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Introduction & Market Context
South Plains Financial, Inc. (NASDAQ:SPFI) released its first quarter 2025 earnings presentation on April 24, 2025, revealing a mixed performance with declining net income but improvements in several key metrics including credit quality and deposit growth. The Texas-based financial institution, which operates in Dallas/Fort Worth, El Paso, Houston, and Lubbock markets, reported results amid a challenging but improving banking environment.
The company’s stock closed at $33.24 on the day of the announcement, showing minimal change from its previous close of $33.03. SPFI is currently trading below its 52-week high of $40.91 but well above its 52-week low of $25.13.
Quarterly Performance Highlights
South Plains Financial reported net income of $12.3 million for Q1 2025, a decrease from $16.5 million in the previous quarter. Diluted earnings per share fell to $0.72 from $0.96 in Q4 2024. Despite the earnings decline, the company showed improvement in several key areas, including net interest margin, deposit growth, and credit quality.
As shown in the following chart of quarterly highlights:
The company’s net interest margin improved to 3.81% from 3.75% in the previous quarter, primarily due to a 10 basis point decrease in the cost of deposits. Total (EPA:TTEF) loans held for investment increased slightly to $3.08 billion from $3.06 billion at the end of 2024, while deposits grew significantly to $3.79 billion from $3.62 billion.
A notable improvement was seen in credit quality, with nonperforming assets to total assets ratio decreasing to 0.16% from 0.58% at the end of 2024. This improvement was primarily due to a $19.0 million credit being placed back on accrual status based on sustained payment performance and improved credit structure.
Detailed Financial Analysis
South Plains Financial’s net interest income remained flat at $38.5 million compared to Q4 2024, but the net interest margin improved by 6 basis points to 3.81%. This improvement was driven by a decrease in deposit costs, which offset a slight decline in the yield on interest-earning assets.
The following chart illustrates the net interest income and margin trends over the past five quarters:
Noninterest income decreased to $10.6 million in Q1 2025 from $13.3 million in Q4 2024, primarily due to a $2.8 million decrease in mortgage banking revenues. This decline was mainly attributed to a $3.0 million decrease in the fair value adjustment of mortgage servicing rights assets as interest rates affecting their value decreased in Q1 2025.
Despite this decrease, South Plains Financial maintains a diversified revenue stream, as shown in the following breakdown:
On the expense side, noninterest expense increased by $3.1 million from Q4 2024, largely due to a $2.1 million increase in personnel expenses. This contributed to an efficiency ratio of 66.9% in Q1 2025, compared to 57.5% in the previous quarter.
The company’s deposit base showed strong growth in Q1 2025, with total deposits increasing by $171.6 million from the previous quarter to $3.79 billion. The cost of deposits decreased by 10 basis points to 2.19% from 2.29% in Q4 2024, reflecting improved funding costs.
Strategic Initiatives
South Plains Financial continues to focus on its presence in major Texas metropolitan markets, which represented 33.8% of the bank’s total loans held for investment as of March 31, 2025. These markets, including Dallas/Fort Worth, El Paso, and Houston, offer significant growth opportunities due to their expanding populations and strong economic indicators.
The company highlighted the attractive characteristics of these markets in its presentation:
Despite the strategic importance of these metropolitan markets, loans in these areas decreased by $18 million to $1.04 billion during Q1 2025. This suggests the company may be taking a cautious approach to lending in these regions while maintaining its long-term strategic focus.
South Plains Financial also maintains a diversified loan portfolio, with a balanced mix between commercial and residential lending. The company’s loan portfolio is also well-distributed between fixed and variable rate loans, providing some protection against interest rate fluctuations.
The company’s credit quality showed significant improvement in Q1 2025, with nonperforming assets to total assets ratio decreasing to 0.21% from 0.57% in the previous quarter. This improvement reflects the company’s prudent risk management practices and the overall health of its loan portfolio.
Forward-Looking Statements
South Plains Financial maintains a strong capital base, with a Common Equity Tier 1 Ratio of 13.59% and a Total Capital to Risk-Weighted Assets Ratio of 17.93% as of March 31, 2025. These capital levels provide the company with flexibility to pursue growth opportunities and navigate potential economic challenges.
The company’s tangible book value per share increased to $26.05 from $25.40 at the end of 2024, reflecting continued value creation for shareholders. During the quarter, South Plains repurchased 250,000 shares under its $15.0 million share repurchase program, demonstrating confidence in its financial position and commitment to returning capital to shareholders.
Looking ahead, South Plains Financial is well-positioned to benefit from the economic strength of its Texas markets. The company’s focus on relationship-based banking, as highlighted in its core purpose statement, continues to be a key differentiator in its competitive strategy.
While the decline in net income and increase in the efficiency ratio present challenges, the improvements in net interest margin, deposit growth, and credit quality suggest underlying strength in the company’s operations. The management’s ability to navigate the evolving interest rate environment and capitalize on growth opportunities in its key markets will be crucial for future performance.
Full presentation:
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