Financial Data and Key Metrics Changes - The company reported diluted earnings per share of $0.72, down from $0.96 in the linked quarter, with a $0.14 per share after-tax differential in the mortgage servicing rights fair value adjustment [26] - Net interest income remained unchanged at $38.5 million, while the net interest margin increased to 3.81% from 3.75% in the linked quarter, primarily due to a decline in the cost of deposits [27] - Deposits increased by $171.6 million to $3.79 billion, with the cost of deposits decreasing to 219 basis points from 229 basis points in the linked quarter [28] Business Line Data and Key Metrics Changes - Loans held for investment increased by $20.8 million or 2.7% annualized to $3.08 billion, with growth in commercial owner-occupied real estate loans and commercial goods and services loans [16] - The indirect auto loan portfolio grew by $7 million to $243 million, with a decline in 30-plus days past due loans to 41 basis points from 47 basis points in the fourth quarter [21] - Non-interest income decreased to $10.6 million from $13.3 million in the linked quarter, primarily due to a decrease in mortgage banking revenues [23][24] Market Data and Key Metrics Changes - The loan portfolio in major metropolitan markets decreased by $18 million to $1.04 billion, with higher levels of scheduled and early payments on loans exceeding new loan production [18] - The company reported strong loan growth in the Permian market, achieving the strongest loan growth in a single quarter since entering the market in 2019 [20] - The company anticipates loan growth to trend towards the lower end of the low- to mid-single-digit range for the full year 2025 due to economic uncertainty [23] Company Strategy and Development Direction - The company remains focused on organic growth while selectively adding to its team across major metropolitan and rural markets [10] - A $15 million stock repurchase program was authorized, with $8.3 million spent to repurchase 250,000 shares in the first quarter, indicating a strategy to balance buybacks with liquidity for growth [13] - The company is positioning itself to capitalize on opportunities during economic downturns, emphasizing the importance of credit quality and customer relationships [14][96] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the company's ability to perform well through economic downturns, citing strong credit quality and a solid capital position [9][96] - The company is cautious about the economic outlook but believes Texas's pro-business environment will support growth above the broader U.S. economy [9] - Management expects to continue hiring experienced lenders to enhance the team's capabilities and support growth [10][96] Other Important Information - The allowance for credit losses to total loans held for investment ratio was 1.40%, with a recorded provision for credit losses of $420,000 in the first quarter [29] - Non-interest expense increased to $33.0 million from $29.9 million in the linked quarter, with expectations that this level will be a good run rate for the remainder of the year [30] - Tangible book value per share increased to $26.05 from $25.40, driven by net income after dividends and an increase in accumulated other comprehensive income [31] Q&A Session Summary Question: On deposit costs and potential for further reduction - Management indicated that while they have made significant progress in reducing deposit costs, there is still room for further reductions, particularly in exception pricing [37][40] Question: Loan yield stability and margin expansion - Management noted that while the loan yield has been stable, further expansion of the net interest margin may be limited, but they remain optimistic about maintaining current levels [41][46] Question: Elevated loan payoffs and their impact - Management acknowledged that payoffs were approximately $10 million higher in the first quarter compared to the previous quarter, but they are comfortable with the anticipated payoffs as production remains strong [50][52] Question: Current hiring landscape and mortgage hiring outlook - Management stated they are actively hiring but are selective, particularly in the mortgage sector, as they prepare for a potential housing recovery [59][63] Question: Concentration of loan portfolio in energy and growth - The energy concentration in the loan portfolio is around 4%, primarily driven by energy service businesses, with management noting growth in this area [78][82]
South Plains Financial(SPFI) - 2025 Q1 - Earnings Call Transcript