earnings 15.2%CAGR 14.8%CAGR
Loan Portfolio 6 Total Loans decreased $66.7 million compared to 3Q’20Decrease in total loans during the quarter was due primarily to:$41.8 million in forgiveness and paydowns on PPP loans$28.0 million in pay downs on seasonal agricultural production loansEarly payoff of a $16.0 million state and municipality loan4Q’20 loan yield of 5.11%; a decrease of 17 bps compared to 3Q’20 excluding PPP loans 4Q’20 Highlights Total Loans Held for Investment$ in Millions Source: Company documents
Loan Portfolio 7 Portfolio Composition (Dollars in thousands) Loan Portfolio 4Q’20 Commercial C&D $ 89.5 Residential C&D 166.1 CRE Owner/Occ. 208.5 Other CRE Non Owner/Occ. 435.5 Multi-Family 66.7 C&I 276.4 Agriculture 175.2 1-4 Family 360.3 Auto 205.8 Other Consumer 67.6 PPP 170.0 Total $ 2,221.6 Source: Company documents
(Dollars in thousands) Total # of Active Active Mod % Loan Segment Balance Loan Mods Mods of Segment Hospitality $ 123,495 11 $ 56,943 46.1% Hotels (Under Construction) 14,998 - - 0.0% All Other CRE 520,706 3 638 0.1% Oil & Gas 64,007 7 270 0.4% Restaurant & Retail - Owner Occ. 90,515 7 1,911 2.1% All Other Commercial 509,618 9 2,422 0.5% Residential Real Estate 360,315 6 365 0.1% Consumer 273,435 72 1,529 0.6% Residential Construction 94,494 - - 0.0% Paycheck Protection Program ("PPP") 170,000 - - 0.0% Total $ 2,221,583 115 $ 64,078 2.9% COVID-19 Loan Modifications – Updated (As of December 31, 2020) 8 The Company has taken an aggressive and proactive approach to managing credit in light of the economic uncertainty caused by the ongoing COVID-19 pandemicCustomers were offered a range of loan modifications with six months interest only being the preferred option by the BankActive modifications do not include loans that were previously modified but where the first scheduled payment post-modification has not been madeActive modifications as a percent of loans held for investment have declined from 5.4% at September 30, 2020 to 2.9% at December 31, 2020 Highlights Active Loan Modifications Source: Company documents
COVID-19 Loan Modifications – Updated (As of December 31, 2020) 9 Other modifications were primarily hotel loans that had interest-only periods of 12 months or a combination of a 90 day deferral and 9 months of interest-only Hospitality has the highest modification status at 46.1% of loans in that segment, due to the potential long-term stress in the industry Note: Other reflects loan deferrals classified under the CARES Act Section 4013Source: Company documents Modification Type (Dollars in thousands) 6 month 90 Day Consumer Loan Segment Interest Only Deferral & Mortgage Other Total Hospitality $ - $ - $ - $ 56,943 $ 56,943 Hotels (Under Construction) - - - - - All Other CRE 237 - - 401 638 Oil & Gas 115 38 - 117 270 Restaurant & Retail - Owner Occ. 597 - - 1,314 1,911 All Other Commercial 93 70 - 2,259 2,422 Residential Real Estate - 186 179 - 365 Consumer - - 1,529 - 1,529 Residential Construction - - - - - Paycheck Protection Program ("PPP") - - - - - Total $ 1,042 $ 294 $ 1,708 $ 61,034 $ 64,078 % of Loans 0.1% 0.0% 0.1% 2.7% 2.9%
DirectEnergy Select Loan Industry Concentration Detail 10 As of December 31, 2020 Hospitality Total operating hospitality loans of $123 million*$15 million in hotels under construction, with unfunded commitments of $9 million83% of balances are to limited service hotels43% of operating hospitality classified; 2% is nonaccrual; < 0.5% are 30 days or more past dueALLL on operating hospitality is 7.7%** Does not include loans reported in construction and development Total direct energy loans of $64 million92% support services, 8% upstreamNearly 100% are located in Permian and Palo Duro Basins12% of energy sector classifiedALLL on energy sector is 5.3% Hotels by Geography Source: Company documents Energy Support Services by Type
Noninterest Income 11 Noninterest Income$ in Millions 4Q’20 Highlights Noninterest income of $26.2 million, compared to $16.7 million in 4Q’19Revenue from mortgage banking activities:Improved $10.3 million based on an increase of 146% in production in 4Q’20 compared to 4Q’19Declined $4.5 million as a result of lower interest rate lock commitments in 4Q’20 compared to 3Q’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 Twelve Months Ended December 31, 2020 12 Total Revenues$223.9 million Noninterest Income$101.6 million Source: Company documents
Net Interest Income and Margin 13 Net Interest Income & Margin$ in Millions 4Q’20 Highlights Net interest income of $30.4 million, compared to $28.6 million in 4Q’19The increase as compared to 4Q’19 was a result of:$523 million rise in average interest-earnings assets primarily from the WTSB acquisition and PPP loans Partially offset by a decrease in overall rates starting in 1Q’204Q’20 NIM of 3.64% - decrease of 18 bps compared to 3Q’20:17 bps decline in non-PPP loan yield7 bps lower due to sub debt issuance Source: Company documents
Deposit Portfolio 14 Total Deposits$ in Millions 4Q’20 Highlights Total Deposits of $2.97 billion at 4Q’20, an increase of $30.5 million from 3Q’20Cost of interest-bearing deposits declined in 4Q’20 to 45bps from 106bps in 4Q’19Noninterest-bearing deposits represented 30.8% of deposits in 4Q’20, compared to 30.8% in 3Q’20 and 29.3% in 4Q’19 Source: Company documents
Credit Quality 15 4Q’20 Highlights Credit Quality Ratios Recorded a $141 thousand provision for loan losses in 4Q’20 as compared to $6.1 million in 3Q’20 as the result of modest improvements in the economy and a decline in loans actively under a modificationTotal classified loans decreased $6 million in 4Q’20Nonperforming assets and net loans charged-off during quarter had a small decrease in 4Q’20 compared to 3Q’20 Net Charge-Offs to Average Loans ALLL to Total Loans HFI Source: Company documents
Investment Securities 16 4Q’20 Highlights Investment Securities totaled $803.1 million at 4Q’20, an increase of $76.8 million from 3Q’20All municipal bonds are in TexasAll MBS, CMO, and Asset Backed securities are U.S. Government or GSE 4Q’20 Securities Composition $803.1mm Securities & Cash$ in Millions Source: Company documents
Noninterest Expense and Efficiency 17 Noninterest Expense$ in Millions 4Q’20 Highlights Noninterest expense for 4Q’20 increased from 4Q’19 primarily due to an increase of $3.7 million in commissions and higher variable expenses related to strong mortgage activityManagement continues to focus on reducing fixed expenses to drive improved profitability Note: Adjusted Efficiency Ratio is a non-GAAP measure. See appendix for the reconciliation to GAAP Source: Company documents
Balance Sheet Highlights$ in Millions Balance Sheet Growth and Development 18 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 19 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 20
Non-GAAP Financial Measures 21 As of and for the quarter ended December 31,2020 September 30,2020 June 30,2020 March 31,2020 December 31,2019 Efficiency Ratio Noninterest expense $ 36,504 $ 35,993 $ 35,207 $ 34,011 $ 31,714 Net interest income $ 30,365 $ 31,273 $ 30,448 $ 30,199 $ 28,624 Tax equivalent yield adjustment 336 322 290 145 133 Noninterest income 26,172 31,660 24,896 18,875 16,740 Total income $ 56,873 $ 63,255 $ 55,634 $ 49,219 $ 45,497 Efficiency ratio 64.19% 56.90% 63.28% 69.10% 69.71% Noninterest expense $ 36,504 $ 35,993 $ 35,207 $ 34,011 $ 31,714 Less: net loss on sale of securities - - - - (27) Adjusted noninterest expense 36,504 35,993 35,207 34,011 31,687 Total income $ 56,873 $ 63,255 $ 55,634 $ 49,219 $ 45,497 Less: net gain on sale of securities - - - (2,318) - Adjusted total income $ 56,873 $ 63,255 $ 53,634 $ 46,901 $ 45,497 Adjusted efficiency ratio 64.19% 56.90% 63.28% 72.52% 69.65% Unaudited$ in Thousands Pre-Tax, Pre-Provision Income Net income $ 15,924 $ 16,731 $ 5,615 $ 7,083 $ 10,109 Income tax expense 3,968 4,147 1,389 1,746 2,645 Provision for loan losses 141 6,062 13,133 6,234 896 Pre-tax, pre-provision income $ 20,033 $ 26,940 $ 20,137 $ 15,063 $ 13,650 Source: Company documents
Non-GAAP Financial Measures 22 As of December 31,2020 December 31,2019 Tangible common equity Total common stockholders' equity $ 370,048 $ 306,182 Less: goodwill and other intangibles (27,070) (27,389) Tangible common equity $ 342,978 $ 278,793 Tangible assets Total assets $ 3,599,160 $ 3,237,167 Less: goodwill and other intangibles (27,070) (27,389) Tangible assets $ 3,572,090 $ 3,209,778 Shares outstanding 18,076,364 18,036,115 Total stockholders' equity to total assets 10.28% 9.46% Tangible common equity to tangible assets 9.60% 8.69% Book value per share $ 20.47 $ 16.98 Tangible book value per share $ 18.97 $ 15.46 Unaudited$ in Thousands Source: Company documents