South Plains Financial, Inc.

Good afternoon, ladies and gentlemen, and welcome to the South Plains Financial Inc. First Quarter 2021 Earnings Conference Call. During today's presentation, all parties will be in a listen-only mode. Following the presentation, the conference will be open for questions with instructions to follow at that time. As a reminder, this conference call is being recorded. I would now like to turn the call over to Mr. Steven Crockett, Chief Financial Officer of South Plains Financial. Please go ahead, sir.

Thank you, operator, and good afternoon, everyone. We appreciate your participation in our first quarter 2021 earnings conference call. With me here today are Curtis Griffith, our chairman and chief executive officer, Corey Newsome, our president, and Brent Bates, Citibank's chief credit officer. As a reminder, a replay of this call will be available through May 11th, 2021. Additionally, a slide deck presentation to complement today's discussion is available on the investor section of our website. Before we begin, let me remind everyone that this call may contain forward-looking statements that are subject to a variety of risks, uncertainties, and other factors that could cause actual results to differ materially from those anticipated future results. Please see our safe harbor statement beginning on page four of our earnings press release and on slide two of the slide deck presentation. All comments made during today's call are subject to those safe harbor statements. Any forward-looking statements presented herein are made only as of today's date, and we do not undertake any duty to update such forward-looking statements, except as required by law. Additionally, during today's call, we may discuss certain non-GAAP measures, which we believe are useful in evaluating our performance. Reconciliation of these non-GAAP measures to the most comparable GAAP measures can be found on page 11 of our earnings release. At this point, I'll turn the call over to Curtis.

Thank you, Steve, and good afternoon. On today's call, I will briefly review the highlights of our first quarter 2021 results, provide an update on our capital allocation strategy, and conclude with comments on our inaugural corporate sustainability report, which we released in February 2021. Corey will discuss our initiatives designed to accelerate organic growth, and Steve will conclude with a more detailed review of our first quarter 2021 financial results. We will then open the call for your questions. Turning to our first quarter 2021 results on slide four, we reported net income of $15.2 million or 82 cents per diluted common share, which compares to net income of $7.1 million or 38 cents per diluted common share that we reported in the first quarter of 2020. Pre-tax pre-provision income for the first quarter of 2021 was $19.0 million, which compares to $20.0 million in the fourth quarter of 2020 and $15.1 million in last year's first quarter. Our provision for loan loss in the first quarter of 2021 was minimal for the second consecutive quarter and compares to $6.2 million in the year-ago first quarter. It is important to emphasize that we remain confident in the credit quality of our loan portfolio and the reserves that we have recorded over the last year. We have instilled a conservative credit culture at the bank and adhere to strict underwriting standards, which we believe positioned our loan portfolio to weather the COVID-19 crisis. We recognize that economic activity is accelerating and many of the hardest hit areas of the economy are improving. That said, we are maintaining our conservative stance and keeping our reserves stable at current levels given the continued stress in certain sectors, most notably the hotel sector. The U.S. government's recent stimulus package has provided much needed support to many individuals and businesses, and we are watching to see how the economy evolves as that stimulus is spent through the year. While we have started to see more banks releasing some of their reserves this quarter, we will continue to monitor our position at the end of each quarter as we assess the risks in the loan portfolio along with the economic environment at that time and will adjust accordingly. As we have discussed on prior calls, our hospitality exposure is the primary area of our loan portfolio that has been slow to recover. Though we are beginning to see some improvement as the governor of Texas has lifted many COVID-19-related restrictions, the rollout of the COVID-19 vaccines continue and the pace of activity in the economy starts to accelerate. This improvement can be seen in our active loan modifications attributed to the COVID-19 pandemic, which declined to $46.9 million, or 2.1% of our loan portfolio as of March 31, 2021, as compared to $64.1 million, or 2.9% of our loan portfolio as of December 31, 2020. Approximately 95% of our active modified loans at the end of the first quarter of 2021 are in our hotel portfolio, and we're encouraged with the trends that we are seeing, and which Corey will touch on in more detail in a moment. Overall, we continue to believe that our current reserve position is appropriate and are cautiously optimistic that the economy will continue to improve. Looking forward, our team continues to remain focused on growing the value of the bank. I am very proud of the success that we have achieved. Over the last year, we have grown tangible book value per share 16.6% to $19.28 as of March 31, 2021, as compared to $16.54 per share as of March 31, 2020. We have utilized a disciplined and thoughtful capital allocation strategy to support this growth, while providing a steady stream of dividends to our shareholders. We will continue to be disciplined in the year ahead as we look for accretive acquisitions like our acquisition of West Texas State Bank or WTSB. I am proud to report that we met or exceeded all of our integration goals including our expense saved target. Additionally, we were very focused on our process throughout the WTSB integration which has prepared our team for the next acquisition. That said, we understand what the investment community expects on valuation and earn back in an acquisition and will approach any M&A opportunity with that in mind. As part of our capital allocation strategy, our Board of Directors approved a 40% increase in our quarterly dividend to $0.07 per share this past week. This will be our ninth consecutive quarterly dividend and will be paid on May 17, 2021, to shareholders of record on May 3, 2021. During the first quarter of 2021, we repurchased approximately 40,000 shares of common stock under our $10 million share repurchase program, which we are continuing at this time. Importantly, we will remain disciplined as we weigh the opportunities for improving shareholder value and capital redeployment to grow the bank. Another area of focus in the year ahead is our effort to expand our engagement across a broad spectrum of sustainability initiatives. Over the years, we have been very active providing service and aid to our local communities, ranging from financial support for local nonprofit organizations to our employees volunteering as part of their work for the bank. Our dedication and commitment to our communities is at the core of our culture and ultimately how we have succeeded over our long history. That said, I know we can do more. and I'm proud of our first corporate sustainability report, which we launched in February 2021. Our report outlines our commitment to a diverse workforce and board of directors, our goal to reduce our carbon footprint, and our ongoing support to our local communities through increasing employee and bank engagement. We understand that this is a journey and are excited with the many opportunities ahead that will enable us to make a positive impact in our communities. To conclude, our local Texas markets continue to recover through the first quarter of 2021 as the pace of business has started to accelerate, real estate volumes remain strong, and the price of oil continued to rise. Additionally, new COVID-19 case numbers have remained very low as our restaurants have returned to full occupancy and events began to come back. As a result, we have opened all of our bank branches and lobbies to our customers and are optimistic on the outlook for the economy and the bank. Now let me turn the call over to Corey.