South Plains Financial: Kicking the Tires on a Forbes-Honored Bank

The Forbes ranking is a strong vote of confidence in how South Plains Financial operates on Main Street. The honor, which placed the bank 12th on the 2024 list, is based on a rigorous look at 10 financial metrics from the 12 months ending last September. These include core measures like net interest margin, return on average assets, and credit quality. For a regional bank, this is a stamp of approval for solid execution and customer service, as CEO Curtis Griffith noted, calling it a testament to the invaluable contributions of our employees to the communities they serve.

Yet this is a lagging indicator. The data used for the ranking covers a period that ended over a year ago, when the broader banking environment was still riding the wave of elevated rates. The honor highlights what the bank did well in the past, not what it will do next. It signals product quality and brand loyalty that built a strong foundation, but it doesn't guarantee future performance in a changing market.

The backdrop for South Plains is generally supportive. The regional banking sector as a whole is thriving, with 93.6% of banks profitable as of September 2024. This healthy environment provides a cushion for a bank with South Plains' regional footprint and community focus. The Forbes honor fits neatly within this picture of sector strength, confirming that South Plains was a standout performer in its peer group during a good period.

The bottom line is that the Forbes ranking is a real-world signal of past excellence. It tells you the bank's products and service were in demand, and its balance sheet was sound. But as the recent earnings show, even a well-regarded bank must now navigate fresh pressures on its core profitability. The honor is a useful reference point, but the real test is what happens next.

The Real-World Numbers: Growth, Pressure, and the Bottom Line

The numbers from the fourth quarter tell a story of solid execution meeting fresh headwinds. On the surface, the bank delivered a slight beat on earnings per share, with diluted earnings per share of $0.90 for the quarter. That's a tick higher than the year-ago figure and just above the forecast. But the broader picture shows a bank under pressure. Net income itself dipped to $15.3 million, a clear decline from the $16.5 million reported a year earlier. This is the kind of result that makes you kick the tires: the headline EPS number looks okay, but the underlying profit engine is sputtering.

The pressure is most visible in the bank's return on assets, a key measure of how efficiently it turns its capital into profit. That metric fell to 1.36% for the quarter, down from 1.53% a year ago. Even more telling is the trend in the net interest margin, the lifeblood of a bank's earnings. While it held steady at 4.00% for the quarter, that's a slight contraction from the 4.05% posted last quarter and the 3.75% from a year ago. The math here is straightforward: if your spread is flat or shrinking while your costs are rising, your profitability gets squeezed. The bank did manage to lower its average cost of deposits to 201 basis points, a positive, but it wasn't enough to fully offset the margin pressure.

On the growth side, the bank is still actively lending. The loan portfolio grew by $91 million in the quarter, showing demand for its products. Yet even that growth came with a cost: the average yield on those new loans dipped to 6.79%. That's a classic sign of competitive pressure in a market where banks are fighting for business. You can't just lend more; you have to lend at a price that still makes money, and that price is coming down.

So what's the bottom line? South Plains is a bank that's trying to do the right things-lending, managing costs, planning for expansion. But the real-world utility of its products is being tested by a tougher environment. The Forbes honor was a vote for past excellence; these quarterly results are a report card on current performance. The bank is holding its ground, but the slight decline in net income and the erosion in return on assets are red flags that the easy money from elevated rates is fading. For a stock to rally, you need to see that growth accelerate and profitability stabilize. Right now, the numbers suggest the bank is navigating a period of modest pressure.

The Growth Engine: Acquisitions and Local Execution

The Forbes honor and the quarterly numbers tell part of the story. To understand how South Plains is actually growing its business on the ground, you have to look at its physical footprint and its strategy for expanding it. As of June 2025, the bank had total assets of $4.23 billion across 24 bank branches and 7 mortgage locations in Texas and New Mexico. That's a solid regional base. The real engine for growth, however, is a mix of local execution and strategic moves to punch above its weight in key Texas markets.

The bank's playbook is clear: it's using acquisitions to accelerate its reach. A recent example is the purchase of Bank of Houston. This isn't just about adding more branches; it's about gaining a foothold in a major market where it previously had limited presence. The strategy here is to target areas like Dallas, El Paso, and the Permian Basin, using these deals to bolster its customer base and loan pipeline. The bank's strong capital position, with a common equity tier 1 risk-based capital ratio of 13.86%, gives it the firepower to pursue such opportunities without straining its balance sheet.

On the ground, the bank is also driving growth through hiring and local lending. It's making strategic hires in high-growth markets like Dallas, betting that new loan officers will generate more business. This organic push is meant to complement the acquisition strategy, creating a dual engine for expansion. The goal is to see that loan portfolio growth accelerate, even as it faces the competitive pressure that pushes down yields on new loans.

The bottom line is that South Plains is playing a smart, two-pronged game. It's leveraging its strong regional reputation-evidenced by its second-place ranking in Texas on Forbes' 2024 Best-in-State Banks list-to attract customers and talent. At the same time, it's using acquisitions to quickly scale into new areas, all while maintaining a focus on cultural fit and sensible valuations. For a bank of its size, this approach is the practical way to grow. The question for investors is whether these local execution efforts can generate enough profitable lending to offset the margin pressures the bank is currently feeling. The strategy is sound, but the real-world test is in the loan books and the bottom line.

What the Stock Tells Us and What to Watch

The stock's recent dance tells a story of a bank finding its footing. After a sharp drop in early January, when shares hit lows near $38, the price has staged a clear recovery. As of today, it's trading around $42.88, a bounce of over 10% from those January lows. This volatility is the market's way of pricing in the mixed signals from the latest quarter. The stock popped on the earnings beat for EPS, but the underlying profit decline and margin pressure kept it from rallying. Now, it's in a holding pattern, waiting for clearer direction.

The key near-term catalyst is the bank's ability to stabilize its profitability in a potentially shifting environment. The return on average assets is the canary in the coal mine here, having fallen to 1.36% last quarter. For the stock to move decisively higher, investors need to see this metric stop its slide and start climbing again. That hinges on the net interest margin, which held at 4.00% but is under clear pressure from competitive loan yields. The bank's recent success in lowering its average cost of deposits to 201 basis points is a positive, but it must now fight to protect its spread as new loan yields dip. Watch for the next quarter's margin report as the first real test of its pricing power.

The primary risk, however, is the sustainability of its asset quality. This is the foundation of the Forbes honor and long-term profitability. The ranking heavily weights metrics like nonperforming assets and net charge-offs. While the bank's strong capital ratios provide a buffer, any sign that credit quality is weakening would be a major red flag. The bank's aggressive growth through acquisitions, like the pending acquisition of Bank of Houston, adds complexity. Integrating new loans and customers without a spike in delinquencies is a critical execution challenge. For now, the stock is pricing in steady execution, but the real-world utility of its products and the health of its loan books will determine if that confidence is justified.

The bottom line is that the stock is at a crossroads. It has recovered from a panic sell-off, but it's not yet signaling a new trend. The setup is for a stock that will move on the fundamentals, not hype. Investors should watch the return on assets and the net interest margin for stabilization, and keep a close eye on credit metrics for any cracks. If South Plains can show its growth engine is profitable and its balance sheet remains solid, the recent recovery could be the start of a longer climb. If not, the stock may face more volatility as the easy money from elevated rates fades.