South Plains Financial (SPFI) Q3 2024 earnings summary

Executive summary

• Net income for Q3 2024 was $11.2 million ($0.66 per diluted share), unchanged from Q2 2024 but down from $13.5 million ($0.78 per share) in Q3 2023; return on average assets was 1.05%.

• Deposit growth was robust, increasing to $3.72 billion, driven by customer dissatisfaction with competitors and strong treasury management.

• Loan portfolio declined by $57 million due to payoffs and a managed reduction in the indirect auto portfolio, but stabilization is expected.

• The company remains well-capitalized, with tangible common equity to tangible assets at 9.77% and tangible book value per share at $25.75.

• Optimism among customers is at its highest in over two years, with a strong new business pipeline indicating potential for loan growth in 2025.

Financial highlights

• Net interest income for Q3 2024 was $37.3 million, up from $35.9 million in Q2 2024 and $35.7 million in Q3 2023; net interest margin rose to 3.65%.

• Noninterest income was $10.6 million, down from $12.7 million in Q2 2024 and $12.3 million in Q3 2023, mainly due to lower mortgage banking revenues.

• Noninterest expense increased to $33.1 million from $32.6 million in Q2 2024 and $31.5 million in Q3 2023, driven by higher occupancy, marketing, and IT costs.

• Provision for credit losses was $495 thousand, down from $1.8 million in Q2 2024 and up from a negative $700 thousand in Q3 2023.

• Tangible book value per share increased to $25.75 from $24.15 in Q2 2024 and $23.47 at year-end 2023.

Outlook and guidance

• Management expects easing deposit cost pressures and continued deposit growth to support net interest margin.

• Loan growth expected to be flat in Q4 due to seasonal agricultural payoffs, but momentum is building for 2025, especially in energy, agriculture, and single-family residential sectors.

• Noninterest expense expected to remain flat in Q4; 2025 should be a normalized year with manageable growth.

• Margin projected to improve modestly as rates decline, though short-term liquidity may pressure NIM.

• Uncertainty remains regarding economic conditions, inflation, and interest rates, which may impact credit quality and future provisions.