South Plains Financial Grows Loans in Q2

South Plains Financial(NASDAQ:SPFI) reported Q2 2025 results on July 16, 2025, posting diluted EPS of $0.86 (including a $0.09 one-time benefit), net income of $12.2 million, and net interest margin expansion to 4.07%. The quarter featured modest loan growth, core deposit mix improvement, capital ratio expansion, and proactive hiring, but also underscored headwinds from elevated loan payoffs.

Capital Position Enables Simultaneous Organic Growth and M&A Capacity

South Plains Financial ended the quarter with a consolidated common equity tier 1 risk-based capital ratio of 13.86% and a tier 1 leverage ratio of 12.12%. Tangible common equity to tangible assets rose 34 basis points to 9.98% quarter-over-quarter, with tangible book value per share reaching $26.70. Mergers and acquisitions remain part of its growth strategy.

"We continue to have a strict criteria for a deal, and are only interested in acquiring a bank with the right culture, an asset liability profile that meets our needs, a stable deposit base, and at a valuation that makes sense. We can be patient given the organic growth opportunities that we have across our markets. Importantly, we believe that we are in a strong position to capitalize on opportunities to drive growth as the bank and the company each significantly exceed the minimum regulatory capital levels necessary to be deemed well-capitalized. At June 30, 2025, our consolidated common equity tier one risk-based capital ratio was 13.86% and our tier one leverage ratio was 12.12%."
— Curtis Griffith, Chairman & CEO

Loan Pipeline and Geographic Diversification Support Long-Term Growth, Despite Near-Term Headwinds

Loans held for investment rose $23.1 million, or 3% annualized, as broad-based gains offset $49.1 million in multifamily loan payoffs and a $26 million decline in major metro (Dallas, Houston, El Paso) balances to $1.01 billion. New hiring in growth markets, particularly Dallas, is expected to reinforce long-term origination levels. Management expects full-year 2025 loan growth at the lower end of the "low to mid-single-digit" range as near-term payoffs weigh on net growth, but views hiring as the lever that can drive a subsequent acceleration.

"If you look at the hires that we're trying to do, our intention is not to leave it at that level. And so our goal is to be driving that up probably more to the mid to high end after '25. I feel really good about what we're trying to accomplish on some of the hires that we're actually doing."
— Cory Newsom, President

The deliberate investment in experienced relationship bankers is designed to expand origination capacity and produce a structural uplift in both loan and core deposit growth.

Deposit Mix Enhancements and Margin Management Drive Core Earnings Quality

Core net interest margin, excluding one-time items, rose 9 basis points to 3.9%, driven by a 5 basis point drop in cost of deposits (down to 2.14%) after noninterest-bearing deposits increased $32.3 million, public fund deposits declined, CD rates continued to drop, and the deposit mix shifted towards lower-cost funding. Exception-based pricing and treasury management services are maturing, and noninterest income comprised 22% of revenues.

"Noninterest-bearing deposits increased $32.3 million in the second quarter. This, coupled with the decline in public fund deposits, contributed to total deposits ratio increasing to 26.7% in the second quarter from 25.5% in the linked quarter. The mix shift change in deposits, along with the continued drop in CD rates, contributed to the 5 basis point decline in our cost of deposits."
— Steve Crockett, CFO & Treasurer

Looking Ahead

Management expects full-year 2025 loan growth at the lower end of its low- to mid-single-digit percentage range due to ongoing but moderating loan payoffs. Loan yields are guided to stabilize near current levels in the absence of FOMC rate moves. No explicit quantitative EPS or revenue guidance was provided.

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This article was created using Large Language Models (LLMs) based on The Motley Fool's insights and investing approach. It has been reviewed by our AI quality control systems. Since LLMs cannot (currently) own stocks, it has no positions in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.