UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): August 3, 2021
(Exact name of registrant as specified in its charter)
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(State or other jurisdiction of incorporation)
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(Commission File Number)
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(IRS Employer Identification No.)
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(Address of principal executive offices)
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(Zip Code)
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(806 ) 792-7101
(Registrant’s telephone number, including area code)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following
provisions:
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Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
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Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
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Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
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Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
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Securities registered pursuant to Section 12(b) of the Act:
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Title of each class
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Trading Symbol(s)
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Name of each exchange on which registered
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Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2
of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☒
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any
new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
| Item 7.01 |
Regulation FD Disclosure.
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On August 3, 2021, South Plains Financial, Inc. (the “Company”) will present at the Virtual Community Bank Investor Conference hosted by Keefe,
Bruyette & Woods, Inc., a Stifel company. A copy of the investor presentation that the Company will use at the conference is furnished as Exhibit 99.1 of this Current Report on Form 8-K and is incorporated herein by reference. This investor
presentation will also be available on our website, www.spfi.bank, under the “News & Events” section.
In accordance with General Instruction B.2 of Form 8-K, the information in Item 7.01 of this Current Report on Form 8-K, including Exhibit 99.1
hereto, shall not be deemed “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section. The information in Item 7.01 of this Current
Report on Form 8-K, including Exhibit 99.1 furnished herewith, shall not be incorporated by reference into any filing or other document pursuant to the Exchange Act or the Securities Act of 1933, as amended, except as shall be expressly set forth
by specific reference in such filing or document.
| Item 9.01 |
Financial Statements and Exhibits.
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Exhibits.
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| 99.1 |
South Plains Financial, Inc. Investor Presentation, dated August 3, 2021.
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| 104 |
Cover Page Interactive Data File (formatted as Inline XBRL).
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
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SOUTH PLAINS FINANCIAL, INC.
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Dated: August 3, 2021
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By:
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/s/ Steven B. Crockett
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Steven B. Crockett
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Chief Financial Officer and Treasurer
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Exhibit 99.1
South Plains Financial Investor Presentation August 2021 1
Safe Harbor Statement and Other 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 (“City Bank” or the “Bank”) may contain, statements about future events that constitute 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, among other things, 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.
Forward-looking statements include, but are not limited to: (i) projections and estimates of revenues, expenses, income or loss, earnings or loss per share, and other financial items, (ii) statements of plans, objectives and expectations of
South Plains or its management, (iii) statements of future economic performance, and (iv) statements of assumptions underlying such statements. Forward-looking statements should not be relied on because they involve known and unknown risks,
uncertainties and other factors, some of which are beyond the control of South Plains and City Bank. These risks, uncertainties and other factors may cause the actual results, performance, and achievements of South Plains and City Bank to be
materially different from the anticipated future results, performance or achievements expressed in, or implied by, the forward-looking statements. Factors that could cause such differences include, but are not limited to, local, regional,
national and international economic conditions, the extent of the impact of the COVID-19 pandemic, including the impact of actions taken by governmental and regulatory authorities in response to such pandemic, such as the Coronavirus Aid,
Relief, and Economic Security Act and subsequent related legislations, and the programs established thereunder, and City Bank’s participation in such programs, volatility of the financial markets, changes in interest rates, regulatory
considerations, competition and market expansion opportunities, changes in non-interest expenditures or in the anticipated benefits of such expenditures, the receipt of required regulatory approvals, changes in non-performing assets and
charge-offs, adequacy of loan loss reserves, changes in tax laws, current or future litigation, regulatory examinations or other legal and/or regulatory actions, the impact of any tariffs, terrorist threats and attacks, acts of war or threats
thereof or other pandemics. Therefore, South Plains 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 presentation. For more information about these factors, please see South Plains’ reports filed with or furnished to the U.S. Securities and Exchange Commission (the “SEC”), including 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." Further, any forward-looking
statement speaks only as of the date on which it is made and South Plains undertakes no obligation to update or revise any forward-looking statement to reflect events or circumstances after the date on which the statement is made or to reflect
the occurrence of unanticipated events, except as required by law. All forward-looking statements, express or implied, herein are qualified in their entirety by this cautionary statement.NON-GAAP FINANCIAL MEASURESManagement believes that
certain non-GAAP performance measures used in this presentation provide meaningful information about underlying trends in its business and operations. Non-GAAP financial measures should be viewed in addition to, and not as an alternative for,
SPFI’s reported results prepared in accordance with GAAP. Numbers in this presentation may not sum due to rounding. 2
New Mexico Texas Dallas Bryan /College Station Houston Midland Odessa El
Paso Lubbock Ruidoso SanAntonio Ft. Worth Austin Albuquerque Santa Fe City Bank Branch Locations A Leading West Texas Franchise 3 Financial Snapshot (As of June 30, 2021) Our Company Bank holding company headquartered in
Lubbock, Texas with $3.7 billion in total assetsOne of the largest independent banks headquartered in West TexasExecuted a successful IPO in May 2019; now one of two publicly-traded Texas institutions west of I-35Repeatedly recognized as an
outstanding place to work, including being on American Banker’s Best Banks to Work For list six consecutive times Balance Sheet (Dollars in thousands) 2Q’21 Total Assets $3,712,915 Total Loans Held for Investment $2,303,462 Allowance
for Loan Losses $42,963 Total Deposits $3,158,495 Interest-bearing Deposits $2,159,554 Noninterest-bearing Deposits $998,941 Total Stockholders’ Equity $392,815 Profitability (Dollars in thousands) 2Q’21 Net
Income $13,650 Return on Average Assets (annualized) 1.46% Return on Average Equity (annualized) 14.27% Net Interest Margin 3.42% Efficiency Ratio 70.52% Capital Ratios 2Q’21 Total Stockholders’ Equity to Total
Assets 10.58% Tangible Common Equity to Tangible Assets 9.94% Common Equity Tier 1 to Risk-Weighted Assets 13.12% Tier 1 Capital to Average Assets 10.54% Total Capital to Risk-Weighted Assets 18.92% Asset
Quality 2Q’21 Nonperforming Loans to Total Loans Held for Investment 0.54% Nonperforming Assets to Total Assets 0.37% Allowance for Loan Losses to Total Loans Held for Investment 1.87% Net Charge-Offs to Average Loans Outstanding
(annualized) 0.01% Unless otherwise stated, financial data as of June 30, 2021 as complied and reported by South PlainsNote: Tangible common equity is a non-GAAP measure. See appendix for the reconciliation to GAAP
Our History and Growth Profile 4 Our History Loans and Deposits ($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 of Levelland, Texas in 1991 and changed its name to South Plains BankCompany became the
holding company to First State Bank of Morton and South Plains Bank in 1993Acquired City Bank in 1993, which was originally established in Lubbock in 1984, and merged First State Bank of Morton and South Plains Bank into City Bank in 1998 and
1999, respectively$59.2 million initial public offering on May 8, 2019, pricing with-in the range at $17.50Closed the $76.1 million acquisition of West Texas State Bank on November 12, 2019, which added six branches to the Midland / Odessa area
and approximately $430 million in assetsToday we serve our customers through 25 full-service banking locations across six geographic markets, and 15 mortgage loan production offices Note: Tangible common equity is a non-GAAP measure. See
appendix for the reconciliation toGAAP; Company documents; S&P Global Market Intelligence Tangible Common Equity ($M) Total Assets ($M)
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
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 Company since 1993 Steven B.
CrockettChief Financial Officer & Treasurer Began his career in public accounting in 1994 by serving for seven years with a local firm in Lubbock, TexasAppointed Chief Financial Officer in 2015Controller of the Bank and The Company for 14
and 5 years respectively Mikella D. NewsomChief Risk Officer & Secretary Appointed Chief Risk Officer of the Company in 2019Chief Risk Officer of the Bank for 5 years Appointed Secretary of the Company in 2013More than 20 years with the
Bank and its predecessors Cory T. NewsomPresident Entire banking career with the Company focused on lending and operationsAppointed President and Chief Executive Officer of the Bank in 2008Joined the Board in 2008 Brent A. BatesCity Bank’s
Chief Credit Officer Joined City Bank in February 2020Previously served as Division Credit Officer for Simmons First National CorpPreviously served as EVP and Chief Credit Officer of Southwest Bancorp, Inc. 1
Significant Insider Share Ownership Stakeholders / Insiders currently own approximately 39.6% of the
Company 7 Shares1 Name Title Position % Outstanding Market Value ($000’s) South Plains Financial ESOP ESOP 2,478,319 13.80% $57,324 Curtis C. Griffith Chairman & CEO 2,486,044 13.76% 57,502 Henry Taw, L.P.
* -- 1,703,787 9.46% 39,409 Cory T. Newsom President & Director 220,177 1.22% 5,093 Noe G. Valles Director 84,466 0.47% 1,954 Steven B. Crockett CFO & Treasurer 51,275 0.28% 1,186 Richard D. Campbell Lead
Director 45,093 0.25% 1,043 Kelly L. Deterding Pres. Insur Division & SVP of Insur Dev (Bank) 22,834 0.13% 528 Mikella D. Newsom Chief Risk Officer and Secretary 18,559 0.10% 429 Kyle R.
Wargo Director 8,866 0.05% 205 Cynthia B. Keith Director 4,866 0.03% 113 Total 7,124,286 39.55% $164,786 Market data as of June 30, 2021; Shareholder information as of June 30, 2021. Source: Company filings and
documents; S&P Global Market Intelligence 1 * - Voting power for shares is with Richard D. Campbell
Emphasis on 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 focus on providing “big bank” products with
the personal attention of a community bank resonates with our customers and drives market shareOur customer service-driven, community-focused business model differentiates our company from competitors, many of which are larger out-of-market
banks Our Goal We measure success by the support that we can provide to our local communities, not the level of business that we can achieveProviding service and aid to our communities is, ultimately, how we have succeeded over our long
historyOur dedication and commitment is at the core of City Bank’s culture as we encourage our employees to volunteer, including as part of their workOur employees have partnered with Meals on Wheels to help care for senior citizens in Lubbock
and the Bank has also been a long time supporter of the South Plains Food Bank and have made a five year, $150,000 pledge Dedicated to Supporting our Communities
Market Branches1 Deposits($ millions)1 Market Highlights 10 $2,039 Population in excess of
310,000 with major industries in agribusiness, education, and trade among othersHome of Texas Tech University – enrollment of 40,000 students 6 $273 Responsible for the production of over four million barrels of crude oil per day, or
roughly 39% of Total U.S. oil productionGrowing expansion of alternative energy resources, creating a solar and wind production hub 3 $410 DFW is the largest MSA in Texas and fourth largest in the nationResponsible for producing 28% of
Texas GDP in 2019Home to 22 Fortune 500 Companies 2 $163 Population of 840,000+ with major military presence through Fort BlissAdjacent to Juarez, Mexico, which has a growing industrial center, and an estimated population of 1.5 million
peopleHome to four universities including The University of Texas at El Paso 2 $168 Serves as a regional economic hubLarge investments from developers over the past ten years – housing subdivisions, condominiums, retail establishments,
etc.Growing retirement community 1 $69 Home to Texas A&M University – enrollment of 71,000 studentsRanked first in Texas and second nationwide for Best Small Places for Business and Careers in 2019 by Forbes 1 $37 Second largest
MSA in Texas and fifth largest in the nationHome to 24 Fortune 500 CompaniesCalled the “Energy Capital of the World,” the area also boasts the world’s largest medical center and second busiest port in the U.S. Ruidoso /Eastern New Mexico El
Paso Our Markets of Operation 9 2 Source: Company documents; FRED; S&P Global Market Intelligence; Respective university websites; Branch and deposit data as of June 30, 2021 Permian Basin Dallas /Ft. Worth Bryan /College
Station Houston /The Woodlands Lubbock /South Plains Find a stat
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 – enrollment ranks within the top 10 for
universities in Texas as of Fall 2020 at 40,000+ studentsThe Lubbock MSA reports unemployment of 5.8% for 2020Forbes listed Lubbock as one of its ‘‘Best Places for Business and Careers’’ during
2019 Headquarters In-Market Rank Institution City State Branches Deposits (Millions)(1) Market Share 1 Hilltop Holdings Dallas TX 10 $1,972 19.4% 2 South Plans
Financial Lubbock TX 8 $1,631 16.1% 3 Wells Fargo San Francisco CA 9 $905 8.9% 4 Prosperity Bancshares Houston TX 16 $817 8.1% 5 Amarillo National Bancorp Amarillo TX 9 $767 7.6% 6 Heartland Financial
USA Dubuque IA 7 $744 7.3% 7 Peoples Bancorp Lubbock TX 6 $499 4.9% 8 Bank of America Charlotte NC 2 $432 4.3% 9 Vista Bancshares Dallas TX 7 $330 3.3% 10 Americo
Bancshares Wolfforth TX 5 $268 2.7% 11 AIM Bancshares Levelland TX 4 $239 2.4% 12 Happy Bancshares Amarillo TX 2 $211 2.1% 13 Plains Bancorp Dimmitt TX 3 $207 2.0% 14 First Bancshares of
Texas Midland TX 2 $191 1.9% 15 Lone Star State Bancshares Lubbock TX 1 $187 1.8% Top 1 - 15 Total 91 $9,400 92.8% Total For Market (27) 113 $10,147 100.0% 2 Deposit data as of June 30,
2020 as complied and reported by S&P Global Market Intelligence. Source: BLS; FDIC; S&P Global Market Intelligence; Lubbock Chamber of Commerce; Forbes
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 effectiveness of risk management across the
institution Integrating this system into our culture and strategic decision making has improved all functional areas of the business Significantly improved asset quality by enhancing our underwriting process, and establishing a specific
credit appetite that aligns to the broader enterprise risk management framework Has provided a process to quickly detect and address potential problems in our loan portfolio, greatly improving our ability to manage through the COVID-19
pandemic We have also implemented monitoring and controls for other functional areas such as:Information security and technology, vendor management, liquidity, interest rate risk, compliance, and company reputation The ERM program has
positioned our Company to better consummate acquisitions with less risk and increased cost savings We believe we are the only community bank of our size and in our market area to implement such a comprehensive enterprise risk management
system
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 across various product linesThe few loans
secured by properties outside of our primary market areas were made to borrowers who are otherwise well-known to usWe adhere to what we believe are disciplined underwriting standards, but also remain cognizant of serving the credit needs of
customers in our primary market areas by offering flexible loan solutions in a responsive and timely mannerOur lending policies do not provide for loans that are highly speculative, subprime, or that have high loan-to-value ratiosWe maintain
asset quality through an emphasis on the following: These components, together with active credit management, are the foundation of our credit culture, which we believe is critical to enhancing the long-term value of our organization to our
shareholders, customers, employees, and communities 4 Local market knowledge Long-term customer relationships Consistent and thorough underwriting Conservative Credit Culture Loan Portfolio Diversity Relationship Focused Source:
Company documents
Loan Approval Process 13 Striking a Balance Between: In Our Decision Making and Responsiveness to
Customers Prudence Disciplined Underwriting Flexibility Loan relationships in excess of an individual officers lending authority up to $3 million may be approved with joint authorities of the market president and senior credit officer.Loan
relationships over $3 million are approved by our Executive Loan Committee.New loans over $5 million to a relationship over $20 million are reported to the Board Credit Risk Committee. These limits are reviewed periodically by the Company’s
Board of DirectorsWe believe that our credit approval process provides for thorough underwriting and efficient decision making 4 Source: Company documents
Credit Quality 14 2Q’21 Highlights Credit Quality Ratios Negative provision for loan loss of $2.0
million in 2Q’21 as the result of general improvements in the economy, a decline in loans actively under a modification, and a decrease in nonperforming loansTotal classified loans decreased $4 million in 2Q’21 as compared to 1Q’21Allowance for
Loan Losses (“ALLL”) to Loans Held for Investment (“HFI”) was 1.87% at 6/30/21 Net Charge-Offs to Average Loans ALLL to Total Loans HFI Source: Company documents 4
We are actively recruiting additional lenders from other institutions with the goal of adding 20 lenders
to our 60 lender team over the next two years. We are actively hiring in all of our markets with a focus on Dallas and Houston where we have commercial loan offices. As we put our excess liquidity to work in organic loan growth, we expect to
see margins expand, earnings growth accelerate, and our returns improve. Organic Growth Strategy Homegrown Returns We focus on leveraging our banking platform in our metropolitan markets of Dallas, Houston and El Paso, where we target
customers looking for our relationship-based approach to banking and our sophisticated products and services Our strategy is to continue gathering low-cost deposits in smaller, non-metropolitan markets and deploy our excess funds in larger,
more dynamic lending markets, where we have had strong success 15 Includes three Dallas, TX branches, two El Paso, TX branches, and one Houston, TX branchIncludes ten branches in the Lubbock/South Plains, TX market area, six branches in the
Permian Basin, TX, two branches in Ruidoso, NM, and one branch in Bryan/College Station, TXDeposit and Loan data as of June 30, 2021 (Dollars in thousands) Deposits(3) Loans(3) Amount Overall % Amount Overall
% Loans/Deposits Metropolitan Markets(1) $ 610,084 19.3% $ 670,888 29.1% 110.0% Community Markets(2) $ 2,548,411 80.7% $ 1,632,574 70.9% 64.1% 5
New Mexico Texas Dallas Bryan /College Station Houston Midland Odessa El
Paso Lubbock Ruidoso SanAntonio Ft. Worth Austin Albuquerque Santa Fe City Bank Branch Locations Organic Growth Markets 16 El Paso Adjacent to Juarez, Mexico, which has a growing industrial center and an estimated population
of 1.5 million people, and has contributed to significant growth in the El Paso MSAHome to Fort Bliss, which houses the 1st Armored Division, the 32nd Army Air and Missile Defense Command and the 402nd Field Artillery Brigade, among other major
units, and has almost 50,000 military and civilian employeesOther large employers include El Paso Healthcare System, Tenet Hospitals, The University of Texas at El Paso, The Texas Tech School of Medicine, El Paso Community College, Southwest
University and Vista College 5 Dallas / Ft. Worth1 Largest MSA in Texas, responsible for a total GDP of almost $524 Billion in 2019Estimated population of around 7.5 million as of 2019, which is a little over 26% of the state’s
populationPopulation has steadily expanded over the past decade, with an increase of over 1.2 million residentsCompetitive cost of living, provides an attractive location for companies interested in relocating to more efficient economic
environments Major U.S. Airport hub, responsible for 35.8 million enplaned passengers in 2019Home to 22 Fortune 500 companies, in notable sectors including energy, financial services, transportation, and technology Source: Bureau of
Transportation Statistics; Federal Reserve of Dallas; FRED; Texas Demographic Center
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 management succession, shareholder
liquidity needs, scale, and excessive regulationThere are 25 banks located in the West Texas market area with total assets between $250 million and $2.0 billion, which provides us with ample opportunities to drive growth and increase
shareholder valueManagement employs a strict framework for analyzing potential acquisition opportunities including:Substantial earnings accretionReasonable tangible book value dilutionAcceptable earn-back periodStrong Internal Rate of
ReturnCompleted the acquisition of West Texas State Bank on November 12, 2019 6 Most Recent Acquisition Metric Promised? Delivered? Contiguous West Texas Market Manageable Size Attractively Priced Substantial EPS
Accretion TBV Earnback < 4 Years TBV Dilution Under 10% Strong IRR
Improving Profitability 18 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 and payment technologies including improved
remote deposit capture software for business customers, expanded usage of electronic signatures, online account tools, and technologies that facilitate more efficient item processing These investments position the Bank to scale to more than $5
billion in assets through both organic growth and accretive, strategic M&A without commensurate additional expenses Long Term Goal: Deliver peer average or better ROA’s and ROE’s 7
Investment Highlights 19 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
Financial Update 20
Second Quarter 2021 Highlights 21 Note: Tangible book value per share and pre-tax, pre-provision
income are non-GAAP measures. See appendix for the reconciliation to GAAP Source: Company documents Net income of $13.7 million, compared to $15.2 million in 1Q’21 and $5.6 million in 2Q’20Diluted earnings per share of $0.74, compared to $0.82
in 1Q’21 and $0.31 in 2Q’20Pre-tax, pre-provision income of $15.1 million, compared to $19.0 million in 1Q’21 and $20.1 million in 2Q’20Average cost of deposits declined to 27 bps, compared to 29 bps in 1Q’21 and 39 bps in 2Q’20Provision for
loan loss of $(2.0) million, compared to $89 thousand in 1Q’21 and $13.1 million in 2Q’20Nonperforming assets to total assets were 0.37%, compared to 0.42% at 3/31/21 and 0.33% at 6/30/20Net interest margin of 3.42%, compared to 3.52% in 1Q’21
and 3.79% in 2Q’20 Efficiency ratio was 70.52%, compared to 65.76% in 1Q’21 and 63.28% in 2Q’20Tangible book value per share of $20.35, compared to $19.28 at 3/31/21 and $17.06 at 6/30/20Return on average assets (annualized) of 1.46%, compared
to 1.66% in 1Q’21 and 0.64% in 2Q’20
Loan Portfolio 22 2Q’21 Highlights Total loans increased by $60.8 million compared to 1Q’21,
primarily due to:$120.1 million in organic net growth; Partially offset by a net decrease of $59.3 million in Paycheck Protection Program (“PPP”) loansStrategic initiative underway to grow SPFI’s banking team by more than 30% over two years
with a focus on Dallas and Houston2Q’21 loan yield of 4.91%; a decrease of 2 bps compared to 1Q’21, excluding PPP loans Total Loans Held for Investment$ in Millions Source: Company documents
Loan Portfolio 23 Portfolio Composition Loan Portfolio ($ in
millions) 6/30/21 Commercial C&D $ 100.6 Residential C&D 195.1 CRE Owner/Occ. 240.5 Other CRE Non Owner/Occ. 428.0 Multi-Family 90.0 C&I 284.0 Agriculture 177.2 1-4 Family 375.3
Auto 230.5 Other Consumer 68.1 PPP 114.2 Total $ 2,303.5 Source: Company documents PPP loans totaled $114.2 million at 6/30/21; includes $13.9 million in PPP loan originations in 2Q’21Active pandemic loan
modifications were 1.6%, or $36.6 million, of total loans at 6/30/21:Decrease from 2.1%, or $46.9 million, at 3/31/21Approximately 96% of these remaining pandemic-related modifications are in the hotel industry 2Q’21 Highlights
DirectEnergy Select Loan Industry Concentration Detail 24 As of June 30, 2021 Hospitality Total
operating hospitality loans of $121 million*$20 million in hotels under construction, with unfunded commitments of $4 million86% of balances are to limited service hotels40% of operating hospitality classified; 1% is nonaccrual; < 2.7% are
30 days or more past dueALLL on operating hospitality is 8.6x%** Does not include loans reported in construction and development Total direct energy loans of $78 million93% support services, 7% upstreamNearly 100% are located in Permian and
Palo Duro Basins7% of energy sector classifiedALLL on energy sector is 3.5% Hotels by Geography Source: Company documents Energy Support Services by Type
Noninterest Income 25 Noninterest Income$ in Millions 2Q’21 Highlights Noninterest income of $22.3
million in 2Q’21, compared to $24.9 million in 2Q’20, primarily due to:a decline in mortgage banking activities revenuePartially offset by growth in bank card services and interchange revenue and other noninterest income itemsRevenue from
mortgage banking activities of $13.7 million in 2Q’21, compared to $18.0 million in 2Q’20 Source: Company documents
Mortgage Banking Overview 26 Mortgage Banking Activity$ in Millions 2Q’21 Highlights $61 million
decrease in interest rate lock commitments at 6/30/21 compared to 6/30/20$56.9 million decrease in mortgage loan originations in 2Q’21 compared to 1Q’21Mortgage servicing rights asset valuation – a negative adjustment of $351 thousand in 2Q’21,
compared to a positive adjustment of $1.3 million in 1Q’21 Source: Company documents
Diversified Revenue Stream Six Months Ended June 30, 2021 27 Total Revenues$107.9
million Noninterest Income$48.8 million Source: Company documents
Net Interest Income and Margin 28 Net Interest Income & Margin$ in Millions 2Q’21
Highlights Net interest income of $29.6 million in 2Q’21, compared to $30.4 million in 2Q’20. The decline was a result of:Decrease of 9 bps in loan ratesInterest expense for $50 million of subordinated notes issued in 3Q’20 Partially offset by
a decrease of 16 bps in the cost of interest-bearing deposits2Q’21 net interest margin (“NIM”) of 3.42% - decrease of 10 bps compared to 1Q’21:Excess liquidity - $130 million growth in average deposits negatively affected NIM approximately 12
bps Source: Company documents
Deposit Portfolio 29 Total Deposits$ in Millions 2Q’21 Highlights Total Deposits of $3.16 billion at
2Q’21, an increase of $2.9 million from 1Q’21Period end balances were flatDeposit balances peaked in mid-JuneCost of interest-bearing deposits declined in 2Q’21 to 40 bps from 56 bps in 2Q’20Noninterest-bearing deposits represented 31.6% of
deposits in 2Q’21, compared to 30.5% in 1Q’21 and 31.9% in 2Q’20 Source: Company documents
Investment Securities 30 2Q’21 Highlights Investment Securities totaled $777.6 million at 2Q’21,
the fair value of securities increased $10.6 million due to market conditions from 1Q’21All municipal bonds are in TexasAll MBS, CMO, and Asset Backed securities are U.S. Government or GSE 2Q’21 Securities
Composition $777.6million Securities & Cash$ in Millions Source: Company documents
Noninterest Expense and Efficiency 31 Noninterest Expense$ in Millions 2Q’21 Highlights Noninterest
expense for 2Q’21 increased from 2Q’20 primarily due to:Primarily driven by a $1.8 million increase in personnel expense, including a rise of $1.4 million in higher commissions paid on mortgage loan originations and in salary and other
personnel expenses to support mortgage activitiesManagement continues to focus on reducing fixed expenses to drive improved profitability Source: Company documents
Balance Sheet Highlights$ in Millions Balance Sheet Growth and Development 32 Tangible Book Value
Per Share Note: Tangible book value per share is a non-GAAP measure. See appendix for the reconciliation to GAAP Source: Company documents
Strong Capital Base 33 Tangible Common Equity to Tangible Assets Ratio Common Equity Tier 1
Ratio Tier 1 Capital to Average Assets Ratio Total Capital to Risk-Weighted Assets Ratio Source: Company documents Note: Tangible common equity to tangible assets is a non-GAAP measure. See appendix for the reconciliation to GAAP
Appendix 34
Non-GAAP Financial Measures 35 As of and for the quarter ended June
30,2021 March 31,2021 December 31,2020 September 30,2020 June 30,2020 Efficiency Ratio Noninterest expense $ 36,778 $ 37,057 $ 36,504 $ 35,993
$ 35,207 Net interest income $ 29,593 $ 29,544 $ 30,365 $ 31,273 $ 30,448 Tax equivalent yield adjustment 309 312 336 322 290 Noninterest
income 22,250 26,500 26,172 31,660 24,896 Total income $ 52,152 $ 56,356 $ 56,873 $ 63,255 $ 55,634 Efficiency ratio
70.52% 65.76% 64.19% 56.90% 63.28% Noninterest expense $ 36,778 $ 37,057 $ 36,504 $ 35,993 $ 35,207 Less: net loss on sale of securities - -
- - - Adjusted noninterest expense 36,778 37,057 36,504 35,993 35,207 Total income $ 52,152 $ 56,356 $ 56,873 $ 63,255 $
55,634 Less: net gain on sale of securities - - - - - Adjusted total income $ 52,152 $ 56,356 $ 56,873 $ 63,255 $ 53,634 Adjusted
efficiency ratio 70.52% 65.76% 64.19% 56.90% 63.28% Unaudited$ in Thousands Pre-Tax, Pre-Provision Income Net income $ 13,650 $ 15,160 $ 15,924
$ 16,731 $ 5,615 Income tax expense 3,422 3,738 3,968 4,147 1,389 Provision for loan losses (2,007) 89 141 6,062 13,133 Pre-tax,
pre-provision income $ 15,065 $ 18,987 $ 20,033 $ 26,940 $ 20,137 Source: Company documents
Non-GAAP Financial Measures 36 As of and for the quarter ended June
30,2021 March 31,2021 December 31,2020 September 30,2020 June 30,2020 Tangible common equity Total common stockholders' equity $ 392,815 $ 374,671 $ 370,048
$ 352,568 $ 336,534 Less: goodwill and other intangibles (26,226) (26,648) (27,070) (27,502) (28,414) Tangible common equity $ 366,589 $ 348,023
$ 342,978 $ 325,066 $ 308,120 Tangible assets Total assets $ 3,712,915 $ 3,732,894 $ 3,599,160 $ 3,542,666 $ 3,584,532 Less:
goodwill and other intangibles (26,226) (26,648) (27,070) (27,502) (28,414) Tangible assets $ 3,686,689 $ 3,706,246 $ 3,572,090
$ 3,515,164 $ 3,556,118 Shares outstanding 18,014,398 18,053,229 18,076,364 18,059,174 18,059,174 Total stockholders'
equity to total assets 10.58% 10.04% 10.28% 9.95% 9.39% Tangible common equity to tangible assets 9.94% 9.39% 9.60% 9.25% 8.66% Book value per share $ 21.81 $ 20.75
$ 20.47 $ 19.52 $ 18.64 Tangible book value per share $ 20.35 $ 19.28 $ 18.97 $ 18.00 $ 17.06 Unaudited$ in Thousands Source: Company documents