SPFI Financial Analysis

Analysis Date: 1/27/2025

Business Model

South Plains Financial generates revenue primarily through net interest income from lending activities and noninterest income from various banking services

Revenue Sources

• Net Interest Income (75% of total revenue)
• Noninterest Income (25% of total revenue) including mortgage banking, interchange fees, service charges

Revenue Distribution by Channel

• Metropolitan Markets (21% of deposits)
• Rural Markets (79% of deposits)

Income Statement Analysis

• Net interest income increased 3.36% QoQ due to improved net interest margin
• Noninterest income grew 25.24% QoQ primarily due to higher mortgage banking revenues
• Noninterest expense decreased 9.60% QoQ mainly from lower personnel costs

Balance Sheet Analysis

• Total assets decreased 2.43% QoQ primarily due to deposit management strategy
• Loans held for investment grew modestly by 0.58% QoQ
• Total deposits decreased 2.65% QoQ due to seasonal declines and planned reduction in sweep deposits

Capital Allocation

The company maintains strong capital ratios well above regulatory requirements with CET1 ratio of 13.53%, total capital ratio of 17.86%, and leverage ratio of 12.04%. Quarterly dividend of $0.15 per share was paid in Q4 2024.

Management Commentary

Seeing strongest new business production pipeline in more than two years

Deposit pricing falling across markets contributing to margin expansion

Expect low to mid-single digit loan growth for full year 2025

Overall Sentiment: Positive and optimistic about growth prospects while maintaining focus on profitability and risk management

Recommendation

Rating: Buy

Reason for Rating: Strong fundamentals, improving margins, and positive growth outlook support a buy rating

Disclaimer: This analysis is based on company filings and public information. It is for informational purposes only and not financial advice. Past performance does not guarantee future results.

Generated on: 1/27/2025, 10:32:59 AM