South Plains Financial, Inc.

Good afternoon, ladies and gentlemen, and welcome to the South Plains Financial Incorporated Third 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. Steve Crockett, Chief Financial Officer and Treasurer of South Plains Financial. Please go ahead, sir.

Thank you, operator, and good afternoon, everyone. We appreciate your participation in our third quarter 2021 earnings conference call. With me here today are Curtis Griffith, our chairman and chief executive officer, and Corey Newsome, our president. As a reminder, a replay of this call will be available on our website within two hours of the conclusion of the call until November 9th, 2021. Additionally, a slide deck presentation To complement today's discussion, it's available on the news and events 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 in our earnings press release that was issued this afternoon and on slide two of the slide deck presentation available on our website. 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. The reconciliation of these non-GAAP measures to the most comparable GAAP measures can also be found in our earnings release and on slide 19 of the slide presentation. 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 third quarter 2021 results. Corey will provide an update on our successful efforts to expand our lending team and accelerate organic loan growth. And Steve will then conclude with a more detailed review of our third quarter 2021 financial results. To start, I'm very pleased with our team's performance again this quarter and would like to thank our employees for their hard work as they continue to deliver outstanding service to our customers, which continues to translate into strong financial results for South Plains. Along those lines, there are six key points that I would like you to take away from today's call. First, our local Texas markets are seeing strong economic growth and continued population gain from across the country, which is providing a robust backdrop for new business. Second, our experienced lending team is benefiting from this strong economic backdrop as well as our market share gains in our communities, large and small, which we believe are contributing to our strong results. Third, we have continued to make solid progress adding new lenders to our platform through the quarter as we work to grow our team by 20 lenders or about 30% over a two year timeframe. Importantly, we have been very impressed with our new lenders ability to bring new clients to Citibank and quickly build their portfolios. Fourth, we have grown our loan portfolio by more than 9% year to date and expect loan growth to continue at a robust pace into 2022. We believe we have ample liquidity to fund this growth, which will drive continued margin expansion, earnings, and book value growth, along with improved returns. Fifth, we expect our mortgage business to decline to about 10% to 15% of total revenues over the next few years as mortgage originations gradually normalize in future periods. I think it is important to reiterate that we are not a mortgage bank. We have simply taken advantage of a strong cycle which has been very lucrative. As mortgage revenues decline, we expect organic loan growth to drive improved net interest income, and we anticipate this growth will more than offset the decline in mortgage income over the next two to three years. Lastly, we will continue to pursue a thoughtful capital allocation strategy focused on share buybacks, maintaining and growing our dividend over time, and tactical MA. During the quarter, we were aggressive with our share buyback given the opportunity that we see ahead for South Plains. We do not believe this is fully reflected in our current share price. Turning to our third 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 $13.7 million or 74 cents per diluted common share in the second quarter of 2021. We did not record a provision for loan loss in the third quarter of 2021 compared to a negative provision for loan loss of $2 million in the second quarter of this year. This decision was made in light of the continued general improvement in the economy, as well as a decline in the amount of loans in our portfolio that are actively under a modification, and we remain confident in the credit quality of our loan portfolio, as well as the strong reserves that we've built over the last year. Additionally, the credit metrics of our hospitality portfolio continue to improve through the third quarter of 2021. Turning to loan growth, we delivered 5.5% growth in the third quarter of 2021 as we benefited from our lending team's strong execution, combined with our new lenders who are quickly growing their portfolios as they bring new relationships to Citibank. While recruiting takes time, we're very pleased with the lenders that we have been able to attract. Importantly, we have been deliberate in our growth as we look for lenders who share our culture and values. We will remain laser-focused on credit quality, and we will not sacrifice our conservative approach to underwriting to derive growth as we expand our loan portfolio. Looking to future periods, we have excess liquidity to deploy, as our loan-to-deposit ratio at the end of the third quarter of 2021 was 76%. Our goal is to ultimately drive that ratio up into the mid-to-high 80s over time. which represents significant earnings power and leverage of the infrastructure we have to support $5 billion or more in assets. As we execute our strategic plan to profitably grow South Plains, we will also continue to employ a thoughtful capital allocation strategy to create value for our shareholders. During the third quarter of 2021, we continued to see our shares trade below the intrinsic value, And as a result, we repurchased approximately 190,000 common shares under our previously announced $10 million share repurchase program. Additionally, our Board of Directors authorized a quarterly dividend of $0.09 per share this past week, which is in line with the last quarterly dividend that we paid in August of this year. This will be our 11th consecutive quarterly dividend and will be paid on November 16, 2021. to shareholders of record on November 1st, 2021. Lastly, we continue to evaluate potential M&A candidates as activity has picked up. As we've said in the past, we are looking at banks with good deposit franchises in rural markets where there could be leadership changes over the next few years. We will be very disciplined and focused on finding the right bank with a similar culture and at an attractive price. Thus far, we have not found a target that meets our acquisition criteria and metrics. Now, let me turn the call over to Corey.