South Plains Financial ((SPFI)) has held its Q1 earnings call. Read on for the main highlights of the call.
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South Plains Financial’s recent earnings call presented a mixed outlook, reflecting both strengths and challenges. The company reported strong deposit growth, improved credit quality, and a solid capital position, which highlight its financial resilience. However, these positives were tempered by decreased non-interest income, significant loan payoffs, and a decline in earnings per share, indicating areas of concern.
Strong Deposit Growth
South Plains Financial experienced a significant increase in deposits, which rose by $171.6 million to reach $3.79 billion by the end of the first quarter. This growth was accompanied by a decline in the cost of deposits from 229 basis points to 219 basis points, showcasing the bank’s ability to attract and manage deposits efficiently.
Improved Credit Quality
The company reported a notable improvement in credit quality, with the non-performing assets to total assets ratio dropping to 16 basis points at the end of the first quarter, down from 58 basis points at the end of 2024. This improvement underscores the bank’s effective risk management practices.
Advantageous Capital Position
South Plains Financial maintains a strong capital position, with a consolidated common equity tier 1 risk-based capital ratio of 13.59% and a tier 1 leverage ratio of 12.04%. These metrics indicate a robust financial foundation, providing the bank with flexibility to navigate market challenges.
Successful Stock Repurchase
The company successfully repurchased 250,000 shares for $8.3 million as part of its $15 million stock repurchase program. This move reflects confidence in the company’s future prospects and commitment to enhancing shareholder value.
Indirect Auto Loan Portfolio Growth
South Plains Financial’s indirect auto loan portfolio grew by $7 million to $243 million, with a decline in loans 30+ days past due to 41 basis points from 47 basis points. This growth highlights the bank’s strategic focus on expanding its auto loan segment while maintaining credit quality.
Decrease in Non-Interest Income
The bank faced a decrease in non-interest income, which fell from $13.3 million to $10.6 million. This decline was primarily driven by a $2.8 million reduction in mortgage banking revenues, presenting a challenge for the company’s revenue diversification efforts.
Loan Payoff Concerns
Loans in major metropolitan markets decreased by $18 million, with elevated loan payoffs expected to persist into the next quarter. This trend raises concerns about the bank’s ability to sustain loan growth in key markets.
Decline in Earnings Per Share
South Plains Financial reported a decline in diluted earnings per share, which fell to $0.72 from $0.96 in the previous quarter. This decrease was influenced by a $0.14 per share after-tax differential in mortgage servicing rights fair value adjustment, highlighting the impact of market conditions on earnings.
Forward-Looking Guidance
The company’s forward-looking guidance reflects cautious optimism. South Plains Financial reported strong financial metrics, including a consolidated common equity tier 1 risk-based capital ratio of 13.59% and a tier 1 leverage ratio of 12.04%. The bank’s net interest margin increased to 3.81%, aided by a decline in the cost of deposits. The guidance suggests a focus on organic growth, talent acquisition, and market opportunities, with expectations for loan growth in the low- to mid-single-digit range for the year, despite economic uncertainties.
In conclusion, South Plains Financial’s earnings call painted a picture of resilience amidst challenges. The company demonstrated strong deposit growth, improved credit quality, and a solid capital position, while facing headwinds from decreased non-interest income and declining earnings per share. The forward-looking guidance suggests a strategic focus on growth and market opportunities, positioning the bank for continued success in a dynamic economic environment.
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