Joe Yanchunis

Joe Yanchunis inquired about South Plains Financial's plan to expand its lending team by up to 20%, seeking clarification on the proportion of true lenders versus support staff and the base number of current lenders. He also asked about specific growth markets and the observed increase in subprime and deep subprime concentrations within the indirect auto portfolio. Additionally, Yanchunis questioned the incremental P&L costs associated with the $50 million subordinated debt redemption.

Answer

President Cory Newsom stated that the 20% growth target is for production lenders, not support staff, with a current base of approximately 40 lenders, and over 10% of this growth already achieved. He highlighted Permian, Houston, and Dallas MSA as key growth markets. CFO Steve Crockett clarified that the indirect auto portfolio data in the deck was updated information, not origination data, explaining the perceived shift in credit scores. Steve Crockett also confirmed there were no P&L expenses incurred for the sub debt redemption as it occurred at the end of the call period. Chairman and CEO Curtis Griffith added context on compensation structure for new hires.

Joe Yanchunis with Raymond James inquired about South Plains Financial's strategy to expand its lending team by up to 20% next year, specifically asking about the proportion of true lenders versus support staff and the current base number of lenders. He also sought clarification on key markets driving this growth, the reported increase in subprime and deep subprime concentrations within the indirect auto portfolio, and any incremental P&L costs associated with the $50 million subordinated debt redemption.

Answer

President Cory Newsom clarified that the 20% growth target is entirely for production lenders, not support staff, and the company is already over 10% towards this goal, with the base being about 40% of current lenders. He highlighted growth in the Permian, Houston, and Dallas MSA markets. CFO Steve Crockett addressed the indirect auto portfolio data, explaining that the reported figures were updated borrower credit scores, not origination scores, which caused the apparent change. Steve Crockett and Cory Newsom confirmed there were no P&L expenses for redeeming the subordinated debt as it was repaid at the end of its call period.

Joe Yanchunis (Raymond James) asked about changes in demand for early wage access loans, including potential impacts from the government shutdown, and the implied growth for the tax business within the fiscal year 2026 EPS guidance, considering recent tax law changes. He also inquired about the peak of non-performing loan (NPL) concentrations and the expected pace of share repurchases and buyback ratio for 2026.

Answer

CEO Brett Pharr indicated no immediate impact on early wage access from the government shutdown, emphasizing the significant volume expected from the Claire’s/Intuit partnership. Pharr and CFO Greg Sigrist noted that while tax law changes are generally positive, the 2026 EPS guidance implies a solid tax year with mid-single-digit growth, building on a strong prior year. Regarding NPLs, Pharr clarified that NPLs and past-due loans are not directly correlated, and the focus remains on managing collateral and net charge-offs. Sigrist added that specific well-collateralized loans are expected to resolve within the next few quarters. Sigrist also stated that the share buyback ratio is anticipated to return to its historic 80% to 90% payout range after slowing to build capital.

Joe Yanchunis questioned the demand trends for early wage access loans, potential impacts of recent tax law changes on the tax business, the outlook for non-performing loans (NPLs) and portfolio concentration, and the anticipated pace of share repurchases for fiscal year 2026.

Answer

CEO Brett Pharr noted no immediate impact from the government shutdown on early wage access but highlighted significant volume potential from the Claire’s/Intuit partnership. Pharr and CFO Greg Sigrist discussed the positive but not 'huge' growth expectations for the tax business, aligning with mid-single-digit historic growth. Pharr clarified that NPLs are not directly correlated with past-due loans due to collateral management, emphasizing net charge-offs as the key metric. Sigrist added that three specific loans constitute half of current NPLs, expected to resolve within one to three quarters. Sigrist also stated that the buyback ratio is expected to return to historic norms of 80%-90% payout.