South Plains Financial (SPFI, Financial) reported a notable performance for the first quarter of 2025, showcasing an increase in its net interest margin on a tax-equivalent basis. The margin rose to 3.81% in Q1 2025, up from 3.75% in the previous quarter and significantly higher than the 3.56% recorded in the same period last year.
A key highlight was the reduction in nonperforming assets, which declined to 0.16% of total assets by the end of March 31, 2025. This represents a significant improvement from 0.58% at the end of December 2024, although it's slightly up from 0.10% on March 31, 2024.
Despite these gains, the company saw a decrease in its return on average assets, recording 1.16% for Q1 2025. This is down from 1.53% in Q4 2024 but up from 1.04% in the first quarter of the previous year.
South Plains Financial attributed its solid first-quarter results to robust deposit growth and healthy margin expansion, which were bolstered by continued improvements in its cost of funds and aligned loan growth. The company also emphasized a continued strengthening in the credit quality of its loan portfolio, reflecting its conservative and proactive credit management strategies.
Looking forward, South Plains Financial is positioning itself to capitalize on growth opportunities in both metropolitan and rural markets, supported by its liquidity and capital strength. As economic conditions remain uncertain, the company is preparing to meet customer needs despite potential slowdowns and reduced risk appetites among businesses.
Wall Street Analysts Forecast
Based on the one-year price targets offered by 4 analysts, the average target price for South Plains Financial Inc (SPFI, Financial) is $42.75 with a high estimate of $45.00 and a low estimate of $39.00. The average target implies an upside of 28.61% from the current price of $33.24. More detailed estimate data can be found on the South Plains Financial Inc (SPFI) Forecast page.
Based on the consensus recommendation from 4 brokerage firms, South Plains Financial Inc's (SPFI, Financial) average brokerage recommendation is currently 2.0, indicating "Outperform" status. The rating scale ranges from 1 to 5, where 1 signifies Strong Buy, and 5 denotes Sell.
Based on GuruFocus estimates, the estimated GF Value for South Plains Financial Inc (SPFI, Financial) in one year is $30.24, suggesting a downside of 9.03% from the current price of $33.24. GF Value is GuruFocus' estimate of the fair value that the stock should be traded at. It is calculated based on the historical multiples the stock has traded at previously, as well as past business growth and the future estimates of the business' performance. More detailed data can be found on the South Plains Financial Inc (SPFI) Summary page.
SPFI Key Business Developments
Release Date: January 24, 2025
- 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.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- South Plains Financial Inc (SPFI, Financial) 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.
