South Plains Financial (NASDAQ:SPFI) reported higher second-quarter 2026 earnings as its recent Bank of Houston acquisition contributed to balance sheet growth, while management said the company remains focused on organic loan expansion, expense discipline and maintaining profitability amid an elevated interest-rate environment.
The Lubbock, Texas-based parent of City Bank posted diluted earnings per share of $0.96 for the quarter, up from $0.85 in the linked quarter, Chief Financial Officer and Treasurer Steve Crockett said on the company’s earnings call. Crockett said the increase was primarily driven by the Bank of Houston acquisition and improved non-interest income.
Bank of Houston Integration Largely Completed
President Cory Newsom said South Plains has largely completed the integration of Bank of Houston, with the systems conversion occurring in May, roughly three months after the transaction closed. Loans held for investment increased by $677.3 million from the linked quarter to $3.77 billion. The increase included $632 million of loans from Bank of Houston and $35 million of organic loan growth.
Loans in the company’s major metropolitan markets of Dallas, Houston and El Paso increased by $682 million to $1.69 billion, driven by the acquired Bank of Houston loans and $50 million of organic growth.
Newsom said the acquired loan portfolio has performed in line with expectations and that South Plains sees further opportunities to optimize the acquired balance sheet by evaluating higher-cost funding sources and certain relationships. During the question-and-answer session, Crockett said some work had already been done to manage Bank of Houston funding costs, with more expected in the third quarter. Chairman and Chief Executive Officer Curtis Griffith said Bank of Houston’s Federal Home Loan Bank borrowings had been paid off.
Management also said expense savings tied to the deal should begin to show more clearly after the second quarter. Non-interest expense rose by $4.3 million to $39.9 million, with the increase primarily reflecting $2.7 million in core operating expenses related to Bank of Houston and higher incentive-based compensation. Crockett said the quarter included about $1.1 million of acquisition-related expenses, including $710,000 in personnel expenses, and that acquisition expenses should be largely behind the company in the third quarter.
Loan Growth Outlook Remains Positive Despite Paydowns
Newsom said underlying loan demand remains healthy, even as elevated payoffs continue to create a headwind. During the quarter, two loans totaling $37.5 million paid off. He said the company remains confident in delivering full-year loan growth guidance in the mid-single digits.
Chief Credit Officer Brent Bates said the company feels “really good” about second-half growth prospects, citing the increased number of bankers from the acquisition and hiring activity, as well as a stronger pipeline. He said recent payoffs were normal-course events, including asset sales by clients, rather than loans pushed out of the portfolio.
Newsom said the Bank of Houston conversion created internal disruption during the quarter, including training and systems work, but the company still maintained loan growth. He said the completion of that integration work should help offset future paydowns.
Deposits Rise, Funding Costs Remain a Focus
Deposits increased by $613 million from the linked quarter to $4.64 billion. Crockett said Bank of Houston contributed $596 million of acquired deposits, while South Plains generated $17 million of organic deposit growth. He described organic deposit growth in the second quarter as a strong result given typical seasonal outflows tied to tax payments and public funds.
Non-interest-bearing deposits represented 24.8% of total deposits at quarter-end, down from 25.7% at the end of the first quarter. Crockett said the decline was largely due to Bank of Houston’s non-interest-bearing deposit ratio being about 16% at acquisition. The company’s cost of deposits increased 11 basis points, in line with prior expectations.
Management said South Plains has room to reduce higher-cost brokered deposits and non-core funding sources as they mature. Asked about the loan-to-deposit ratio, Crockett said the company has been operating near the middle of its preferred range and has some room to move higher, though he indicated management would not want the ratio to get much above 85%.
Non-Interest Income Improves
South Plains generated $14.1 million of non-interest income in the quarter, up from $11.3 million in the linked quarter. Newsom said the increase was primarily due to a $929,000 rise in mortgage banking revenue as mortgage originations improved during the spring selling season, along with an $894,000 increase in bank card services and interchange revenue tied to continued customer card usage growth and incentives received during the period.
Newsom said mortgage volumes remain subdued due to higher interest rates, but the business continues to perform well in a low-transaction environment and is positioned for an eventual upturn if rates normalize lower. Non-interest income represented 22% of bank revenues, essentially flat with the linked quarter.
Credit, Capital and Leadership Transition
Crockett said the allowance for credit losses to total loans was 1.41% at quarter-end, stable with the prior quarter. The company recorded a $350,000 provision for credit losses related to organic loan growth and net charge-off activity. Crockett said classified and non-performing loans increased, primarily from acquired Bank of Houston loans, which management had expected.
South Plains remained well capitalized, with tangible common equity to tangible assets of 10.47% at the end of the second quarter. Tangible book value per share was $29.57, compared with $29.65 at the end of the first quarter.
Griffith also discussed the company’s planned leadership transition. He will retire as CEO at the end of 2026, with Newsom set to become CEO on Jan. 1, 2027. Griffith will remain chairman of the board in a non-executive capacity and continue as a consultant to the company. Griffith said the transition has been planned for many years and described Newsom as the right leader to guide the company’s next phase.
Newsom said South Plains remains open to additional acquisitions but will be disciplined, focusing on potential partners in Texas that align with the company’s culture, credit discipline and community banking focus. He said organic growth remains the company’s primary focus.
The board authorized a 6% increase in the quarterly dividend to $0.18 per share on July 15, which Newsom said will mark the company’s 29th consecutive dividend.
About South Plains Financial (NASDAQ:SPFI)
South Plains Financial, Inc is the bank holding company for South Plains Bank, a community-oriented financial institution headquartered in Lubbock, Texas. The company operates as a full-service commercial bank, providing a broad spectrum of banking solutions to individuals, small businesses and agricultural clients. Its principal subsidiary, South Plains Bank, holds state and national banking charters and is subject to regulatory oversight by the Federal Reserve and various state banking authorities.
The company’s product offerings include traditional deposit accounts such as checking, savings and money market accounts, as well as time deposits.
