SOUTH PLAINS FINANCIAL, INC. Q4 FY2024 earnings call

• Full Year 2024 Results: Diluted earnings per share were $2.92 for the full year, down from $3.62 in 2023. Excluding a one-time gain, diluted EPS outperformed 2023 by $0.62 per share. Loan portfolio grew 1.4% full year.
• Deposit Franchise: The community-based deposit franchise was $3.6 billion in 2024, with 79% in rural markets and 21% in major metros. Deposits were repriced lower in Q4, driving net interest margin (NIM) up 10 basis points.
• Loan Portfolio: Q4 saw loan growth in commercial owner-occupied real estate, offsetting payoffs and seasonal declines in agricultural balances. Indirect auto portfolio held steady at $236 million.
• Non-Interest Income: Mortgage banking revenues increased due to the fair value adjustment of mortgage servicing rights, partially offset by non-recurring interest proceeds from property damage in Q3 2024.

Loan Portfolio: In the fourth quarter, the loan portfolio increased $17.7 million to $3.06 billion. Full-year loan portfolio growth was 1.4% to $3.06 billion. Yield on loan portfolio was 6.69% in Q4. Deposits: The community-based deposit franchise held steady at $3.6 billion in 2024. In the fourth quarter, deposits decreased by $94.8 million to $3.62 billion. Non-Interest Income: For the fourth quarter, non-interest income was $13.3 million, up from $10.6 million in the prior quarter, primarily due to an increase in mortgage banking revenues from the fair value adjustment of mortgage servicing rights.

• Loan Growth: Expect low to mid-single-digit loan growth for full year 2025.
• Dividend: Board authorized a $0.15 per share quarterly dividend, 23rd consecutive.
• Stock Repurchase: $10 million stock repurchase program expiring Feb 26, 2025; Board to consider new plan.
• M&A: Expect community bank M&A activity to pick up, but remain disciplined, weighing acquisitions against share buybacks.

• Economic uncertainty affecting actual results.
• Unrealized securities losses on bank balance sheets.
• Competitor transactions potentially impacting markets.

Q: Good morning guys. Wanted to start with the loan yield in the fourth quarter. I mean it was pretty impressive to see that be relatively flat quarter-over-quarter given the rate cuts. Any color on what allowed the loan yields to remain stable. There wasn't a sort of onetime interest benefit, was there?

A: Woody, this is Steve. There was a little bit less than $200,000 of non-accrued interest that we got, not necessarily out of line with what we see in other quarters, really between that and just having loans pay-off. We had some loans paying off that were at those -- at lower rates, quite frankly, which we were glad to see even some of the 4% to 5% loans pay off and then some of the new loans being booked that are at rates higher than what the average is. So overall, again, we were very pleased with where that ended up, but no real one big time nonrecurring item.

Q: Got it. That's helpful. And then any expectations near term for the margin, do you think it can remain stable around the 375 level? Or is there a chance that it could even move higher?

A: We've had a lot of discussion about that. We are going to be more conservative, as you know, and what we would say. I mean I would hope we could keep it where it is at and hopefully incrementally improve, but a lot of that's really going to depend on loan growth and where that kind of ends up. I mean you'll see us -- deposit costs will still come down just a little bit as we flush out the rate cuts that were done midway through the quarter and things like that. And loan yields may trend down slightly just depending on where -- how that ends up for a full quarter after those cuts. But we -- overall, we would with the right loan growth, I think we could see it stabilize and maybe grow incrementally.

Q: Wood. This is Cory. I think the one thing that's going to help us do that is the fact that our liquidity position is where it is. It just gives us some opportunities to make sure we are not overpricing on the cost side.

Q: Right. Well, you all have consistently been beating the NIM guide, so we'll see how it turns out. Lastly, on the loan pipeline, I mean, it's great to hear all the color on the new customer activity. Just is that concentrated in any one segment? And then is it a reflection of new hires? Or is it just a reflection of hard work?

A: Yes, Woody, this is Brent. It's a combination, I think of all those factors. We have good production from new hires, but really I think we've got a lot of optimism we're seeing from our clients and capital outlays that they're planning to make. And our pipeline is much better than it was this time last year. So we feel optimistic about it, too.