Sign in

You're signed outSign in or to get full access.

SP

SOUTH PLAINS FINANCIAL, INC. (SPFI)·Q2 2025 Earnings Summary

Executive Summary

  • EPS of $0.86 rose 19% QoQ and 30% YoY; NIM expanded 26 bps to 4.07% (17 bps from a one‑time $1.7M interest recovery; core NIM +9 bps), while ROAA improved to 1.34% .
  • Net interest income increased 10% QoQ to $42.5M on lower deposit costs and higher loan yields; provision rose to $2.5M on specific reserves, net charge‑offs, and downgrades .
  • Loans HFI grew modestly (+$23.1M QoQ) as expected multifamily payoffs offset broad‑based originations; deposit mix improved (non‑interest bearing 26.7%), with seasonal public fund outflows driving total deposits -1.4% QoQ .
  • Company raised its quarterly dividend 7% to $0.16, signaling confidence and capital strength (TCE/TA 9.98%; CET1 13.86%) .
  • Versus S&P Global consensus, SPFI beat on EPS by $0.09 and modestly beat on revenue; catalysts ahead include ongoing deposit cost repricing, lender hires in Dallas, and potential bolt‑on M&A amid a more permissive regulatory backdrop .
    Estimates values marked with an asterisk are from S&P Global.

What Went Well and What Went Wrong

What Went Well

  • Margin expansion continued: NIM rose to 4.07% (core 3.90% ex $1.7M recovery); loan yield improved to 6.99% and cost of deposits fell 5 bps QoQ to 2.14% .
  • Deposit mix improved: non‑interest bearing balances increased to $998.8M (26.7% of deposits), aiding funding costs and NIM trajectory .
  • Strategy execution: Management recruited experienced Dallas lenders to accelerate organic growth; “we believe we have opportunities to accelerate that growth by further expanding our lending platform” (CEO) .

What Went Wrong

  • Elevated credit costs: Provision increased to $2.5M on specific reserves, net charge‑offs, and several downgrades; nonperforming assets/total assets rose to 0.25% QoQ (still below 0.57% YoY) .
  • Loan growth muted by payoffs: Loans HFI +$23.1M QoQ (3.0% annualized) despite $49.1M of multifamily payoffs; management guides Q3 loan growth “flat to up low single digits” .
  • Seasonal deposit decline: Total deposits -$53.6M QoQ due to a $73.7M seasonal decrease in public funds, partially offset by retail/commercial growth .

Financial Results

Core P&L and Ratios (YoY and QoQ comparison)

MetricQ2 2024Q1 2025Q2 2025
Net Interest Income ($M)35.888 38.527 42.503
Noninterest Income ($M)12.709 10.625 12.165
Provision for Credit Losses ($M)1.775 0.420 2.500
Noninterest Expense ($M)32.572 33.030 33.543
Net Income ($M)11.134 12.294 14.605
Diluted EPS ($)0.66 0.72 0.86
ROAA (%)1.07 1.16 1.34
NIM (tax‑eq, %)3.63 3.81 4.07
Loan Yield (%)6.60 6.67 6.99
Cost of Int‑bearing Deposits (%)3.33 2.93 2.91
Efficiency Ratio (%)66.72 66.90 61.11

Balance Sheet and Credit

MetricQ2 2024Q1 2025Q2 2025
Loans HFI ($M)3,094.273 3,075.860 3,098.978
Total Deposits ($M)3,624.513 3,792.519 3,738.938
Non‑interest Bearing Deposits ($M)951.565 966.464 998.759
NPLs ($M)23.452 6.467 10.463
NPLs/Loans (%)0.76 0.21 0.34
NPAs/Assets (%)0.57 0.16 0.25
ACL/Loans (%)1.40 1.40 1.45
Net Charge‑offs / Avg Loans (Ann.) (%)0.10 0.07 0.06
TCE/TA (%)9.44 9.64 9.98
CET1 (%)12.61 13.59 13.86

Vs. Wall Street Consensus (S&P Global)

MetricConsensusActualBeat/(Miss)
Diluted EPS ($)0.77*0.86*+0.09*
Revenue ($)52.02M*52.17M*+$0.15M*

Values marked with * retrieved from S&P Global.

Segment/KPI Details

  • Loan composition (6/30/25, $000s): CRE $1,085,309; Commercial‑Specialized $379,068; Commercial‑General $620,934; 1–4 Family $589,935; Auto $258,193; Other Consumer $63,589; Construction $101,950; Total $3,098,978 .
  • Deposit composition (6/30/25, $000s): Non‑interest Bearing $998,759; NOW/Other $1,244,023; MMDA/Other Savings $1,072,010; Time $424,146; Total $3,738,938 .
  • Notable one‑time items: $1.7M interest recovery (nonaccrual payoff) added ~17 bps to NIM and 23 bps to loan yield in Q2 .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Loan GrowthQ3 2025—“Flat to up low single digits” as payoffs moderate but remain a headwind New specificity
Loan GrowthFY 2025Low‑to‑mid single digits (Q1 call) Reiterated lower end of low‑to‑mid single digits given payoffs Maintained (lower end)
NIM2H 2025Slight expansion potential (Q1) Modest expansion expected via exception pricing and lower deposit costs; core NIM +9 bps QoQ in Q2 Maintained/Incrementally positive
Deposit Costs2H 2025Room to move down (Q1) Trending lower; Q2 cost of deposits down 5 bps QoQ to 2.14% Favorable trend
Noninterest Expense2025Q1 run‑rate “good” for year Q2 up modestly; continue managing expenses; efficiency 61.1% Maintained discipline
DividendOngoing$0.15/qtr (Q1) Raised 7% to $0.16 (payable Aug 11, 2025) Raised

Earnings Call Themes & Trends

TopicQ4 2024 (Prior‑2)Q1 2025 (Prior‑1)Q2 2025 (Current)Trend
NIM/MarginNIM +10 bps to 3.75% on lower deposit costs; scope for incremental improvement NIM 3.81%; management targeting further gains as costs fall NIM 4.07%; +17 bps one‑time, +9 bps core; deposit costs down 5 bps Improving
Loan Growth/PayoffsElevated payoffs mask strong pipeline; cautious FY growth guide Expect lower‑end of low‑to‑mid single‑digit FY growth; payoffs elevated near‑term Q3 guide flat to low single digits; Dallas payoffs included problem loan resolution Gradual acceleration after payoffs
Deposit Mix/CostsRepricing down; liquidity gives flexibility More room to lower exception pricing Non‑interest bearing up; cost of deposits down 5 bps QoQ Positive mix/cost
Credit QualityStable; NPLs ~flat; disciplined underwriting NPA ratio improved; one large multifamily back to accrual (then repaid post‑Q) Provision up on reserves/downgrades; NPA ratio 0.25% (still below YoY) Mixed near‑term; still manageable
Indirect AutoPortfolio stable; tight standards Tightened LTVs; DQ 30+ at 41 bps DQ 30+ improved to 32 bps; consumer spending slowed on tariff expectations Resilient but watch macro
Mortgage BankingQ4 MSR uplift aided fees MSR FV headwind; prudent staffing MSR FV stabilized; fees +$1.5M QoQ Stabilizing
M&APrepared but selective; valuation realism needed Waiting for better terms Environment improving; strict criteria; optionality maintained Optionality rising

Management Commentary

  • “We delivered solid second quarter results highlighted by steady margin expansion, continued loan growth despite high levels of loan payoffs… and healthy capital levels… We recruited several experienced lenders in the Dallas market during the second quarter” — Curtis Griffith, CEO .
  • “Excluding [the $1.7M interest recovery], our NIM rose nine basis points to 3.90%, primarily due to a five basis point decline in our cost of deposits” — Steven Crockett, CFO .
  • “We expect the yield on our loan portfolio to stabilize near current levels… we recruited several experienced lenders in the Dallas area… payoffs will begin to moderate in the third quarter” — Cory Newsom, President .

Q&A Highlights

  • Loan pipeline and growth: Pipeline healthy, but repayments ~$15M higher QoQ drive “flat to low single-digit” near‑term outlook; aim to re‑accelerate with new hires .
  • Credit/reserves: Provision tied to specific smaller credits; no specific reserve on the previously discussed larger credit .
  • NIM outlook: CDs repricing down; scope for continued modest expansion via deposit pricing discipline; core NIM +9 bps in Q2 .
  • M&A: Improved regulatory backdrop, but seller valuation expectations remain a hurdle; target ~$0.6B–>$1B assets for fit/returns .
  • Deposit growth strategy: Treasury management traction and lender incentives driving non‑interest bearing growth alongside new relationships .

Estimates Context

  • S&P Global consensus EPS was $0.77 vs. actual $0.86, a beat of $0.09; revenue consensus $52.02M vs. actual $52.17M, a modest beat. Four estimates for both metrics, suggesting reasonable coverage depth for a community bank. Values retrieved from S&P Global.* [Values above from GetEstimates]
  • Post‑print, estimate models may raise NIM assumptions (core +9 bps QoQ) and slightly higher loan yields, while incorporating a higher provision run‑rate near‑term given Q2 downgrades and specific reserve build .

Key Takeaways for Investors

  • Margin momentum is intact: core NIM expanded +9 bps QoQ, with further tailwinds from deposit repricing and mix (26.7% NIB) .
  • Growth should improve as payoffs normalize and newly hired Dallas lenders ramp; near‑term guide is “flat to up low single digits” for Q3 .
  • Credit remains manageable despite higher provision; NPAs still well below last year; watch multifamily/classified trends and downgrades .
  • Capital and dividend support total return: TCE/TA ~10%, CET1 ~13.9%, dividend raised 7% to $0.16 .
  • M&A optionality is rising, but discipline on price/culture remains; organic growth remains the base case .
  • Trading setup: With an EPS beat and visible core NIM expansion, estimate revisions bias higher; sustainability hinges on deposit cost trajectory and payoff moderation .
  • Monitor mortgage/MSR stability and indirect auto performance as macro/tariff developments affect consumer behavior .

RELEVANT SOURCE DOCUMENTS

  • Q2 2025 8‑K and Press Release (Ex. 99.1): results, NIM drivers, deposit mix, credit, capital .
  • Q2 2025 Earnings Presentation (Ex. 99.2): core NIM ex‑recovery, loan/NOO‑CRE details, liquidity .
  • Q2 2025 Earnings Call Transcript: growth/NIM outlook, payoffs, M&A commentary, hiring .
  • Dividend increase PR (July 17, 2025): $0.16 quarterly dividend (+7%) .
  • Prior quarters for trend: Q1 2025 PR and call ; Q4 2024 PR and call .

Values marked with * retrieved from S&P Global.