South Plains Financial, Inc. Common Stock 2026 Q3 Earnings Call

Please go ahead. Thank you, operator, and good afternoon, everyone.

Before I turn the call over to Cory, I want to take a moment to thank our employees, our customers, and our shareholders for their support over the years. As I prepare to retire as Chief Executive Officer at the end of this year, I've been reflecting on what we have built together, and I could not be prouder of what City Bank and South Plains have become. Over the years, we've built a strong relationship-driven franchise, a unique culture, and a team that has always remained committed to serving our customers and communities. What gives me the greatest confidence about the future is the people we have in place today.

The leadership transition that will be completed at year-end has been planned for many years, and Cory and Steve, along with the rest of our experienced management team, have been leading the day-to-day operations for quite some time. We have worked hard to build a deep and experienced leadership team while also developing the next generation of talent across the company, including Tyler Haines, who joins us on the call today, and many others who represent the future of South Plains. While my role will change at year-end, I will remain involved as Chairman of both South Plains and City Bank. My focus will shift toward helping guide the long-term strategy of the company and the bank alongside our boards of directors and management team.

I am confident that South Plains is in an excellent position with a strong balance sheet, attractive growth opportunities, and a talented leadership team that is well prepared to continue building on our success. The strong results we delivered during the third quarter, including near record earnings per share, stable profitability, and solid organic loan growth, reinforce that confidence and demonstrate the continued success of the strategy we have been executing. With that, let me turn the call over to Cory.

Thank you, Curtis, and thank you for your leadership, support, and guidance over the years. It has been a privilege to work alongside you for many years. The culture, customer relationships, and reputation that we have built over the past several decades have created a tremendous foundation for the future. While I am honored to step into the CEO role at year-end, I am equally pleased that Curtis will remain Chairman. I look forward to his support as Chairman as we execute our strategy of expanding our lending platform across our high-growth Texas markets while pursuing disciplined acquisition opportunities. Most importantly, the bank is in an excellent position today, and I am excited to build upon the strong foundation that our team has created. Turning to slide 4. I am very pleased with our third quarter results. Net income increased to $20.8 million compared to $19 million in the second quarter.

We also delivered diluted earnings per share of $1.06 as compared to $0.96 in the linked quarter. Return on average assets improved to 1.53%, while our efficiency ratio improved to 58.1%. Importantly, we generated these results while maintaining our disciplined approach to credit and risk management as we continue to build the long-term earning power of the bank. Turning to slide 6. Loans held for investment increased by approximately $60 million as compared to the linked quarter, representing 6.3% annualized organic loan growth, and ended the period at $3.83 billion. The increase was driven by healthy loan production across our markets and was achieved despite the early payoff of a $25 million loan that was fully secured by the borrower's deposit account, as well as an anticipated payoff of a large relationship during the quarter.

The fact that we were able to deliver this level of growth despite these payoffs reflects the strength of our underlying loan pipeline and customer demand. As we have discussed throughout the year, we expected loan production to accelerate as we move through 2026, and we believe the second half is developing largely as anticipated. While loan payoffs continue to occur in the normal course of business, we believe our loan pipeline remains healthy and customer demand remains strong across both our metropolitan and community markets. Based on current production trends and pipeline activity, we remain confident in delivering our full year loan growth guidance in the mid-single digits. Our loan yield was 6.75% during the quarter, compared to 6.81% in the second quarter.

Although the market interest rate environment remains volatile, we remain focused on balancing prudent growth with profitability as we continue to expand relationships throughout our footprint. Turning to slide 7, our major metropolitan markets remain an important growth driver for the bank. Loans in Dallas, Houston, and El Paso increased by approximately $23 million during the quarter to $1.71 billion and represented 44.6% of our total loan portfolio as of September 30. We continue to see attractive opportunities across these markets and remain encouraged by the activity levels, loan pipelines, and long-term growth prospects in each of these regions. In Houston specifically, we continue to be pleased with our progress following the Bank of Houston acquisition. It is important to note that much of our team's focus has been on the integration, the system conversion process, and employee training since we closed on April 1.

With those efforts now largely behind us, our Houston bankers are now able to focus more fully on business development and growth opportunities available in one of the most attractive banking markets in Texas. We are also beginning to see the benefits of combining the two organizations, including enhanced lending capacity, additional liquidity, and the ability to pursue opportunities that may have been previously constrained. More broadly, expanding our lending platform remains one of our top priorities. We continue to benefit from the disruption across the Texas banking industry, particularly as competitor mergers create opportunities to recruit experienced bankers and deepen customer relationships. During the quarter, we added experienced bankers in Lubbock and in College Station, and we remain active in identifying talent that fits our culture and relationship-based approach to banking.

Given the ongoing consolidation across our markets, we believe there will continue to be opportunities to grow our team and drive future organic loan growth. As we continue to execute our organic growth initiatives, M&A remains an important component of our long-term strategy. We continue to evaluate opportunities that have the potential to strengthen our franchise, expand our presence in attractive markets, and create long-term shareholder value. Importantly, we will remain disciplined in our approach if any potential transaction must align with our culture, community banking model, credit standards, and financial objectives. We are not interested in growth for growth's sake, and any acquisition must create long-term value for shareholders. Given our strong capital position and the scale of our platform, we believe we are well-positioned to pursue the right opportunity should one emerge.

Skipping to slides 11 and 12, non-interest income totaled $13.8 million during the quarter, compared to $14.1 million in the second quarter. The modest decline was primarily driven by lower bank card services and interchange revenue, as the prior quarter benefited from incentive income that did not repeat in the third quarter. Mortgage banking revenues totaled $4.9 million and benefited from a $1.6 million increase in the value of our mortgage servicing rights asset as market interest rates moved higher during the period. While higher interest rates have created additional pressure on mortgage origination activity across the industry, our mortgage operation has not been a drag on earnings during this challenging environment and should be positioned to benefit when the activity eventually improves. Outside of mortgage banking, our diversified fee income businesses continue to perform well and remain an important contributor to the bank's overall profitability.

For the third quarter, non-interest income was 21% of bank revenues, essentially flat with the linked quarter. I'd like to turn the call to Steve to discuss our third quarter results in more detail.