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 September 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 November 3, 2023, the registrant had 16,482,279 shares of common stock, par value $1.00 per share, outstanding.



TABLE OF CONTENTS

   
Page
PART I.
3
Item 1.
3
 
3
 
4
 
6
 
7
 
8
Item 2.
31
Item 3.
54
Item 4.
55
PART II.
56
Item 1.
56
Item 1A.
56
Item 2.
56
Item 3.
56
Item 4.
56
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)

 
September 30,
2023
   
December 31,
2022
 
   
(Unaudited)
       
ASSETS
           
Cash and due from banks
 
$
44,583
   
$
61,613
 
Interest-bearing deposits in banks
   
307,841
     
173,270
 
Cash and cash equivalents
   
352,424
     
234,883
 
Securities available for sale
   
584,969
     
701,711
 
Loans held for sale ($14,496 and $10,038 at fair value at September 30, 2023 and December 31, 2022, respectively)
   
20,273
     
30,403
 
Loans held for investment
   
2,993,563
     
2,748,081
 
Allowance for credit losses on loans
   
(42,075
)
   
(39,288
)
Loans held for investment, net
    2,951,488       2,708,793  
Accrued interest receivable
   
17,672
     
16,432
 
Premises and equipment, net
   
56,391
     
56,337
 
Bank-owned life insurance
   
74,104
     
73,174
 
Goodwill
   
19,315
     
19,508
 
Intangible assets, net
   
2,621
     
4,349
 
Mortgage servicing rights
   
27,749
     
27,474
 
Deferred tax asset, net
   
28,135
     
22,818
 
Other assets
   
51,299
     
48,181
 
Total assets
 
$
4,186,440
   
$
3,944,063
 
                 
LIABILITIES AND STOCKHOLDERS’ EQUITY
               
                 
Deposits:
               
Noninterest-bearing
 
$
1,046,253
   
$
1,150,488
 
Interest-bearing
   
2,574,361
     
2,255,942
 
Total deposits
   
3,620,614
     
3,406,430
 
Accrued expenses and other liabilities
   
71,617
     
58,265
 
Subordinated debt
   
76,100
     
75,961
 
Junior subordinated deferrable interest debentures
   
46,393
     
46,393
 
Total liabilities
   
3,814,724
     
3,587,049
 
                 
Stockholders’ equity:
               
Common stock, $1.00 par value per share, 30,000,000 shares authorized; 16,600,442 and 17,027,197 issued and outstanding at September 30, 2023 and December 31, 2022, respectively
   
16,600
     
17,027
 
Additional paid-in capital
   
102,633
     
112,834
 
Retained earnings
   
337,076
     
292,261
 
Accumulated other comprehensive loss
   
(84,593
)
   
(65,108
)
Total stockholders’ equity
   
371,716
     
357,014
 
Total liabilities and stockholders’ equity
 
$
4,186,440
   
$
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
September 30,
   
Nine Months Ended
September 30,
 
   
2023
   
2022
   
2023
   
2022
 
Interest income:
                       
Loans, including fees
 
$
46,242
   
$
34,463
   
$
128,703
   
$
99,260
 
Securities:
                               
Taxable
   
5,422
     
4,224
     
16,027
     
10,142
 
Non-taxable
   
833
     
1,128
     
3,057
     
3,409
 
Federal funds sold and interest-bearing deposits in banks
   
4,031
     
1,293
     
7,010
     
2,129
 
Total interest income
   
56,528
     
41,108
     
154,797
     
114,940
 
Interest expense:
                               
Deposits
   
18,965
     
4,537
     
44,768
     
8,744
 
Notes payable & other borrowings
   
     
     
5
     
 
Subordinated debt
   
1,012
     
1,012
     
3,037
     
3,037
 
Junior subordinated deferrable interest debentures
   
862
     
457
     
2,402
     
1,005
 
Total interest expense
   
20,839
     
6,006
     
50,212
     
12,786
 
Net interest income
   
35,689
     
35,102
     
104,585
     
102,154
 
Provision for credit losses    
(700
)
   
(782
)
   
4,010
     
(2,867
)
Net interest income, after provision for credit losses
   
36,389
     
35,884
     
100,575
     
105,021
 
Noninterest income:
                               
Service charges on deposit accounts
   
1,840
     
1,764
     
5,286
     
5,149
 
Income from insurance activities
   
30
     
4,856
     
1,478
     
8,003
 
Net gain on sales of loans
   
2,631
     
4,452
     
9,077
     
17,924
 
Bank card services and interchange fees
   
3,157
     
3,156
     
10,156
     
9,856
 
Other mortgage banking income
   
1,971
     
1,836
      3,069       10,670  
Investment commissions
   
430
     
391
     
1,239
     
1,403
 
Fiduciary fees
   
582
     
568
     
1,779
     
1,815
 
Gain on sale of subsidiary
    290
            33,778
     
 
Other
   
1,346
     
3,914
     
4,218
     
8,649
 
Total noninterest income
   
12,277
     
20,937
     
70,080
     
63,469
 
Noninterest expense:
                               
Salaries and employee benefits
   
18,709
     
22,927
     
61,400
     
67,620
 
Occupancy and equipment, net
   
4,111
     
4,132
     
12,246
     
11,902
 
Professional services
   
1,560
     
2,523
     
4,924
     
7,795
 
Marketing and development
   
853
     
913
     
2,573
     
2,391
 
IT and data services
   
818
     
908
     
2,570
     
2,902
 
Bank card expenses
   
1,451
     
1,399
     
4,119
     
4,050
 
Appraisal expenses
   
283
     
359
     
862
     
1,432
 
Realized loss on sale of securities
                3,409        
Other
   
3,704
     
4,240
     
12,246
     
13,289
 
Total noninterest expense
   
31,489
     
37,401
     
104,349
     
111,381
 
Income before income taxes
   
17,177
     
19,420
     
66,306
     
57,109
 
Income tax expense
   
3,683
     
3,962
     
13,885
     
11,490
 
Net income
 
$
13,494
   
$
15,458
   
$
52,421
   
$
45,619
 

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
September 30,
   
Nine Months Ended
September 30,
 
   
2023
   
2022
   
2023
   
2022
 
Earnings per share:
                       
Basic
 
$
0.80
   
$
0.89
   
$
3.09
   
$
2.61
 
Diluted
 
$
0.78
   
$
0.86
   
$
3.01
   
$
2.52
 
                                 
Net income
 
$
13,494
   
$
15,458
   
$
52,421
   
$
45,619
 
Other comprehensive loss:                                
Unrealized losses on securities available for sale    
(30,907
)
   
(39,102
)
   
(29,393
)
   
(126,076
)
Less: Change in fair value on hedged state and municipal securities
   
2,091
     
5,332
     
1,320
     
15,681
 
Reclassification adjustment for loss on sale of securities
                3,409        
Tax effect
   
6,051
     
7,092
     
5,179
     
23,183
 
Other comprehensive loss
   
(22,765
)
   
(26,678
)
   
(19,485
)
   
(87,212
)
Comprehensive income (loss)
 
$
(9,271
)
 
$
(11,220
)
 
$
32,936
   
$
(41,593
)

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
 
Nine Months Ended September 30,
                                   
Balance at December 31, 2021
   
17,760,243
   
$
17,760
   
$
133,215
   
$
242,750
   
$
13,702
   
$
407,427
 
Net income
   
     
     
     
45,619
     
     
45,619
 
Cash dividends declared  - $0.34 per share
   
     
     
     
(5,973
)
   
     
(5,973
)
Other comprehensive loss
   
     
     
     
     
(87,212
)
   
(87,212
)
Impact of adoption of Topic 842 related to leases
                      (717 )           (717 )
Exercise of employee stock options and vesting of restricted stock units, net of 16,255 shares for cashless exercise and net of 11,126 shares for taxes
   
34,010
     
34
     
(319
)
   
     
     
(285
)
Repurchases of common stock
   
(729,613
)
   
(729
)
   
(18,197
)
   
     
     
(18,926
)
Stock-based compensation
   
     
     
1,866
     
     
     
1,866
 
Balance at September 302022
   
17,064,640
   
$
17,065
   
$
116,565
   
$
281,679
   
$
(73,510
)
 
$
341,799
 
                                                 
Balance at December 31, 2022
   
17,027,197
   
$
17,027
   
$
112,834
   
$
292,261
   
$
(65,108
)
 
$
357,014
 
Net income
   
     
     
     
52,421
     
     
52,421
 
Cash dividends declared  - $0.39 per share
   
     
     
     
(6,609
)
   
     
(6,609
)
Other comprehensive loss
   
     
     
     
     
(19,485
)
   
(19,485
)
Impact of adoption of ASU 2016-13 - CECL
                      (997 )           (997 )
Exercise of employee stock options and vesting of restricted stock units, net of 26,872 shares for cashless exercise and net of 15,769 shares for taxes
   
40,720
     
40
     
(433
)
   
     
     
(393
)
Repurchases of common stock
   
(467,475
)
   
(467
)
   
(11,393
)
   
     
     
(11,860
)
Stock-based compensation
   
     
     
1,625
     
     
     
1,625
 
Balance at September 302023
   
16,600,442
   
$
16,600
   
$
102,633
   
$
337,076
   
$
(84,593
)
 
$
371,716
 
                                                 
Three Months Ended September 30,
                                               
Balance at June 30, 2022
   
17,417,094
   
$
17,417
   
$
125,332
   
$
268,305
   
$
(46,832
)
 
$
364,222
 
Net income
   
     
     
     
15,458
     
     
15,458
 
Cash dividends declared  - $0.12 per share
   
     
     
     
(2,084
)
   
     
(2,084
)
Other comprehensive loss
   
     
     
     
     
(26,678
)
   
(26,678
)
Exercise of employee stock options and vesting of  restricted stock units, net of 11,431 shares for cashless exercise and net of 3,997 shares for taxes
    13,673       14       (104 )                 (90 )
Repurchases of common stock
   
(366,127
)
   
(366
)
   
(9,352
)
   
     
     
(9,718
)
Stock-based compensation
   
     
     
689
     
     
     
689
 
Balance at September 302022
   
17,064,640
   
$
17,065
   
$
116,565
   
$
281,679
   
$
(73,510
)
 
$
341,799
 
                                                 
Balance at June 30, 2023
   
16,952,072
   
$
16,952
   
$
111,133
   
$
325,772
   
$
(61,828
)
 
$
392,029
 
Net income
   
     
     
     
13,494
     
     
13,494
 
Cash dividends declared  - $0.13 per share
   
     
     
     
(2,190
)
   
     
(2,190
)
Other comprehensive loss
   
     
     
     
     
(22,765
)
   
(22,765
)
Exercise of employee stock options and vesting of restricted stock units, net of 2,732 shares for cashless exercise and net of 1,877 shares for taxes
    2,891       2       (53 )                 (51 )
Repurchases of common stock
    (354,521 )     (354 )     (8,958 )                 (9,312 )
Stock-based compensation
   
     
     
511
     
     
     
511
 
Balance at September 302023
   
16,600,442
   
$
16,600
   
$
102,633
   
$
337,076
   
$
(84,593
)
 
$
371,716
 

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)

 
Nine Months Ended
September 30,
 
   
2023
   
2022
 
Cash flows from operating activities:
           
Net income
 
$
52,421
   
$
45,619
 
Adjustments to reconcile net income to net cash from operating activities:
               
Provision for credit losses
   
4,010
     
(2,867
)
Provision for foreclosed asset losses
    97        
Depreciation and amortization
   
4,784
     
5,277
 
Accretion and amortization
   
2,731
     
3,089
 
Other gains, net
   
(248
)
   
(65
)
Gain on sale of subsidiary
    (33,778 )      
Loss on sale of securities
    3,409        
Net gain on sales of loans
   
(9,077
)
   
(17,924
)
Proceeds from sales of loans held for sale
   
339,220