South Plains Financial, Inc. · NASDAQ:SPFI
South Plains Financial — Q2 2020 Earnings Presentation
39 slides from South Plains Financial's earnings presentation, Jul 30, 2020
Slide 1: South Plains Financial Investor Presentation Second Quarter 2020
South Plains Financial Investor Presentation Second Quarter, 2020 1
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: A Leading West Texas Franchise
A Leading West Texas Franchise 3 Financial Snapshot (As of June 30, 2020) Our Company Bank holding company headquartered in Lubbock, Texas with $3.6 billion in total assetsOne of the largest independent banks headquartered in West TexasRecently executed a successful IPO in May 2019; now one of two p
Slide 4: Our History and Growth Profile
Our History and Growth Profile 4 Total Assets(1) Our History Loans and Deposits(1) Tangible Common Equity(1) 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 of Leve
Slide 5: Investment Highlights
Investment Highlights 5 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 6: Experienced Management Team
Experienced Management Team 6 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 7: Significant Insider Share Ownership
Significant Insider Share Ownership Stakeholders / Insiders currently own approximately 40.4% of the Company 7 Shares(1) Name Title Position % Outstanding Market Value (000’s) South Plains Financial ESOP ESOP 2,678,648 14.83 $35,733 Curtis C. Griffith Chairman & CEO 2,480,913 13.74 $33,095 Henry Taw
Slide 8: Emphasize Community Banking
Emphasize Community Banking 8 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 9: Our Markets of Operation
Our Markets of Operation 9 Market Branches(1) Deposits (millions)(1) Market Highlights 10 $1,744 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 $357 Area produces about 50% of the
Slide 10: Our Markets of Operation (Cont'd)
Our Markets of Operation (Cont’d) 10 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 11: Enterprise Risk Management
Enterprise Risk Management 11 3 We implemented a rigorous enterprise risk management (“ERM”) system in the aftermath of the 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 effectivenes
Slide 12: Our Credit Culture
Our Credit Culture 12 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 13: Loan Approval Process
Loan Approval Process 13 Striking a Balance Between: In Our Decision Making and Responsiveness to Customers Prudence Disciplined Underwriting Flexibility Loans in excess of an individual officer’s lending limit up to $1 million may be approved by one (of three) lending and credit senior officersLoan
Slide 14: Credit Quality
Credit Quality 14 2Q’20 Highlights Credit Quality Ratios Recorded a $13.1 million provision for loan losses in Q2’20 as compared to $6.2 million in Q1’20 due primarily to management’s conservative and cautious approach Total classified loans increased to $95 million in Q2’20 from $39 million in Q1’2
Slide 15: Covid-19 Cumulative Loan Modifications
Covid-19 Cumulative Loan Modifications 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 Chairman, CEO, CLO, or CCO for additional oversightAdditionally, customers were off
Slide 16: 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 17: Capital Allocation to Drive Value
Capital Allocation to Drive Value 17 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 include managem
Slide 18: Our Acquisition Strategy
Our Acquisition Strategy 18 Strategy Guidelines Commentary 6 We plan to take advantage of acquisition opportunities, and use a combination of public stock and cash to become the acquirer of choice in West TexasCatalysts for acquisition activity include:Management successionShareholder liquidity need
Slide 19: Expansion into Midland / Odessa Markets
Expansion into Midland / Odessa Markets 19 West Texas State Bank Highlights Branch Overview West Texas State Bank (“WTSB”) was headquartered in Odessa, Texas and operated six bank branches across five West Texas communitiesWTSB had a low cost deposit base, a clean loan portfolio, and high quality ba
Slide 20: Priority Expansion Markets – West Texas
Priority Expansion Markets – West Texas 20 Dallas Bryan /College Station Houston Midland Odessa El Paso Lubbock SanAntonio Ft. Worth Austin Midland /Odessa El Paso Located along Permian Basin, which is a petroleum rich area that extends into the South Plains region of Lubbock and west into the south
Slide 21: Improving Profitability
Improving Profitability 21 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 22: Investment Highlights
Investment Highlights 22 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 23: Financial Update
Financial Update &% South Plains as” Financial, Inc.
Slide 24: Second Quarter 2020 Highlights
Second Quarter 2020 Highlights 24 Pre-Tax, Pre-Provision income of $20.1 million, compared to $15.1 million in Q1’20 and $8.6 million in Q2’19Net Income of $5.6 million, compared to $6.1 million in 2Q’19Earnings per share of $0.31, compared to $0.37 in 2Q’19Provision for loan loss of $13.1 million,
Slide 25: COVID-19 Update
COVID-19 Update 25 Impact of COVID-19 on Our… Our Business Continuity Oversight Committee 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 safety
Slide 26: Loan Portfolio
Loan Portfolio 26 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 Ag loan fundings This growth was partially offset by $24.4 million in paydowns in non-residential consumer loans and direct energ
Slide 27: Loan Portfolio Composition
Loan Portfolio 27 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 production – 6%Direct energy – 3% 2Q’20 Highlights Portfolio Composition Net Loans2Q’20: $2.3
Slide 28: Select Loan Industry Concentration Detail
Hospitality Select Loan Industry Concentration Detail 28 As of June 30, 2020 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 $115 millio
Slide 29: Noninterest Income
Noninterest Income 29 Noninterest Income$ in Millions 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 sa
Slide 30: Diversified Revenue Stream
Diversified Revenue Stream Six Months Ended June 30, 2020 30 Total Revenues$104.4 million Noninterest Income$43.8 million
Slide 31: Net Interest Income and Margin
Net Interest Income and Margin 31 Net Interest Income & Margin$ in Millions 2Q’20 Highlights 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 $429 million rise in average loans primarily from the WTSB acquisition and PPP loan
Slide 32: Deposit Portfolio
Deposit Portfolio 32 Total Deposits$ in Millions 2Q’20 Highlights 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
Slide 33: Investment Securities
Investment Securities 33 2Q’20 Highlights 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 2Q’20 Securities Composition $730.7mm Securities & Cash$ in
Slide 34: Noninterest Expense and Efficiency
Noninterest Expense and Efficiency 34 Noninterest Expense$ in Millions 2Q’20 Highlights Noninterest expense for 2Q’20 increased due to an increase of $2.2 million in commissions and higher variable expenses related to strong mortgage activityPartially offset by higher expenses in 1Q’20 for data conv
Slide 35: Balance Sheet Growth and Development
Balance Sheet Growth and Development 35 2Q’20 Highlights Balance Sheet Highlights$ in Millions 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 depositTota
Slide 36: Strong Capital Base
Strong Capital Base 36 Total Stockholders’ Equity to Total Assets Ratio Common Equity Tier 1 Ratio Tier 1 Capital to Average Assets Ratio Total Capital to Risk-Weighted Assets Ratio
Slide 37: Appendix
Appendix South Plains Fin. al, In
Slide 38: Non-GAAP Financial Measures
Non-GAAP Financial Measures 38 As of and for the quarter ended June 30,2020 March 31,2019 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 39: Non-GAAP Financial Measures
Non-GAAP Financial Measures 39 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:
South Plains Financial — Q2 2020 Earnings Presentation on 6ix