SPFI - Earnings call transcript Q3 2020 | South Plains Financial, Inc.

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Operator

Good afternoon, ladies and gentlemen, and welcome to the South Plains Financial Third Quarter 2020 Earnings Conference Call.

During today's presentation, all parties will be in a listen-only mode.

Following the presentation, the conference will be opened for questions with instructions to follow at that time.

As a reminder, this conference call is being recorded. I would like now to turn the call over to Mr. Officer Plains Financial Chief Crockett, of Financial. South Steven go ahead, sir. Please

Steven Crockett

me everyone. operator, XXXX your With Cory Curtis Newsom, and Bates, Executive you, and Bank's and We our earnings today Chairman Griffith, good call. our quarter Thank Officer; third Chief afternoon appreciate Credit Chief are our participation conference Brent President; here City in Officer.

a of available XXth, XXXX. be this through will As call replay a reminder, November

Web to deck Investors complement today's available is the our slide discussion section on of a site. Additionally,

as begin, are variety we factors statements and statements as of release call X today's statement. subject uncertainties statement press presentation. the this future results remind call may required Slide herein that any Please statements earnings we of anticipated duty Before our those presented by made update actual other results. let Harbor are today's everyone beginning Any subject to on All see me such on contain Safe except to and from during Safe differ that comments only cause forward-looking Page forward-looking of do and not to of Harbor could forward-looking date a undertake materially that law. to risks, and are X our made

our the we to call, release. most evaluating believe At are comparable to our the Curtis. non-GAAP measures may useful earnings today's call during measures will measures, turn GAAP Additionally, be in these this of performance. certain discuss which in found non-GAAP over we point, A I can reconciliation

Curtis Griffith

for modifications for of discuss have we well to update our I level afternoon. stabilization subordinated as as of related and quarter provide Steve call, mortgage our our will on infrastructure. open have with and the achieved portfolio active capital COVID-XX sharp detailed a a will the conclude more largely experienced the as our and to To that uncertain issuance. business as have continue the our financial in light growing and a customers decline review weathered Steve third I'm the pleased good during with quarter, we call in very our recent you, we environment and to will third the Cory have seen loan success results that we your Thank XXXX in run Bank's our note our an results scaling date. economic will performance our questions. smoothly of operations priorities today's high then start, review On

over steps crisis credit to be manage have we metrics a at a which testament taken six credit well culture years this is in seen to our as improve that and to Our the conservative through instill the can the Bank, ability this last as significant our quarter. team our systems,

common quarter of second which the second and $X.XX recorded in third diluted third Turning last or compares share per X, in was quarter pre-provision and We million third income $XX.X year's year XXXX million for the the quarter. net loss XXXX XXXX, XXXX, in provision we the quarter income to of provision $XX.X quarter ago million million million to to diluted Slide compares or that million, $XX.X $XX.X which income compares loan in of quarter $XXX,XXX the XXXX of share per of XXXX. which Pre-tax reported in $X.X quarter third $XX.X quarter. of in $X.X to $X.XX million we of the common net for for the third reported of

a continue was to to provision expense qualitative conservative take largely in we the Our as third approach credit. quarter

proven of has to sound the manage during businesses cash decision allow peak to and one, modify their in customers to our has this our a better to as payments the loans Our borrowers build interest-only their early allowed to be this pandemic crisis.

in June decline in active XXXX, portfolio sharp with at have during we versus the as portfolio only modification our to modifications remaining of third a COVID-XX XX, five. X.X% XX.X% related Importantly, quarter, detailed of the experienced slide on

While with and of pace we continue accelerating, manage the our will aggressively our we of portfolio economies Bank. are the to local business are credit optimistic the improving that quality

the As have I $XX.XX we what has the able touched of to third the this we second to on pandemic. again book been very deliver Bank to $XX.XX despite per result grew faced recording challenges a growth I'm an substantial in of of enjoy last outsized growth been to challenging that we In compared quarter, quarter the as expense the have XXXX. the provision a as share value quarter continues and quarter. of despite proud in that environment XXXX,

fixed we that at take to advantage be Bank will capital, may able the or X.X% notes We of for rate position that of attractive to qualifies rate from Tier purposes. the to X to pleased the were issued $XX pandemic. issue third arise capital subordinated the an million as floating notes dislocations very regulatory at interest quarter that these end Turning to

and shareholders to has expense. our on and in attractive awareness Looking is with will have Bank the dividend. providing returns forward, our our group. the having and raised infrastructure, accretive incremental process slowing goal to find like through term energy to to us scaling exceeded this deliver which State peer Permian, prices internal accelerate which beginning allow accomplish our application, in will longer to very recently WTSB minimal cost strong a we quarterly has to drop cross-sale save launched upwards will or capital to asset focus $X this, regards reach opportunities M&A, our expand goals Despite that We growth. encourages We we WTSB, while and this our believe economic geographic the steady are also In goal value of help revenue believe while results. opportunistic will in allow the cross-selling M&A, return to activity us acquisitions, maximize billion been To with shareholders. driving an acquisition approach our levels our on focus of delivering for to employees us handle has in capacity line achieve which than of of is to Texas successful West as or better in our very our

also We of Xst, which our encourages October community visit on program community rolled for Web not-for-profit favorite members rewards vote their to the out to our site organizations.

per further We an Directors customer increase our consecutive regards our communities. report this City as real represents to Permian dividend, a in into which to have to I $X.XX on local our XXnd, October dividend way this am found sixth drive and In approved Board program embed engagement dividend. the of Bank see pleased our that share quarterly to to

raise while to Importantly, our uncertain. to provides economic and capital acquisitions our strength dividend provide the the accretive remains environment maintain the balance flexibility sheet pursue

also Turning recent We Dallas economies. they report and the the our improvement new where across by by Fed's cases see of the an to in Texas, to a started result spending. COVID in rebound local echoed decline peak driven the July most was acceleration the through which noted from summer, statewide consumer

trends as Tech new rise. employment we local is pickup lifting are again a We remains Lubbock closely the Texas economy projects recent optimistic the spending and as watching started pandemic to as nice seeing cases in remain and That breaking said, University once are in have ground, and session.

over me Cory. to Now let call the turn

Cory Newsom

investment portfolio million Slide on the decline Curtis, and the the by quarter with the our $XX energy were X. Starting in from for second XXXX million second quarter nonresidential The end and loan of in and of XXXX. which third afternoon direct third increase of good loans of you, was at $XX decrease largely $X loans. driven from downs consumer held from $XXX of $X.XX XXXX XXXX is Thank million Loans pay the everyone. billion, a of quarter million quarter

large also of estate several early loans third through experienced commercial the We payoffs of XXXX. real quarter

that very of six touched and to a on, paid during only allowing loan in provided to our Curtis our they time. early has for their customers assistance management months, manage businesses the modify run our were their crisis By effectively we to and interest uncertain our As loans, more primarily borrowers dividends. portfolio to aggressive able the

economy ERM has investment of majority address and has returned our in terms. customers results loan which These pre-modification to problems preliminary of provided the the detect a process As our potential have are portfolio. payment validation our a quickly improved, in system the to also

portfolio Our ERM system the pandemic. ability loan to through has greatly our manage improved our

a the end our active loan of was interest-only our These loans. XX-month generally XX-day the our Turning nine. our will is area portfolio, slide which hospitality exposure, PPP the of $XXX deferral quarter, excluding combination At million to one are and a hospitality portfolio approximately of to a The portfolio time interest-only. representing of X.X% take modifications. approximately of resolve modifications XX% or has nine-month third in loans which more

XXth. Importantly, due are September are only more days or X% of these and none non-accrual loans past XX at

We work with position looking through improve we the and our additional opportunities as for process. borrowers are the also modification to Bank's collateral obtain

Our direct loans. X.X% of level exposure our million. excluding modest million is quarter-end energy $XX PPP of second at This quarter's was from portfolio, loan $XX decline the or a

We exposure the prices and continue to feel from have in modestly Permian oil levels. the quarter's stabilized comfortable second our with as activity has improved

service support outside of industry. half the our is exposure of energy reminder, strong a sector where As we one direct almost guarantor have energy loan

second the that have million which we income fee we non-interest million of XXXX quarter to XXXX, the in generated given of slide XX, the Turning generated XXXX loan on growth have of banking in and $XX.X quarter million generated originations. revenue, due million million to second $XX.X in we income The of third in quarter compares increase in to XXXX. from the mortgage was of that of $X.X the primarily quarter third $XX.X the mortgage increase an of $XX.X

$X.X income a in to related activities. our experienced also We increase insurance million

compared business insulating second very volumes. Bank XX.X% order XX% quarter XXXX, This our with as expand be for see gains and in A growth the refinance infrastructure to in third eventual the refinance maintained expense of for and and I'm we which key grow achieved in been can we XXXX next third the accomplish in marketing to the that compared To in as revenues gains. third focus to year seen this, decline mortgage our in our the in of expect have against has would which efficiency volumes of grown, structure profitability ago. and progress XXXX. Bank year. to quarter quarter scaling pull income to room eventual in on assets. continued total improve fee as our the I with the efficiency XX.X% quarter, strong the as our profitability ratio we contributed pleased further for while For of That have our XX% XX.X% volumes quarter has ratio return was our increasing through have a represented said, efficiencies decline the our back

as robust made economy. and remain continues to however, bank. that investments to an growth more becomes the of we normalize bankers credit recruiting have share power to earnings the talented evident expect improving We the market take with

to our In the fact, our see of business. we mortgage benefits investments are in starting already

the driving been instrumental purchase rate mortgage season brought While has low markets. benefited year on interest and last over have in share certainly refinance that the the have we activity, builder environment the teams in gains market

Another have Paso, who leader good in City brought where in example and market city we El lending on is to our bringing been new the in strong instrumental commercial business in relationships has a Bank. new

turn of we organic deposit to the provides I in are bear many local Taken over results. would Steve. this together, to economies optimism to starting investments as our seeing call are trends as growth now for similar like our

Steven Crockett

Thank quarter of Starting of million for the income quarter for income. the WTSB the were loan funded partially environment second sharp to you, XXXX basis attributable the $XX.X third in points interest a XX Slide of in XXXX. as Cory. an net first million decline XXXX million quarter the third In and loans our was $X.X of in $XXX deferred of acquisition compared on in third the largely to quarter recognized to interest of by PPP experienced million the as as There as rates rate in PPP average that a primarily due XXXX, in loans offset million PPP XXXX The adjustment $XX.X unrecognized of is from quarter, for the $XX.X fees of of was second well currently third the increase the $X.X million quarter non-PPP rise quarter we fees. since decrease to XXXX. XX,

quarter to increased quarter of compared third margin in interest of X.XX% net the as the Our second XXXX to X.XX% XXXX. in

rates. in quarter XX Our allowed the the XXXX to lower to average some due and in in the the the $X.XX XX XX.X% rate we of to or of at third declined cost deposits, quarter the basis total the as deposits the $XXX to end rate our $XXX X will XX.X% XX was XXXX of $X.XX and monitor second as total of on billion bearing XXXX. of third largely quarter deposits of quarter the essentially our third ago of quarter points compares deposits from deposits the of XXX ended million third basis end year, in of million to on in $XXX believe cost total constant to pay future second lower quarter. point In We basis decline We which continue seen million deposit the this year or were second XXXX third the XXXX quarter basis of points at XXXX total XX.X% XX. compared compared of to basis XX.X% points of improvement at or to and additional Slide billion deposits points there can funds as deposits. is the further us XXXX, which be March in with room the in we non-interest federal in This quarter

to assets industry. non-performing related the the basis our industry million this million total status XXXX. The loans ratio XX to as transportation the relationship but non-accrual a quarter third of paid-off points in quarter points was in XX, XXXX have debt in on as in on the $X.X the the to increase quarter-end, assets placed non-accrual. basis to to of to were XX slide stress to October. borrower compared The Turning in of agreed, borrower's quarter due $X.X third performed second increased that put Subsequent

the provision third losses represents said, the did the of qualitative, XXXX, mentioned, our largely quarter in culture. that quarter As for to credit continues Curtis a That we COVID-XX. our add as given our of loan result to for allowance exist conservative recorded third was uncertainty

for our average loans interest to loans assets September total X.XX% ALLL compared remains on XX, Additionally, XX, as PPP over the X.XX% overall The portfolio our points to was as the driven third time in same compared XXXX, very of period. quarterly XXXX. XXXX at period well decrease X.XX% XXXX, it rates excluding June of a to reserved basis in at quarter yield earning by the was the XX decline interest was

ahead commissions primarily X.XX% common XXXX. to as the a second will compared and PPP to primarily XXXX $XX.X to million $XX.X of interest $XXX,XXX acquisition the in our of of the second was quarter of of law well our activity with $XXX,XXX earning concluding of XXXX. by variable expense an quarter XX.XX% the in quarter to the other tangible to I from This increase in to non-interest the assets the million, XX, of disclosed we offset XX, slide increased Additionally, Skipping due XXXX million call and turn suit quarter, XXXX well partially to tangible in expenses recovery third X.XX% was reductions. higher expense capitalized quarter as end this previously mortgage our to origination ahead slide third back other at of of as $XXX end equity for the third remarks. and settlement WTSB assets related Curtis remain compared the quarter loans. of Skipping additional at of the now the of strong to

Curtis Griffith

Thank you, Steve.

a our XX.X% our our can laid-out and quarter Our on this effectively a efficiency ratio strategy to of our be remained on a results year ago we are IPO. at more have third compared seen disciplined we infrastructure, record of the as are quarter roadshow validation than which IPO XX.X% as scaling in little that expenses

We system current conservative have our credit the has manage and instilled helped ERM cycle. us culture a

to successfully and expense Importantly, our profitably well We help the we which our Through and acquired take integration, reserved expectations. feel a execute WTSB have have of acquisition. we efficiently more and capitalized to advantage future will developed on next opportunities. skill-set, us save over-achieved

to talented attracted the bankers position organic bank this our and quarter normalize. growth who for have help economy contributed as have future continues we to Lastly, Texas will growth who the

of efforts much like customers. you them. greatly to employees that to Bank however, accomplished of possible commitment everything their for I appreciate and the Steve, Operator? our the Cory, in do. Brent would None a and that, thank operator myself I'd questions. short without with have would been like to this, the and ahead. both With our have to up open and are of any tireless the opportunity excited ask We period time the line

Operator

Thank you.

We Thank a question-and-answer Instructions]. session will now [Operator be you. conducting

your Brady comes from with with KBW. question. Please Gailey Our first question proceed

Brady Gailey

you the be that Texas, do stock which repurchases? building sub-debt M&A but I think look at a it's hear compelling. you tangible interested term longer to your on raise, value, West is and What book mean XX% about you're if little of out I So trades, below in where you share

Curtis Griffith

one. that's below other that. we and the a that address that's think out near-term. I some go certainly And have frankly, of level me to are wise and restarts I think share tangible Let consider activity. into bank a banks markets when We've do our use repurchase back that do that coming in would some here We trading discussions about our had see in with that's you something and capital of book Board

Brady Gailey

high a to that now of a great And the then, I job you watermark consider little do see or could think I mean you up, you here. loans. Would guys a continue your X.X% of build from over reserves non-PPP you have done building mean, that reserve

Brent Bates

in deterioration feel to just going where really we I about We're reserved. as it, on but and to good reserves tell, where to, pandemic have you sectors about this continue evaluate I now think we have can right right broad seeing a not not through I now. good really continue seeing we're are feel we're our as

Brady Gailey

up And how couple at income you that look points. going interest forward? nice do spread you you interest holding want But look margin about how guys this not you margin a of did however the sure of the you even do or about but if net quarter basis think net at really dollars job or a I'm think to it,

Steven Crockett

quarter few on income We have Otherwise, of margin. points up additional loan purchase basis flat. We in basically there. did with a have interest a would been we ended good net

know on still will the pressure of this on we come we we is on to there I down mean mean having the than continue is and you to we do, side loans we we some see to our some to deposit next do what to side, some see were books had that loans Going pressure modest with some know that lower this NIM the new and we forward, continue but that, as re-pricing maybe the we loan books, able room but there expect there believe I reprice can lower quarter. rates

Brady Gailey

me. finally then And from

linked-quarter about we enter ex-PPP, at growth How a XXXX? If as you loan down are quarter. look were you loans they little thinking this bit

Curtis Griffith

see to our normally QX, USDA out would One the reason as came ag portfolio experience that some fund really weather-related didn't our up, have here farmers as in did from that reasons growth did programs. we that's that help well we or the of for just various

but quality more as pretty to loans on effect those loans real in line think the down back pretty aggressive loan on our we'll I being our our in some a and are and try estate a normal of have historical we're the a situation that on to side norms. get positive XXXX. We're particular on also trying in get that bit ratio to line have back books with commercial seasoned reaching a to on that we new to out aggressive going being think more I deposit to some bottom little effect it's NIM, on push on rights may be

lot people for and for their for around to For of but be there top projects when are us, much folks want a a and those home. looking some look potentially we of existing refinance it to is uncertainty, ways now definitely a so of mind tough right we new still looking seeing and environment they're is

Brady Gailey

what number be from of you loan excluding you couple impact all, PPP any next do mid shrinkage. the think Curtis, would growth years So sort single-digit appropriate for of for

Curtis Griffith

sir. Yes,

be that we we If QX and that couple you certainly equation, But all out single we that the do obviously levels achievable that the dollars that's in loan ex-PPP team do low of during hope hundred million to that digit in place. of have XXXX really and a away goes think with would because mid QX. taking growth XXXX

Operator

you. Thank

with Our proceed Sandler. your next with Brad Please Piper Milsaps question comes from question.

Bradley Milsaps

to havoc questions bit those on look sort little quickly know been mortgage working of been of numbers, have expense you but continue impact Steve, may of can have of lot what banking a of the your asked, kind you maybe to of but happen how expenses. hard to about So I more the ways curious excluding efficient. for know just play a guys get with line sort mortgage. think just the to I

Steven Crockett

that's talked had we of a know you actually said to continuing that that that upwards, some when that legal But our as about but settlement of mortgage you and drive $X obviously, release expense our of point about shrink whatever insurance we now that had, quarter, able we're is third our generating and skew even the exclude we revenue are the in to address you kind expenses. expense, So offset looking the to to in them activities some are were thing, up good non-interest they non-interest million, that does down.

Bradley Milsaps

expect operating way of those it be you to of total back drop another you've to the or levels room return to if in down. sort year, this kind quarters You further XXXX, expense got some do would of push the level even you may thinking originations mortgage quarter about you first to of had think maybe it

Steven Crockett

it's say saves level and still we do we of the fourth with quarter, we closer going quarter, to that's but to to If were course. toward. and Of where a before kind acquisition, able first some conversion we're trending I'd of go cost expenses back the be back the had to the

Curtis Griffith

department that add and passed We're to comment, are we through we all areas we of Brad still things that going just finding finding going our that of to some, do think some still moderate heads. for looking we in areas, and that also are Just across good places organization. saves the cost expenses some cost still and operating we've we've of we're trim that we're other personnel continue saves some can but see to got back the I going can

can't are right You organic save like this focus in time on is your obviously, very a we of now. achieving way certainly lot very it into prosperity cognizant where we something completely, a but growth can when we're and of it's difficult

nice I you're to see XXXX. in us out some think going results of

Bradley Milsaps

And you obviously of biggest fourth some I forward, thinking that I to kind be as fourth commission I and the expect you quarter. came get, one still some new going know missed reporting quarter of with was acquisitions but your lot in do helpful. if quarter you Great. insurance, of changed some the typically that get. had quarter on income a apologize I with change maybe the And follow-up just Is this revenue a and seems you've fee the this. you've dollars that's on a way of bigger that

Steven Crockett

Yes.

come the based kind like would fourth of I some like would quarter. the have but a some third bump based so is last fourth on won't the do pretty it still and we on I timing have we're a which like, what look waiting how confusing. to that to we see that We but lot profit like change we in -- sorry -- weeds get do down we've come to see we would quarter. you fourth seen that quarter, historically as of our of bonuses insurance commission the a the that's revenue of really end would quarter, additional sharing -- and year we of on were of bump to won't did that get the right from recognition would far this in companies on close this but on be see because definitely, we some get in we of have said, really rest that expect the at all a we see expect that third ratios So, this, still too did in of what seen the the expect quarter, the know their plus little revenue year, year And would that the of so in. in what came did came lot

Bradley Milsaps

Yes.

the So it those kind in million year, be of at annual of $X you the depending kind going upon that to of did look or how best if last of you're number, at number, kind an to of end play insurance plus year minus out. factors some

Steven Crockett

at that's Yes, a great way to look it.

Operator

the There to management over are no for further floor turn comments. to questions closing at this time. like I back would

Curtis Griffith

things of can the to we whole more want and when a support interest near-term our I today But now, IPO. XXXX. on normal do Obviously, everybody had we're get lot South a We do we're hope through Plains going sometime of the that plans. was pandemic that to move cautious. think and appreciate including disrupted and to Curtis direction call that back everyone be activity we the that and the is very of for lot set has on safe levels back moving thank continued We right forward your planned This we out and this Financial. during

quarter. forward of in we great people there fourth everyone and Thanks and look else to some healthy results keep trying and our are can reporting productive the all our for to wearing definitely same out requiring after safe We locations and and hope you again. mask do the

Operator

This concludes today's conference.

your for participating your at disconnect day. and you You Thank have a may great this lines time.

South Plains Financial (SPFI) 31 Oct 202020 Q3 Earnings call transcript