South Plains Financial, Inc. Reports Fourth Quarter and Year-End 2023 Financial Results
January 26, 2024 at 07:01 am EST
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LUBBOCK, Texas, Jan. 26, 2024 (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 and year ended December 31, 2023.
Fourth Quarter 2023 Highlights
Net income for the fourth quarter of 2023 was $10.3 million, compared to $13.5 million for the third quarter of 2023 and $12.6 million for the fourth quarter of 2022.
Diluted earnings per share for the fourth quarter of 2023 was $0.61, compared to $0.78 for the third quarter of 2023 and $0.71 for the fourth quarter of 2022.
Average cost of deposits for the fourth quarter of 2023 increased to 224 basis points, compared to 207 basis points for the third quarter of 2023 and 97 basis points for the fourth quarter of 2022.
Net interest margin, calculated on a tax-equivalent basis, was 3.52% for the fourth quarter of 2023, compared to 3.52% for the third quarter of 2023.
Loans held for investment grew $20.6 million, or 2.8% annualized, during the fourth quarter of 2023 as compared to September 30, 2023.
Nonperforming assets to total assets were 0.14% at December 31, 2023, compared to 0.12% at September 30, 2023 and 0.20% at December 31, 2022.
Return on average assets for the fourth quarter of 2023 was 0.99% annualized, compared to 1.27% annualized for the third quarter of 2023 and 1.27% annualized for the fourth quarter of 2022.
Tangible book value (non-GAAP) per share was $23.47 as of December 31, 2023, compared to $21.07 as of September 30, 2023.
The consolidated total risk-based capital ratio, Common Equity Tier 1 risk-based capital ratio, and Tier 1 leverage ratio at December 31, 2023 were 16.74%, 12.41%, and 11.33%, respectively. These ratios significantly exceeded the minimum regulatory levels necessary to be deemed “well-capitalized”.
Full Year 2023 Highlights
Total assets were $4.20 billion at December 31, 2023, compared to $3.94 billion at December 31, 2022.
Full year net income of $62.7 million in 2023, compared to $58.2 million in 2022.
Diluted earnings per share of $3.62 in 2023, compared to $3.23 in 2022.
Loans held for investment grew $266.1 million, or 9.7%, during 2023.
Tangible book value (non-GAAP) per share of $23.47 at December 31, 2023, compared to $19.57 at December 31, 2022.
Return on average assets of 1.54% for the full year 2023, compared to 1.47% for 2022.
The Bank’s wholly-owned subsidiary, Windmark Insurance Agency, Inc. (“Windmark”), was sold in the second quarter of 2023 for $36.1 million, resulting in a gain, net of related charges and taxes, of $22.9 million.
Curtis Griffith, South Plains’ Chairman and Chief Executive Officer, commented, “While our industry faced significant challenges through the year, we delivered strong results which demonstrates not only the strength of our franchise but also our ability to take advantage of opportunities that lie ahead to drive growth and shareholder value. First and foremost, our community-based deposit franchise grew modestly through the year, despite the significant dislocation that occurred following the failures of Silicon Valley Bank and Signature Bank in the first quarter. Loan demand also remained healthy across our markets while the Fed steadily raised their benchmark interest rate to what is expected to be a peak for the cycle this past December. For the full year, we delivered 9.7% loan growth which highlights both the strength of the Texas economy and our efforts to expand our lending platform with a focus on our metro markets. The credit quality of our loan portfolio also remained strong as we ended 2023 with our classified loans remaining at the lowest level since the start of the pandemic.”
Mr. Griffith concluded, “We also completed the sale of Windmark for a pre-tax gain of $33.8 million. The gain that we recorded positioned us to strategically sell $56 million of investment securities at a loss in a tax efficient manner and reinvest those proceeds into higher yielding loans. Given our strong capital and liquidity position, our Board of Directors authorized a $15 million stock repurchase program in May, which has been exhausted. We repurchased 218 thousand shares during the fourth quarter and a total of 686 thousand shares during 2023. Through the year, our Board has believed that our shares have traded below intrinsic value and we have been aggressive in repurchasing our stock.”
Results of Operations, Quarter Ended December 31, 2023
Net Interest Income
Net interest income was $35.2 million for the fourth quarter of 2023, compared to $35.7 million for the third quarter of 2023 and $36.3 million for the fourth quarter of 2022. Net interest margin, calculated on a tax-equivalent basis, was 3.52% for the fourth quarter of 2023, compared to 3.52% for the third quarter of 2023 and 3.88% for the fourth quarter of 2022. The average yield on loans was 6.29% for the fourth quarter of 2023, compared to 6.10% for the third quarter of 2023 and 5.59% for the fourth quarter of 2022. The average cost of deposits was 224 basis points for the fourth quarter of 2023, which is 17 basis points higher than the third quarter of 2023 and 127 basis points higher than the fourth quarter of 2022.
Interest income was $57.2 million for the fourth quarter of 2023, compared to $56.5 million for the third quarter of 2023 and $46.2 million for the fourth quarter of 2022. Interest income increased $708 thousand in the fourth quarter of 2023 from the third quarter of 2023, which was comprised of an increase of $1.7 million in loan interest income offset by a decrease of $945 thousand in interest income on other interest-earning assets. The growth in loan interest income was primarily due to an increase of $13.5 million in average loans outstanding and a rise of 19 basis points in the yield on loans. The decline in interest income on other interest-earning assets was predominately a result of decreased liquidity maintained at the Federal Reserve Bank of Dallas. Interest income increased $11.0 million in the fourth quarter of 2023 compared to the fourth quarter of 2022. This increase was primarily due to an increase of average loans of $273.6 million and higher market interest rates during the period, resulting in growth of $9.2 million in loan interest income.
Interest expense was $22.1 million for the fourth quarter of 2023, compared to $20.8 million for the third quarter of 2023 and $9.9 million for the fourth quarter of 2022. Interest expense increased $1.2 million compared to the third quarter of 2023 and $12.2 million compared to the fourth quarter of 2022, primarily as a result of significantly higher short-term interest rates on interest-bearing liabilities, with the increase being mainly comprised of interest expense on deposits. Additionally, interest-bearing deposits grew during the fourth quarter of 2023 versus the compared periods, which also contributed to the higher interest expense.
Noninterest Income and Noninterest Expense
Noninterest income was $9.1 million for the fourth quarter of 2023, compared to $12.3 million for the third quarter of 2023 and $12.7 million for the fourth quarter of 2022. The decrease from the third quarter of 2023 was primarily due to a decrease of $2.9 million in mortgage banking revenues, mainly from a reduction in the fair value of the mortgage servicing rights assets as interest rates that affect the value began falling late in the fourth quarter. Additionally, originations of mortgage loans held for sale declined $11.8 million due to typical seasonality. The decrease in noninterest income for the fourth quarter of 2023 as compared to the fourth quarter of 2022 was primarily due to a reduction of $2.8 million in income from insurance activities due to the sale of Windmark and a decrease of $1.1 million in mortgage banking revenues as originations of mortgage loans held for sale declined $35.0 million due to higher mortgage interest rates during the period, which has slowed mortgage activity.
Noninterest expense was $30.6 million for the fourth quarter of 2023, compared to $31.5 million for the third quarter of 2023 and $32.7 million for the fourth quarter of 2022. The $892 thousand decrease from the third quarter of 2023 was largely the result of a reduction of $732 thousand in personnel costs, which predominately came from lower mortgage personnel costs as mortgage loan originations slowed as well as lower health care insurance costs. The decrease in noninterest expense for the fourth quarter of 2023 as compared to the fourth quarter of 2022 was primarily driven by a reduction of $783 thousand in Windmark-related expenses due to its sale and a reduction of approximately $1.2 million in mortgage noninterest expenses due to the decline in mortgage loan originations.
Loan Portfolio and Composition
Loans held for investment were $3.01 billion as of December 31, 2023, compared to $2.99 billion as of September 30, 2023 and $2.75 billion as of December 31, 2022. The $20.6 million, or 2.8% annualized, increase during the fourth quarter of 2023 as compared to the third quarter of 2023 occurred primarily in commercial real estate loans, partially offset by a reduction in consumer auto loans. As of December 31, 2023, loans held for investment increased $266.1 million, or 9.7% year over year, from December 31, 2022, primarily attributable to strong organic loan growth, occurring mainly in commercial real estate loans.
Deposits and Borrowings
Deposits totaled $3.63 billion as of December 31, 2023, compared to $3.62 billion as of September 30, 2023 and $3.41 billion as of December 31, 2022. Deposits increased by $5.5 million, or 0.6% annualized, in the fourth quarter of 2023 from September 30, 2023. As of December 31, 2023, deposits increased $219.7 million, or 6.5% year over year, from December 31, 2022. Noninterest-bearing deposits were $974 million as of December 31, 2023, compared to $1.05 billion as of September 30, 2023 and $1.15 billion as of December 31, 2022. Noninterest-bearing deposits represented 26.9% of total deposits as of December 31, 2023. The quarterly change in total deposits was mostly flat, reflecting a decline in noninterest-bearing deposits of $72.1 million and an increase in interest-bearing deposits of $77.6 million. The year-over-year increase in total deposits is primarily a result of growth of $152 million in brokered deposits in the second and third quarters of 2023 given the overall focus in the banking industry on improving liquidity, as well as organic deposit growth. In December 2023, $12.4 million in subordinated notes with a weighted-average interest rate of 5.75% were redeemed.
Asset Quality
The Company recorded a provision for credit losses in the fourth quarter of 2023 of $600 thousand, compared to negative $700 thousand in the third quarter of 2023 and $248 thousand in the fourth quarter of 2022. The provision during the fourth quarter of 2023 was largely attributable to organic loan growth and net charge-off activity during the quarter.
The ratio of allowance for credit losses to loans held for investment was 1.41% as of December 31, 2023, compared to 1.41% as of September 30, 2023 and 1.43% as of December 31, 2022.
The ratio of nonperforming assets to total assets as of December 31, 2023 was 0.14%, compared to 0.12% as of September 30, 2023 and 0.20% as of December 31, 2022. Annualized net charge-offs were 0.08% for the fourth quarter of 2023, compared to 0.05% for the third quarter of 2023 and 0.09% for the fourth quarter of 2022.
Capital
Book value per share increased to $24.80 at December 31, 2023, compared to $22.39 at September 30, 2023. The increase was primarily driven by an increase in accumulated other comprehensive income (“AOCI”) of $32.9 million and $8.2 million of net income after dividends paid. The increase in AOCI was attributed to the after-tax increase in fair value of our available for sale securities, net of fair value hedges, as a result of decreases in long-term market interest rates during the period.
Conference Call
South Plains will host a conference call to discuss its fourth quarter and year-end 2023 financial results today, January 26, 2024, at 10:00 a.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 13743667. The replay will be available until February 9, 2024.
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, New Mexico market. 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 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 Share, Tangible Common Equity to Tangible Assets, 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 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 within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements reflect South Plains’ current views with respect to future events and South Plains’ financial performance. 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, the impact on us and our customers of a decline in general economic conditions and any regulatory responses thereto; potential recession in the United States and our market areas; the impacts related to or resulting from recent bank failures and any continuation of the recent uncertainty in the banking industry, including the associated impact to the Company and other financial institutions of any regulatory changes or other mitigation efforts taken by government agencies in response thereto; increased competition for deposits and related changes in deposit customer behavior; changes in market interest rates; the persistence of the current inflationary environment in the United States and our market areas; the uncertain impacts of ongoing quantitative tightening and current and future monetary policies of the Board of Governors of the Federal Reserve System; the effects of declines in housing prices in the United States and our market areas; increases in unemployment rates in the United States and our market areas; declines in commercial real estate prices; uncertainty regarding United States fiscal debt and budget matters; cyber incidents or other failures, disruptions or breaches of our operational or security systems or infrastructure, or those of our third-party vendors or other service providers, including as a result of cyber attacks; severe weather, natural disasters, acts of war or terrorism, geopolitical instability or other external events; regulatory considerations; competition and market expansion opportunities; changes in non-interest expenditures or in the anticipated benefits of such expenditures; the risks related to the development, implementation, use and management of emerging technologies, including artificial intelligence and machine learnings; potential increased regulatory requirements and costs related to the transition and physical impacts of climate change; current or future litigation, regulatory examinations or other legal and/or regulatory actions; 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 Annual Report on Form 10-K and Quarterly Reports on Form 10-Q on file with the SEC, including the sections entitled “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of such documents, and other documents South Plains files or furnishes with the SEC from time to time, which are available on the SEC’s website, www.sec.gov. 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, the Company can give no assurance that the results contemplated in the forward-looking statements will be realized and 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 applicable law. All forward-looking statements, express or implied, included in the press release are qualified in their entirety by this cautionary statement.
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
December 31, 2023
September 30, 2023
June 30, 2023
March 31, 2023
December 31, 2022
Selected Income Statement Data:
Interest income
$
57,236
$
56,528
$
50,821
$
47,448
$
46,228
Interest expense
22,074
20,839
16,240
13,133
9,906
Net interest income
35,162
35,689
34,581
34,315
36,322
Provision for credit losses
600
(700
)
3,700
1,010
248
Noninterest income
9,146
12,277
47,112
10,691
12,676
Noninterest expense
30,597
31,489
40,499
32,361
32,708
Income tax expense
2,787
3,683
7,811
2,391
3,421
Net income
10,324
13,494
29,683
9,244
12,621
Per Share Data (Common Stock):
Net earnings, basic
0.63
0.80
1.74
0.54
0.74
Net earnings, diluted
0.61
0.78
1.71
0.53
0.71
Cash dividends declared and paid
0.13
0.13
0.13
0.13
0.12
Book value
24.80
22.39
23.13
21.57
20.97
Tangible book value (non-GAAP)
23.47
21.07
21.82
20.19
19.57
Weighted average shares outstanding, basic
16,443,908
16,842,594
17,048,432
17,046,713
17,007,914
Weighted average shares outstanding, dilutive
17,008,892
17,354,182
17,386,515
17,560,756
17,751,674
Shares outstanding at end of period
16,417,099
16,600,442
16,952,072
17,062,572
17,027,197
Selected Period End Balance Sheet Data:
Cash and cash equivalents
330,158
352,424
295,581
328,002
234,883
Investment securities
622,762
584,969
628,093
698,579
701,711
Total loans held for investment
3,014,153
2,993,563
2,979,063
2,788,640
2,748,081
Allowance for credit losses
42,356
42,075
43,137
39,560
39,288
Total assets
4,204,793
4,186,440
4,150,129
4,058,049
3,944,063
Interest-bearing deposits
2,651,952
2,574,361
2,473,755
2,397,115
2,255,942
Noninterest-bearing deposits
974,201
1,046,253
1,100,767
1,110,939
1,150,488
Total deposits
3,626,153
3,620,614
3,574,522
3,508,054
3,406,430
Borrowings
110,168
122,493
122,447
122,400
122,354
Total stockholders’ equity
407,114
371,716
392,029
367,964
357,014
Summary Performance Ratios:
Return on average assets (annualized)
0.99%
1.27%
2.97%
0.95%
1.27%
Return on average equity (annualized)
10.52%
14.01%
31.33%
10.34%
14.33%
Net interest margin (1)
3.52%
3.52%
3.65%
3.75%
3.88%
Yield on loans
6.29%
6.10%
5.94%
5.78%
5.59%
Cost of interest-bearing deposits
3.14%
2.93%
2.45%
2.03%
1.52%
Efficiency ratio
68.71%
65.34%
49.39%
71.42%
66.35%
Summary Credit Quality Data:
Nonperforming loans
5,178
4,783
21,039
7,579
7,790
Nonperforming loans to total loans held for investment
0.17%
0.16%
0.71%
0.27%
0.28%
Other real estate owned
912
242
249
202
169
Nonperforming assets to total assets
0.14%
0.12%
0.51%
0.19%
0.20%
Allowance for credit losses to total loans held for investment
1.41%
1.41%
1.45%
1.42%
1.43%
Net charge-offs to average loans outstanding (annualized)
0.08%
0.05%
0.05%
0.09%
0.09%
As of and for the quarter ended
December 31 2023
September 30, 2023
June 30, 2023
March 31, 2023
December 31, 2022
Capital Ratios:
Total stockholders’ equity to total assets
9.68
%
8.88
%
9.45
%
9.07
%
9.05
%
Tangible common equity to tangible assets (non-GAAP)
9.21
%
8.40
%
8.96
%
8.54
%
8.50
%
Common equity tier 1 to risk-weighted assets
12.41
%
12.19
%
12.11
%
11.92
%
11.81
%
Tier 1 capital to average assets
11.33
%
11.13
%
11.67
%
11.22
%
11.03
%
Total capital to risk-weighted assets
16.74
%
16.82
%
16.75
%
16.70
%
16.58
%
(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)
(1) Average loan balances include nonaccrual loans and loans held for sale. (2) Net interest margin is calculated as the annualized 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)
(1) Average loan balances include nonaccrual loans and loans held for sale. (2) Net interest margin is calculated as the annualized net interest income, on a fully tax-equivalent basis, divided by average interest-earning assets.
South Plains Financial, Inc. Consolidated Balance Sheets (Unaudited) (Dollars in thousands)
South Plains Financial, Inc. is the bank holding company for City Bank (the Bank). The Bank is an independent bank 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, New Mexico market. The Bank provides a range of commercial and consumer financial services to small and medium-sized businesses and individuals in its market areas. The Banks principal business activities include commercial and retail banking, along with investment, trust, and mortgage services. The Bank is primarily involved in real estate, commercial, agricultural and consumer lending activities with customers throughout Texas and Eastern New Mexico. The Bank operates about 25 full-service banking locations across seven geographic markets. The Bank also operates about eight loan production offices both in its banking markets and in certain key areas in Texas that focus on mortgage loan origination.
SOUTH PLAINS FINANCIAL, INC. 
