South Plains Financial ((SPFI)) has held its Q4 earnings call. Read on for the main highlights of the call.
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South Plains Financial’s recent earnings call painted a picture of cautious optimism. The company highlighted positive trends such as robust loan demand and growth in noninterest income, alongside a robust capital position. However, tempered expectations for loan growth and a decrease in diluted earnings per share introduced a note of caution, balancing out the overall sentiment.
Strong Underlying Loan Demand
The company is experiencing strong underlying loan demand, with expectations of growth as payoffs normalize. Impressively, the new business pipeline has reached its highest level since mid-2022, indicating potential for future expansion.
Increase in Net Interest Margin
The net interest margin saw a positive uptick, increasing by 10 basis points to 3.75% in the fourth quarter. This improvement was driven by a decline in the cost of deposits, showcasing effective financial management.
Noninterest Income Growth
Noninterest income experienced significant growth, rising to $13.3 million from $10.6 million in the previous quarter. This increase was primarily fueled by a $3.1 million boost in mortgage banking revenues, highlighting the company’s diverse income streams.
Strong Capital Position
South Plains Financial maintains a strong capital position, with a consolidated common equity Tier 1 risk-based capital ratio of 13.53% and a Tier 1 leverage ratio of 12.04% at year-end. This solid foundation supports the company’s stability and growth prospects.
Consistent Dividend and Potential Buyback
The company authorized a $0.15 per share quarterly dividend, marking the 23rd consecutive quarter of dividend payments. Additionally, a $10 million stock repurchase program is in place, reflecting shareholder-friendly policies.
Decrease in Diluted Earnings Per Share
There was a noted decrease in diluted earnings per share, down to $2.92 from $3.62 the previous year. This decline was attributed to the absence of a one-time gain from the sale of their insurance subsidiary in 2023.
Challenges in Loan Growth
Despite optimism, loan growth is anticipated to remain flat in the first quarter of 2025. This is due to elevated payoffs and seasonal agricultural loan paydowns, which pose challenges to immediate growth.
Lower Tangible Book Value
The tangible book value per share decreased slightly to $25.40 as of December 31, 2024, from $25.75 in the previous quarter, primarily due to a decline in accumulated other comprehensive income.
Guidance and Future Outlook
Looking ahead, South Plains Financial provided guidance with a cautiously optimistic outlook for 2025. The company anticipates low to mid-single-digit loan growth, with an increase in M&A activity. They plan to continue their $10 million stock repurchase program, with the potential for additional repurchases to navigate volatile market conditions.
In conclusion, South Plains Financial’s earnings call reflected a balanced sentiment, with significant strengths in loan demand and income growth counterbalanced by challenges in loan growth and earnings declines. The company’s strong capital position and strategic initiatives, including dividends and potential buybacks, underscore its commitment to navigating market challenges effectively.
