425: South Plains Financial Reports Strong 2025, Eyes Houston Growth

South Plains Financial, Inc. reported strong full-year 2025 financial results, including significant EPS growth and strategic expansion into the Houston market via acquisition.

Summary

• Net income for the fourth quarter of 2025 was $15.3 million, compared to $16.3 million for the third quarter of 2025 and $16.5 million for the fourth quarter of 2024.
• Diluted earnings per share for the fourth quarter of 2025 was $0.90, compared to $0.96 for the third quarter of 2025 and $0.96 for the fourth quarter of 2024.
• Full year net income for 2025 was $58.5 million, compared to $49.7 million in 2024.
• Diluted earnings per share for the full year 2025 was $3.44, compared to $2.92 in 2024.
• Average cost of deposits for the fourth quarter of 2025 was 201 basis points, a decrease from 210 basis points in Q3 2025 and 229 basis points in Q4 2024.
• Net interest margin, on a tax-equivalent basis, was 4.00% for the fourth quarter of 2025, compared to 4.05% for the third quarter of 2025 and 3.75% for the fourth quarter of 2024.
• Tangible book value per share (non-GAAP) was $29.05 as of December 31, 2025, an increase from $28.14 as of September 30, 2025 and $25.40 as of December 31, 2024.
• Total assets were $4.48 billion at December 31, 2025, compared to $4.23 billion at December 31, 2024.
• Loans held for investment grew $89.4 million, or 2.9%, during 2025, reaching $3.14 billion at year-end.
• The company entered into a definitive agreement to acquire BOH Holdings, Inc. and its banking subsidiary Bank of Houston on December 1, 2025. At September 30, 2025, BOH had approximately $772 million in assets, $633 million in loans, and $629 million in deposits.
• The consolidated total risk-based capital ratio, common equity tier 1 risk-based capital ratio, and tier 1 leverage ratio at December 31, 2025 were 17.26%, 14.45%, and 12.53%, respectively.
• The ratio of nonperforming assets to total assets was 0.26% as of December 31, 2025, a significant improvement from 0.58% at December 31, 2024.

Sentiment

Score: 7

Explanation: The company reported strong full-year financial performance with significant EPS and tangible book value growth. While Q4 saw a slight dip in net income and EPS quarter-over-quarter, the overall trajectory is positive, supported by strategic acquisition and effective cost management. The outlook for accelerated loan growth in 2026 is optimistic.

Positives

• Delivered strong full year 2025 net income of $58.5 million and diluted EPS of $3.44, representing 17.8% EPS growth year-over-year.
• Achieved tangible book value per share growth of over 14% to $29.05 at year-end 2025.
• Expanded net interest margin by 33 basis points year-over-year, reaching 4.00% in Q4 2025, driven by effective management of the cost of funds.
• Successfully executed growth strategy with 2.9% loan growth for the full year 2025, in line with guidance.
• Entered into a definitive agreement to acquire BOH Holdings, Inc., providing important scale in the fast-growing Houston market and expected to be 11% accretive to EPS with a tangible book value earnback under 3 years.
• Improved asset quality with the nonperforming assets to total assets ratio decreasing to 0.26% at December 31, 2025, from 0.58% at December 31, 2024.
• Maintained strong capital ratios, including a common equity tier 1 ratio of 14.45% and a total risk-based capital ratio of 17.26% at year-end 2025.
• Reduced average cost of deposits to 201 basis points in Q4 2025, a 28 basis point decrease from Q4 2024.
• Demonstrated ample liquidity with $1.93 billion of available borrowing capacity through FHLB and FRB, with no utilization during Q4 2025.

Negatives

• Net income for Q4 2025 decreased to $15.3 million from $16.3 million in Q3 2025 and $16.5 million in Q4 2024.
• Diluted earnings per share for Q4 2025 decreased to $0.90 from $0.96 in Q3 2025 and Q4 2024.
• Net interest margin (tax-equivalent) slightly decreased to 4.00% in Q4 2025 from 4.05% in Q3 2025.
• Noninterest income decreased to $10.9 million in Q4 2025 from $11.2 million in Q3 2025, primarily due to a $185 thousand decrease in mortgage banking revenues.
• Mortgage servicing rights assets experienced a write-down of $665 thousand in Q4 2025, contrasting with a write-up of $1.5 million in Q4 2024, impacting noninterest income.
• Provision for credit losses increased to $1.8 million in Q4 2025 from $500 thousand in Q3 2025, largely attributable to the increase in loan balances.

Risks

• The expected impact of the proposed transaction between South Plains and BOH on the combined entities' operations, financial condition, and financial results.
• The businesses of South Plains and BOH may not be combined successfully, or such combination may take longer to accomplish than expected.
• Cost savings from the proposed transaction may not be fully realized or may take longer to realize than expected.
• Operating costs, customer loss, and business disruption following the proposed transaction, including adverse effects on relationships with employees, may be greater than expected.
• Regulatory approvals of the proposed transaction may not be obtained, or adverse conditions may be imposed in connection with regulatory approvals.
• BOH shareholders may not approve the proposed transaction.
• The impact on the company and its customers of a decline in general economic conditions and any regulatory responses thereto.
• Slower economic growth rates or potential recession in the United States and the company's market areas.
• Uncertainty or perceived instability in the banking industry as a whole.
• Increased competition for deposits in market areas among traditional and nontraditional financial services companies, and related changes in deposit customer behavior.
• The impact of changes in market interest rates, whether due to a continuation of the elevated interest rate environment or further reductions in interest rates and a resulting decline in net interest income.
• Lingering inflationary pressures, and the risk of the resurgence of elevated levels of inflation, in the United States and the company's market areas.
• The uncertain impacts of ongoing quantitative tightening and current and future monetary policies of the Board of Governors of the Federal Reserve System.
• Changes in unemployment rates in the United States and the company's market areas.
• Adverse changes in customer spending, borrowing, and savings habits.
• Declines in commercial real estate values and prices.
• A deterioration of the credit rating for U.S. long-term sovereign debt or the impact of uncertain or changing political conditions.
• Cyber incidents or other failures, disruptions, or breaches of operational or security systems or infrastructure, or those of third-party vendors or other service providers.
• Severe weather, natural disasters, acts of war or terrorism, geopolitical instability, domestic civil unrest or other external events.
• The impacts of tariffs, sanctions, and other trade policies of the United States and its global trading counterparts and the resulting impact on the company and its customers.
• Changes in non-interest expenditures or in the anticipated benefits of such expenditures.
• The risks related to the development, implementation, use and management of emerging technologies, including artificial intelligence and machine learning.
• Potential costs related to the impacts of climate change.
• Current or future litigation, regulatory examinations or other legal and/or regulatory actions.
• Changes in accounting principles and standards, including those related to loan loss recognition under the current expected credit loss (CECL) methodology.
• Changes in applicable laws, regulations, or policies in the United States.

Future Outlook

Management expects loan growth to accelerate to a mid-to-high single-digit rate in 2026, driven by the BOH acquisition and recruitment of new lenders, aiming to increase the company's earnings power. The company plans to continue making necessary investments in technology, systems, and processes for efficient growth and will actively seek attractive acquisition targets of similar size to BOH while selectively recruiting high-quality lenders in its markets.

Management Comments

• "We delivered strong results for the full year 2025 highlighted by 17.8% diluted earnings per share growth, loan growth in line with our guidance, year-over-year net interest margin expansion of 33 basis points as we continue to closely manage our cost of funds, and grew our tangible book value per share over 14% to $29.05 at the end of 2025."
• "We also made great strides executing our growth strategy having recruited outstanding lenders across our markets who we believe will bring new relationships to City Bank while also entering into the definitive agreement in December to acquire BOH and Bank of Houston which we believe will provide important scale in the fast-growing Houston market upon consummation of the acquisition."
• "Taken together, we expect our loan growth to accelerate to a mid-to-high single digit rate in 2026 as we work to increase the earnings power of South Plains."
• "We have laid the foundation to be a larger community bank which includes making the necessary investments in our technology, systems, and processes so that we can grow efficiently."
• "While we have accomplished much, we are not standing still. We continue to look for attractive franchises, like BOH, as we believe we have the capacity to acquire another bank in a similar size range while also selectively recruiting high-quality lenders in our markets."
• "I am very excited for what lies ahead for our employees, our customers, and our shareholders."

Industry Context

The acquisition of BOH Holdings positions South Plains Financial to strengthen its presence in the rapidly growing Houston metropolitan statistical area (MSA), aligning with a trend of regional banks seeking scale and market share in high-growth urban centers. The company's focus on organic loan growth, effective management of the cost of funds, and investments in technology reflects broader banking industry efforts to optimize profitability and efficiency in a dynamic interest rate environment and competitive landscape. The emphasis on relationship-based banking and community values also highlights a strategy to differentiate in a consolidating market.

Comparison to Industry Standards

• The acquisition of BOH Holdings, Inc. is expected to be 11% accretive to EPS, a strong indicator of value creation often sought in banking mergers.
• The tangible book value earnback period for the BOH acquisition is projected to be under 3 years, which is generally considered an attractive timeframe for M&A in the banking sector.
• The company believes it has the capacity to acquire another bank in a similar size range to BOH (which had approximately $772 million in assets), indicating a strategic benchmark for future inorganic growth opportunities.

Stakeholder Impact

• Shareholders are expected to benefit from increased earnings power, 11% EPS accretion from the BOH acquisition, enhanced long-term shareholder value, and continued growth in tangible book value per share.
• Employees are offered great benefits and opportunities for growth, with the BOH acquisition adding key talent and leadership depth to support continued expansion.
• Customers will benefit from personalized advice and solutions, expanded services, and a strengthened presence in key markets like Houston, driven by organic growth and strategic acquisitions.
• Communities where City Bank operates are expected to benefit from the company's commitment to investing generously and helping people succeed and live better.

Next Steps

• Consummation of the acquisition of BOH Holdings, Inc. and Bank of Houston.
• Accelerate loan growth to a mid-to-high single-digit rate in 2026.
• Continue to look for attractive bank franchises for potential acquisition in a similar size range.
• Selectively recruit high-quality lenders in existing markets.
• Conduct a conference call on January 26, 2026, at 5:00 p.m., Eastern Time, to discuss the financial results.

Key Dates

Recommendation

The company demonstrated strong full-year 2025 performance with significant diluted EPS growth and robust tangible book value per share appreciation. The strategic acquisition of BOH Holdings is expected to be highly accretive to EPS and provides a strong foothold in a fast-growing market, positioning the company for accelerated loan growth in 2026. Effective cost management, improving asset quality, and a solid capital base further support a positive outlook, making it an attractive investment for long-term growth.

Keywords

South Plains Financial, SPFI, City Bank, BOH Holdings, Bank of Houston, Financial Results, Earnings, Banking, Acquisition, Merger, Net Income, EPS, Net Interest Margin, Deposits, Loans, Texas Banking, Community Bank, Financial Services, Corporate Governance, Risk Management, SEC Filing, Form 8-K, 425 Filing