Item 1. Legal Proceedings
Item 1.
Legal Proceedings
The Company and its subsidiaries are subject to various legal actions, as described in our Annual Report on Form 10-K for the year ended December 31, 2019 (the “2019 Annual Report on Form 10-K”)
filed with the SEC on March 25, 2020. There are no material developments in the legal actions described in our 2019 Annual Report on Form 10-K.
In connection with the recent acquisition of WTSB), the Company and the Bank filed a lawsuit in the 72nd Judicial District Court of Lubbock County, Texas: South
Plains Financial, Inc. and City Bank v. R. Jay Phillips and West Texas State Bank , Case No. 202053938, on April 8, 2020 (as amended). The petition names as defendants Mr. R. Jay Phillips (“Phillips”) and WTSB.
The petition alleges that Phillips, the former Chairman of the Board and Chief Executive Officer of WTSB, made false representations and misstatements to the Company and the Bank regarding the
amount of expenses that were to be incurred as a result of WTSB’s termination of its core data processing contract, as required under the terms of the transaction. In particular, the petition alleges that Phillips’ material misrepresentations,
which were certified in writing, resulted in an incorrect quantification of WTSB’s transaction-related expenses and, in turn, inflated the consideration paid by the Company. The petition seeks actual damages, punitive damages, exemplary damages,
and attorney’s fees, and, alternatively, rescission of the Company’s acquisition of WTSB.
Phillips filed a counterclaim on May 6, 2020 seeking indemnification from City Bank, as successor to WTSB through merger, including reimbursement and payment of expenses incurred in connection with
the lawsuit. The Company intends to vigorously pursue its claim; however, it is not possible at this time to determine with any degree of certainty the ultimate outcome of the litigation. If the case is not resolved, the lawsuit could result in
costs associated with indemnification of Phillips and advancement of expenses not covered by insurance.
Except as described above or in our 2019 Annual Report on Form 10-K, we are not presently involved in any other litigation, nor to our knowledge is any litigation threatened against us, that in
management’s opinion would result in any material adverse effect on our financial position or results of operations or that is not expected to be covered by insurance.
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