South Plains Financial, Inc. Reports Third Quarter 2021 Financial Results

October 26, 2021

LUBBOCK, Texas, Oct. 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 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 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 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 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 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,
2021
 June 30,
2021
 March 31,
2021
 December 31,
2020
 September 30,
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
2021
 June 30,
2021
 March 31,
2021
 December 31,
2020
 September 30,
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
Balance
 Interest
Income
Expense
 Yield Average
Balance
 Interest
Income
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
Balance
 Interest
Income
Expense
 Yield Average
Balance
 Interest
Income
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,
2021
 December 31,
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,
2021
 September 30,
2020
 September 30,
2021
 September 30,
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,
2021
 December 31,
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,
2021
 December 31,
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,
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

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

 As of
 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