South Plains Financial(US:SPFI)2021-10-26 23:38Financial Data and Key Metrics Changes - The company reported net income of $15.2 million or $0.82 per diluted common share for Q3 2021, compared to $13.7 million or $0.74 per diluted common share in Q2 2021 [16] - There was no provision for loan loss in Q3 2021, contrasting with a negative provision of $2 million in Q2 2021, reflecting confidence in credit quality and economic improvement [17] - Net interest income increased to $31.2 million in Q3 2021 from $29.6 million in Q2 2021, driven by an increase in average loans outstanding [38] Business Line Data and Key Metrics Changes - The loan portfolio grew by 5.5% in Q3 2021, reaching $2.43 billion, with organic net loan growth of $178 million [23] - Mortgage originations for Q3 2021 were $373 million, slightly down from $379 million in Q2 2021, with expectations of a decline in mortgage revenues over the coming years [30][32] - Non-interest income was $25.8 million in Q3 2021, compared to $22.3 million in Q2 2021, primarily due to seasonal increases in insurance activities [35] Market Data and Key Metrics Changes - The company noted strong economic growth in Texas markets, contributing to robust business opportunities and population gains [11] - The loan to deposit ratio at the end of Q3 2021 was 76%, with a goal to increase this ratio into the mid-high 80s over time [19] Company Strategy and Development Direction - The company aims to add 20 lenders over two years to enhance loan growth, with a focus on hiring experienced bankers who fit the company culture [12][28] - A thoughtful capital allocation strategy is in place, focusing on share buybacks and maintaining dividends, with aggressive buybacks noted during the quarter [15][21] - The company is evaluating potential M&A candidates, particularly banks with strong deposit franchises in rural markets [22] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the credit quality of the loan portfolio and the overall economic environment, with expectations for continued loan growth into 2022 [13][19] - The mortgage business is expected to decline to 10-15% of total revenues as the market normalizes, with net interest income growth anticipated to offset this decline [14][32] - Management remains optimistic about future growth, citing strong pipelines and the successful recruitment of new lenders [26][36] Other Important Information - The company’s tangible book value per share increased to $20.90 at the end of Q3 2021, up from $18.97 at the end of 2020 [57] - The efficiency ratio improved to 66.5% in Q3 2021 from 70.5% in Q2 2021, reflecting better net interest margins [51] - The audit committee selected BKD as the independent registered public accounting firm for the fiscal year ending December 31, 2022 [54] Q&A Session Summary Question: Timeline for remaining lender hires - Management indicated that while they hope to complete the hiring in the next couple of quarters, it may realistically take until the end of next year due to the focus on quality candidates [65][66] Question: Expense growth outlook - Management acknowledged upward pressure on personnel costs due to wage inflation but expects revenue increases to offset these costs [67][68] Question: Share repurchase average price - The average repurchase price for the 190,000 shares was approximately $23, with discussions ongoing about future buyback strategies [70][71] Question: Loan growth guidance - Management expressed optimism about achieving high single-digit loan growth in 2022 but remained cautious about predicting higher growth rates due to economic uncertainties [79][80] Question: Balance sheet positioning - The company has ample liquidity and capital to support loan growth and is exploring opportunities for acquisitions in West Texas markets [82][84] Question: Personnel costs and expense management - Management indicated that while they expect some upward pressure on personnel costs, they are also looking to manage other expenses to maintain a flat run rate [86][87]