SPIRIT OF TEXAS BANCSHARES, INC. REPORTS FOURTH QUARTER 2021 FINANCIAL RESULTS

CONROE, Texas, Jan. 26, 2022 /PRNewswire/ -- Spirit of Texas Bancshares, Inc. (NASDAQ:STXB) ("Spirit," the "Company," "we," "our," or "us"), reported net income of $9.1 million in the fourth quarter of 2021, representing diluted earnings per share of $0.51, compared to net income of $12.5 million in the fourth quarter of 2020, representing diluted earnings per share of $0.72. During the fourth quarter  of  2020, net income was impacted by $3.7 million in gain on sale of Main Street Lending loans and $4.5 million in net accretion of deferred origination fees on Paycheck Protection Program ("PPP") loans forgiven by the U.S. Small Business Administration ("SBA"), compared to the fourth quarter of 2021 which only had $1.5 million in net accretion of deferred origination fees on PPP loans.   Additionally, the fourth quarter of 2021 contained $800 thousand of expenses related to the proposed merger with Simmons First Financial Corporation ("Simmons") and $412 thousand of expenses related to normal bonus payments that will be accelerated to the proposed acquisition close date.

Fourth Quarter 2021 Financial and Operational Highlights

• On November 19, 2021, Spirit announced its intention to merge with Simmons with expectations to close the transaction during the second quarter of 2022, subject to the receipt of Spirit shareholder approval, regulatory approvals and waivers and other customary closing conditions.
• Excluding the impact of PPP loan forgiveness by the SBA during the period, loans held for investment increased 24.3% annualized for the three months ended December 31, 2021.
• Net interest margin for the fourth quarter of 2021 as reported and on a tax equivalent basis⁽¹⁾ was 3.87% and 3.89%, respectively.
• At December 31, 2021, return on average assets was 1.13% on an annualized basis.
• Book value per share increased to $22.79 and tangible book value per share⁽¹⁾ increased to $18.02 at December 31, 2021, compared to $22.49 and $17.67, respectively, at September 30, 2021.
• Total stockholders' equity to total assets was 12.06% and tangible stockholders' equity to tangible assets⁽¹⁾ was 9.78% at December 31, 2021.
• Capital ratios remained strong with Common Equity Tier 1 ratio at the Company and the Bank of 10.64% and 10.65%, respectively, at December 31, 2021.

"As we continue to work toward the upcoming completion of the proposed merger with Simmons, I am pleased to report another exceptional quarter of financial and operational success." Dean Bass, Spirit's Chairman and Chief Executive Officer, stated. "While we have enjoyed seeing the return of loan demand over the past few quarters in the form of a larger loan pipeline, the fourth quarter of 2021 saw an impressive move in volume from the pipeline to closed and funded loans. We are also excited to see SBA loan sales during the quarter which translated into $811 thousand in gain on sale of loans during the fourth quarter of 2021. Both robust loan demand and the return of higher non-interest revenue streams represent great opening acts to the start of our anticipated next chapter merging with Simmons.

"I am exceptionally proud of what our team has been able to accomplish over the past twelve years and I'm excited to see what heights we can reach partnering with a best-in-class regional bank," Mr. Bass concluded.

Loan Portfolio and Composition

During the fourth quarter of 2021, gross loans increased to $2.32 billion as of December 31, 2021, an increase of 3.08% from $2.25 billion as of September 30, 2021, and a decrease of 2.78% from $2.39 billion as of December 31, 2020.  PPP loan forgiveness, which has been the primary cause of the overall decrease in loans year over year, will not significantly impact loan growth going forward as only 237 PPP loans remain outstanding with a total recorded investment of $43.9 million as of December 31, 2021. Excluding the effect of PPP loan forgiveness, the loan portfolio as of December 31, 2021 increased by $131.6 million, or 24.3% annualized from September 30, 2021. Despite a large volume of loans moving from the pipeline to closed loans, the remaining pipeline is well over $1.0 billion and represents an exciting opportunity to fund additional projects in the coming quarters.

Asset Quality

Asset quality is strong with loans continuing to migrate into lower risk ratings during the fourth quarter of 2021 and with non-performing loans declining $855 thousand or 13.9% from the third quarter of 2021.  We perceive the sentiment in the Texas economy to be optimistic despite continued labor and supply shortages and higher inflation that may persist longer than previously expected. The provision for loan losses recorded for the fourth quarter of 2021 was $970 thousand, which served to increase the allowance to $16.4 million, or 0.71% of the $2.32 billion in gross loans outstanding as of December 31, 2021. Provision expense for the fourth quarter of 2021 related primarily to the provisioning of new loans.

As of December 31, 2021, the nonperforming loans to loans held for investment ratio remains low at 0.22%, a decrease from 0.28% at September 30, 2021, and a decrease from 0.36% as of December 31, 2020.  Annualized net charge-offs were 15 basis points for the fourth quarter of 2021 compared to 10 basis points for the third quarter of 2021.

Deposits and Borrowings

Deposits totaled $2.78 billion as of December 31, 2021, an increase of 4.2% from $2.67 billion as of September 30, 2021, and an increase of 13.2% from $2.46 billion as of December 31, 2020.  Noninterest-bearing demand deposits increased $36.1 million, or 4.70%, from September 30, 2021, and increased $76.0 million, or 10.5%, from December 31, 2020. Noninterest-bearing demand deposits represented 28.9% of total deposits as of December 31, 2021, up from 28.7% of total deposits as of September 30, 2021, and down from 29.6% of total deposits as of December 31, 2020.  Interest-bearing deposits, including money market and savings as of December 31, 2021 increased $96.6 million, or 29.1% annualized from September 30, 2021, primarily due to success in retaining and growing client relationships from COVID-19 related assistance programs. Growth in interest-bearing deposits was slightly offset by a decrease in time deposits of $20.9 million, or 3.6%, from September 30, 2021. The average cost of deposits was 0.22% for the fourth quarter of 2021, representing a 3 basis point decrease from the third quarter of 2021 and a 21 basis point decrease from the fourth quarter of 2020. 

Borrowings decreased by $4.3 million during the fourth quarter of 2021 to $74.9 million, due primarily to the repayment of maturing Federal Home Loan Bank ("FHLB") advances. At December 31, 2021, we did not have any remaining borrowings under the Paycheck Protection Program Liquidity Facility with the Board of Governors of the Federal Reserve System ("PPPLF"). Borrowings totaled 2.3% of total assets at December 31, 2021, compared to 2.5% at September 30, 2021 and 8.2% at December 31, 2020.

Net Interest Margin and Net Interest Income

The net interest margin for the fourth quarter of 2021 was 3.87%, a decrease of 5 basis points from the third quarter of 2021 and a decrease of 49 basis points from the fourth quarter of 2020.  The tax equivalent net interest margin⁽¹⁾ for the fourth quarter of 2021 was 3.89%, a decrease of 11 basis points from the third quarter of 2021 and a decrease of 55 basis points from the fourth quarter of 2020.  The decline in net interest margin is primarily due to the increase in average cash balances.  Approximately $979 thousand of net deferred SBA fees related to PPP loans remain unamortized at December 31, 2021. The yield on loans for the fourth quarter of 2021 was 5.08% compared to 5.09% at September 30, 2021 and 5.42% at December 21, 2020.

Net interest income totaled $28.5 million for the fourth quarter of 2021, an increase of 1.3% from $28.1 million for the third quarter of 2021 and a decrease of 4.7% from $29.9 million for the fourth quarter of 2020.  Interest income totaled $30.8 million for the fourth and third quarters of 2021, compared to $33.7 million for the fourth quarter of 2020.  Interest and fees on loans increased $218 thousand, or 0.75%, compared to the third quarter of 2021, and decreased by $3.5 million, or 10.8%, from the fourth quarter of 2020.  Interest expense was $2.4 million for the fourth quarter of 2021, a decrease of 10.8% from $2.7 million for the third quarter of 2021 and a decrease of 38.1% from $3.8 million for the fourth quarter of 2020. 

Noninterest Income and Noninterest Expense

Noninterest income totaled $4.3 million for the fourth quarter of 2021, compared to $3.3 million for the third quarter of 2021 and $8.8 million for the fourth quarter of 2020.  This increase from the third quarter of 2021 was primarily driven by higher SBA loan servicing fees and a gain on sale of loans. 

Noninterest expense totaled $20.3 million in the fourth quarter of 2021, an increase of 12.6 % from $18.0 million in the third quarter of 2021, which was primarily due to increases in salaries and benefits expense and professional services.  The increase in salaries and benefits expense for the quarter was due to $412 thousand of normal bonus payments that will be accelerated to the close date of the proposed merger with Simmons.

The efficiency ratio was 61.9% in the fourth quarter of 2021, compared to 57.5% in the third quarter of 2021, and 47.7% in the fourth quarter of 2020.  The fourth quarter of 2021 efficiency ratio was negatively impacted during the quarter by the aforementioned additional salaries and benefits expense.

Conference Call

Spirit of Texas Bancshares, Inc. has scheduled a conference call to discuss its fourth quarter 2021 financial results, which will be broadcast live over the Internet, on Thursday, January 27, 2022 at 11:00 a.m., Eastern Time / 10:00 a.m., Central Time.  To participate in the call, dial 201-389-0867 and ask for the "Spirit of Texas" call at least 10 minutes prior to the start time, or access it live over the Internet at https://ir.sotb.com/news-events/ir-calendar.  For those who cannot listen to the live call, a replay will be available through February 3, 2022, and may be accessed by dialing 201-612-7415 and using pass code 13725940#. Also, an archive of the webcast will be available shortly after the call at https://ir.sotb.com/news-events/ir-calendar for 90 days.

About Spirit of Texas Bancshares, Inc.

Spirit, through its wholly-owned subsidiary, Spirit of Texas Bank SSB (the "Bank"), provides a wide range of relationship-driven commercial banking products and services tailored to meet the needs of businesses, professionals and individuals.  The Bank has 35 locations in the Houston, Dallas/Fort Worth, Bryan/College Station, Austin, San Antonio-New Braunfels, Corpus Christi, Austin and Tyler metropolitan areas, along with offices in North Central and South Texas.  Please visit https://www.sotb.com for more information.

Forward Looking Statements

Litigation Reform Act of 1995 that are subject to risks and uncertainties and are made pursuant to the safe harbor provisions of Section 27A of the Securities Act of 1933, as amended.  Any statements about our expectations, beliefs, plans, predictions, protections, forecasts, objectives, assumptions or future events or performance are not historical facts and may be forward-looking.  Forward-looking statements are typically, but not exclusively, identified by the use of forward-looking terminology such as "believes," "expects," "could," "may," "will," "should," "seeks," "likely," "intends" "plans," "pro forma," "projects," "estimates" or "anticipates" or the negative of these words and phrases or similar words or phrases that are predictions of or indicate future events or trends and that do not relate solely to historical matters.  Forward-looking statements involve numerous risks and uncertainties and you should not rely on them as predictions of future events.  Factors that could cause our actual results to differ materially from those described in the forward-looking statements include, among others: (i) disruption from the proposed merger with Simmons; (ii) the risk that the proposed merger with Simmons may not be completed in a timely manner or at all; (iii) the occurrence of any event, change, or other circumstances that could give rise to the termination of the proposed merger with Simmons, including under circumstances that would require Spirit to pay a termination fee; (iv) the failure to obtain necessary shareholder or regulatory approvals for the proposed merger with Simmons; (v) the ability to successfully integrate the combined business; (vi) the possibility that the amount of the costs, fees, expenses, and charges related to the proposed merger with Simmons may be greater than anticipated, including as a result of unexpected or unknown factors, events, or liabilities; (vii) the failure of the conditions to the proposed merger with Simmons to be satisfied; (viii) reputational risk and the reaction of the parties' customers to the proposed merger with Simmons; (xi) the risk of potential litigation or regulatory action related to the proposed merger with Simmons; (x) changes in general business, industry or economic conditions, or competition; (xi) the impact of the ongoing COVID-19 pandemic (or any current or future variant thereof) on the Bank's business, including the impact of actions taken by governmental and regulatory authorities in response to such pandemic, such as the CARES Act and the programs established thereunder, and the Bank's participation in such programs, (xii) changes in any applicable law, rule, regulation, policy, guideline, or practice governing or affecting bank holding companies and their subsidiaries or with respect to tax or accounting principles or otherwise; (xiii) adverse changes or conditions in capital and financial markets; (xiv) changes in interest rates; (xv) higher-than-expected costs or other difficulties related to integration of combined or merged businesses; (xvi) the inability to realize expected cost savings or achieve other anticipated benefits in connection with business combinations and other acquisitions; (xvii) changes in the quality or composition of our loan and investment portfolios; (xviii) adequacy of loan loss reserves; (xix) increased competition; (xx) loss of certain key officers; (xxi) continued relationships with major customers; (xxii) deposit attrition; (xxiii) rapidly changing technology; (xxiv) unanticipated regulatory or judicial proceedings and liabilities and other costs; (xxv) changes in the cost of funds, demand for loan products, or demand for financial services; (xxvi) other economic, competitive, governmental, or technological factors affecting our operations, markets, products, services, and prices; and (xxvii) our success at managing the foregoing items.  For a discussion of additional factors that could cause our actual results to differ materially from those described in the forward-looking statements, please see the risk factors discussed in our most recent Annual Report on Form 10-K for the year ended December 31, 2020, filed with the U.S. Securities and Exchange Commission (the "SEC") on March 5, 2021, and our other filings with the SEC.

While forward-looking statements reflect our good-faith beliefs, they are not guarantees of future performance.  All forward-looking statements are necessarily only estimates of future results.  Accordingly, actual results may differ materially from those contemplated, expressed in or implied by the particular forward-looking statement due to additional risks and uncertainties of which the Company is not currently aware or which it does not currently view as, but in the future may become, material to its business or operating results.  Due to these and other possible uncertainties and risks, we can give no assurance that the results contemplated in the forward-looking statements will be realized and, therefore, you are cautioned not to place undue reliance on such statements.  Further, any forward-looking statement speaks only as of the date on which it is made, and we undertake no obligation to update 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 or circumstances, except as required by applicable law.  All forward-looking statements, express or implied, included in this press release are qualified in their entirety by this cautionary statement.

 

 

 

 

 

 

 

 

 

 

 

Dennard Lascar Investor Relations

Ken Dennard / Natalie Hairston

(713) 529-6600

[email protected]

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SOURCE Spirit of Texas Bancshares, Inc.