UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

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FORM 8-K

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CURRENT REPORT

Pursuant to Section 13 or 15(d) of

the Securities Exchange Act of 1934

 

Date of Report (Date of earliest event reported):  October 24, 2019

 

South Plains Financial, Inc.

(Exact name of registrant as specified in its charter)

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(806) 792-7101

(Registrant’s telephone number, including area code)

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

 

 

 

 

Securities registered pursuant to Section 12(b) of the Act:

 

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company ☒

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

Press Release For Immediate Release

South Plains Financial, Inc. Reports Third Quarter 2019 Financial Results

 

LUBBOCK, Texas, October 24, 2019 (GLOBE NEWSWIRE) – South Plains Financial, Inc. (NASDAQ:SPFI) (“South Plains” or the “Company”), the parent company of City Bank, today reported its financial results for the quarter ended September 30, 2019.

 

 Third Quarter 2019 Highlights

 

 

Subsequent Events

 

 

Curtis Griffith, South Plains’ Chairman and Chief Executive Officer, commented, “I am very pleased with our third quarter results as they clearly demonstrate the successful execution of our strategy to grow City Bank while also leveraging the significant investments that we have made in our infrastructure.  Today, we believe our infrastructure can handle more than $5 billion in assets which will allow us to further scale City Bank without adding significant incremental expenses or investments as we strive to deliver returns in line with or exceeding our peer group.  Signs of our success can be seen in our third quarter results as we improved our efficiency ratio by 123 basis points, year over year, to 73.62%.  Additionally, our return on average assets expanded by 44 basis points, year over year, to 1.18% annualized and our return on average equity expanded by more than 200 basis points, year over year, to 11.10% annualized.”

 

Mr. Griffith continued, “Turning to our pending acquisition of WTSB, I am pleased to report that we have received all necessary regulatory approvals and expect the acquisition to close on October 31, 2019.  Since our announcement in July, we have been working closely with the WTSB management team on our integration plan and are very pleased with the early success that we have achieved.  As a result, we remain confident that we will deliver our cost synergy target of reducing WTSB’s non-interest expense by 30% by 2021, approximately 75% of which we expect to achieve in 2020.  We also continue to expect 20% earnings accretion over four quarters beginning in 2020 with a tangible book value per share earn back of less than four years.  Additionally, we are encouraged with the potential cross selling opportunities to WTSB’s customers, as there is a real need for South Plains’ mortgage, wealth management and trust products in WTSB’s more rural markets.  Our bankers are positioning themselves to begin introducing our products in WTSB’s branches on day one post-closing.”

Results of Operations, Quarter Ended September 30, 2019

 

Net Interest Income

 

Net interest income was $26.6 million for the third quarter of 2019, compared to $24.8 million for the third quarter of 2018 and $24.8 million for the second quarter of 2019.

 

Interest income was $33.7 million for the third quarter of 2019, compared to $30.7 million for the third quarter of 2018 and $32.5 million for the second quarter of 2019.  Interest and fees on loans increased by $2.0 million from the third quarter of 2018 due to organic growth of $20.0 million in average loans and an increase of 34 basis points in interest rates.  The increase from the second quarter of 2019 was the result of an increase of $46.9 million in average loans outstanding during the third quarter of 2019.

 

Interest expense was $7.1 million for the third quarter of 2019, compared to $5.9 million for the third quarter of 2018 and $7.7 million for the second quarter of 2019.  The increase from the third quarter of 2018 was primarily due to an increase in the rate paid on interest-bearing liabilities of 24 basis points.  The decrease from the second quarter of 2019 was due to a decrease in the rate paid on interest-bearing liabilities of 9 basis points and a decrease of $50.0 million in average interest-bearing liabilities in the third quarter of 2019.  The average cost of deposits was 98 basis points for the third quarter of 2019, representing a 14 basis point increase from the third quarter of 2018 and a 10 basis point decrease from the second quarter of 2019.

 

The net interest margin was 4.07% for the third quarter of 2019, compared to 4.02% for the third quarter of 2018 and 3.88% for the second quarter of 2019.

 

Noninterest Income and Noninterest Expense

 

Noninterest income was $14.1 million for the third quarter of 2019, compared to $13.3 million for the third quarter of 2018 and $13.7 million for the second quarter of 2019.  The increase in noninterest income for the third quarter of 2019 compared to the third quarter of 2018 was primarily the result of an increase of $1.4 million in mortgage banking activities revenue as a result of an increase of $47.2 million in mortgage loan originations.  The increase from the second quarter of 2019 was primarily the result of an increase of $339,000 in mortgage banking activities revenue for the third quarter of 2019.

 

Noninterest expense was $30.0 million for the third quarter of 2019, compared to $28.6 million for the third quarter of 2018 and $29.9 million for the second quarter of 2019.  This increase in noninterest expense for the third quarter of 2019 compared to the third quarter of 2018 was primarily driven by $328,000 in professional services related to our announced acquisition of WTSB as well as increased costs for legal, accounting, and insurance as a new public company.  There was a decrease in personnel expense of $649,000 from the second quarter of 2019, which was partially offset by the increase in expenses noted above for the third quarter of 2019.

Loan Portfolio and Composition

 

Loans held for investment were $1.96 billion as of September 30, 2019, compared to $1.94 billion as of June 30, 2019 and $1.97 billion as of September 30, 2018.  Loans held for investment increased $27.0 million, or 5.6% annualized, during the third quarter of 2019 compared to the second quarter of 2019, primarily as a result of an increase of $19.1 million seasonal agricultural production loan net fundings.  As of September 30, 2019, loans held for investment decreased $5.5 million, or 0.3%, from September 30, 2018.

 

Agricultural production loans were $166.8 million as of September 30, 2019, compared to $147.7 million as of June 30, 2019 and $175.8 million as of September 30, 2018.

 

Deposits and Borrowings

 

Deposits totaled $2.29 billion as of September 30, 2019, compared to $2.28 billion as of June 30, 2019 and $2.26 billion as of September 30, 2018.  Deposits increased $4.1 million in the third quarter of 2019, primarily as the result of growth in noninterest-bearing deposits of $42.9 million during the quarter, partially offset by a decrease of $38.7 million in interest-bearing deposits.  The decrease in interest-bearing deposits was primarily attributable to a planned reduction of $43.3 million in public funds.  The increase of $24.6 million in deposits from September 30, 2018 was the result of the Company’s organic growth.

 

Noninterest-bearing deposits were $556.2 million as of September 30, 2019, compared to $513.4 million as of June 30, 2019 and $517.0 million as of September 30, 2018.  Noninterest-bearing deposits represented 24.3%, 22.5%, and 22.9% of total deposits as of September 30, 2019, June 30, 2019, and September 30, 2018, respectively.

 

Asset Quality

 

The provision for loan losses recorded for the third quarter of 2019 was $420,000, compared to $3.4 million for the third quarter of 2018 and $875,000 for the second quarter of 2019.  The allowance for loan losses to loans held for investment was 1.23% as of September 30, 2019, compared to 1.25% as of June 30, 2019 and 1.07% as of September 30, 2018.

 

The nonperforming assets to total assets ratio as of September 30, 2019 was 0.31%, compared to 0.37% as of June 30, 2019 and 0.37% at September 30, 2018.

 

Annualized net charge-offs were 0.08% for the third quarter of 2019, compared to 0.02% for the second quarter of 2019 and 0.82% for the third quarter of 2018.

 

Conference Call

 

South Plains will host a conference call to discuss its third quarter 2019 financial results today, October 24, 2019 at 9 a.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 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 13694929.  The replay will be available until 11:59 p.m. Eastern Time on November 7, 2019.

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 and El Paso markets, as well as in the Greater Houston, 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.

 

Pro Forma Financial Information

 

As a result of the revocation of the Company’s subchapter S corporation election, which was effective May 31, 2018, the net income presented herein may not be comparable for all periods presented herein.  As a result, the Company is disclosing pro forma net income and income tax expense as if the Company’s conversion to a C corporation had occurred as of January 1, 2018.

 

Additionally, prior to the listing of our common stock on the NASDAQ, in accordance with applicable provisions of the Internal Revenue Code, the terms of the South Plains Financial, Inc. Employee Stock Ownership Plan (“ESOP”) provided that ESOP participants had the right, for a specified period of time, to require us to repurchase shares of our common stock that were distributed to them by the ESOP.  The shares of common stock held by the ESOP were reflected in our consolidated balance sheets as a line item called “ESOP-owned shares” appearing between total liabilities and shareholders’ equity.  As a result, the ESOP-owned shares were deducted from shareholders’ equity in our consolidated balance sheets.  This repurchase right terminated upon the listing of our common stock on the NASDAQ, which we sometimes refer to as the ESOP Repurchase Right Termination, whereupon our repurchase liability was extinguished and thereafter the ESOP-owned shares are included in shareholders’ equity.

 

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 and Tangible Common Equity to Tangible Assets.  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.

Forward Looking Statements

 

This press release contains forward-looking statements.  These forward-looking statements reflect South Plains’ current views with respect to, among other things, the completion of its acquisition of WTSB 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.  Additional information regarding these risks and uncertainties to which South Plains’ business and future financial performance are subject is contained in South Plains’ Prospectus filed with the U.S. Securities and Exchange Commission (“SEC”), dated May 8, 2019 (“Prospectus”), 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 that Prospectus and 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.

 

Source: South Plains Financial, Inc.

South Plains Financial, Inc.

Consolidated Financial Highlights - (Unaudited)

(Dollars in thousands, except share data)

South Plains Financial, Inc.

Average Balances and Yields - (Unaudited)

(Dollars in thousands)

(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)

(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)

South Plains Financial, Inc.

Consolidated Statements of Income

(Unaudited)

(Dollars in thousands)

South Plains Financial, Inc.

Loan Composition

(Unaudited)

(Dollars in thousands)

South Plains Financial, Inc.

Deposit Composition

(Unaudited)

(Dollars in thousands)

South Plains Financial, Inc.

Reconciliation of Non-GAAP Financial Measures

(Unaudited)

(Dollars in thousands)

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