Fourth-Quarter Snapshot
Fourth-quarter diluted EPS totaled $0.90, down from $0.96 in the previous quarter. Chief Financial Officer Steve Crockett said the decline was mainly the result of a larger provision for credit losses tied to robust loan production and the absence of one-time interest income items that benefited earlier periods.
Net interest income in the fourth quarter remained stable at $43 million. The quarterly NIM was 4.00 percent. Crockett noted that the margin figure in the third and second quarters contained temporary boosts from credit workout recoveries—six basis points, or roughly $640,000, in the third quarter and 17 basis points, or about $1.7 million, in the second quarter. Excluding those items, he said, margin expansion has been consistent, though the growth rate moderated late in the year.
Loan Growth Outlook
Looking ahead to 2026, management anticipates loan balances will increase at a mid- to high-single-digit pace. Griffith said demand across most commercial categories remains solid, and the bank’s recent hires in the Houston market are generating new opportunities. Even so, he cautioned that early-year activity could be tempered by potential payoffs in the multifamily portfolio and lower asset yields as expected Federal Reserve interest-rate cuts filter through the market. Recent Federal Reserve communications indicate policymakers could begin lowering rates later in 2026, a scenario the bank has incorporated into its planning assumptions.
Pending Acquisition in Houston
South Plains expects to close its acquisition of BOH Holdings and Bank of Houston in early second quarter 2026, subject to regulatory approvals. The transaction will add scale in a core growth market and is projected to push combined loans in the Houston region above $1 billion. Management models the deal to be roughly 11 percent accretive to earnings in 2027, with a tangible book value earn-back period of less than three years.
Operational integration teams have already been formed, according to Griffith. Workstreams are addressing technology conversion, customer communication and retention strategies to ensure a smooth transition once the merger receives final clearance.
Balance-Sheet Drivers
Total deposits ended the year modestly higher on a linked-quarter basis, with a continued shift from non-interest-bearing to interest-bearing accounts as customers sought higher yields. Crockett said the mix change pressured funding costs during 2025 but was largely offset by loan repricing at higher rates. He added that management is closely monitoring deposit competition and stands ready to adjust pricing as market conditions warrant.
The allowance for credit losses increased in the fourth quarter, reflecting both loan growth and a cautious view of sectors potentially sensitive to economic slowing. Credit quality metrics remained stable, and non-performing assets stayed at historically low levels, according to the presentation.
Capital and Liquidity
Capital ratios stayed above internal and regulatory targets, giving the bank what executives described as ample flexibility for organic expansion and the pending Houston acquisition. Liquidity levels were characterized as robust, supported by a diversified deposit base and unused borrowing capacity.
Strategic Priorities for 2026
Management outlined several objectives for the coming year:
- Accelerate organic loan growth, particularly in commercial and industrial, owner-occupied real estate, and small business segments.
- Complete the integration of Bank of Houston while retaining key employees and customers.
- Maintain cost discipline, targeting modestly positive operating leverage even as investments in technology continue.
- Preserve strong asset quality through prudent underwriting and active portfolio monitoring.
Crockett said expense run rates are expected to remain relatively stable in early 2026, with merger-related costs hitting the income statement as closing approaches. Any revenue synergies from the deal are scheduled to begin contributing late in the year and ramp through 2027.
Market Context
Executives acknowledged macroeconomic uncertainty but expressed confidence that South Plains’ geographic footprint and customer relationships position the bank to manage through different operating environments. The company’s exposure to energy-related lending—often a focus for investors in Texas banks—was described as modest and well diversified.
Griffith concluded the call by thanking employees and shareholders for their support and reiterating the bank’s commitment to building long-term franchise value. No changes were announced to dividend policy or share-repurchase programs.
South Plains Financial trades on the Nasdaq under the ticker symbol SPFI. Following the earnings release, the share price showed limited immediate reaction in after-hours trading, though management did not provide specific guidance on future capital actions beyond reiterating confidence in the current strategic plan.
Crédito da imagem: South Plains Financial
