South Plains signals Bank of Houston deal to be 11% accretive in 2027 with tangible book value earn-back under 3 years

Earnings Call Insights: South Plains Financial (SPFI) Q1 2026

MANAGEMENT VIEW

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"We delivered solid first quarter results, highlighted by strong profitability, continued improvement in credit quality and disciplined balance sheet management" (Chairman & CEO Curtis Griffith).

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"Our strategy remains focused on expanding our lending team across our high-growth Texas markets while also pursuing accretive M&A" (Chairman & CEO Curtis Griffith). Griffith added, "we have not identified another transaction that meets our strict criteria" and "we're not interested in growth for growth's sake."

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On the Bank of Houston (BOH) acquisition, Griffith said, "We were pleased to complete our merger on April 1," and "we expect the core conversion to be completed in early May." He also reiterated, "we continue to expect the merger to be 11% accretive to our earnings in 2027 with a tangible book value earn-back of less than 3 years."

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"Loans held for investment decreased by $41 million to $3.1 billion" and "we experienced strong unfunded loan commitment growth during the quarter" (President & Director Cory Newsom). Newsom also said, "we remain confident in delivering our loan growth guidance for the full year, albeit towards the lower end of our mid- to high single-digit range."

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"For the first quarter, diluted earnings per share were $0.85 compared to $0.90 from the linked quarter" (CFO & Treasurer Steven Crockett).

OUTLOOK

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"Importantly, our loan pipeline remains healthy" and "we also expect another early payoff of approximately $34 million multifamily loan" (President & Director Cory Newsom).

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"We do expect our loan yields to moderate in the quarters ahead" (President Newsom).

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"We would expect deposit growth to be flat to down in the second quarter before returning to growth in the second half of 2026 before you factor in acquisition deposits" (CFO Crockett).

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Compared with last quarter’s stance that "you could see a little bit of compression" in NIM (CFO Steven Crockett, Q4 2025), management’s current-quarter positioning emphasized stability, with Crockett saying, "our goal is to maintain our profitability at current levels while growing our balance sheet."

FINANCIAL RESULTS

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"Net interest income was $43 million for the first quarter" and "our net interest margin on a tax equivalent basis was 4.04%" (CFO Steven Crockett).

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"Deposits increased by $154 million or 4% from the linked quarter to $4.03 billion" and "our cost of deposits decreased by 4 basis points to 1.97%" (CFO Crockett).

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Credit provisioning and asset-quality commentary centered on lower reserve build: "We recorded a $260,000 provision for credit losses" and "the decrease in provision expense was largely attributable to the decrease in loan balances, combined with a decrease of $4.8 million in nonperforming loans and a $460,000 decrease in loan net charge-offs" (CFO Crockett).

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Noninterest income and fee items included mortgage strength and an investment loss: "We generated $11.3 million of noninterest income" and "the increase... was primarily due to an increase of $1.5 million in mortgage banking revenues, partially offset by a loss of approximately $800,000 in an SBIC investment" (President Newsom).

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Expenses reflected acquisition and compensation pressure: "Our noninterest expense increased $2.5 million to $35.5 million" and "there was approximately $1.5 million in acquisition-related expenses" (CFO Crockett).

Q&A

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Wood Lay, KBW: asked about BOH balance-sheet repositioning and why it didn’t change the accretion outlook; CFO Crockett responded, "some of the Federal Home Loan Bank borrowings had dropped" and "some of the brokered -- time broker deposits did not get redone," adding, "we'll continue to look at the noncore funding where we can and pare that back."

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Wood Lay, KBW: pressed on how quickly BOH deposit costs could be lowered and whether it could support NIM; Chairman & CEO Griffith answered, "as all of the higher cost stuff hits maturity and payoff dates... we'll just pay them off," while also cautioning, "it's not going to be a radical improvement in overall deposit costs for us."

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Brett Rabatin, StoneX: asked if new lender hires were entering specialized businesses; President Newsom replied, "there's not a single one that we've hired that's going to put us into something that we don't think we have good expertise in doing or gets us out of the fairway that we like to stay in."

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Brett Rabatin, StoneX: asked about mortgage outlook; Senior VP & Chief Credit Officer Brent Bates said, "I think rates probably have to drop quite a bit to make a meaningful difference there," and Newsom added, "we've kept the nucleus of this business together, and we're not losing any money."

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Stephen Scouten, Piper Sandler: asked whether payoffs were anticipated in guidance and about BOH synergy timing; Chief Credit Officer Bates said, "we anticipated this... it was kind of baked in," and Newsom said on integration, "we closed, we have converted and integrated everything about this inside of a quarter... we're going to do a conversion May 8."

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Joseph Yanchunis, Raymond James: asked about energy exposure; Chief Credit Officer Bates answered, "most of our energy portfolio is really on the C&I servicing side" and "we're still under 5% of the portfolio."

SENTIMENT ANALYSIS

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Analysts’ tone was neutral-to-skeptical, repeatedly pressing on margin durability, BOH funding repricing, and loan-growth math, including Yanchunis asking, "I'm just trying to understand what the jumping off point is" and Scouten testing the implied pace of growth.

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Management’s tone was slightly positive but measured, frequently emphasizing patience and discipline, including Newsom saying, "this is a bit more of a marathon than a sprint" and Griffith signaling caution on macro uncertainty while maintaining strategic confidence.

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Versus Q4 2025’s tone, which highlighted broad full-year performance and anticipated acceleration, Q1 2026 included more operational integration detail and more explicit near-term caveats (payoffs, tax-related deposit seasonality), while still reiterating the same BOH accretion and payback framework.

QUARTER-OVER-QUARTER COMPARISON

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The BOH narrative shifted from planning to execution: Q4 2025 said the merger was "expected to occur early in the second quarter of 2026" (Chairman & CEO Curtis Griffith, Q4 2025), while Q1 2026 reported, "We were pleased to complete our merger on April 1" and set "core conversion" for "early May" (Chairman & CEO Griffith).

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Loan-growth framing tightened: Q4 2025 said loan growth was expected to "accelerate to a mid- to high single-digit growth rate in 2026" (Chairman & CEO Griffith, Q4 2025), while Q1 2026 guided to delivery "towards the lower end" of that range (President Newsom).

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NIM language moved from acknowledging potential pressure ("you could see a little bit of compression," CFO Steven Crockett, Q4 2025) to emphasizing steadier profitability goals ("maintain our profitability at current levels," CFO Crockett).

RISKS AND CONCERNS

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Management cited macro uncertainty: "inflationary pressures appear to be resurfacing" and this "may limit the Federal Reserve's ability to further reduce interest rates" and "could act as a headwind to economic activity and loan growth" (Chairman & CEO Griffith).

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Loan growth was described as facing payoff headwinds: "some large payoffs will continue to be a headwind to loan growth" (President Newsom).

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Deposit flows were expected to be seasonally pressured: "we expect a portion of the public funds to flow back out of the Bank" in Q2 due to "annual tax payments" (CFO Crockett).

FINAL TAKEAWAY

Management presented Q1 2026 as a transition quarter that combined stable core earnings drivers with BOH integration execution: Griffith said the merger was completed April 1, the core conversion was expected in early May, and the company continued to expect 11% earnings accretion in 2027 with a tangible book value earn-back under 3 years. While Newsom reiterated full-year loan growth expectations, he positioned delivery toward the lower end of the mid- to high single-digit range due to multifamily payoffs, as Crockett described near-term deposit seasonality and a priority on maintaining profitability as the balance sheet grows.

Read the full Earnings Call Transcript [https://seekingalpha.com/symbol/spfi/earnings/transcripts]

MORE ON SOUTH PLAINS FINANCIAL

* South Plains Financial, Inc. (SPFI) Q1 2026 Earnings Call Transcript [https://seekingalpha.com/article/4895469-south-plains-financial-inc-spfi-q1-2026-earnings-call-transcript]
* South Plains Financial, Inc. 2026 Q1 - Results - Earnings Call Presentation [https://seekingalpha.com/article/4895412-south-plains-financial-inc-2026-q1-results-earnings-call-presentation]
* South Plains Financial approves $10M stock repurchase program [https://seekingalpha.com/news/4555101-south-plains-financial-approves-10m-stock-repurchase-program]
* Seeking Alpha’s Quant Rating on South Plains Financial [https://seekingalpha.com/symbol/SPFI/ratings/quant-ratings]
* Historical earnings data for South Plains Financial [https://seekingalpha.com/symbol/SPFI/earnings]