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):  July 25, 2023

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 July 25, 2023, South Plains Financial, Inc. (the “Company”) issued a press release announcing its financial results for the second quarter ended June 30, 2023.  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 July 25, 2023, officers of the Company will have a conference call with respect to the Company’s financial results for the second quarter ended June 30, 2023. An earnings release slide presentation highlighting the Company’s financial results for the second quarter ended June 30, 2023 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 furnished herewith, 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 furnished herewith, 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 9.01
Financial Statements and Exhibits.

  (d)
Exhibits.

 
Press release, dated July 25, 2023, announcing second quarter 2023 financial results of South Plains Financial, Inc.
     
 
Earnings release slide presentation, dated July 25, 2023.
     
 
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:  July 25, 2023
By:
/s/ Steven B. Crockett
   
Steven B. Crockett
   
Chief Financial Officer and Treasurer




Exhibit 99.1


South Plains Financial, Inc. Reports Second Quarter 2023 Financial Results

LUBBOCK, Texas, July 25, 2023 (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 June 30, 2023.

Second Quarter 2023 Highlights


Net income for the second quarter of 2023 was $29.7 million, compared to $9.2 million for the first quarter of 2023 and $15.9 million for the second quarter of 2022.

Diluted earnings per share for the second quarter of 2023 was $1.71, compared to $0.53 for the first quarter of 2023 and $0.88 for the second quarter of 2022.

Excluding one-time gains net of charges related to the sale of Windmark ($22.9 million net of tax) and the loss from repositioning of the securities portfolio ($2.7 million net of tax), second quarter 2023 diluted earnings per share was $0.55

Deposits grew $66.5 million, or 1.9%, to $3.57 billion during the second quarter of 2023, as compared to March 31, 2023; an estimated 16% of deposits at June 30, 2023 were uninsured or uncollateralized.

Average cost of deposits for the second quarter of 2023 was 169 basis points, compared to 136 basis points for the first quarter of 2023 and 27 basis points for the second quarter of 2022.

Net interest margin, calculated on a tax-equivalent basis, was 3.65% for the second quarter of 2023, compared to 3.75% for the first quarter of 2023.

Loans held for investment grew $190.4 million, or 6.8%, during the second quarter of 2023, compared to March 31, 2023.

Provision for credit losses was $3.7 million in the second quarter of 2023, compared to $1.0 million in the first quarter of 2023 and no provision for the second quarter of 2022.

Nonperforming assets to total assets were 0.51% at June 30, 2023, compared to 0.19% at March 31, 2023 and 0.20% at June 30, 2022.

Return on average assets for the second quarter of 2023 was 2.97% annualized, compared to 0.95% annualized for the first quarter of 2023 and 1.60% annualized for the second quarter of 2022.

Tangible book value (non-GAAP) per share was $21.82 as of June 30, 2023, compared to $20.19 as of March 31, 2023 and $19.50 as of June 30, 2022.

Liquidity - available borrowing capacity of $1.82 billion through the Federal Home Loan Bank of Dallas, the Federal Reserve’s Discount Window, and access to the Federal Reserve’s Bank Term Funding Program at June 30, 2023.

Capital - total risk-based capital ratio – 16.75%, Tier 1 risk-based capital ratio – 13.37%, Common Equity Tier 1 risk-based capital ratio – 12.11%, and Tier 1 leverage ratio - 11.68%, all at June 30, 2023 and significantly exceeding the minimum regulatory levels necessary to be deemed “well-capitalized.”

As previously announced, on April 1, 2023, the sale of City Bank’s formerly wholly owned subsidiary, Windmark Insurance Agency, Inc. (“Windmark”) to Alliant Insurance Services in an all cash transaction was completed.

Curtis Griffith, South Plains’ Chairman and Chief Executive Officer, commented, “Our second quarter results demonstrate the strength of the Bank and the resiliency of our markets as we maintained core deposits while our non-interest bearing deposits remained relatively steady, which is quite an accomplishment in this challenging environment. Additionally, we were able to maintain our net interest margin at March’s level of 3.65% through the second quarter as higher loan yields are offsetting the rise in our cost of funds. We have also maintained a strong liquidity and capital position which was further bolstered by the sale of Windmark in April. Given the large one-time gain that was recognized, we made the strategic decision to sell $56 million of securities having recorded a realized loss of $3.4 million. We believe this was a tax efficient transaction which will boost our earnings in future quarters as we have reinvested the proceeds into higher yielding loans through the quarter. While we continue to deliver strong results, we believe our shares are trading below intrinsic value. As a result, our board of directors authorized a $15 million stock repurchase program in May and we subsequently bought back approximately 113,000 shares during the remainder of the quarter.”

Results of Operations, Quarter Ended June 30, 2023

Net Interest Income

Net interest income was $34.6 million for the second quarter of 2023, compared to $34.3 million for the first quarter of 2023 and $37.1 million for the second quarter of 2022. Net interest margin, calculated on a tax-equivalent basis, was 3.65% for the second quarter of 2023, compared to 3.75% for the first quarter of 2023 and 4.02% for the second quarter of 2022. The average yield on loans was 5.94% for the second quarter of 2023, compared to 5.78% for the first quarter of 2023 and 5.57% for the second quarter of 2022. The average cost of deposits was 169 basis points for the second quarter of 2023, which is 33 basis points higher than the first quarter of 2023 and 142 basis points higher than the second quarter of 2022.


Interest income was $50.8 million for the second quarter of 2023, compared to $47.4 million for the first quarter of 2023 and $40.8 million for the second quarter of 2022. Interest income increased $3.4 million in the second quarter of 2023 from the first quarter of 2023, which was mainly comprised of an increase of $3.3 million in loan interest income. The growth in loan interest income was primarily due to an increase of $115.2 million in average loans outstanding and the rising short-term interest rate environment, as the yield on loans rose 16 basis points. Interest income increased $10.1 million in the second quarter of 2023 compared to the second quarter of 2022. This increase was primarily due to an increase of average loans of $344.8 million and higher market interest rates during the period, partially offset by $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.

Interest expense was $16.2 million for the second quarter of 2023, compared to $13.1 million for the first quarter of 2023 and $3.6 million for the second quarter of 2022. Interest expense increased $3.1 million compared to the first quarter of 2023 and $12.6 million compared to the second quarter of 2022, primarily as a result of significantly rising short-term interest rates on interest-bearing liabilities, with the increase being mainly comprised of interest expense on deposits. Additionally, interest-bearing deposits have grown during both of the period comparisons.

Noninterest Income and Noninterest Expense

Noninterest income was $47.1 million for the second quarter of 2023, compared to $10.7 million for the first quarter of 2023 and $18.8 million for the second quarter of 2022. The increase from the first quarter of 2023 was primarily due to the $33.5 million gain on sale of Windmark and an increase of $3.0 million in mortgage banking activities revenue, partially offset by a reduction of $1.4 million in income from insurance activities due to the sale of Windmark. The increase in mortgage banking activities revenues was mainly the result of a $400 thousand fair value write-up of the mortgage servicing rights portfolio compared to the write-down of $2.0 million in the first quarter of 2023 and an increase of $45.9 million in mortgage loans originated for sale. Additionally, bank card services and interchange revenue increased $1.1 million for the second quarter of 2023 compared to the first quarter of 2022 mainly as a result of continued growth in customer card usage and incentives received during the period. The increase in noninterest income for the second quarter of 2023 as compared to the second quarter of 2022 was primarily due to the $33.5 million gain on sale of Windmark noted above, partially offset by a reduction of $1.5 million in income from insurance activities due to the sale of Windmark and a decrease of $3.4 million in mortgage banking revenues as originations of mortgage loans held for sale declined $74.5 million.

Noninterest expense was $40.5 million for the second quarter of 2023, compared to $32.4 million for the first quarter of 2023 and $36.1 million for the second quarter of 2022. The $8.1 million increase from the first quarter of 2023 was largely the result of $4.5 million in personnel and transaction expenses as part of the Windmark sale plus related incentive compensation and a $3.4 million loss on the sale of securities. The increase in noninterest expense for the second quarter of 2023 as compared to the second quarter of 2022 was primarily driven by the $4.5 million in Windmark transaction and related personnel expenses, the $3.4 million loss on sale of securities, partially offset by a reduction of $1.1 million in mortgage personnel costs due to the decline in mortgage loan originations and a decrease of $759 thousand in legal expenses incurred largely as a result of a vendor dispute, which was resolved and accounted for by the end of 2022.

Loan Portfolio and Composition

Loans held for investment were $2.98 billion as of June 30, 2023, compared to $2.79 billion as of March 31, 2023 and $2.58 billion as of June 30, 2022. The $190.4 million, or 6.8%, increase during the second quarter of 2023 as compared to the first quarter of 2023 remained relationship-focused and occurred primarily in commercial real estate loans, residential mortgage loans, seasonal agricultural loans, and energy loans. As of June 30, 2023, loans held for investment increased $398.6 million, or 15.4% year over year, from June 30, 2022, primarily attributable to strong organic loan growth.

Deposits and Borrowings

Deposits totaled $3.57 billion as of June 30, 2023, compared to $3.51 billion as of March 31, 2023 and $3.43 billion as of June 30, 2022. Deposits increased by $66.5 million, or 1.9%, in the second quarter of 2023 from March 31, 2023. As of June 30, 2023, deposits increased $148.7 million, or 4.3% year over year, from June 30, 2022. Noninterest-bearing deposits were $1.10 billion as of June 30, 2023, compared to $1.11 billion as of March 31, 2023 and $1.20 billion as of June 30, 2022. Noninterest-bearing deposits represented 30.8% of total deposits as of June 30, 2023. The quarterly growth in deposits was mainly the result of an increase of $81 million in brokered deposits, partially offset by a reduction of $67 million in our public fund deposits. The year-over-year increase in deposits is primarily a result of the noted growth in the second quarter of 2023 and the overall focus on liquidity.


Asset Quality

The Company recorded a provision for credit losses in the second quarter of 2023 of $3.7 million, compared to $1.0 million in the first quarter of 2023 and no provision in the second quarter of 2022. The provision during the second quarter of 2023 was largely attributable to growth in loans held for investment and an increase of $1.3 million in specific reserves. The change in specific reserves was primarily related to a $13.3 million previously-classified relationship that was placed on nonaccrual in May 2023. Classified loans declined $3.5 million during the second quarter of 2023 to $67.4 from $70.9 million at March 31, 2023.

The ratio of allowance for credit losses to loans held for investment was 1.45% as of June 30, 2023, compared to 1.42% as of March 31, 2023 and 1.54% as of June 30, 2022.

The ratio of nonperforming assets to total assets as of June 30, 2023 was 0.51%, compared to 0.19% as of March 31, 2023 and 0.20% at June 30, 2022. Annualized net charge-offs (recoveries) were 0.05% for the second quarter of 2023, compared to 0.09% for the first quarter of 2023 and (0.02)% for the second quarter of 2022. The increase in nonperforming assets was a result of the $13.3 million relationship noted above.

Capital

Book value per share increased to $23.13 at June 30, 2023, compared to $21.57 at March 31, 2023. The growth was driven by an increase of $27.5 million of net income after dividends paid, partially offset by $2.5 million in share repurchases.

Conference Call

South Plains will host a conference call to discuss its second quarter 2023 financial results today, July 25, 2023, 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 13739671. The replay will be available until August 8, 2023.

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 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 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 and South Plains’ financial performance. 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, potential recession in the United States and our market areas, the impacts related to or resulting from recent bank failures and any continuation of the recent uncertainty in the banking industry, including the associated impact to the Company and other financial institutions of any regulatory changes or other mitigation efforts taken by government agencies in response thereto, increased competition for deposits and related changes in deposit customer behavior, changes in market interest rates, the persistence of the current inflationary environment in the United States and our market areas, the uncertain impacts of ongoing quantitative tightening and current and future monetary policies of the Board of Governors of the Federal Reserve System, the effects of declines in housing prices in the United States and our market areas, increases in unemployment rates in the United States and our market areas, declines in commercial real estate prices, uncertainty regarding United States fiscal debt and budget matters, severe weather, natural disasters, acts of war or terrorism or other external events, 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
 
   
June 30,
2023
   
March 31,
2023
   
December 31,
2022
   
September 30,
2022
   
June 30,
2022
 
Selected Income Statement Data:
                             
Interest income
 
$
50,821
   
$
47,448
   
$
46,228
   
$
41,108
   
$
40,752
 
Interest expense
   
16,240
     
13,133
     
9,906
     
6,006
     
3,647
 
Net interest income
   
34,581
     
34,315
     
36,322
     
35,102
     
37,105
 
Provision for credit losses
   
3,700
     
1,010
     
248
     
(782
)
   
-
 
Noninterest income
   
47,112
     
10,691
     
12,676
     
20,937
     
18,835
 
Noninterest expense
   
40,499
     
32,361
     
32,708
     
37,401
     
36,056
 
Income tax expense
   
7,811
     
2,391
     
3,421
     
3,962
     
4,001
 
Net income
   
29,683
     
9,244
     
12,621
     
15,458
     
15,883
 
Per Share Data (Common Stock):
                                       
Net earnings, basic
   
1.74
     
0.54
     
0.74
     
0.89
     
0.91
 
Net earnings, diluted
   
1.71
     
0.53
     
0.71
     
0.86
     
0.88
 
Cash dividends declared and paid
   
0.13
     
0.13
     
0.12
     
0.12
     
0.11
 
Book value
   
23.13
     
21.57
     
20.97
     
20.03
     
20.91
 
Tangible book value (non-GAAP)
   
21.82
     
20.19
     
19.57
     
18.61
     
19.50
 
Weighted average shares outstanding, basic
   
17,048,432
     
17,046,713
     
17,007,914
     
17,286,531
     
17,490,706
 
Weighted average shares outstanding, dilutive
   
17,386,515
     
17,560,756
     
17,751,674
     
17,901,899
     
18,020,548
 
Shares outstanding at end of period
   
16,952,072
     
17,062,572
     
17,027,197
     
17,064,640
     
17,417,094
 
Selected Period End Balance Sheet Data:
                                       
Cash and cash equivalents
   
295,581
     
328,002
     
234,883
     
329,962
     
375,690
 
Investment securities
   
628,093
     
698,579
     
701,711
     
711,412
     
763,943
 
Total loans held for investment
   
2,979,063
     
2,788,640
     
2,748,081
     
2,690,366
     
2,580,493
 
Allowance for credit losses
   
43,137
     
39,560
     
39,288
     
39,657
     
39,785
 
Total assets
   
4,150,129
     
4,058,049
     
3,944,063
     
3,992,690
     
3,974,724
 
Interest-bearing deposits
   
2,473,755
     
2,397,115
     
2,255,942
     
2,198,464
     
2,230,105
 
Noninterest-bearing deposits
   
1,100,767
     
1,110,939
     
1,150,488
     
1,262,072
     
1,195,732
 
Total deposits
   
3,574,522
     
3,508,054
     
3,406,430
     
3,460,536
     
3,425,837
 
Borrowings
   
122,447
     
122,400
     
122,354
     
122,307
     
122,261
 
Total stockholders’ equity
   
392,029
     
367,964
     
357,014
     
341,799
     
364,222
 
Summary Performance Ratios:
                                       
Return on average assets (annualized)
   
2.97
%
   
0.95
%
   
1.27
%
   
1.53
%
   
1.60
%
Return on average equity (annualized)
   
31.33
%
   
10.34
%
   
14.33
%
   
17.37
%
   
16.96
%
Net interest margin (1)
   
3.65
%
   
3.75
%
   
3.88
%
   
3.70
%
   
4.02
%
Yield on loans
   
5.94
%
   
5.78
%
   
5.59
%
   
5.12
%
   
5.57
%
Cost of interest-bearing deposits
   
2.45
%
   
2.03
%
   
1.52
%
   
0.82
%
   
0.42
%
Efficiency ratio
   
49.39
%
   
71.42
%
   
66.35
%
   
66.38
%
   
64.11
%
Summary Credit Quality Data:
                                       
Nonperforming loans
   
21,039
     
7,579
     
7,790
     
7,834
     
7,889
 
Nonperforming loans to total loans held for investment
   
0.71
%
   
0.27
%
   
0.28
%
   
0.29
%
   
0.31
%
Other real estate owned
   
249
     
202
     
169
     
37
     
59
 
Nonperforming assets to total assets
   
0.51
%
   
0.19
%
   
0.20
%
   
0.20
%
   
0.20
%
Allowance for credit losses to total loans held for investment
   
1.45
%
   
1.42
%
   
1.43
%
   
1.47
%
   
1.54
%
Net charge-offs (recoveries) to average loans outstanding (annualized)
   
0.05
%
   
0.09
%
   
0.09
%
   
(0.10
)%
   
(0.02
)%


   
As of and for the quarter ended
 
   
June 30
2023
   
March 31,
2023
   
December 31,
2022
   
September 30,
 2022
   
June 30,
2022
 
Capital Ratios:
                             
Total stockholders’ equity to total assets
   
9.45
%
   
9.07
%
   
9.05
%
   
8.56
%
   
9.16
%
Tangible common equity to tangible assets (non-GAAP)
   
8.96
%
   
8.54
%
   
8.50
%
   
8.00
%
   
8.60
%
Common equity tier 1 to risk-weighted assets
   
12.11
%
   
11.92
%
   
11.81
%
   
11.67
%
   
12.24
%
Tier 1 capital to average assets
   
11.68
%
   
11.22
%
   
11.03
%
   
10.95
%
   
10.93
%
Total capital to risk-weighted assets
   
16.75
%
   
16.70
%
   
16.58
%
   
16.46
%
   
17.32
%

(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
 
   
June 30, 2023
   
June 30, 2022
 
             
   
Average Balance
   
Interest
   
Yield/Rate
   
Average
Balance
   
Interest
   
Yield/Rate
 
Assets
                                   
Loans
 
$
2,894,087
   
$
42,872
     
5.94
%
 
$
2,549,264
   
$
35,420
     
5.57
%
Debt securities - taxable
   
575,983
     
5,365
     
3.74
%
   
637,814
     
3,538
     
2.22
%
Debt securities - nontaxable
   
210,709
     
1,403
     
2.67
%
   
217,023
     
1,439
     
2.66
%
Other interest-bearing assets
   
149,996
     
1,484
     
3.97
%
   
329,869
     
658
     
0.80
%
                                                 
Total interest-earning assets
   
3,830,775
     
51,124
     
5.35
%
   
3,733,970
     
41,055
     
4.41
%
Noninterest-earning assets
   
182,752
                     
238,575
                 
                                                 
Total assets
 
$
4,013,527
                   
$
3,972,545
                 
                                                 
Liabilities & stockholders’ equity
                                               
NOW, Savings, MMDA’s
 
$
2,059,182
     
12,484
     
2.43
%
 
$
1,903,452
     
1,357
     
0.29
%
Time deposits
   
299,358
     
1,949
     
2.61
%
   
334,819
     
960
     
1.15
%
Short-term borrowings
   
325
     
5
     
6.17
%
   
4
     
-
     
0.00
%
Notes payable & other long-term borrowings
   
-
     
-
     
0.00
%
   
-
     
-
     
0.00
%
Subordinated debt
   
76,031
     
1,013
     
5.34
%
   
75,845
     
1,013
     
5.36
%
Junior subordinated deferrable interest debentures
   
46,393
     
789
     
6.82
%
   
46,393
     
317
     
2.74
%
                                                 
Total interest-bearing liabilities
   
2,481,289
     
16,240
     
2.63
%
   
2,360,513
     
3,647
     
0.62
%
Demand deposits
   
1,075,514
                     
1,171,454
                 
Other liabilities
   
76,727
                     
64,933
                 
Stockholders’ equity
   
379,997
                     
375,645
                 
                                                 
Total liabilities & stockholders’ equity
 
$
4,013,527
                   
$
3,972,545
                 
                                                 
Net interest income
         
$
34,884
                   
$
37,408
         
Net interest margin (2)
                   
3.65
%
                   
4.02
%

(1)
Average loan balances include nonaccrual loans and loans held for sale.
(2)
Net interest margin is calculated as the annualized 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 Six Months Ended
 
   
June 30, 2023
   
June 30, 2022
 
                                     
   
Average
Balance
   
Interest
   
Yield/Rate
   
Average
Balance
   
Interest
   
Yield/Rate
 
Assets
                                   
Loans
 
$
2,836,482
   
$
82,474
     
5.86
%
 
$
2,515,934
   
$
64,799
     
5.19
%
Debt securities - taxable
   
580,705
     
10,605
     
3.68
%
   
579,243
     
5,892
     
2.05
%
Debt securities - nontaxable
   
211,950
     
2,815
     
2.68
%
   
217,672
     
2,887
     
2.67
%
Other interest-bearing assets
   
155,976
     
2,979
     
3.85
%
   
398,670
     
862
     
0.44
%
                                                 
Total interest-earning assets
   
3,785,113
     
98,873
     
5.27
%
   
3,711,519
     
74,440
     
4.04
%
Noninterest-earning assets
   
186,114
                     
250,376
                 
                                                 
Total assets
 
$
3,971,227
                   
$
3,961,895
                 
                                                 
Liabilities & stockholders’ equity
                                               
NOW, Savings, MMDA’s
 
$
2,023,869
     
22,468
     
2.24
%
 
$
1,920,609
     
2,268
     
0.24
%
Time deposits
   
291,677
     
3,335
     
2.31
%
   
336,962
     
1,939
     
1.16
%
Short-term borrowings
   
165
     
5
     
6.11
%
   
4
     
-
     
0.00
%
Notes payable & other long-term borrowings
   
-
     
-
     
0.00
%
   
-
     
-
     
0.00
%
Subordinated debt
   
76,008
     
2,025
     
5.37
%
   
75,822
     
2,025
     
5.39
%
Junior subordinated deferrable interest debentures
   
46,393
     
1,540
     
6.69
%
   
46,393
     
548
     
2.38
%
                                                 
Total interest-bearing liabilities
   
2,438,112
     
29,373
     
2.43
%
   
2,379,790
     
6,780
     
0.57
%
Demand deposits
   
1,092,429
                     
1,137,771
                 
Other liabilities
   
69,443
                     
57,887
                 
Stockholders’ equity
   
371,243
                     
386,447
                 
                                                 
Total liabilities & stockholders’ equity
 
$
3,971,227
                   
$
3,961,895
                 
                                                 
Net interest income
         
$
69,500
                   
$
67,660
         
Net interest margin (2)
                   
3.70
%
                   
3.68
%

(1)
Average loan balances include nonaccrual loans and loans held for sale.
(2)
Net interest margin is calculated as the annualized net interest 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
 
   
June 30,
2023
   
December 31,
2022
 
             
Assets
           
Cash and due from banks
 
$
64,497
   
$
61,613
 
Interest-bearing deposits in banks
   
231,084
     
173,270
 
Securities available for sale
   
628,093
     
701,711
 
Loans held for sale
   
22,158
     
30,403
 
Loans held for investment
   
2,979,063
     
2,748,081
 
Less:  Allowance for credit losses
   
(43,137
)
   
(39,288
)
Net loans held for investment
   
2,935,926
     
2,708,793
 
Premises and equipment, net
   
56,416
     
56,337
 
Goodwill
   
19,315
     
19,508
 
Intangible assets
   
2,834
     
4,349
 
Mortgage servicing assets
   
26,658
     
27,474
 
Other assets
   
163,148
     
160,605
 
Total assets
 
$
4,150,129
   
$
3,944,063
 
                 
Liabilities and Stockholders’ Equity
               
Noninterest-bearing deposits
 
$
1,100,767
   
$
1,150,488
 
Interest-bearing deposits
   
2,473,755
     
2,255,942
 
Total deposits
   
3,574,522
     
3,406,430
 
Subordinated debt
   
76,054
     
75,961
 
Junior subordinated deferrable interest debentures
   
46,393
     
46,393
 
Other liabilities
   
61,131
     
58,265
 
Total liabilities
   
3,758,100
     
3,587,049
 
Stockholders’ Equity
               
Common stock
   
16,952
     
17,027
 
Additional paid-in capital
   
111,133
     
112,834
 
Retained earnings
   
325,772
     
292,261
 
Accumulated other comprehensive income (loss)
   
(61,828
)
   
(65,108
)
Total stockholders’ equity
   
392,029
     
357,014
 
Total liabilities and stockholders’ equity
 
$
4,150,129
   
$
3,944,063
 


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

   
Three Months Ended
   
Six Months Ended
 
   
June 30,
2023
   
June 30,
2022
   
June 30,
2023
   
June 30,
2022
 
                         
Interest income:
                       
Loans, including fees
 
$
42,864
   
$
35,419
   
$
82,461
   
$
64,797
 
Other
   
7,957
     
5,333
     
15,808
     
9,035
 
Total interest income
   
50,821
     
40,752
     
98,269
     
73,832
 
Interest expense:
                               
Deposits
   
14,433
     
2,317
     
25,803
     
4,207
 
Subordinated debt
   
1,013
     
1,013
     
2,025
     
2,025
 
Junior subordinated deferrable interest debentures
   
789
     
317
     
1,540
     
548
 
Other
   
5
     
-
     
5
     
-
 
Total interest expense
   
16,240
     
3,647
     
29,373
     
6,780
 
Net interest income
   
34,581
     
37,105
     
68,896
     
67,052
 
Provision for credit losses
   
3,700
     
-
     
4,710
     
(2,085
)
Net interest income after provision for credit losses
   
30,881
     
37,105
     
64,186
     
69,137
 
Noninterest income:
                               
Service charges on deposits
   
1,745
     
1,612
     
3,446
     
3,385
 
Income from insurance activities
   
37
     
1,577
     
1,448
     
3,147
 
Mortgage banking activities
   
5,258
     
8,669
     
7,544
     
22,306
 
Bank card services and interchange fees
   
4,043
     
3,478
     
6,999
     
6,700
 
Gain on sale of subsidiary
   
33,488
     
     
33,488
     
 
Other
   
2,541
     
3,499
     
4,878
     
6,994
 
Total noninterest income
   
47,112
     
18,835
     
57,803
     
42,532
 
Noninterest expense:
                               
Salaries and employee benefits
   
23,437
     
21,990
     
42,691
     
44,693
 
Net occupancy expense
   
4,303
     
4,033
     
8,135
     
7,770
 
Professional services
   
1,716
     
2,647
     
3,364
     
5,272
 
Marketing and development
   
784
     
758
     
1,720
     
1,478
 
Other
   
10,259
     
6,628
     
16,950
     
14,767
 
Total noninterest expense
   
40,499
     
36,056
     
72,860
     
73,980
 
Income before income taxes
   
37,494
     
19,884
     
49,129
     
37,689
 
Income tax expense
   
7,811
     
4,001
     
10,202
     
7,528
 
Net income
 
$
29,683
   
$
15,883
   
$
38,927
   
$
30,161
 


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

   
As of
 
   
June 30,
2023
   
December 31,
2022
 
             
Loans:
           
Commercial Real Estate
 
$
1,006,909
   
$
919,358
 
Commercial - Specialized
   
355,252
     
327,513
 
Commercial - General
   
551,096
     
484,783
 
Consumer:
               
1-4 Family Residential
   
522,472
     
460,124
 
Auto Loans
   
318,126
     
321,476
 
Other Consumer
   
79,795
     
81,308
 
Construction
   
145,413
     
153,519
 
Total loans held for investment
 
$
2,979,063
   
$
2,748,081
 

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

   
As of
 
   
June 30,
2023
   
December 31,
2022
 
             
Deposits:
           
Noninterest-bearing deposits
 
$
1,100,767
   
$
1,150,488
 
NOW & other transaction accounts
   
400,779
     
350,910
 
MMDA & other savings
   
1,751,029
     
1,618,833
 
Time deposits
   
321,947
     
286,199
 
Total deposits
 
$
3,574,522
   
$
3,406,430
 


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

   
For the quarter ended
 
   
June 30,
2023
   
March 31,
2023
   
December 31,
2022
   
September 30,
2022
   
June 30,
2022
 
Pre-tax, pre-provision income
                             
Net income
 
$
29,683
   
$
9,244
   
$
12,621
   
$
15,458
   
$
15,883
 
Income tax expense
   
7,811
     
2,391
     
3,421
     
3,962
     
4,001
 
Provision for credit losses
   
3,700
     
1,010
     
248
     
-782
     
 
                                         
Pre-tax, pre-provision income
 
$
41,194
   
$
12,645
   
$
16,290
   
$
18,638
   
$
19,884
 

Efficiency Ratio
                             
Noninterest expense
 
$
40,499
   
$
32,361
   
$
32,708
   
$
37,401
   
$
36,056
 
                                         
Net interest income
   
34,581
     
34,315
     
36,322
     
35,102
     
37,105
 
Tax equivalent yield adjustment
   
303
     
302
     
299
     
301
     
303
 
Noninterest income
   
47,112
     
10,691
     
12,676
     
20,937
     
18,835
 
Total income
   
81,996
     
45,308
     
49,297
     
56,340
     
56,243
 
                                         
Efficiency ratio
   
49.39
%
   
71.42
%
   
66.35
%
   
66.38
%
   
64.11
%
                                         
Noninterest expense
 
$
40,499
   
$
32,361
   
$
32,708
   
$
37,401
   
$
36,056
 
Less:  Windmark transaction and related expenses
   
(4,532
)
   
     
     
     
 
Less:  net loss on sale of securities
   
(3,409
)
   
     
     
     
 
Adjusted noninterest expense
   
32,558
     
32,361
     
32,708
     
37,401
     
36,056
 
                                         
Total income
   
81,996
     
45,308
     
49,297
     
56,340
     
56,243
 
Less:  gain on sale of Windmark
   
(33,488
)
   
     
     
     
 
Adjusted total income
   
48,508
     
45,308
     
49,297
     
56,340
     
56,243
 
                                         
Adjusted efficiency ratio
   
67.12
%
   
71.42
%
   
66.35
%
   
66.38
%
   
64.11
%

   
As of
 
   
June 30,
2023
   
March 31,
2023
   
December 31,
2022
   
September 30,
2022
   
June 30,
2022
 
Tangible common equity
                             
Total common stockholders’ equity
 
$
392,029
   
$
367,964
   
$
$ 357,014
   
$
$ 341,799
   
$
$ 364,222
 
Less:  goodwill and other intangibles
   
(22,149
)
   
(23,496
)
   
(23,857
)
   
(24,228
)
   
(24,620
)
                                         
Tangible common equity
 
$
369,880
   
$
344,468
   
$
$ 333,157
   
$
$ 317,571
   
$
$ 339,602
 
                                         
Tangible assets
                                       
Total assets
 
$
4,150,129
   
$
4,058,049
   
$
$ 3,944,063
   
$
$ 3,992,690
   
$
$ 3,974,724
 
Less:  goodwill and other intangibles
   
(22,149
)
   
(23,496
)
   
(23,857
)
   
(24,228
)
   
(24,620
)
                                         
Tangible assets
 
$
4,127,980
   
$
4,034,553
   
$
$ 3,920,206
   
$
$ 3,968,462
   
$
$ 3,950,104
 
                                         
Shares outstanding
   
16,952,072
     
17,062,572
     
17,027,197
     
17,064,640
     
17,417,094
 
                                         
Total stockholders’ equity to total assets
   
9.45
%
   
9.07
%
   
9.05
%
   
8.56
%
   
9.16
%
Tangible common equity to tangible assets
   
8.96
%
   
8.54
%
   
8.50
%
   
8.00
%
   
8.60
%
Book value per share
 
$
23.13
   
$
21.57
   
$
20.97
   
$
20.03
   
$
20.91
 
Tangible book value per share
 
$
21.82
   
$
20.19
   
$
19.57
   
$
18.61
   
$
19.50
 




Exhibit 99.2

 South Plains Financial  Second Quarter 2023  Earnings Presentation  July 25, 2023 
 

 Safe Harbor Statement and Other Disclosures   FORWARD-LOOKING STATEMENTS  This presentation contains, and future oral and written statements of South Plains Financial, Inc. (“South Plains” or the “Company” or “SPFI”) and City Bank (“City Bank” or the “Bank”) may contain, statements about future events that constitute 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 and South Plains’ financial performance. 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. Forward-looking statements include, but are not limited to: (i) projections and estimates of revenues, expenses, income or loss, earnings or loss per share, and other financial items, (ii) statements of plans, objectives and expectations of South Plains or its management, (iii) statements of future economic performance, and (iv) statements of assumptions underlying such statements. Forward-looking statements should not be relied on because they involve known and unknown risks, uncertainties and other factors, some of which are beyond the control of South Plains and City Bank. These risks, uncertainties and other factors may cause the actual results, performance, and achievements of South Plains and City Bank to be materially different from the anticipated future results, performance or achievements expressed in, or implied by, the forward-looking statements. Factors that could cause such differences include, but are not limited to, general economic conditions, potential recession in the United States and our market areas, the impacts related to or resulting from recent bank failures and any continuation of the recent uncertainty in the banking industry, including the associated impact to the Company and other financial institutions of any regulatory changes or other mitigation efforts taken by government agencies in response thereto, increased competition for deposits and related changes in deposit customer behavior, changes in market interest rates, the persistence of the current inflationary environment in the United States and our market areas, the uncertain impacts of ongoing quantitative tightening and current and future monetary policies of the Board of Governors of the Federal Reserve System, the effects of declines in housing prices in the Unites States and our market areas, increases in unemployment rates in the United States and our market areas, declines in commercial real estate prices, uncertainty regarding United States fiscal debt and budget matters, severe weather, natural disasters, acts of war or terrorism or other external events, regulatory considerations, competition and market expansion opportunities, changes in non-interest expenditures or in the anticipated benefits of such expenditures, the receipt of required regulatory approvals, changes in non-performing assets and charge-offs, adequacy of loan loss reserves, changes in tax laws, current or future litigation, regulatory examinations or other legal and/or regulatory actions, the impact of any tariffs, terrorist threats and attacks, acts of war or threats thereof or other pandemics. Due to these and other possible uncertainties and risks, South Plains 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 presentation. For more information about these factors, please see South Plains’ reports filed with or furnished to the U.S. Securities and Exchange Commission (the “SEC”), including South Plains’ most recent Annual Report on Form 10-K and Quarterly Reports on Form 10-Q on file with the SEC, including the sections entitled "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations." Further, any forward-looking statement speaks only as of the date on which it is made and South Plains undertakes no obligation to update or revise any forward-looking statement to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence of unanticipated events, except as required by law. All forward-looking statements, express or implied, herein are qualified in their entirety by this cautionary statement.  NON-GAAP FINANCIAL MEASURES  Management believes that certain non-GAAP performance measures used in this presentation provide meaningful information about underlying trends in its business and operations and provide both management and investors a more complete understanding of the Company’s financial position and performance. Non-GAAP financial measures should be viewed in addition to, and not as an alternative for, SPFI’s reported results prepared in accordance with GAAP. Numbers in this presentation may not sum due to rounding.  2 
 

 Today’s Speakers   Curtis C. Griffith Chairman & Chief Executive Officer  Elected to the board of directors of First State Bank of Morton, Texas, in 1972 and employed by it in 1979  Elected Chairman of the First State Bank of Morton board in 1984  Chairman of the Board of City Bank and the Company since 1993  Steven B. Crockett Chief Financial Officer & Treasurer  Appointed Chief Financial Officer in 2015  Previously Controller of City Bank and the Company for 14 and 5 years respectively  Began career in public accounting in 1994 by serving for seven years with a local firm in Lubbock, Texas  Cory T. Newsom President  Entire banking career with the Company focused on lending and operations  Appointed President and Chief Executive Officer of the Bank in 2008  Joined the Board in 2008  3 
 

 Second Quarter 2023 Highlights  Diluted earnings per share for the second quarter was $1.71, compared to $0.53 for the first quarter of 2023  Excluding one-time gains and charges related to the sale of Windmark Insurance Agency, Inc. (“Windmark”) and the repositioning of the securities portfolio, second quarter diluted earnings per share was $0.55  Loans grew $190.4 million, or 6.8%, during the second quarter as compared to the first quarter of 2023  Deposits grew $66.5 million, or 1.9%, during the second quarter as compared to the first quarter of 2023  Net Interest Margin held steady from March 2023 levels at 3.65% as higher loan yields offset the rise in deposit costs  Completed the sale of Windmark for $35.5 million on April 1, 2023  Offset a portion of the Windmark gain through the strategic sale of $56 million of our investment securities resulting in a realized loss of $3.4 million. Reinvested those proceeds in higher yielding loans which will be accretive in subsequent quarters  Recorded a $3.7 million provision for credit losses in the second quarter due to strong organic loan growth and $1.3 million in specific reserves for a previously-classified credit relationship totaling $13.3 million that was placed on nonaccrual in May 2023  Classified loans declined $3.5 million during the second quarter to $67.4 million from $70.9 million at March 31, 2023  Deposit Growth   1.9%  Uninsured / Uncollaterized Deposits 16%  Net Income   $29.7 M  EPS - Diluted  $1.71  Net Interest Margin (1)  (“NIM”) 3.65%  Average Yield on Loans