South Plains Financial(US:SPFI)2022-01-27 23:59Financial Data and Key Metrics Changes - The company reported net income of $14.6 million or $0.79 per diluted common share for Q4 2021, compared to $15.2 million or $0.82 per diluted common share in Q3 2021 and $15.9 million or $0.87 per diluted common share in Q4 2020 [17] - Total assets grew 8.4% year-over-year to $3.9 billion, with diluted earnings per share increasing 28% year-over-year to $3.17 per share [24] - The return on average assets expanded by 25 basis points to 1.56% for 2021 [24] Business Line Data and Key Metrics Changes - The loan portfolio grew 9.7% year-over-year in 2021, with loans held for investment at $2.44 billion at the end of Q4 2021, an increase of $8.5 million from Q3 2021 [13][29] - Mortgage loan originations were $314 million in Q4 2021, down from $374 million in Q3 2021, leading to a decline in mortgage banking revenue [36] - Non-interest income for Q4 2021 was $22.9 million, compared to $25.8 million in Q3 2021, primarily due to the decline in mortgage banking activities [38] Market Data and Key Metrics Changes - The company experienced strong organic loan growth in Texas markets, particularly in commercial land development, commercial retail, and direct energy loans [30] - The loan to deposit ratio was 73% at the end of Q4 2021, down from 76% in Q3 2021, indicating strong deposit growth [20] Company Strategy and Development Direction - The company aims to focus on organic growth and has a capital allocation strategy centered on maintaining and growing dividends while utilizing share repurchase programs [26] - The Board of Directors authorized a quarterly dividend of $0.11 per share, an increase of $0.02 from the previous quarter [27] - The company plans to add 20 new lenders to its team of 60 over the next two years to support growth [14][32] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving mid-to-high single-digit loan growth in 2022, despite anticipated headwinds from larger loans paying off [19][26] - The company believes it is well-positioned to benefit from rising interest rates, which could enhance net interest income [42][75] - Management emphasized the importance of maintaining credit discipline while pursuing growth [33] Other Important Information - The company reported a decrease in classified assets by $20.3 million in Q4 2021, reflecting improved credit quality [49] - The efficiency ratio improved to 66.1% in Q4 2021 from 66.5% in Q3 2021, despite a slowdown in mortgage banking activity [51] Q&A Session Summary Question: What is the long-term outlook for mortgage revenue? - Management clarified that while mortgage revenue is expected to decrease to 10% to 15% of total revenue, they anticipate it to be closer to 20% in 2022 due to strong demand [61][64] Question: How will the company approach share buybacks in 2022? - Management indicated that they will continue to evaluate the stock's valuation and remain active in buybacks as appropriate [66] Question: What is the expected increase in expenses for 2022? - Management expects a modest rise in core expenses, likely in the low-to-mid single-digit range, depending on mortgage volume [68] Question: Will there be notable headwinds from larger loans paying off in 2022? - Management acknowledged potential headwinds but expressed confidence in their ability to manage these challenges due to strong demand and a solid lending team [69] Question: How will the loan portfolio respond to a 25 basis point increase in the Fed fund rate? - Approximately 20% of the loan portfolio would reprice immediately, and the company is positioned to benefit from rising rates [74]