8-K
SOUTH PLAINS FINANCIAL, INC. (SPFI)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): October 26, 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 October 26, 2021, South Plains Financial, Inc. (the “Company”) issued a press release announcing its financial results for the third quarter ended September 30, 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 October 26, 2021, officers of the Company will have a conference call with respect to the Company’s financial results for the third quarter ended September 30, 2021. An earnings release slide presentation highlighting the Company’s financial results for the third quarter ended September 30, 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 October 26, 2021, announcing third quarter 2021 financial results of South Plains Financial, Inc. |
| --- | --- |
| 99.2 | Earnings release slide presentation, dated October 26, 2021. |
| 104 | Cover Page Interactive Data File (formatted as Inline XBRL). |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| SOUTH PLAINS FINANCIAL, INC. | |||
|---|---|---|---|
| Dated: October 26, 2021 | By: | /s/ | Steven B. Crockett |
| Steven B. Crockett | |||
| Chief Financial Officer and Treasurer |
Exhibit 99.1
South Plains Financial, Inc. Reports Third Quarter 2021 Financial Results
LUBBOCK, Texas, October 26, 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 September 30, 2021.
Third Quarter 2021 Highlights
| ● | Net income for the third quarter of 2021 was $15.2 million, compared to $13.7 million for the second quarter of 2021 and $16.7 million for the third quarter of<br> 2020. |
|---|---|
| ● | Diluted earnings per share for the third quarter of 2021 was $0.82, compared to $0.74 for the second quarter of 2021 and $0.92 for the third quarter of 2020. |
| --- | --- |
| ● | Average cost of deposits for the third quarter of 2021 decreased to 25 basis points, compared to 27 basis points for the second quarter of 2021 and 34 basis<br> points for the third quarter of 2020. |
| --- | --- |
| ● | The Company did not record a provision for loan losses in the third quarter of 2021, compared to a negative provision for loan losses of $2.0 million for the<br> second quarter of 2021 and provision for loan losses of $6.1 million for the third quarter of 2020. |
| --- | --- |
| ● | Loans held for investment grew $125.6 million, or 5.5%, during the third quarter of 2021 as compared to June 30, 2021. |
| --- | --- |
| ● | Nonperforming assets to total assets were 0.32% at September 30, 2021, compared to 0.37% at June 30, 2021 and 0.46% at September 30, 2020. |
| --- | --- |
| ● | Return on average assets for the third quarter of 2021 was 1.61% annualized, compared to 1.46% annualized for the second quarter of 2021 and 1.88% annualized<br> for the third quarter of 2020. |
| --- | --- |
| ● | Tangible book value (non-GAAP) per share was $20.90 as of September 30, 2021, compared to $20.35 per share as of June 30, 2021 and $18.00 per share as of<br> September 30, 2020. |
| --- | --- |
Curtis Griffith, South Plains’ Chairman and Chief Executive Officer, commented, “I am very pleased with our team’s performance again in the third quarter and would like to thank our employees for their hard work as they continue to deliver outstanding service to our customers which continues to translate into strong results for the Bank. This can be seen in our financial performance as we grew loans by 5.5% in the third quarter of 2021 and have benefited from a strong Texas economy. We are also benefiting from our plan to grow our lending team by more than 30% over a two-year timeframe, as the lenders who we have recruited have begun growing their loan portfolios. In fact, we are seeing an acceleration in activity in several of our key markets, like Houston, where we have recently hired a new market leader. We expect to continue redeploying our excess liquidity into higher yielding loans, which we believe will drive an acceleration to net interest income and offset the eventual decline in mortgage revenue as activity normalizes in future periods. We remain very optimistic with what the future holds for South Plains and continue to see our shares trading below intrinsic value. As a result, we were aggressive in the third quarter having repurchased approximately 190,000 shares under our previously-announced $10 million share repurchase plan.”
Results of Operations, Quarter Ended September 30, 2021
Net Interest Income
Net interest income was $31.2 million for the third quarter of 2021, compared to $29.6 million for the second quarter of 2021 and $31.3 million for the third quarter of 2020. Net interest margin was 3.58% for the third quarter of 2021, compared to 3.42% for the second quarter of 2021 and 3.82% for the third quarter of 2020. The average yield on loans was 4.99% for the third quarter of 2021, compared to 4.97% for the second quarter of 2021 and 5.08% for the third quarter of 2020. The average cost of deposits was 25 basis points for the third quarter of 2021, representing a two basis point decrease from the second quarter of 2021 and a 9 basis point decrease from the third quarter of 2020.
Interest income was $34.4 million for the third quarter of 2021, compared to $33.0 million for the second quarter of 2021 and $34.5 million for the third quarter of 2020. Interest income increased $1.4 million in the third quarter of 2021 from the second quarter of 2021 due primarily to an increase of $1.5 million in loan interest income as a result of the growth of $82.9 million in average loans outstanding during the third quarter of 2021. In the third quarter of 2021, interest and fees on Small Business Administration (“SBA”) Paycheck Protection Program (“PPP”) loans declined $405 thousand compared to the second quarter of 2021, as the average balance of PPP loans decreased $70.3 million during the third quarter of 2021 due to PPP loan forgiveness payments received from the SBA during the quarter. Interest income was flat in the third quarter of 2021 compared to the third quarter of 2020 as average interest-earning assets were $199.2 million higher and the related yield was 26 basis points lower in the third quarter of 2021. During the third quarter of 2021, the Company recognized $1.7 million in deferred PPP-related SBA fees. At September 30, 2021, the Company had $2.9 million of deferred PPP 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 $3.3 million for the third quarter of 2021, compared to $3.4 million for the second quarter of 2021 and $3.2 million for the third quarter of 2020. Interest expense declined 4.8% as compared to the second quarter of 2021 as a result of lower average interest-bearing deposits and a reduction in interest rates on these deposits. Interest expense was consistent as compared to the third quarter of 2020, with a reduction in interest rates on interest-bearing deposits offset by an increase in the overall cost of long-term borrowings. The increase in the cost of long-term borrowings was due to the issuance of $50 million in subordinated notes at the end of the third quarter of 2020.
Noninterest Income and Noninterest Expense
Noninterest income was $25.8 million for the third quarter of 2021, compared to $22.3 million for the second quarter of 2021 and $31.7 million for the third quarter of 2020. The growth from the second quarter of 2021 was primarily due to the seasonal increase of $2.6 million in income from insurance activities and an increase of $1.1 million in mortgage banking activities revenue. The growth in mortgage banking revenues was mainly the result of an increase of $470 thousand in the fair value adjustment to the Company’s mortgage servicing rights as mortgage interest rates began to rise in September 2021. The decrease in noninterest income for the third quarter of 2021 as compared to the third quarter of 2020 was primarily due to a decline of $6.6 million in mortgage banking activities revenue as a result a reduction of $75 million in interest rate lock commitments and a decline in gain on sale margins. This decrease was partially offset by increases in income from insurance activities and bank card services and interchange fees as compared to the third quarter of 2020.
Noninterest expense was $38.1 million for the third quarter of 2021, compared to $36.8 million for the second quarter of 2021 and $36.0 million for the third quarter of 2020. The growth from the second quarter of 2021 was primarily the result of an increase of $739 thousand in personnel expense due to the payment of an additional $1.2 million in commissions on insurance activities and a reduction in mortgage commissions related to an decline in mortgage production. There was also a $397 thousand increase net occupancy expense from the second quarter of 2021, primarily the result of higher repairs and maintenance expense related to several projects, additional rent expense as the Company has increased leased space at several locations, and higher seasonal utility costs. The increase in noninterest expense for the third quarter of 2021 as compared to the third quarter of 2020 was primarily driven by a $444 thousand increase in personnel expense, which is reflective of the Company’s stated initiative of growing its loan officer capacity. There were also smaller increases in mortgage related expenses, bank card expenses, technology costs, and travel related expenses as compared to the third quarter of 2020.
As part of the Bank’s information technology roadmap, management is implementing a process to begin transitioning the Company’s computing and data storage to the cloud, which is expected to deliver increased security, more seamless maintenance, and lower costs. The Bank is also refocusing its advertising to digital media to improve new customer lead generation. The Bank’s technology initiatives are expected to modestly add to noninterest expense and started in the third quarter of 2021.
Loan Portfolio and Composition
Loans held for investment were $2.43 billion as of September 30, 2021, compared to $2.30 billion as of June 30, 2021 and $2.29 billion as of September 30, 2020. The $125.6 million, or 5.5%, increase during the third quarter of 2021 as compared to the second quarter of 2021 was primarily the result of organic net loan growth of $177.6 million, partially offset by a decrease from SBA forgiveness and repayments of $52.0 million in PPP loans during the third quarter of 2021. The organic loan growth remained relationship-focused and occurred in a majority of loan segments, with the largest volume growth in multifamily properties, agricultural production loans, and direct energy loans. As of September 30, 2021, loans held for investment increased $140.8 million, or 6.2%, from September 30, 2020, attributable to organic loan growth experienced in each quarter of 2021, partially offset by SBA forgiveness or repayments, net of originations, of $149.6 million on PPP loans.
Agricultural production loans were $119.3 million as of September 30, 2021, compared to $96.2 million as of June 30, 2021 and $133.9 million as of September 30, 2020. The increase from the second quarter of 2021 is due to typical seasonal funding on these agricultural production loans. The decrease from the third quarter of 2020 is primarily due to the loss of several large agricultural loan customers.
Deposits and Borrowings
Deposits totaled $3.21 billion as of September 30, 2021, compared to $3.16 billion as of June 30, 2021 and $2.94 billion as of September 30, 2020. Deposits increased by $53.8 million, or 1.7%, in the third quarter of 2021 from June 30, 2021. The largest increase in deposits in the third quarter of 2021 was experienced in non-personal demand accounts. As of September 30, 2021, deposits increased $268.4 million, or 9.1%, from September 30, 2020. The increase in deposits since September 30, 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 $1.05 billion as of September 30, 2021, compared to $998.9 million as of June 30, 2021 and $906.1 million as of September 30, 2020. Noninterest-bearing deposits represented 32.8% of total deposits as of September 30, 2021. The change in noninterest-bearing deposit balances at September 30, 2021 compared to June 30, 2021 was an increase of $55.3 million, or 5.5%. The change in noninterest-bearing deposit balances at September 30, 2021 compared to September 30, 2020 was an increase of $148.2 million, or 16.4%. The changes from both compared periods is primarily a result of organic growth as well as existing customers increasing their deposit balances.
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 impacted by the COVID-19 pandemic with 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 September 30, 2021, total active loan modifications attributed to COVID-19 were $16.4 million, or 0.7% of the Company’s loan portfolio, down from $36.6 million, or 1.6% of the Company’s loan portfolio, at June 30, 2021. Approximately 97% of these active modified loans at September 30, 2021 are in the hotel portfolio and have original modified terms that extended up to 18 months. We expect that these remaining modified loans will return to full payment status at the end of their respective modification periods.
The Company did not record a provision for loan losses in the third quarter of 2021, compared to a negative provision for loan losses of $2.0 million for the second quarter of 2021 and a provision for loan losses of $6.1 million for the third quarter of 2020. While the Company experienced growth in the loan portfolio and classified loans increased by 7% in the third quarter of 2021, the Company determined that no provision for loan losses was necessary in the third quarter of 2021 in light of the continued general improvement in the economy and a decline in the amount of loans that are actively under a modification. This increase in classified loans resulted from one credit, which was resolved in the fourth quarter of 2021 with no loss to the Company. 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 ratio of allowance for loan losses to loans held for investment was 1.76% as of September 30, 2021, compared to 1.87% as of June 30, 2021 and 2.01% as of September 30, 2020. The ratio of allowance for loan losses to non-PPP loans held for investment was 1.81% as of September 30, 2021.
The ratio of nonperforming assets to total assets as of September 30, 2021 was 0.32%, compared to 0.37% as of June 30, 2021 and 0.46% at September 30, 2020. Annualized net charge-offs were 0.03% for the third quarter of 2021, compared to 0.01% for the second quarter of 2021 and 0.10% for the third quarter of 2020.
Conference Call
South Plains will host a conference call to discuss its third quarter 2021 financial results today, October 26, 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 13723541. The replay will be available until November 9, 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, 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, the Company can give no assurance that the results contemplated in the forward-looking statements will be realized and readers are cautioned not to place undue reliance on the forward-looking statements contained in this press release. Any forward-looking statements presented herein are made only as of the date of this press release, and South Plains does not undertake any obligation to update or revise any forward-looking statements to reflect changes in assumptions, new information, the occurrence of unanticipated events, or otherwise, except as required by law. All forward-looking statements, express or implied, included in the press release are qualified in their entirety by this cautionary statement.
| Contact: | Mikella Newsom, Chief Risk Officer and Secretary |
|---|---|
| (866) 771-3347 | |
| investors@city.bank |
Source: South Plains Financial, Inc.
South Plains Financial, Inc.
Consolidated Financial Highlights - (Unaudited)
(Dollars in thousands, except share data)
| As of and for the quarter ended | |||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| September 30,<br><br> <br>2021 | June 30,<br><br> <br>2021 | March 31,<br><br> <br>2021 | December 31,<br><br> <br>2020 | September 30,<br><br> <br>2020 | |||||||||||
| Selected Income Statement Data: | |||||||||||||||
| Interest income | $ | 34,438 | $ | 33,016 | $ | 32,982 | $ | 33,984 | $ | 34,503 | |||||
| Interest expense | 3,260 | 3,423 | 3,438 | 3,619 | 3,230 | ||||||||||
| Net interest income | 31,178 | 29,593 | 29,544 | 30,365 | 31,273 | ||||||||||
| Provision for loan losses | - | (2,007 | ) | 89 | 141 | 6,062 | |||||||||
| Noninterest income | 25,791 | 22,250 | 26,500 | 26,172 | 31,660 | ||||||||||
| Noninterest expense | 38,063 | 36,778 | 37,057 | 36,504 | 35,993 | ||||||||||
| Income tax expense | 3,716 | 3,422 | 3,738 | 3,968 | 4,147 | ||||||||||
| Net income | 15,190 | 13,650 | 15,160 | 15,924 | 16,731 | ||||||||||
| Per Share Data (Common Stock): | |||||||||||||||
| Net earnings, basic | 0.85 | 0.76 | 0.84 | 0.88 | 0.93 | ||||||||||
| Net earnings, diluted | 0.82 | 0.74 | 0.82 | 0.87 | 0.92 | ||||||||||
| Cash dividends declared and paid | 0.09 | 0.07 | 0.05 | 0.05 | 0.03 | ||||||||||
| Book value | 22.34 | 21.81 | 20.75 | 20.47 | 19.52 | ||||||||||
| Tangible book value | 20.90 | 20.35 | 19.28 | 18.97 | 18.00 | ||||||||||
| Weighted average shares outstanding, basic | 17,931,660 | 18,039,553 | 18,069,186 | 18,053,467 | 18,059,174 | ||||||||||
| Weighted average shares outstanding, dilutive | 18,464,183 | 18,553,050 | 18,511,120 | 18,366,129 | 18,256,161 | ||||||||||
| Shares outstanding at end of period | 17,824,094 | 18,014,398 | 18,053,229 | 18,076,364 | 18,059,174 | ||||||||||
| Selected Period End Balance Sheet Data: | |||||||||||||||
| Cash and cash equivalents | 327,600 | 383,949 | 413,406 | 300,307 | 290,885 | ||||||||||
| Investment securities | 752,562 | 777,613 | 777,208 | 803,087 | 726,329 | ||||||||||
| Total loans held for investment | 2,429,041 | 2,303,462 | 2,242,676 | 2,221,583 | 2,288,234 | ||||||||||
| Allowance for loan losses | 42,768 | 42,963 | 45,019 | 45,553 | 46,076 | ||||||||||
| Total assets | 3,774,175 | 3,712,915 | 3,732,894 | 3,599,160 | 3,542,666 | ||||||||||
| Interest-bearing deposits | 2,157,981 | 2,159,554 | 2,193,427 | 2,057,029 | 2,037,743 | ||||||||||
| Noninterest-bearing deposits | 1,054,264 | 998,941 | 962,205 | 917,322 | 906,059 | ||||||||||
| Total deposits | 3,212,245 | 3,158,495 | 3,155,632 | 2,974,351 | 2,943,802 | ||||||||||
| Borrowings | 122,121 | 125,965 | 164,553 | 223,532 | 204,704 | ||||||||||
| Total stockholders’ equity | 398,276 | 392,815 | 374,671 | 370,048 | 352,568 | ||||||||||
| Summary Performance Ratios: | |||||||||||||||
| Return on average assets | 1.61 | % | 1.46 | % | 1.66 | % | 1.76 | % | 1.88 | % | |||||
| Return on average equity | 15.24 | % | 14.27 | % | 16.51 | % | 17.53 | % | 19.32 | % | |||||
| Net interest margin ^(1)^ | 3.58 | % | 3.42 | % | 3.52 | % | 3.64 | % | 3.82 | % | |||||
| Yield on loans | 4.99 | % | 4.97 | % | 5.07 | % | 5.10 | % | 5.08 | % | |||||
| Cost of interest-bearing deposits | 0.37 | % | 0.40 | % | 0.41 | % | 0.45 | % | 0.50 | % | |||||
| Efficiency ratio | 66.45 | % | 70.52 | % | 65.76 | % | 64.19 | % | 56.90 | % | |||||
| Summary Credit Quality Data: | |||||||||||||||
| Nonperforming loans | 10,895 | 12,538 | 14,316 | 14,964 | 15,006 | ||||||||||
| Nonperforming loans to total loans held for investment | 0.45 | % | 0.54 | % | 0.64 | % | 0.67 | % | 0.66 | % | |||||
| Other real estate owned | 1,081 | 1,146 | 1,377 | 1,353 | 1,336 | ||||||||||
| Nonperforming assets to total assets | 0.32 | % | 0.37 | % | 0.42 | % | 0.45 | % | 0.46 | % | |||||
| Allowance for loan losses to total loans held for investment | 1.76 | % | 1.87 | % | 2.01 | % | 2.05 | % | 2.01 | % | |||||
| Net charge-offs to average loans outstanding (annualized) | 0.03 | % | 0.01 | % | 0.11 | % | 0.11 | % | 0.10 | % |
| As of and for the quarter ended | |||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| September 30<br><br> <br>2021 | June 30,<br><br> <br>2021 | March 31,<br><br> <br>2021 | December 31,<br><br> <br>2020 | September 30,<br><br> <br>2020 | |||||||||||
| Capital Ratios: | |||||||||||||||
| Total stockholders’ equity to total assets | 10.55 | % | 10.58 | % | 10.04 | % | 10.28 | % | 9.95 | % | |||||
| Tangible common equity to tangible assets | 9.94 | % | 9.94 | % | 9.39 | % | 9.60 | % | 9.25 | % | |||||
| Common equity tier 1 to risk-weighted assets | 12.68 | % | 13.14 | % | 13.23 | % | 12.96 | % | 12.49 | % | |||||
| Tier 1 capital to average assets | 10.83 | % | 10.54 | % | 10.35 | % | 10.24 | % | 10.01 | % | |||||
| Total capital to risk-weighted assets | 18.21 | % | 18.95 | % | 19.24 | % | 19.08 | % | 18.67 | % | |||||
| (1) | Net interest margin is calculated as the annual net interest income, on a fully tax-equivalent basis, divided by average interest-earning assets. | ||||||||||||||
| --- | --- |
South Plains Financial, Inc.
Average Balances and Yields - (Unaudited)
(Dollars in thousands)
| For the Three Months Ended | ||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| September 30, 2021 | September 30, 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)^ | $ | 2,365,010 | $ | 28,947 | 4.86 | % | $ | 2,195,507 | $ | 29,162 | 5.28 | % | ||
| Loans - PPP | 86,645 | 1,872 | 8.57 | % | 212,337 | 1,602 | 3.00 | % | ||||||
| Debt securities - taxable | 531,620 | 2,309 | 1.72 | % | 525,301 | 2,613 | 1.98 | % | ||||||
| Debt securities - nontaxable | 221,026 | 1,468 | 2.64 | % | 187,400 | 1,343 | 2.85 | % | ||||||
| Other interest-bearing assets | 284,369 | 151 | 0.21 | % | 168,922 | 105 | 0.25 | % | ||||||
| Total interest-earning assets | 3,488,670 | 34,747 | 3.95 | % | 3,289,467 | 34,825 | 4.21 | % | ||||||
| Noninterest-earning assets | 259,641 | 247,338 | ||||||||||||
| Total assets | $ | 3,748,311 | $ | 3,536,805 | ||||||||||
| Liabilities & stockholders’ equity | ||||||||||||||
| NOW, Savings, MMA’s | $ | 1,820,677 | 1,005 | 0.22 | % | $ | 1,695,476 | 1,213 | 0.28 | % | ||||
| Time deposits | 330,161 | 1,025 | 1.23 | % | 322,535 | 1,304 | 1.61 | % | ||||||
| Short-term borrowings | 725 | - | 0.00 | % | 12,080 | 3 | 0.10 | % | ||||||
| Notes payable & other long-term borrowings | - | - | 0.00 | % | 95,870 | 65 | 0.27 | % | ||||||
| Subordinated debt securities | 75,728 | 1,013 | 5.31 | % | 26,472 | 403 | 6.06 | % | ||||||
| Junior subordinated deferrable interest debentures | 46,393 | 217 | 1.86 | % | 46,393 | 242 | 2.08 | % | ||||||
| Total interest-bearing liabilities | 2,273,684 | 3,260 | 0.57 | % | 2,198,826 | 3,230 | 0.58 | % | ||||||
| Demand deposits | 1,035,910 | 944,420 | ||||||||||||
| Other liabilities | 43,171 | 49,008 | ||||||||||||
| Stockholders’ equity | 395,546 | 344,551 | ||||||||||||
| Total liabilities & stockholders’ equity | $ | 3,748,311 | $ | 3,536,805 | ||||||||||
| Net interest income | $ | 31,487 | $ | 31,595 | ||||||||||
| Net interest margin ^(2)^ | 3.58 | % | 3.82 | % | ||||||||||
| (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 Nine Months Ended | ||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| September 30, 2021 | September 30, 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)^ | $ | 2,246,650 | $ | 82,314 | 4.90 | % | $ | 2,188,988 | $ | 89,041 | 5.43 | % | ||
| Loans - PPP | 141,040 | 7,147 | 6.78 | % | 127,880 | 2,678 | 2.80 | % | ||||||
| Debt securities - taxable | 540,380 | 7,118 | 1.76 | % | 544,650 | 9,285 | 2.28 | % | ||||||
| Debt securities - nontaxable | 219,242 | 4,414 | 2.69 | % | 142,158 | 3,037 | 2.85 | % | ||||||
| Other interest-bearing assets | 328,412 | 373 | 0.15 | % | 164,936 | 963 | 0.78 | % | ||||||
| Total interest-earning assets | 3,475,724 | 101,366 | 3.90 | % | 3,168,612 | 105,004 | 4.43 | % | ||||||
| Noninterest-earning assets | 261,449 | 248,523 | ||||||||||||
| Total assets | $ | 3,737,173 | $ | 3,417,135 | ||||||||||
| Liabilities & stockholders’ equity | ||||||||||||||
| NOW, Savings, MMA’s | $ | 1,834,113 | 3,259 | 0.24 | % | $ | 1,630,524 | 5,199 | 0.43 | % | ||||
| Time deposits | 326,862 | 3,114 | 1.27 | % | 334,189 | 4,361 | 1.74 | % | ||||||
| Short-term borrowings | 10,725 | 5 | 0.06 | % | 19,758 | 102 | 0.69 | % | ||||||
| Notes payable & other long-term borrowings | 26,188 | 38 | 0.19 | % | 117,726 | 518 | 0.59 | % | ||||||
| Subordinated debt securities | 75,682 | 3,044 | 5.38 | % | 26,472 | 1,210 | 6.11 | % | ||||||
| Junior subordinated deferrable interest debentures | 46,393 | 661 | 1.90 | % | 46,393 | 937 | 2.70 | % | ||||||
| Total interest-bearing liabilities | 2,319,963 | 10,121 | 0.58 | % | 2,175,062 | 12,327 | 0.76 | % | ||||||
| Demand deposits | 991,331 | 870,606 | ||||||||||||
| Other liabilities | 41,996 | 40,579 | ||||||||||||
| Stockholders’ equity | 383,883 | 330,888 | ||||||||||||
| Total liabilities & stockholders’ equity | $ | 3,737,173 | $ | 3,417,135 | ||||||||||
| Net interest income | $ | 91,245 | $ | 92,677 | ||||||||||
| Net interest margin ^(2)^ | 3.51 | % | 3.91 | % | ||||||||||
| (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 | ||||||
|---|---|---|---|---|---|---|
| September 30,<br><br> <br>2021 | December 31,<br><br> 2020 | |||||
| Assets | ||||||
| Cash and due from banks | $ | 62,638 | $ | 76,146 | ||
| Interest-bearing deposits in banks | 264,962 | 224,161 | ||||
| Federal funds sold | — | — | ||||
| Investment securities | 752,562 | 803,087 | ||||
| Loans held for sale | 90,880 | 111,477 | ||||
| Loans held for investment | 2,429,041 | 2,221,583 | ||||
| Less: Allowance for loan losses | (42,768 | ) | (45,553 | ) | ||
| Net loans held for investment | 2,386,273 | 2,176,030 | ||||
| Premises and equipment, net | 59,056 | 60,331 | ||||
| Goodwill | 19,508 | 19,508 | ||||
| Intangible assets | 6,296 | 7,562 | ||||
| Other assets | 132,000 | 120,858 | ||||
| Total assets | $ | 3,774,175 | $ | 3,599,160 | ||
| Liabilities and Stockholders’ Equity Liabilities | ||||||
| Noninterest bearing deposits | $ | 1,054,264 | $ | 917,322 | ||
| Interest-bearing deposits | 2,157,981 | 2,057,029 | ||||
| Total deposits | 3,212,245 | 2,974,351 | ||||
| Other borrowings | - | 101,550 | ||||
| Subordinated debt securities | 75,728 | 75,589 | ||||
| Trust preferred subordinated debentures | 46,393 | 46,393 | ||||
| Other liabilities | 41,533 | 31,229 | ||||
| Total liabilities | 3,375,899 | 3,229,112 | ||||
| Stockholders’ Equity | ||||||
| Common stock | 17,824 | 18,076 | ||||
| Additional paid-in capital | 136,402 | 141,112 | ||||
| Retained earnings | 229,737 | 189,521 | ||||
| Accumulated other comprehensive income (loss) | 14,313 | 21,339 | ||||
| Total stockholders’ equity | 398,276 | 370,048 | ||||
| Total liabilities and stockholders’ equity | $ | 3,774,175 | $ | 3,599,160 |
South Plains Financial, Inc.
Consolidated Statements of Income
(Unaudited)
(Dollars in thousands)
| Three Months Ended | Nine Months Ended | ||||||||
|---|---|---|---|---|---|---|---|---|---|
| September 30,<br><br> <br>2021 | September 30,<br><br> <br>2020 | September 30,<br><br> <br>2021 | September 30,<br><br> <br>2020 | ||||||
| Interest income: | |||||||||
| Loans, including fees | $ | 30,818 | $ | 30,724 | $ | 89,458 | $ | 91,600 | |
| Other | 3,620 | 3,779 | 10,978 | 12,647 | |||||
| Total Interest income | 34,438 | 34,503 | 100,436 | 104,247 | |||||
| Interest expense: | |||||||||
| Deposits | 2,030 | 2,517 | 6,373 | 9,560 | |||||
| Subordinated debt securities | 1,013 | 403 | 3,044 | 1,210 | |||||
| Trust preferred subordinated debentures | 217 | 242 | 661 | 937 | |||||
| Other | - | 68 | 43 | 620 | |||||
| Total Interest expense | 3,260 | 3,230 | 10,121 | 12,327 | |||||
| Net interest income | 31,178 | 31,273 | 90,315 | 91,920 | |||||
| Provision for loan losses | - | 6,062 | (1,918 | ) | 25,429 | ||||
| Net interest income after provision for loan losses | 31,178 | 25,211 | 92,233 | 66,491 | |||||
| Noninterest income: | |||||||||
| Service charges on deposits | 1,851 | 1,749 | 5,023 | 5,171 | |||||
| Income from insurance activities | 3,794 | 3,303 | 6,146 | 5,484 | |||||
| Mortgage banking activities | 14,802 | 21,409 | 47,329 | 48,117 | |||||
| Bank card services and interchange fees | 3,045 | 2,608 | 8,760 | 7,190 | |||||
| Other | 2,299 | 2,591 | 7,283 | 7,151 | |||||
| Total Noninterest income | 25,791 | 31,660 | 74,541 | 75,431 | |||||
| Noninterest expense: | |||||||||
| Salaries and employee benefits | 24,116 | 23,672 | 71,811 | 66,103 | |||||
| Net occupancy expense | 3,896 | 3,710 | 10,960 | 10,896 | |||||
| Professional services | 1,388 | 1,177 | 4,483 | 4,710 | |||||
| Marketing and development | 777 | 615 | 2,157 | 2,189 | |||||
| Other | 7,886 | 6,819 | 22,487 | 21,313 | |||||
| Total noninterest expense | 38,063 | 35,993 | 111,898 | 105,211 | |||||
| Income before income taxes | 18,906 | 20,878 | 54,876 | 36,711 | |||||
| Income tax expense (benefit) | 3,716 | 4,147 | 10,876 | 7,282 | |||||
| Net income | $ | 15,190 | $ | 16,731 | $ | 44,000 | $ | 29,429 |
South Plains Financial, Inc.
Loan Composition
(Unaudited)
(Dollars in thousands)
| As of | ||||
|---|---|---|---|---|
| September 30,<br><br> <br>2021 | December 31,<br><br> <br>2020 | |||
| Loans: | ||||
| Commercial Real Estate | $ | 746,775 | $ | 663,344 |
| Commercial - Specialized | 390,394 | 311,686 | ||
| Commercial - General | 452,776 | 518,309 | ||
| Consumer: | ||||
| 1-4 Family Residential | 387,167 | 360,315 | ||
| Auto Loans | 239,397 | 205,840 | ||
| Other Consumer | 69,079 | 67,595 | ||
| Construction | 143,453 | 94,494 | ||
| Total loans held for investment | $ | 2,429,041 | $ | 2,221,583 |
South Plains Financial, Inc.
Deposit Composition
(Unaudited)
(Dollars in thousands)
| As of | ||||
|---|---|---|---|---|
| September 30,<br><br> <br>2021 | December 31,<br><br> <br>2020 | |||
| Deposits: | ||||
| Noninterest-bearing demand deposits | $ | 1,054,264 | $ | 917,322 |
| NOW & other transaction accounts | 359,177 | 332,829 | ||
| MMDA & other savings | 1,464,376 | 1,398,699 | ||
| Time deposits | 334,428 | 325,501 | ||
| Total deposits | $ | 3,212,245 | $ | 2,974,351 |
South Plains Financial, Inc.
Reconciliation of Non-GAAP Financial Measures (Unaudited)
(Dollars in thousands)
| As of and for the quarter ended | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| September 30,<br><br> <br>2021 | June 30,<br><br> <br>2021 | March 31,<br><br> <br>2021 | December 31,<br><br> <br>2020 | September 30,<br><br> <br>2020 | |||||||
| Pre-tax, pre-provision income | |||||||||||
| Net income | $ | 15,190 | $ | 13,650 | $ | 15,160 | $ | 15,924 | $ | 16,731 | |
| Income tax expense | 3,716 | 3,422 | 3,738 | 3,968 | 4,147 | ||||||
| Provision for loan losses | - | (2,007 | ) | 89 | 141 | 6,062 | |||||
| Pre-tax, pre-provision income | $ | 18,906 | $ | 15,065 | $ | 18,987 | $ | 20,033 | $ | 26,940 |
South Plains Financial, Inc.
Reconciliation of Non-GAAP Financial Measures (Unaudited)
(Dollars in thousands)
| As of | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| September 30,<br><br> <br>2021 | June 30,<br><br> <br>2021 | March 31,<br><br> <br>2021 | December 31,<br><br> <br>2020 | September 30,<br><br> <br>2020 | ||||||||
| Tangible common equity | ||||||||||||
| Total common stockholders’ equity | $ | 398,276 | $ | 392,815 | $ | 374,671 | $ | 370,048 | $ | 352,568 | ||
| Less: goodwill and other intangibles | (25,804 | ) | (26,226 | ) | (26,648 | (27,070 | (27,502 | |||||
| Tangible common equity | $ | 372,472 | $ | 366,589 | $ | 348,023 | $ | 342,978 | $ | 325,066 | ||
| Tangible assets | ||||||||||||
| Total assets | $ | 3,774,175 | $ | 3,712,915 | $ | 3,732,894 | $ | 3,599,160 | $ | 3,542,666 | ||
| Less: goodwill and other intangibles | (25,804 | ) | (26,226 | ) | (26,648 | (27,070 | (27,502 | |||||
| Tangible assets | $ | 3,748,371 | $ | 3,686,689 | $ | 3,706,246 | $ | 3,572,090 | $ | 3,515,164 | ||
| Shares outstanding | 17,824,094 | 18,014,398 | 18,053,229 | 18,076,364 | 18,059,174 | |||||||
| Total stockholders’ equity to total assets | 10.55 | % | 10.58 | % | 10.04 | 10.28 | 9.95 | |||||
| Tangible common equity to tangible assets | 9.94 | % | 9.94 | % | 9.39 | 9.60 | 9.25 | |||||
| Book value per share | $ | 22.34 | $ | 21.81 | $ | 20.75 | $ | 20.47 | $ | 19.52 | ||
| Tangible book value per share | $ | 20.90 | $ | 20.35 | $ | 19.28 | $ | 18.97 | $ | 18.00 |
All values are in US Dollars.
Exhibit 99.2
South Plains Financial Earnings Presentation Third 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, the ongoing COVID-19 pandemic, 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. Due to these and other possible uncertainties and risks, South Plains can give no assurance that the results contemplated in the forward-looking statements will be realized and readers are cautioned not to place undue reliance on the forward-looking statements contained in this presentation. For more information about these factors, please see South Plains’ reports filed with or furnished to the U.S. Securities and Exchange Commission (the “SEC”), including South Plains’ most recent Annual Report on Form 10-K and Quarterly Reports on Form 10-Q on file with the SEC, including the sections entitled “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Further, any forward-looking statement speaks only as of the date on which it is made and South Plains undertakes no obligation to update or revise any forward-looking statement to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence of unanticipated events, except as required by law. All forward-looking statements, express or implied, herein are qualified in their entirety by this cautionary statement.NON-GAAP FINANCIAL 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
$3.8 Billion in Total Assets as of September 30, 2021 Parent company of City Bank, a leading Texas-based community bank headquartered in Lubbock, TX Third 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 City Bank Branch Locations Net income of $15.2 million, compared to $13.7 million in 2Q’21 and $16.7 million in 3Q’20Diluted earnings per share of $0.82, compared to $0.74 in 2Q’21 and $0.92 in 3Q’20Average cost of deposits declined to 25 bps, compared to 27 bps in 2Q’21 and 34 bps in 3Q’20No provision for loan losses (“PLL”), compared to a negative PLL of $2.0 million in 2Q’21 and a PLL of $6.1 million in 3Q’20Loans held for investment grew $125.6 million, or 5.5%, during the third quarter of 2021 as compared to June 30, 2021.Nonperforming assets to total assets were 0.32%, compared to 0.37% at 6/30/21 and 0.46% at 9/30/20Net interest margin of 3.58%, compared to 3.42% in 2Q’21 and 3.82% in 3Q’20 Efficiency ratio was 66.45%, compared to 70.52% in 2Q’21 and 56.90% in 3Q’20Tangible book value per share of $20.90, compared to $20.35 at 6/30/21 and $18.00 at 9/30/20Return on average assets (annualized) of 1.61%, compared to 1.46% in 2Q’21 and 1.88% in 3Q’20 NASDAQ: SPFI 3Q’21 Highlights Note: Tangible book value per share is a non-GAAP measures. See appendix for the reconciliation to GAAP Source: Company documents
Loan Portfolio 5 3Q’21 Highlights Total loans increased by $125.6 million compared to 2Q’21, primarily due to:$177.6 million in organic net growth; Partially offset by a net decrease of $52.0 million in Paycheck Protection Program (“PPP”) loans, primarily due to PPP loan forgiveness received from the Small Business AdministrationStrategic initiative underway to grow SPFI’s banking team by more than 30% over two years with a primary focus on Dallas and Houston3Q’21 yield on loans, ex-PPP, of 4.86%; a decrease of 5 bps compared to 2Q’21, excluding PPP loans Total Loans Held for Investment$ in Millions Source: Company documents
Loan Portfolio 6 Portfolio Composition Loan Portfolio ($ in millions) 9/30/21 Commercial C&D $ 85.3 Residential C&D 215.8 CRE Owner/Occ. 219.9 Other CRE Non Owner/Occ. 458.4 Multi-Family 130.7 C&I 353.0 Agriculture 208.1 1-4 Family 387.1 Auto 239.4 Other Consumer 69.1 PPP 62.2 Total $ 2,429.0 Source: Company documents PPP loans totaled $62 million at 9/30/21Active pandemic loan modifications were 0.7%, or $16.4 million, of total loans at 9/30/21:Decrease from 1.6%, or $36.6 million, at 6/30/21Approximately 97% of these modifications are in the hotel industry, which are expected to return to full payment status at the end of their respective modification periods. 3Q’21 Highlights
Mortgage Banking Overview 7 Mortgage Banking Activity$ in Millions 3Q’21 Highlights $75 million decrease in interest rate lock commitments at 9/30/21 compared to 9/30/20Mortgage loan originations decreased 1.6% in 3Q’21 compared to 2Q’21Mortgage servicing rights asset valuation – a positive adjustment of $119 thousand in 3Q’21, compared to a negative adjustment of $351 thousand in 2Q’21 Source: Company documents
Noninterest Income 8 Noninterest Income$ in Millions 3Q’21 Highlights Noninterest income of $25.8 million, compared to $22.3 million in 2Q’21; the increase is primarily due to:Seasonal increase of $2.6 million in noninterest income from insurance activities $1.1 million increase in mortgage banking activities revenueRevenue from mortgage banking activities of was 26% of total revenue, compared to 26% in 2Q’21 and 34% in 3Q’20 Source: Company documents
Diversified Revenue Stream Nine Months Ended September 30, 2021 9 Total Revenues$164.9 million Noninterest Income$74.5 million Source: Company documents
Net Interest Income and Margin 10 Net Interest Income & Margin$ in Millions 3Q’21 Highlights Net interest income of $31.2 million, compared to $29.6 million in 2Q’21Increase was mainly the result of the growth of $82.9 million in average loans outstanding3Q’21 net interest margin (“NIM”) of 3.58%, an increase of 16 bps compared to 2Q’21 as excess liquidity was deployed into higher yielding loans during the quarter Source: Company documents
Deposit Portfolio 11 Total Deposits$ in Millions 3Q’21 Highlights Total Deposits of $3.21 billion at 3Q’21, an increase of $53.8 million from 2Q’21largest increase was experienced in non-personal demand accounts Cost of interest-bearing deposits declined in 3Q’21 to 37 bps from 40 bps in 2Q’21Noninterest-bearing deposits represented 32.8% of deposits in 3Q’21, compared to 31.6% in 2Q’21 Source: Company documents
Credit Quality 12 3Q’21 Highlights Credit Quality Ratios While growth was experienced in the loan portfolio and classified loans increased, the Company made no provision for loan loss in 3Q’21 in light of the general improvements in the economy and a decline in loans actively under a modification.Total classified loans increased $6 million in 3Q’21 as compared to 2Q’21Ratio of Allowance for Loan Losses (“ALLL”) to Loans Held for Investment (“HFI”) was 1.76% at 9/30/21 Net Charge-Offs to Average Loans ALLL to Total Loans HFI Source: Company documents
DirectEnergy Select Loan Industry Concentration Detail 13 As of September 30, 2021 Hospitality Total operating hospitality loans of $129 million*$6 million in hotels under construction, with unfunded commitments of <$2 million85% of balances are to limited service hotels37% of operating hospitality classified; 0.9% is nonaccrual; none are 30 days or more past dueALLL on operating hospitality is 7.6x%** Does not include loans reported in construction and development Total direct energy loans of $107 million96% support services, 4% upstreamNearly 100% are located in Permian and Palo Duro Basins6% of energy sector classifiedALLL on energy sector is 1.7% Hotels by Geography Source: Company documents Energy Support Services by Type
Investment Securities 14 3Q’21 Highlights Investment Securities totaled $752.6 million at 9/30/21, the fair value of securities decreased $6 million due to market conditions from 6/30/21All municipal bonds are in TexasAll MBS, CMO, and Asset Backed securities are U.S. Government or GSE 3Q’21 Securities Composition $752.6million Securities & Cash$ in Millions Source: Company documents
Noninterest Expense and Efficiency 15 Noninterest Expense$ in Millions 3Q’21 Highlights Noninterest expense for 3Q’21 increased $1.3 million from 2Q’21 primarily due to:$739 thousand increase in personnel expense from an additional $1.2 million in commissions for insurance activities partially offset by a decline in mortgage commissions paid related to a decline in mortgage production$397 thousand increase in net occupancy expense due to higher maintenance and repair costs, additional rent overhead due to an expansion in leased space, and higher seasonal utility costs.Management continues to focus on reducing fixed expenses to drive improved profitability Source: Company documents
Balance Sheet Highlights$ 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 September 30,2021 June 30,2021 March 31,2021 December 31,2020 September 30,2020 Pre-Tax, Pre-Provision Income Net income $ 15,190 $ 13,650 $ 15,160 $ 15,924 $ 16,731 Income tax expense 3,716 3,422 3,738 3,968 4,147 Provision for loan losses - (2,007 ) 89 141 6,062 Pre-tax, pre-provision income $ 18,906 $ 15,065 $ 18,987 $ 20,033 $ 26,940 Unaudited$ in Thousands Source: Company documents As of the quarter ended September 30,2021 June 30,2021 March 31,2021 December 31,2020 September 30,2020 Tangible common equity Total common stockholders’ equity $ 398,276 $ 392,815 $ 374,671 $ 370,048 $ 352,568 Less: goodwill and other intangibles (25,804) (26,226) (26,648) (27,070) (27,502) Tangible common equity $ 372,472 $ 366,589 $ 348,023 $ 342,978 $ 325,066 Tangible assets Total assets $ 3,774,175 $ 3,712,915 $ 3,732,894 $ 3,599,160 $ 3,542,666 Less: goodwill and other intangibles (25,804) (26,226) (26,648) (27,070) (27,502) Tangible assets $ 3,748,371 $ 3,686,689 $ 3,706,246 $ 3,572,090 $ 3,515,164 Shares outstanding 17,824,094 18,014,398 18,053,229 18,076,364 18,059,174 Total stockholders’ equity to total assets 10.55% 10.58% 10.04% 10.28% 9.95% Tangible common equity to tangible assets 9.94% 9.94% 9.39% 9.60% 9.25% Book value per share $ 22.34 $ 21.81 $ 20.75 $ 20.47 $ 19.52 Tangible book value per share $ 20.90 $ 20.35 $ 19.28 $ 18.97 $ 18.00