South Plains Financial targets up to 20% lending platform growth while expanding M&A discussions

Earnings Call Insights: South Plains Financial (SPFI) Q3 2025

MANAGEMENT VIEW

* Curtis Griffith, Chairman & CEO, highlighted "strong third quarter results, highlighted by solid earnings growth as we continue to experience net interest income expansion, supported by our low-cost community-based deposit franchise." He emphasized improvements in credit quality, return on assets, and a focus on both organic growth and accretive M&A.
* Griffith stated the bank is "firmly positioned to accelerate our asset growth through both organic growth and accretive M&A opportunities." He noted ongoing discussions with potential acquisition targets and underscored that M&A will proceed only if deals fit the bank’s conservative culture and benefit shareholders.
* Griffith reported a consolidated common equity Tier 1 risk-based capital ratio of 14.41% and a Tier 1 leverage ratio of 12.37% as of September 30, 2025.
* Cory Newsom, President & Director, indicated that loans held for investment decreased by $45.5 million to $3.05 billion due to significant multifamily property loan payoffs. He explained, "We expect level of paydowns and payoffs to moderate as we look to 2026." He added the bank is "actively recruiting lenders who fit our culture to grow our lending capabilities," with a target to grow the lending platform by up to 20% and is already more than halfway there.
* Steven Crockett, CFO & Treasurer, stated, "For the third quarter, diluted earnings per share were $0.96 compared to $0.86 from the linked quarter. This increase is primarily a result of the reduction in provision for credit losses and increase in net interest income."

OUTLOOK

* Management expects loan growth to accelerate to a mid- to high single-digit rate through 2026, driven by new hires and moderating payoffs. Newsom said, "We expect our new hires to begin contributing to a loan growth in '26, while the level of payoffs begin to diminish."
* Griffith reiterated, "M&A is not the only option that we have to grow. Our organic growth initiative is just in the early innings, and we are optimistic that we will see a sharp acceleration in loan growth in the year ahead."

FINANCIAL RESULTS

* Diluted earnings per share for Q3 2025 were $0.96, up from $0.86 in Q2 2025.
* Net interest income rose to $43 million, compared to $42.5 million in the prior quarter. The net interest margin was 4.05% in Q3 versus 4.07% in Q2; excluding one-time items, the margin increased by 9 basis points to 3.99%.
* Deposits grew by $142.2 million to $3.88 billion, reversing the previous quarter’s $53.6 million decline. Noninterest-bearing deposits increased $50.7 million, with the deposit mix shift contributing to a reduction in the cost of deposits to 210 basis points from 214 basis points.
* Provision for credit losses decreased to $500,000 from $2.5 million last quarter, attributed to improved credit quality and lower specific reserves.
* Noninterest income was $11.2 million, down from $12.2 million, primarily due to a decrease in mortgage banking revenues.
* Noninterest expense decreased to $33 million from $33.5 million, mainly due to lower professional service expenses.

Q&A

* Joseph Yanchunis, Raymond James: Asked about the composition and base of new lender hires, and geographic areas of focus. Newsom responded, "from the base is probably about 40. And...none of that includes support staff. That's all production... we've probably already achieved north of 10% so far this year," with growth focused in Permian, Houston, and Dallas.
* Yanchunis also questioned an apparent increase in subprime and deep subprime loans. Newsom and Crockett clarified the data reflected updated borrower credit scores, not origination data, and that overall subprime exposure remains low.
* Woody Lay, KBW: Asked about expense implications of new hires and M&A strategy. Crockett noted, "overall noninterest expense to modestly increase." Griffith and Newsom stressed culture fit as the top M&A priority, alongside financial alignment.
* Stephen Scouten, Piper Sandler: Probed on lender impact and book of business. Newsom said new hires have "capacity to go out and produce and have been very successful for long periods..." Scouten also questioned net interest margin outlook, with Crockett stating, "you may see a slight decline in NIM until everything kind of works through the system."
* Scouten raised concerns over credit score migration in the auto portfolio. Brent Bates, Chief Credit Officer, acknowledged downward migration in lower half scores but "haven't seen delinquencies rise or other credit issues."
* Brett Rabatin, Hovde Group: Focused on payoffs in the commercial real estate book. Bates expects "scheduled payoffs of some projects that are complete and stabilized into the first quarter, maybe second."

SENTIMENT ANALYSIS

* Analysts displayed a neutral to slightly cautious tone, pressing for clarity on hiring, credit quality, and loan payoffs, with repeated queries into the implications for growth and risk.
* Management maintained a confident tone in prepared remarks, emphasizing strong capital and a disciplined approach. In Q&A, management was forthcoming but sometimes cautious, especially on topics like credit score migration and NIM direction.
* Compared to the previous quarter, analyst sentiment remained steady, with a focus on risk management and strategic priorities, while management confidence was reinforced by improved capital metrics and execution on hiring goals.

QUARTER-OVER-QUARTER COMPARISON

* The current quarter saw a shift from modest loan growth in Q2 to a decline in Q3, attributed to large payoffs, especially in multifamily. Management is now more explicit about expectations for loan growth reacceleration and the impact of new hires.
* M&A language is more optimistic this quarter, with Griffith stating "we continue to engage in discussions with potential target banks" and noting promising opportunities.
* Deposit growth reversed last quarter’s contraction, and capital ratios improved.
* Management’s tone remains confident, but more focused on the near-term challenge of loan paydowns and the strategic solution of aggressive lender recruitment.
* The analysts’ focus remains on risk, payoffs, and the pace of loan and deposit growth, consistent with prior quarters.

RISKS AND CONCERNS

* Persistent elevated loan paydowns, particularly in multifamily, are a headwind to loan growth.
* Credit migration in the indirect auto portfolio is being closely watched, though management reports stable delinquencies and low net charge-offs.
* Management stressed adherence to tightened credit standards and proactive credit risk monitoring.
* M&A integration risk is acknowledged, with a strong emphasis on culture fit and financial discipline in potential deals.

FINAL TAKEAWAY

Management underscores the strong financial position and growing capital base of South Plains Financial, highlighting robust earnings growth and strategic investments in talent and technology. The company is focused on accelerating organic loan growth through a targeted 20% expansion of its lending platform, while also actively exploring disciplined, accretive M&A opportunities. The leadership team remains optimistic about both organic and inorganic growth prospects, supported by improved asset quality, deposit growth, and a solid capital foundation.

Read the full Earnings Call Transcript [https://seekingalpha.com/symbol/spfi/earnings/transcripts]

MORE ON SOUTH PLAINS FINANCIAL

* South Plains Financial, Inc. (SPFI) Q3 2025 Earnings Call Transcript [https://seekingalpha.com/article/4832828-south-plains-financial-inc-spfi-q3-2025-earnings-call-transcript]
* Seeking Alpha’s Quant Rating on South Plains Financial [https://seekingalpha.com/symbol/SPFI/ratings/quant-ratings]
* Historical earnings data for South Plains Financial [https://seekingalpha.com/symbol/SPFI/earnings]
* Dividend scorecard for South Plains Financial [https://seekingalpha.com/symbol/SPFI/dividends/scorecard]
* Financial information for South Plains Financial [https://seekingalpha.com/symbol/SPFI/income-statement]