South Plains Financial, Inc. (SPFI) Q4 2025 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call summary presents a stable financial performance with steady net interest income and deposits, and a strong capital position. However, the Q&A reveals uncertainties in deposit cost reduction and revenue synergies from the BOH acquisition. The company's cautious approach to M&A and lack of specific guidance on technology investments further contribute to a neutral sentiment. While there is potential for loan growth and cross-selling, the lack of strong positive catalysts or new partnerships tempers expectations for significant stock price movement.
Key Financial Performance
Diluted Earnings Per Share (EPS) Increased by 17.8% year-over-year for the full year of 2025. Reasons for the increase include strong financial performance and strategic initiatives.
Net Interest Margin (NIM) Expanded by 33 basis points year-over-year, reaching 4% for the fourth quarter of 2025. The increase was driven by effective loan repricing and deposit management.
Tangible Book Value Per Share Grew by more than 14% year-over-year to $29.05 as of December 31, 2025. The growth was attributed to net income after dividends and an increase in accumulated other comprehensive income.
Loans Held for Investment Increased by $91 million to $3.14 billion in the fourth quarter of 2025 compared to the linked quarter. The growth was primarily due to organic loan growth in multifamily property loans, direct energy loans, and other commercial loans.
Yield on Loans Was 6.79% in the fourth quarter of 2025, compared to 6.92% in the linked quarter. The slight decline was due to the absence of one-time gains from interest and fees related to credit workouts in the prior quarter.
Indirect Auto Loan Portfolio Declined by $55 million since the third quarter of 2023, reaching $241 million at the end of the fourth quarter of 2025. The decline was due to tightened credit standards and a focus on maintaining credit quality.
Noninterest Income Generated $10.9 million in the fourth quarter of 2025, relatively flat compared to $11.2 million in the linked quarter. The slight decline was due to a $185,000 decrease in mortgage banking revenues, attributed to seasonal declines in mortgage volumes.
Net Interest Income Was $43 million for the fourth quarter of 2025, in line with the third quarter. The stability was due to steady net interest margin and loan growth.
Deposits Held steady at $3.87 billion at the end of the fourth quarter of 2025, with a 7% increase year-over-year. Noninterest-bearing deposits grew by $88 million for the full year.
Allowance for Credit Losses to Total Loans Ratio was 1.44% as of December 31, 2025, stable from the prior quarter. The provision for credit losses increased to $1.8 million in the fourth quarter, primarily due to strong loan growth.
Noninterest Expense Was $33 million in the fourth quarter of 2025, unchanged from the linked quarter. The stability was due to offsetting changes in professional service expenses and personnel expenses.
Tangible Common Equity to Tangible Assets Increased to 10.61% at the end of the fourth quarter of 2025, up 36 basis points from the prior quarter. The increase was driven by net income after dividends and an increase in accumulated other comprehensive income.
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Operating Highlights
Acquisition of Bank of Houston (BOH): South Plains Financial entered into a definitive agreement to acquire BOH Holdings and its banking subsidiary, Bank of Houston. This acquisition is expected to close in Q2 2026 and will significantly expand South Plains' presence in the high-growth Houston market. BOH has $772 million in assets, $633 million in loans, and $629 million in deposits as of September 30, 2025. The merger is projected to be 11% accretive to earnings by 2027 and will bring South Plains' loan portfolio in Houston to over $1 billion.
Houston Market Expansion: South Plains has been growing its loan portfolio in Houston at a 34% compound annual rate over the last five years. The acquisition of BOH will complement this growth and provide meaningful scale in one of the fastest-growing metropolitan markets in the U.S.
Loan Growth: Loans held for investment increased by $91 million to $3.14 billion in Q4 2025, driven by organic growth in multifamily property loans, direct energy loans, and other commercial loans. Loan growth is expected to accelerate to mid- to high single-digit rates in 2026.
Deposit Growth: Deposits grew by $253 million or 7% year-over-year to $3.87 billion by the end of 2025. Noninterest-bearing deposits increased by $88 million for the full year.
Cost Management: Cost of deposits decreased by 9 basis points to 2.01% in Q4 2025, reflecting effective repricing strategies. Noninterest expenses remained stable at $33 million for the quarter.
Recruitment of Lenders: South Plains has been actively recruiting experienced lenders across its growth markets, including Dallas, Houston, and Midland. Approximately 50% of the expected hiring has been completed, which is expected to drive loan growth in 2026.
Focus on Commercial Real Estate Lending: The merger with BOH aligns with South Plains' focus on commercial real estate lending, as both institutions share similar credit cultures and underwriting disciplines.
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Risk or Challenges
Loan Yield Moderation: The company expects loan yields to moderate in the coming quarters due to the Federal Open Market Committee's (FOMC) series of 25 basis point reductions in target interest rates. This could impact net interest income and overall profitability.
Multifamily Property Portfolio Payoffs: Expected payoffs in the multifamily property portfolio in the first quarter of 2026 could create headwinds for loan growth.
Indirect Auto Loan Portfolio Challenges: The indirect auto loan portfolio has been declining due to tightened credit standards and competitors becoming more aggressive in the higher credit spectrum. This could limit growth in this segment.
Acquisition Integration Risk: While the Bank of Houston acquisition is expected to be a strategic fit, there is always a risk of disruption or challenges during the integration process, despite cultural alignment.
Provision for Credit Losses: The company recorded a $1.8 million provision for credit losses in the fourth quarter, up from $500,000 in the prior quarter, primarily due to strong loan growth. This indicates potential credit risk.
Economic Environment Impact on Consumer Loans: The company has tightened credit standards in the indirect auto loan portfolio to mitigate risks from the current economic environment, which could signal broader economic challenges.
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Guidance & Outlook
Loan Growth Projections: The company expects loan growth to accelerate to a mid- to high single-digit growth rate in 2026, driven by the recruitment of experienced lenders and the integration of Bank of Houston.
Merger with Bank of Houston: The merger is expected to be completed in early Q2 2026 and is projected to be approximately 11% accretive to earnings in 2027, with a tangible book value earn-back period of less than 3 years. The merger will expand the company's presence in the high-growth Houston market, increasing loans in the region to over $1 billion.
Deposit Cost Outlook: The company anticipates a modest decline in the cost of funds in Q1 2026, following the Federal Reserve's recent rate cuts.
Loan Yield Expectations: Loan yields are expected to moderate in the coming quarters due to recent Federal Reserve rate reductions.
Noninterest Expense: Noninterest expense is expected to trend modestly higher in Q1 2026 due to acquisition-related expenses and consulting on technology projects.
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Shareholder Return Plan
Quarterly Dividend: The Board of Directors authorized a $0.17 per share quarterly dividend, marking the 27th consecutive dividend.
Share Buyback Program: The company plans to keep a share buyback program in place as part of its strategy to return income to shareholders.
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Key Q&A
Q:What is the outlook for NIM (Net Interest Margin) given the expected strong growth in 2026?
A:Management aims to keep NIM stable but acknowledges potential compression due to factors like loan repricing, competition on deposits, and the cost of deposits. They are focused on managing deposit costs effectively.
Q:How is the company thinking about deposit growth during the year, especially with the pending BOH acquisition?
A:Management believes they can reduce BOH's deposit costs over time, which could offset NIM pressures. However, the speed of achieving this remains uncertain.
Q:Is the company open to additional M&A deals similar to BOH?
A:Yes, the company is open to thoughtful and methodical acquisitions but is not aiming to be a serial acquirer. They are open to deals in Houston and other markets if they make sense.
Q:What is the impact of payoffs on loan growth, and what are the expectations for 2026?
A:Payoffs were lighter in Q4, which helped net growth. Management expects some payoffs in Q1 but believes they are past the period of significant exits. They anticipate mid- to high single-digit growth in 2026.
Q:How is the company monitoring the migration of customers to deep subprime credit in the indirect auto book?
A:The migration is often due to factors like missed payments or small medical collections. Management feels confident about the portfolio's quality and stability, emphasizing that the deep subprime portion is a small and non-material part of the portfolio.
Q:Is the company planning to expand its mortgage banking or fee income drivers in 2026?
A:The company is focused on hiring producers to increase volume in mortgage banking. They are also maintaining their infrastructure and exploring other fee income opportunities.
Q:What revenue upside does the company see from the Bank of Houston acquisition?
A:Management sees opportunities in cross-selling and balance sheet optimization, particularly in treasury services. However, revenue synergies are not yet quantified in their models.
Q:Are there any technology investment priorities for 2026?
A:Yes, the company is focused on enhancing credit workflows, loan operations, and maintaining relevance in technology. They are also preparing for the integration of BOH.
Q:What were the new loan yields in Q4?
A:New loan yields were in the mid-6% range, around 6.5% to 6.75%.
Q:Can the $500,000 acquisition-related expenses be broken down?
A:The expenses are primarily in legal and professional services, with a significant portion related to consulting for ongoing projects.
Q:What is the outlook for expenses in 2026?
A:Expenses are expected to rise modestly due to salary adjustments, hiring initiatives, and technology projects. However, consulting expenses are expected to decrease after project completions.
Q:What is the deposit beta outlook?
A:Deposit betas are estimated to be around 35% to 40%, with management focused on keeping costs down and protecting NIM.
Q:What gives confidence in the mid- to high single-digit loan growth guidance for 2026?
A:Confidence comes from the BOH acquisition, new hires, and strong organic growth opportunities. Management is focused on maintaining efficient approval processes and scaling the company safely.
Q:Review of Unclear Management Responses
A:Management avoided providing a direct answer on the speed of reducing BOH's deposit costs and the exact revenue synergies from the acquisition. They also did not provide a detailed breakdown of the $500,000 acquisition-related expenses or specific quantifications for technology investments.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
BOH Holdings
BOH South
BOH employee
BOH scale
BOH tailwind
BOH transaction
Bank Houston
Bank continuity
Bank credit
Bank effort
Bank stream
Boards South
City Bank
Curtis
Houston market
Slide presentation
acceleration loan
agreement
category
competitor
deterioration
dislocation
harbor statement
loan mid
majority
market Houston
merger BOH
mid digit
platform
point interest
portfolio Bank
portfolio prime
power
presence Houston
presentation release
rate loan
volume
year BOH
yield basis
SPFI Transcript
South Plains Financial, Inc. (SPFI) Q4 2025 Earnings Call Transcript
Unknown1-26
The earnings call summary presents a stable financial performance with steady net interest income and deposits, and a strong capital position. However, the Q&A reveals uncertainties in deposit cost reduction and revenue synergies from the BOH acquisition. The company's cautious approach to M&A and lack of specific guidance on technology investments further contribute to a neutral sentiment. While there is potential for loan growth and cross-selling, the lack of strong positive catalysts or new partnerships tempers expectations for significant stock price movement.
South Plains Financial, Inc. (SPFI) Q3 2025 Earnings Call Transcript
Positive10-23
The earnings call shows strong financial performance with increased deposits, reduced classified loans, and improved tangible book value. The Q&A indicates positive growth in the lending team and a strategic focus on expansion. Despite some concerns about credit score migration, the overall sentiment is positive due to stable net interest margins and a strong capital position. The company's proactive hiring strategy and strategic M&A criteria further support a positive outlook. Given these factors, a positive stock price movement is likely over the next two weeks.
South Plains Financial, Inc. (SPFI) Q2 2025 Earnings Call Transcript
Unknown7-16
The earnings call presents a mixed picture: while there are positives like increased net interest income, tangible book value, and noninterest-bearing deposits, there are concerns about deposit outflows, increased credit losses, and a conservative loan growth outlook. The Q&A highlights management's cautious optimism but also reveals challenges in loan growth and M&A. The sentiment is tempered by uncertainties in deposit costs and loan yields. Overall, the positives and negatives balance out, resulting in a neutral sentiment.
Earnings call transcript: South Plains Financial Q1 2025 beats EPS forecasts
Unknown4-24
The earnings call presents a mixed picture: stable loan yields and deposit growth are positive, but declining non-interest income and EPS are concerning. The dividend increase and stock repurchase are positives, but the Q&A reveals uncertainties in deposit cost reductions and unclear management responses. The hiring strategy indicates cautious growth. Overall, the sentiment is neutral, as positives are offset by negatives, and the lack of market cap information limits precise prediction.
SPFI Slides
SPFI Report
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