South Plains Financial NASDAQ: SPFI reported higher third-quarter earnings as organic loan growth, stable net interest margin and lower acquisition-related expenses supported results. The company also outlined a planned leadership transition, with Chairman and Chief Executive Officer Curtis Griffith set to retire as CEO at year-end while remaining chairman of South Plains and City Bank.
President Cory Newsom, who will become CEO at year-end, said the transition has been planned for years and that the existing management team has been leading day-to-day operations. Griffith said the company has built a relationship-driven franchise and expressed confidence in its balance sheet, growth opportunities and leadership team.
“The strong results we delivered during the third quarter, including near record earnings per share, stable profitability, and solid organic loan growth, reinforce that confidence,” Griffith said.
Third-Quarter Earnings and Margin
South Plains reported net income of $20.8 million in the third quarter, compared with $19 million in the second quarter. Diluted earnings per share rose to $1.06 from $0.96 in the linked quarter. Return on average assets improved to 1.53%, while the efficiency ratio declined to 58.1% from 61.6%.
Chief Financial Officer and Treasurer Steve Crockett said the earnings increase reflected organic loan growth before two large loan payoffs, stable margin performance and lower expenses related to the company’s acquisition of Bank of Houston. Results also included approximately $875,000 of accrued expense related to Griffith’s retirement, most of which has now been recognized, he said.
Net interest income increased $1.1 million from the second quarter to $51.5 million, primarily reflecting a $53 million increase in average interest-earning assets. Tax-equivalent net interest margin held steady at 4%.
Management said it is focused on maintaining margin near current levels while growing the balance sheet. Crockett told analysts that the company’s balance sheet is generally neutral to changes in interest rates, although new loan pricing and higher-rate deposits can create short-term pressure.
Brent Bates, City Bank’s chief credit officer, said new loan originations were generally priced in the upper 6% range late in the quarter. South Plains’ overall loan yield was 6.75%, compared with 6.81% in the prior quarter.
Loan Production, Texas Markets and Hiring
Loans held for investment increased about $60 million during the quarter to $3.83 billion, representing 6.3% annualized organic growth. The increase occurred despite the early payoff of a $25 million loan secured by the borrower’s deposit account and another anticipated large relationship payoff.
Newsom said the company’s loan pipeline and customer demand remained healthy across metropolitan and community markets. Management reaffirmed its expectation for full-year loan growth in the mid-single digits.
Loans in Dallas, Houston and El Paso rose approximately $23 million to $1.71 billion and represented 44.6% of the portfolio at Sept. 30. Bates said metropolitan markets now account for nearly half of the company’s overall pipeline, compared with roughly one-third in prior years.
South Plains said its Houston bankers are turning more attention toward business development following the completion of Bank of Houston integration, system conversion and employee training activities. Newsom said the combined organization has greater lending capacity and liquidity and can pursue opportunities that may previously have been constrained.
The company also added experienced bankers in Lubbock and College Station during the quarter. Management said consolidation among Texas banks has created recruiting opportunities, though Newsom said South Plains is selective in adding bankers and seeks candidates who fit its culture and relationship-based model.
South Plains continues to view acquisitions as part of its long-term strategy, but Newsom said any transaction must meet the company’s cultural, credit and financial standards. He said the company is not seeking growth solely for its own sake.
Deposits, Expenses and Capital
Deposits increased $20 million from the second quarter to $4.66 billion. Noninterest-bearing deposits rose to $1.18 billion, representing 25.3% of total deposits, up from 24.8% at June 30.
The $25 million CD-secured loan payoff resulted in the liquidation of the related deposit collateral, which Crockett said should benefit net interest margin. The company also allowed some higher-cost, non-core funding to leave the bank while generating core customer deposit growth. Cost of deposits declined 1 basis point from the prior quarter to 2.07%.
Noninterest expense declined $1.8 million sequentially to $38.1 million, reflecting lower personnel costs, lower mortgage commissions and the absence of most Bank of Houston acquisition expenses. Crockett said the bulk of expected Bank of Houston cost savings was implemented in the second quarter and carried into the third quarter.
Management indicated expenses could decline somewhat in the fourth quarter, including the removal of retirement-related costs, but may rise in dollar terms during 2027 as the company adds personnel and invests in growth. Crockett said he would not expect noninterest expense to increase as a percentage of revenue.
South Plains ended the quarter with tangible common equity to tangible assets of 10.32% and a Common Equity Tier 1 ratio of 14.2%. Tangible book value per share was $29.23 at Sept. 30, down from $29.60 at June 30, largely due to a $25.5 million decline in accumulated other comprehensive income as interest rates rose. The company said it had announced its 30th consecutive quarterly dividend, to be paid in the fourth quarter.
Credit Quality and Balance-Sheet Priorities
The allowance for credit losses was 1.38% of total loans at quarter-end, compared with 1.41% in the prior quarter. South Plains recorded a $1 million provision for credit losses, primarily related to loan growth and net charge-offs.
Nonperforming loans increased to 40 basis points of total loans, primarily because of Bank of Houston acquired loans. Bates said the credits that migrated to nonperforming status were already classified at the time of the acquisition and were being addressed through remediation plans. He added that the largest such credit had returned to performing status after quarter-end.
Management said it remains comfortable with the quality of its portfolio and is no longer in a position of seeking to exit relationships that do not fit its strategy. The company also said it intends to retain its indirect auto lending business, citing its focus on prime and super-prime borrowers, short portfolio duration and credit performance. Bates said roughly 90% of the portfolio is prime and super-prime, while Newsom said more than 99% of the portfolio consists of automobile loans rather than recreational lending.
Looking ahead, management said it would prefer to maintain a loan-to-deposit ratio near 85%. The company has allowed its securities portfolio to decline but has recently purchased some securities to offset paydowns and preserve collateral available for public-fund deposits. Crockett said South Plains does not intend to materially increase securities holdings and continues to prioritize prudent loan growth.
About South Plains Financial (NASDAQ:SPFI)
South Plains Financial, Inc is a bank holding company headquartered in Lubbock, Texas. Through its principal subsidiary, City Bank, the company provides banking and financial services to individuals, businesses, agricultural customers and other organizations.
City Bank offers a range of products and services, including checking and savings accounts, certificates of deposit, consumer loans, commercial and industrial lending, agricultural loans, real estate financing, mortgage lending, wealth management and treasury management services.
This instant news alert was generated by narrative science technology and financial data from MarketBeat in order to provide readers with the fastest reporting and unbiased coverage. Please send any questions or comments about this story to contact@marketbeat.com.
Before you consider South Plains Financial, you'll want to hear this.
MarketBeat keeps track of Wall Street's top-rated and best performing research analysts and the stocks they recommend to their clients on a daily basis. MarketBeat has identified the five stocks that top analysts are quietly whispering to their clients to buy now before the broader market catches on... and South Plains Financial wasn't on the list.
While South Plains Financial currently has a Moderate Buy rating among analysts, top-rated analysts believe these five stocks are better buys.
View The Five Stocks Here
The space race is growing fast, and you don’t have to have gotten in early on SpaceX to profit. This report shows seven space stocks you can buy today that may grow as rockets, satellites, defense, space internet, and new space technology become more important.
Get This Free Report
Continue following MarketBeat
Add MarketBeat as your preferred source on Google to see our latest stories in your feed.
