STANDARD PREMIUM FINANCE HOLDINGS, INC. (SPFX) stock intrinsic value fair value estimate & owner earnings analysis

Standard Premium Finance Holdings lends money to businesses so they can pay their commercial property and casualty insurance premiums in monthly installments instead of one lump sum. It has done this since 1991 out of Miami. Business comes through relationships with independent insurance agents, who are paid a commission for each referral. The loans are short (usually under a year) and secured: if a borrower stops paying, the company cancels the policy and collects the unearned premium back from the insurer, which keeps losses small (credit-loss provisions have run at about 0.8% of new loan volume). At the end of 2025 the company had 18,846 loans and about $76.6 million outstanding. About 62% of that was in Florida, with most of the rest in Georgia, North Carolina, South Carolina and Texas. Loans made in 2025 totaled $158 million. Change since our previous estimate. Our October 2 estimate set the margin-of-safety price at $3.50. That price assumed the shares would trade close to our base-case value within four or five years. For a company this small and this thinly traded, with no dividend, we no longer think that share price can be counted on (see Margin-of-safety price below). We have lowered the margin-of-safety price to $2.50. Our estimates of what the business is worth are unchanged. Before that, in late September, our figures were $11.04 / $20.19 / $30.76. Those treated the yearly loan-loss provision as a non-cash charge to be added back, and counted the preferred stock as extra common shares. Both were corrected on October 2, which roughly halved the values. How we measure earnings. This is a lender, so its borrowings (a $75 million bank credit line, plus about $12 million of subordinated notes sold mostly to individuals at 6-8%) are the raw material of the business, the same way deposits are for a bank. We therefore value the cash it earns after paying interest and do not subtract its debt separately. We count two items as real, recurring costs of lending: the yearly provision for loan losses ($1.26 million in 2025) and the fees paid to set up the credit line, spread over its life. Measured this way, owner earnings were $0.68 million in 2020, $0.79 million in 2021, $0.86 million in 2022, $0.41 million in 2023, $0.86 million in 2024 and $1.17 million in 2025. That is close to reported net income each year. The Series A preferred stock is treated as a fixed claim ahead of the common shares. It is $1.66 million of preferred paying a $116,200 yearly dividend, convertible only at the company's option at 80% of the market price. We value it at about $1.94 million (the dividend stream discounted at 6%). What drives it. The business earns roughly 18% on new loans and pays about 6-7% on its borrowings, so profit depends heavily on the gap between the two. Loan rates are fixed when the loan is written, while the bank line floats with SOFR. When rates jumped in 2022-2023, funding costs rose faster than the loan book could reprice. Owner earnings fell from $0.86 million to $0.41 million before recovering. A 1-point change in funding cost moves after-tax earnings by roughly $0.4 million, about a third of a normal year. The company is heavily leveraged, as a lender of this kind normally is: at June 30, 2026 it held $89.9 million of assets on $9.0 million of shareholders' equity, about ten dollars of loans for every dollar of equity. In September 2025 the credit line was renewed through September 25, 2028. The limit rose from $50 million to $75 million, Flagstar Bank and Cadence Bank joined First Horizon in the lending group, and the rate margin was cut from 2.55-2.96% to 2.10% over SOFR. That cut is contracted, so we count it: about $0.2 million a year after tax, net of the $373,011 of fees paid for the renewal. Results so far support this. First-half 2026 revenue rose 12.7% and net income rose 32% from the first half of 2025. Normal earnings level. We did not use the most recent year, and we did not use the 2020-2021 years, when near-zero interest rates flattered profits under conditions that have since reversed. Instead we took the median owner-earnings margin from 2022-2025. That period covers a full swing of the funding-cost cycle: the 2023 squeeze and the 2024-2025 recovery. The median margin is 8.2% of revenue. Adding the contracted credit-line saving gives 9.9%. We applied it to revenue of about $13.6 million, which is the first half of 2026 doubled and reflects loans already on the books. That gives normal owner earnings of about $1.35 million. Owner earnings grew 36% in 2025 (from $0.86 to $1.17 million), and our first-year figure of about $1.38 million implies about 17% growth, below that trailing rate. Growth we credit and growth we leave out. The number of loans grew from 17,177 at the end of 2021 to 18,846 at the end of 2025, about 2.3% a year, but was flat in 2025. Much of the recent revenue growth came from larger average premiums as commercial insurance prices rose, especially in Florida. That is a market condition that can reverse, so we do not credit it. Expansion into new states is also left out (the company is licensed in 37 states but books almost all its business in five). Each dollar of new loans needs about 10 cents of the company's own capital alongside the bank line and notes, so every case charges growth for the earnings that must be kept in the business to fund it. The company pays no common dividend and keeps its earnings. Bear case ($2.84 per share): Revenue falls back to the 2025 level ($12.5 million) as premium prices soften, with no growth in loan count. A 2023-style funding squeeze cuts the margin to 4.2% for two years. The credit line is then renewed at the old, higher margin, and earnings settle at the 8.2% cycle median. After year 10, earnings fade to zero over 20 years. This reflects real concentration risks named in the filings: about 62% of the book is in Florida, the business depends on agent referrals, and the credit line is personally guaranteed by the CEO, so the business relies heavily on one person. Even at the low point, earnings stay positive and cover interest. The business is worth about $10.4 million, less $1.9 million for the preferred, leaving $8.5 million for common shareholders. Base case ($7.38 per share): Margin of 9.9% on $13.6 million of revenue, loan count growing 2% a year for ten years (below the demonstrated pace), and the growth funded from retained earnings. After year 10, earnings hold flat at about $1.6 million. That rests on a 35-year operating record and a credit line renewed repeatedly on equal or better terms. The business is worth about $25.0 million, less $1.9 million for the preferred, leaving $23.1 million. Bull case ($9.25 per share): Today's funding conditions persist. That means the 2.10% margin is renewed in 2028 and margins stay at about 11.2%, roughly the level earned in the first half of 2026. Loan count grows 4% a year for five years and 3% a year for the next five, in line with the 5.5% annual pace achieved from 2020 to 2025. Earnings then hold flat. The business is worth about $31.2 million, less $1.9 million for the preferred, leaving $29.2 million. Per-share values use 2,930,726 common shares outstanding at June 30, 2026 (down from 3,001,216 after a 2026 buyback), plus the dilutive effect of 111,200 options at $1.51 and, where in the money, 235,000 warrants at $4.00. What could make this wrong. Higher short-term rates would squeeze margins quickly. So would a Florida hurricane season that drives insurer failures and slows refunds of unearned premium, the loss or illness of the CEO who guarantees the credit line, or rising agent commissions (up 24% in 2025 while revenue rose 2.7%) as competition for referrals intensifies. On the upside, a sustained period of lower rates or a steady push into new states would add value we have not counted. Margin-of-safety price ($2.50). Our estimates say what the business is worth to a long-term owner. They do not say where the shares will trade, and with no common dividend, a return depends both on the business growing and on the later share price. Our base-case value of $7.38 is close to three times the common shareholders' equity on the books. At June 30, 2026 that equity was about $7.36 million (total equity of $9.02 million less the $1.66 million of preferred), or $2.51 a share. The business earned about 18% on its common equity in 2025, which is what supports a value well above book. But the company is worth only about $9 million in total, its shares trade over the counter with 122 holders of record, it pays no dividend, and it runs about ten dollars of mostly floating-rate borrowing for every dollar of equity, with the bank line guaranteed by one person. Few investors can or will own a company like this, and nothing we can point to would push its share price toward our estimate of its value. We therefore set the margin-of-safety price without relying on the shares ever being valued near our base case. Instead we assume a later share price at a modest premium to book value, about 1.25 times. In the base case, with all earnings kept in the business, book value grows to about $4.77 a share in five years. At 1.25 times book that is about $5.96, and a 20% annual return to that figure requires a starting price near $2.40. Over one year, book value grows to about $2.94 a share, so a 20% return from $2.50 needs a share price of roughly book value. We set the margin-of-safety price at $2.50. That is about book value today and below our bear-case value of $2.84, so the bear case implies roughly break-even on the business's value. Any move in the share price toward our base-case value would be upside, not something the price depends on. A regular common dividend or a steady buyback program would make the return less dependent on the later share price and would justify a higher margin-of-safety price.