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South Plains Financial (SPFI) Q3 Earnings call transcript Oct 23, 2024

Daily EarningsMonday, Oct 28, 2024 8:26 pm ET

1min read

SPFI --

In the third quarter of 2024, South Plains Financial, Inc. (SPFI) reported a solid financial performance, showcasing resilience in the face of economic challenges. The earnings call, led by CEO Curtis Griffith and CFO Steve Crockett, offered insights into the company's strategic direction, financial health, and prospects for the future.

Financial Highlights and Challenges

SPFI reported a diluted earnings per share (EPS) of $0.66 for the third quarter, which remained consistent with the second quarter. The quarter was impacted by a decrease in the fair value adjustment of mortgage servicing rights (MSRs) due to declining interest rates and a gain from insurance proceeds. Loans held for investment declined by approximately $57 million due to loan payoffs and the managed decline of the indirect auto portfolio. However, the company remains optimistic about loan growth in the quarters ahead, citing a strong new business production pipeline and improving customer sentiment.

Deposit Growth and Liquidity

Deposit growth was a highlight of the quarter, with a $95 million increase, or over 10% annualized, compared to the linked quarter. This growth was driven by customer dissatisfaction with competitors due to mergers and the stability and consistency offered by South Plains Financial. The bank holds a significant deposit share in its Lubbock market, with a 18% deposit share at June 30, 2024, and a $454 million lead over its nearest competitor. This strong deposit base provides liquidity for anticipated loan growth in the year ahead.

Credit Quality and Loan Portfolio

The credit quality of the loan portfolio remains solid, with no adverse trends observed in the third quarter. The company has an agreed resolution in place for a multifamily loan in Houston, which is paying as agreed, demonstrating effective credit management. The decline in the indirect auto portfolio is stabilizing, and the company is cautiously optimistic about loan growth accelerating in the year ahead.

Outlook and Strategic Initiatives

Looking ahead, SPFI expects economic growth to improve in the first half of 2025, driven by the Federal Reserve's expected reduction in market interest rates. This is expected to stimulate loan growth. The company remains focused on maintaining credit discipline and managing liquidity, while also exploring potential acquisition opportunities that align with its strategic goals.

Conclusion

South Plains Financial's third-quarter earnings call highlighted a strong performance in a challenging economic environment. The company's focus on customer relationships, deposit growth, and credit management positions it well for the future. With a solid financial foundation and a strategic outlook, SPFI is poised to navigate the evolving economic landscape and capitalize on opportunities for growth.

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