UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 8-K

CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported):  October 20, 2022

South Plains Financial, Inc.
(Exact name of registrant as specified in its charter)

Texas
001-38895
75-2453320
(State or other jurisdiction of incorporation)
(Commission File Number)
(IRS Employer Identification No.)

5219 City Bank Parkway
Lubbock, Texas
 
79407
(Address of principal executive offices)
 
(Zip Code)

(806) 792-7101
(Registrant’s telephone number, including area code)

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

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)


Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))


Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

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

Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Common Stock, par value $1.00 per share
SPFI
The Nasdaq Stock Market LLC

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

Emerging growth company

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



Item 2.02
Results of Operations and Financial Condition.

On October 21, 2022, South Plains Financial, Inc. (the “Company”) issued a press release announcing its financial results for the third quarter ended September 30, 2022.  A copy of the Company’s press release covering such announcement and certain other matters is furnished as Exhibit 99.1 to this Current Report on Form 8-K.

Item 7.01
Regulation FD Disclosure.

On October 21, 2022, officers of the Company will have a conference call with respect to the Company’s financial results for the third quarter ended September 30, 2022. An earnings release slide presentation highlighting the Company’s financial results for the third quarter ended September 30, 2022 is furnished as Exhibit 99.2 to this Current Report on Form 8-K. This earnings release slide presentation will also be available on the Company’s website, www.spfi.bank, under the “News & Events” section.

In accordance with General Instruction B.2 of Form 8-K, the information in Items 2.02 and 7.01 of this Current Report on Form 8-K, including Exhibit 99.1 and Exhibit 99.2 hereto, shall not be deemed “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section.  The information in Items 2.02 and 7.01 of this Current Report on Form 8-K, including Exhibit 99.1 and Exhibit 99.2 hereto, shall not be incorporated by reference into any filing or other document pursuant to the Exchange Act or the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such filing or document.

Item 8.01
Other Events.

Settlement of Previously-Disclosed Litigation

As previously disclosed, in response to a Notice of Termination received from Kasasa, Ltd. f/k/a Moneyvue Financial, Inc., Bankvue Financial, Inc., and BancVue, Ltd. (“Kasasa”) purporting to terminate a Software License and Maintenance Agreement (the “Software License Agreement”), Trademark License Agreement (the “Trademark License Agreement”), and Addendum to Software License Agreement (“Addendum”) between the Company’s wholly-owned banking subsidiary City Bank (the “Bank”) and Kasasa, the Bank filed suit against Kasasa in Travis County, Texas, styled City Bank v. Kasasa, Ltd., Cause No. D-1-GN-20-003630, 53rd Judicial District, Travis County, Texas.

On or about September 23, 2022, the parties entered into a Settlement Agreement and Mutual Release (the “Settlement Agreement”), pursuant to which the parties agreed to the settlement and release of all claims related to the Software License Agreement, Trademark License Agreement, and Addendum, including all claims and counterclaims in the lawsuit.  Thereafter, the parties filed a joint motion to dismiss with prejudice and the court formally dismissed the case by order dated October 7, 2022.

Quarterly Dividend

On July 21, 2022, South Plains Financial, Inc. issued a press release announcing the declaration of a quarterly cash dividend of $0.12 per share on its outstanding common stock.  The dividend will be paid on November 15, 2022 to shareholders of record as of the close of business on October 31, 2022.  A copy of the press release is attached hereto as Exhibit 99.1 and is incorporated herein by reference.

Item 9.01
Financial Statements and Exhibits.


(d)
Exhibits.


99.1
Press release, dated October 21, 2022, announcing third quarter 2022 financial results of South Plains Financial, Inc.


99.2
Earnings release slide presentation, dated October 21, 2022.


99.3
Press release, dated October 20, 2022, announcing South Plains Financial, Inc. quarterly cash dividend.


104
Cover Page Interactive Data File (formatted as Inline XBRL).


SIGNATURES

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

 
SOUTH PLAINS FINANCIAL, INC.
   
Dated:  October 21, 2022
By:
/s/ Steven B. Crockett
   
Steven B. Crockett
   
Chief Financial Officer and Treasurer




Exhibit 99.1


South Plains Financial, Inc. Reports Third Quarter 2022 Financial Results

LUBBOCK, Texas, October 21, 2022 (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, 2022.

Third Quarter 2022 Highlights


Net income for the third quarter of 2022 was $15.5 million, compared to $15.9 million for the second quarter of 2022 and $15.2 million for the third quarter of 2021.

Diluted earnings per share for the third quarter of 2022 was $0.86, compared to $0.88 for the second quarter of 2022 and $0.82 for the third quarter of 2021.

Loans held for investment grew $109.9 million, or 17.0% annualized, during the third quarter of 2022 as compared to June 30, 2022.

Average cost of deposits for the third quarter of 2022 was 52 basis points, compared to 27 basis points for the second quarter of 2022 and 25 basis points for the third quarter of 2021.

The Company recorded a negative provision for loan losses of $782,000 in the third quarter of 2022, compared to no provisions for loan losses for the second quarter of 2022 and for the third quarter of 2021.

Nonperforming assets to total assets were 0.19% at September 30, 2022, compared to 0.20% at June 30, 2022 and 0.32% at September 30, 2021.

Return on average assets for the third quarter of 2022 was 1.53% annualized, compared to 1.60% annualized for the second quarter of 2022 and 1.61% annualized for the third quarter of 2021.

Tangible book value (non-GAAP) per share was $18.61 as of September 30, 2022, compared to $19.50 per share as of June 30, 2022 and $20.90 per share as of September 30, 2021.

The Company repurchased 366 thousand shares of common stock in the third quarter of 2022 as compared to 257 thousand shares in the second quarter of 2022.

Curtis Griffith, South Plains’ Chairman and Chief Executive Officer, commented, “Our business continued to perform well through the third quarter of 2022, highlighted by 17.0% annualized loan growth during the period driven by strength in both our community markets and major metropolitan markets of Dallas, Houston and El Paso. The expansion in our loan portfolio is contributing to strong underlying earnings growth, which has been masked by large recoveries, negative provisions for loan losses, and fair value increases in our mortgage servicing rights portfolio over the last three quarters. These items totaled $0.24 per share of income, net of tax, in the second quarter of 2022 and $0.10 per share of income, net of tax, in the third quarter of 2022. The investments that we have made to expand our lending platform and increase our presence in our metropolitan markets has provided an acceleration to our growth and is contributing to the building earnings power of the Company. Importantly, our mortgage banking business has reached a level where we believe it is no longer a headwind to our financial results, as we highlighted last quarter. While we are delivering improved loan growth, we are also maintaining our strict credit culture and underwriting standards, including not sacrificing credit quality for growth. Overall, our Company continues to perform well, and we believe this performance has not been reflected in our share price. As a result, we further accelerated the pace of our share repurchases in the third quarter having bought back 366 thousand shares as compared to 257 thousand shares and 106 thousand shares in the second and first quarter of 2022, respectively.”

Results of Operations, Quarter Ended September 30, 2022

Net Interest Income

Net interest income was $35.1 million for the third quarter of 2022, compared to $37.1 million for the second quarter of 2022 and $31.2 million for the third quarter of 2021. Net interest margin, calculated on a tax-equivalent basis, was 3.70% for the third quarter of 2022, compared to 4.02% for the second quarter of 2022 and 3.58% for the third quarter of 2021. The average yield on loans was 5.12% for the third quarter of 2022, compared to 5.57% for the second quarter of 2022 and 4.99% for the third quarter of 2021. The average cost of deposits was 52 basis points for the third quarter of 2022, which is 25 basis points higher than the second quarter of 2022 and 27 basis points higher than the third quarter of 2021.


Interest income was $41.1 million for the third quarter of 2022, compared to $40.8 million for the second quarter of 2022 and $34.4 million for the third quarter of 2021. Interest income increased $356 thousand in the third quarter of 2022 from the second quarter of 2022, which was comprised of an increase of $1.3 million in interest income from securities and other interest-earning assets, partially offset by a decrease of $1.0 million in loan interest income. The increase in interest income on securities and other interest-earning assets was primarily due to continued rising market interest rates. The decrease in loan interest income was primarily due to $4.4 million of interest income received related to four credits for the recovery of interest on previously charged-off credits, purchase discount principal recovery, and prepayment penalties during the second quarter of 2022, partially offset by an increase of $121.9 million in average loans outstanding, and the rising interest rate environment. Excluding the $4.4 million of large loan recoveries and prepayment penalties, the yield on loans was 4.88% during the second quarter of 2022, as compared to 5.12% in the third quarter of 2022, while net interest margin, on a tax-equivalent basis, was 3.54% during the second quarter of 2022, as compared to 3.70% for the third quarter of 2022. Interest income increased $6.7 million in the third quarter of 2022 compared to the third quarter of 2021. This increase was primarily due to an increase of average loans of $219.5 million, securities purchases, and rising market interest rates during the period.

Interest expense was $6.0 million for the third quarter of 2022, compared to $3.6 million for the second quarter of 2022 and $3.3 million for the third quarter of 2021. Interest expense increased $2.4 million compared to the second quarter of 2022 and $2.7 million compared to the third quarter of 2021 primarily as a result of rising interest rates on interest-bearing liabilities, with the increase being mainly comprised of interest expense on deposits.

Noninterest Income and Noninterest Expense

Noninterest income was $20.9 million for the third quarter of 2022, compared to $18.8 million for the second quarter of 2022 and $25.8 million for the third quarter of 2021. The increase from the second quarter of 2022 was primarily due to $2.1 million of income in legal settlements and the seasonal increase of $3.3 million in income from insurance activities, partially offset by a decrease of $2.4 million in mortgage banking activities revenue. This decrease in mortgage banking revenues was mainly the result of mortgage loan originations declining $55.1 million, or 26.6%, as the residential mortgage market continued to slow during the third quarter of 2022 as a result of rising market interest rates and seasonality. The decrease in noninterest income for the third quarter of 2022 as compared to the third quarter of 2021 was primarily due to a decline of $8.5 million in mortgage banking activities revenue as mortgage loan originations declined $222.2 million, or 59.4%, as high-volume refinance activity experienced during 2020 and 2021 has slowed as a result of rising market interest rates. This decrease was partially offset by the growth in income from insurance activities and the income from legal settlements noted previously.

Noninterest expense was $37.4 million for the third quarter of 2022, compared to $36.1 million for the second quarter of 2022 and $38.1 million for the third quarter of 2021. The increase from the second quarter of 2022 was primarily the result of an increase of $937 thousand in personnel expense due to the payment of an additional $1.8 million in commissions on insurance activities, partially offset by a decrease in mortgage commissions expense and related supporting personnel expense from the decline in mortgage loan originations and a decrease of $265 thousand in legal expenses. The decrease in noninterest expense for the third quarter of 2022 as compared to the third quarter of 2021 was primarily driven by lower mortgage commissions and other variable mortgage-based expenses due to the reduction in mortgage loan originations, partially offset by additional commercial lenders hired as part of a planned initiative, and an increase of $731 thousand in legal expenses.

Loan Portfolio and Composition

Loans held for investment were $2.69 billion as of September 30, 2022, compared to $2.58 billion as of June 30, 2022 and $2.43 billion as of September 30, 2021. The $109.9 million, or 17.0% annualized, increase during the third quarter of 2022 as compared to the second quarter of 2022 was primarily the result of organic net loan growth. This loan growth remained relationship-focused and occurred primarily in commercial real estate loans, residential mortgage loans, and consumer auto loans, partially offset by a decrease in hotel loans. As of September 30, 2022, loans held for investment increased $261.3 million, or 10.8% year over year, from September 30, 2021, attributable to strong organic loan growth.

Agricultural production loans were $94.1 million as of September 30, 2022, compared to $88.8 million as of June 30, 2022 and $119.3 million as of September 30, 2021. The typical seasonal funding of these agricultural production loans during the third quarter of 2022 was below normal based on drought conditions experienced across the State of Texas.

Deposits and Borrowings

Deposits totaled $3.46 billion as of September 30, 2022, compared to $3.43 billion as of June 30, 2022 and $3.21 billion as of September 30, 2021. Deposits increased by $34.7 million, or 1.0%, in the third quarter of 2022 from June 30, 2022. As of September 30, 2022, deposits increased $248.3 million, or 7.7% year over year, from September 30, 2021. Noninterest-bearing deposits were $1.26 billion as of September 30, 2022, compared to $1.20 billion as of June 30, 2022 and $1.05 billion as of September 30, 2021. Noninterest-bearing deposits represented 36.5% of total deposits as of September 30, 2022. The increase in deposits noted above is primarily a result of organic growth.


Asset Quality

The Company recorded a negative provision for loan losses in the third quarter of 2022 of $782 thousand, compared to no provisions for loan losses in the second quarter of 2022 or for the third quarter of 2021. There was a loan loss recovery of $822 thousand of a direct energy credit during the third quarter of 2022. Overall, the Company continued to experience improving credit metrics in the loan portfolio during the third quarter of 2022. These improvements were specifically noted in the hotel segment, which had a net reduction in outstanding principal of $19.6 million during the quarter. The loan loss recovery noted above and improving credit metrics, offset by the organic growth in the loan portfolio, resulted in the negative provision for the third quarter of 2022. Nevertheless, concerns regarding forecasted economic conditions continue to worsen due to the rising interest rate environment and persistent high inflation levels in the United States, and provisions for loan losses may be necessary in future periods.

The ratio of allowance for loan losses to loans held for investment was 1.47% as of September 30, 2022, compared to 1.54% as of June 30, 2022 and 1.76% as of September 30, 2021.

The ratio of nonperforming assets to total assets as of September 30, 2022 was 0.19%, compared to 0.20% as of June 30, 2022 and 0.32% at September 30, 2021. Annualized net charge-offs were (0.10)% for the third quarter of 2022, compared to (0.02)% for the second quarter of 2022 and 0.03% for the third quarter of 2021.

Capital

Book value per share decreased to $20.03 at September 30, 2022, compared to $20.91 at June 30, 2022. The decline was mainly driven by a $26.7 million dollar decrease in accumulated other comprehensive income (“AOCI”), partially offset by an increase of $13.4 million of net income after dividends paid. The decrease in AOCI was attributed to the decline in fair value of our available for sale securities and fair value hedges, net of tax, as a result of the rising interest rate environment.

Conference Call

South Plains will host a conference call to discuss its third quarter 2022 financial results today, October 21, 2022, at 11:00 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 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 13733502. The replay will be available until November 4, 2022.

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 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 (and any current or future variants thereof) on our customers, changes in market interest rates, the persistence of the current inflationary environment in the United States and our market areas, the uncertain impacts of quantitative tightening and current and future monetary policies of the Federal Reserve, 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, 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,
2022
   
June 30,
2022
   
March 31,
2022
   
December 31,
2021
   
September 30,
2021
 
Selected Income Statement Data:
                             
Interest income
 
$
41,108
   
$
40,752
   
$
33,080
   
$
34,600
   
$
34,438
 
Interest expense
   
6,006
     
3,647
     
3,133
     
3,151
     
3,260
 
Net interest income
   
35,102
     
37,105
     
29,947
     
31,449
     
31,178
 
Provision for loan losses
   
(782
)
   
-
     
(2,085
)
   
-
     
-
 
Noninterest income
   
20,937
     
18,835
     
23,697
     
22,928
     
25,791
 
Noninterest expense
   
37,401
     
36,056
     
37,924
     
36,132
     
38,063
 
Income tax expense
   
3,962
     
4,001
     
3,527
     
3,631
     
3,716
 
Net income
   
15,458
     
15,883
     
14,278
     
14,614
     
15,190
 
Per Share Data (Common Stock):
                                       
Net earnings, basic
   
0.89
     
0.91
     
0.81
     
0.82
     
0.85
 
Net earnings, diluted
   
0.86
     
0.88
     
0.78
     
0.79
     
0.82
 
Cash dividends declared and paid
   
0.12
     
0.11
     
0.11
     
0.09
     
0.09
 
Book value
   
20.03
     
20.91
     
21.90
     
22.94
     
22.34
 
Tangible book value (non-GAAP)
   
18.61
     
19.50
     
20.49
     
21.51
     
20.90
 
Weighted average shares outstanding, basic
   
17,286,531
     
17,490,706
     
17,716,136
     
17,777,542
     
17,931,174
 
Weighted average shares outstanding, dilutive
   
17,901,899
     
18,020,548
     
18,392,397
     
18,433,038
     
18,463,697
 
Shares outstanding at end of period
   
17,064,640
     
17,417,094
     
17,673,407
     
17,760,243
     
17,824,094
 
Selected Period End Balance Sheet Data:
                                       
Cash and cash equivalents
   
329,962
     
375,690
     
528,612
     
486,821
     
327,600
 
Investment securities
   
711,412
     
763,943
     
793,404
     
724,504
     
752,562
 
Total loans held for investment
   
2,690,366
     
2,580,493
     
2,453,631
     
2,437,577
     
2,429,041
 
Allowance for loan losses
   
39,657
     
39,785
     
39,649
     
42,098
     
42,768
 
Total assets
   
3,992,690
     
3,974,724
     
3,999,744
     
3,901,855
     
3,774,175
 
Interest-bearing deposits
   
2,198,464
     
2,230,105
     
2,318,942
     
2,269,855
     
2,157,981
 
Noninterest-bearing deposits
   
1,262,072
     
1,195,732
     
1,131,215
     
1,071,367
     
1,054,264
 
Total deposits
   
3,460,536
     
3,425,837
     
3,450,157
     
3,341,222
     
3,212,245
 
Borrowings
   
122,307
     
122,261
     
122,214
     
122,168
     
122,121
 
Total stockholders’ equity
   
341,799
     
364,222
     
387,068
     
407,427
     
398,276
 
Summary Performance Ratios:
                                       
Return on average assets
   
1.53
%
   
1.60
%
   
1.47
%
   
1.50
%
   
1.61
%
Return on average equity
   
17.37
%
   
16.96
%
   
14.58
%
   
14.39
%
   
15.24
%
Net interest margin (1)
   
3.70
%
   
4.02
%
   
3.33
%
   
3.50
%
   
3.58
%
Yield on loans
   
5.12
%
   
5.57
%
   
4.80
%
   
4.90
%
   
4.99
%
Cost of interest-bearing deposits
   
0.82
%
   
0.42
%
   
0.34
%
   
0.35
%
   
0.37
%
Efficiency ratio
   
66.38
%
   
64.11
%
   
70.30
%
   
66.07
%
   
66.45
%
Summary Credit Quality Data:
                                       
Nonperforming loans
   
7,733
     
7,889
     
12,141
     
10,598
     
10,895
 
Nonperforming loans to total loans held for investment
   
0.29
%
   
0.31
%
   
0.49
%
   
0.43
%
   
0.45
%
Other real estate owned
   
37
     
59
     
1,141
     
1,032
     
1,081
 
Nonperforming assets to total assets
   
0.19
%
   
0.20
%
   
0.33
%
   
0.30
%
   
0.32
%
Allowance for loan losses to total loans held for investment
   
1.47
%
   
1.54
%
   
1.62
%
   
1.73
%
   
1.76
%
Net charge-offs to average loans outstanding (annualized)
   
(0.10
)%
   
(0.02
)%
   
0.06
%
   
0.11
%
   
0.03
%


   
As of and for the quarter ended
 
   
September 30
2022
   
June 30,
2022
   
March 31,
2022
   
December 31,
2021
   
September 30,
2021
 
Capital Ratios:
                             
Total stockholders’ equity to total assets
   
8.56
%
   
9.16
%
   
9.68
%
   
10.44
%
   
10.55
%
Tangible common equity to tangible assets (non-GAAP)
   
8.00
%
   
8.60
%
   
9.11
%
   
9.85
%
   
9.94
%
Common equity tier 1 to risk-weighted assets
   
11.67
%
   
12.24
%
   
12.86
%
   
12.91
%
   
12.68
%
Tier 1 capital to average assets
   
10.95
%
   
10.93
%
   
10.78
%
   
10.77
%
   
10.83
%
Total capital to risk-weighted assets
   
16.46
%
   
17.32
%
   
18.22
%
   
18.40
%
   
18.21
%

(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, 2022
   
September 30, 2021
 
   
Average
Balance
   
Interest
Income
Expense
   
Yield
   
Average
Balance
   
Interest
Income
Expense
   
Yield
 
Assets
                                   
Loans, excluding PPP (1)
 
$
2,666,429
   
$
34,176
     
5.09
%
 
$
2,365,010
   
$
28,947
     
4.86
%
Loans - PPP
   
4,754
     
288
     
24.03
%
   
86,645
     
1,872
     
8.57
%
Debt securities - taxable
   
617,722
     
4,166
     
2.68
%
   
531,620
     
2,309
     
1.72
%
Debt securities - nontaxable
   
215,508
     
1,428
     
2.63
%
   
221,026
     
1,468
     
2.64
%
Other interest-bearing assets
   
293,636
     
1,351
     
1.83
%
   
284,369
     
151
     
0.21
%
                                                 
Total interest-earning assets
   
3,798,049
     
41,409
     
4.33
%
   
3,488,670
     
34,747
     
3.95
%
Noninterest-earning assets
   
208,135
                     
259,641
                 
                                                 
Total assets
 
$
4,006,184
                   
$
3,748,311
                 
                                                 
Liabilities & stockholders’ equity
                                               
NOW, Savings, MMA’s
 
$
1,873,786
     
3,514
     
0.74
%
 
$
1,820,677
     
1,005
     
0.22
%
Time deposits
   
330,133
     
1,023
     
1.23
%
   
330,161
     
1,025
     
1.23
%
Short-term borrowings
   
4
     
-
     
0.00
%
   
725
     
-
     
0.00
%
Notes payable & other long-term borrowings
   
-
     
-
     
0.00
%
   
-
     
-
     
0.00
%
Subordinated debt securities
   
75,914
     
1,012
     
5.29
%
   
75,728
     
1,013
     
5.31
%
Junior subordinated deferrable interest debentures
   
46,393
     
457
     
3.91
%
   
46,393
     
217
     
1.86
%
                                                 
Total interest-bearing liabilities
   
2,326,230
     
6,006
     
1.02
%
   
2,273,684
     
3,260
     
0.57
%
Demand deposits
   
1,248,804
                     
1,035,910
                 
Other liabilities
   
78,139
                     
43,171
                 
Stockholders’ equity
   
353,011
                     
395,546
                 
                                                 
Total liabilities & stockholders’ equity
 
$
4,006,184
                   
$
3,748,311
                 
                                                 
Net interest income
         
$
35,403
                   
$
31,487
         
Net interest margin (2)
                   
3.70
%
                   
3.58
%

(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.
PPP - Small Business Administration Paycheck Protection Program


South Plains Financial, Inc.
Average Balances and Yields - (Unaudited)
(Dollars in thousands)

   
For the Nine Months Ended
 
   
September 30, 2022
   
September 30, 2021
 
   
Average
Balance
   
Interest
Income
Expense
   
Yield
   
Average
Balance
   
Interest
Income
Expense
   
Yield
 
Assets
                                   
Loans, excluding PPP (1)
 
$
2,548,174
   
$
97,321
     
5.11
%
 
$
2,246,650
   
$
82,314
     
4.90
%
Loans - PPP
   
19,509
     
1,941
     
13.30
%
   
141,040
     
7,147
     
6.78
%
Debt securities - taxable
   
592,069
     
10,058
     
2.27
%
   
540,380
     
7,118
     
1.76
%
Debt securities - nontaxable
   
216,951
     
4,315
     
2.66
%
   
219,242
     
4,414
     
2.69
%
Other interest-bearing assets
   
363,659
     
2,213
     
0.81
%
   
328,412
     
373
     
0.15
%
                                                 
Total interest-earning assets
   
3,740,362
     
115,848
     
4.14
%
   
3,475,724
     
101,366
     
3.90
%
Noninterest-earning assets
   
236,296
                     
261,449
                 
                                                 
Total assets
 
$
3,976,658
                   
$
3,737,173
                 
                                                 
Liabilities & stockholders’ equity
                                               
NOW, Savings, MMA’s
 
$
1,905,000
     
5,782
     
0.41
%
 
$
1,834,113
     
3,259
     
0.24
%
Time deposits
   
334,686
     
2,962
     
1.18
%
   
326,862
     
3,114
     
1.27
%
Short-term borrowings
   
4
     
-
     
0.00
%
   
10,725
     
5
     
0.06
%
Notes payable & other long-term borrowings
   
-
     
-
     
0.00
%
   
26,188
     
38
     
0.19
%
Subordinated debt securities
   
75,852
     
3,037
     
5.35
%
   
75,682
     
3,044
     
5.38
%
Junior subordinated deferrable interest debentures
   
46,393
     
1,005
     
2.90
%
   
46,393
     
661
     
1.90
%
                                                 
Total interest-bearing liabilities
   
2,361,935
     
12,786
     
0.72
%
   
2,319,963
     
10,121
     
0.58
%
Demand deposits
   
1,174,783
                     
991,331
                 
Other liabilities
   
64,639
                     
41,996
                 
Stockholders’ equity
   
375,301
                     
383,883
                 
                                                 
Total liabilities & stockholders’ equity
 
$
3,976,658
                   
$
3,737,173
                 
                                                 
Net interest income
         
$
103,062
                   
$
91,245
         
Net interest margin (2)
                   
3.68
%
                   
3.51
%

(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.
PPP - Small Business Administration Paycheck Protection Program


South Plains Financial, Inc.
Consolidated Balance Sheets
(Unaudited)
(Dollars in thousands)

   
As of
 
   
September 30,
2022
   
December 31,
2021
 
             
Assets
           
Cash and due from banks
 
$
52,749
   
$
68,425
 
Interest-bearing deposits in banks
   
277,213
     
418,396
 
Federal funds sold
   
     
 
Investment securities
   
711,412
     
724,504
 
Loans held for sale
   
26,922
     
76,507
 
Loans held for investment
   
2,690,366
     
2,437,577
 
Less:  Allowance for loan losses
   
(39,657
)
   
(42,098
)
Net loans held for investment
   
2,650,709
     
2,395,479
 
Premises and equipment, net
   
56,532
     
57,699
 
Goodwill
   
19,508
     
19,508
 
Intangible assets
   
4,720
     
5,895
 
Mortgage servicing assets
   
28,424
     
19,700
 
Other assets
   
164,501
     
115,742
 
Total assets
 
$
3,992,690
   
$
3,901,855
 
                 
Liabilities and Stockholders’ Equity Liabilities
               
Noninterest bearing deposits
 
$
1,262,072
   
$
1,071,367
 
Interest-bearing deposits
   
2,198,464
     
2,269,855
 
Total deposits
   
3,460,536
     
3,341,222
 
Other borrowings
   
-
     
-
 
Subordinated debt securities
   
75,914
     
75,775
 
Trust preferred subordinated debentures
   
46,393
     
46,393
 
Other liabilities
   
68,048
     
31,038
 
Total liabilities
   
3,650,891
     
3,494,428
 
Stockholders’ Equity
               
Common stock
   
17,065
     
17,760
 
Additional paid-in capital
   
116,565
     
133,215
 
Retained earnings
   
281,679
     
242,750
 
Accumulated other comprehensive income (loss)
   
(73,510
)
   
13,702
 
Total stockholders’ equity
   
341,799
     
407,427
 
Total liabilities and stockholders’ equity
 
$
3,992,690
   
$
3,901,855
 


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

   
Three Months Ended
   
Nine Months Ended
 
   
September 30,
2022
   
September 30,
2021
   
September 30,
2022
   
September 30,
2021
 
                         
Interest income:
                       
Loans, including fees
 
$
34,463
   
$
30,818
   
$
99,260
   
$
89,458
 
Other
   
6,645
     
3,620
     
15,680
     
10,978
 
Total Interest income
   
41,108
     
34,438
     
114,940
     
100,436
 
Interest expense:
                               
Deposits
   
4,537
     
2,030
     
8,744
     
6,373
 
Subordinated debt securities
   
1,012
     
1,013
     
3,037
     
3,044
 
Trust preferred subordinated debentures
   
457
     
217
     
1,005
     
661
 
Other
   
-
     
-
     
-
     
43
 
Total Interest expense
   
6,006
     
3,260
     
12,786
     
10,121
 
Net interest income
   
35,102
     
31,178
     
102,154
     
90,315
 
Provision for loan losses
   
(782
)
   
-
     
(2,867
)
   
(1,918
)
Net interest income after provision for loan losses
   
35,884
     
31,178
     
105,021
     
92,233
 
Noninterest income:
                               
Service charges on deposits
   
1,764
     
1,851
     
5,149
     
5,023
 
Income from insurance activities
   
4,856
     
3,794
     
8,003
     
6,146
 
Mortgage banking activities
   
6,287
     
14,802
     
28,593
     
47,329
 
Bank card services and interchange fees
   
3,156
     
3,045
     
9,856
     
8,760
 
Other
   
4,874
     
2,299
     
11,868
     
7,283
 
Total Noninterest income
   
20,937
     
25,791
     
63,469
     
74,541
 
Noninterest expense:
                               
Salaries and employee benefits
   
22,927
     
24,116
     
67,620
     
71,811
 
Net occupancy expense
   
4,132
     
3,896
     
11,902
     
10,960
 
Professional services
   
2,523
     
1,388
     
7,795
     
4,483
 
Marketing and development
   
913
     
777
     
2,391
     
2,157
 
Other
   
6,906
     
7,886
     
21,673
     
22,487
 
Total noninterest expense
   
37,401
     
38,063
     
111,381
     
111,898
 
Income before income taxes
   
19,420
     
18,906
     
57,109
     
54,876
 
Income tax expense
   
3,962
     
3,716
     
11,490
     
10,876
 
Net income
 
$
15,458
   
$
15,190
   
$
45,619
   
$
44,000
 


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

   
As of
 
   
September 30,
2022
   
December 31,
2021
 
             
Loans:
           
Commercial Real Estate
 
$
869,231
   
$
755,444
 
Commercial - Specialized
   
368,204
     
378,725
 
Commercial - General
   
477,209
     
460,024
 
Consumer:
               
1-4 Family Residential
   
424,802
     
387,690
 
Auto Loans
   
309,110
     
240,719
 
Other Consumer
   
80,524
     
68,113
 
Construction
   
161,286
     
146,862
 
Total loans held for investment
 
$
2,690,366
   
$
2,437,577
 

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

   
As of
 
   
September 30,
2022
   
December 31,
2021
 
             
Deposits:
           
Noninterest-bearing demand deposits
 
$
1,262,072
   
$
1,071,367
 
NOW & other transaction accounts
   
353,871
     
395,322
 
MMDA & other savings
   
1,518,485
     
1,534,795
 
Time deposits
   
326,108
     
339,738
 
Total deposits
 
$
3,460,536
   
$
3,341,222
 


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

   
As of and for the quarter ended
 
   
September 30,
2022
   
June 30,
2022
   
March 31,
2022
   
December 31,
2021
   
September 30,
2021
 
Pre-tax, pre-provision income
                             
Net income
 
$
15,458
   
$
15,883
   
$
14,278
   
$
14,614
   
$
15,190
 
Income tax expense
   
3,962
     
4,001
     
3,527
     
3,631
     
3,716
 
Provision for loan losses
   
(782
)
   
-
     
(2,085
)
   
-
     
-
 
                                         
Pre-tax, pre-provision income
 
$
18,638
   
$
19,884
   
$
15,720
   
$
18,245
   
$
18,906
 


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

   
As of
 
   
September 30,
2022
   
June 30,
2022
   
March 31,
2022
   
December 31,
2021
   
September 30,
2021
 
Tangible common equity
                             
Total common stockholders’ equity
 
$
341,799
   
$
364,222
   
$
$ 387,068
   
$
$ 407,427
   
$
$ 398,276
 
Less:  goodwill and other intangibles
   
(24,228
)
   
(24,620
)
   
(25,011
)
   
(25,403
)
   
(25,804
)
                                         
Tangible common equity
 
$
317,571
   
$
339,602
   
$
$ 362,057
   
$
$ 382,024
   
$
$ 372,472
 
                                         
Tangible assets
                                       
Total assets
 
$
3,992,690
   
$
3,974,724
   
$
$ 3,999,744
   
$
$ 3,901,855
   
$
$ 3,774,175
 
Less:  goodwill and other intangibles
   
(24,228
)
   
(24,620
)
   
(25,011
)
   
(25,403
)
   
(25,804
)
                                         
Tangible assets
 
$
3,968,462
   
$
3,950,104
   
$
$ 3,974,733
   
$
$ 3,876,452
   
$
$ 3,748,371
 
                                         
Shares outstanding
   
17,064,640
     
17,417,094
     
17,673,407
     
17,760,243
     
17,824,094
 
                                         
Total stockholders’ equity to total assets
   
8.56
%
   
9.16
%
   
9.68
%
   
10.44
%
   
10.55
%
Tangible common equity to tangible assets
   
8.00
%
   
8.60
%
   
9.11
%
   
9.85
%
   
9.94
%
Book value per share
 
$
20.03
   
$