Q3 2025 South Plains Financial Inc Earnings Call

Speaker #3: Good afternoon , ladies and gentlemen , and welcome to the South Plains . Third quarter 2025 Earnings Conference Call . During today's presentation , all parties will be in a listen only mode .

Steve Crockett: Good afternoon, ladies and gentlemen, and welcome to the South Plains Financial Inc. Third Quarter 2025 Earnings Conference Call. During today's presentation, all parties will be in a listen-only mode. Following the presentation, the conference will be open for questions with instructions to follow at that time. As a reminder, this conference call is being recorded. I would now like to turn the call over to Steve Crockett, Chief Financial Officer and Treasurer of South Plains Financial. Please go ahead.

Speaker #3: Following the presentation, the conference will be opened for questions, with instructions to follow at that time. As a reminder, this conference call is being recorded.

Speaker #3: I would now like to turn the call over to Steve Crockett . Chief Financial Officer and Treasurer of South Plains Financial Inc . Please go ahead .

Speaker #4: Thank you . Operator , and good afternoon , everyone . We appreciate you joining our earnings conference call . With me here today are Curtis Griffith , our chairman and CEO .

Steve Crockett: Thank you, Operator, and good afternoon, everyone. We appreciate you joining our earnings conference call. With me here today are Curtis Griffith, our Chairman and CEO, Cory Newsom, our President, and Brent Bates, the Bank's Chief Credit Officer. The related earnings press release and earnings presentation are available on the News and Events section of our website, spfi.bank. Before we begin, I'd like to remind everyone that any forward-looking statements are subject to risk, uncertainties, and other factors that could cause actual results to differ materially from those anticipated future results. Please see our Safe Harbor statements in our earnings press release and in our earnings presentation. All comments, expressed or implied, made during today's call are qualified by those Safe Harbor statements.

Speaker #4: Cory Newsom . Our president . And Brent Bates , the bank's chief credit officer . The related earnings press release and earnings presentation are available on the News and Events section of our website , SPF KeyBank .

Speaker #4: Before we begin, I'd like to remind everyone that any forward-looking statements are subject to risks, uncertainties, and other factors that could cause actual results to differ materially from those anticipated future results.

Speaker #4: Please see our Safe harbor statements in our earnings press release and in our earnings presentation . All comments expressed or implied , made during today's call are qualified by those safe harbor statements .

Speaker #4: Any forward-looking statements made during this call are made only as of today's date, and we do not undertake any duty to update such forward-looking statements except as required by law.

Steve Crockett: Any forward-looking statements made during this call are made only as of today's date, and we do not undertake any duty to update such forward-looking statements except as required by law. Additionally, during today's call, we may discuss certain non-GAAP financial measures, which we believe are useful in evaluating our performance. The reconciliation of these non-GAAP financial measures to the most comparable GAAP financial measures can also be found in our earnings release and in the earnings presentation. Curtis, let me hand it over to you.

Speaker #4: Additionally, during today's call, we may discuss certain non-GAAP financial measures, which we believe are useful in evaluating our performance. A reconciliation of these non-GAAP financial measures to the most comparable GAAP financial measures can also be found in our earnings release and in the earnings presentation.

Speaker #4: Curtis , let me hand it over to you .

Speaker #5: Thank you , Steve , and good afternoon . As outlined on slide four of our presentation , we delivered strong third quarter results highlighted by solid earnings growth as we continued to experience net interest income expansion supported by our low cost community based deposit franchise .

Curtis Griffith: Thank you, Steve, and good afternoon. As outlined on slide four of our presentation, we delivered strong third-quarter results highlighted by solid earnings growth as we continued to experience net interest income expansion supported by our low-cost community-based deposit franchise. The credit quality of our loan portfolio also continued to improve, and our return on assets markedly expanded. Our results demonstrate the strong foundation that we have purposefully built. We've added exceptional talent across the bank while also making the necessary investments in our technology platform that positions South Plains Financial to efficiently scale our operations as we grow. We have also built strong liquidity in capital while continuing to improve the asset quality of our loan portfolio. As a result, I believe the bank is firmly positioned to accelerate our asset growth through both organic growth and accretive M&A opportunities.

Speaker #5: The credit quality of our loan portfolio also continued to improve , and our return on assets markedly expanded . Our results demonstrate the strong foundation that we have purposefully built .

Speaker #5: We've added exceptional talent across the bank while also making the necessary investments in our technology platform that position South Plains to efficiently scale our operations as we grow.

Speaker #5: We have also built strong liquidity and capital while continuing to improve the asset quality of our loan portfolio. As a result, I believe the bank is firmly positioned to accelerate our asset growth through both organic growth and accretive M&A opportunities.

Speaker #5: As Corie will expand upon , we continue to benefit from our competitors acquisitions by attracting experienced lenders to the bank . We expect they will bring high quality , long term customer relationships .

Curtis Griffith: As Cory will expand upon, we continue to benefit from our competitors' acquisitions by attracting experienced lenders to the bank. We expect they will bring high-quality, long-term customer relationships they have built in their successful careers to South Plains Financial. While we have been experiencing higher-than-normal loan paydowns, which has proved a headwind to loan growth, we expect an acceleration in growth next year through increasing our lending team by up to 20%. The investments that we've made in the bank, combined with the experience that we gained through the acquisition of West Texas State Bank, also positions us to explore further acquisitions. Of note, we continue to engage in discussions with potential target banks in our core markets that we believe have the potential to fit our conservative nature and overall culture and meet our strict criteria for a deal.

Speaker #5: They have built in their successful careers to South Plains . While we have been experiencing higher than normal loan paydowns , which has proved a headwind to loan growth , we expect an acceleration in growth next year through increasing our lending team by up to 20% .

Speaker #5: The investments that we've made in the bank , combined with the experience that we gained through the acquisition of West Texas State Bank , also positions us to explore further acquisitions .

Speaker #5: Of note, we continue to engage in discussions with potential target banks in our core markets that we believe have the potential to fit our conservative nature and overall culture, and meet our strict criteria for a deal.

Speaker #5: As I have said on many of these calls, we are only interested in acquiring a bank that possesses these qualities and makes sense for us and our shareholders.

Curtis Griffith: As I have said on many of these calls, we are only interested in acquiring a bank that possesses these qualities and makes sense for us and our shareholders. Importantly, M&A is not the only option that we have to grow. Our organic growth initiative is just in the early innings, and we are optimistic that we will see a sharp acceleration in loan growth in the year ahead. As a result, we will only do a deal that makes sense for the bank and our shareholders, of which my family and I are the largest. We believe that we are in a strong position to capitalize on opportunities to drive growth as the bank and the company each significantly exceed the minimum regulatory capital levels necessary to be deemed well capitalized.

Speaker #5: Importantly , M&A is not the only option that we have to grow our organic growth initiative is just in the early innings and we are optimistic that we will see a sharp acceleration in loan growth in the year ahead .

Speaker #5: As a result, we will only do a deal that makes sense for the bank and our shareholders, of which my family and I are the largest.

Speaker #5: We believe that we are in a strong position to capitalize on opportunities to drive growth . As the bank and the company each significantly exceed the minimum regulatory capital levels necessary to be deemed well-capitalized at September 30th , 2025 , our consolidated Common Equity tier one risk based capital ratio was 14.41% and our tier one leverage ratio was 12.37% .

Curtis Griffith: At September 30, 2025, our consolidated common equity Tier 1 risk-based capital ratio was 14.41%, and our Tier 1 leverage ratio was 12.37%. Given our capital position, we remain focused on both growing the bank while also returning a steady stream of income to our shareholders through our quarterly dividend and keeping a share buyback program in place. Last week, our Board of Directors authorized a $0.16 per share quarterly dividend, which will be our 26th consecutive dividend. Now, let me turn the call over to Cory.

Speaker #5: Given our capital position , we remain focused on both growing the bank while also returning a steady stream of income to our shareholders through our quarterly dividend and keeping a share buyback program in place .

Speaker #5: Last week , our board of directors authorized a $0.16 per share quarterly dividend , which will be our 26th consecutive dividend . Now , let me turn the call over to Corie .

Speaker #6: Thank you , Curtis . And hello everyone . Starting on slide five . Our loans held for investment decreased by $45.5 million to $3.5 billion in the third quarter , as compared to the linked quarter .

Cory Newsom: Thank you, Curtis, and hello, everyone. Starting on slide five, our loans held for investment decreased by $45.5 million to $3.05 billion in the third quarter as compared to the linked quarter. The decline was primarily due to a decrease of $46.5 million in multifamily property loans, mainly due to the payoff of two loans totaling $39.6 million. As Curtis mentioned, and we have discussed on previous calls, we've been experiencing a heightened level of loan payoffs and paydowns through the year, which have been a headwind to loan growth. Looking forward, we expect the level of paydowns and payoffs to moderate as we look to 2026. Our yield on loans was 6.92% in the third quarter as compared to 6.99% in the linked quarter.

Speaker #6: The decline was primarily due to a decrease of $46.5 million in multifamily property loans , mainly due to the payoff of two loans totaling $39.6 million .

Speaker #6: As Curtis mentioned, we have discussed, on previous calls, that we've been experiencing a heightened level of loan payoffs and paydowns throughout the year, which have been a headwind to loan growth.

Speaker #6: Looking forward, we expect the level of paydowns and payoffs to moderate as we look to 2026. Our yield on loans was 6.92% in the third quarter, compared to 6.99% in the linked quarter.

Speaker #6: Our loan yield was boosted by eight basis points in the third quarter due to $640,000 in interest and fees related to the resolution of credit workouts.

Cory Newsom: Our loan yield was boosted by eight basis points in the third quarter due to $640,000 in interest and fees related to the resolution of credit workouts. As a reminder, our loan yield was also boosted by 23 basis points in the second quarter due to a $1.7 million interest recovery from the full repayment of a loan that had been on non-accrual. Excluding these one-time gains, our yield on loans was 6.84% in the third quarter and 6.76% in the second quarter, representing an increase of eight basis points. Looking ahead, the impact to our loan yields from the FOMC's 25 basis point reduction in their benchmark interest rate in September was not material, though we do expect our loan yields to moderate. That said, we remain optimistic that we can continue to reprice our deposits and manage our margin as market rates decline.

Speaker #6: As a reminder, our loan yield was also boosted by 23 basis points in the second quarter due to $1.7 million in interest recovery from the full repayment of a loan that had been on non-accrual.

Speaker #6: Excluding these , one time gains , our yield on loans was 6.84% in the third quarter and 6.76% in the second quarter , representing an increase of eight basis points .

Speaker #6: Looking ahead, the impact to our loan yields from the FOMC's 25 basis point reduction in their benchmark interest rate in September was not material. However, we do expect our loan yields to moderate.

Speaker #6: That said , we remain optimistic that we can continue to reprice our deposits and manage our margin as market rates decline . Importantly , our new loan production pipeline continues to remain solid and economic activity continues to be healthy .

Cory Newsom: Importantly, our new loan production pipeline continues to remain solid, and economic activity continues to be healthy. As we discussed on our second quarter call, we have a strong position in each of the communities and metro markets where we do business and have capacity with our existing infrastructure to expand our lending platform. We're actively recruiting lenders who fit our culture to grow our lending capabilities as we work to accelerate our loan growth, which is a priority for our management team. We continue to be very pleased with the quality of bankers that we are speaking with who have an interest in joining South Plains Financial. We are also seeing dislocation from recent acquisitions in Texas, which is creating more opportunity to expand our platform.

Speaker #6: As we discussed on our second-quarter call, we have a strong position in each of the communities and metro markets where we do business and have capacity with our existing infrastructure to expand our lending platform.

Speaker #6: We're actively recruiting lenders who fit our culture to grow our lending capabilities. As we work to accelerate our loan growth, which is a priority for our management team.

Speaker #6: We continue to be very pleased with the quality of bankers that we are speaking with, who have an interest in joining South Plains.

Speaker #6: We are also seeing dislocation from recent acquisitions in Texas , which is creating more opportunity to expand our platform . As Curtis touched on , our goal is to grow our lending platform by up to 20% , and we are more than halfway there .

Cory Newsom: As Curtis touched on, our goal is to grow our lending platform by up to 20%, and we are more than halfway there, having added lenders in Houston and Midland since our last call. This builds on our success from the second quarter where we recruited several experienced lenders in our Dallas MSA. While loans in our major metropolitan markets of Dallas, Houston, and El Paso held steady in the third quarter at $1.01 billion, as can be seen on slide seven, we remain optimistic that loan growth will reaccelerate as we continue to add lenders across our metropolitan markets. At quarter end, our major metro loan portfolio represented 33.2% of our total loan portfolio. Skipping to slide 10, our indirect auto loan portfolio totaled $239 million at the end of the third quarter, which is relatively unchanged as compared to $241 million at the end of the linked quarter.

Speaker #6: Having added lenders in Houston and Midland since our last call, this builds on our success from the second quarter, where we recruited several experienced lenders in our Dallas MSA.

Speaker #6: While loans in our major metropolitan markets of Dallas , Houston and El Paso held steady in the third quarter at $1.1 billion . As can be seen on slide seven , we remain optimistic that loan growth will re-accelerate as we continue to add lenders across our metropolitan markets at quarter end , our major Metro loan portfolio represented 33.2% of our total loan portfolio .

Speaker #6: Skipping to slide ten , our indirect auto loan portfolio totaled $239 million at the end of the third quarter , which is relatively unchanged as compared to $241 million at the end of the linked quarter .

Speaker #6: We've been carefully managing this portfolio with a focus on maintaining its credit quality over the last two years, which has resulted in a decline in loan balances of $57 million since the third quarter of 2023, when the portfolio was $296 million.

Cory Newsom: We've been carefully managing this portfolio with a focus on maintaining its credit quality over the last two years, which has resulted in a decline in loan balances of $57 million since the third quarter of 2023, when the portfolio was $296 million. Over this time period, we have seen competitors become more aggressive at the higher end of the credit spectrum while volumes have declined. More recently, we have tightened our loan-to-value requirements to further ensure that we are proactively managing this portfolio in the current environment, as well as any potential challenges to come. It is also important to highlight that we are primarily a lender through auto dealers to borrowers who are in our markets, 86% with Super Prime or Prime credit ratings at origination.

Speaker #6: Over this time period , we have seen competitors become more aggressive at the higher end of the credit spectrum . While volumes have declined .

Speaker #6: More recently , we have tightened our loan to value requirements to further ensure that we are proactively managing this portfolio in the current environment , as well as any potential challenges to come .

Speaker #6: It is also important to highlight that we are primarily a lender through auto dealers to borrowers who are in our markets , 86% with super Prime or Prime credit ratings at origination .

Speaker #6: Our borrowers strong credit profiles can further be seen in the credit metrics of this portfolio . As our 30 plus days past due loans , which total approximately $575,000 , improved eight basis points to 24 basis points in the third quarter .

Cory Newsom: Our borrowers' strong credit profiles can further be seen in the credit metrics of this portfolio as our 30-plus days past due loans, which total approximately $575,000, improved 8 basis points to 24 basis points in the third quarter as compared to 32 basis points in the second quarter. At year-end 2024, our 30-plus days past due loans stood at 47 basis points. We believe our 30-plus past due loans are the best early indicator to any potential signs of credit stress in this portfolio and believe our tightened credit standards will further protect the bank and the credit profile of our indirect auto portfolio as we look forward. Additionally, our net charge-offs for all consumer autos were approximately $160,000 for the quarter as compared to $350,000 in the linked quarter.

Speaker #6: As compared to 32 basis points in the second quarter . At year end 2020 . For our 30 plus days past due loans stood at 47 basis points .

Speaker #6: We believe our 30 plus past due loans are the best early indicator to any potential signs of credit stress in this portfolio , and believe our tightened credit standards will further protect the bank and the credit profile of our indirect auto portfolio .

Speaker #6: As we look forward . Additionally , our net charge offs for all consumer autos were approximately $160,000 for the quarter as compared to $350,000 in the linked quarter .

Speaker #6: Given the stable profile of our indirect portfolio combined with the success that we are having , adding lenders to the bank , we expect loan growth to gradually accelerate to a mid to high single digit rate through 2026 .

Cory Newsom: Given the stable profile of our indirect auto loan portfolio combined with the success that we were having adding lenders to the bank, we expect loan growth to gradually accelerate to a mid to high single-digit rate through 2026. We expect our new hires to begin contributing to loan growth in 2026 while the level of payoffs begin to diminish. We also remain cautiously optimistic that economic growth across our Texas markets can remain resilient and provide a tailwind to growth. Turning to slide 11, we generated $11.2 million of non-interest income in the third quarter as compared to $12.2 million in the linked quarter. This was primarily due to a decrease of $1 million in mortgage banking revenues, as can be seen on slide 12. The decrease was mainly from a $769,000 quarter-over-quarter decline in the fair value adjustment of the mortgage servicing rights asset.

Speaker #6: We expect our new hires to begin contributing to loan growth in 2026, while the level of payoffs begins to diminish. We also remain cautiously optimistic that economic growth across our Texas markets can remain resilient and provide a tailwind to growth.

Speaker #6: Turning to slide 11, we generated $11.2 million of non-interest income in the third quarter, as compared to $12.2 million in the linked quarter.

Speaker #6: This was primarily due to a decrease of $1 million in mortgage banking revenues , as can be seen on slide 12 . The decrease was mainly from a $769,000 quarter over quarter decline in the fair value adjustment of the mortgage servicing rights asset .

Speaker #6: Overall, our mortgage banking revenues have been relatively flat over the last four quarters, given persistently high mortgage rates combined with low housing supply.

Cory Newsom: Overall, our mortgage banking revenues have been relatively flat over the last four quarters given persistently high mortgage rates combined with low housing supply. We are pleased with how the business is performing in this low-transaction environment and the recent easing of market interest rates and believe we are well positioned with the eventual upturn in volumes as rates look set to decline further. For the third quarter, non-interest income was 21% of bank revenues, essentially flat with the linked quarter and the year-ago 2024 third quarter. Continuing to grow our non-interest income remains a focus of our team. I would now like to turn the call over to Steve.

Speaker #6: We are pleased with how the business is performing in this low transaction environment and the recent easing of market interest rates. We believe we are well positioned for the eventual upturn in volumes as rates look set to decline further for the third quarter.

Speaker #6: Non-interest income was 21% of bank revenues, essentially flat with the linked quarter and the year ago. The 2024 third quarter continued to grow.

Speaker #6: Our non-interest income remains a focus of our team. I would now like to turn the call over to Steve.

Speaker #4: Thanks , Corey . For the third quarter , diluted earnings per share were $0.96 , compared to $0.86 from the linked quarter . This increase is primarily a result of the reduction in provision for credit losses and increase in net interest income , which I'll cover , partially offset by the decrease in MSR fair value adjustment .

Steve Crockett: Thanks, Cory. For the third quarter, diluted earnings per share were $0.96 compared to $0.86 from the linked quarter. This increase is primarily a result of the reduction in provision for credit losses and increase in net interest income, which I'll cover, partially offset by the decrease in MSR fair value adjustment Cory mentioned. Starting on slide 14, net interest income was $43 million for the third quarter compared to $42.5 million in the linked quarter. Our net interest margin calculated on a tax-equivalent basis was 4.05% in the third quarter as compared to 4.07% in the linked quarter. As Cory touched on, we had loan interest and fee items related to specific credit workouts that positively impacted our NIM in both the third quarter and the second quarter.

Speaker #4: Corey mentioned that starting on slide 14, net interest income was $43 million for the third quarter, compared to $42.5 million in the linked quarter.

Speaker #4: Our net interest margin , calculated on a tax equivalent basis , was 4.05% in the third quarter as compared to 4.07% in the linked quarter .

Speaker #4: As Cory touched on, we had loan interest and fee items related to specific credit workouts that positively impacted our NIM in both the third quarter and the second quarter.

Speaker #4: The third quarter impact was six basis points for $640,000 , while the second quarter impact was 17 basis points , or $1.7 million .

Steve Crockett: The third quarter impact was 6 basis points or $640,000, while the second quarter impact was 17 basis points or $1.7 million. Excluding these one-time items in both periods, our third quarter NIM increased by 9 basis points to 3.99% from the linked quarter. As outlined on slide 15, deposits increased by $142.2 million to $3.88 billion at the end of the third quarter due to organic growth in both retail and commercial deposits. The increase was predominantly noted in the Lubbock market and follows the overall $53.6 million decline during the second quarter. Non-interest-bearing deposits increased $50.7 million in the third quarter. Additionally, our non-interest-bearing deposit-to-total deposit ratio increased to 27% in the third quarter from 26.7% in the linked quarter.

Speaker #4: Excluding these one time items in both periods , our third quarter Nim increased by nine basis points to 3.99% from the linked quarter .

Speaker #4: As outlined on slide 15, deposits increased by $142.2 million to $3.88 billion at the end of the third quarter, due to organic growth in both retail and commercial deposits.

Speaker #4: The increase was predominantly noted in the Lubbock market and follows the overall $53.6 million decline during the second quarter. Noninterest-bearing deposits increased $50.7 million in the third quarter.

Speaker #4: Additionally , our non-interest bearing deposit to total deposit ratio increased to 27% in the third quarter from 26.7% in the linked quarter . The mix shift change in deposits , along with the continued drop in CD rates , contributed to the four basis point decline in our cost of deposits to 210 basis points in the third quarter , down from 214 basis points in the linked quarter .

Steve Crockett: The mixed-shift change in deposits, along with a continued drop in CD rates, contributed to the four basis point decline in our cost of deposits to 2.10% in the third quarter, down from 2.14% in the linked quarter. Turning to slide 17, our classified loans decreased $21.1 million during the quarter. This includes the full collection of a $32 million multifamily property loan that had been talked about on prior calls. This is the second consecutive quarter with a positive resolution to a large previously classified and/or non-performing loan that included full repayment of all amounts owed and shows our commitment to asset quality. Our ratio of allowance for credit losses to total loans held for investment was 1.45% as of September 30, 2025, unchanged from the end of the prior quarter.

Speaker #4: Turning to slide 17 . Our classified loans decreased $21.1 million during the quarter . This includes the full collection of a $32 million multifamily property loan that had been talked about on prior calls .

Speaker #4: This is the second consecutive quarter with a positive resolution to a large, previously classified and/or non-performing loan that included full repayment of all amounts owed and shows our commitment to asset quality.

Speaker #4: A ratio of allowance for credit losses to total loans held for investment was 1.45% . At September 30th , 2020 . Five , unchanged from the end of the prior quarter .

Speaker #4: We recorded a $500,000 provision for credit losses in the third quarter , compared to $2.5 million in the linked quarter . The decrease in provision expense was largely attributable to a decrease in specific reserves , decreased loan balances and overall improved credit quality .

Steve Crockett: We recorded a $500,000 provision for credit losses in the third quarter compared to $2.5 million in the linked quarter. The decrease in provision expense was largely attributable to a decrease in specific reserves, decreased loan balances, and overall improved credit quality. I would note that we believe we continue to be well positioned for varying economic conditions. Skipping ahead to slide 19, our non-interest expense was $33 million in the third quarter as compared to $33.5 million in the linked quarter. A $519,000 decrease from the linked quarter was largely the result of a decrease of $581,000 in professional service expenses related primarily to consulting on technology projects and initiatives. On September 30, 2025, we redeemed $50 million in subordinated debt. The redemption was done in conjunction with the end of the initial five-year fixed-rate period as the debt was to begin floating quarterly at a higher interest rate.

Speaker #4: I would note that we believe we continue to be well positioned for varying economic conditions. Skipping ahead to slide 19, our non-interest expense was $33 million in the third quarter, compared to $33.5 million in the linked quarter.

Speaker #4: $519,000 decrease from the linked quarter was largely the result of a decrease of $581,000 in professional service expenses . Related primarily to consulting on technology projects and initiatives .

Speaker #4: On September 30th , 2020 , we redeemed $50 million in subordinated debt . The redemption was done in conjunction with the end of the initial five year fixed rate period .

Speaker #4: As the debt was to begin floating quarterly at a higher interest rate , we made the decision to repay the debt given the higher rates combined with our view that we can readily access the fixed income market if and when a need arises .

Steve Crockett: We made the decision to repay the debt given the higher rates combined with our view that we can readily access the fixed-income market if and when a need arises. Moving to slide 21, we remain well capitalized with tangible common equity to tangible assets of 10.25% at the end of the third quarter, an increase of 27 basis points from the end of the second quarter. Tangible book value per share increased to $28.14 as of September 30, 2025, compared to $26.70 as of June 30, 2025. The increase was primarily driven by $13.7 million of net income after dividends paid and by an increase in accumulated other comprehensive income of $9.1 million. This concludes our prepared remarks. I will now turn the call back to our operator to open the line for any questions. Operator?

Speaker #4: Moving to slide 21 , we remain well capitalized with tangible common equity to tangible assets of 10.25% at the end of the third quarter , an increase of 27 basis points from the end of the second quarter .

Speaker #4: Tangible book value per share increased to $28.14 as of September 30th , 2025 , compared to $26.70 as of June 30th , 2025 .

Speaker #4: The increase was primarily driven by $13.7 million of net income after dividends paid and by an increase in accumulated other comprehensive income of $9.1 million.

Speaker #4: This concludes our prepared remarks . I'll now turn the call back to our operator to open the line for any questions . Operator .

Speaker #3: Thank you . We'll now be conducting a question and answer session . If you would like to ask a question , please press star one on your telephone keypad .

Operator: Thank you. We'll now be conducting a question-and-answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up the handset before pressing the star keys. One moment, please, while we pull for questions. Thank you. Our first question is from Joe Yantunis with Raymond James.

Speaker #3: A confirmation tone will indicate your line is in the question queue. You may press star two to remove your question from the queue.

Speaker #3: For participants using speaker equipment, it may be necessary to pick up the handset before pressing the star keys. One moment, please, while we pull for questions.

Speaker #3: Thank you. Our first question is from Joe Jankunas with Raymond James.

Speaker #7: Good afternoon .

Cory Newsom: Good afternoon.

Speaker #8: Joe . Hey .

Brent Bates: Hello, Joe.

Cory Newsom: Hey.

Speaker #7: So you discussed your plan to increase your lending team by up to 20% next year , and you . That follows a relatively rapid pace of hires over the past couple of years .

Brent Bates: You discussed your plan to increase your lending team by up to 20% next year. You know that follows a relatively rapid pace of hires over the past couple of years. I guess how much of that growth is coming from true lenders versus support staff? For context, can you tell us how many lenders we should use as a base to go off this growth?

Speaker #7: I guess how much of that growth is coming from true lenders versus support staff . And for context , can you tell us how many lenders we should use as a base to go off this growth ?

Speaker #9: Yeah, I think, I think from.

Cory Newsom: I think from the base is probably about 40. As far as none of that includes support staff, that's all production. I would say, based on the 20% that we're talking about, we've probably already achieved north of 10% so far this year.

Speaker #6: The base is probably about 40 . And as far as none of that includes support staff , it's all that's all production . And and I would .

Speaker #9: Say .

Speaker #6: Based and based on the 20% that that we're talking about , you know , we've probably already achieved north of 10% so far this year .

Speaker #5: We're already partway to that. Yeah.

Curtis Griffith: Joe, we're already partway to that. Yeah.

Speaker #7: And are there any particular markets that you can highlight where that growth has either come from or where you're expecting that growth to come from?

Brent Bates: Are there any particular markets that you can highlight where that growth has either come from or where you're expecting that growth to come from?

Speaker #8: Yes .

Cory Newsom: Yes. Permian Basin, Houston, and definitely in the Dallas area.

Speaker #6: Permian Houston and definitely in the Dallas area .

Speaker #7: Okay . So shifting gears here and I apologize , I only heard most of your comments on your indirect auto portfolio , and I certainly understand your great pass through ratios and low charge charge off activity .

Brent Bates: Okay. Shifting gears here, I apologize, I only heard most of your comments on your indirect auto loan portfolio. I certainly understand your great past due ratios and low charge-off activity. However, I noticed in your deck your concentration of subprime and deep prime indirect loans increased pretty materially. Can you talk about that?

Speaker #7: However, I noticed in your deck that your concentration of subprime and deep-prime indirect loans increased pretty materially. Can you talk about that?

Speaker #6: Repeat part of that. I didn't hear part of what.

Cory Newsom: Repeat part of that. I didn't hear part of what you said.

Speaker #8: You said .

Speaker #7: Yeah . It looks like there was an increase in subprime and deep subprime kind of concentration in that portfolio .

Brent Bates: Yeah, it looks like there's an increase in subprime and deep subprime kind of concentration in that portfolio.

Speaker #8: I mean, I don't see that we haven't had much of an increase. Yeah.

Cory Newsom: I don't see that. We haven't had much of an increase.

Speaker #4: Hey , Joe , this is this is Steve . I'll start with that . And I'll . I'll have to say this . There .

Brent Bates: Yeah. Hey, Joe, this is Steve. I'll start with that. I have to say, this is showing, while it says on the deck, it's showing the category at origination. The numbers that actually got put in are updated information. It's not as of origination date, which it normally is. I think we did not grab the consistent data we've been providing. This is really more updated and shows some changes in what's going on with borrower credit scores. That is why it does look different than what you've seen before. Got it. Okay. That's helpful. Lastly for me, just kind of a modeling question. You know, based on that $50 million of sub debt you guys redeemed, what was the incremental cost associated with that? If you happen to have that in your mind.

Speaker #4: This is showing while it says on the deck , it's showing the the category at origination . The numbers that actually got put in are updated , updated information .

Speaker #4: So it's not as of the origination date, which it normally is. I think we did not grab the consistent data.

Speaker #4: We've been providing updates, and this is really more current and shows some changes in what's going on with borrower credit scores.

Speaker #4: And that is so that's that's why it does look different than what you've , what you've seen before .

Speaker #7: Got it okay . That's helpful . And then lastly for me just kind of a modeling question . You know , based on that 50 million of subnet , you guys redeemed , what was the incremental cost associated with that .

Speaker #7: If you to have that handy .

Speaker #4: Well , I mean the the 50 million we were paying for at four and a half and , you know , it would have been going up to eight .

Cory Newsom: The $50 million we were paying 4.5%, and you know it would have been going up to 8%.

Speaker #10: Right ?

Brent Bates: No, I was wondering about any expenses that you incurred in the P&L from redeeming that. Just to kind of try to understand the true run rate.

Speaker #8: No .

Speaker #7: I was wondering about any expenses that you incurred . You know , in the PNL from redeeming that . Yeah . Just to kind of try to run rate .

Speaker #4: Yeah . And I may not be understanding . I mean , there , there there was no expense to , to to redeem it .

Cory Newsom: I may not be understanding. There was no expense to redeem it. It was at the end of the call period.

Speaker #4: It was at the end of the end of the period .

Speaker #8: Yeah , yeah . That if , if that's what you're wondering , we didn't we didn't go .

Brent Bates: If that's what you're wondering, we didn't go outside of a call period. We had the opportunity, the window opened, and we took it. Okay, understood. Great. Thank you for taking my questions.

Speaker #6: Outside of a .

Speaker #8: Call period .

Speaker #6: We had the opportunity . . The window opened and we .

Speaker #8: Took it . Yeah .

Speaker #7: Okay . Understood . So . All right . Well , great . Well , thank you for taking my questions .

Speaker #11: Thank you .

Cory Newsom: Thanks, Joe.

Speaker #3: Our next question is from Woody Ley with KBW.

Operator: Our next question is from Woody Lay with KBW.

Speaker #12: Hey , thanks for taking my questions . Wanted to hey , wanted to follow up on the hiring initiative . You did a similar initiative back in 2021 , and it I believe it was pretty successful .

[Analyst]: Hey, thanks for taking my questions.

Brent Bates: Hey, Woody?

[Analyst]: Hey, wanted to follow up on the hiring initiative. You did a similar initiative back in 2021, and I believe it was pretty successful. Could you talk about your previous experience, being aggressive on the hiring front and how you're translating those past experiences to what you're doing now in the market?

Speaker #12: So could you talk about your kind of previous experience ? You know , being aggressive on the hiring front and how your , you're translating those past experiences to what you're doing now in the market ?

Speaker #8: Yeah . So if you go .

Cory Newsom: Yeah. If you go back to that timeframe, we were fairly aggressive in hiring those. If you also remember, we had a fair number of retirees that were coming around in the near term after that. We were as equally focused on making sure we were prepared to replace those as we were trying to increase our team at the same time. That's not the case today. We feel like we are in a position to continue to take advantage of some really good opportunities and for us to be able to expand in those markets. The way we look at those, whenever we model one, we model to a break-even in six months or less. That's what we stay pretty well focused on to make sure that's how we do it.

Speaker #6: Back to that time frame , we were fairly aggressive in hiring those . But if you also remember , we had a fair number of retirees that were coming around in the near term after that .

Speaker #6: And so we were as equally focused on making sure we were prepared to replace those as we were trying to increase our team .

Speaker #6: At the same time , that's not the case today . We're just I mean , we feel like that we're in a position to continue to take take advantage of some really good opportunities .

Speaker #6: And for us to be able to expand in those markets and the way we look at those , whenever we model one , we model to a break even in six months or less .

Speaker #6: And that's what we stay pretty well focused on to make sure that's how how we do it . But , you know , if you still go back to the to our hiring process , it's pretty rigorous trying to make sure that we find a credit culture fit and a culture fit that fits into who we are .

Cory Newsom: If you still go back to our hiring process, it's pretty rigorous trying to make sure that we find a credit culture fit and a culture fit that fits into who we are. It's quite an undertaking, but one that we're quite proud of and have had great success.

Speaker #6: So it's it's a it's quite an undertaking , but one that we're quite proud of and have had great success .

Speaker #12: Yeah . And then I believe you all said , y'all are about 50% the way through there , but it doesn't feel like , you know , we've seen a a huge expense impact from that .

[Analyst]: Yeah. I believe you all said you are about 50% the way through there, but it doesn't feel like we've seen a huge expense impact from that. Is it fair to, I guess, just how should we think about the expense growth rate from here given the additional hires you expect?

Speaker #12: Is it fair to . I guess just how should we think about the expense growth rate from here , given the additional hires you expect ?

Speaker #6: You're usually on cleanup on me for stuff like that, but I mean, these guys are covering their way as we go on this, so the expense run hasn't been that bad.

Cory Newsom: Steve, you're usually on cleanup on me for stuff like that. I mean, these guys are covering the ways we go on this. The expense run hasn't been that bad. I mean, it's from a net perspective, but Steve, what would you?

Speaker #6: I mean , it's from a net perspective , but , Steve , what would you .

Speaker #4: Yeah , I mean , it it will increase . It's increased a little bit as we've gone . I mean , it hasn't all everybody hadn't all hit it one one time .

Brent Bates: Yeah, I mean, it will increase. It's increased a little bit as we've gone. I mean, it hadn't all, everybody hadn't all hit at one time. It's been spread out. That's, you know, again, I would expect overall non-interest expense to modestly increase.

Speaker #4: It's been been spread out . And so that's you know again I would I would expect overall noninterest expense to , to to modestly increase .

Speaker #6: You know we've kind of taken the approach that this is the kind of money we're we're quite proud to be spending and having the increases on .

Cory Newsom: We've kind of taken the approach that this is the kind of money we're quite proud to be spending and having the increases on.

Speaker #6: And .

Speaker #5: Well, and remember that a significant part of the compensation will be in their ICP packages. And that won't get paid out until well into next year, even for the ones that are bringing the business on.

Curtis Griffith: A significant part of the compensation will be in their ICP packages, and that won't get paid out until well into next year, even for the ones that are bringing the business on.

Speaker #5: So .

Speaker #12: Yeah , it may be just last for me on M&A . You'll sound a little bit more optimistic on the M&A front than maybe previous quarters .

[Analyst]: Yeah. Maybe just last for me on M&A. You all sound a little bit more optimistic on the M&A front than maybe previous quarters. I know you all are very stringent on who you look at and who would make a good target for you all. Could you just remind us, sort of, you know, go down the checklist of what makes a good target for South Plains Financial?

Speaker #12: I know y'all are very stringent on who you look at and who would make a good target for you all. So, could you just remind us, sort of, you know, go down the checklist of what makes a good target for South Plains?

Speaker #6: I'm going to I'm going I'm to lead it off . It's number one . Got to be a culture fit in . We've got to make sure that this is somebody that we think that we could go achieve success with long term and the the , the numbers have got to line up .

Cory Newsom: I'm going to lead it off. It's number one, got to be a culture fit. We've got to make sure that this is somebody that we think that we could go achieve success with long term. The numbers have got to line up. There is no question. I'll let Curtis talk a little bit further about this, but we're as focused on culture as anything that you can find because that's where we've seen more of the train wrecks that have really come from.

Speaker #6: There is no question . And I'll let Curtis talk a little bit further about this . But we're as focused on culture as anything that you can find because that's where we've seen more of the train wrecks that have really come from .

Speaker #10: Yeah .

Curtis Griffith: Yeah. If we can't integrate the acquired banks successfully, then this is not good for anybody, not good for their customers, not good for our shareholders. As Cory says, that's really what we focus on. We also want to focus on successful banks, ones that are doing a good job with what they're doing, that have built some customer loyalty, that they have, again, and this is all part of the culture, but have that mindset among their employees that they're not very short-timers for things. They're there for the long haul, and we want to just transition them over to be working for us. That's the kind of group that we look for. It's got to, the numbers have to work. Right now, I think we're seeing out there in the marketplace lots of activity.

Speaker #5: If we can't integrate the the acquired bank successfully , then this this is not good for anybody , not good for their customers , not good for our shareholders .

Speaker #5: So as Corey says , that's really what we focus on . But we also want to focus on successful banks , ones that are doing a good job with what they're doing that have built some customer loyalty that they have .

Speaker #5: Again , and this is all part of the culture , but have that that mindset among their employees that they're they're not they're short timers for things .

Speaker #5: They're they're there for the long haul . And we want to just transition them over to be working for us . And that's that's the kind of group that we look for .

Speaker #5: And , you know , it's got the numbers have to work . And right now I think we're seeing out there in the marketplace lots of activity .

Speaker #5: And it's interesting that it's coming at a time when bank stocks really aren't doing all that well. We're certainly not leading the market by any means.

Curtis Griffith: It's interesting that it's coming at a time when bank stocks really aren't doing all that well. We're certainly not leading the market by any means. A lot of the acquirers, including us, don't have a big multiple to play with. You've also really got to look at someone that is looking at joining us up, joining with us as an investor to be there for the long pull. They ultimately benefit, their shareholders ultimately benefit through the long-term growth in our stock. It's a combination. I think we are going to see some activity. I really do. We're looking at some very promising situations right now.

Speaker #5: So a lot of the acquirers , including us , don't have a big multiple to play with . So you've also really got to look at someone that is looking at joining us up , joining with us as an investor to be there for the long pool .

Speaker #5: And they ultimately benefit . They're shareholders ultimately benefit through the long term growth in our stock . So it's a combination and it it's I think we are going to see some activity .

Speaker #5: I really do . We're we're looking at some very promising situations right now .

Speaker #6: Woody both your questions are kind of funny because they're kind of tied together typically unless there's disruption involved , we're not hiring lenders or employees that are that are looking for a job .

Cory Newsom: Woody, both of your questions are kind of funny because they're kind of tied together. Typically, unless there's disruption involved, we're not hiring lenders or employees that are looking for a job. We look for contentment. I think the same thing goes as we look for an acquisition. There's a difference between somebody who may want to sell and somebody who has to sell. We're much more focused on somebody who might want to sell.

Speaker #6: We look for contentment . I think the same thing goes is we look for an acquisition . There's a difference between somebody who may want to sell and somebody who has to sell .

Speaker #6: And we're much more focused on somebody who might want to sell .

Speaker #12: Yep . That that makes total sense . Well , as always , thanks for taking the questions .

[Analyst]: That makes total sense. As always, thanks for taking the questions.

Speaker #6: Absolutely .

Speaker #11: That's really .

Cory Newsom: Absolutely.

Curtis Griffith: Thanks, Woody.

Speaker #3: Our next question is from Stephen Scouten with Piper Sandler .

Operator: Our next question is from Steven Crockett with Piper Sandler.

Speaker #13: Hey , good afternoon everyone . We'll see if you've gotten tired of asking answering questions about these new hires yet when you bring these guys on , I know , Corey , you said think about like a six month break even .

[Analyst]: Hey, good afternoon, everyone. We'll see if you've gotten tired of answering questions about these new hires yet. When you bring these guys on, I know, Cory, you said think about like a six-month break-even. Are you guys targeting any specific kind of segment of lender, like C&I versus CRE currently? Ultimately, how big of a book of business do you anticipate each one of these people bringing over? Is it kind of, is it a $50 million kind of book over time, or what's the right way to frame up the potential of each kind of hire as you see it at a high level?

Speaker #13: Are you guys targeting any specific kind of segment of lender like CNI versus CRE ? Currently ? And then ultimately , how big of a book of business do you anticipate each one of these people bringing over ?

Speaker #13: Is it kind of is it a $50 million book over time , or what's the right way to frame up the potential of each kind of hire , as you see it , at a high level ?

Speaker #11: So .

Speaker #6: Woody , I mean , I mean , Stephen , we're we're I mean , I would say a good portion of these are I mean , they're still going to be cre or real estate .

Cory Newsom: Woody, it's going to be up to me, Steven. I would say a good portion of these are still going to be CRE or real estate. Portfolios, as a general rule, we like to see an eye when we can get it. We've never hidden from the fact that we're a real estate bank, and a lot of that stuff ties together. If you, I will just tell you this. We've never gone out and hired somebody to see what portion of their book they could bring. We want to know what their abilities have been and how they generate business. Typically, we will hire them under the impression they might bring anything. The people that we're hiring are carrying portfolios that might run anywhere from $75 million to $300 million to $400 million.

Speaker #6: I mean , portfolios as a general rule . I mean , we like the CNI when we can get it , but we've never hid from the fact that we're a real estate bank .

Speaker #6: And a lot of that stuff . Ties . Ties together . But if you I will just tell you this , I can't .

Speaker #6: We've never gone out and hired somebody to see what portion of their book they could bring. We want to know what their abilities have been and how they generate business.

Speaker #6: And we really typically will hire them under the impression they're not bringing anything, but the people that we're hiring are carrying portfolios that might run anywhere from $75 million to $300 million to $400 million.

Speaker #6: And I mean, these guys have very good capacity. We're looking at people that have the capability to go out and produce and have been very successful for long periods of time before they've ever joined our organization.

Cory Newsom: These guys have very good, we're looking at people that have the capacity to go out and produce and have been very successful for long periods of time before they've ever joined our organization. I would just tell you that I'm probably pretty conservative when I give you those numbers right there.

Speaker #6: So I would just tell you that I'm probably pretty conservative when I give you those numbers right there .

Speaker #13: Okay . That's helpful . And just the ones I mean , if I'm doing the math kind of roughly right , sounds like maybe you got 4 or 5 more lenders to add to get to this 20% .

Brent Bates: Okay. That's helpful. If I'm doing the math kind of roughly, right, it sounds like maybe you got four or five more lenders to add to get to this 20%. The four or five maybe that you've already added that comprises the 10% already, what have they done so far or what kind of build have you seen in those people over, I don't know what length of time that's been when you've added them, but over the duration of time as you've added them?

Speaker #13: And the 4 or 5 maybe that you've already added that comprises the 10% already . What have they done so far ? Or what kind of , you know , build ?

Speaker #13: Have you seen in those people over ? You know , I don't know what length of time that's been when you've added them , but over the duration of time , as you've added them .

Speaker #6: I think you've I think you have to factor in that . You're probably on the longest of two quarters in place , as opposed to some that have been a little bit shorter than that .

Cory Newsom: I think you have to factor in that you're probably on the longest of two quarters in place as opposed to some that have been a little bit shorter than that. I'm not prepared really to rattle off any numbers because I didn't come expecting that one. Are we seeing nice, good-sized transactions coming across the table? Absolutely. I would venture to say that I can't think of anyone that's not already breaking in.

Speaker #6: So , I mean , I I'm not prepared really to , I guess , rattle off any numbers because I didn't I didn't come expecting that one .

Speaker #6: Are we seeing nice good sized transactions coming across the table ? Absolutely , absolutely . I would venture to say I can't think of anyone that's not already break even .

Speaker #13: So most of them have been . Their under under , you know , it's all under six months . Sounds like maybe a lot under three months .

Brent Bates: Yeah. Most of them have been there under, you know, it's all under six months. Sounds like maybe a lot under three months. Okay. It's all been relatively recent. Got it. Thank you. Maybe going back on, sorry?

Speaker #13: Okay . Okay . So it's all been relatively recent . Got it . Thank you . And then maybe going back on sorry .

Speaker #6: So typically a lot of these people that you'll bring on , they may have a non solicit for a short for a period of time on the front end .

Cory Newsom: Typically, a lot of these people that you'll bring on may have a non-solicit for a short period of time on the front end. It's getting where they are and the new business that they're chasing that doesn't conflict with anything they might have already had in agreements in place. We're pretty careful about all of that stuff. What we see is their overall ability, and what we see probably on the first six months are probably a little bit different.

Speaker #6: So, it's getting where they are. And the new business that they're chasing doesn't conflict with anything they might have already had in agreements in place.

Speaker #6: We're pretty careful about all of that stuff. So, that's, I mean, what we see is their overall ability, and what we see probably in the first six months is probably a little bit different.

Speaker #13: Got it . Helpful . And then maybe this won't be for Steve . I'm kind of curious on where you think like a good starting point is for the Nim next quarter .

Brent Bates: Got it. Helpful. Maybe this one will be for Steve. I'm kind of curious on where you think a good starting point is for the NIM next quarter. Obviously, there's a lot of puts and takes there with the recovery. I guess maybe starting from that $3.99 net of the recovery, but then I assume it looks like you're paying the sub date off with existing liquidity. I assume there'll be some NIM benefit there. You know, rate cuts. If there's a, you know, maybe a starting point you think about for fourth quarter as a jumping-off point. Yeah. No, that's a good question. I mean, as you said, there are lots of puts and takes. We did show, if you will, a nine basis point increase, but the Fed movement just only occurred right at the end of the quarter.

Speaker #13: Obviously there's a lot of puts and takes there with the recovery . I guess maybe starting from that 3.99 net of the recovery .

Speaker #13: But then I assume looks like you're paying the sub debt off with existing liquidity . So I assume there'll be some Nim benefit there .

Speaker #13: And then , you know , rate cuts . So if there's a , you know , maybe a starting point , you think about for , for fourth quarter as a jumping off point .

Speaker #4: Yeah . No , that's , that is a , that's a good question . I mean , we as you said , there are lots of lots of puts and takes .

Speaker #4: I mean , that's that's a , you know , we did show core , if you will . A nine basis point increase .

Speaker #4: But you know , the fed fed movement just only occurred right at the end of end of the quarter . And with , you know , a couple more scheduled , you know , that's I'm going to say I don't necessarily foresee us increasing Nim .

Brent Bates: With a couple more scheduled, I'm going to say I don't necessarily foresee us increasing NIM. We could have a basis point or two, or it could decline a couple of basis points in the short term. Again, we've got some, I think we've talked about before, some of our public funds that are tied to an index, but they may lag till the following month or something like that where they will catch up. We've done good. I think in the immediate term, you may see a slight decline in NIM until everything kind of works through the system. We're able to reprice deposits the way we need to. You still have some loans coming off of low rates as they hit a three-year, five-year mark. Like she said, lots of puts and takes, but that range is not a bad spot. Okay. That's helpful.

Speaker #4: I mean , we could have basis point or two or it could decline a couple basis points in the in the short term .

Speaker #4: Again , we've got some I think we've talked about before , some of our public funds that they are tied to an index , but they do .

Speaker #4: They may lag till , till the following month or something like that . Where they will catch up . But you know , it's we've , we , we've done , we've done good .

Speaker #4: I think in the immediate term it may it may , you may see a slight decline in Nim until everything kind of works through , through the system .

Speaker #4: We're able to reprice deposits the way we need to . And , you know , you still have some loans coming off of low , low rates as they hit a 3 or 5 year mark .

Speaker #4: So again , as you said , lots of puts and takes . But that's that range is not not a bad bad spot .

Speaker #13: Okay . That's helpful . And maybe one last one for me . Just just kind of going back to the indirect auto and I hear what you're saying , Corey , you know , losses obviously haven't really been material this quarter or in the past .

Brent Bates: Maybe one last one for me. Just kind of going back to the indirect auto, and I hear what you're saying, Cory. Losses obviously haven't really been material this quarter or in the past. That data of credit scores and the migration, even though I know it's not apples to apples in the quarter-over-quarter presentation of it, it does obviously show a migration of credit scores downwards. Does that concern you at all, or is that kind of part of why you guys have been pulling back a little bit in indirect auto? Maybe any more color you can give about that credit score migration and what that maybe means for the consumer part of your book?

Speaker #13: But that that data of credit scores in the migration , even though I know it's not apples to apples in the quarter of a quarter presentation of it .

Speaker #13: But but it does obviously show migration of credit scores down downwards . I mean , does that concern you at all , or is that kind of part of why you guys have been pulling back a little bit in indirect auto or maybe any more color you can give about that credit score migration and what that maybe means for the consumer part of your book .

Speaker #10: Yeah , this is Brett . We have done kind of a study once . It typically once a year where we pull scores on the whole portfolio , soft scores on the whole portfolio , and what we're seeing is both this year and in last year , we saw some migration in the bottom half of those credit scores migrating downward .

Curtis Griffith: Yeah. This is Brent. We have done kind of a study, typically once a year where we pull scores on the whole portfolio, soft scores on the whole portfolio. What we're seeing is both this year and last year, we saw some migration in the bottom half of those credit scores migrating downward. All through those 24 months, we really haven't seen delinquencies rise or other credit issues that would cause some concern. It is something we actively monitor, just like all other areas of credit risk where we're diligently looking for potential issues. You know.

Speaker #10: All all through those , those 24 months , we really haven't seen delinquencies rise or other credit issues that would cause some concern .

Speaker #10: But it is something we actively monitor, just like all other areas of credit risk where we're diligently looking for potential issues.

Speaker #6: You know , and the average duration on these loans ends up being , what , a little over two years . Yeah . So it's .

Cory Newsom: What the average duration on these loans ends up being is, what, a little over two years?

Curtis Griffith: Yeah.

Cory Newsom: So it's.

Speaker #5: Moves pretty fast .

Curtis Griffith: It's pretty fast.

Speaker #6: But we've still stayed so focused on the upper portion of that growing that the higher end stuff on the portfolio that we want to be very , very careful with it .

Cory Newsom: We've just stayed so focused on the upper portion of that, of growing the higher-end stuff on the portfolio that we want to be very, very careful with it.

Speaker #6: I mean .

Speaker #5: Steven , it it is very true all across the country . The folks kind of on the lower end life's getting harder . It's getting tight out there and you're seeing it in all kinds of areas .

Curtis Griffith: Steve, it is very true. All across the country, the folks kind of on the lower end, life's getting harder. It's getting tight out there, and you're seeing it in all kinds of areas. I worry about that some just from the overall economy. The good news for us is, yes, we do have some of those, but we have very few of those. We're not immune to some of our people having some credit problems. So far, it just hasn't impacted us on any meaningful losses. We don't think it will because so much of that portfolio is much higher credit scores.

Speaker #5: And I worry about that some just from the overall economy . The good news for us is , yes , we do have some of those , but we have very few of those .

Speaker #5: So, we're not immune to some of our people having credit problems. But so far, it just hasn't impacted us with any meaningful losses.

Speaker #5: And we don't think it will, because so much of that portfolio is much higher credit scores.

Speaker #14: And .

Cory Newsom: Keep in mind one thing. If you put the dollar amount to it, you're still looking at less than $20 million that is in subprime or deep subprime in the whole portfolio. Less than 2% of that is in non-autos, which would be in any type of an RV or something like that. We just don't get out into some of that stuff that's a little bit questionable. We're very, very careful about what we're going to put on our books.

Speaker #6: Go back and keep in mind one thing. I mean, if you put the dollar amount to it, you're still looking at less than $20 million.

Speaker #6: That is in subprime or deep subprime in the whole portfolio , less than 2% of that is is in non autos , which would be any type of an RV or something like that .

Speaker #6: We just don't get out into some of that stuff that's a little bit questionable. We're very, very careful about what we're going to put on our books.

Speaker #13: Yeah , yeah . No that makes sense . And I guess at the end of the day , if the past dues are still good , maybe they're not paying their credit card , but they're continuing to pay their auto payment to make sure they got some way to get to work .

Brent Bates: Yeah, that makes sense. I guess at the end of the day, if the past dues are still good, maybe they're not paying their credit card, but they're continuing to pay their auto payment to make sure they got somewhere to get to work and the like.

Speaker #13: And the like. Sounds like. Right.

Cory Newsom: That's what we've seen for years. I mean, they'll pay for the car when sometimes they make a mess on something else.

Speaker #14: And that's what we've seen for years. I mean, they'll pay for the car.

Speaker #6: When sometimes they may miss on something .

Speaker #14: Else .

Speaker #11: Yeah , yeah .

Brent Bates: Yeah, that's great, guys. Appreciate all the color and the time this afternoon.

Speaker #13: That's great, guys. I appreciate all the color and the time this afternoon.

Speaker #14: You bet. Thanks, Steven.

Cory Newsom: You bet. Thanks, Steve.

Speaker #3: As a reminder , if you'd like to ask a question , please press star one . Our next question is from Brett Rabatin with the Hardy Group .

Operator: As a reminder, if you'd like to ask a question, please press star one. Our next question is from Brett Rabbiton with the Hobdee Group.

Speaker #15: Hey , guys . Good afternoon . . Brett wanted to wanted to go back to payoffs . And I know that's been a topic for for some quarters now .

Cory Newsom: Hey, guys. Good afternoon.

Brent Bates: Brett?

Cory Newsom: Wanted to go back to payoffs, and I know that's been a topic for some quarters now, and you guys are optimistic. Obviously, all this hiring is going to help drive origination activity. To what extent does the commercial real estate book look vulnerable to the curve here to the permanent market, just given a dip here recently in rates? Does that concern you guys at all about continued payoffs, maybe in the CRE book, just given where rates are?

Speaker #15: And you guys are optimistic . Obviously all this hiring is is going to help drive origination activity to what extent does the commercial real estate book look vulnerable to the curve here , to the permanent market ?

Speaker #15: Just given a dip here recently in rates . Does that does that concern you guys at all about continued continued payoffs maybe in the CRE book just given where rates are .

Speaker #10: Yeah this is Brett I'll address that . I do think we still have some that are scheduled . We expect to have scheduled payoffs of some projects that are complete and stabilized and into the first quarter , maybe second .

Brent Bates: Yeah, this is Brent. I'll address that. I do think we're great. We still have some that are scheduled. We expect to have scheduled payoffs of some projects that are complete and stabilized into the first quarter, maybe second. It is kind of a normal course a little bit. I think what you've seen a little bit of in the past six months or so has been just partly efforts of identifying potential credit issues and resolving those. That put a little pressure on loan balances. We will have some additional payments coming at us, we think, in the first and second quarter of next year, maybe a little earlier.

Speaker #10: So it's kind of a normal course a little bit . I think what you've seen a little bit of in the past six months or or so has been just partly efforts of of identifying potential credit issues and , and resolving those .

Speaker #10: And , and that put a little pressure on loan balances . But we will have some additional payments coming , coming at us .

Speaker #10: We think in the in the . First and second quarter of next year , maybe , maybe a little earlier .

Speaker #14: Than we were .

Cory Newsom: We were just looking at our multifamily. It's down about $100 million over the last three quarters. If you take that $100 million and you try to reconcile it just a little bit, over half of that was the two credits that we told the whole world we were exited. It did not matter. We were and we exited without any loss or anything else, but we didn't feel like it was what we wanted on our balance sheet. You take another 25% of that, and it went into a non-traditional bank lender that let them take a P&L loan back to interest only. We're not doing that stuff. There's a little bit of that stuff that we're not lowering our credit standards to keep something on our books.

Speaker #6: And we were just looking over the over look at our multifamily . It's down about $100 million over the last three quarters . If you take that $100 million and you you try to reconcile it just a little bit , you know , over over half of that was the two credits that we've told the whole world .

Speaker #6: We were extended. It did not matter. We were in; we exited without any loss or anything else, but we didn't feel like it was what we wanted on our balance sheet.

Speaker #6: But you take another 25% of that, and it went into a non-traditional bank lender that let them take a loan back to interest only.

Speaker #6: We're not doing that stuff. And so, there's a little bit of that stuff that we're not lowering our credit standards to keep something on our books.

Speaker #6: We'll go out there and find new business to continue to replace it with . But we will not lower credit standards just because we're afraid of something's going to pay off .

Cory Newsom: We'll go out there and find new business to continue to replace it with, but we will not lower credit standards just because we're afraid something's going to pay off. Here's the bigger one in all of that. I think in nearly every aspect of even what we've talked about, all those loans were at below market rates. We were okay they left. Not all headwinds that come with some paydowns are necessarily a bad thing, especially if you were in a situation that you had some stuff that was back in the 4% and 5% rates that you don't really, I mean, it's not something you really want to have on the books.

Speaker #6: But here's the bigger picture in all of that. I think in nearly every aspect of even what we've talked about, all those loans were at below-market rates.

Speaker #6: We were okay . They left . And so not all not all headwinds that come with some paydowns are necessarily a bad thing , especially if you were in a situation that you had some stuff that was back in the four and 5% rates that you don't really I mean , it's not something you really want to have on the books .

Speaker #15: Okay . That's all great color . That's all I had . Thanks , guys .

Cory Newsom: Okay. That's all great color. That's all I had. Thanks, guys.

Speaker #6: Good talking to .

Speaker #11: You .

Cory Newsom: Good talking to you.

Curtis Griffith: Thanks, Brent.

Speaker #3: Thank you. There are no further questions at this time. I'd like to hand the floor back over to Curtis Griffith for any closing comments.

Operator: Thank you. There are no further questions at this time. I'd like to hand the floor back over to Curtis Griffith for any closing comments.

Speaker #5: Thank you . Operator . Thank you to all of those that dissipated on today's call . Just conclude , we do believe our third quarter results demonstrate a strong financial position as well as growing earnings power and capital of the bank while delivering our strong earnings growth .

Curtis Griffith: Thank you, Operator. Thank you to all of those that participated on today's call. Just to conclude, we do believe our third-quarter results demonstrate a strong financial position as well as growing earnings power and capital of the bank. While delivering our strong earnings growth, we've been making necessary investments to expand our capabilities, positioning South Plains Financial Inc. to be a much larger company. Our growth will come from our strategic initiative, focused on reaccelerating organic loan growth while seeking to expand South Plains Financial Inc. through accretive M&A opportunities. We've continued to add experienced lenders all across our markets to expand our lending platform and increase our loan growth through 2026. We also continue to engage in discussions with potential acquisition candidates and are pleased with the opportunities we're evaluating. Fortunately, the organic loan growth initiative is also just in the early innings.

Speaker #5: We've been making necessary investments to expand our capabilities and position South Plains to be a much larger company. Our growth will come from our strategic initiative focused on re-accelerating organic loan growth while seeking to expand South Plains through accretive M&A opportunities.

Speaker #5: We've continued to add experienced lenders all across our markets to expand our lending platform and increase our loan growth through 2026. We also continue to engage in discussions with potential acquisition candidates and are pleased with the opportunities we're evaluating.

Speaker #5: Fortunately, the organic loan growth initiative is also just in the early innings. We're optimistic we'll see that growth in the year ahead. As a result, we're only going to do a deal that makes real sense for the bank and our shareholders.

Curtis Griffith: We're optimistic we'll see that growth in the year ahead. As a result, we're only going to do a deal that makes real sense for the bank and our shareholders. Taken together, we believe we're in a good position to deliver on our initiatives and drive value for our shareholders as we work to accelerate the growth of South Plains Financial Inc. Thank you again for your time today.

Speaker #5: Taken together, we believe we're in a good position to deliver on our initiatives and drive value for our shareholders as we work to accelerate the growth of South Plains Financial.

Speaker #5: Thank you again for your time today .

Operator: This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.