South Plains Financial, Inc. Reports Fourth Quarter and Year-End 2020 Financial Results

January 27, 2021

LUBBOCK, Texas, Jan. 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 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 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 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 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 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,
2020
 September 30,
2020
 June 30,
2020
 March 31,
2020
 December 31,
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
2020
 September 30,
2020
 June 30,
2020
 March 31,
2020
 December 31,
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
Balance
 Interest
Income
Expense
 Yield Average
Balance
 Interest
Income
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
Balance
 Interest
Income
Expense
 Yield Average
Balance
 Interest
Income
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,
2020
 December 31,
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,
2020
 December 31,
2019
 December 31,
2020
 December 31,
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,
2020
  December 31,
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,
2020
  December 31,
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,
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  $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,
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