South Plains Financial (SPFI) Q4 2025: Houston Loans Set to Top $1B, Accelerating Texas Expansion
South Plains Financial’s pending Bank of Houston acquisition positions the company to surpass $1 billion in Houston-area loans and meaningfully accelerate loan growth in 2026. Management is leveraging M&A and targeted lender hiring to expand in high-growth Texas markets, while maintaining disciplined credit standards and a stable deposit base. Investors should watch for integration execution and net interest margin resilience as competition and rate cuts reshape the regional banking landscape.
Summary
- Houston Scale Inflection: Bank of Houston deal will push SPFI’s Houston loans past $1 billion, deepening metro presence.
- Lender Hiring Drives Organic Growth: Targeted recruiting and market dislocation support mid-to-high single-digit loan growth guidance.
- Margin Management in Focus: Deposit repricing and yield discipline remain key as rate cuts and competition pressure NIM.
Performance Analysis
SPFI delivered steady core operating performance in Q4, with loan growth of $91 million—primarily in multifamily, energy, and commercial segments—pushing total loans held for investment to $3.14 billion. This late-quarter surge positions net interest income for a lift in Q1, as new loans contribute a full quarter of earnings impact. The yield on loans remained relatively stable, with management noting that recent quarters’ headline yield was boosted by one-time recoveries; underlying loan yields have held in the high 6 percent range, even as market rates began to decline late in the year.
Deposit balances held steady at $3.87 billion, with noninterest-bearing deposits comprising 26.4 percent of the total, reflecting a slight dip from the prior quarter but up year-over-year. Cost of deposits decreased by nine basis points to 2.01 percent, reflecting management’s proactive repricing efforts following Federal Reserve rate cuts. Non-interest income remained stable, with mortgage banking revenues showing a typical seasonal dip. Non-interest expense was flat at $33 million, though Q4 included $500,000 in acquisition costs and several hundred thousand dollars in consulting spend for technology projects. Tangible book value per share rose to $29.05, up more than 14 percent for the year.
- Loan Growth Acceleration: Late-quarter loan funding sets up higher net interest income in Q1 and supports 2026 growth targets.
- Deposit Cost Control: Active repricing and a stable noninterest-bearing base helped offset rate-driven margin pressure.
- Expense Discipline: Cost structure remained flat despite M&A and tech investments, with further hiring planned in 2026.
SPFI’s ability to balance organic growth, disciplined credit, and integration of new markets will be critical as it scales up in Houston and beyond.
Executive Commentary
"By bringing BOH into the South Plains family, we are projected to have more than $1 billion in loans in the Houston region, which is significant to us. Importantly, both institutions share a focus on commercial real estate lending, a segment where Bank of Houston has built a high-quality portfolio and where Bank of Houston and Citibank's credit culture and underwriting discipline are closely aligned."
Curtis Griffith, Chairman and CEO
"Our net interest margin, calculated on a tax equivalent basis, was 4% in the fourth quarter, as compared to 4.05% in the linked quarter... Excluding these one-time items in both periods, we delivered steady NIM expansion over the course of the past year. So that expansion slowed in the fourth quarter to just one basis point."
Steve Crockett, Chief Financial Officer and Treasurer
Strategic Positioning
1. Houston Market Expansion
The Bank of Houston acquisition is a transformative move for SPFI, enabling immediate scale in the fastest-growing Texas metro. Post-deal, Houston-area loans will exceed $1 billion, and the combined platform will be positioned to deepen commercial and private banking relationships in a high-growth market. Leadership emphasized cultural alignment and low integration risk, with BOH’s management team remaining in place and joining SPFI’s boards.
2. Organic Growth Engine
SPFI’s targeted hiring of experienced lenders across Dallas, Houston, and Midland is designed to capitalize on market dislocation from competitor M&A and drive organic loan growth. About half of the planned hires were completed in 2025, with the remainder expected in 2026. Management expects these hires to bring established customer relationships, supporting the mid-to-high single-digit loan growth guidance for the coming year.
3. Margin and Deposit Management
With net interest margin (NIM) stabilizing at 4 percent and deposit costs trending lower, management is focused on repricing both sides of the balance sheet to protect profitability as rates fall. The ability to reduce BOH’s deposit costs post-integration is seen as a key lever to offset competitive and macro headwinds. Exception-based pricing and a disciplined approach to deposit betas will be central to margin defense.
4. Credit Quality and Portfolio Discipline
SPFI’s indirect auto portfolio remains high quality, with 94 percent of loans originated in super prime or prime categories and only modest credit migration since origination. Past-due metrics and net charge-offs remain low, and management has proactively tightened loan-to-value requirements. The company continues to emphasize disciplined credit standards across all lending segments, especially as it scales in commercial real estate.
5. Technology and Integration Readiness
Ongoing investments in workflow and credit technology are intended to support efficient growth and smooth integration of BOH. Management highlighted a major loan operations system conversion in 2026 and a focus on enhancing credit capabilities to accommodate a larger, more diverse loan book.
Key Considerations
SPFI’s Q4 results and forward strategy reflect a deliberate expansion in both scale and capability, underpinned by a conservative approach to credit and margin management. Integration of BOH, lender recruitment, and technology upgrades will shape the company’s growth trajectory and risk profile in 2026.
Key Considerations:
- Houston Market Leverage: Successful integration of BOH will determine SPFI’s ability to capture outsized growth in Texas’s largest metro.
- Loan Growth Sustainability: Lender hiring and market dislocation provide a near-term tailwind, but long-term growth depends on relationship depth and underwriting discipline.
- Margin Compression Risks: Rate cuts and deposit competition threaten NIM; offsetting actions on deposit repricing and product mix are critical.
- Expense Trajectory: M&A, hiring, and tech investments will push non-interest expense modestly higher in 2026, with a focus on quick break-even for new lenders.
- Credit Vigilance: Continued monitoring of consumer and CRE portfolios will be essential as economic conditions evolve.
Risks
Execution risk around the Bank of Houston integration, including deposit cost reduction and cultural fit, could impact both growth and profitability if not managed carefully. Margin pressure from rate cuts and competitive deposit markets remains a persistent threat. Credit quality, particularly in consumer and CRE portfolios, must be monitored as economic conditions shift. Technology execution and cost discipline will also be tested as the company scales.
Forward Outlook
For Q1 2026, SPFI expects:
- A modest decline in cost of funds, supporting NIM stability
- Non-interest expense to trend modestly higher due to hiring and integration costs
For full-year 2026, management guided to:
- Mid-to-high single-digit loan growth, driven by organic expansion and BOH integration
- Margin management focus to keep NIM near current levels despite competitive and macro pressures
Management highlighted the importance of deposit repricing, disciplined hiring, and technology investments as key levers for delivering on 2026 growth and profitability targets.
- Integration of BOH expected to close early Q2 2026
- Ongoing recruitment of commercial and mortgage lenders to support organic growth
Takeaways
SPFI’s strategy is to combine targeted M&A with disciplined organic growth, leveraging market dislocation and a strong capital base to expand in Texas’s fastest-growing metros.
- Houston Expansion: BOH deal will more than double SPFI’s Houston loan book, creating a new scale platform in a top-growth market.
- Margin and Credit Focus: Active management of deposit costs and credit standards will be essential as the rate environment shifts and competition intensifies.
- Execution Watchpoint: Investors should monitor integration milestones, hiring ramp, and NIM resilience as key signals of forward success.
Conclusion
South Plains Financial enters 2026 positioned for accelerated growth, leveraging both acquisition and organic levers in high-opportunity Texas markets. Disciplined execution on integration, hiring, and margin management will determine the sustainability and quality of this expansion.
Industry Read-Through
SPFI’s approach highlights a broader trend among regional banks: leveraging targeted M&A and experienced lender recruitment to drive growth in high-population, high-opportunity markets, while maintaining disciplined credit and margin management. The focus on deposit cost control, technology investment, and credit transparency echoes sector-wide imperatives as banks contend with rate cuts, fintech competition, and shifting customer behavior. Banks with strong capital and integration capabilities are best positioned to gain share, but face mounting pressure to defend NIM and credit quality as macro and competitive forces intensify.