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SP

SOUTH PLAINS FINANCIAL, INC. (SPFI)·Q1 2025 Earnings Summary

Executive Summary

  • Q1 2025 EPS of $0.72 beat Wall Street consensus of $0.6675; total revenues were $49.2M, with net interest margin up 6 bps q/q to 3.81% as deposit costs declined to 2.19% (219 bps). Bold beat driven by lower funding costs; MSR fair value was a headwind to noninterest income and EPS in the quarter . EPS consensus values retrieved from S&P Global.*
  • Deposits grew $171.6M q/q (4.7%) to $3.79B; nonperforming assets/total assets fell sharply to 0.16% from 0.58% as a $19.0M credit returned to accrual and was repaid post quarter-end, reinforcing credit quality as a positive catalyst .
  • Management reiterated focus on margin expansion via deposit repricing and selective loan growth; expects loan growth to trend to the low end of low- to mid-single-digit range for 2025 and indicated Q1’s noninterest expense run-rate should hold for the year .
  • Capital return remained active: $8.3M repurchase for 250,000 shares in Q1 with ~$7M remaining under the program; quarterly dividend maintained at $0.15 per share .

What Went Well and What Went Wrong

What Went Well

  • Margin expansion and funding cost relief: NIM rose to 3.81% (+6 bps q/q) as average cost of deposits fell to 2.19% (down 10 bps q/q), supporting earnings quality . Quote: “healthy margin expansion as our cost of funds continued to improve” .
  • Credit quality improvement: NPAs/Assets improved to 0.16% (from 0.58%); the $19.0M credit was returned to accrual and repaid subsequent to quarter end, reducing NPLs to $6.5M . Quote (CFO): the multifamily credit “was repaid in full” after quarter-end .
  • Strategic and capital actions: $171.6M deposit growth, strong liquidity and capital ratios (CET1 13.59%, Tier 1 leverage 12.04%); repurchased $8.3M of stock with ~$7M remaining, and maintained dividend . Quote (CEO): “We have the liquidity, capital, and team to take advantage of opportunities…” .

What Went Wrong

  • Noninterest income headwind: Mortgage banking revenues fell $2.8M q/q, largely due to a $3.0M negative MSR fair value adjustment; CFO quantified ~$0.14 per share after-tax MSR FV differential vs Q4 .
  • Expense pressure: Noninterest expense rose $3.1M q/q to $33.0M, driven by personnel (annual salary adjustments, health insurance, incentive comp) and other items; efficiency ratio worsened to 66.9% from 57.5% .
  • Metro loan balances down: Major metropolitan market loans decreased $18M q/q to $1.04B as payoffs outpaced production; loan payoffs likely remain elevated in Q2 before moderating .

Financial Results

MetricQ3 2024Q4 2024Q1 2025
Total Revenues ($USD Millions)$47.929 (NII $37.294 + Noninterest $10.635) $51.867 (NII $38.548 + Noninterest $13.319) $49.2
Diluted EPS ($)$0.66 $0.96 $0.72
Net Interest Margin (%)3.65% 3.75% 3.81%
Efficiency Ratio (%)68.80% 57.50% 66.90%
ROAA (%)1.05% 1.53% 1.16%
Average Cost of Deposits (%)2.47% 2.29% 2.19%

Segment / Loan Composition ($USD Millions)

Loan CategoryDec 31, 2024Mar 31, 2025
Commercial Real Estate$1,119.1 $1,126.8
Commercial – Specialized$389.0 $366.8
Commercial – General$557.4 $584.7
1-4 Family Residential$566.4 $569.8
Auto Loans$254.5 $261.6
Other Consumer$64.9 $64.1
Construction$103.9 $102.0
Total Loans HFI$3,055.1 $3,075.9

KPIs

KPIQ4 2024Q1 2025
Loans HFI ($USD Billions)$3.06 $3.08
Deposits ($USD Billions)$3.62 $3.79
Nonperforming Assets / Total Assets (%)0.58% 0.16%
NPLs / Total Loans (%)0.79% 0.21%
ACL / Loans HFI (%)1.42% 1.40%
Net Charge-offs (Annualized, %)0.11% 0.07%

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Loan GrowthFY 2025Low-to mid-single digit growth for 2025 Trend to the low end of low- to mid-single digit range Lowered (narrowed to low end)
Noninterest ExpenseFY 2025Q4’24 expected flat vs Q3’24 Q1’25 level is expected as run-rate for the balance of the year Updated run-rate (maintained)
Deposits – Public Funds SeasonalityQ2 2025Not specifiedExpect some public-fund outflows and seasonal tax payments impacting deposits in Q2 New disclosure
Net Interest Margin2025Projected improvement as rates decline; neutral sensitivity with liquidity caveat Aim to expand further, but less than +6 bps; depends on liquidity and loan funding Maintained cautious expansion
DividendQ2 2025$0.15 declared Jan 23, 2025 $0.15 declared Apr 17, 2025 Maintained
Share RepurchaseOngoing$15M authorization (Feb); activity expected to be balanced with liquidity $8.3M repurchased in Q1; ~$7M remaining Ongoing; capacity remaining

Earnings Call Themes & Trends

TopicPrevious Mentions (Q3 2024 and Q4 2024)Current Period (Q1 2025)Trend
Deposit costs / pricingCost of deposits 2.47% in Q3; 2.29% in Q4; softening competitive CD rates; targeting stronger down-beta Average cost of deposits 2.19%; management sees some additional room to lower exceptions Improving
Net interest marginNIM 3.65% (Q3) to 3.75% (Q4); projected to improve as rates decline with some liquidity caveat NIM 3.81%; aim to expand slightly from here, contingent on funding mix Slightly improving
Credit qualityNPLs $24.7M (Q3) to $24.0M (Q4); multifamily Houston credit on nonaccrual, enhanced structure NPAs/Assets 0.16%; $19.0M credit back to accrual in Q1; repaid in April Strengthening
Loan growth / payoffsQ3 decline on payoffs; Q4 modest growth; pipeline strongest in >2 years Q1 loans +$20.8M; elevated payoffs likely Q2; pipeline healthy (Permian strong) Rebuilding momentum
Mortgage/MSR dynamicsQ2: MSR FV -$0.68M; Q3: MSR FV -$1.4M; Q4: MSR FV +$3.5M; fees mixed Q1: MSR FV -$3.0M; mortgage fees down; preparing selectively for eventual cycle turn Volatile headwind
Metro market trendsMajor metro loans $1.07B (Q2) → $1.05B (Q3) → $1.06B (Q4) Down $18M q/q to $1.04B; production building; payments elevated H1, moderating H2 Soft near term
Liquidity & capitalBorrowing capacity ~$1.77B (Q4); CET1 13.53%; leverage 12.04% Borrowing capacity $1.78B; CET1 13.59%; leverage 12.04%; robust core funding Strong / stable
Macro/tariffsAnticipated rate cuts supportive in H1’25 CEO flags tariff uncertainty; recession risk; CRE focus reduces manufacturing exposure Macro risk elevated

Management Commentary

  • CEO: “We delivered strong first quarter results highlighted by solid deposit growth, healthy margin expansion as our cost of funds continued to improve, and loan growth that was in line with our expectations… the credit quality of our loan portfolio continued to strengthen” .
  • CFO: “There was a $0.14 per share after-tax differential in the mortgage servicing rights fair value adjustment in the first quarter as compared to the fourth quarter” .
  • President: “Loans held for investment increased $20.8 million… partially offset by the expected seasonal decrease in our agricultural production loans… loan yields stable at 6.67%” .

Q&A Highlights

  • Deposit costs: Room to lower exception pricing given liquidity; ongoing daily focus to “build a bigger margin” .
  • NIM trajectory: Management aims for modest further expansion, less than Q1’s +6 bps; constrained by liquidity mix and loan funding .
  • Loan payoffs: Payoffs were ~$10M higher vs Q4; expect elevated payoffs in Q2 with healthy production to offset .
  • Energy exposure: ~4% of loans, largely energy services rather than E&P .
  • Fee income outlook: Ex-mortgage fee lines show YoY growth; mortgage expected to slightly outperform 2024 year-to-date .
  • Expense outlook: Q1 noninterest expense viewed as a good run-rate for 2025 .

Estimates Context

MetricQ1 2025 ConsensusQ1 2025 Actual (S&P)
Primary EPS Consensus Mean$0.6675*$0.72*
Revenue Consensus Mean ($USD)$48.928M*$48.732M*
Primary EPS – # of Estimates4*—
Revenue – # of Estimates4*—
  • Company-reported total revenues were $49.2M in Q1 2025 (NII $38.5M + noninterest $10.6M) .
  • EPS beat consensus; revenue near consensus; estimate anchor is S&P Global data.*
    Disclaimer: Values retrieved from S&P Global.*

Key Takeaways for Investors

  • Positive earnings quality: Margin expansion and declining deposit costs underpin core profitability; expect cautious further NIM improvement subject to liquidity deployment .
  • Credit catalyst: Sharp reduction in NPAs/NPLs and repayment of the $19.0M Houston multifamily credit de-risks the book; supports multiple expansion narrative .
  • Mix shift opportunity: Deposit growth and high liquidity enable selective repricing and funding of pipelines; near-term payoff headwinds likely transitory .
  • Mortgage/MSR volatility: MSR FV remained a swing factor (-$3.0M), creating EPS noise; monitor rate path and housing cycle turn for noninterest income recovery .
  • Capital returns: Ongoing repurchases (~$7M capacity left) and steady dividend ($0.15) provide shareholder support while preserving balance sheet strength .
  • 2025 outlook: Loan growth guided to the low end of low- to mid-single digits; Q1 expense run-rate expected to hold; potential Q2 deposit outflows from public funds are seasonal .
  • Trading implications: Near-term sentiment likely favors improving credit metrics and margin; watch Q2 seasonal deposit outflows, payoff cadence, and MSR FV sensitivity as key drivers .