South Plains Financial(SPFI) - 2025 Q2 - Quarterly Results

Executive Summary & Highlights The company achieved solid Q2 2025 results, marked by steady margin expansion, loan growth, and strong capital, with key financial metrics showing significant improvements CEO Commentary Curtis Griffith, Chairman and CEO, highlighted solid Q2 2025 results, characterized by steady margin expansion, continued loan growth despite payoffs, and healthy capital levels. The company is pursuing a strategy to expand lending capabilities and recruit experienced commercial lenders - Solid Q2 results were driven by steady margin expansion, continued loan growth despite high payoffs, and healthy capital levels[3] - The company is pursuing a strategy to increase bank assets by expanding lending capabilities and adding experienced commercial lenders, having recruited several in the Dallas market during Q2[3] - The community-based deposit franchise continues to provide a stable, lower-cost funding source for loan growth[3] Key Financial Highlights The second quarter of 2025 saw significant improvements in net income, diluted EPS, net interest margin, and return on average assets, alongside a decrease in the average cost of deposits and an increase in tangible book value per share Key Financial Metrics (Q2 2025 vs Q1 2025 vs Q2 2024) | Metric | Q2 2025 | Q1 2025 | Q2 2024 | | :------------------------------------ | :------ | :------ | :------ | | Net income ($ millions) | 14.6 | 12.3 | 11.1 | | Diluted earnings per share ($) | 0.86 | 0.72 | 0.66 | | Average cost of deposits (bps) | 214 | 219 | 243 | | Net interest margin (tax-equivalent, %) | 4.07 | 3.81 | 3.63 | | Return on average assets (%) | 1.34 | 1.16 | 1.07 | | Tangible book value (non-GAAP) per share ($) | 26.70 | 26.05 | 24.15 | - As of June 30, 2025, consolidated capital ratios were strong: total risk-based capital ratio at 18.17%, common equity tier 1 risk-based capital ratio at 13.86%, and tier 1 leverage ratio at 12.12%[6] Detailed Financial Performance This section details the company's financial performance, highlighting significant growth in net interest income and margin, alongside changes in noninterest income and expenses Net Interest Income Net interest income and net interest margin showed significant growth quarter-over-quarter and year-over-year, driven by increased loan interest income, a loan recovery, and a decrease in the average cost of deposits Net Interest Income and Margin Trends | Metric | Q2 2025 | Q1 2025 | Q2 2024 | QoQ Change | YoY Change | | :-------------------------- | :------ | :------ | :------ | :--------- | :--------- | | Net Interest Income ($ millions) | 42.5 | 38.5 | 35.9 | +10.4% | +18.4% | | Net Interest Margin (tax-equivalent, %) | 4.07 | 3.81 | 3.63 | +26 bps | +44 bps | | Average Yield on Loans (%) | 6.99 | 6.67 | 6.60 | +32 bps | +39 bps | | Average Cost of Deposits (bps) | 214 | 219 | 243 | -5 bps | -29 bps | - A $1.7 million recovery in interest from a fully repaid nonaccrual loan positively impacted net interest margin by 17 basis points and loan yield by 23 basis points during Q2 2025[4][5] - Interest income increased $4.2 million QoQ, primarily from a $3.3 million increase in loan interest income (due to the $1.7 million recovery and $20.0 million growth in average loans) and an $888 thousand increase in interest income on other earning assets[5] - Interest expense increased $237 thousand QoQ due to a $21.2 million increase in average interest-bearing deposits, but decreased $1.7 million YoY due to a 42 basis point decline in the cost of interest-bearing deposits[7] Noninterest Income and Noninterest Expense Noninterest income increased quarter-over-quarter primarily due to mortgage banking revenues, while noninterest expense saw a slight increase driven by personnel and professional service costs Noninterest Income and Expense Trends | Metric | Q2 2025 ($ millions) | Q1 2025 ($ millions) | Q2 2024 ($ millions) | QoQ Change | YoY Change | | :------------------ | :------------------- | :------------------- | :------------------- | :--------- | :--------- | | Noninterest Income | 12.2 | 10.6 | 12.7 | +15.1% | -4.3% | | Noninterest Expense | 33.5 | 33.0 | 32.6 | +1.6% | +3.0% | - The QoQ increase in noninterest income was primarily due to a $1.5 million increase in mortgage banking revenues, largely from a $1.4 million fair value adjustment of mortgage servicing rights[8] - The QoQ increase in noninterest expense was mainly due to a $267 thousand increase in personnel expenses and $144 thousand in professional service expenses[9] Balance Sheet and Credit Quality Overview This section provides an overview of the company's balance sheet, detailing loan portfolio growth, deposit trends, asset quality metrics, and strengthened capital levels Loan Portfolio and Composition Loans held for investment showed modest growth quarter-over-quarter and year-over-year, driven by organic growth across the portfolio despite significant multi-family loan payoffs Loans Held for Investment | Period | Amount ($ billions) | QoQ Change | YoY Change | | :------------- | :------------------ | :--------- | :--------- | | Jun 30, 2025 | 3.10 | +0.7% | +0.2% | | Mar 31, 2025 | 3.08 | | | | Jun 30, 2024 | 3.09 | | | - The $23.1 million (3.0% annualized) increase in loans held for investment during Q2 2025 was primarily from organic growth, partially offset by a $52.6 million decrease in multi-family property loans due to payoffs[10] Deposits and Borrowings Total deposits experienced a slight quarterly decrease due to seasonal public fund outflows but showed healthy year-over-year growth driven by organic retail and commercial deposits. Noninterest-bearing deposits increased QoQ Total Deposits | Period | Amount ($ billions) | QoQ Change | YoY Change | | :------------- | :------------------ | :--------- | :--------- | | Jun 30, 2025 | 3.74 | -1.4% | +3.2% | | Mar 31, 2025 | 3.79 | | | | Jun 30, 2024 | 3.62 | | | - The quarterly decrease of $53.6 million in deposits was mainly due to a seasonal $73.7 million decrease in public fund deposits, partially offset by organic growth in retail and commercial deposits[11] - Noninterest-bearing deposits increased to $998.8 million as of June 30, 2025, representing 26.7% of total deposits[11] Asset Quality The provision for credit losses increased significantly quarter-over-quarter, attributed to higher specific reserves, net charge-offs, increased loan balances, and credit quality downgrades. Nonperforming assets to total assets remained low, and net charge-offs decreased YoY Credit Quality Metrics | Metric | Q2 2025 | Q1 2025 | Q2 2024 | QoQ Change | YoY Change | | :-------------------------------------------------- | :------ | :------ | :------ | :--------- | :--------- | | Provision for credit losses ($ millions) | 2.5 | 0.42 | 1.8 | +495% | +40.8% | | Allowance for credit losses to loans held for investment (%) | 1.45 | 1.40 | 1.40 | +5 bps | +5 bps | | Nonperforming assets to total assets (%) | 0.25 | 0.16 | 0.57 | +9 bps | -32 bps | | Annualized net charge-offs (%) | 0.06 | 0.07 | 0.10 | -1 bps | -4 bps | - The Q2 2025 provision for credit losses was largely attributable to an increase in specific reserves, net charge-off activity, increased loan balances, and several credit quality downgrades[12] Capital Capital levels strengthened during the quarter, with increases in book value per share and tangible common equity to tangible assets, primarily driven by net income after dividends Capital Metrics | Metric | Jun 30, 2025 | Mar 31, 2025 | Jun 30, 2024 | | :------------------------------------ | :----------- | :----------- | :----------- | | Book value per share ($) | 27.98 | 27.33 | 25.45 | | Tangible book value (non-GAAP) per share ($) | 26.70 | 26.05 | 24.15 | | Tangible common equity to tangible assets (non-GAAP) (%) | 9.98 | 9.64 | 9.44 | | Common equity tier 1 risk-based capital ratio (%) | 13.86 | 13.59 | 12.61 | | Total risk-based capital ratio (%) | 18.17 | 17.93 | 16.86 | | Tier 1 leverage ratio (%) | 12.12 | 12.04 | 11.81 | - The increase in book value per share was primarily driven by $12.2 million of net income after dividends paid, partially offset by a $2.3 million decrease in accumulated other comprehensive income[14] Corporate and Legal Information This section provides corporate details, including conference call information, company overview, non-GAAP measure explanations, investor information access, forward-looking statements, and contact details Conference Call Details South Plains Financial, Inc. hosted a conference call on July 16, 2025, to discuss Q2 2025 financial results, with replay options available until July 30, 2025 - A conference call to discuss Q2 2025 financial results was held on July 16, 2025, at 5:00 p.m. Eastern Time[15] - A live audio webcast and conference materials are available on the Company's website at https://www.spfi.bank/news-events/events[15](index=15&type=chunk) - A replay of the call is available until July 30, 2025, via telephone (1-844-512-2921, pin 13754259) and on the investor section of the Company's website[16] About South Plains Financial, Inc. South Plains Financial, Inc. is the bank holding company for City Bank, a Texas state-chartered bank operating across West Texas, Dallas, El Paso, Greater Houston, Permian Basin, College Station, and Ruidoso, New Mexico, offering commercial and consumer financial services - South Plains Financial, Inc. is the bank holding company for City Bank, headquartered in Lubbock, Texas[17] - City Bank operates in West Texas, Dallas, El Paso, Greater Houston, the Permian Basin, College Station, Texas markets, and the Ruidoso, New Mexico market[17] - The company provides a wide range of commercial and consumer financial services, including commercial and retail banking, investment, trust, and mortgage services[17] Non-GAAP Financial Measures The company uses non-GAAP financial measures like Tangible Book Value Per Share, Tangible Common Equity to Tangible Assets, and Pre-Tax, Pre-Provision Income to provide a more complete understanding of its financial position and performance, noting they are supplemental and not GAAP substitutes - Non-GAAP financial measures used include Tangible Book Value Per Share, Tangible Common Equity to Tangible Assets, and Pre-Tax, Pre-Provision Income[18] - These measures are considered supplemental and are not a substitute for GAAP financial measures, nor are they necessarily comparable to similarly titled measures from other companies[18][19] - A reconciliation of non-GAAP financial measures to GAAP financial measures is provided at the end of the press release[20] Available Information South Plains Financial, Inc. routinely posts important investor information on its website, including press releases and SEC filings, as a means of disclosing material non-public information in compliance with Regulation FD - The Company routinely posts important information for investors on its website (www.spfi.bank/news-events/press-releases)[21](index=21&type=chunk) - The website is used as a means of disclosing material non-public information and for complying with disclosure obligations under Regulation FD[21] Forward Looking Statements This section contains cautionary statements regarding forward-looking information, highlighting various known and unknown risks and uncertainties that could cause actual results to differ materially from expectations, and emphasizes that the company does not undertake to update these statements - This press release contains forward-looking statements subject to known and unknown risks and uncertainties that are beyond South Plains' control[23] - Factors that could cause changes include economic conditions, banking industry uncertainty, interest rate fluctuations, inflation, cyber incidents, and regulatory actions[23] - Readers are cautioned not to place undue reliance on these statements, and the Company does not undertake any obligation to update or revise them, except as required by applicable law[23] Contact Information Contact details for investor inquiries are provided, including the Chief Risk Officer and Secretary, Mikella Newsom - For investor inquiries, contact Mikella Newsom, Chief Risk Officer and Secretary, at (866) 771-3347 or investors@city.bank[24] Detailed Financial Statements and Reconciliations This section presents detailed financial statements, including consolidated highlights, average balances and yields, balance sheets, income statements, loan and deposit compositions, and non-GAAP reconciliations Consolidated Financial Highlights This table provides a summary of key income statement, per share, balance sheet, performance ratios, and credit quality data for recent quarters, offering a quick overview of the company's financial trends Selected Income Statement Data (Q2 2025 vs Q1 2025 vs Q2 2024) | Metric | Q2 2025 ($k) | Q1 2025 ($k) | Q2 2024 ($k) | | :---------------------- | :----------- | :----------- | :----------- | | Interest income | 64,135 | 59,922 | 59,208 | | Interest expense | 21,632 | 21,395 | 23,320 | | Net interest income | 42,503 | 38,527 | 35,888 | | Provision for credit losses | 2,500 | 420 | 1,775 | | Noninterest income | 12,165 | 10,625 | 12,709 | | Noninterest expense | 33,543 | 33,030 | 32,572 | | Net income | 14,605 | 12,294 | 11,134 | Per Share Data (Q2 2025 vs Q1 2025 vs Q2 2024) | Metric | Q2 2025 ($) | Q1 2025 ($) | Q2 2024 ($) | | :-------------------------------- | :---------- | :---------- | :---------- | | Net earnings, diluted | 0.86 | 0.72 | 0.66 | | Cash dividends declared and paid | 0.15 | 0.15 | 0.14 | | Book value | 27.98 | 27.33 | 25.45 | | Tangible book value (non-GAAP) | 26.70 | 26.05 | 24.15 | Summary Performance and Credit Quality Ratios (Q2 2025 vs Q1 2025 vs Q2 2024) | Metric | Q2 2025 (%) | Q1 2025 (%) | Q2 2024 (%) | | :-------------------------------------------------- | :---------- | :---------- | :---------- | | Return on average assets (annualized) | 1.34 | 1.16 | 1.07 | | Net interest margin | 4.07 | 3.81 | 3.63 | | Efficiency ratio | 61.11 | 66.90 | 66.72 | | Nonperforming assets to total assets | 0.25 | 0.16 | 0.57 | | Allowance for credit losses to total loans held for investment | 1.45 | 1.40 | 1.40 | | Net charge-offs to average loans outstanding (annualized) | 0.06 | 0.07 | 0.10 | Average Balances and Yields (Quarterly) This table details average balances, interest income/expense, and yields/rates for interest-earning assets and interest-bearing liabilities for the three months ended June 30, 2025, and 2024, illustrating the components of net interest income Average Balances and Yields (Q2 2025 vs Q2 2024) | Metric | Q2 2025 Average Balance ($k) | Q2 2025 Interest ($k) | Q2 2025 Yield/Rate (%) | Q2 2024 Average Balance ($k) | Q2 2024 Interest ($k) | Q2 2024 Yield/Rate (%) | | :--------------------------- | :--------------------------- | :-------------------- | :--------------------- | :--------------------------- | :-------------------- | :--------------------- | | Loans | 3,094,558 | 53,894 | 6.99 | 3,082,601 | 50,579 | 6.60 | | Total interest-earning assets | 4,212,086 | 64,356 | 6.13 | 3,997,282 | 59,431 | 5.98 | | NOW, Savings, MMDA's | 2,326,779 | 15,890 | 2.74 | 2,221,427 | 17,652 | 3.20 | | Total interest-bearing liabilities | 2,875,918 | 21,632 | 3.02 | 2,724,446 | 23,320 | 3.44 | | Net interest income | | 42,724 | | | 36,111 | | | Net interest margin | | | 4.07 | | | 3.63 | Average Balances and Yields (Year-to-Date) This table presents average balances, interest income/expense, and yields/rates for interest-earning assets and interest-bearing liabilities for the six months ended June 30, 2025, and 2024, providing a year-to-date perspective on interest rate dynamics Average Balances and Yields (YTD Q2 2025 vs YTD Q2 2024) | Metric | YTD Q2 2025 Average Balance ($k) | YTD Q2 2025 Interest ($k) | YTD Q2 2025 Yield/Rate (%) | YTD Q2 2024 Average Balance ($k) | YTD Q2 2024 Interest ($k) | YTD Q2 2024 Yield/Rate (%) | | :------------------------------- | :------------------------------- | :------------------------ | :------------------------- | :------------------------------- | :------------------------ | :------------------------- | | Loans | 3,084,563 | 104,471 | 6.83 | 3,048,569 | 99,519 | 6.56 | | Total interest-earning assets | 4,168,609 | 124,498 | 6.02 | 4,010,562 | 118,381 | 5.94 | | NOW, Savings, MMDA's | 2,314,562 | 31,401 | 2.74 | 2,253,704 | 35,649 | 3.18 | | Total interest-bearing liabilities | 2,865,271 | 43,027 | 3.03 | 2,747,738 | 46,679 | 3.42 | | Net interest income | | 81,471 | | | 71,702 | | | Net interest margin | | | 3.94 | | | 3.60 | Consolidated Balance Sheets This table presents the consolidated balance sheet data for South Plains Financial, Inc. as of June 30, 2025, and December 31, 2024, showing changes in assets, liabilities, and stockholders' equity Consolidated Balance Sheet (Jun 30, 2025 vs Dec 31, 2024) | Metric | Jun 30, 2025 ($k) | Dec 31, 2024 ($k) | | :--------------------------- | :---------------- | :---------------- | | Cash and due from banks | 60,400 | 54,114 | | Interest-bearing deposits in banks | 410,096 | 304,968 | | Securities available for sale | 570,000 | 577,240 | | Loans held for investment | 3,098,978 | 3,055,054 | | Total assets | 4,363,674 | 4,232,239 | | Noninterest-bearing deposits | 998,759 | 935,510 | | Interest-bearing deposits | 2,740,179 | 2,685,366 | | Total deposits | 3,738,938 | 3,620,876 | | Total liabilities | 3,909,600 | 3,793,290 | | Total stockholders' equity | 454,074 | 438,949 | Consolidated Statements of Income This table provides the consolidated statements of income for the three and six months ended June 30, 2025, and 2024, detailing interest income, interest expense, noninterest income, noninterest expense, and net income Consolidated Statements of Income (Q2 2025 vs Q2 2024) | Metric | Q2 2025 ($k) | Q2 2024 ($k) | | :---------------------- | :----------- | :----------- | | Total interest income | 64,135 | 59,208 | | Total interest expense | 21,632 | 23,320 | | Net interest income | 42,503 | 35,888 | | Provision for credit losses | 2,500 | 1,775 | | Total noninterest income | 12,165 | 12,709 | | Total noninterest expense | 33,543 | 32,572 | | Net income | 14,605 | 11,134 | Consolidated Statements of Income (YTD Q2 2025 vs YTD Q2 2024) | Metric | YTD Q2 2025 ($k) | YTD Q2 2024 ($k) | | :---------------------- | :--------------- | :--------------- | | Total interest income | 124,057 | 117,935 | | Total interest expense | 43,027 | 46,679 | | Net interest income | 81,030 | 71,256 | | Provision for credit losses | 2,920 | 2,605 | | Total noninterest income | 22,790 | 24,118 | | Total noninterest expense | 66,573 | 64,502 | | Net income | 26,899 | 22,008 | Loan Composition This table breaks down the loan portfolio by category as of June 30, 2025, and December 31, 2024, showing the distribution across commercial, consumer, and construction loans Loan Composition (Jun 30, 2025 vs Dec 31, 2024) | Loan Category | Jun 30, 2025 ($k) | Dec 31, 2024 ($k) | | :---------------------- | :---------------- | :---------------- | | Commercial Real Estate | 1,085,309 | 1,119,063 | | Commercial - Specialized | 379,068 | 388,955 | | Commercial - General | 620,934 | 557,371 | | 1-4 Family Residential | 589,935 | 566,400 | | Auto Loans | 258,193 | 254,474 | | Other Consumer | 63,589 | 64,936 | | Construction | 101,950 | 103,855 | | Total loans held for investment | 3,098,978 | 3,055,054 | Deposit Composition This table outlines the composition of deposits by type as of June 30, 2025, and December 31, 2024, distinguishing between interest-bearing and noninterest-bearing accounts Deposit Composition (Jun 30, 2025 vs Dec 31, 2024) | Deposit Type | Jun 30, 2025 ($k) | Dec 31, 2024 ($k) | | :--------------------------- | :---------------- | :---------------- | | Noninterest-bearing deposits | 998,759 | 935,510 | | NOW & other transaction accounts | 1,244,023 | 498,718 | | MMDA & other savings | 1,072,010 | 1,741,988 | | Time deposits | 424,146 | 444,660 | | Total deposits | 3,738,938 | 3,620,876 | Reconciliation of Non-GAAP Financial Measures This table provides a reconciliation of non-GAAP financial measures, including Pre-tax, Pre-provision income, Tangible common equity, and Tangible assets, to their most directly comparable GAAP measures for various periods Pre-tax, Pre-provision income (Q2 2025 vs Q1 2025 vs Q2 2024) | Metric | Q2 2025 ($k) | Q1 2025 ($k) | Q2 2024 ($k) | | :-------------------------- | :----------- | :----------- | :----------- | | Net income | 14,605 | 12,294 | 11,134 | | Income tax expense | 4,020 | 3,408 | 3,116 | | Provision for credit losses | 2,500 | 420 | 1,775 | | Pre-tax, pre-provision income | 21,125 | 16,122 | 16,025 | Tangible Common Equity and Assets (Jun 30, 2025 vs Mar 31, 2025 vs Jun 30, 2024) | Metric | Jun 30, 2025 ($k) | Mar 31, 2025 ($k) | Jun 30, 2024 ($k) | | :------------------------------------ | :---------------- | :---------------- | :---------------- | | Total common stockholders' equity | 454,074 | 443,743 | 417,985 | | Less: goodwill and other intangibles | (20,732) | (20,884) | (21,379) | | Tangible common equity | 433,342 | 422,859 | 396,606 | | Total assets | 4,363,674 | 4,405,209 | 4,220,936 | | Less: goodwill and other intangibles | (20,732) | (20,884) | (21,379) | | Tangible assets | 4,342,942 | 4,384,325 | 4,199,557 | Per Share and Ratio Data (Jun 30, 2025 vs Mar 31, 2025 vs Jun 30, 2024) | Metric | Jun 30, 2025 | Mar 31, 2025 | Jun 30, 2024 | | :------------------------------------ | :----------- | :----------- | :----------- | | Book value per share | $27.98 | $27.33 | $25.45 | | Tangible book value per share | $26.70 | $26.05 | $24.15 | | Tangible common equity to tangible assets | 9.98% | 9.64% | 9.44% |