• Diluted Earnings Per Share (EPS) for Full Year 2024: $2.92, compared to $3.62 in 2023.
• Diluted Earnings Per Share (EPS) for Q4 2024: $0.96, compared to $0.66 in the linked quarter.
• Loan Portfolio Growth: Increased by 1.4% for the full year; $17.7 million increase to $3.06 billion in Q4.
• Community-Based Deposit Franchise: Held steady at $3.6 billion in 2024.
• Net Interest Margin (NIM) for Q4 2024: 3.75%, up from 3.65% in the linked quarter.
• Return on Average Assets for Full Year 2024: 1.17%.
• Efficiency Ratio for Full Year 2024: 65.1%.
• Common Equity Tier One Risk-Based Capital Ratio at Year End 2024: 13.53%.
• Tier One Leverage Ratio at Year End 2024: 12.4%.
• Loans Held for Investment to Deposit Ratio at Year End 2024: 84%.
• Non-Interest Income for Q4 2024: $13.3 million, compared to $10.6 million in the linked quarter.
• Net Interest Income for Q4 2024: $38.5 million, compared to $37.3 million in the linked quarter.
• Allowance for Credit Losses to Total Loans Held for Investment at Year End 2024: 1.42%.
• Non-Interest Expense for Q4 2024: $29.9 million, compared to $33.1 million in the linked quarter.
• Tangible Common Equity to Tangible Assets at Year End 2024: 9.92%.
• Tangible Book Value Per Share at Year End 2024: $25.40, compared to $25.75 as of September 30, 2024.

• Warning! GuruFocus has detected 2 Warning Signs with SPFI.

Release Date: January 24, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• South Plains Financial Inc (NASDAQ:SPFI) delivered solid financial results despite a challenging environment, with a focus on optimizing profitability and maintaining strong credit quality.
• The company reported a diluted earnings per share of $2.92 for the full year 2024, outperforming the previous year when excluding a one-time gain.
• Loan portfolio growth of 1.4% for the full year was achieved, with strong new business production pipeline expected to drive further growth in 2025.
• The community-based deposit franchise remains a competitive advantage, with a stable deposit base and the ability to reprice deposits lower, contributing to a higher net interest margin.
• SPFI is well-capitalized, with a strong capital position allowing for potential growth opportunities and shareholder returns through dividends and stock repurchase programs.

Negative Points

• Diluted earnings per share decreased from $3.62 in 2023 to $2.92 in 2024, partly due to the absence of a one-time gain from the previous year.
• Loan payoffs and paydowns, particularly in the indirect auto portfolio, have been a significant headwind to loan growth.
• Non-interest-bearing deposits decreased, largely due to seasonal declines, impacting the overall deposit base.
• The company anticipates relatively flat loan growth in the first quarter of 2025 due to seasonal agricultural loan payoffs and continued elevated loan payoffs.
• M&A activity remains uncertain, with potential acquisitions being evaluated cautiously due to high seller expectations and the need for strong cultural fit and minimal shareholder dilution.

Q & A Highlights

Q: What allowed the loan yield to remain stable in the fourth quarter despite rate cuts? Was there any onetime interest benefit? A: Steven Crockett, Chief Financial Officer, explained that there was a minor non-accrued interest benefit of less than $200,000, which is typical. The stability was mainly due to loans paying off at lower rates and new loans being booked at higher rates. There was no significant non-recurring item affecting the yield.

Q: What are the expectations for the net interest margin (NIM) in the near term? Can it remain stable or move higher? A: Steven Crockett, Chief Financial Officer, stated that while they hope to maintain or incrementally improve the NIM, it largely depends on loan growth. Deposit costs may decrease slightly, and loan yields might trend down, but with the right loan growth, the NIM could stabilize or grow incrementally.

Q: Can you provide more color on the loan pipeline and whether it's concentrated in any segment? Is it due to new hires or hard work? A: Brent Bates, Chief Credit Officer, mentioned that the pipeline is a combination of new hires and optimism from clients planning capital outlays. The pipeline is much better than last year, reflecting both new hires and increased client activity.

Q: What is the outlook for M&A activity, and are there any potential acquisition opportunities? A: Curtis Griffith, Chairman and CEO, noted an increase in M&A opportunities but emphasized the importance of finding the right deal. They are cautious about overpaying and want acquisitions that benefit shareholders long-term. They are well-positioned for acquisitions but will remain disciplined.

Q: How do you view the potential impact of drilling activity in the Gulf of America on your economies and loan demand? A: Cory Newsom, President, and Brent Bates, Chief Credit Officer, expressed optimism about the energy sector, particularly in the Permian Basin. They noted that the region is a low-cost producer, and increased activity could lead to more opportunities and optimism in the local economy.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.