UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549



FORM 10-Q



(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2023

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ______ to ______

Commission File Number: 001-38895



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

 Texas
 
75-2453320
(State or other jurisdiction of incorporation or organization)
 
(I.R.S. Employer Identification No.)
     
5219 City Bank Parkway
Lubbock, Texas
 
79407
(Address of principal executive offices)
 
(Zip Code)

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

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, $1.00 par value per share
SPFI
The Nasdaq Stock Market, LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.     Yes      No 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes      No 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer
 
Accelerated filer
Non-accelerated filer
 
Smaller reporting company

     
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.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes    No 

As of August 3, 2023, the registrant had 16,913,686 shares of common stock, par value $1.00 per share, outstanding.



TABLE OF CONTENTS

   
Page
PART I.
FINANCIAL INFORMATION
3
Item 1.
Consolidated Financial Statements
3
 
3
 
4
 
6
 
7
 
8
Item 2.
32
Item 3.
56
Item 4.
56
PART II.
57
Item 1.
57
Item 1A.
57
Item 2.
57
Item 3.
57
Item 4.
57
Item 5.
57
Item 6.
58
59

PART I. FINANCIAL INFORMATION
Item 1.
Consolidated Financial Statements

SOUTH PLAINS FINANCIAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except per share data)

 
June 30,
2023
   
December 31,
2022
 
   
(Unaudited)
       
ASSETS
           
Cash and due from banks
 
$
64,497
   
$
61,613
 
Interest-bearing deposits in banks
   
231,084
     
173,270
 
Cash and cash equivalents
   
295,581
     
234,883
 
Securities available for sale
   
628,093
     
701,711
 
Loans held for sale ($15,516 and $10,038 at fair value at June 30, 2023 and December 31, 2022, respectively)
   
22,158
     
30,403
 
Loans held for investment
   
2,979,063
     
2,748,081
 
Allowance for credit losses on loans
   
(43,137
)
   
(39,288
)
Loans held for investment, net
    2,935,926       2,708,793  
Accrued interest receivable
   
15,917
     
16,432
 
Premises and equipment, net
   
56,416
     
56,337
 
Bank-owned life insurance
   
73,804
     
73,174
 
Goodwill
   
19,315
     
19,508
 
Intangible assets, net
   
2,834
     
4,349
 
Mortgage servicing rights
   
26,658
     
27,474
 
Deferred tax asset, net
   
22,359
     
22,818
 
Other assets
   
51,068
     
48,181
 
Total assets
 
$
4,150,129
   
$
3,944,063
 
                 
LIABILITIES AND STOCKHOLDERS’ EQUITY
               
                 
Deposits:
               
Noninterest-bearing
 
$
1,100,767
   
$
1,150,488
 
Interest-bearing
   
2,473,755
     
2,255,942
 
Total deposits
   
3,574,522
     
3,406,430
 
Accrued expenses and other liabilities
   
61,131
     
58,265
 
Subordinated debt
   
76,054
     
75,961
 
Junior subordinated deferrable interest debentures
   
46,393
     
46,393
 
Total liabilities
   
3,758,100
     
3,587,049
 
                 
Stockholders’ equity:
               
Common stock, $1.00 par value per share, 30,000,000 shares authorized; 16,952,072 and 17,027,197 issued and outstanding at June 30, 2023 and December 31, 2022, respectively
   
16,952
     
17,027
 
Additional paid-in capital
   
111,133
     
112,834
 
Retained earnings
   
325,772
     
292,261
 
Accumulated other comprehensive loss
   
(61,828
)
   
(65,108
)
Total stockholders’ equity
   
392,029
     
357,014
 
Total liabilities and stockholders’ equity
 
$
4,150,129
   
$
3,944,063
 

The accompanying notes are an integral part of these consolidated financial statements.

SOUTH PLAINS FINANCIAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(Unaudited)
(Dollars in thousands, except per share data)

 
Three Months Ended
June 30,
   
Six Months Ended
June 30,
 
   
2023
   
2022
   
2023
   
2022
 
Interest income:
                       
Loans, including fees
 
$
42,864
   
$
35,419
   
$
82,461
   
$
64,797
 
Securities:
                               
Taxable
   
5,365
     
3,542
     
10,605
     
5,918
 
Non-taxable
   
1,108
     
1,137
     
2,224
     
2,281
 
Federal funds sold and interest-bearing deposits in banks
   
1,484
     
654
     
2,979
     
836
 
Total interest income
   
50,821
     
40,752
     
98,269
     
73,832
 
Interest expense:
                               
Deposits
   
14,433
     
2,317
     
25,803
     
4,207
 
Notes payable & other borrowings
   
5
     
     
5
     
 
Subordinated debt
   
1,013
     
1,013
     
2,025
     
2,025
 
Junior subordinated deferrable interest debentures
   
789
     
317
     
1,540
     
548
 
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 deposit accounts
   
1,745
     
1,612
     
3,446
     
3,385
 
Income from insurance activities
   
37
     
1,577
     
1,448
     
3,147
 
Net gain on sales of loans
   
3,528
     
5,979
     
6,446
     
13,472
 
Bank card services and interchange fees
   
4,043
     
3,478
     
6,999
     
6,700
 
Other mortgage banking income
   
1,731
     
2,690
      1,098       8,834  
Investment commissions
   
420
     
466
     
809
     
1,012
 
Fiduciary fees
   
597
     
635
     
1,197
     
1,247
 
Gain on sale of subsidiary
    33,488
            33,488
     
 
Other
   
1,523
     
2,398
     
2,872
     
4,735
 
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
 
Occupancy and equipment, net
   
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
 
IT and data services
   
888
     
941
     
1,752
     
1,994
 
Bank card expenses
   
1,316
     
1,328
     
2,668
     
2,651
 
Appraisal expenses
   
301
     
508
     
579
     
1,073
 
Realized loss on sale of securities
    3,409             3,409        
Other
   
4,345
     
3,851
     
8,542
     
9,049
 
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
 

The accompanying notes are an integral part of these consolidated financial statements.

SOUTH PLAINS FINANCIAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (CONTINUED)
(Unaudited)
(Dollars in thousands, except per share data)

 
Three Months Ended
June 30,
   
Six Months Ended
June 30,
 
   
2023
   
2022
   
2023
   
2022
 
Earnings per share:
                       
Basic
 
$
1.74
   
$
0.91
   
$
2.28
   
$
1.71
 
Diluted
 
$
1.71
   
$
0.88
   
$
2.23
   
$
1.66
 
                                 
Net income
 
$
29,683
   
$
15,883
   
$
38,927
   
$
30,161
 
Other comprehensive income (loss):                                
Unrealized gains (losses) on securities available for sale    
(7,109
)
   
(42,097
)
   
1,514
     
(86,974
)
Less: Change in fair value on hedged state and municipal securities
   
1,866
     
3,450
     
(771
)
   
10,349
 
Reclassification adjustment for loss on sale of securities
    3,409             3,409        
Tax effect
   
385
     
8,116
     
(872
)
   
16,091
 
Other comprehensive income (loss)
   
(1,449
)
   
(30,531
)
   
3,280
     
(60,534
)
Comprehensive income (loss)
 
$
28,234
   
$
(14,648
)
 
$
42,207
   
$
(30,373
)

The accompanying notes are an integral part of these consolidated financial statements.

SOUTH PLAINS FINANCIAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
(Unaudited)
(Dollars in thousands, except per share data)

 
Common Stock
   
Additional
Paid-in
   
Retained
   
Accumulated
Other
Comprehensive
       
   
Shares
   
Amount
   
Capital
   
Earnings
   
Income (Loss)
   
Total
 
Six Months Ended June 30,
                                   
Balance at December 31, 2021
   
17,760,243
   
$
17,760
   
$
133,215
   
$
242,750
   
$
13,702
   
$
407,427
 
Net income
   
     
     
     
30,161
     
     
30,161
 
Cash dividends declared  - $0.22 per share
   
     
     
     
(3,889
)
   
     
(3,889
)
Other comprehensive loss
   
     
     
     
     
(60,534
)
   
(60,534
)
Impact of adoption of Topic 842 related to leases
                      (717 )           (717 )
Exercise of employee stock options and vesting of restricted stock units, net of 4,824 shares for cashless exercise and net of 7,129 shares for taxes
   
20,337
     
20
     
(215
)
   
     
     
(195
)
Repurchases of common stock
   
(363,486
)
   
(363
)
   
(8,845
)
   
     
     
(9,208
)
Stock-based compensation
   
     
     
1,177
     
     
     
1,177
 
Balance at June 302022
   
17,417,094
   
$
17,417
   
$
125,332
   
$
268,305
   
$
(46,832
)
 
$
364,222
 
                                                 
Balance at December 31, 2022
   
17,027,197
   
$
17,027
   
$
112,834
   
$
292,261
   
$
(65,108
)
 
$
357,014
 
Net income
   
     
     
     
38,927
     
     
38,927
 
Cash dividends declared  - $0.26 per share
   
     
     
     
(4,419
)
   
     
(4,419
)
Other comprehensive income
   
     
     
     
     
3,280
     
3,280
 
Impact of adoption of ASU 2016-13 - CECL
                      (997 )           (997 )
Exercise of employee stock options and vesting of restricted stock units, net of 24,140 shares for cashless exercise and net of 13,892 shares for taxes
   
37,829
     
38
     
(380
)
   
     
     
(342
)
Repurchases of common stock
   
(112,954
)
   
(113
)
   
(2,435
)
   
     
     
(2,548
)
Stock-based compensation
   
     
     
1,114
     
     
     
1,114
 
Balance at June 302023
   
16,952,072
   
$
16,952
   
$
111,133
   
$
325,772
   
$
(61,828
)
 
$
392,029
 
                                                 
Three Months Ended June 30,
                                               
Balance at March 31, 2022
   
17,673,407
   
$
17,673
   
$
130,618
   
$
255,078
   
$
(16,301
)
 
$
387,068
 
Net income
   
     
     
     
15,883
     
     
15,883
 
Cash dividends declared  - $0.11 per share
   
     
     
     
(1,939
)
   
     
(1,939
)
Other comprehensive loss
   
     
     
     
     
(30,531
)
   
(30,531
)
Impact of adoption of Topic 842 related to leases
                      (717 )           (717 )
Exercise of employee stock options and vesting of  restricted stock units, net of 272 shares for taxes
    675       1       (1 )                  
Repurchases of common stock
   
(256,988
)
   
(257
)
   
(5,933
)
   
     
     
(6,190
)
Stock-based compensation
   
     
     
648
     
     
     
648
 
Balance at June 302022
   
17,417,094
   
$
17,417
   
$
125,332
   
$
268,305
   
$
(46,832
)
 
$
364,222
 
                                                 
Balance at March 31, 2023
   
17,062,572
   
$
17,062
   
$
112,981
   
$
298,300
   
$
(60,379
)
 
$
367,964
 
Net income
   
     
     
     
29,683
     
     
29,683
 
Cash dividends declared  - $0.13 per share
   
     
     
     
(2,211
)
   
     
(2,211
)
Other comprehensive loss
   
     
     
     
     
(1,449
)
   
(1,449
)
Exercise of employee stock options and vesting of restricted stock units, net of 10,567 shares for cashless exercise
    2,454       3       (3 )                  
Repurchases of common stock
    (112,954 )     (113 )     (2,435 )                 (2,548 )
Stock-based compensation
   
     
     
590
     
     
     
590
 
Balance at June 302023
   
16,952,072
   
$
16,952
   
$
111,133
   
$
325,772
   
$
(61,828
)
 
$
392,029
 

The accompanying notes are an integral part of these consolidated financial statements.

SOUTH PLAINS FINANCIAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Dollars in thousands)

 
Six Months Ended
June 30,
 
   
2023
   
2022
 
Cash flows from operating activities:
           
Net income
 
$
38,927
   
$
30,161
 
Adjustments to reconcile net income to net cash from operating activities:
               
Provision for credit losses
   
4,710
     
(2,085
)
Provision for foreclosed asset losses
    97        
Depreciation and amortization
   
3,240
     
3,508
 
Accretion and amortization
   
1,980
     
2,077