South Plains Financial, Inc.

Good afternoon, ladies and gentlemen, and welcome to the South Plains Financial Inc. First Quarter 2022 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 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 first quarter 2022 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 May 10th, 2022. Additionally, a slide deck presentation to complement today's discussion is 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 and 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. A 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 deck 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 first quarter 2022 results. Corey will provide an update on our efforts to accelerate loan growth, as well as the successes that we're beginning to achieve in many of our markets. Steve will then conclude with a more detailed review of our Q1 results. Turning to slide four. we reported net income of $14.3 million or 78 cents per diluted common share, which compares to net income of $14.6 million or 79 cents per diluted common share in the fourth quarter of 2021 and $15.2 million or 82 cents per diluted common share in the first quarter of 2021. It's important to note that our first quarter results included a positive fair value adjustment on our mortgage servicing rights portfolio that added 19 cents per share and a reserve release equating to 9 cents per share, both net of tax. Excluding the impact of these two items, we see core earnings for the first quarter of 2022 of 50 cents per share, which we believe provides a better baseline for the run rate earnings of the company. During the first quarter, we grew loans 2.6% annualized compared to the fourth quarter of 2021. As Corey will discuss, we experienced the typical softer trims through the fourth and first quarters, which suppressed loan growth. However, underlying loan demand remains strong as we continue to experience solid momentum across all of our markets. In Lubbock, we're benefiting from recent acquisitions by out-of-state banks which are creating customer disruption and opening up opportunities to bring new relationships to South Plains. In our MSAs of Dallas, Houston, and El Paso, economic growth is strong, and our recently hired lenders continue to build their portfolios, which we expect to accelerate loan growth as we move through the year. And we are excited with the progress that we've achieved in the Permian Basin, as we have invested in our employees, infrastructure, and operations to position Citibank to gain market share in this very dynamic region. We also believe that we have an attractive deposit franchise which continues to demonstrate robust growth, having increased $109 million, or 13% annualized, from the fourth quarter of 2021. Our cost of deposits remained stable at 23 basis points in the first quarter of 2022, which was consistent with the fourth quarter's level. while non-interest bearing deposits represented 33% of total deposits. Our deposit franchise will provide the liquidity to fund loan growth in our MSAs as we continue to work to improve our loan to deposit ratio, which was 71% at the end of the first quarter of 2022. As we put this excess liquidity to work in higher yielding loans, we expect to see increased net interest earnings that will help offset the decline in our mortgage business in this rising interest rate environment. During the first quarter, mortgage banking income, excluding the MSR fair value adjustment, was approximately 19% of total revenue, which compares to 23% in the fourth quarter of 2021 and 34% in the first quarter of 2021. We continue to expect mortgage banking income to normalize at approximately 10 to 15 percent of revenues as we continue to grow the bank we will remain disciplined on credit which is central to our culture during the first quarter of 2022 we continued to experience improving credit metrics in our loan portfolio driven by improvements in our hotel and direct energy segments as a result we recorded a negative provision for loan losses of $2.1 million in the first quarter of 2022, compared to no provision for loan losses in the fourth quarter of 2021. Turning to capital, we remain focused on our capital allocation through our dividend, which has grown over time, and strategically utilizing our share repurchase program. As a result, our Board of Directors authorized a quarterly dividend of 11 cents per share this past week. This will be our 13th consecutive quarterly dividend and will be paid as of May 16, 2022 to shareholders of record on May 2, 2022. We also repurchased approximately 106,000 shares during the first quarter of 2022 under our share repurchase program. Now let me turn the call over to Corey.