South Plains Financial, Inc. · NASDAQ:SPFI
South Plains Financial — Debt Investor Presentation (September 2020)
41 slides from South Plains Financial's debt investor presentation, Sep 30, 2020
Slide 1: Subordinated Debt Offering Investor Presentation September 2020
Subordinated Debt OfferingInvestor Presentation September 2020
Slide 2: Forward-Looking Statements and Disclosures
Forward-Looking Statements and Disclosures FORWARD-LOOKING STATEMENTSThis presentation contains, and future oral and written statements of South Plains Financial, Inc. (“South Plains” or the “Company”) and City Bank may contain, statements about future events that constitute forward-looking statemen
Slide 3: Terms of the Proposed Subordinated Debt Offering
Terms of the ProposedSubordinated Debt Offering 3 Issuer Security Amount Security Rating1 Issuance Type Offering Structure Term No Call Period Use of Proceeds Placement Agent South Plains Financial, Inc. (NASDAQ: SPFI) Fixed-to-Floating Subordinated Notes due 2030 $50 million BBB- (Stable) by Kroll
Slide 4: A Leading West Texas Franchise
A Leading West Texas Franchise 4 Financial Snapshot (As of June 30, 2020) Our Company Balance Sheet (Dollars in thousands) 2Q’20 Total Assets $3,584,532 Total Loans Held for Investment $2,331,716 Allowance for Loan Losses $40,635 Total Deposits $2,947,837 Interest-bearing Deposits $2,006,984 Noninte
Slide 5: Our History and Growth Profile
Our History and Growth Profile 5 Total Assets ($M) Our History Loans and Deposits ($M) Tangible Common Equity ($M) First State Bank of Morton, a community bank that held approximately $1 million of total assets in 1941Parent company to First State Bank of Morton acquired South Plains National Bank o
Slide 6: Investment Highlights
Investment Highlights 6 Improving Profitability Organic Growth Strong Credit Culture Enterprise Risk Management Experienced Management Team Emphasize Community Banking Capital Allocation to Drive Value 1 2 3 4 5 6 7
Slide 7: Experienced Management Team
Experienced Management Team 7 Curtis C. GriffithChairman & Chief Executive Officer Elected to the board of directors of First State Bank of Morton, Texas, in 1972 and employed by it in 1979Elected Chairman of the First State Bank of Morton board in 1984Chairman of the Board of City Bank and the Comp
Slide 8: Significant Insider Share Ownership
Significant Insider Share Ownership Stakeholders / Insiders currently own approximately 40.2% of the Company 8 * - Voting power for shares is with Richard D. CampbellMarket data as of September 4 2020; Shareholder information as of September 3, 2020. Source: Company filings and documents; S&P Global
Slide 9: Emphasize Community Banking
Emphasize Community Banking 9 2 Our strategy - deliver best-in-class customer service and achieve our goal of becoming the preferred community bank in our market areasTo achieve our goal - we build long-lasting relationships with our customers by delivering high quality products and services Our foc
Slide 10: Our Markets of Operation
Our Markets of Operation 10 Market Branches1 Deposits ($millions)1 Market Highlights 10 $1,863 Population in excess of 315,000 with major industries in agribusiness, education, and trade among othersHome of Texas Tech University – enrollment of 39,000 students 6 $343 Area produces about 50% of the c
Slide 11: Our Markets of Operation (Cont'd)
Our Markets of Operation (Cont’d) 11 Deposit Market Share: Lubbock MSA Lubbock, Texas – Our Home Market Major industries include agriculture – primarily cotton, corn, and grain sorghum – as well as education, trade and transportation, health services and governmentHome to Texas Tech University – enr
Slide 12: Enterprise Risk Management
Enterprise Risk Management 12 3 We implemented a rigorous enterprise risk management (“ERM”) system in the aftermath of the 2008 financial crisis, and view this development as a defining event for our institution This system delivers a systematic approach to risk measurement and enhances the effecti
Slide 13: Our Credit Culture
Our Credit Culture 13 We have a service-driven, relationship-based, business-focused credit culture, rather than a price-driven, transaction-based cultureSubstantially all of our loans are made to borrowers located, or operating, in our primary market areas with whom we have ongoing relationships ac
Slide 14: Credit Quality
Credit Quality 14 2Q’20 Highlights Credit Quality Ratios Net Charge-Offs to Average Loans ALLL to Total Loans HFI Recorded a $13.1 million provision for loan losses in 2Q’20 as compared to $6.2 million in 1Q’20 due primarily to the uncertain economic effects from the ongoing COVID-19 pandemic as wel
Slide 15: COVID-19 Loan Modifications – Updated
COVID-19 Loan Modifications – Updated (As of August 31, 2020) 15 The Company has taken an aggressive and proactive approach to managing credit in light of the economic uncertaintyMost at-risk loans over $1 million have been assigned to the Bank’s Chairman, CEO, CLO, or CCO for additional oversightAd
Slide 16: COVID-19 Loan Modifications – Updated
COVID-19 Loan Modifications – Updated (As of August 31, 2020) 16 Note: Other reflects loan deferrals classified under the CARES Act Section 4013Source: Company documents Bank’s preferred structure is 6mo interest only, modifications other than 6mo interest only are < 4.0% of the current loan portfol
Slide 17: Organic Growth Strategy
We are actively recruiting additional lenders and employees from other institutions. We have had success in this area which we believe is attributable to our employee ownership, long-standing market presence and desirable culture in which our employees can thrive We also cross-sell our various banki
Slide 18: Our Long Term Acquisition Strategy
Our Long Term Acquisition Strategy 18 Growth Through Accretive M&A We plan to take advantage of acquisition opportunities, and use a combination of public stock and cash to become the acquirer of choice in our core markets of West Texas and New MexicoCatalysts for acquisition activity with respect t
Slide 19: Improving Profitability
Improving Profitability 19 We have invested heavily into our infrastructure including:Our Enterprise Risk Management system State-of-the-art operations center which houses the Bank’s back-office processing for deposit operations, loan operations, mortgage operations, and corporate trainingDigital an
Slide 20: Financial Update
Financial Update &% South Plains ‘“aiy’ Financia
Slide 21: Second Quarter 2020 Highlights
Second Quarter 2020 (“2Q’20”) Highlights 21 Net Income of $5.6 million, compared to $6.1 million in 2Q’19Pre-Tax, Pre-Provision income of $20.1 million, compared to $15.1 million in 1Q’20 and $8.6 million in 2Q’19Earnings per share of $0.31, compared to $0.37 in 2Q’19Provision for loan loss of $13.1
Slide 22: COVID-19 Update
COVID-19 Update 22 Impact of COVID-19 on Our… Our Business Continuity Oversight Committee has monitored the spread of the COVID-19 pandemic since late January 2020As the pandemic escalated the Company created a Pandemic Task Force to implement the Company’s Business Continuity Plan to ensure the saf
Slide 23: Loan Portfolio
Loan Portfolio 23 Total Loans Held for Investment$ In Millions Source: Company documents; S&P Global Market Intelligence 2Q’20 Highlights Total Loans increased $229.9 million compared to 1Q’20Loan growth was driven by origination of $215.3 million in PPP loans and $34.7 million in seasonal agricultu
Slide 24: Loan Portfolio Composition
Loan Portfolio 24 Net Loans2Q’20: $2.3 Billion Source: Company documents; S&P Global Market Intelligence Commercial Real Estate includes:Comm. LDC & Res. LD – 9%Hospitality – 5%Commercial – General includes:PPP – 9%Owner – Occ. Rest. & Retail – 4%Commercial – Specialized includes:Agricultural produc
Slide 25: Select Loan Industry Concentration Detail
Hospitality Select Loan Industry Concentration Detail 25 DirectEnergy Total loans of $79 million91% support services, 9% upstreamNearly 100% Permian and Palo Duro Basins20% of energy sector classifiedZero non-accrual creditsALLL on energy sector is 5.7% Total loans of $115 million on operating hospi
Slide 26: Noninterest Income
Noninterest Income 26 2Q’20 Highlights Noninterest income is $24.9 million, compared to $18.9 million in 1Q’20The increase in 2Q’20 compared to 1Q’20 due to:An increase in mortgage banking activities revenue of $9.2 millionPartially offset by a $2.3 million gain on sale of securities in 1Q’20Fee inc
Slide 27: Diversified Revenue Stream
Diversified Revenue Stream Six Months Ended June 30, 2020 27 Total Revenues$104.4 million Noninterest Income$43.8 million Source: Company documents; S&P Global Market Intelligence
Slide 28: Net Interest Income and Margin
Net Interest Income and Margin 28 Net interest income of $30.4 million, compared to $24.8 million in 2Q’19The increase as compared to 2Q’19 was a result of:A $429 million rise in average loans primarily from the WTSB acquisition and PPP loans This was partially offset by a decrease in overall rates
Slide 29: Deposit Portfolio
Deposit Portfolio 29 Total deposits increased $282 million, compared to 1Q’20The increase was largely due to organic growth and PPP loan fundings that are still on depositNoninterest-bearing deposits grew $200 million compared to 1Q’20 Noninterest-bearing deposits represented 31.9% of deposits in 2Q
Slide 30: Investment Securities
Investment Securities 30 2Q’20 Securities Composition $730.7mm Securities & Cash$ In Millions Investment Securities totaled $730.7 million for 2Q’20Securities decreased $4.1 million from 1Q’20All municipal bonds are in TexasAll MBS, CMO, and Asset Backed securities are U.S. Government or GSE Source:
Slide 31: Noninterest Expense and Efficiency
Noninterest Expense and Efficiency 31 2Q’20 Highlights Noninterest expense for 2Q’20 increased due to an increase of $2.2 million in commissions and higher variable expenses related to strong mortgage activityPartially offset by higher expenses in 1Q’20 for data conversion expenses and purchases to
Slide 32: Balance Sheet Growth and Development
Balance Sheet Growth and Development 32 Tangible Book Value Per Share 2Q’20 Highlights Total Deposits were $2.9 billion as of 2Q’20, compared to $2.3 billion in 2Q’19:$343 million from the assumption of deposits in the WTSB acquisitionOrganic growth and PPP loan fundings still on depositTotal Loans
Slide 33: Strong Capital Base
Strong Capital Base 33 Tang. Common Equity to Total Tang. Assets Ratio Common Equity Tier 1 Ratio Tier 1 Capital to Average Assets Ratio Total Capital to Risk-Weighted Assets Ratio Holding Company Bank Level For illustrative purposes only. Assumes gross offering proceeds of $50.0 million with $49.0
Slide 34: Appendix
Appendix South Plains Fin al, In
Slide 35: Interest Rate Shock Analysis
Interest Rate Shock Analysis 35 Note: Data as of June 30, 2020Source: Company documents We use interest rate risk simulation models and shock analyses to test the interest rate sensitivity of net interest income and fair value of equity, and the impact of changes in interest rates on other financial
Slide 36: Sources of Liquidity and Current Debt Profile
Sources of Liquidity and Current Debt Profile 36 South Plains Financial, Inc. (NASDAQ: SPFI)The following are sources of liquidity at the holding company:$10.1 million of cash as of June 30, 2020$27.0 million of dividend capacity from City Bank without prior regulatory approvalCity BankThe following
Slide 37: Pro Forma Interest Coverage and Double Leverage
Pro Forma Interest Coverage and Double Leverage 37 For illustrative purposes only. Assumes gross offering proceeds of $50.0 million with $49.0 million down streamed to the Bank after offering expenses (based on an underwriting spread of 1.5% and $300,000 of other offering expenses)For illustrative p
Slide 38: Company Contact Information
Company Contact Information 38 Company Contact Corporate Headquarters South Plains Financial, Inc.5219 City Bank Parkway(806) 792-7101www.spfi.bank Mikella NewsomChief Risk Officer and SecretaryPhone: (866) 771-3347Email: investors@citybank.com
Slide 39: Ratings Summary
Ratings Summary1 39 Issuer Subordinated Debt South Plains Financial, Inc. (NASDAQ: SPFI) BBB- (Stable) A rating is not a recommendation to buy, sell or hold securities. Ratings may be subject to revision or withdrawal at any time by the assigning rating organization. Each rating organization has its
Slide 40: Non-GAAP Financial Measures
Non-GAAP Financial Measures 40 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 adju
Slide 41: Non-GAAP Financial Measures
Non-GAAP Financial Measures 41 Unaudited$ In Thousands As of and for the quarter ended, As of and for the year ended, June 30, March 31, December 31, September 30, June 30, December 31, December 31, December 31, December 31, 2020 2020 2019 2019 2019 2019 2018 2017 2016 Tangible common equity Total c
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