Earnings Call Spotlight: South Plains Financial Maintains Steady Earnings Per Share in Q3 2024

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Earnings Call Spotlight: South Plains Financial Maintains Steady Earnings Per Share in Q3 2024

South Plains Financial, Inc. (NASDAQ: SPFI), a Texas-based bank, reported a stable diluted earnings per share (EPS) of $0.66 in the third quarter of 2024 earnings conference call, unchanged from the previous quarter. The bank experienced a decline in its loan portfolio while seeing an increase in deposits and maintaining a strong capital position. It announced a 7% rise in its quarterly dividend and is actively buying back shares. Management expressed cautious optimism with expectations of improving economic conditions influenced by loan growth and potential interest rate cuts by the Federal Reserve.

Key Points:

  • Diluted EPS remained steady at $0.66.
  • The loan portfolio decreased by $57 million to $3.04 billion.
  • Deposits increased by $95 million to $3.72 billion.
  • Quarterly dividend increased by 7% to $0.15 per share.
  • A $10 million share repurchase program is ongoing, with 40,000 shares bought back.
  • Management expects loan growth and a positive economic environment.

Company Outlook:

  • Management anticipates stabilization in loan growth, particularly in the indirect auto portfolio.
  • They foresee a stronger loan pipeline and continue to focus on loan quality.
  • South Plains Financial is optimistic about margin improvements and future loan growth while managing expenses and loan quality.

Negative Highlights:

  • The loan portfolio reduction due to repayments and managed declines in indirect auto loans.
  • Non-interest income fell to $10.6 million, impacted by lower mortgage banking revenue.
  • Non-performing loans slightly increased to $24.7 million.
  • Non-interest expenses rose to $33.1 million due to occupancy and marketing costs.

Positive Highlights:

  • Loan quality remains solid with no adverse trends.
  • Deposit growth benefited from market disruptions.
  • Net interest margin increased to 3.65%.
  • Demand deposits now constitute 26.9% of total deposits.
  • Management notes signs of stabilization in the indirect and home builder portfolios.

Misses:

  • Non-interest income represented a smaller percentage of bank income compared to the previous quarter.
  • Decrease in bank card services and investment income.
  • A $495,000 provision for loan losses was recorded.

Q&A Highlights:

  • Executives expect performance improvements starting in the first quarter of 2025.
  • Anticipated net interest margin improvement as interest rates fall.
  • Strong loan pipeline expected to materialize in early 2025.
  • Deposit pricing trends are competitive but softened, with recent interest rate cuts affecting certificates of deposit.
  • Mortgage activity is expected to improve as interest rates stabilize.
  • Management is cautious about restructuring the investment portfolio, aiming for stability.

In conclusion, South Plains Financial, Inc. demonstrates stable financial performance with consistent EPS and a strong capital position. The bank's management remains positive about future prospects, seeing potential benefits from an evolving loan pipeline and the changing interest rate environment. The bank continues to focus on maintaining loan quality and leveraging market opportunities to support anticipated growth.

InvestingPro Insights: South Plains Financial, Inc. (NASDAQ: SPFI) continues to demonstrate financial resilience and shareholder value, as reflected in its recent earnings report and forecasts provided by InvestingPro. According to InvestingPro data, SPFI has a market cap of $557.47 million, reflecting its robust position in the regional banking sector. The company's price-to-earnings (P/E) ratio of 12.3 indicates it may be undervalued compared to sector peers, potentially presenting an attractive entry point for investors.

One notable InvestingPro Tip highlights that SPFI has "increased its dividend for 6 consecutive years." This aligns well with the company's announcement of a 7% increase in its quarterly dividend, underscoring management's commitment to creating value for shareholders. The current dividend yield of 1.76% may appeal to income-focused investors.

Another relevant InvestingPro Tip emphasizes that SPFI has "seen a substantial price increase over the last six months." This is supported by InvestingPro data showing an impressive 28.49% price total return over the past six months. This positive momentum reflects investor confidence in the bank's strategic direction and financial health.

While it's important to note challenges such as the company's weak gross profit margins, as indicated in an InvestingPro Tip, SPFI has maintained its profitability over the last twelve months. Combined with the bank's strong capital position and improving net interest margin, this profitability suggests SPFI is well-positioned within the current economic landscape.

For investors seeking deeper insight into South Plains Financial's outlook, InvestingPro offers additional tips and forecasts. In fact, there are 8 more InvestingPro Tips available for SPFI, providing a comprehensive perspective on the company's financial health and market position.