South Plains Financial(US:SPFI)2026-01-26 23:02Financial Data and Key Metrics Changes - The company reported a 17.8% increase in diluted earnings per share for the full year of 2025, with diluted EPS at $0.90 for the fourth quarter compared to $0.96 in the linked quarter [5][21] - Net interest income was $43 million for the fourth quarter, consistent with the third quarter, while the net interest margin (NIM) was 4% for the fourth quarter, down from 4.05% in the linked quarter [21][22] - Deposits remained steady at $3.87 billion at the end of the fourth quarter, with a full-year increase of $253 million or 7% from year-end 2024 [22][23] - Tangible book value per share increased to $29.05 as of December 31, 2025, compared to $28.14 as of September 30, 2025 [25] Business Line Data and Key Metrics Changes - Loans held for investment increased by $91 million to $3.14 billion in the fourth quarter, primarily due to organic growth in multifamily property loans, direct energy loans, and other commercial loans [11] - The indirect auto loan portfolio totaled $241 million at the end of the fourth quarter, relatively unchanged from the linked quarter, with a focus on maintaining credit quality [16][19] - Non-interest income was $10.9 million in the fourth quarter, flat compared to $11.2 million in the linked quarter, with mortgage banking revenues declining due to seasonal factors [20] Market Data and Key Metrics Changes - The loan portfolio in major metropolitan markets of Dallas, Houston, and El Paso increased by $15 million or 5.8% annualized to $1.03 billion [14] - The Houston market is highlighted as a key growth area, with the Bank of Houston acquisition expected to enhance the company's presence in this fast-growing region [6][15] Company Strategy and Development Direction - The company is focused on expanding its lending team across high-growth Texas markets and pursuing accretive M&A opportunities, including the acquisition of Bank of Houston [5][6] - The merger with Bank of Houston is projected to be approximately 11% accretive to earnings in 2027, with a tangible book value earnback of less than three years [8] - The company aims to enhance its technology and systems to support efficient growth and is open to additional acquisitions that align with its strategic goals [98][99] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about loan growth accelerating to a mid to high single-digit growth rate in 2026, driven by new hires and the Bank of Houston acquisition [9][13] - The company remains well-capitalized and is focused on returning income to shareholders through dividends and share buybacks [10][25] - Management acknowledged potential headwinds in the first quarter of 2026 from expected payoffs in the multifamily property portfolio [14] Other Important Information - The company recorded a $1.8 million provision for credit losses in the fourth quarter, up from $500,000 in the linked quarter, primarily due to strong loan growth [24] - The cost of deposits decreased by 9 basis points to 2.01% compared to the linked quarter, with expectations for a modest decline in the cost of funds in the first quarter [23] Q&A Session Summary Question: NIM outlook and loan growth - Management indicated that while they aim to keep NIM stable, there may be some compression due to competitive pressures and loan growth dynamics [28][29][30] Question: Deposit growth expectations - Management believes they can reduce the deposit costs of Bank of Houston's deposits over time, which may help offset NIM pressures [31] Question: M&A strategy - The company is not pursuing aggressive acquisitions but is open to opportunities that align with their strategic goals, including potential deals beyond Houston [32][33] Question: Payoffs and loan growth - The fourth quarter saw fewer payoffs than previous quarters, aiding net growth, but management anticipates some payoffs in the first quarter of 2026 [40][41] Question: Indirect auto loan portfolio quality - Management noted that the portfolio remains in good condition, with a focus on maintaining high credit quality despite some shifts in borrower credit scores [44][48] Question: Mortgage banking and fee income - The company is actively hiring mortgage producers to prepare for a potential upturn in volumes and is focused on maintaining fee income growth [51][52]