South Plains Financial Inc. Reports Mixed Results Amid Economic Challenges

• Net Interest Income: $35.2 million for Q4 2023, a slight decrease from $35.7 million in Q3 2023 and $36.3 million in Q4 2022.

• Loan Portfolio: Loans held for investment grew to $3.01 billion as of December 31, 2023, marking a 9.7% year-over-year increase.

• Deposits: Total deposits reached $3.63 billion, up 6.5% from the previous year.

• Asset Quality: The allowance for credit losses to loans held for investment remained stable at 1.41% as of December 31, 2023.

• Net Income: Reported at $10.3 million for Q4 2023, down from $13.5 million in Q3 2023 but up from $9.2 million in Q1 2023.

• Capital: Book value per share increased to $24.80 at the end of 2023, driven by an increase in AOCI and net income after dividends.

• Stock Repurchase: SPFI repurchased 686 thousand shares during 2023, with the belief that shares traded below intrinsic value.

On January 26, 2024, South Plains Financial Inc (NASDAQ:SPFI) released its 8-K filing, detailing its financial results for the fourth quarter and year-end of 2023. As a bank holding company providing a range of financial services, SPFI faced significant industry challenges throughout the year, yet managed to deliver strong results, reflecting the resilience of its franchise and the robust Texas economy.

Performance Amidst Economic Headwinds

Despite the banking sector's dislocation following the failures of Silicon Valley Bank and Signature Bank, SPFI's Chairman and CEO, Curtis Griffith, highlighted the company's modest community-based deposit franchise growth and healthy loan demand. The Federal Reserve's interest rate hikes, peaking in December, did not deter a 9.7% loan growth for SPFI, showcasing the strength of its lending platform and the Texas economy. Griffith also noted the company's strategic sale of Windmark, which resulted in a pre-tax gain of $33.8 million, allowing SPFI to sell investment securities at a loss in a tax-efficient manner and reinvest in higher-yielding loans.

Financial Highlights and Challenges

SPFI's net interest income for Q4 2023 was $35.2 million, with a net interest margin of 3.52%, consistent with the previous quarter but down from 3.88% in Q4 2022. The average yield on loans increased to 6.29%, up from 5.59% in the same quarter of the previous year. However, interest expense also rose significantly due to higher short-term interest rates and increased interest-bearing deposits.

Noninterest income decreased to $9.1 million in Q4 2023, primarily due to a fall in mortgage banking revenues and the sale of Windmark. Noninterest expense saw a decrease from both the previous quarter and the same quarter last year, largely due to lower mortgage-related personnel costs and reduced Windmark-related expenses.

Stable Asset Quality and Capital Strength

Asset quality remained strong, with a stable ratio of allowance for credit losses to loans held for investment at 1.41%. Nonperforming assets to total assets slightly increased to 0.14%, with annualized net charge-offs at 0.08% for Q4 2023. The book value per share increased significantly to $24.80, reflecting an increase in AOCI and net income after dividends.

SPFI's capital position remains robust, with a total stockholders equity to total assets ratio of 9.68% and common equity tier 1 to risk-weighted assets at 12.41%. The company's strategic actions, including the stock repurchase program, have been aimed at enhancing shareholder value, with the board authorizing a $15 million stock repurchase program that was fully utilized in 2023.

For a more detailed analysis of South Plains Financial Inc's financial performance and to access the full earnings report, visit SPFI's investor relations page.

South Plains Financial Inc will host a conference call to discuss its Q4 and year-end 2023 financial results, providing an opportunity for investors and analysts to gain further insights into the company's performance and future outlook.

Note: This summary is provided for informational purposes only and does not constitute investment advice. Investors are encouraged to conduct their own due diligence before making any investment decisions.

Explore the complete 8-K earnings release (here) from South Plains Financial Inc for further details.

This article first appeared on GuruFocus.