South Plains Financial, Inc. Reports Third Quarter 2020 Financial Results

October 27, 2020

LUBBOCK, Texas, Oct. 27, 2020 (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, 2020.

Third Quarter 2020 Highlights

  • Net income for the third quarter of 2020 was $16.7 million, compared to $5.6 million for the second quarter of 2020 and $8.3 million for the third quarter of 2019.
  • Diluted earnings per share for the third quarter of 2020 was $0.92, compared to $0.31 for the second quarter of 2020 and $0.45 for the third quarter of 2019.
  • Pre-tax, pre-provision income (non-GAAP) for the third quarter of 2020 was $26.9 million, compared to $20.1 million for the second quarter of 2020 and $10.7 million for the third quarter of 2019.
  • Average cost of deposits for the third quarter of 2020 decreased to 34 basis points, compared to 39 basis points for the second quarter of 2020 and 98 basis points for the third quarter of 2019.
  • The provision for loan losses for the third quarter of 2020 was $6.1 million, compared to $13.1 million for the second quarter of 2020 and $420,000 for the third quarter of 2019.
  • Nonperforming assets to total assets were 0.46% at September 30, 2020, compared to 0.33% at June 30, 2020 and 0.31% at September 30, 2019.
  • The adjusted (non-GAAP) efficiency ratio for the third quarter of 2020 was 56.90%, compared to 63.28% for the second quarter of 2020 and 73.62% for the third quarter of 2019.
  • Return on average assets for the third quarter of 2020 was 1.88% annualized, compared to 0.64% annualized for the second quarter of 2020 and 1.18% annualized for the third quarter of 2019.
  • Book value per share was $19.52 as of September 30, 2020, compared to $18.64 per share as of June 30, 2020 and $16.61 per share as of September 30, 2019.
  • On September 29, 2020, the Company completed an issuance of $50 million of subordinated notes.

Curtis Griffith, South Plains’ Chairman and Chief Executive Officer, commented, “I am very pleased with our performance as the Bank’s operations continue to run smoothly and our customers have largely weathered the uncertain economic environment to date. Our decision to allow our borrowers to modify their loans to interest only payments early in the pandemic has proven to be a sound one as this allowed our customers to build cash and better manage their businesses. Importantly, we have experienced a sharp decline in active modifications related to COVID-19 during the third quarter, with only 5.4% of our portfolio remaining in an active modification versus 19.9% of the portfolio at June 30, 2020. While we are optimistic that our local economies are improving with the pace of business accelerating, we continue to manage our loan portfolio and reserves conservatively having recorded a $6.1 million provision for loan loss in the third quarter of 2020, which was largely qualitative, and compares favorably to the $13.1 million provision in the second quarter of 2020. At quarter end, our allowance for loan loss was 2.01%.”

Mr. Griffith continued, “We also experienced strong revenue growth in the quarter as the investments that we have made in our mortgage business are generating strong results. Over the last year, we have actively recruited seasoned mortgage teams that have been instrumental in driving market share gains in the builder and purchase markets. We have also maintained our expense structure in this business as volumes have grown which has contributed to strong margin gains and insulates us against the eventual decline in refinance volumes. Turning to capital, we opportunistically issued $50 million of fixed-to-floating rate subordinated notes, that qualify as Tier 2 capital for regulatory purposes, in the quarter at an attractive interest rate which will position the Company to take advantage of any dislocations that may occur in the market while providing protection if the pandemic were to severely worsen, which is not our expectation. We continue to be pleased with our acquisition of West Texas State Bank this past year and see M&A as an attractive strategy to further expand our geographic footprint in West Texas.”

Results of Operations, Quarter Ended September 30, 2020

Net Interest Income

Net interest income was $31.3 million for the third quarter of 2020, compared to $26.6 million for the third quarter of 2019 and $30.4 million for the second quarter of 2020.

Interest income was $34.5 million for the third quarter of 2020, compared to $33.7 million for the third quarter of 2019 and $34.0 million for the second quarter of 2020. Interest and fees on loans increased by $1.1 million from the third quarter of 2019 due to growth of $414.3 million in average loans, primarily from the Company’s acquisition of West Texas State Bank (“WTSB”) as well as the Small Business Administration (“SBA”) Paycheck Protection Program (“PPP”) loans that were originated largely in the second quarter of 2020, partially offset by a decrease of 63 basis points in non-PPP loan rates due to the decline in the interest rate environment experienced in the first quarter of 2020. Interest income increased slightly in the third quarter of 2020 from the second quarter of 2020 due to the additional interest and fees on PPP loans. The PPP loans yielded 3.00% during the third quarter of 2020, which includes accretion of the related SBA lender fees for processing PPP loans during the quarter. As of September 30, 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 third quarter of 2020, the Company recognized $1.1 million in PPP related SBA fees. The Company expects that the majority of PPP loans will be forgiven over the next several quarters. At September 30, 2020, there is $6.1 million of deferred fees that have not been accreted to income.

Interest expense was $3.2 million for the third quarter of 2020, compared to $7.1 million for the third quarter of 2019 and $3.6 million for the second quarter of 2020. The decrease from the third quarter of 2019 was primarily due to a decrease in the interest rate paid on interest-bearing liabilities of 91 basis points, partially offset by an increase of $303.4 million in average interest-bearing liabilities. The increase in average interest-bearing liabilities was largely due to the Company’s acquisition of WTSB as well as growth in deposits from PPP loan funding and other government stimulus payments and programs as well as organic growth. 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 decrease in interest expense from the second quarter of 2020 was primarily due to a decrease in the interest rate paid on interest-bearing liabilities of 6 basis points and by a decrease of $28.3 million in average interest-bearing liabilities in the third quarter of 2020. The average cost of deposits was 34 basis points for the third quarter of 2020, representing a 64 basis point decrease from the third quarter of 2019 and a 5 basis point decrease from the second quarter of 2020. The decrease in average interest-bearing liabilities was primarily due to paying back $95.0 million in advances from the Federal Home Loan Bank of Dallas (“FHLB”), partially offset by organic growth of $41.3 million in average interest-bearing deposits.

The net interest margin was 3.82% for the third quarter of 2020, compared to 4.07% for the third quarter of 2019 and 3.79% for the second quarter of 2020.

Noninterest Income and Noninterest Expense

Noninterest income was $31.7 million for the third quarter of 2020, compared to $14.1 million for the third quarter of 2019 and $24.9 million for the second quarter of 2020. The increase in noninterest income for the third quarter of 2020 compared to the third quarter of 2019 was primarily due to growth of $14.4 million in mortgage banking activities revenue as a result of an additional $209.6 million in mortgage loan originations. Additionally, there was an increase in income from insurance activities of $2.2 million in the third quarter of 2020 related to recent acquisitions as well as the effect of adoption of the revenue recognition standard for quarterly reporting in 2020, which has delayed the recognition of revenue until later in the year as compared to previous years. The increase from the second quarter of 2020 was primarily due to growth of $3.5 million in mortgage banking activities revenue as a result of an additional $31.8 million in mortgage loan originations and an increase of $2.3 million in income from insurance activities.

Noninterest expense was $36.0 million for the third quarter of 2020, compared to $30.0 million for the third quarter of 2019 and $35.2 million for the second quarter of 2020. This increase in noninterest expense for the third quarter of 2020 compared to the third quarter of 2019 was primarily driven by a $5.5 million increase in personnel expense. This increase was predominately related to an additional $3.0 million in commissions paid on the higher volume of mortgage loan originations and personnel in the Bank’s branches in the Permian Basin that were acquired in the fourth quarter of 2019 through the Company’s acquisition of WTSB. The remaining other noninterest expenses increased $428,000, or 3.6%, which encompasses the additional variable mortgage expenses related to the growth in mortgage production and other operating expenses and core deposit intangible amortization from the acquisition of WTSB. The increase from the second quarter of 2020 was primarily the result of an additional $758,000 in commissions and higher other variable expenses as a result of increased mortgage production and insurance activities. This increase was partially offset by a recovery of $303,000 of legal expenses from the previously disclosed settlement of a lawsuit in September 2020 as well as other expense reductions.

Loan Portfolio and Composition

Loans held for investment were $2.29 billion as of September 30, 2020, compared to $2.33 billion as of June 30, 2020 and $1.96 billion as of September 30, 2019. The $43.5 million decrease during the third quarter of 2020 as compared to the second quarter of 2020 was primarily the result of paydowns of $10.1 million in non-residential consumer loans and $8.0 million in direct energy loans as well as several large commercial real estate loans that paid off early. As of September 30, 2020, loans held for investment increased $325.6 million from September 30, 2019, largely attributable to the PPP loans primarily funded in the second quarter of 2020 and the WTSB acquisition in the fourth quarter of 2019.

Agricultural production loans were $133.9 million as of September 30, 2020, compared to $131.5 million as of June 30, 2020 and $166.8 million as of September 30, 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 $2.94 billion as of September 30, 2020, compared to $2.95 billion as of June 30, 2020 and $2.29 billion as of September 30, 2019. Deposits decreased $4.0 million in the third quarter of 2020 from June 30, 2020. As of September 30, 2020, deposits increased $657.8 million from September 30, 2019. The increase in deposits since September 30, 2019 is primarily a result of organic growth as well as the assumption of deposits from the WTSB acquisition in the fourth quarter of 2019.

Noninterest-bearing deposits were $906.1 million as of September 30, 2020, compared to $940.9 million as of June 30, 2020 and $556.2 million as of September 30, 2019. Noninterest-bearing deposits represented 30.8%, 31.9%, and 24.3% of total deposits as of September 30, 2020, June 30, 2020, and September 30, 2019, respectively. The decrease in noninterest-bearing deposit balances at September 30, 2020 compared to June 30, 2020 was largely the result of customer quarterly estimated tax payments that were extended until July 15, 2020.

The Bank has utilized its lines of credit with 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 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 10 year fixed-to-floating rate subordinated notes on September 29, 2020. 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 offered 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, to provide borrowers relief. As of September 30, 2020, total active loan modifications attributed to COVID-19 were $124.0 million, or 5.4% of the Company’s loan portfolio, down from $464.4 million, or 19.9% of the Company’s loan portfolio, at June 30, 2020. The modified loan breakdown as of September 30, 2020 is: 36% are 6 months interest only, 7% are 90 day payment deferrals on commercial customers, 57% are interest only periods longer than 6 months, primarily in the hotel portfolio, and less than 1% are payment deferrals of one to four months on consumer loans.

The provision for loan losses recorded for the third quarter of 2020 was $6.1 million, compared to $420,000 for the third quarter of 2019 and $13.1 million for the second quarter of 2020. The increase in the provision for loan losses in the third quarter of 2020 compared to the third quarter of 2019 is a result of economic effects from COVID-19, the decline in the oil and gas industry, and the change in credit quality and increase in nonperforming assets. The decrease from the second quarter of 2020 is a result of a modest improvement in the economy as well as a decline in the amount of loans that are actively under a modification. There is continued uncertainty from COVID-19 and the full extent of the impact on the economy and the Bank’s customers is unknown at this time. Accordingly, additional provisions for loan losses may be necessary in future periods.

The allowance for loan losses to loans held for investment was 2.01% as of September 30, 2020, compared to 1.74% as of June 30, 2020 and 1.23% as of September 30, 2019. The allowance for loan losses to non-PPP loans held for investment was 2.22% as of September 30, 2020.

The nonperforming assets to total assets ratio as of September 30, 2020 was 0.46%, compared to 0.33% as of June 30, 2020 and 0.31% at September 30, 2019. The increase in the third quarter of 2020 related to a $5.4 million relationship in the transportation industry that was put on nonaccrual. The loans have performed as agreed but were placed on nonaccrual status due to stress in the borrower’s industry. The borrower paid off $2.1 million of this debt in October 2020.

Annualized net charge-offs were 0.10 % for the third quarter of 2020, compared to 0.27% for the second quarter of 2020 and 0.08% for the third quarter of 2019.

Conference Call

South Plains will host a conference call to discuss its third quarter 2020 financial results today, October 27, 2020 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 13711893. The replay will be available until November 10, 2020.

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 Lititgation 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 Report 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 Report on Form 10-Q, as well as the “Risk Factors” section of other documents South Plains files with the SEC from time to time. 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.

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,
2020
 June 30,
2020
 March 31,
2020
 December 31,
2019
 September 30,
2019
Selected Income Statement Data:              
Interest income$34,503  $34,007  $35,737  $34,764  $33,665 
Interest expense 3,230   3,559   5,538   6,140   7,097 
Net interest income 31,273   30,448   30,199   28,624   26,568 
Provision for loan losses 6,062   13,133   6,234   896   420 
Noninterest income 31,660   24,896   18,875   16,740   14,115 
Noninterest expense 35,993   35,207   34,011   31,714   30,028 
Income tax expense 4,147   1,389   1,746   2,645   1,977 
Net income 16,731   5,615   7,083   10,109   8,258 
Per Share Data (Common Stock):              
Net earnings, basic 0.93   0.31   0.39   0.56   0.46 
Net earnings, diluted 0.92   0.31   0.38   0.55   0.45 
Cash dividends declared and paid 0.03   0.03   0.03   0.03   0.03 
Book value 19.52   18.64   18.10   16.98   16.61 
Tangible book value 18.00   17.06   16.54   15.46   16.47 
Weighted average shares outstanding, basic 18,059,174   18,061,705   18,043,105   18,010,065   17,985,429 
Weighted average shares outstanding, dilutive 18,256,161   18,224,630   18,461,922   18,415,656   18,363,033 
Shares outstanding at end of period 18,059,174   18,059,174   18,056,014   18,036,115   18,004,323 
Selected Period End Balance Sheet Data:              
Cash and cash equivalents 290,885   256,101   136,062   158,099   244,645 
Investment securities 726,329   730,674   734,791   707,650   401,335 
Total loans held for investment 2,288,234   2,331,716   2,108,805   2,143,623   1,962,609 
Allowance for loan losses 46,076   40,635   29,074   24,197   24,176 
Total assets 3,542,666   3,584,532   3,216,563   3,237,167   2,795,582 
Interest-bearing deposits 2,037,743   2,006,984   1,924,902   1,905,936   1,729,741 
Noninterest-bearing deposits 906,059   940,853   740,946   790,921   556,233 
Total deposits 2,943,802   2,947,837   2,665,848   2,696,857   2,285,974 
Borrowings 204,704   252,430   185,265   205,030   177,720 
Total stockholders’ equity 352,568   336,534   326,890   306,182   299,027 
Summary Performance Ratios:              
Return on average assets 1.88%  0.64%  0.89%  1.32%  1.18%
Return on average equity 19.32%  6.81%  9.00%  13.25%  11.10%
Net interest margin (1) 3.82%  3.79%  4.13%  4.03%  4.07%
Yield on loans 5.08%  5.06%  5.76%  5.79%  5.91%
Cost of interest-bearing deposits 0.50%  0.56%  0.91%  1.06%  1.30%
Efficiency ratio 56.90%  63.28%  69.10%  69.71%  73.62%
Summary Credit Quality Data:              
Nonperforming loans 15,006   10,472   7,112   6,045   6,456 
Nonperforming loans to total loans held for investment 0.66%  0.45%  0.34%  0.28%  0.33%
Other real estate owned 1,336   1,335   1,944   1,883   2,296 
Nonperforming assets to total assets 0.46%  0.33%  0.28%  0.24%  0.31%
Allowance for loan losses to total loans held for investment 2.01%  1.74%  1.38%  1.13%  1.23%
Net charge-offs to average loans outstanding (annualized) 0.10%  0.27%  0.25%  0.17%  0.08%
                    



 As of and for the quarter ended
 September 30
2020
 June 30,
2020
 March 31,
2020
 December 31,
2019
 September 30,
2019
Capital Ratios:              
Total stockholders’ equity to total assets 9.95%  9.39%  10.16%  9.46%  10.70%
Tangible common equity to tangible assets 9.25%  8.66%  9.37%  8.69%  10.62%
Common equity tier 1 to risk-weighted assets 12.49%  10.47%  11.24%  11.06%  13.10%
Tier 1 capital to average assets 10.01%  9.60%  10.34%  10.74%  12.17%
Total capital to risk-weighted assets 18.67%  14.32%  15.23%  14.88%  17.38%


(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, 2020 September 30, 2019
    
 Average
Balance
 Interest
Income
Expense
 Yield Average
Balance
 Interest
Income
Expense
 Yield
Assets                 
Loans, excluding PPP (1)$2,195,507 $29,162  5.28% $1,993,507 $29,695  5.91%
Loans - PPP 212,337  1,602  3.00%  -  -  0.00%
Debt securities - taxable 525,301  2,613  1.98%  287,128  1,956  2.70%
Debt securities - nontaxable 187,400  1,343  2.85%  32,993  286  3.44%
Other interest-bearing assets 168,922  105  0.25%  284,579  1,831  2.55%
                  
Total interest-earning assets 3,289,467  34,825  4.21%  2,598,207  33,768  5.16%
Noninterest-earning assets 247,338        181,139      
Total assets$3,536,805       $2,779,346      
                  
Liabilities & stockholders’ equity                 
NOW, Savings, MMA’s$1,695,476  1,213  0.28% $1,399,727  4,057  1.15%
Time deposits 322,535  1,304  1.61%  315,376  1,570  1.98%
Short-term borrowings 12,080  3  0.10%  12,468  58  1.85%
Notes payable & other long-term borrowings 95,870  65  0.27%  95,000  523  2.18%
Subordinated debt securities 26,472  403  6.06%  26,472  404  6.05%
Junior subordinated deferrable interest debentures 46,393  242  2.08%  46,393  485  4.15%
                  
Total interest-bearing liabilities 2,198,826  3,230  0.58%  1,895,436  7,097  1.49%
Demand deposits 944,420        555,501      
Other liabilities 49,008        33,339      
Stockholders’ equity 344,551        295,070      
                  
Total liabilities & stockholders’ equity$3,536,805       $2,779,346      
                  
Net interest income   $31,595       $26,671   
Net interest margin (2)       3.82%        4.07%


(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, 2020 September 30, 2019
            
 Average
Balance
 Interest
Income
Expense
 Yield Average
Balance
 Interest
Income
Expense
 Yield
Assets                 
Loans, excluding PPP (1)$2,188,988 $89,041  5.43% $1,965,297 $86,471  5.88%
Loans - PPP 127,880  2,678  2.80%  -  -  0.00%
Debt securities - taxable 544,650  9,285  2.28%  281,904  5,819  2.76%
Debt securities - nontaxable 142,158  3,037  2.85%  32,184  847  3.52%
Other interest-bearing assets 164,936  963  0.78%  292,099  5,348  2.45%
                  
Total interest-earning assets 3,168,612  105,004  4.43%  2,571,484  98,485  5.12%
Noninterest-earning assets 248,523        177,507      
                  
Total assets$3,417,135       $2,748,991      
                  
Liabilities & stockholders’ equity                 
NOW, Savings, MMA’s$1,630,524  5,199  0.43% $1,439,699  13,287  1.23%
Time deposits 334,189  4,361  1.74%  314,128  4,368  1.86%
Short-term borrowings 19,758  102  0.69%  15,425  226  1.96%
Notes payable & other long-term borrowings 117,726  518  0.59%  95,000  1,623  2.28%
Subordinated debt securities 26,472  1,210  6.11%  26,890  1,213  6.03%
Junior subordinated deferrable interest debentures 46,393  937  2.70%  46,393  1,510  4.35%
                  
Total interest-bearing liabilities 2,175,062  12,327  0.76%  1,937,535  22,227  1.53%
Demand deposits 870,606        524,468      
Other liabilities 40,579        31,795      
Stockholders’ equity 330,888        255,193      
                  
Total liabilities & stockholders’ equity$3,417,135       $2,748,991      
                  
Net interest income   $92,677       $76,258   
Net interest margin (2)       3.91%        3.96%


(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,
2020
 December 31,
2019
      
Assets     
Cash and due from banks$43,750  $56,246 
Interest-bearing deposits in banks 245,785   101,853 
Federal funds sold 1,350    
Investment securities 726,329   707,650 
Loans held for sale 76,507   49,035 
Loans held for investment 2,288,234   2,143,623 
Less:  Allowance for loan losses (46,076)  (24,197)
Net loans held for investment 2,242,158   2,119,426 
Premises and equipment, net 61,399   61,873 
Goodwill 19,508   18,757 
Intangible assets 7,994   8,632 
Other assets 117,886   113,695 
Total assets$3,542,666  $3,237,167 
      
Liabilities and Stockholders’ Equity Liabilities     
Noninterest bearing deposits$906,059  $790,921 
Interest-bearing deposits 2,037,743   1,905,936 
Total deposits 2,943,802   2,696,857 
Other borrowings 82,765   132,165 
Subordinated debt securities 75,546   26,472 
Trust preferred subordinated debentures 46,393   46,393 
Other liabilities 41,592   29,098 
Total liabilities 3,190,098   2,930,985 
Stockholders’ Equity     
Common stock 18,059   18,036 
Additional paid-in capital 141,245   140,492 
Retained earnings 174,501   146,696 
Accumulated other comprehensive income (loss) 18,763   958 
Total stockholders’ equity 352,568   306,182 
Total liabilities and stockholders’ equity$3,542,666  $3,237,167 
        

South Plains Financial, Inc. 
Consolidated Statements of Income
(Unaudited)
(Dollars in thousands)

 Three Months Ended Nine Months Ended
 September 30,
2020
 September 30,
2019
 September 30,
2020
 September 30,
2019
            
Interest income:           
Loans, including fees$30,724 $29,652 $91,600 $86,342
Other 3,779  4,013  12,647  11,836
Total Interest income 34,503  33,665  104,247  98,178
Interest expense:           
Deposits 2,517  5,627  9,560  17,655
Subordinated debt securities 403  404  1,210  1,213
Trust preferred subordinated debentures 242  485  937  1,510
Other 68  581  620  1,849
Total Interest expense 3,230  7,097  12,327  22,227
Net interest income 31,273  26,568  91,920  75,951
Provision for loan losses 6,062  420  25,429  1,903
Net interest income after provision for loan losses 25,211  26,148  66,491  74,048
Noninterest income:           
Service charges on deposits 1,749  2,101  5,171  5,985
Income from insurance activities 3,303  1,114  5,484  4,074
Mortgage banking activities 21,409  6,991  48,117  18,509
Bank card services and interchange fees 2,608  2,192  7,190  6,273
Other 2,591  1,717  7,151  5,052
Total Noninterest income 31,660  14,115  75,431  39,893
Noninterest expense:           
Salaries and employee benefits 23,672  18,135  66,103  56,044
Net occupancy expense 3,710  3,486  10,896  10,309
Professional services 1,177  1,852  4,710  5,169
Marketing and development 615  762  2,189  2,275
Other 6,819  5,793  21,313  16,197
Total noninterest expense 35,993  30,028  105,211  89,994
Income before income taxes 20,878  10,235  36,711  23,947
Income tax expense (benefit) 4,147  1,977  7,282  4,836
Net income$16,731 $8,258 $29,429 $19,111
            

South Plains Financial, Inc. 
Loan Composition
(Unaudited)
(Dollars in thousands)

 As of
 September 30,
2020
 December 31,
2019
      
Loans:     
Commercial Real Estate$655,432 $658,195
Commercial - Specialized 340,458  309,505
Commercial - General 578,181  441,398
Consumer:     
1-4 Family Residential 372,114  362,796
Auto Loans 193,023  215,209
Other Consumer 68,877  74,000
Construction 80,149  82,520
Total loans held for investment$2,288,234 $2,143,623
      

South Plains Financial, Inc.
Deposit Composition
(Unaudited)
(Dollars in thousands)

 As of
 September 30,
2020
 December 31,
2019
      
Deposits:     
Noninterest-bearing demand deposits$906,059 $790,921
NOW & other transaction accounts 323,955  318,379
MMDA & other savings 1,391,620  1,231,534
Time deposits 322,168  356,023
Total deposits$2,943,802 $2,696,857
      

South Plains Financial, Inc. 
Reconciliation of Non-GAAP Financial Measures
(Unaudited)
(Dollars in thousands)

 As of and for the quarter ended
 September 30,
2020
 June 30,
2020
 March 31,
2020
 December 31,
2019
 September 30,
2019
Efficiency ratio              
Noninterest expense$35,993  $35,207  $34,011  $31,714  $30,028 
               
Net interest income$31,273  $30,448  $30,199  $28,624  $26,568 
Tax equivalent yield adjustment 322   290   145   133   103 
Noninterest income 31,660   24,896   18,875   16,740   14,115 
Total income$63,255  $55,634  $49,219  $45,497  $40,786 
               
Efficiency ratio 56.90%  63.28%  69.10%  69.71%  73.62%
               
Noninterest expense$35,993  $35,207  $34,011  $31,714  $30,028 
Less:  net loss on sale of securities -   -   -   (27)  - 
Adjusted noninterest expense$35,993  $35,207  $34,011  $31,687  $30,028 
               
Total income$63,255  $55,634  $49,219  $45,497  $40,786 
Less:  net gain on sale of securities -   -   (2,318)  -   - 
Adjusted total income$63,255  $55,634  $46,901  $45,497  $40,786 
               
Adjusted efficiency ratio 56.90%  63.28%  72.52%  69.65%  73.62%
               
Pre-tax, pre-provision income              
Net income$16,731  $5,615  $7,083  $10,109  $8,258 
Income tax expense 4,147   1,389   1,746   2,645   1,977 
Provision for loan losses 6,062   13,133   6,234   896   420 
               
Pre-tax, pre-provision income$26,940  $20,137  $15,063  $13,650  $10,655 
                    

South Plains Financial, Inc.
Reconciliation of Non-GAAP Financial Measures
(Unaudited)
(Dollars in thousands)

 As of
 September 30,
2020
 December 31,
2019
Tangible common equity     
Total common stockholders’ equity$352,568  $306,182 
Less:  goodwill and other intangibles (27,502)  (27,389)
      
Tangible common equity$325,066  $278,793 
      
Tangible assets     
Total assets$3,542,666  $3,237,167 
Less:  goodwill and other intangibles (27,502)  (27,389)
      
Tangible assets$3,515,164  $3,209,778 
      
Shares outstanding 18,059,174   18,036,115 
      
Total stockholders’ equity to total assets 9.95%  9.46%
Tangible common equity to tangible assets 9.25%  8.69%
Book value per share$19.52  $16.98 
Tangible book value per share$18.00  $15.46