South Plains Financial, Inc. Reports Second Quarter 2020 Financial Results

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LUBBOCK, Texas, July 29, 2020 (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, 2020. Curtis Griffith, South Plains’ Chairman and Chief Executive Officer, […]

LUBBOCK, Texas, July 29, 2020 (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, 2020.

Curtis Griffith, South Plains’ Chairman and Chief Executive Officer, commented, “I am very proud of our employees for their hard work and dedication to our customers and communities during this unprecedented time. They have kept the Bank’s operations running smoothly and maintained a high level of service and support for our customers. As the number of COVID-19 cases started to spike in Texas in June, we made the decision to close our branch lobbies once again to appointment-only service while keeping our drive-through windows in operation. Overall, we continue to operate very effectively through our drive-through windows and are successfully transitioning our customers to our digital banking platforms. Importantly, we have invested in the technology and developed the digital platforms and systems which have allowed us to effectively service our customers remotely throughout the ongoing COVID-19 pandemic. We will also remain disciplined on expenses and are adapting our branch network to more effectively meet customer traffic trends, which remain robust. As part of this, we closed our Springlake, Texas branch at the end of June and will continue to focus on doing more with less.” 

Mr. Griffith continued, “While the economic backdrop was a headwind to our second quarter results, I am very pleased with our performance and the earnings growth that is building within the Bank. For the second quarter of 2020, we delivered pre-tax, pre-provision income of $20.1 million, which compares favorably to the $15.1 million achieved in the first quarter of 2020 and the $8.6 million in the year ago second quarter. We recorded a $13.1 million provision expense during the second quarter of 2020, driven largely by qualitative factors based upon what we are seeing in our local economies and the potential extended impact of the COVID-19 pandemic. We have taken a very proactive approach to this crisis with all of our borrowers, especially in our at-risk categories of the loan portfolio, including our borrowers in the hospitality and energy segments. We are encouraged with the flattening of our loan modifications at 19.9% of the total loan portfolio at June 30, 2020. We believe our aggressive provision this quarter reflects a conservative outlook at the end of the second quarter and we believe that we have the capital to absorb the losses in our loan portfolio that could result from an adverse stress environment. Looking forward, we feel well positioned to take advantage of opportunities that could be created in these difficult times.”

The Company’s Oversight Committee for Business Continuity and Incident Response, which has monitored the spread of the coronavirus since January, continues to monitor the impact of the ongoing COVID-19 pandemic, as well as employee and customer communications. The Company’s Pandemic Task Force continues to implement South Plains’ Business Continuity Plan, focusing on the safety of the Company’s employees and customers while maintaining the operational and financial integrity of the Bank. Non-essential employees were transitioned to a work-from-home environment, strict protocols for employees deemed essential were adopted to ensure adequate social distancing and all Bank facilities are receiving incremental cleaning and sanitization. The Company restricted access to its bank lobbies and customers are currently served through appointments only, as well as through the Bank’s drive-through windows and recently upgraded digital platforms.

The Bank also continues to implement a rigorous enterprise risk management (“ERM”) system that delivers a systematic approach to risk measurement and enhances the effectiveness of risk management across the Bank. The Bank’s ERM system has allowed management to consistently and aggressively review the Bank’s loan portfolio for signs of potential issues during the ongoing COVID-19 pandemic and the Bank continues to closely monitoring its loans to borrowers in the retail, hospitality and energy sectors.

While the duration of the COVID-19 pandemic and the scope of its impact on the economy is uncertain, the Bank continues to be proactive with its borrowers in those sectors most affected by the COVID-19 pandemic and offering loan modifications to borrowers who are or may be unable to meet their contractual payment obligations because of the effects of COVID-19. As previously disclosed, the Bank has assigned its Chairman, Chief Executive Officer, Chief Credit Officer and Chief Lending Officer to partner with the Bank’s lenders on those borrowers most impacted by the COVID-19 pandemic to ensure the Company remains proactive in addressing those credits with the appropriate oversight and modifications when warranted. As part of the Bank’s efforts to support its customers and protect the Bank, the Bank has offered varying forms of loan modifications ranging from 90-day payment deferrals to 6- to 12-month interest only terms to provide borrowers relief. As of June 30, 2020, total loan modifications attributed to COVID-19 were approximately $464 million, or 19.9%, of the Company’s loan portfolio. The modification breakdown is: 64% of modified loans are interest only with periods of up to 6 months, 15% of modified loans are 90 day payment deferrals on commercial customers, 10% of modified loans are interest only periods longer than 6 months, primarily in the Bank’s hotel portfolio, and 11% of modified loans are payment deferrals of one to four months on consumer loans.

The Bank has assisted its customers in accessing the Paycheck Protection Program (the “PPP”) administered by the Small Business Administration (the “SBA”) and created under the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”). During the second quarter of 2020, the Bank originated approximately 2,050 PPP loans totaling $215 million. The Bank has utilized its lines of credit with the Federal Home Loan Bank of Dallas and/or the Federal Reserve Bank to supplement funding for origination of PPP loans as needed. Helping City Bank’s customers access PPP loans is just one way that the Bank has been helping its customers and communities during this challenging time. City Bank has also been a supporter of the South Plains and Permian Basin food banks and recently increased its financial support given the challenging economic environment for so many.

Finally, as previously announced on April 16, 2020, the Company temporarily suspended its stock repurchase program in response to the ongoing COVID-19 pandemic. Suspending the stock repurchase program has allowed the Company to preserve capital and provide liquidity to meet the credit needs of the customers, small businesses and local communities served by the Company and City Bank. The Company believes that it remains strong and well-capitalized, and the Company may reinstate the stock repurchase program in the future.

Results of Operations, Quarter Ended June 30, 2020

Net Interest Income

Net interest income was $30.4 million for the second quarter of 2020, compared to $24.8 million for the second quarter of 2019 and $30.2 million for the first quarter of 2020.

Interest income was $34.0 million for the second quarter of 2020, compared to $32.5 million for the second quarter of 2019 and $35.7 million for the first quarter of 2020. Interest and fees on loans increased by $1.3 million from the second quarter of 2019 due to growth of $429.1 million in average loans, primarily from the Company’s acquisition of West Texas State Bank (“WTSB”) as well as the PPP loans that were originated in the second quarter of 2020, partially offset by a decrease of 64 basis points in non-PPP loan rates due to the decline in the interest rate environment experienced in the first quarter of 2020. The decrease from the first quarter of 2020 was principally the result of a decrease of 50 basis points in non-PPP loan rates, partially offset by an increase of $208.7 million in average loans outstanding during the second quarter of 2020. The increase in average loans was largely attributable to the new PPP loans originated in the second quarter of 2020 as well as normal seasonal funding of the Bank’s agricultural production loans. The PPP loans yielded 2.53% during the second quarter of 2020, which includes accretion of the related SBA lenders fees for processing PPP loans during the quarter. As of June 30, 2020, the Company has received and deferred $7.7 million in PPP related SBA fees and is accreting these fees into interest income over the life of the applicable loans. If a PPP loan is forgiven or paid off before maturity, the remaining unamortized fee is accreted to income at that time. During the second quarter of 2020, the Company recognized $641,000 million in PPP related SBA fees. The Company expects that the majority of PPP loans will begin to be forgiven over the next several quarters.

Interest expense was $3.6 million for the second quarter of 2020, compared to $7.7 million for the second quarter of 2019 and $5.5 million for the first quarter of 2020. The decrease from the second quarter of 2019 was primarily due to a decrease in the interest rate paid on interest-bearing liabilities of 94 basis points, partially offset by an increase of $281.7 million in average interest-bearing liabilities. The decrease from the first quarter of 2020 was primarily due to a decrease in the interest rate paid on interest-bearing liabilities of 42 basis points, partially offset by an increase of $127.9 million in average interest-bearing liabilities in the second quarter of 2020. The average cost of deposits was 39 basis points for the second quarter of 2020, representing a 69 basis point decrease from the second quarter of 2019 and a 26 basis point decrease from the first quarter of 2020. The increase in average interest-bearing liabilities in the second quarter of 2020 compared to the first quarter of 2020 was primarily due to increased deposits, from PPP loan funding and other government stimulus payments and programs as well as organic growth, and an additional $75.0 million in borrowings to augment liquidity in funding the PPP loans.  The increase compared to the second quarter of 2019 was largely due to the Company’s acquisition of WTSB as well as the other deposit growth noted above. Additionally, the decrease in the rate paid on interest-bearing liabilities was the result of the decline in the overall rate environment experienced in the first quarter of 2020.

The net interest margin was 3.79% for the second quarter of 2020, compared to 3.88% for the second quarter of 2019 and 4.13% for the first quarter of 2020. The origination of PPP loans accounted for an estimated 11 basis points of the decrease of net interest margin. An estimated additional 7 basis points of the decrease in net interest margin is attributable to a reduction in purchased loan income accretion.

Noninterest Income and Noninterest Expense

Noninterest income was $24.9 million for the second quarter of 2020, compared to $13.7 million for the second quarter of 2019 and $18.9 million for the first quarter of 2020. The increase in noninterest income for the second quarter of 2020 compared to the second quarter of 2019 was primarily the result of an increase of $11.3 million in mortgage banking activities revenue due to an increase of $225.8 million in mortgage loan originations. Additionally, there was a decrease in service charges on deposits of $540,000 in the second quarter of 2020 from reduced customer spending and activity during the ongoing COVID-19 pandemic. The increase from the first quarter of 2020 was primarily the result of an increase of $9.2 million in mortgage banking activities revenue as a result of an increase of $152.6 million in mortgage loan originations, partially offset by a $2.3 million gain on sale of securities recorded in the first quarter of 2020.  Additionally, there was a decrease in service charges on deposits of $544,000 in the second quarter of 2020.

Noninterest expense was $35.2 million for the second quarter of 2020, compared to $29.9 million for the second quarter of 2019 and $34.0 million for the first quarter of 2020. This increase in noninterest expense for the second quarter of 2020 compared to the second quarter of 2019 was primarily driven by a $2.8 million increase in personnel expense. This increase was predominately related to an additional $2.6 million in commissions paid on the higher volume of mortgage loan originations and personnel in the Bank’s branches in the Permian Basin that were acquired in the fourth quarter of 2019 through the Company’s acquisition of WTSB, partially offset by a reduction in the Bank’s online mortgage platform personnel and other efficiency enhancements. There was also an increase in variable mortgage expenses, such as appraisal expenses, due to the increased mortgage production during the quarter. Other noninterest expenses also increased due to the acquisition of WTSB, including occupancy and other noninterest expenses for the branches acquired and core deposit intangible amortization expense. The increase from the first quarter of 2020 was primarily the result of an additional $2.2 million in commissions and higher other variable expenses as a result of increased mortgage production, partially offset by higher expenses in the first quarter of 2020 for data conversion expenses and computer equipment purchased in connection with upgrading the equipment at the acquired branches as well as at existing branches.

Loan Portfolio and Composition

Loans held for investment were $2.33 billion as of June 30, 2020, compared to $2.11 billion as of March 31, 2020 and $1.94 billion as of June 30, 2019. The $222.9 million increase during the second quarter of 2020 as compared to the first quarter of 2020 was primarily the result of the Bank’s origination of $215.3 million in PPP loans and $34.7 million in seasonal funding on agricultural loans, partially offset by paydowns of $13.1 million in non-residential consumer loans and $11.3 million in direct energy loans. As of June 30, 2020, loans held for investment increased $396.1 million from June 30, 2019, largely attributable to the PPP loans and the WTSB acquisition in the fourth quarter of 2019.

Agricultural production loans were $131.5 million as of June 30, 2020, compared to $96.8 million as of March 31, 2020 and $147.7 million as of June 30, 2019.

Deposits and Borrowings

Deposits totaled $2.95 billion as of June 30, 2020, compared to $2.67 billion as of March 31, 2020 and $2.28 billion as of June 30, 2019. Deposits increased $282.0 million in the second quarter of 2020, compared to the first quarter of 2020, primarily as a result of organic growth, customers depositing PPP loan proceeds, and other government stimulus payments and programs. As of June 30, 2020, deposits increased $666.0 million from June 30, 2019. The increase in deposits since June 30, 2019 is primarily a result of the increases noted above as well as the assumption of deposits from the WTSB acquisition in the fourth quarter of 2019.

Noninterest-bearing deposits were $940.9 million as of June 30, 2020, compared to $740.9 million as of March 31, 2020 and $513.4 million as of June 30, 2019. Noninterest-bearing deposits represented 31.9%, 27.8%, and 22.5% of total deposits as of June 30, 2020, March 31, 2020, and June 30, 2019, respectively. The increases in noninterest-bearing deposit balances at June 30, 2020 compared to the other periods is the same as detailed above.

Asset Quality

The provision for loan losses recorded for the second quarter of 2020 was $13.1 million, compared to $875,000 for the second quarter of 2019 and $6.2 million for the first quarter of 2020. The increase in the provision for loan losses in the second quarter of 2020 compared to the second quarter of 2019 is a result of economic effects from COVID-19 as well as the decline in oil and gas prices that started in the first quarter of 2019. The increase in the provision for loan losses in the second quarter of 2020 compared to the first quarter of 2020 is a result of a further worsening of the economy and continued uncertainty from COVID-19. The full extent of the impact on the economy and the Bank’s customers is unknown at this time. Accordingly, additional provisions for loan losses may be necessary in future periods.

The allowance for loan losses to loans held for investment was 1.74% as of June 30, 2020, compared to 1.38% as of March 31, 2020 and 1.25% as of June 30, 2019. The allowance for loan losses to non-PPP loans held for investment was 1.91% as of June 30, 2020.

The nonperforming assets to total assets ratio as of June 30, 2020 was 0.33%, compared to 0.28% as of March 31, 2020 and 0.37% at June 30, 2019.

Annualized net charge-offs were 0.27% for the second quarter of 2020, compared to 0.25% for the first quarter of 2020 and 0.02% for the second quarter of 2019.

Conference Call

South Plains will host a conference call to discuss its second quarter 2020 financial results today, July 29, 2020 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 13706046. The replay will be available until August 12, 2020.

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 and Eastern New Mexico markets. South Plains provides a wide range of commercial and consumer financial services to small and medium-sized businesses and individuals in its market areas. Its principal business activities include commercial and retail banking, along with insurance, investment, trust and mortgage services. Please visit https://www.spfi.bank for more information.

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, Adjusted Efficiency Ratio, 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 SEC 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. These forward-looking statements reflect South Plains’ current views with respect to, among other things, the ongoing COVID-19 pandemic and other future events. Any statements about South Plains’ expectations, beliefs, plans, predictions, forecasts, objectives, assumptions or future events or performance are not historical facts and may be forward-looking. These statements are often, but not always, made through the use of words or phrases such as “anticipate,” “believes,” “can,” “could,” “may,” “predicts,” “potential,” “should,” “will,” “estimate,” “plans,” “projects,” “continuing,” “ongoing,” “expects,” “intends” and similar words or phrases. South Plains cautions that the forward-looking statements in this press release are based largely on South Plains’ expectations and are subject to a number of known and unknown risks and uncertainties that are subject to change based on factors which are, in many instances, beyond South Plains’ control. 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 on our customers, changes in interest rates, 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 Quarterly Report on Form 10-Q on file with the Securities and Exchange Comission (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 Quarterly Report on Form 10-Q, as well as the “Risk Factors” section of other documents South Plains files with the SEC from time to time. Actual results, performance or achievements could differ materially from those contemplated, expressed, or implied by the forward-looking statements due to additional risks and uncertainties of which South Plains is not currently aware or which it does not currently view as, but in the future may become, material to its business or operating results. Due to these and other possible uncertainties and risks, readers are cautioned not to place undue reliance on the forward-looking statements contained in this press release. Any forward-looking statements presented herein are made only as of the date of this press release, and South Plains does not undertake any obligation to update or revise any forward-looking statements to reflect changes in assumptions, new information, the occurrence of unanticipated events, or otherwise, except as required by law.

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,
2020
  March 31,
2020
  December 31,
2019
  September 30,
2019
  June 30,
2019
Selected Income Statement Data:                            
Interest income $ 34,007     $ 35,737     $ 34,764     $ 33,665     $ 32,509  
Interest expense   3,559       5,538       6,140       7,097       7,672  
Net interest income   30,448       30,199       28,624       26,568       24,837  
Provision for loan losses   13,133       6,234       896       420       875  
Noninterest income   24,896       18,875       16,740       14,115       13,703  
Noninterest expense   35,207       34,011       31,714       30,028       29,930  
Income tax expense   1,389       1,746       2,645       1,977       1,655  
Net income   5,615       7,083       10,109       8,258       6,080  
Per Share Data (Common Stock):                            
Net earnings, basic   0.31       0.39       0.56       0.46       0.37  
Net earnings, diluted   0.31       0.38       0.55       0.45       0.37  
Cash dividends declared and paid   0.03       0.03       0.03       0.03        
Book value   18.64       18.10       16.98       16.61       16.19  
Tangible book value   17.06       16.54       15.46       16.47       16.19  
Weighted average shares outstanding, basic   18,061,705       18,043,105       18,010,065       17,985,429       16,459,366  
Weighted average shares outstanding, dilutive   18,224,630       18,461,922       18,415,656       18,363,033       16,563,543  
Shares outstanding at end of period   18,059,174       18,056,014       18,036,115       18,004,323       17,978,520  
Selected Period End Balance Sheet Data:                            
Cash and cash equivalents   256,101       136,062       158,099       244,645       408,116  
Investment securities   730,674       734,791       707,650       401,335       263,564  
Total loans held for investment   2,331,716       2,108,805       2,143,623       1,962,609       1,935,653  
Allowance for loan losses   40,635       29,074       24,197       24,176       24,171  
Total assets   3,584,532       3,216,563       3,237,167       2,795,582       2,777,170  
Interest-bearing deposits   2,006,984       1,924,902       1,905,936       1,729,741       1,768,475  
Noninterest-bearing deposits   940,853       740,946       790,921       556,233       513,383  
Total deposits   2,947,837       2,665,848       2,696,857       2,285,974       2,281,858  
Borrowings   252,430       185,265       205,030       177,720       176,675  
Total stockholders’ equity   336,534       326,890       306,182       299,027       291,113  
Summary Performance Ratios:                            
Return on average assets   0.64%       0.89%       1.32%       1.18%       0.89%  
Return on average equity   6.81%       9.00%       13.25%       11.10%       9.57%  
Net interest margin (1)   3.79%       4.13%       4.03%       4.07%       3.88%  
Yield on loans   5.26%       5.76%       5.79%       5.91%       5.90%  
Cost of interest-bearing deposits   0.56%       0.91%       1.06%       1.30%       1.39%  
Efficiency ratio   63.28%       69.10%       69.71%       73.62%       77.46%  
Summary Credit Quality Data:                            
Nonperforming loans   10,472       7,112       6,045       6,456       7,946  
Nonperforming loans to total loans held for investment   0.45%       0.34%       0.28%       0.33%       0.41%  
Other real estate owned   1,335       1,944       1,883       2,296       2,305  
Nonperforming assets to total assets   0.33%       0.28%       0.24%       0.31%       0.37%  
Allowance for loan losses to total loans held for investment   1.74%       1.38%       1.13%       1.23%       1.25%  
Net charge-offs to average loans outstanding (annualized)   0.27%       0.25%       0.17%       0.08%       0.02%  
  As of and for the quarter ended
  June 30,
2020
  March 31,
2020
  December 31,
2019
  September 30,
2019
  June 30,
2019
Capital Ratios:                            
Total stockholders’ equity to total assets   9.39 %     10.16 %     9.46 %     10.70 %     10.48 %
Tangible common equity to tangible assets   8.66 %     9.37 %     8.69 %     10.62 %     10.48 %
Common equity tier 1 to risk-weighted assets   10.51 %     11.24 %     11.06 %     13.10 %     13.31 %
Tier 1 capital to average assets   9.60 %     10.34 %     10.74 %     12.17 %     12.10 %
Total capital to risk-weighted assets   14.36 %     15.23 %     14.88 %     17.38 %     17.75 %

(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, 2020   June 30, 2019
       
  Average
Balance
  Interest
Income
Expense
  Yield   Average
Balance
  Interest
Income
Expense
  Yield
Assets                                  
Loans, excluding PPP (1) $ 2,204,441   $ 28,825     5.26 %   $ 1,946,602   $ 28,635     5.90 %
Loans – PPP   171,304     1,076     2.53 %             0.00 %
Debt securities – taxable   547,971     3,080     2.26 %     248,915     1,754     2.83 %
Debt securities – nontaxable   160,142     1,192     2.99 %     31,387     275     3.51 %
Other interest-bearing assets   174,753     124     0.29 %     348,106     1,946     2.24 %
                                   
Total interest-earning assets   3,258,611     34,297     4.23 %     2,575,010     32,610     5.08 %
Noninterest-earning assets   249,571                 174,944            
Total assets $ 3,508,182               $ 2,749,954            
                                   
Liabilities & stockholders’ equity                                  
NOW, Savings, MMA’s $ 1,650,159     1,330     0.32 %   $ 1,449,169     4,696     1.30 %
Time deposits   326,561     1,430     1.76 %     317,323     1,443     1.82 %
Short-term borrowings   16,449     6     0.15 %     11,085     57     2.06 %
Notes payable & other long-term borrowings   161,099     96     0.24 %     95,000     561     2.37 %
Subordinated debt securities   26,472     403     6.12 %     26,472     403     6.11 %
Junior subordinated deferrable interest debentures   46,393     294     2.55 %     46,393     512     4.43 %
                                   
Total interest-bearing liabilities   2,227,133     3,559     0.64 %     1,945,442     7,672     1.58 %
Demand deposits   901,761                 516,783            
Other liabilities   47,576                 32,890            
Stockholders’ equity   331,712                 254,839            
                                   
Total liabilities & stockholders’ equity $ 3,508,182               $ 2,749,954            
                                   
Net interest income       $ 30,738               $ 24,938      
Net interest margin (2)               3.79 %                 3.88 %

(1)   Average loan balances include nonaccrual loans and loans held for sale.
(2)   Net interest margin is calculated as the annualized net income, on a fully tax-equivalent basis, divided by average interest-earning assets.

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

  For the Six Months Ended
  June 30, 2020   June 30, 2019
                       
  Average
Balance
  Interest
Income
Expense
  Yield   Average
Balance
  Interest
Income
Expense
  Yield
Assets                                  
Loans, excluding PPP (1) $ 2,185,728   $ 59,879     5.51 %   $ 1,951,193   $ 56,776     5.87 %
Loans – PPP   85,652     1,076     2.53 %             0.00 %
Debt securities – taxable   554,324     6,672     2.42 %     279,293     3,863     2.79 %
Debt securities – nontaxable   119,538     1,694     2.85 %     31,780     561     3.56 %
Other interest-bearing assets   162,944     858     1.06 %     295,858     3,517     2.40 %
                                   
Total interest-earning assets   3,108,186     70,179     4.54 %     2,558,124     64,717     5.10 %
Noninterest-earning assets   250,114                 175,689            
                                   
Total assets $ 3,358,300               $ 2,733,813            
                                   
Liabilities & stockholders’ equity                                  
NOW, Savings, MMA’s $ 1,598,048     3,986     0.50 %   $ 1,459,684     9,230     1.28 %
Time deposits   340,016     3,057     1.81 %     313,505     2,798     1.80 %
Short-term borrowings   23,597     99     0.84 %     16,904     168     2.00 %
Notes payable & other long-term borrowings   128,654     453     0.71 %     95,000     1,100     2.33 %
Subordinated debt securities   26,472     807     6.13 %     27,100     809     6.02 %
Junior subordinated deferrable interest debentures   46,393     695     3.01 %     46,393     1,025     4.46 %
                                   
Total interest-bearing liabilities   2,163,180     9,097     0.85 %     1,958,586     15,130     1.56 %
Demand deposits   833,699                 508,951            
Other liabilities   37,364                 31,021            
Stockholders’ equity   324,057                 235,255            
                                   
Total liabilities & stockholders’ equity $ 3,358,300               $ 2,733,813            
                                   
Net interest income       $ 61,082               $ 49,587      
Net interest margin (2)               3.95 %                 3.91 %

(1)   Average loan balances include nonaccrual loans and loans held for sale.
(2)   Net interest margin is calculated as the annualized net income, on a fully tax-equivalent basis, divided by average interest-earning assets.

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

  As of
  June 30,
2020
  December 31,
2019
           
Assets          
Cash and due from banks $ 51,256     $ 56,246  
Interest-bearing deposits in banks   204,845       101,853  
Investment securities   730,674       707,650  
Loans held for sale   92,774       49,035  
Loans held for investment   2,331,716       2,143,623  
Less:  Allowance for loan losses   (40,635)       (24,197)  
Net loans held for investment   2,291,081       2,119,426  
Premises and equipment, net   61,883       61,873  
Goodwill   19,968       18,757  
Intangible assets   8,446       8,632  
Other assets   123,605       113,695  
Total assets $ 3,584,532     $ 3,237,167  
           
Liabilities and Stockholders’ Equity Liabilities          
Noninterest bearing deposits $ 940,853     $ 790,921  
Interest-bearing deposits   2,006,984       1,905,936  
Total deposits   2,947,837       2,696,857  
Other borrowings   179,565       132,165  
Subordinated debt securities   26,472       26,472  
Trust preferred subordinated debentures   46,393       46,393  
Other liabilities   47,731       29,098  
Total liabilities   3,247,998       2,930,985  
Stockholders’ Equity          
Common stock   18,059       18,036  
Additional paid-in capital   140,620       140,492  
Retained earnings   158,311       146,696  
Accumulated other comprehensive income (loss)   19,544       958  
Total stockholders’ equity   336,534       306,182  
Total liabilities and stockholders’ equity $ 3,584,532     $ 3,237,167  

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

  Three Months Ended   Six Months Ended
  June 30,
2020
  June 30,
2019
  June 30,
2020
  June 30,
2019
                       
Interest income:                      
Loans, including fees $ 29,861   $ 28,592   $ 60,876   $ 56,690
Other   4,146     3,917     8,868     7,823
Total Interest income   34,007     32,509     69,744     64,513
Interest expense:                      
Deposits   2,760     6,139     7,043     12,028
Subordinated debt securities   403     403     807     809
Trust preferred subordinated debentures   294     512     695     1,025
Other   102     618     552     1,268
Total Interest expense   3,559     7,672     9,097     15,130
Net interest income   30,448     24,837     60,647     49,383
Provision for loan losses   13,133     875     19,367     1,483
Net interest income after provision for loan losses   17,315     23,962     41,280     47,900
Noninterest income:                      
Service charges on deposits   1,439     1,979     3,422     3,884
Income from insurance activities   1,022     1,210     2,181     2,960
Mortgage banking activities   17,955     6,652     26,708     11,518
Bank card services and interchange fees   2,344     2,071     4,582     4,081
Other   2,136     1,791     4,560     3,335
Total Noninterest income   24,896     13,703     43,771     25,778
Noninterest expense:                      
Salaries and employee benefits   21,621     18,784     42,431     37,909
Net occupancy expense   3,586     3,416     7,186     6,823
Professional services   1,961     1,611     3,533     3,317
Marketing and development   806     796     1,574     1,513
Other   7,233     5,323     14,494     10,404
Total noninterest expense   35,207     29,930     69,218     59,966
Income before income taxes   7,004     7,735     15,833     13,712
Income tax expense (benefit)   1,389     1,655     3,135     2,859
Net income $ 5,615   $ 6,080   $ 12,698   $ 10,853

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

  As of
  June 30,
2020
  December 31,
2019
           
Loans:          
Commercial Real Estate $ 648,888   $ 658,195
Commercial – Specialized   325,942     309,505
Commercial – General   627,923     441,398
Consumer:          
1-4 Family Residential   360,308     362,796
Auto Loans   202,263     215,209
Other Consumer   69,754     74,000
Construction   96,638     82,520
Total loans held for investment $ 2,331,716   $ 2,143,623

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

  As of
  June 30,
2020
  December 31,
2019
           
Deposits:          
Noninterest-bearing demand deposits $ 940,853   $ 790,921
NOW & other transaction accounts   344,485     318,379
MMDA & other savings   1,340,004     1,231,534
Time deposits   322,495     356,023
Total deposits $ 2,947,837   $ 2,696,857

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

  As of and for the quarter ended
  June 30,
2020
  March 31,
2020
  December 31,
2019
  September 30,
2019
  June 30,
2019
Efficiency Ratio                            
Noninterest expense $ 35,207     $ 34,011     $ 31,714     $ 30,028     $ 29,930  
                             
Net interest income   30,448       30,199       28,624       26,568       24,837  
Tax equivalent yield adjustment   290       145       133       103       101  
Noninterest income   24,896       18,875       16,740       14,115       13,703  
Total income   55,634       49,219       45,497       40,786       38,641  
                             
Efficiency ratio   63.28%       69.10%       69.71%       73.62%       77.46%  
                             
Noninterest expense $ 35,207     $ 34,011     $ 31,714     $ 30,028     $ 29,930  
Less:  net loss on sale of securities               (27)              
Adjusted noninterest expense   35,207       34,011       31,687       30,028       29,930  
                             
Total income   55,634       49,219       45,497       40,786       38,641  
Less:  net gain on sale of securities         (2,318)                    
Adjusted total income   55,634       46,901       45,497       40,786       38,641  
                             
Adjusted efficiency ratio   63.28%       72.52%       69.65%       73.62%       77.46%  
Pre-tax, pre-provision income                            
Net income $ 5,615       7,083       10,109       8,258       6,080  
Income tax expense   1,389       1,746       2,645       1,977       1,655  
Provision for loan losses   13,133       6,234       896       420       875  
Pre-tax, pre-provision income $ 20,137       15,063       13,650       10,655       8,610  

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

  As of
  June 30,
2020
  December 31,
2019
Tangible common equity          
Total common stockholders’ equity $ 336,534     $ 306,182  
Less:  goodwill and other intangibles   (28,414)       (27,389)  
           
Tangible common equity $ 308,120     $ 278,793  
           
Tangible assets          
Total assets $ 3,584,532     $ 3,237,167  
Less:  goodwill and other intangibles   (28,414)       (27,389)  
           
Tangible assets $ 3,556,118     $ 3,209,778  
           
Shares outstanding   18,059,174       18,036,115  
           
Total stockholders’ equity to total assets   9.39%       9.46%  
Tangible common equity to tangible assets   8.66%       8.69%  
Book value per share $ 18.64     $ 16.98  
Tangible book value per share $ 17.06     $ 15.46  

Source Article

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