South Plains Financial(US:SPFI)2021-07-28 04:00Financial Data and Key Metrics Changes - The company reported net income of $13.7 million or $0.74 per diluted common share for Q2 2021, compared to $5.6 million or $0.31 per diluted common share in Q2 2020 [9] - Pre-tax pre-provision income for Q2 2021 was $15.1 million, down from $19 million in Q1 2021 and $20.1 million in Q2 2020 [9] - A negative provision for loan loss of $2 million was recorded in Q2 2021, compared to a provision expense of $13.1 million in Q2 2020 [9] Business Line Data and Key Metrics Changes - Loans held for investment at the end of Q2 2021 were $2.3 billion, a $60.8 million or 2.7% increase from Q1 2021, driven by organic net loan growth of $120.1 million [20] - Mortgage loan originations for Q2 2021 were $378 million, down from $435 million in Q1 2021, leading to a decrease in mortgage banking revenues [25] - Non-interest income for Q2 2021 was $22.3 million, compared to $26.5 million in Q1 2021, reflecting a decline in mortgage banking activity [26] Market Data and Key Metrics Changes - The loan-to-deposit ratio at the end of Q2 2021 was 73%, indicating significant excess liquidity available for deployment [12] - Total non-interest-bearing deposits were approximately $1 billion, representing 31.6% of total deposits [32] - The non-performing assets to total assets ratio declined to 37 basis points in Q2 2021 from 42 basis points in Q1 2021, reflecting positive credit migrations [33] Company Strategy and Development Direction - The company is focused on expanding its loan portfolio and hiring bankers, particularly in major metropolitan markets like Dallas and Houston [7][11] - A thoughtful capital allocation strategy is being pursued, including share buybacks and maintaining dividends [8][13] - The company plans to increase its lending team by more than 30% over the next two years to support organic growth [12][22] Management's Comments on Operating Environment and Future Outlook - Management noted that economic activity is accelerating across Texas, but they are monitoring the impact of the Delta variant [7] - The company expects mid-single-digit loan growth in 2021, with potential for better growth in 2022 as new hires ramp up [10][50] - Management expressed confidence in the robustness of local economies and the potential for loan growth, particularly in the Permian Basin [10][24] Other Important Information - The company repurchased approximately 39,000 common shares under its $10 million share repurchase program [13] - The Board of Directors authorized a quarterly dividend of $0.09 per share, up from $0.07 in the previous quarter [13] - The company is investing in technology to enhance efficiency, including moving data storage to the cloud [17] Q&A Session Summary Question: Loan yields and growth expectations - Management indicated that loan yields remained flat, with some newer loans coming in at lower yields, suggesting potential compression [46][47] - The company aims for mid-single-digit growth across the entire portfolio, including replacing PPP loans [48][49] Question: Hiring new lenders and geographic focus - Management confirmed that they are nearly 50% into the hiring process for new lenders, focusing on existing markets and relationship-based lending [56][57] - The company is looking for experienced lenders with strong relationships, particularly in commercial real estate and construction [57] Question: Expense impacts from new hires and technology investments - Management anticipates a 2% to 3% increase in annual non-interest expenses due to new hires and technology investments [59] - They are also focused on offsetting expenses through careful management and efficiency improvements [61]