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    SPFI
    Earnings call· Jun 2026(Q2 FY26)

    SOUTH PLAINS FINANCIAL Q2 FY26 earnings call SPFI

    Jul 17, 2026 Source

    Executive summary

    South Plains Financial, Inc. Q2 FY26 — Strong Profitability and Successful Bank of Houston Integration

    South Plains Financial delivered a solid second quarter, marked by resilient profitability and the successful integration of Bank of Houston. The company is focused on disciplined organic loan growth and strategic M&A, while managing balance sheet optimization and maintaining a conservative credit culture. Leadership transition plans are on track, with Cory Newsom set to become CEO in 2027.

    Highlights

    5

    • Loans held for investment increased by $667.3 million to $3.77 billion, driven by the Bank of Houston acquisition and $35 million in organic growth.

    • Noninterest income increased by $2.8 million to $14.1 million, primarily due to improved mortgage banking revenues and bank card services.

    • Diluted EPS increased to $0.96 from $0.85 in the linked quarter, largely due to the BOH acquisition and improved noninterest income.

    • The Board authorized a 6% increase to the quarterly dividend to $0.18 per share, marking the 29th consecutive dividend.

    • Organic deposit growth of $17 million was achieved in Q2, contributing to total deposits of $4.64 billion, despite typical seasonal outflows.

    Concerns

    5

    • Elevated loan payoffs, including two loans totaling $37.5 million, are expected to continue as a headwind to overall loan growth.

    • Net interest margin (NIM) slightly decreased to 4.00% from 4.04% in the linked quarter, though stable excluding nonaccrual loan interest recovery.

    • Noninterest-bearing deposits decreased to 24.8% of total deposits from 25.7% due to the Bank of Houston acquisition's lower ratio.

    • The cost of deposits increased by 11 basis points, in line with expectations.

    • An uptick in classified and nonperforming loans was observed, primarily from Bank of Houston acquired loans.

    Guidance & targets

    9
    CategoryTargetConfidence
    Full year loan growth
    mid-single digits
    high materiality
    High
    Reduce higher cost deposits
    Opportunity to reduce
    low materiality
    Medium
    Deposit growth
    moderate growth
    medium materiality
    Medium
    Acquisition expenses
    Largely behind us
    medium materiality
    High
    Bank of Houston cost of funds
    A little bit better
    medium materiality
    Medium
    Net interest margin
    Maintain in same range
    high materiality
    Medium
    Expense savings from BOH acquisition
    Decline a little bit
    medium materiality
    High
    Loan growth prospects
    Feel pretty good, continue path
    medium materiality
    High
    Cross-sell revenue uptick
    Little bit more uptick
    low materiality
    Medium

    Operational metrics

    25
    Loans held for investment increase
    $667.3 million
    Q2 FY26

    primarily a result of $632 million in loans from our Bank of Houston acquisition

    Loans held for investment total
    $3.77 billion
    Q2 FY26

    as compared to the linked quarter

    Yield on loans
    6.81%down slightly from 6.83% in the first quarter
    Q2 FY26
    Loans in major metropolitan markets increase
    $682 million
    Q2 FY26

    due to the $632 million of loans from the Bank of Houston acquisition and $50 million in organic loan growth

    Loans in major metropolitan markets total
    $1.69 billion
    Q2 FY26

    as compared to the linked quarter

    Noninterest income
    $14.1 millionup $2.8 million from the first quarter
    Q2 FY26
    Noninterest income (prior quarter)
    $11.3 million
    Q1 FY26

    compared to $14.1 million in Q2 FY26

    Noninterest income as % of bank revenues
    22%essentially flat with the linked quarter
    Q2 FY26
    Diluted earnings per share
    $0.96compared to $0.85 from the linked quarter
    Q2 FY26
    Diluted earnings per share (prior quarter)
    $0.85
    Q1 FY26

    compared to $0.96 in Q2 FY26

    Net interest income
    $50.3 millionup $7.4 million from the first quarter
    Q2 FY26

    largely due to the increase of BOH's $667 million of interest-earning assets

    Net interest margin (tax equivalent)
    4.00%as compared to 4.04% in the linked quarter
    Q2 FY26
    Deposits increase
    $613 million
    Q2 FY26

    Acquired BOH deposits were $596 million, while we organically grew deposits by $17 million

    Deposits total
    $4.64 billion
    Q2 FY26

    as of Q2 FY26

    Noninterest-bearing deposits as % of total deposits
    24.8%compared to 25.7% at the end of the linked quarter
    Q2 FY26
    Cost of deposits increase
    11 basis points
    Q2 FY26

    in line with the expectations that we outlined on the first quarter's earnings call

    Allowance for credit losses to total loans ratio
    1.41%stable from the prior quarter end
    Q2 FY26
    Provision for credit losses
    $350,000
    Q2 FY26

    related to our organic loan growth and net charge-off activity in the quarter

    Noninterest expense
    $39.9 millionincreased by $4.3 million as compared to the linked quarter
    Q2 FY26
    Tangible common equity to tangible assets
    10.47%in line with the first quarter
    Q2 FY26
    Tangible book value per share
    $29.57in line with $29.65 as of March 31, 2026
    Q2 FY26
    Quarterly dividend increase
    6%
    Q3 FY26

    to $0.18 per share on July 15, which will be our 29th consecutive dividend

    Quarterly dividend per share
    $0.186% increase
    Q3 FY26

    authorized on July 15

    Loan payoffs
    $37.5 million
    Q2 FY26

    2 loans totaling $37.5 million paid off

    Total assets
    $5.4 billion
    Q2 FY26

    at the end of the second quarter

    Industry KPIs

    10
    MetricValueDetails
    Loans$3.77 billionUSD
    Deposits$4.64 billionUSD
    Cet1 ratio10.47%%
    Capital returns$0.18USD
    Fee income lines$14.1 millionUSD
    Allowance reserves1.41%%
    Net interest income$50.3 millionUSD
    Net interest margin4.00%%
    Net charge offs nplsUptick
    Provision for credit losses$350,000USD

    Deals & partnerships

    1
    Bank of Houstonacquisition

    Integration largely completed with conversion occurring in May. Management sees opportunities to optimize the acquired balance sheet.

    Risks & headwinds

    3
    Elevated loan payoffsFuture periods

    2 loans totaling $37.5 million paid off in Q2

    Mitigation: Strong underlying loan demand and confidence in mid-single digit full-year loan growth guidance.

    Elevated interest rate environment and lingering inflationary pressuresOngoing

    Unquantified impact on NIM and deposit costs

    Mitigation: Maintaining cautious and conservative approach, focused on maintaining margin while growing balance sheet.

    Uptick in classified and nonperforming loansQ2 FY26

    Primarily from BOH acquired loans

    Mitigation: Credit team actively working these loans to ensure proper resolution.

    Q&A highlights

    7

    What is the outlook for the forward NIM, and how will managing BOH's brokered CDs and cost of funds impact it? Was any of this work done in Q2 or is it mostly ahead?

    Management confirmed some work was done in Q2, but most optimization of BOH's cost of funds is ahead, particularly with brokered CDs as they mature. They paid off BOH's Federal Home Loan Bank borrowings and expect to see improvement in Q3, aiming to bring BOH's cost of funds in line with historical levels. The overall goal is to maintain NIM in the current range.

    “We did pay off their borrowings to Federal Home Loan Bank. That's already done. But like Steve said, we've got maturities on some of these others that we'll be dealing with as they come due. But yes, we do believe there's still good opportunity there to get their cost of funds more in line with what our historical costs are.”

    asked by Brett Rabatin · answered by Steven Crockett

    2 min read6 chapters

    Detailed Narrative

    01

    Leadership Transition

    Curtis Griffith will retire as CEO at the end of 2026, with Cory Newsom slated to take over as CEO on January 1, 2027. Griffith will continue to serve as the company's non-executive Chairman of the Board. This planned transition has been years in the making, with Newsom already leading day-to-day operations and driving growth strategies, including the recent Bank of Houston acquisition.

    02

    Bank of Houston Integration Success

    The integration of Bank of Houston was largely completed with the conversion occurring in May, just three months after the transaction closing. The acquisition contributed $632 million in loans and $596 million in deposits. Management expressed satisfaction with the new Houston team and the cultural similarities, noting opportunities to optimize the acquired balance sheet by evaluating higher-cost funding sources.

    03

    Strategic Growth and M&A Discipline

    The company's growth strategy remains focused on disciplined organic loan growth and strategic M&A. While open to another acquisition, management emphasizes a highly disciplined approach, seeking partners that align with their culture, credit discipline, and community banking focus, and are in the best strategic and financial interest of shareholders. Organic growth opportunities are currently the primary focus.

    04

    Credit Quality and Economic Outlook

    South Plains Financial maintains a conservative credit culture, proactively identifying and addressing risk. The overall credit quality of the loan portfolio remains a strength, despite an uptick in classified and nonperforming loans primarily from the Bank of Houston acquired portfolio. Economic activity in Texas markets is healthy, supporting a strong loan pipeline and better-than-expected deposit performance.

    05

    Noninterest Income Expansion

    Noninterest income increased significantly to $14.1 million in Q2, up $2.8 million from the linked quarter. This growth was primarily driven by a $929,000 increase in mortgage banking revenues due to improved originations during the spring selling season, and an $894,000 increase in bank card services and interchange revenue from continued customer card usage.

    06

    Capital Position and Shareholder Returns

    The company remains well capitalized, with tangible common equity to tangible assets at 10.47% at the end of Q2, in line with the prior quarter. The Board authorized a 6% increase in the quarterly dividend to $0.18 per share, marking the 29th consecutive dividend. A portion of Curtis Griffith's shares were bought back as part of his long-term estate planning strategy.

    AI-generated summary of the company’s earnings call. Not investment advice.