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[10-Q] South Plains Financial, Inc. Quarterly Earnings Report

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Form Type
10-Q
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549


FORM 10-Q


(Mark One)

☒
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2025

OR

☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ______ to ______

Commission File Number: 001-38895


South Plains Financial, Inc.
(Exact name of registrant as specified in its charter)

 Texas
  
75-2453320
(State or other jurisdiction of incorporation or organization)
  
(I.R.S. Employer Identification No.)
     
5219 City Bank Parkway
Lubbock, Texas
  
79407
(Address of principal executive offices)
  
(Zip Code)

Registrant’s telephone number, including area code: (806) 792-7101

Securities registered pursuant to Section 12(b) of the Act:

Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Common Stock, $1.00 par value per share
SPFI
The Nasdaq Stock Market, LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.     Yes  ☒    No  ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  ☒    No  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer
☐
  
Accelerated filer
☒
Non-accelerated filer
☐
  
Smaller reporting company
☐
     
Emerging growth company
☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes  ☐  No  ☒

As of August 1, 2025, the registrant had 16,236,701 shares of common stock, par value $1.00 per share, outstanding.

TABLE OF CONTENTS

   
Page
PART I.
FINANCIAL INFORMATION
3
Item 1.
Consolidated Financial Statements
3
 
Consolidated Balance Sheets (Unaudited)
3
 
Consolidated Statements of Comprehensive Income (Unaudited)
4
 
Consolidated Statements of Changes in Stockholders’ Equity (Unaudited)
5
 
Consolidated Statements of Cash Flows (Unaudited)
6
 
Notes to Consolidated Financial Statements (Unaudited)
7
Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
26
Item 3.
Quantitative and Qualitative Disclosures About Market Risk
 47
Item 4.
Controls and Procedures
 48
PART II.
OTHER INFORMATION
49
Item 1.
Legal Proceedings
49
Item 1A.
Risk Factors
49
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
 49
Item 3.
Defaults Upon Senior Securities
49
Item 4.
Mine Safety Disclosures
49
Item 5.
Other Information
49
Item 6.
Exhibits
50
Signatures
51

Table of Contents
PART I. FINANCIAL INFORMATION
Item 1.
Consolidated Financial Statements

SOUTH PLAINS FINANCIAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except per share data)

 
June 30, 2025
    
December 31,
2024
  
   
(Unaudited)
        
ASSETS
            
Cash and due from banks
  
$
60,400
    
$
54,114
  
Interest-bearing deposits in banks
    
410,096
      
304,968
  
Cash and cash equivalents
    
470,496
      
359,082
  
Securities available for sale
    
570,000
      
577,240
  
Loans held for sale ($15,020 and $13,791 at fair value at June 30, 2025 and December 31, 2024, respectively)
    
17,182
      
20,542
  
Loans held for investment
    
3,098,978
      
3,055,054
  
Allowance for credit losses on loans
    
(45,010
)
    
(43,237
)
Loans held for investment, net
     3,053,968       3,011,817  
Accrued interest receivable
    
17,996
      
21,687
  
Premises and equipment, net
    
51,329
      
52,951
  
Bank-owned life insurance
    
76,859
      
76,054
  
Goodwill
    
19,315
      
19,315
  
Intangible assets, net
    
1,417
      
1,720
  
Mortgage servicing rights
    
25,134
      
26,292
  
Deferred tax asset, net
    
23,469
      
22,840
  
Other assets
    
36,509
      
42,699
  
Total assets
  
$
4,363,674
    
$
4,232,239
  
                 
LIABILITIES AND STOCKHOLDERS’ EQUITY
                
                 
Deposits:
                
Noninterest-bearing
  
$
998,759
    
$
935,510
  
Interest-bearing
    
2,740,179
      
2,685,366
  
Total deposits
    
3,738,938
      
3,620,876
  
Accrued expenses and other liabilities
    
58,863
      
62,060
  
Short-term borrowings     1,352       —  
Subordinated debt
    
64,054
      
63,961
  
Junior subordinated deferrable interest debentures
    
46,393
      
46,393
  
Total liabilities
    
3,909,600
      
3,793,290
  
                 
Stockholders’ equity:
                
Common stock, $1.00 par value per share, 30,000,000 shares authorized; 16,230,475 and 16,455,826 issued and outstanding at June 30, 2025 and December 31, 2024, respectively
    
16,230
      
16,456
  
Additional paid-in capital
    
90,268
      
97,287
  
Retained earnings
    
407,822
      
385,827
  
Accumulated other comprehensive loss
    
(60,246
)
    
(60,621
)
Total stockholders’ equity
    
454,074
      
438,949
  
Total liabilities and stockholders’ equity
  
$
4,363,674
    
$
4,232,239
  

The accompanying notes are an integral part of these consolidated financial statements.

3
Table of Contents
SOUTH PLAINS FINANCIAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
(Dollars in thousands, except per share data)

 
Three Months Ended
June 30,
    
Six Months Ended
June 30,
  
   
2025
    
2024
    
2025
    
2024
  
Interest income:
                        
Loans, including fees
  
$
53,886
    
$
50,571
    
$
104,456
    
$
99,503
  
Securities:
                                
Taxable
    
4,700
      
5,285
      
9,392
      
10,796
  
Non-taxable
    
802
      
807
      
1,603
      
1,616
  
Federal funds sold and interest-bearing deposits in banks
    
4,747
      
2,545
      
8,606
      
6,020
  
Total interest income
    
64,135
      
59,208
      
124,057
      
117,935
  
Interest expense:
                                
Deposits
    
20,062
      
21,629
      
39,889
      
43,292
  
Subordinated debt
    
835
      
835
      
1,670
      
1,670
  
Junior subordinated deferrable interest debentures
    
735
      
856
      
1,468
      
1,717
  
Total interest expense
    
21,632
      
23,320
      
43,027
      
46,679
  
Net interest income
    
42,503
      
35,888
      
81,030
      
71,256
  
Provision for credit losses    
2,500
      
1,775
      
2,920
      
2,605
  
Net interest income, after provision for credit losses
    
40,003
      
34,113
      
78,110
      
68,651
  
Noninterest income:
                                
Service charges on deposit accounts
    
2,098
      
1,949
      
4,239
      
3,762
  
Net gain on sales of loans
    
2,655
      
2,788
      
5,246
      
5,442
  
Bank card services and interchange fees
    
3,771
      
4,052
      
7,150
      
7,113
  
Other mortgage banking income
    
951
      
609
       473       1,900  
Investment commissions
    
426
      
450
      
860
      
884
  
Fiduciary fees
    
694
      
720
      
1,432
      
1,474
  
Other
    
1,570
      
2,141
      
3,390
      
3,543
  
Total noninterest income
    
12,165
      
12,709
      
22,790
      
24,118
  
Noninterest expense:
                                
Salaries and employee benefits
    
19,708
      
19,199
      
39,149
      
38,187
  
Occupancy and equipment, net
    
3,972
      
4,029
      
7,999
      
7,949
  
Professional services
    
1,874
      
1,738
      
3,604
      
3,221
  
Marketing and development
    
919
      
860
      
1,824
      
1,614
  
IT and data services
    
1,181
      
1,086
      
2,345
      
2,076
  
Bank card expenses
    
1,579
      
1,516
      
3,033
      
2,913
  
Appraisal expenses
    
236
      
229
      
428
      
456
  
Other
    
4,074
      
3,915
      
8,191
      
8,086
  
Total noninterest expense
    
33,543
      
32,572
      
66,573
      
64,502
  
Income before income taxes
    
18,625
      
14,250
      
34,327
      
28,267
  
Income tax expense
    
4,020
      
3,116
      
7,428
      
6,259
  
Net income
  
$
14,605
    
$
11,134
    
$
26,899
    
$
22,008
  

Earnings per share:
                        
Basic
  
$
0.90
    
$
0.68
    
$
1.65
    
$
1.34
  
Diluted
  
$
0.86
    
$
0.66
    
$
1.58
    
$
1.30
  
                                 
Net income
  
$
14,605
    
$
11,134
    
$
26,899
    
$
22,008
  
Other comprehensive income (loss):                                
Unrealized gains (losses) on securities available for sale    
(1,341
)
    
561
      
4,299
      
(10,269
)
Less: Change in fair value on hedged state and municipal securities
    
(1,573
)
    
(463
)
    
(3,825
)
    
920
  
Tax effect
    
612
      
(21
)
    
(99
)
    
1,963
  
Other comprehensive income (loss)
    
(2,302
)
    
77
      
375
      
(7,386
)
Comprehensive income
 
$
12,303
    
$
11,211
    
$
27,274
    
$
14,622
  

The accompanying notes are an integral part of these consolidated financial statements.

4
Table of Contents
SOUTH PLAINS FINANCIAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
(Unaudited)
(Dollars in thousands, except per share data)

 
Common Stock
    
Additional
Paid-in
    
Retained
    
Accumulated
Other
Comprehensive
        
   
Shares
    
Amount
    
Capital
    
Earnings
    
Income (Loss)
    
Total
  
Six Months Ended June 30, 2024
                                    
Balance at beginning of period
    
16,417,099
    
$
16,417
    
$
97,107
    
$
345,264
    
$
(51,674
)
  
$
407,114
  
Net income
    
—
      
—
      
—
      
22,008
      
—
      
22,008
  
Cash dividends declared  - $0.27 per share
    
—
      
—
      
—
      
(4,417
)
    
—
      
(4,417
)
Other comprehensive loss
    
—
      
—
      
—
      
—
      
(7,386
)
    
(7,386
)
Net issuance of stock related to stock-based awards
    20,721       21       (153 )     —       —       (132 )
Repurchases of common stock
    
(13,799
)
    
(14
)
    
(326
)
    
—
      
—
      
(340
)
Stock-based compensation
    
—
      
—
      
1,138
      
—
      
—
      
1,138
  
Balance at end of period
    
16,424,021
    
$
16,424
    
$
97,766
    
$
362,855
    
$
(59,060
)
  
$
417,985
  
                                                 
Six Months Ended June 30, 2025
                                                
Balance at beginning of period
    
16,455,826
    
$
16,456
    
$
97,287
    
$
385,827
    
$
(60,621
)
  
$
438,949
  
Net income
    
—
      
—
      
—
      
26,899
      
—
      
26,899
  
Cash dividends declared  - $0.30 per share
    
—
      
—
      
—
      
(4,904
)
    
—
      
(4,904
)
Other comprehensive income
    
—
      
—
      
—
      
—
      
375
      
375
  
Net issuance of stock related to stock-based awards
    24,981       24       (301 )     —       —       (277 )
Stock issued under employee stock purchase plan
    8,714       9       226       —       —       235  
Repurchases of common stock
    
(259,046
)
    
(259
)
    
(8,267
)
    
—
      
—
      
(8,526
)
Stock-based compensation
    
—
      
—
      
1,323
      
—
      
—
      
1,323
  
Balance at end of period
    
16,230,475
    
$
16,230
    
$
90,268
    
$
407,822
    
$
(60,246
)
  
$
454,074
  
                                                 
Three Months Ended June 30, 2024
                                                
Balance at beginning of period
    
16,431,755
    
$
16,432
    
$
97,406
    
$
354,011
    
$
(59,137
)
  
$
408,712
  
Net income
    
—
      
—
      
—
      
11,134
      
—
      
11,134
  
Cash dividends declared  - $0.14 per share
    
—
      
—
      
—
      
(2,290
)
    
—
      
(2,290
)
Other comprehensive income
    
—
      
—
      
—
      
—
      
77
      
77
  
Net issuance of stock related to stock-based awards
     4,659
       5
       (5 )     —
       —
       —
  
Repurchases of common stock
     (12,393 )     (13 )     (292 )     —       —       (305 )
Stock-based compensation
    
—
      
—
      
657
      
—
      
—
      
657
  
Balance at end of period
    
16,424,021
    
$
16,424
    
$
97,766
    
$
362,855
    
$
(59,060
)
  
$
417,985
  
                                                 
Three Months Ended June 30, 2025                                                
Balance at beginning of period
    
16,235,647
    
$
16,236
    
$
89,799
    
$
395,652
    
$
(57,944
)
  
$
443,743
  
Net income
    
—
      
—
      
—
      
14,605
      
—
      
14,605
  
Cash dividends declared  - $0.15 per share
    
—
      
—
      
—
      
(2,435
)
    
—
      
(2,435
)
Other comprehensive loss
    
—
      
—
      
—
      
—
      
(2,302
)
    
(2,302
)
Net issuance of stock related to stock-based awards
     3,874       3       (18 )     —       —       (15 )
Repurchases of common stock
     (9,046 )     (9 )     (267 )     —       —       (276 )
Stock-based compensation
    
—
      
—
      
754
      
—
      
—
      
754
  
Balance at end of period
    
16,230,475
    
$
16,230
    
$
90,268
    
$
407,822
    
$
(60,246
)
  
$
454,074
  

The accompanying notes are an integral part of these consolidated financial statements.

5
Table of Contents
SOUTH PLAINS FINANCIAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Dollars in thousands)

 
Six Months Ended
June 30,
  
   
2025
    
2024
  
Cash flows from operating activities:
            
Net income
  
$
26,899
    
$
22,008
  
Adjustments to reconcile net income to net cash from operating activities:
                
Provision for credit losses
    
2,920
      
2,605
  
Depreciation and amortization
    
2,939
      
3,257
  
Accretion and amortization
    
1,473
      
1,346
  
Other gains, net
    
(266
)
    
(50
)
Net gain on sales of loans
    
(5,246
)
    
(5,442
)
Proceeds from sales of loans held for sale
    
145,512
      
154,753
  
Loans originated for sale
    
(137,489
)
    
(151,879
)
Deferred income tax expense
     (728 )     (944 )
Earnings on bank-owned life insurance
    
(805
)
    
(750
)
Stock-based compensation
    
1,323
      
1,138
  
Change in valuation of mortgage servicing rights
    
1,741
      
625
  
Net change in:
                
Accrued interest receivable and other assets
    
5,935
      
3,916
  
Accrued expenses and other liabilities
    
(3,367
)
    
6,754
  
Net cash provided by operating activities
    
40,841
      
37,337
  
                 
Cash flows from investing activities:
                
Activity in securities available for sale:
                
Purchases
    
(9,374
)
    
(299,849
)
Maturities, prepayments, and calls
    
19,533
      
320,058
  
Loan originations and principal collections, net
    
(45,880
)
    
(82,575
)
Purchases of premises and equipment
    
(2,862
)
    
(1,552
)
Proceeds from sales of premises and equipment
    
2,240
      
69
  
Proceeds from sales of foreclosed assets
    
974
      
889
  
Net cash used in investing activities
    
(35,369
)
    
(62,960
)
                 
Cash flows from financing activities:
                
Net change in deposits
    
118,062
      
(1,640
)
   Net change in short-term borrowings
     1,352       —  
Proceeds from common stock issuance
     235       —  
Payments to tax authorities for stock-based compensation
    
(277
)
    
(132
)
Cash dividends paid on common stock
    
(4,904
)
    
(4,417
)
Payments to repurchase common stock
    
(8,526
)
    
(340
)
Net cash provided by (used in) financing activities
    
105,942
      
(6,529
)
                 
Net change in cash and cash equivalents
    
111,414
      
(32,152
)
Beginning cash and cash equivalents
    
359,082
      
330,158
  
Ending cash and cash equivalents
  
$
470,496
    
$
298,006
  

               
Supplemental disclosures of cash flow information:
                
Interest paid on deposits and borrowed funds
  
$
44,173
    
$
45,667
  
Income taxes paid
     6,820       3,625  
Supplemental schedule of noncash activities:
                
Loans transferred to foreclosed assets
  
$
981
    
$
732
  
Additions to mortgage servicing rights
    
583
      
482
  

The accompanying notes are an integral part of these consolidated financial statements.

6
Table of Contents
SOUTH PLAINS FINANCIAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES


Nature of Operations – South Plains Financial, Inc. (“SPFI”) is a Texas corporation and registered bank holding company that conducts its principal activities through its subsidiaries from offices located throughout Texas and Eastern New Mexico. Principal activities include commercial and retail banking, along with investment, trust, and mortgage services. The following were subsidiaries of SPFI as of June 30, 2025:

Wholly-Owned, Consolidated Subsidiaries:
  
City Bank
Bank subsidiary
Ruidoso Retail, Inc.
Non-bank subsidiary
CB Provence, LLC
Non-bank subsidiary
CBT Brushy Creek, LLC
Non-bank subsidiary
CBT Properties, LLC
Non-bank subsidiary
Wholly-Owned, Equity Method Subsidiaries:
  
South Plains Financial Capital Trusts (“SPFCT”) III-V
Non-bank subsidiaries

Basis of Presentation and Consolidation –
The consolidated financial statements in this Quarterly Report on Form 10-Q for the three and six months ended June 30, 2025 (this “Form 10-Q”) include the accounts of SPFI and its wholly-owned consolidated subsidiaries (collectively referred to as the “Company”) identified above. All significant intercompany balances and transactions have been eliminated in consolidation.

The interim consolidated financial statements in this Form 10-Q have not been audited by an independent registered public accounting firm, but in the opinion of management, reflect all adjustments necessary for a fair presentation of the Company’s financial position, results of operations, and cash flows. All such adjustments were of a normal and recurring nature. The consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and with the instructions to Form 10-Q adopted by the U.S. Securities and Exchange Commission (“SEC”). Accordingly, the financial statements do not include all of the information and notes required by GAAP for complete financial statements and should be read in conjunction with the Company’s audited consolidated financial statements, and notes thereto in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024 as filed with the SEC on March 7, 2025 (the “2024 Annual Report on Form 10-K”). Operating results for the interim periods disclosed herein are not necessarily indicative of the results that may be expected for a full year or any future period.

Use of Estimates – The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Determination of the adequacy of the allowance for credit losses (“ACL”) is a material estimate that is particularly susceptible to significant change in the near term; the assumptions used in stock-based compensation, derivatives, mortgage servicing rights, and fair values of financial instruments can also involve significant management estimates.

Recent Accounting Pronouncements – Updates to the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) are prescribed in Accounting Standards Updates (“ASUs”), which are not authoritative until incorporated into the ASC.

ASU 2023-06, Disclosure Improvements: Codification Amendments in Response to the SEC’s Disclosure Update and Simplification Initiative. The amendments in this ASU modify the disclosure or presentation requirements of a variety of Topics in the Codification. Certain of the amendments represent clarifications to, or technical corrections of the current requirements. Each amendment in the ASU will only become effective if the SEC removes the related disclosure or presentation requirement from its existing regulations by June 30, 2027. The amendments in this ASU are not expected to have a material impact on the Company’s financial statements.


ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. The amendments in this ASU are intended to improve the transparency of income tax disclosures by requiring consistent categories and greater disaggregation of information in the rate reconciliation and income taxes paid disaggregated by jurisdiction. It also includes certain other amendments intended to improve the effectiveness of income tax disclosures. This ASU is effective for annual periods beginning after December 15, 2024. The adoption of this ASU is not expected to have a material effect on the Company’s financial statements.


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Table of Contents
ASU 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses. This ASU requires public companies to disclose in a tabular format, in the notes to the financial statements, specific disaggregated information about certain prescribed categories of expenses at each interim and annual reporting period. The prescribed categories include, among other things, employee compensation, depreciation, and intangible asset amortization. This ASU is effective for public business entities for annual reporting periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027. Implementation of this ASU may be applied prospectively or retrospectively. The Company does not expect the adoption of this ASU to have a material impact on the Company’s financial statements.

Subsequent Events – The Company has evaluated subsequent events and transactions from June 30, 2025 through the date this Form 10-Q was filed with the SEC for potential recognition or disclosure as required by GAAP.

2.  SECURITIES

A summary of the amortized cost, related gross unrealized gains and losses, allowance for credit losses, and estimated fair value of securities available for sale at the dates indicated is presented below (dollars in thousands):

 
Amortized
Cost
    
Gross
Unrealized
Gains
    
Gross
Unrealized
Losses
    
Allowance
for Credit
Losses
    
Fair
Value
  
June 30, 2025
                              
Available for sale:
                              
State and municipal
  
$
197,553
    
$
3
    
$
(31,965
)
   $ —    
$
165,591
  
Residential mortgage-backed securities
     316,141       65       (49,332 )     —       266,874  
Commercial mortgage-backed securities
     45,934       —       (4,714 )     —       41,220  
Commercial collateralized mortgage obligations
    
70,805
      
59
      
(213
)
     —      
70,651
  
Asset-backed and other amortizing securities
    
15,042
      
—
      
(1,026
)
     —      
14,016
  
Other securities
    
12,000
      
—
      
(352
)
     —      
11,648
  
   
$
657,475
    
$
127
    
$
(87,602
)
   $ —    
$
570,000
  

December 31, 2024
                              
Available for sale:
                              
State and municipal
  
$
199,588
    
$
1
    
$
(26,292
)
   $ —    
$
173,297
  
Residential mortgage-backed securities
    321,021       —       (56,925 )     —       264,096  
Commercial mortgage-backed securities
    46,601       —       (6,241 )     —       40,360  
Commercial collateralized mortgage obligations
    
73,697
      
—
      
(214
)
     —      
73,483
  
Asset-backed and other amortizing securities
    
16,107
      
—
      
(1,526
)
     —      
14,581
  
Other securities
    
12,000
      
—
      
(577
)
     —      
11,423
  
   
$
669,014
    
$
1
    
$
(91,775
)
   $ —    
$
577,240
  

The amortized cost and estimated fair value of securities at June 30, 2025 are presented below by contractual maturity (dollars in thousands). Expected maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations. Declining-balance securities are shown separately since they are not due at a single maturity date.

 
Available for Sale
  
   
Amortized
Cost
    
Fair Value
  
Within 1 year
  
$
2,294
    
$
2,290
  
After 1 year through 5 years
    
4,984
      
4,903
  
After 5 years through 10 years
    
21,160
      
20,075
  
After 10 years
    
181,115
      
149,971
  
Declining-balance securities
    
447,922
      
392,761
  
   
$
657,475
    
$
570,000
  

At both June 30, 2025 and December 31, 2024, there were no holdings of securities of any one issuer, other than the U.S. government, its agencies, or its sponsored enterprises, in an amount greater than 10% of stockholders’ equity.

Securities with a carrying value of approximately $382.3 million and $309.0 million at June 30, 2025 and December 31, 2024, respectively, were pledged to collateralize public deposits and for other purposes as required or permitted by law.

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The following table segregates securities with unrealized losses at the periods indicated, by the duration they have been in a loss position for which an allowance for credit losses has not been recorded (dollars in thousands):

 
Less than 12 Months
    
12 Months or More
    
Total
  
   
Fair
Value
    
Unrealized
Loss
    
Fair
Value
    
Unrealized
Loss
    
Fair
Value
    
Unrealized
Loss
  
June 30, 2025
                                    
State and municipal
  
$
1,038
    
$
8
    
$
160,849
    
$
31,957
    
$
161,887
    
$
31,965
  
Residential mortgage-backed securities
     8       —       257,788       49,332       257,796       49,332  
Commercial mortgage-backed securities
     —       —       41,220       4,714       41,220       4,714  
Commercial collateralized mortgage obligations
    
65,856
      
213
      
—
      
—
      
65,856
      
213
  
Asset-backed and other amortizing securities
    
—
      
—
      
14,016
      
1,026
      
14,016
      
1,026
  
Other securities
    
3,465
      
35
      
8,183
      
317
      
11,648
      
352
  
   
$
70,367
    
$
256
    
$
482,056
    
$
87,346
    
$
552,423
    
$
87,602
  
                                                 
December 31, 2024
                                                
State and municipal
  
$
205
    
$
1
    
$
171,306
    
$
26,291
    
$
171,511
    
$
26,292
  
Residential mortgage-backed securities
    8       —       264,088       56,925       264,096       56,925  
Commercial mortgage-backed securities
    —       —       40,360       6,241       40,360       6,241  
Commercial collateralized mortgage obligations
    
73,483
      
214
      
—
      
—
      
73,483
      
214
  
Asset-backed and other amortizing securities
    
—
      
—
      
14,581
      
1,526
      
14,581
      
1,526
  
Other securities
    
—
      
—
      
11,423
      
577
      
11,423
      
577
  
   
$
73,696
    
$
215
    
$
501,758
    
$
91,560
    
$
575,454
    
$
91,775
  

There were 137 securities with an unrealized loss at June 30, 2025, generally due to a continuation of the elevated market interest rate environment. Management evaluates securities available for sale (“AFS”) in unrealized loss positions to determine whether the impairment is due to credit-related factors or non-credit related factors. Consideration is given to the extent to which the fair value is less than cost, the financial condition and near-term prospects of the issuer, and the intent and ability of the Company to retain its investment in the security for a period of time sufficient to allow for the anticipated recovery in fair value. Management does not have the intent to sell any of the securities in an unrealized loss position and believes that it is not likely that the securities will have to be sold before a recovery of cost. The fair value of these securities is expected to recover as the securities approach their maturity date or repricing date or if market yields for such investments decline. Accordingly, as of June 30, 2025, management believes the unrealized loss positions detailed in the previous table are due to non-credit related factors, including changes in interest rates and other market conditions, and therefore no ACL for AFS securities or losses have been recognized or realized in the consolidated financial statements.

3.  LOANS HELD FOR INVESTMENT

Loans held for investment are summarized by category as of the dates presented below (dollars in thousands):

 
June 30,
2025
    
December 31,
2024
  
Commercial real estate
  
$
1,085,309
    
$
1,119,063
  
Commercial - specialized
    
379,068
      
388,955
  
Commercial - general
    
620,934
      
557,371
  
Consumer:
                
1-4 family residential
    
589,935
      
566,400
  
Auto loans
    
258,193
      
254,474
  
   Other consumer
    
63,589
      
64,936
  
Construction
    
101,950
      
103,855
  
     
3,098,978
      
3,055,054
  
Allowance for credit losses on loans
    
(45,010
)
    
(43,237
)
Loans, net
  
$
3,053,968
    
$
3,011,817
  

The Company has certain lending policies, underwriting standards, and procedures in place that are designed to maximize loan income with an acceptable level of risk. Management reviews and approves these policies, underwriting standards, and procedures on a regular basis and makes changes as appropriate. Management receives frequent reports related to loan originations, quality, concentrations, delinquencies, non-performing, and potential problem loans. Diversification in the loan portfolio is a means of managing risk associated with fluctuations in economic conditions, both by type of loan and geography.

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Table of Contents
Commercial Real Estate – Underwriting standards have been designed to determine whether the borrower possesses sound business ethics and practices, evaluate current and projected cash flows to determine the ability of the borrower to repay their obligations as agreed and ensure appropriate collateral is obtained to secure the loan. Commercial real estate loans are underwritten primarily based on projected cash flows for income-producing properties and collateral values for non-income-producing properties. The repayment of these loans is generally dependent on the successful operation of the property securing the loans or the sale or refinancing of the property. Real estate loans may be adversely affected by conditions in the real estate markets or in the general economy. The properties securing the Company’s real estate portfolio are diversified by type and geographic location. This diversity helps reduce the exposure to adverse economic events that affect any single market or industry.

Commercial – General and Specialized – Commercial loans are underwritten after evaluating and understanding the borrower’s ability to operate profitably. Underwriting standards have been designed to determine whether the borrower possesses sound business ethics and practices, evaluate current and projected cash flows to determine the ability of the borrower to repay their obligations, as agreed and ensure appropriate collateral is obtained to secure the loan. Commercial loans are primarily made based on the identified cash flows of the borrower and, secondarily, on the underlying collateral provided by the borrower. Most commercial loans are secured by the assets being financed or other business assets, such as real estate, accounts receivable, or inventory, and typically include personal guarantees. Owner-occupied real estate is included in commercial loans, as the repayment of these loans is generally dependent on the operations of the commercial borrower’s business rather than on income-producing properties or the sale of the properties. Commercial loans are grouped into two distinct sub-categories: specialized and general. Commercial related segments that are considered “specialized” include agricultural production and real estate loans, energy loans, and finance, investment, and insurance loans. Commercial related segments that contain a broader diversity of borrowers, sub-industries, or serviced industries are grouped into the “general category.” These include goods, services, restaurant & retail, construction, and other industries. Performance of these loans is subject to operating and cash flow results of the borrower, with risk in the volatility of operating results for particular industries.

Consumer – Loans to consumers include 1-4 family residential loans, auto loans, and other loans for recreational vehicles or other purposes. The Company utilizes a computer-based credit scoring analysis to supplement its policies and procedures in underwriting consumer loans. The Company’s loan policy addresses types of consumer loans that may be originated and the collateral, if secured, which must be perfected. The relatively smaller individual dollar amounts of consumer loans that are spread over numerous individual borrowers also minimizes the Company’s risk. The Company generally requires mortgage title insurance and hazard insurance on 1-4 family residential loans. All consumer loans are generally dependent on the risk characteristics of the borrower’s ability to repay the loan, a consideration of the debt to income ratio, employment and income stability, the loan-to-value ratio, and the age, condition and marketability of the collateral.

Construction – Loans for residential construction are for single-family properties to developers, builders, or end-users. These loans are underwritten based on estimates of costs and completed value of the project. Funds are advanced based on estimated percentage of completion for the project. Performance of these loans is affected by economic conditions as well as the ability to control costs of the projects.

The commercial real estate and construction categories comprise the Company’s nonowner-occupied real estate loans. Total nonowner-occupied real estate loans were $1.19 billion at June 30, 2025, and $1.22 billion at December 31, 2024.

The ACL for loans was $45.0 million at June 30, 2025, compared to $43.2 million at December 31, 2024. The ratio of ACL for loans to loans held for investment was 1.45% at June 30, 2025 and 1.42% at December 31, 2024.

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Table of Contents
The following tables detail the activity in the ACL for loans  for the periods indicated (dollars in thousands). Allocation of a portion of the ACL to one category of loans does not preclude its availability to absorb losses in other categories.

 
Beginning
Balance
    
Provision for
Credit Losses
    
Charge-offs
    
Recoveries
    
Ending
Balance
  
For the three months ended June 30, 2025
                              
Commercial real estate
  
$
15,787
    
$
(81
)
  
$
—
    
$
—
    
$
15,706
  
Commercial - specialized
    
4,523
      
311
      
—
      
47
      
4,881
  
Commercial - general
    
6,403
      
856
      
(284
)
    
253
      
7,228
  
Consumer:
                                        
1-4 family residential
    
10,079
      
1,030
      
—
      
41
      
11,150
  
Auto loans
    
3,096
      
252
      
(392
)
    
39
      
2,995
  
Other consumer
    
1,107
      
157
      
(258
)
    
96
      
1,102
  
Construction
    
1,973
      
(25
)
    
—
      
—
      
1,948
  

 
$
42,968
    
$
2,500
    
$
(934
)
  
$
476
    
$
45,010
  
                                         
For the three months ended June 30, 2024
                                        
Commercial real estate
  
$
15,784
    
$
(192
)
  
$
—
    
$
1
    
$
15,593
  
Commercial - specialized
    
3,848
      
877
      
—
      
11
      
4,736
  
Commercial - general
    
6,708
      
461
      
(344
)
    
16
      
6,841
  
Consumer:
                                        
1-4 family residential
    
9,280
      
420
      
—
      
2
      
9,702
  
Auto loans
    
3,415
      
125
      
(265
)
    
12
      
3,287
  
Other consumer
    
983
      
200
      
(251
)
    
42
      
974
  
Construction
    
2,156
      
(116
)
    
—
      
—
      
2,040
  

 
$
42,174
    
$
1,775
    
$
(860
)
  
$
84
    
$
43,173
  

For the six months ended June 30, 2025
                              
Commercial real estate
  
$
15,973
    
$
(267
)
  
$
—
    
$
—
    
$
15,706
  
Commercial - specialized
    
4,640
      
160
      
—
      
81
      
4,881
  
Commercial - general
    
6,874
      
439
      
(358
)
    
273
      
7,228
  
Consumer:
                                        
1-4 family residential
    
9,677
      
1,425
      
—
      
48
      
11,150
  
Auto loans
    
3,015
      
583
      
(694
)
    
91
      
2,995
  
Other consumer
    
1,115
      
410
      
(572
)
    
149
      
1,102
  
Construction
    
1,943
      
—
      
—
      
5
      
1,948
  

 
$
43,237
    
$
2,750
    
$
(1,624
)
  
$
647
    
$
45,010
  
                                         
For the six months ended June 30, 2024
                                        
Commercial real estate   $
 15,808     $
 (130 )   $
(86 )   $
1     $
15,593  
Commercial - specialized     4,020       672       —       44       4,736  
Commercial - general     6,391       1,120       (720 )     50       6,841  
Consumer:                                        
1-4 family residential     9,177       694       (172 )     3       9,702  
Auto loans     3,601       99       (490 )     77       3,287  
Other consumer     968       436       (531 )     101       974  
Construction     2,391       (351 )     —       —       2,040  
    $
 42,356     $
 2,540     $
 (1,999 )   $
 276     $
 43,173  

During the three and six months ended June 30, 2025 the Company recorded a provision for credit loss of $2.5 million and $2.9 million, respectively, which was comprised of a provision for credit losses on loans of $2.5 million and $2.8 million, respectively, and a provision for off-balance sheet credit exposures of $— and $170 thousand, respectively. During the three and six months June 30, 2024, the Company recorded a provision for credit loss of $1.8 million and $2.6 million, respectively, which was comprised of a provision for credit losses on loans of $1.8 million and $2.5 million, respectively, and a provision for off-balance sheet credit exposures of $— and $65 thousand, respectively.

The following tables show the Company’s amortized cost and related ACL for individually evaluated collateral dependent loans by class using the fair value of collateral loss estimation methodology of evaluating expected credit losses at the dates indicated (dollars in thousands).


  Equipment     Real Estate
     Other    
Total Loans
Individually
Evaluated
    
Total ACL
for
Individually
Evaluated
Loans
  
June 30, 2025
  
                         
Commercial real estate
   $ —     $ 961     $ —    
$
961
    
$
413
  
Commercial - specialized
     —       —       —      
—
      
—
  
Commercial - general
     1,071       3,135       —      
4,206
      
196
  
Consumer:
                                        
1-4 family residential
     —       1,482       —      
1,482
      
520
  
Auto loans
     —       —       —      
—
      
—
  
Other consumer
     —       —       —      
—
      
—
  
Construction
     —       141       —      
141
      
—
  
 
   $ 1,071     $ 5,719     $ —    
$
6,790
    
$
1,129
  

December 31, 2024
                              
Commercial real estate
  
$
—
    
$
19,543
    
$
—
    
$
19,543
    
$
552
  
Commercial - specialized
    
—
      
—
      
—
      
—
      
—
  
Commercial - general
    
—
      
—
      
—
      
—
      
—
  
Consumer:
                                        
1-4 family residential
    
—
      
—
      
—
      
—
      
—
  
Auto loans
    
—
      
—
      
—
      
—
      
—
  
Other consumer
    
—
      
—
      
—
      
—
      
—
  
Construction
    
—
      
1,575
      
—
      
1,575
      
—
  
   
$
—
    
$
21,118
    
$
—
    
$
21,118
    
$
552
  
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Table of Contents
The tables below provide an age analysis on accruing past-due loans and nonaccrual loans at the dates indicated (dollars in thousands):

 
30-89 Days
Past Due
    
90 Days or
More Past
Due
    
Nonaccrual
    
 Nonaccrual
with no
ACL
  
June 30, 2025
                        
Commercial real estate
  
$
1,059
    
$
72
    
$
961
     $ 150  
Commercial - specialized
    
163
      
—
      
190
       —  
Commercial - general
    
765
      
46
      
4,359
       —  
Consumer:
                                
1-4 Family residential
    
2,371
      
2,334
      
2,126
       125  
Auto loans
    
645
      
34
      
—
       —  
Other consumer
    
582
      
180
      
20
       —  
Construction
    
—
      
—
      
141
       141  

 
$
5,585
    
$
2,666
    
$
7,797
     $
 416  

December 31, 2024
                        
Commercial real estate
  
$
594
    
$
96
    
$
19,543
     $
 —  
Commercial - specialized
    
1,770
      
240
      
105
       —  
Commercial - general
    
1,374
      
244
      
180
       —  
Consumer:
                                
1-4 Family residential
    
1,966
      
1,042
      
676
       —  
Auto loans
    
1,004
      
114
      
—
       —  
Other consumer
    
1,125
      
185
      
23
       —  
Construction
    
95
      
—
      
1,575
       1,575  

 
$
7,928
    
$
1,921
    
$
22,102
     $
 1,575  

Credit Quality Indicators
The Company grades its loans on a thirteen-point grading scale. These grades fit in one of the following categories: (i) pass, (ii) special mention, (iii) substandard, (iv) doubtful, or (v) loss. Loans categorized as loss are charged-off immediately. The grading of loans reflects a judgment by the Company about the risks of default associated with the loan. The Company reviews the grades on loans as part of the Company’s on-going monitoring of the credit quality of the loan portfolio.  These risk ratings are assigned based on relevant information about the ability of the borrowers to service their debt such as: current financial information, historical payment experience, credit documentation, public information, and current economic trends, among other factors.

Pass loans have financial factors or nature of collateral that are considered reasonable credit risks in the normal course of lending and encompass several grades that are assigned based on varying levels of risk, ranging from credits that are secured by cash or marketable securities, to watch credits which have all the characteristics of an acceptable credit risk but warrant more than the normal level of monitoring.

Special mention loans have potential weaknesses that deserve management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of repayment prospects for the loans at some future date.

Substandard loans are inadequately protected by the current net worth and paying capacity of the borrower or by the collateral pledged, if any. These loans have a well-defined weakness or weaknesses that jeopardize collection and present the distinct possibility that some loss will be sustained if the deficiencies are not corrected. A protracted workout on these credits is a distinct possibility. Prompt corrective action is therefore required to strengthen the Company’s position, and/or to reduce exposure and to assure that adequate remedial measures are taken by the borrower. Credit exposure becomes more likely in such credits and a serious evaluation of the secondary support to the credit is performed. Substandard loans can be accruing or can be nonaccrual depending on the circumstances of the individual loans.

Doubtful loans have all the weaknesses inherent in substandard loans with the added characteristics that the weaknesses make collection or liquidation in full on the basis of currently existing facts, conditions, and values highly questionable and improbable. All doubtful loans are on nonaccrual.

12
Table of Contents
In connection with the review of the Company’s loan portfolio, management considers risk elements attributable to particular loan type or categories in assessing the quality of individual loans. The list of loans to be analyzed for individual evaluation consists of non-accrual loans over $250 thousand with direct exposure. Interest income recognized using a cash-basis method on non-accrual loans for the three and six months ended June 30, 2025 and 2024 was not significant.  In addition, the Company closely monitors substandard accruing loans over $1 million with direct exposure, and past due accruing loans over $100 thousand for possible individual evaluation.  All other loans will be evaluated collectively in designated pools unless a loss exposure has been identified. Additional funds committed to be advanced on individually analyzed loans are not significant.

The following tables reflect the amortized cost basis in loans held for investment by credit quality indicator and origination year at the dates indicated, and related year-to-date gross charge-offs. Loans acquired are shown in the table by origination year. The Company had an immaterial amount of revolving loans converted to term loans at June 30, 2025 and December 31, 2024.

 
                    
Term Loans
                    
 
              
Amortized Cost Basis by Origination Year
              
               
June 30, 2025
              
(Dollars in thousands)                                                

 
2025
    
2024
    
2023
    
2022
    
2021
    
Prior
    
Revolving
Loans
    
Total
  

                                               
Commercial real estate
                                               
Pass
  
$
97,841
    
$
149,557
    
$
219,608
    
$
266,639
    
$
112,562
    
$
174,646
    
$
8,051
    
$
1,028,904
  
Special mention
    
—
      
—
      
3,317
      
2,854
      
179
      
389
      
—
      
6,739
  
Substandard
    
—
      
62
      
1,043
      
4,550
      
34,912
      
8,288
      
—
      
48,855
  
Doubtful
     —       —       811       —       —       —       —       811  
Total commercial real estate loans
  
$
97,841
    
$
149,619
    
$
224,779
    
$
274,043
    
$
147,653
    
$
183,323
    
$
8,051
    
$
1,085,309
  
Year-to-date gross charge-offs
  
$
—
    
$
—
    
$
—
    
$
—
    
$
—
    
$
—
    
$
—
    
$
—
  
 
                                                                
Commercial - specialized
                                                                
Pass
  
$
73,666
    
$
49,175
    
$
49,849
    
$
28,356
    
$
36,894
    
$
33,382
    
$
89,198
    
$
360,520
  
Special mention
    
7,414
      
4,322
      
890
      
1,393
      
1,759
      
999
      
1,300
      
18,077
  
Substandard
    
—
      
—
      
—
      
303
      
108
      
60
      
—
      
471
  
Total commercial - specialized loans
  
$
81,080
    
$
53,497
    
$
50,739
    
$
30,052
    
$
38,761
    
$
34,441
    
$
90,498
    
$
379,068
  
Year-to-date gross charge-offs
  
$
—
    
$
—
    
$
—
    
$
—
    
$
—
    
$
—
    
$
—
    
$
—
  
 
                                                                
Commercial - general
                                                                
Pass
  
$
95,821
    
$
108,375
    
$
55,597
    
$
105,051
    
$
52,781
    
$
95,507
    
$
83,847
    
$
596,979
  
Special mention
    
—
      
581
      
12,206
      
950
      
1,580
      
485
      
—
      
15,802
  
Substandard
    
—
      
140
      
2,332
      
157
      
4,162
      
962
      
350
      
8,103
  
Doubtful
     —       —       —       —       50       —       —       50  
Total commercial - general loans
  
$
95,821
    
$
109,096
    
$
70,135
    
$
106,158
    
$
58,573
    
$
96,954
    
$
84,197
    
$
620,934
  
Year-to-date gross charge-offs
  
$
—
    
$
—
    
$
4
    
$
122
    
$
81
    
$
—
    
$
151
    
$
358
  

                                                               
Consumer 1-4 family residential
                                                                
Pass
  
$
59,549
    
$
78,191
    
$
96,542
    
$
146,475
    
$
82,673
    
$
107,543
    
$
5,746
    
$
576,719
  
Special mention
    
—
      
—
      
490
      
—
      
5,115
      
—
      
—
      
5,605
  
Substandard
    
—
      
150
      
1,510
      
280
      
1,223
      
3,781
      
—
      
6,944
  
Doubtful
     —       —       300       91       —       276       —       667  
Total consumer 1-4 family residential loans
  
$
59,549
    
$
78,341
    
$
98,842
    
$
146,846
    
$
89,011
    
$
111,600
    
$
5,746
    
$
589,935
  
Year-to-date gross charge-offs
  
$
—
    
$
—
    
$
—
    
$
—
    
$
—
    
$
—
    
$
—
    
$
—
  
 
                                                                
Consumer auto loans
                                                                
Pass
  
$
63,069
    
$
60,727
    
$
55,674
    
$
56,294
    
$
17,438
    
$
4,767
    
$
—
    
$
257,969
  
Special mention
    
—
      
—
      
—
      
—
      
—
      
—
      
—
      
—
  
Substandard
    
—
      
—
      
—
      
136
      
61
      
27
      
—
      
224
  
Total consumer auto loans
  
$
63,069
    
$
60,727
    
$
55,674
    
$
56,430
    
$
17,499
    
$
4,794
    
$
—
    
$
258,193
  
Year-to-date gross charge-offs
  
$
—
    
$
105
    
$
245
    
$
209
    
$
109
    
$
26
    
$
—
    
$
694
  
 
                                                                
Consumer other consumer
                                                                
Pass
  
$
16,607
    
$
17,001
    
$
9,420
    
$
10,463
    
$
3,442
    
$
5,205
    
$
1,346
    
$
63,484
  
Special mention
    
—
      
—
      
—
      
—
      
—
      
—
      
—
      
—
  
Substandard
    
—
      
20
      
10
      
17
      
17
      
41
      
—
      
105
  
Total consumer other consumer loans
  
$
16,607
    
$
17,021
    
$
9,430
    
$
10,480
    
$
3,459
    
$
5,246
    
$
1,346
    
$
63,589
  
Year-to-date gross charge-offs (1)
  
$
180
    
$
146
    
$
20
    
$
98
    
$
32
    
$
56
    
$
40
    
$
572
  
                                                 
Construction
                                                
Pass
  
$
41,841
    
$
51,289
    
$
6,001
    
$
1,043
    
$
1,106
    
$
—
    
$
—
    
$
101,280
  
Special mention
    
—
      
—
      
—
      
—
      
—
      
—
      
—
      
—
  
Substandard
    
—
      
—
      
670
      
—
      
—
      
—
      
—
      
670
  
Total construction loans
  
$
41,841
    
$
51,289
    
$
6,671
    
$
1,043
    
$
1,106
    
$
—
    
$
—
    
$
101,950
  
Year-to-date gross charge-offs
   $
—     $
—     $
—     $
—     $
—     $
—     $
—     $
—  

 
(1)
Includes $180 thousand in charged-off demand deposit overdrafts reported as 2025 originations.

13
Table of Contents
                Term Loans              
               
Amortized Cost Basis by Origination Year
December 31, 2024
              
(Dollars in thousands)                                                

 
2024
    
2023
    
2022
    
2021
    
2020
    
Prior
    
Revolving
Loans
    
Total
  
                                                 
Commercial real estate
                                                
Pass
  
$
164,205
    
$
233,047
    
$
300,828
    
$
126,548
    
$
43,628
    
$
175,319
    
$
6,417
    
$
1,049,992
  
Special mention
    
—
      
—
      
—
      
32,243
      
441
      
5,464
      
483
      
38,631
  
Substandard
    
—
      
—
      
147
      
25,164
      
3,125
      
2,004
      
—
      
30,440
  
Total commercial real estate loans
  
$
164,205
    
$
233,047
    
$
300,975
    
$
183,955
    
$
47,194
    
$
182,787
    
$
6,900
    
$
1,119,063
  
Year-to-date gross charge-offs
  
$
—
    
$
—
    
$
65
    
$
—
    
$
—
    
$
22
    
$
—
    
$
87
  
 
                                                                
Commercial - specialized
                                                                
Pass
  
$
103,288
    
$
60,881
    
$
37,940
    
$
41,721
    
$
15,678
    
$
28,488
    
$
98,092
    
$
386,088
  
Special mention
    
214
      
—
      
1,600
      
—
      
—
      
—
      
—
      
1,814
  
Substandard
    
510
      
—
      
85
      
84
      
297
      
77
      
—
      
1,053
  
Total commercial - specialized loans
  
$
104,012
    
$
60,881
    
$
39,625
    
$
41,805
    
$
15,975
    
$
28,565
    
$
98,092
    
$
388,955
  
Year-to-date gross charge-offs
  
$
—
    
$
—
    
$
—
    
$
—
    
$
—
    
$
—
    
$
—
    
$
—
  
                                                                 
Commercial - general
                                                                
Pass
  
$
107,947
    
$
72,500
    
$
109,808
    
$
65,564
    
$
29,808
    
$
82,909
    
$
78,321
    
$
546,857
  
Special mention
    
—
      
—
      
960
      
554
      
—
      
499
      
200
      
2,213
  
Substandard
    
98
      
463
      
2,405
      
4,427
      
19
      
805
      
84
      
8,301
  
Total commercial - general loans
  
$
108,045
    
$
72,963
    
$
113,173
    
$
70,545
    
$
29,827
    
$
84,213
    
$
78,605
    
$
557,371
  
Year-to-date gross charge-offs
  
$
—
    
$
199
    
$
466
    
$
17
    
$
—
    
$
134
    
$
266
    
$
1,082
  
                                                                 
Consumer 1-4 family residential
                                                                
Pass
  
$
87,266
    
$
101,022
    
$
150,358
    
$
91,929
    
$
49,057
    
$
73,730
    
$
5,800
    
$
559,162
  
Special mention
    
—
      
—
      
—
      
—
      
—
      
—
      
—
      
—
  
Substandard
    
—
      
810
      
284
      
1,057
      
225
      
4,812
      
50
      
7,238
  
Total consumer 1-4 family residential loans
  
$
87,266
    
$
101,832
    
$
150,642
    
$
92,986
    
$
49,282
    
$
78,542
    
$
5,850
    
$
566,400
  
Year-to-date gross charge-offs
  
$
—
    
$
—
    
$
121
    
$
51
    
$
—
    
$
3
    
$
—
    
$
175
  
                                                                 
Consumer auto loans
                                                                
Pass
  
$
70,621
     $
72,009
     $
76,412
     $
25,869
     $
7,293
     $
1,931
     $
—
     $
254,135
  
Special mention
    
—
      
—
      
—
      
—
      
—
      
—
      
—
      
—
  
Substandard
    
21
      
28
      
82
      
179
      
4
      
25
      
—
      
339
  
Total consumer auto loans
  
$
70,642
    
$
72,037
    
$
76,494
    
$
26,048
    
$
7,297
    
$
1,956
    
$
—
    
$
254,474
  
Year-to-date gross charge-offs
  
$
23
    
$
386
    
$
519
    
$
198
    
$
25
    
$
35
    
$
—
    
$
1,186
  
                                                                 
Consumer other consumer
                                                                
Pass
  
$
23,665
    
$
12,969
    
$
14,790
    
$
5,477
    
$
1,232
    
$
5,382
    
$
1,324
    
$
64,839
  
Special mention
    
—
      
—
      
—
      
—
      
—
      
—
      
—
      
—
  
Substandard
    
—
      
—
      
8
      
47
      
—
      
42
      
—
      
97
  
Total consumer other consumer loans
  
$
23,665
    
$
12,969
    
$
14,798
    
$
5,524
    
$
1,232
    
$
5,424
    
$
1,324
    
$
64,936
  
Year-to-date gross charge-offs (1)
  
$
469
    
$
308
    
$
245
    
$
43
    
$
29
    
$
145
    
$
18
    
$
1,257
  
                                                 
Construction
                                                
Pass
  
$
65,920
    
$
30,572
    
$
2,172
    
$
2,630
    
$
—
    
$
—
    
$
891
    
$
102,185
  
Special mention
    
—
      
—
      
—
      
—
      
—
      
—
      
—
      
—
  
Substandard
    
—
      
1,190
      
480
      
—
      
—
      
—
      
—
      
1,670
  
Total construction loans
  
$
65,920
    
$
31,762
    
$
2,652
    
$
2,630
    
$
—
    
$
—
    
$
891
    
$
103,855
  
Year-to-date gross charge-offs
  
$
—
    
$
315
    
$
—
    
$
—
    
$
—
    
$
—
    
$
—
    
$
315
  

 
(1)
 Includes $457 thousand in charged-off demand deposit overdrafts reported as 2024 originations.


14
Table of Contents
Occasionally, the Company modifies loans to borrowers in financial distress by providing principal forgiveness, term extensions, an other than insignificant payment delay, or interest rate reduction.  When principal forgiveness is provided, the amount of forgiveness is charged-off against the allowance for credit losses. Typically, one type of concession, such as term extension, is granted initially. If the borrower continues to experience financial difficulty, another concession, such as principal forgiveness, may be granted. In some cases, the Company provides multiple types of concessions on one loan. For the loans included in the “combination” columns below, multiple types of modifications have been made on the same loan within the current reporting period.

The following tables present the amortized cost basis of loans at June 30, 2025 and 2024 that were both experiencing financial difficulty and modified during the periods indicated, by class and by type of modification.  The percentage of the amortized cost basis of loans that were modified to borrowers in financial distress as compared to the amortized cost basis of each class of financing receivable is also presented below (dollars in thousands):

   
Payment
Delay
    
Term
Extension
    
Rate 
Reduction
    
Term
Extension
and
Payment
 Delay
    
Term
Extension
and Interest
Rate
Reduction
    
Payment
Delay and
Interest
Rate
Reduction
    
Payment
Delay, Term
Extension,
and Interest
Rate
Reduction
    
% of Total
Class of
Financing
Receivable
  
Three Months Ended June 30, 2025
                                                 
Commercial real estate
  
$
—
    
$
—
     $
—    
$
—
    
$
—
    
$
—
    
$
—
      
0.00
%
Commercial - specialized
    
—
      
—
       —      
38
      
—
      
—
      
—
      
0.01
%
Commercial - general
    
—
      
—
       —      
50
      
—
      
—
      
10
      
0.01
%
Consumer:
                                                                
1-4 family
    
—
      
—
       —      
—
      
—
      
—
      
—
      
0.00
%
Auto loans
    
44
      
—
       —      
—
      
—
      
—
      
3
      
0.02
%
Other consumer
    
—
      
—
       —      
17
      
—
      
—
      
—
      
0.03
%
Construction
    
—
      
—
       —      
529
      
—
      
—
      
—
      
0.52
%
   
$
44
    
$
—
     $
—    
$
634
    
$
—
    
$
—
    
$
13
      
0.02
%
Three Months Ended June 30, 2024
                                                                
Commercial real estate
  
$
—
    
$
67
     $
—    
$
—
    
$
—
    
$
—
    
$
—
      
0.01
%
Commercial - specialized
    
15
      
—
       —      
—
      
—
      
—
      
—
      
0.00
%
Commercial - general
    
—
      
441
       —      
—
      
—
      
—
      
—
      
0.08
%
Consumer:
                                                                
1-4 family
    
—
      
—
       —      
—
      
—
      
—
      
—
      
0.00
%
Auto loans
    
—
      
—
       —      
—
      
—
      
—
      
—
      
0.00
%
Other consumer
    
—
      
—
       —      
—
      
—
      
—
      
—
      
0.00
%
Construction
    
—
      
—
       —      
—
      
—
      
—
      
—
      
0.00
%
   
$
15
    
$
508
     $
—    
$
—
    
$
—
    
$
—
    
$
—
      
0.02
%
Six Months Ended June 30, 2025
                                                                
Commercial real estate
  
$
—
    
$
—
     $
—    
$
—
    
$
—
    
$
—
    
$
—
      
0.00
%
Commercial - specialized
    
—
      
—
       —      
38
      
—
      
—
      
—
      
0.01
%
Commercial - general
    
—
      
260
       —      
93
      
—
      
—
      
10
      
0.06
%
Consumer:
                                                                
1-4 family
    
—
      
—
       —      
—
      
—
      
—
      
—
      
0.00
%
Auto loans
    
44
      
—
       —      
—
      
—
      
—
      
3
      
0.02
%
Other consumer
    
—
      
—
       —      
17
      
—
      
—
      
—
      
0.03
%
Construction
    
—
      
—
       —      
529
      
—
      
—
      
—
      
0.52
%
   
$
44
    
$
260
     $
—    
$
677
    
$
—
    
$
—
    
$
13
      
0.03
%
Six Months Ended June 30, 2024
                                                                
Commercial real estate
  
$
—
    
$
67
     $
—    
$
—
    
$
—
    
$
—
    
$
—
      
0.01
%
Commercial - specialized
    
15
      
—
       —      
—
      
—
      
—
      
—
      
0.00
%
Commercial - general
    
—
      
441
       —      
—
      
35
      
—
      
—
      
0.09
%
Consumer:
                                                                
1-4 family
    
—
      
—
       —      
—
      
—
      
—
      
—
      
0.00
%
Auto loans
    
—
      
—
       —      
—
      
—
      
—
      
—
      
0.00
%
Other consumer
    
—
      
—
       —      
—
      
—
      
—
      
—
      
0.00
%
Construction
    
—
      
—
       —      
—
      
—
      
—
      
—
      
0.00
%
   
$
15
    
$
508
     $
—    
$
—
    
$
35
    
$
—
    
$
—
      
0.02
%

15
Table of Contents
The following table presents the financial effects of the loan modifications presented above to borrowers experiencing financial difficulty during the periods indicated below (dollars in thousands):

   
Weighted-
Average
Interest Rate
Reduction
    
Weighted-
Average
Term
Extension
(Months)
  
Three Months Ended June 30, 2025
            
Commercial real estate
    
0.00
%
    
—
  
Commercial - specialized
    
0.00
%
    
14
  
Commercial - general
    
1.00
%
    
40
  
Consumer:
                
1-4 Family residential
    
0.00
%
    
—
  
Auto loans
    
1.20
%
    
50
  
Other consumer
    
0.00
%
    
5
  
Construction
    
0.00
%
    
3
  
                 
Three Months Ended June 30, 2024
                
Commercial real estate
    
0.00
%
    
12
  
Commercial - specialized
    
0.00
%
    
—
  
Commercial - general
    
0.00
%
    
13
  
Consumer:
                
1-4 Family residential
    
0.00
%
    
—
  
Auto loans
    
0.00
%
    
—
  
Other consumer
    
0.00
%
    
—
  
Construction
    
0.00
%
    
—
  
                 
Six Months Ended June 30, 2025
                
Commercial real estate
    
0.00
%
    
—
  
Commercial - specialized
    
0.00
%
    
14
  
Commercial - general
    
1.00
%
    
36
  
Consumer:
                
1-4 Family residential
    
0.00
%
    
—
  
Auto loans
    
1.20
%
    
50
  
Other consumer
    
0.00
%
    
5
  
Construction
    
0.00
%
    
3
  
                 
Six Months Ended June 30, 2024
                
Commercial real estate
    
0.00
%
    
12
  
Commercial - specialized
    
0.00
%
    
—
  
Commercial - general
    
1.75
%
    
15
  
Consumer:
                
1-4 Family residential
    
0.00
%
    
—
  
Auto loans
    
0.00
%
    
—
  
Other consumer
    
0.00
%
    
—
  
Construction
    
0.00
%
    
—
  

16
Table of Contents
The Company closely monitors the performance of loans that are modified to borrowers experiencing financial difficulty to understand the effectiveness of its modification efforts. The following presents the performance of such loans that have been modified in the last twelve months at the dates indicated (dollars in thousands):

 
   Current    
30-89 Days
Past Due
    
90 Days or
More Past Due
    
Nonaccrual
  
June 30, 2025
                        
Commercial real estate
   $ 63    
$
45
    
$
27
    
$
150
  
Commercial - specialized
     —      
38
      
—
      
—
  
Commercial - general
     605      
—
      
—
      
139
  
Consumer:
                                
1-4 Family residential
     185      
262
      
60
      
815
  
Auto loans
     48      
—
      
—
      
—
  
Other consumer
     17      
—
      
—
      
—
  
Construction
     529      
—
      
—
      
141
  
 
   $ 1,447    
$
345
    
$
87
    
$
1,245
  

June 30, 2024
                        
Commercial real estate
  
$
2,129
    
$
—
    
$
—
    
$
—
  
Commercial - specialized
    
—
      
—
      
—
      
—
  
Commercial - general
    
577
      
—
      
—
      
124
  
Consumer:
                                
1-4 Family residential
    
900
      
22
      
—
      
5
  
Auto loans
    
77
      
—
      
—
      
—
  
Other consumer
    
—
      
—
      
—
      
—
  
Construction
    
1,324
      
—
      
—
      
—
  
   
$
5,007
    
$
22
    
$
—
    
$
129
  

During the three months ended June 30, 2025, the Company had $865 thousand in loans made to borrowers experiencing financial difficulty that were modified during the last twelve months that subsequently defaulted. During the six months ended June 30, 2025, the Company had $923 thousand in loans made to borrowers experiencing financial difficulty that were modified during the last twelve months that subsequently defaulted. Payment default is defined as movement to nonperforming status, foreclosure, or charge-off.

During the three months ended June 30, 2024, the Company had no loans made to borrowers experiencing financial difficulty that were modified during the last twelve months that subsequently defaulted. During the six months ended June 30, 2024, the Company had $31 thousand in loans made to borrowers experiencing financial difficulty that were modified during the last twelve months that subsequently defaulted.

4.  GOODWILL AND INTANGIBLES

The Company had goodwill of $19.3 million at June 30, 2025 and December 31, 2024.

Other intangible assets, which consisted of core deposit intangibles at the dates indicated are summarized below (dollars in thousands):

 
June 30,
2025
    
December 31,
2024
  
Amortized intangible assets:
            
Core deposit intangible
  
$
6,679
    
$
6,679
  
Less: Accumulated amortization
    
(5,262
)
    
(4,959
)
Other intangible assets, net
  
$
1,417
    
$
1,720
  


5.  MORTGAGE SERVICING RIGHTS

The following table reflects the changes in fair value of the Company’s mortgage servicing rights asset included in the Consolidated Balance Sheets, and other information related to the serviced portfolio, for the periods or dates presented (dollars in thousands):

   
Three Months Ended
June 30,
    
Six Months Ended
June 30,
  
   
2025
    
2024
    
2025
    
2024
  
Beginning balance
  
$
24,906
    
$
26,843
    
$
26,292
    
$
26,569
  
Additions
    
384
      
263
      
583
      
482
  
Valuation adjustment
    
(156
)
    
(680
)
    
(1,741
)
    
(625
)
Ending balance
  
$
25,134
    
$
26,426
    
$
25,134
    
$
26,426
  

   
June 30,
    
December 31,
  
   
2025
    
2024
  
Mortgage loans serviced for others
  
$
1,859,358
    
$
1,903,854
  
Mortgage servicing rights assets as a percentage of serviced mortgage loans
    
1.35
%
    
1.38
%

The following table reflects the key assumptions used in measuring the fair value of the Company’s mortgage servicing rights as of the dates indicated:

   
June 30,
    
December 31,
  
   
2025
    
2024
  
Weighted average constant prepayment rate
    
7.31
%
    
7.16
%
Weighted average discount rate
    
10.19
%
    
10.17
%
Weighted average life in years
    
7.98
      
8.09
  

6.  BORROWING ARRANGEMENTS

Subordinated Debt
In December 2018, the Company issued $14.1 million of subordinated notes that have a maturity date of December 2030 and a weighted average fixed rate of 6.41% for the first seven years. After the fixed rate period, these notes will float at the Wall Street Journal prime rate, with a floor of 4.0% and a ceiling of 7.5%. These notes pay interest quarterly, are unsecured, and may be called by the Company at any time after the remaining maturity is five years or less. Additionally, these notes are intended to qualify for Tier 2 capital treatment, subject to regulatory limitations.

On September 29, 2020, the Company issued $50.0 million in subordinated notes. Proceeds were reduced by approximately $926 thousand in debt issuance costs. These notes have a maturity date of September 2030 with a fixed rate of 4.50% for the first five years. After the expiration of the fixed rate period, these notes will reset quarterly at a variable rate equal to the then current three-month Secured Overnight Financing Rate (“SOFR”), as published by the Federal Reserve Bank of New York, plus 438 basis points. These notes pay interest semi-annually, are unsecured, and may be called by the Company at any time after the remaining maturity is five years or less. Additionally, these notes are intended to qualify for Tier 2 capital treatment, subject to regulatory limitations.

As of June 30, 2025, the total amount of subordinated notes outstanding was $64.1 million less approximately $46 thousand of remaining debt issuance costs. As of December 31, 2024, the total amount of subordinated notes outstanding was $64.1 million less approximately $139 thousand of remaining debt issuance costs for a total balance of $64.0 million.

17
Table of Contents
Notes Payable and Other Borrowings
As of June 30, 2025 and December 31, 2024, City Bank had no outstanding advances from the Federal Home Loan Bank of Dallas (“FHLB”).

As of June 30, 2025, City Bank had $1.4 million in short-term borrowings. There were no short-term borrowings at December 31, 2024.

7.  STOCK-BASED COMPENSATION

Equity Incentive Plan
The 2019 Equity Incentive Plan (“Plan”) was approved by the Company’s Board of Directors on January 16, 2019 and by its shareholders on March 6, 2019. The purpose of the Plan is to: (i) attract and retain the best available personnel for positions of substantial responsibility, (ii) provide additional incentive to employees, directors and consultants, and (iii) promote the success of the Company’s business. The Plan permits the grant of incentive stock options, non-statutory stock options, stock appreciation rights, restricted stock, restricted stock units, performance units, performance shares, and other stock-based awards. The maximum aggregate number of shares of common stock that may be issued pursuant to all awards under the Plan was 5,413,184 at June 30, 2025. The maximum aggregate number of shares that may be issued under the Plan may be increased annually by up to 3% of the total issued and outstanding common shares of the Company at the beginning of each fiscal year.

The fair value of each option award is estimated on the date of grant using the Black-Scholes model that uses the assumptions noted in the table below. Expected volatilities are based on historical volatilities of the Company’s common stock and similar peer company averages. The Company uses historical data to estimate option exercise and post-vesting termination behavior. The expected term of options granted represents the period of time that options granted are expected to be outstanding, which takes in to account that the options are not transferable. The risk-free interest rate for the expected term of the option is based on the U.S. Treasury yield curve in effect at the time of the grant.

Options
A summary of activity in the Plan during the period indicated is presented in the table below (dollars in thousands, except per share data):


 
Number
of Shares
    
Weighted-Average
Exercise Price
  
Weighted-Average
Remaining Contractual
Life in Years
    
Aggregate
Intrinsic Value
  
Six Months Ended June 30, 2025
                      
Outstanding at beginning of year:
    
1,175,787
  
$
17.83
      
$
21,408
Granted
    
30,024
    
34.01
        
61
Exercised
    
(32,333
)
    
18.60
      
(564
)
Forfeited
    
—
    
—
        
—
Expired
    
—
    
—
        
—
                       
Balance at end of period
   
1,173,478
  
$
18.23
      
4.28
  
$
20,905
                           
Exercisable at end of period
    
1,094,490
  
$
17.33
      
3.98
  
$
20,478
                             
Vested at end of period
    
1,094,490
  
$
17.33
      
3.98
  
$
20,478

A summary of assumptions used to calculate the fair values of the awards granted during the periods noted is presented below:

 
Six Months Ended
June 30,
  
 
2025
    
2024
  
Expected volatility
    
41.21
%
    
40.45
%
Expected dividend yield
    
1.80
%
    
1.80
%
Expected term (years)
    
6.1
     
6.1
 
Risk-free interest rate
    
4.43
%
    
3.94
%
Weighted average grant date fair value
   $
13.35
     $
11.10
  

The total intrinsic value of options exercised during the six months ended June 30, 2025 and 2024 was $507 thousand and $52 thousand, respectively.
18
Table of Contents
Restricted Stock Awards and Units
A summary of activity in the Plan during the period indicated is presented in the table below:

 
Number
of Shares
    
Weighted-Average
Grant Date
Fair Value
  
Six Months Ended June 30, 2025
            
Outstanding at beginning of year:
    
187,895
    
$
26.51
  
Granted
    
73,488
      
34.30
  
Vested
    
(18,271
)
    
29.86
  
Forfeited
    
—
   
—
  
                 
Balance at end of period
   
243,112
    
$
28.61
  

Restricted stock units granted under the Plan typically vest from one to four years, but vesting periods may vary. Compensation expense for these grants will be recognized over the vesting period of the awards based on the fair value of the stock at the issue date. The total fair value of restricted stock units vested during each of the six months ended June 30, 2025 and 2024 was $546 thousand and $643 thousand, respectively.

For the three months ended June 30, 2025 and 2024 the Company recorded stock-based compensation expense related to the Plan of $722 thousand and $657 thousand, respectively. For the six months ended June 30, 2025 and 2024 the Company recorded stock-based compensation expense related to the Plan of $1.3 million and $1.1 million, respectively.

The total unrecognized compensation cost for the awards outstanding under the Plan at June 30, 2025 was $4.9 million and will be recognized over a weighted average remaining period of 1.74 years.

Employee Stock Purchase Plan – The Company maintains the South Plains Financial, Inc. 2023 Employee Stock Purchase Plan (the “ESPP”) offering eligible employees an opportunity to purchase shares of Company common stock at a 15% discount from the lesser of fair market value on the first or last day of each six-month offering period, beginning August 1, 2024. The ESPP provides for the purchase of up to an aggregate of one million shares of the Company’s common stock by the employees. A maximum of 1,200 shares per employee may be purchased per offering period. The ESPP benefit is treated as compensation to the employee, and the compensation expense will be recognized over the service period based on the grant date fair value of the rights determined at the beginning of the purchase period, adjusted for forfeitures and certain modifications. Stock-based compensation expense related to the ESPP was $32 thousand and $65 thousand for the three and six months ended June 30, 2025, respectively. At June 30, 2025, there was $11 thousand of total unrecognized compensation expense related to estimated ESPP shares. These costs are expected to be recognized over a period of one month. As of June 30, 2025, 8,714 shares were issued under the ESPP.

A summary of assumptions used to calculate the grant date fair value of the ESPP rights for the period indicated is presented below:

   
Six Months Ended
June 30, 2025
  
Expected volatility
  
31.31% to 36.08%
  
Expected dividend yield
  
1.70% to 1.89%
  
Expected term (years)
    
0.5
  
Risk-free interest rate
  
4.24% to 5.02%
  

8.  OFF-BALANCE-SHEET ACTIVITIES, COMMITMENTS AND CONTINGENCIES

Financial instruments with off-balance-sheet risk - The Company is a party to financial instruments with off-balance-sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments include commitments to extend credit and standby letters of credit. Such commitments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the Company’s consolidated financial statements. The Company’s exposure to credit loss is represented by the contractual amount of these commitments. The Company follows the same credit policies in making commitments as it does for recorded instruments.

Financial instruments whose contract amounts represent credit risk outstanding at the dates indicated follow (dollars in thousands):

 
June 30,
2025
    
December 31,
2024
  
Commitments to grant loans and unfunded commitments under lines of credit
  
$
557,466
    
$
537,688
  
Standby letters of credit
    
12,531
      
18,696
  

Commitments to grant loans and extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. The commitments for lines of credit may expire without being drawn upon. Therefore, the total commitment amounts do not necessarily represent future cash requirements. The amount of collateral obtained, if it is deemed necessary by the Company, is based on management’s credit evaluation of the customer.

19
Table of Contents
Standby letters of credit are conditional commitments issued by the Company to guarantee the performance of a customer to a third party. Those letters of credit are primarily issued to support public and private borrowing arrangements. Essentially all letters of credit issued have expiration dates within one year. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers. The Company requires collateral supporting those commitments if deemed necessary.

FHLB Letters of Credit - The Company may use FHLB letters of credit to pledge to certain public deposits. At June 30, 2025 there were no FHLB letters of credit outstanding. At December 31, 2024 there were $75.0 million of FHLB letters or credit outstanding.
Litigation – The Company is a defendant in legal actions arising from time to time in the normal course of business. Management believes that the ultimate liability, if any, arising from these matters will not materially affect the consolidated financial statements, based on information known as of the date the consolidated financial statements were issued.

9.  CAPITAL AND REGULATORY MATTERS

The Company and its bank subsidiary are subject to various regulatory capital requirements administered by its banking regulators. Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Company’s and its bank subsidiary’s financial statements. Under capital guidelines and the regulatory framework for prompt corrective action, the Company and its bank subsidiary must meet specific capital guidelines that involve quantitative measures of their assets, liabilities, and certain off-balance-sheet items as calculated under regulatory accounting practices. The capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors. Prompt corrective action provisions are not applicable to bank holding companies.

Quantitative measures established by regulation to ensure capital adequacy require the Company and its bank subsidiary to maintain minimum amounts and ratios (set forth in the following table) of total and Tier 1 capital (as defined in the regulations) to risk-weighted assets (as defined) and of Tier 1 capital (as defined) to average assets (as defined). Management believes, as of June 30, 2025 and December 31, 2024, that the Company and its bank subsidiary met all capital adequacy requirements to which they are subject.

As of June 30, 2025 and December 31, 2024, the Company met the definition of “well-capitalized” under the applicable regulations of the Board of Governors of the Federal Reserve System and the bank subsidiary was “well capitalized” under the FDIC’s regulatory framework for prompt corrective action and the Basel III capital guidelines. To be categorized as well capitalized, an institution must maintain minimum total risk-based, Tier 1 risk-based and Tier 1 leverage ratios as set forth in the following tables. There are no conditions or events since June 30, 2025 that management believes have changed the bank subsidiary’s category.

The Company and its bank subsidiary’s actual capital amounts and ratios at the dates indicated follows (dollars in thousands):

 
Actual
    
Minimum Required
Under BASEL III
    
To Be Well Capitalized
Under Prompt Corrective
Action Provisions
  
   
Amount
    
Ratio
    
Amount
    
Ratio
    
Amount
    
Ratio
  
June 30, 2025
                                    
Total Capital to Risk Weighted Assets:
                                    
Consolidated
  
$
647,191
      
18.17
%
  
$
374,000
      
10.50
%
    
N/A
      
N/A
  
City Bank
    
527,722
      
14.82
%
    
373,959
      
10.50
%
  
$
356,151
      
10.00
%
                                                 
Tier 1 Capital to Risk Weighted Assets:
                                                
Consolidated
    
538,588
      
15.12
%
    
302,762
      
8.50
%
    
N/A
      
N/A
  
City Bank
    
483,178
      
13.57
%
    
302,728
      
8.50
%
    
284,921
      
8.00
%
                                                 
Common Equity Tier 1 to Risk Weighted Assets:
                                                
Consolidated
    
493,588
      
13.86
%
    
249,334
      
7.00
%
    
N/A
      
N/A
  
City Bank
    
483,178
      
13.57
%
    
249,306
      
7.00
%
    
231,498
      
6.50
%
                                                 
Tier 1 Capital to Average Assets:
                                                
Consolidated
    
538,588
      
12.12
%
    
178,599
      
4.00
%
    
N/A
      
N/A
  
City Bank
    
483,178
      
10.88
%
    
178,520
      
4.00
%
    
222,113
      
5.00
%
                                                 
December 31, 2024
                                                
Total Capital to Risk Weighted Assets:
                                                
Consolidated
  
$
631,713
      
17.86
%
  
$
371,426
      
10.50
%
    
N/A
      
N/A
  
City Bank
    
520,788
      
14.73
%
    
371,351
      
10.50
%
  
$
353,667
      
10.00
%
                                                 
Tier 1 Capital to Risk Weighted Assets:
                                                
Consolidated
    
523,535
      
14.80
%
    
300,678
      
8.50
%
    
N/A
      
N/A
  
City Bank
    
476,574
      
13.48
%
    
300,617
      
8.50
%
    
282,934
      
8.00
%
                                                 
Common Equity Tier 1 to Risk Weighted Assets:
                                                
Consolidated
    
478,535
      
13.53
%
    
247,617
      
7.00
%
    
N/A
      
N/A
  
City Bank
    
476,574
      
13.48
%
    
247,567
      
7.00
%
    
229,884
      
6.50
%
                                                 
Tier 1 Capital to Average Assets:
                                                
Consolidated
    
523,535
      
12.04
%
    
174,777
      
4.00
%
    
N/A
      
N/A
  
City Bank
    
476,574
      
10.96
%
    
174,710
      
4.00
%
    
217,336
      
5.00
%

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Table of Contents
The Company is subject to the Basel III capital ratio requirements which include a “capital conservation buffer” of 2.50% above the regulatory minimum risk-based capital adequacy requirements. This 2.50% capital conservation buffer is reflected in the table above. Both the Company’s and the Bank’s actual ratios, as outlined in the table above, exceeded the Basel III risk-based capital requirement with the capital conservation buffer as of June 30, 2025.

State banking regulations place certain restrictions on dividends paid by banks to their shareholders. Dividends paid by the Company’s bank subsidiary would be prohibited if the effect thereof would cause the bank subsidiary’s capital to be reduced below applicable minimum capital requirements.

10.  DERIVATIVES

The Company utilizes interest rate swap agreements as part of its asset-liability management strategy to help manage its interest rate risk position. These interest rate swaps are designated and qualify as fair value hedges and are entered into to reduce exposure to changes in fair value of fixed rate financial instruments. The notional amounts of the interest rate swaps do not represent amounts exchanged by the parties. The amount exchanged is determined by reference to the notional amounts and the other terms of the individual interest rate swap agreements.

The following table reflects the changes in fair value hedges included in the Consolidated Statements of Comprehensive Income for the periods indicated (dollars in thousands):


 
 
Three Months Ended
  
       
June 30,
  
Interest Rate Contracts
  
Location
  
2025
    
2024
  
Change in fair value of interest rate swaps hedging investment securities
  
Other noninterest expense
  
$
(1,668
)
  
$
(447
)
Change in fair value of hedged investment securities
  
Other noninterest expense
    
1,573
      
463
  
Change in fair value of interest rate swaps hedging fixed rate loans
  Interest income - loans
  
(43 )  
(32 )
Change in fair value of hedged fixed rate loans
  Interest income - loans
     56       37  


 
 
Six Months Ended
  
       
June 30,
  
Interest Rate Contracts
  
Location
  
2025
    
2024
  
Change in fair value of interest rate swaps hedging investment securities
  
Other noninterest expense
  
$
(4,104
)
  
$
865
  
Change in fair value of hedged investment securities
  
Other noninterest expense
    
3,825
      
(920
)
Change in fair value of interest rate swaps hedging fixed rate loans
  Interest income - loans
  
(102 )  
205  
Change in fair value of hedged fixed rate loans
  Interest income - loans
     127       (116 )

The following table reflects the fair value hedges included in the Consolidated Balance Sheets at the dates indicated (dollars in thousands):

   
June 30, 2025
    
December 31, 2024
  
   
Notional
Amount
    
Fair
Value
    
Notional
Amount
    
Fair
Value
  
Included in other liabilities:
                        
Interest rate swaps related to fixed rate loans
  
$
—
    
$
—
    
$
—
    
$
—
  
Interest rate swaps related to state and municipal securities
    
—
      
—
      
—
      
—
  
                                 
Included in other assets:
                                
Interest rate swaps related to fixed rate loans
  
$
8,169
    
$
103
    
$
11,803
    
$
205
  
Interest rate swaps related to state and municipal securities
    
120,700
      
11,391
      
123,760
      
15,495
  

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Mortgage banking derivatives

The net gains (losses) relating to free standing derivative instruments used for risk management are summarized below for the periods indicated (dollars in thousands):
  
                    
Three Months Ended
  
 
  
 
  
June 30,
  

  Location
   2025     2024
 
Gain (loss) on mortgage banking derivatives
  
Net gain on sales of loans
  
$
(46
)
  
$
(64
)

                   
Six Months Ended
  
 
  
  
  
June 30,
  
 
   Location
  2025     2024
 
Gain (loss) on mortgage banking derivatives
  
Net gain on sales of loans
  
$
37
    
$
244
  

The following table reflects the amount and fair value of mortgage banking derivatives in the Consolidated Balance Sheets at the dates indicated (dollars in thousands):


June 30, 2025
  
December 31, 2024
  
 
Notional
Amount
  
Fair
Value
  
Notional
Amount
  
Fair
Value
  
Included in other assets:
                
Forward contracts related to mortgage loans held for sale
  
$
—
    
$
—
    
$
16,000
    
$
76
  
Interest rate lock commitments
    
26,552
      
485
      
12,937
      
222
  
       
        
        
        
  
Included in other liabilities:
                                
Forward contracts related to mortgage loans held for sale
  
$
23,913
    
$
162
    
$
1,277
    
$
12
  

The Company had received cash collateral of $12.9 million and $17.0 million to offset asset derivative positions on its interest rate swaps at June 30, 2025 and December 31, 2024, respectively. This amount is reported in other liabilities in the Consolidated Balance Sheets. The Company had advanced $1.1 million to offset liability derivative positions on its interest rate swaps at June 30, 2025 and December 31, 2024. Additionally, the Company had advanced $270 thousand on its mortgage forward contracts at June 30, 2025 and December 31, 2024. The advanced cash collateral amounts are reported in cash and due from banks in the Consolidated Balance Sheets.

11.  EARNINGS PER SHARE

The factors used in the earnings per share computation for the periods indicated follow (dollars in thousands, except per share data):

 
Three Months Ended
June 30,
    
Six Months Ended
June 30,
  
   
2025
    
2024
    
2025
    
2024
  
Net income
  
$
14,605
    
$
11,134
    
$
26,899
    
$
22,008
  
                                 
Weighted average common shares outstanding - basic
    
16,231,627
      
16,425,360
      
16,323,236
      
16,427,640
  
Effect of dilutive securities:
                                
Stock-based compensation awards
    
655,366
      
506,717
      
650,636
      
507,758
  
Weighted average common shares outstanding - diluted
    
16,886,993
      
16,932,077
      
16,973,872
      
16,935,398
  
                                 
Basic earnings per share
  
$
0.90
    
$
0.68
    
$
1.65
    
$
1.34
  
Diluted earnings per share
  
$
0.86
    
$
0.66
    
$
1.58
    
$
1.30
  

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Table of Contents

12.  SEGMENT INFORMATION

Operating segments are components of a business about which separate financial information is available that is evaluated regularly by the chief operating decision-maker (“CODM”) in deciding how to allocate resources and in assessing performance.

The Company’s reportable banking segment is determined by its President, who is the designated CODM. City Bank is the only significant subsidiary upon which the CODM makes decisions regarding how to allocate resources and assess performance. Individual bank branches offer a group of similar services, including commercial, real estate and consumer loans, time deposits, checking and savings accounts, all with similar operating and economic characteristics. While the CODM monitors the revenue streams of the various products, services, and branch locations, operations are managed and financial performance is evaluated on a Company-wide basis. Accordingly, all of the community banking services and branch locations are considered by management to be aggregated into one reportable operating segment, banking. Loans, investments, and deposits provide the significant revenues and interest expense, provision for credit losses and salaries and employee benefits comprise the significant expenses within the banking segment. All significant revenues and expenses mentioned above are shown individually on the Consolidated Statements of Comprehensive Income.

13.  FAIR VALUE DISCLOSURES

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. A fair value measurement assumes that the transaction to sell the asset or transfer the liability occurs in the principal market for the asset or liability or, in the absence of a principal market, the most advantageous market for the asset or liability. The price in the principal (or most advantageous) market used to measure the fair value of the asset or liability is not adjusted for transaction costs. An orderly transaction is a transaction that assumes exposure to the market for a period prior to the measurement date to allow for marketing activities that are usual and customary for transactions involving such assets and liabilities; it is not a forced transaction. Market participants are buyers and sellers in the principal market that are: (i) independent, (ii) knowledgeable, (iii) able to transact and (iv) willing to transact.

Valuation techniques that are consistent with the market approach, the income approach and/or the cost approach are required by GAAP. The market approach uses prices and other relevant information generated by market transactions involving identical or comparable assets and liabilities. The income approach uses valuation techniques to convert future amounts, such as cash flows or earnings, to a single present amount on a discounted basis. The cost approach is based on the amount that currently would be required to replace the service capacity of an asset. Valuation techniques should be consistently applied. Inputs to valuation techniques refer to the assumptions that market participants would use in pricing the asset or liability. Inputs may be observable, meaning those that reflect the assumptions market participants would use in pricing the asset or liability developed based on market data obtained from independent sources, or unobservable, meaning those that reflect the reporting entity’s own assumptions about the assumptions market participants would use in pricing the asset or liability developed based on the best information available in the circumstances. The fair value hierarchy for valuation inputs gives the highest priority to quoted prices in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. The fair value hierarchy is as follows:

●
Level 1 Inputs - Unadjusted quoted prices in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date.
●
Level 2 Inputs - Inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. These might include quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability (such as interest rates, volatilities, prepayment speeds, credit risks, etc.) or inputs that are derived principally from or corroborated by market data by correlation or other means.
●
Level 3 Inputs - Significant unobservable inputs for determining the fair values of assets or liabilities that reflect an entity’s own assumptions about the assumptions that market participants would use in pricing the assets or liabilities.

The following table summarizes fair value measurements as of the dates indicated below (dollars in thousands):

 
Level 1
    
Level 2
    
Level 3
    
Total
  
June 30, 2025
                        
Assets (liabilities) measured at fair value on a recurring basis:
                        
Securities available for sale:
                        
State and municipal
  
$
—
    
$
165,591
    
$
—
    
$
165,591
  
Residential mortgage-backed securities
    
—
      
266,874
      
—
      
266,874
  
Commercial mortgage-backed securities
     —       41,220       —       41,220  
Commercial collateralized mortgage obligations
    
—
      
70,651
      
—
      
70,651
  
Asset-backed and other amortizing securities
    
—
      
14,016
      
—
      
14,016
  
Other securities
    
—
      
11,648
      
—
      
11,648
  
Loans held for sale (mandatory)
    
—
      
15,020
      
—
      
15,020
  
Mortgage servicing rights
    
—
      
—
      
25,134
      
25,134
  
Asset derivatives
    
—
      
11,979
      
—
      
11,979
  
Liability derivatives
    
—
      
(162
)
    
—
      
(162
)
                                 
Assets measured at fair value on a non-recurring basis:
                                
Loans held for investment
    
—
      
—
      
5,661
      
5,661
  
                                 
December 31, 2024
                                
Assets (liabilities) measured at fair value on a recurring basis:
                                
Securities available for sale:
                                
State and municipal
  
$
—
    
$
173,297
    
$
—
    
$
173,297
  
Residential mortgage-backed securities
    
—
      
264,096
      
—
      
264,096
  
Commercial mortgage-backed securities
     —       40,360       —       40,360  
Commercial collateralized mortgage obligations
    
—
      
73,483
      
—
      
73,483
  
Asset-backed and other amortizing securities
    
—
      
14,581
      
—
      
14,581
  
Other securities
    
—
      
11,423
      
—
      
11,423
  
Loans held for sale (mandatory)
    
—
      
13,791
      
—
      
13,791
  
Mortgage servicing rights
    
—
      
—
      
26,292
      
26,292
  
Asset derivatives
    
—
      
15,998
      
—
      
15,998
  
Liability derivatives
    
—
      
(12
)
    
—
      
(12
)
                                 
Assets measured at fair value on a non-recurring basis:
                                
Loans held for investment
    
—
      
—
      
20,566
      
20,566
  

23
Table of Contents
Securities – Fair value is calculated based on market prices of similar securities using matrix pricing. Matrix pricing is a mathematical technique commonly used to price debt securities that are not actively traded.

Mortgage servicing rights – Mortgage servicing rights are reported at fair value using Level 3 inputs. The mortgage servicing rights asset is valued by projecting net servicing cash flows, which are then discounted to estimate the fair value. The fair value of the mortgage servicing rights asset is impacted by a variety of factors, including prepayment speeds, default rates, and discount rates, which are significant unobservable inputs. Mortgage servicing rights are the only Level 3 asset measured at fair value on a recurring basis, see Note 5 for the Level 3 change activity for each of the three and six months ended June 30, 2025 and 2024.

Derivatives – Fair value of derivatives is based on valuation models using observable market data as of the measurement date.

Loans held for investment – Includes certain collateral-dependent loans which are reported at fair value, for which a specific allocation of the allowance for credit losses is based off of the underlying collateral, less estimated disposal costs, if repayment is expected solely from the sale of the collateral. Collateral values are estimated using Level 2 inputs based on observable market data or Level 3 inputs based on customized discounting criteria.

Fair Values of Assets Recorded on a Recurring Basis for which the Fair Value Option has been Elected

Loans held for sale (mandatory) – Loans held for sale originated for mandatory delivery are reported at fair value on a recurring basis due to the Company’s election to adopt fair value accounting treatment for these assets. This election allows for a more effective offset of the changes in fair values of the assets and the derivative instruments used to economically hedge them without the burden of complying with the requirements for hedge accounting under ASC Topic 815, Derivatives and Hedging. For assets for which the fair value option has been elected, the earned current contractual interest payment is recognized in interest income, loan origination costs and fees on fair value option loans are recognized in earnings as incurred and not deferred. At June 30, 2025, and December 31, 2024, there were no gains or losses recorded attributable to changes in instrument-specific credit risk. Fair value is determined using quoted prices for similar assets, adjusted for specific attributes of that loan. At June 30, 2025 and December 31, 2024, the aggregate fair value of loans held for sale for mandatory delivery was $15.0 million and $13.8 million, respectively. The aggregate unpaid principal balance as of the same dates was $14.6 million and $13.5 million, respectively, representing differences between fair value and unpaid principal balance of $396 thousand and $271 thousand, respectively. The Company had no loans held for sale for mandatory delivery designated as nonaccrual or 90 days or more past due at each of June 30, 2025 and December 31, 2024.

The total fair value option impact on noninterest income for loans held for sale for mandatory delivery is included in Net gain on sales of loans in the Consolidated Statements of Comprehensive Income. For each of the three months ended June 30, 2025 and 2024, the net (gain) loss amount totaled $(75) thousand and $32 thousand, respectively. For each of the six months ended June 30, 2025 and 2024, the net (gain) loss amount totaled $(163) thousand and $(340) thousand, respectively.

24
Table of Contents
The following table presents quantitative information about recurring and non-recurring Level 3 fair value measurements at the dates indicated (dollars in thousands):

   
Fair
Value
  
Valuation
Techniques
  
Unobservable
Inputs
  
Range of
Discounts
  
June 30, 2025
                  
Non-recurring:
                  
Loans held for investment
  
$
5,661
  
Third party appraisals or inspections
  
Collateral discounts and selling costs
    
20
%
Recurring:
                      
Mortgage servicing rights
    
25,134
  
Discounted cash flows
  
Constant prepayment rate
    
7.31
%
                                     
Discount rate
    
10.19
%
                       
December 31, 2024
                      
Non-recurring:
                      
Loans held for investment
  
$
20,566
  
Third party appraisals or inspections
  
Collateral discounts and selling costs
    
20
%
Recurring:
                      
Mortgage servicing rights
    
26,292
  
Discounted cash flows
  
Constant prepayment rate
    
7.16
%
                                     
Discount rate
    
10.17
%

The estimated fair values, and related carrying amounts, of the Company’s financial instruments that are not previously disclosed in the recurring fair values section are as follows (dollars in thousands):

 
Carrying
Amount
    
Level 1
    
Level 2
    
Level 3
    
Total
Fair Value
  
                               
June 30, 2025
                              
Financial assets:
                              
Cash and cash equivalents
  
$
470,496
    
$
470,496
    
$
—
    
$
—
    
$
470,496
  
Loans held for investment, net
    
3,053,968
      
—
      
—
      
3,011,725
      
3,011,725
  
Loans held for sale (best efforts)
     2,162       —       2,207       —       2,207  
Accrued interest receivable
    
17,996
      
—
      
17,996
      
—
      
17,996
  
Short-term borrowings
    1,352       —       1,352       —       1,352  
Financial liabilities:
                                        
Deposits
    
3,738,938
      
—
      
3,738,516
      
—
      
3,738,516
  
Accrued interest payable
    
4,962
      
—
      
4,962
      
—
      
4,962
  
Junior subordinated deferrable interest debentures
    
46,393
      
—
      
34,372
      
—
      
34,372
  
Subordinated debt
    
64,054
      
—
      
62,796
      
—
      
62,796
  

December 31, 2024
                              
Financial assets:
                              
Cash and cash equivalents
  
$
359,082
    
$
359,082
    
$
—
    
$
—
    
$
359,082
  
Loans held for investment, net
    
3,011,817
      
—
      
—
      
2,937,678
      
2,937,678
  
Loans held for sale (best efforts)
     6,751       —       6,875       —       6,875  
Accrued interest receivable
    
21,687
      
—
      
21,687
      
—
      
21,687
  
Financial liabilities:
                                        
Deposits
    
3,620,876
      
—
      
3,621,106
      
—
      
3,621,106
  
Accrued interest payable
    
6,108
      
—
      
6,108
      
—
      
6,108
  
Junior subordinated deferrable interest debentures
    
46,393
      
—
      
34,285
      
—
      
34,285
  
Subordinated debt
    
63,961
      
—
      
60,969
      
—
      
60,969
  

14.  SUBSEQUENT EVENTS

Dividend Declaration

On July 16, 2025, the Company declared a cash dividend of $0.16 per share of common stock to be paid on August 11, 2025 to all shareholders of record as of the close of business on July 28, 2025.

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Table of Contents
Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of our financial condition and results of operations for the periods covered by this Quarterly Report on Form 10-Q (this “Form 10-Q”) and should be read in conjunction with our consolidated financial statements and the accompanying notes thereto included in this Form 10-Q and in our Annual Report on Form 10-K for the year ended December 31, 2024 (the “2024 Annual Report on Form 10-K”) filed with the U.S. Securities and Exchange Commission (the “SEC”) pursuant to Rule 424(b) of the Securities Act of 1933, as amended (the “Securities Act”), on March 7, 2025. Unless we state otherwise or the context otherwise requires, references in this Form 10-Q to “we,” “our,” “us” and “the Company” refer to South Plains Financial, Inc., a Texas corporation, our wholly-owned banking subsidiary, City Bank, a Texas banking association, and our other consolidated subsidiaries. References in this Form 10-Q to the “Bank” refer to City Bank.

Cautionary Notice Regarding Forward-Looking Statements

This Form 10-Q contains statements that we believe are “forward-looking statements” within the meaning of Section 27A of the Securities Act and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These forward-looking statements reflect our current views with respect to, among other things, future events and our financial performance. These statements are often, but not always, made through the use of words or phrases such as “may,” “might,” “should,” “could,” “predict,” “potential,” “believe,” “expect,” “continue,” “will,” “anticipate,” “seek,” “estimate,” “intend,” “plan,” “strive,” “projection,” “goal,” “target,” “outlook,” “aim,” “would,” “annualized” and “outlook,” or the negative version of those words or other comparable words or phrases of a future or forward-looking nature. These forward-looking statements are not historical facts, and are based on current expectations, estimates and projections about our industry, management’s beliefs and certain assumptions made by management, many of which, by their nature, are inherently uncertain and beyond our control. Accordingly, we caution you that any such forward-looking statements are not guarantees of future performance and are subject to risks, assumptions, estimates and uncertainties that are difficult to predict. Although we believe that the expectations reflected in these forward-looking statements are reasonable as of the date made, actual results may prove to be materially different from the results expressed or implied by the forward-looking statements.

There are or will be important factors that could cause our actual results to differ materially from those indicated in these forward-looking statements, including, but not limited to, the following:


 ●
potential recession in the United States and our market areas;

●
the impacts related to or resulting from uncertainty in the banking industry as a whole;

●
increased competition for deposits and related changes in deposit customer behavior;

●
the lingering inflationary pressures, and the risk of the resurgence of elevated levels of inflation, in the United States and our market areas, and its impact on market interest rates, the economy and credit quality;

●
our ability to effectively execute our expansion strategy and manage our growth, including identifying and consummating suitable acquisitions;

●
business and economic conditions, particularly those affecting our market areas, as well as the concentration of our business in such market areas;

●
adverse changes in customer spending and savings habits;

●
the impact of pandemics, epidemics, or any other health-related crisis;

●
high concentrations of loans secured by real estate located in our market areas;

●
changes in unemployment rates in the United States and our market areas;

●
risks associated with our commercial loan portfolio, including the risk for deterioration in value of the general business assets that secure such loans;

●
potential changes in the prices, values and sales volumes of commercial and residential real estate securing our real estate loans;

●
risks associated with our agricultural loan portfolio, including the heightened sensitivity to weather conditions, commodity prices, and other factors generally outside the borrowers and our control;

●
risks related to the significant amount of credit that we have extended to a limited number of borrowers and in a limited geographic area;

●
public funds deposits comprising a relatively high percentage of our deposits;

●
potential impairment on the goodwill we have recorded or may record in connection with business acquisitions;

●
our ability to maintain our reputation;

●
our ability to successfully manage our credit risk and the sufficiency of our allowance for credit losses;

●
our ability to attract, hire and retain qualified management personnel;

●
our dependence on our management team, including our ability to retain executive officers and key employees and their customer and community relationships;

●
interest rate fluctuations, which could have an adverse effect on our profitability;

●
competition from banks, credit unions and other financial services providers;

●
our ability to keep pace with technological change or difficulties we may experience when implementing new technologies;

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Table of Contents

 ●
cybersecurity risk, including cyber incidents or other failures, disruptions or breaches of our operational or security systems or infrastructure, or those of our third-party vendors or other service providers, including as a result of a cyber-attack, could impact the Company’s reputation, increase regulatory oversight, and impact the financial results of the Company;

●
our ability to maintain effective internal control over financial reporting;

●
employee error, fraudulent activity by employees or customers and inaccurate or incomplete information about our customers and counterparties;

●
increased capital requirements imposed by banking regulators, which may require us to raise capital at a time when capital is not available on favorable terms or at all;

●
our ability to maintain adequate liquidity and to raise necessary capital to fund our acquisition strategy and operations or to meet increased minimum regulatory capital levels;

●
costs and effects of litigation, investigations or similar matters to which we may be subject, including any effect on our reputation;

●
natural disasters, severe weather, acts of god, acts of war or terrorism, geopolitical instability, public health outbreaks (such as coronavirus), other international or domestic calamities, and other events beyond our control, including as a result of policies of the U.S. presidential administration or Congress;

●
a deterioration of the credit rating for United States long-term sovereign debt or uncertainty regarding United States fiscal debt, deficit and budget matters;

●
the impacts of tariffs, sanctions and other trade policies of the United States and its global trading counterparts and the resulting impact on the Company and its customers;

●
compliance with governmental and regulatory requirements, including the Dodd-Frank Act Wall Street Reform and Consumer Protection Act (“Dodd-Frank Act”), Economic Growth, Regulatory Relief, and Consumer Protection Act of 2018 (“EGRRCPA”), and others relating to banking, consumer protection, securities and tax matters;

●
changes in the laws, rules, regulations, interpretations or policies that apply to the Company’s business and operations, and any additional regulations, or repeals that may be forthcoming as a result thereof, which could cause the Company to incur additional costs and adversely affect the Company’s business environment, operations and financial results; and

●
our ability to navigate the uncertain impacts of current and future governmental monetary and fiscal policies, including the current and future policies of the Board of Governors of the Federal Reserve System (“Federal Reserve”) and as a result of initiatives of the Trump administration.

The foregoing factors should not be construed as exhaustive and should be read together with the other cautionary statements included in this Form 10-Q and the risk factors set forth in our 2024 Annual Report on Form 10-K. Because of these risks and other uncertainties, our actual future results, performance or achievements, or industry results, may be materially different from the results indicated by the forward-looking statements in this Form 10-Q. In addition, our past results of operations are not necessarily indicative of our future results. Accordingly, you should not rely on any forward-looking statements, which represent our beliefs, assumptions and estimates only as of the dates on which such forward-looking statements were made. Any forward-looking statement speaks only as of the date on which it is made, and we do not undertake any obligation to update or review any forward-looking statement, whether as a result of new information, future developments or otherwise, except as required by applicable law.

Available Information

The Company maintains an Internet web site at www.spfi.bank. The Company makes available, free of charge, on its web site (under www.spfi.bank/financials-filings/sec-filings ) the Company’s annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or Section 15(d) of the Exchange Act as soon as reasonably practicable after the Company files such material with, or furnishes it to, the SEC. The Company also makes available, free of charge, through its web site (under www.spfi.bank/corporate-governance/documents-charters ) links to the Company’s Code of Conduct and the charters for its board committees. In addition, the SEC maintains an Internet site (at www.sec.gov ) that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC.

The Company routinely posts important information for investors on its web site (under www.spfi.bank and, more specifically, under the News & Events tab at www.spfi.bank/news-events/press-releases ). The Company intends to use its web site as a means of disclosing material non-public information and for complying with its disclosure obligations under SEC Regulation FD (Fair Disclosure). Accordingly, investors should monitor the Company’s web site, in addition to following the Company’s press releases, SEC filings, public conference calls, presentations and webcasts.

The information contained on, or that may be accessed through, the Company’s web site is not incorporated by reference into, and is not a part of, this Form 10-Q.

Overview

We are a bank holding company headquartered in Lubbock, Texas, and our wholly-owned subsidiary, City Bank, is one of the largest independent banks in West Texas and has additional banking operations in the Dallas, El Paso, Greater Houston, the Permian Basin, and College Station, Texas markets, and the Ruidoso, New Mexico market. Through City Bank, we provide a wide range of commercial and consumer financial services to small and medium-sized businesses and individuals in our market areas. Our principal business activities include commercial and retail banking, along with investment, trust and mortgage services.

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Table of Contents
Results of Operations

We had net income of $14.6 million, or $0.86 per diluted common share, for the three months ended June 30, 2025, compared to net income of $11.1 million, or $0.66 per diluted common share for the three months ended June 30, 2024. Return on average equity (annualized) was 13.05% and return on average assets (annualized) was 1.34% for the three months ended June 30, 2025, compared to 10.83% and 1.07%, respectively, for the three months ended June 30, 2024.

We had net income of $26.9 million, or $1.58 per diluted common share for the six months ended June 30, 2025, compared to net income of $22.0 million, or $1.30 per diluted common share for the six months ended June 30, 2024. Return on average equity (annualized) was 12.19% and return on average assets (annualized) was 1.25% for the six months ended June 30, 2025, compared to 10.78% and 1.06%, respectively, for the six months ended June 30, 2024.

Net Interest Income

Net interest income is the principal source of the Company’s net income and represents the difference between interest income (interest and fees earned on assets, primarily loans and investment securities) and interest expense (interest paid on deposits and borrowed funds). We generate interest income from interest-earning assets that we own, including loans and investment securities. We incur interest expense from interest-bearing liabilities, including interest-bearing deposits and other borrowings, notably FHLB advances and subordinated notes. To evaluate net interest income, we measure and monitor (i) yields on our loans and other interest-earning assets, (ii) the costs of our deposits and other funding sources, (iii) our net interest spread and (iv) our net interest margin. Net interest spread is the difference between rates earned on interest-earning assets and rates paid on interest-bearing liabilities. Net interest margin is calculated as the annualized net interest income on a fully tax-equivalent basis divided by average interest-earning assets.

Changes in the market interest rates and interest rates we earn on interest-earning assets or pay on interest-bearing liabilities, as well as the volume and types of interest-earning assets, interest-bearing and noninterest-bearing liabilities, are usually the largest drivers of periodic changes in net interest spread, net interest margin and net interest income.

The following tables present, for the periods indicated, information about: (i) weighted average balances, the total dollar amount of interest income from interest-earning assets and the resultant average yields; (ii) average balances, the total dollar amount of interest expense on interest-bearing liabilities and the resultant average rates; (iii) net interest income; (iv) the interest rate spread; and (v) the net interest margin. For purposes of this table, interest income, net interest margin and net interest spread are shown on a fully tax-equivalent basis.

   
Three Months Ended June 30,
  
   
2025
    
2024
  
   
Average
Balance
    
Interest
    
Yield/
Rate
    
Average
Balance
    
Interest
    
Yield/
Rate
  
   
(Dollars in thousands)
  
Assets:
                                    
Interest-earning assets:
                                    
Loans(1)
  
$
3,094,558
    
$
53,894
      
6.99
%
  
$
3,082,601
    
$
50,579
      
6.60
%
Investment securities – taxable
    
508,508
      
4,700
      
3.71
%
    
533,553
      
5,285
      
3.98
%
Investment securities – non-taxable
    
152,202
      
1,015
      
2.67
%
    
155,408
      
1,022
      
2.64
%
Other interest-earning assets(2)
    
456,818
      
4,747
      
4.17
%
    
225,720
      
2,545
      
4.53
%
Total interest-earning assets
    
4,212,086
      
64,356
      
6.13
%
    
3,997,282
      
59,431
      
5.98
%
Noninterest-earning assets
    
166,763
                      
171,472
                  
Total assets
  
$
4,378,849
                    
$
4,168,754
                  
                                                 
Liabilities and Stockholders’ Equity:
                                                
Interest-bearing liabilities:
                                                
NOW, savings and money market deposits
  
$
2,326,779
    
$
15,890
      
2.74
%
  
$
2,221,427
    
$
17,652
      
3.20
%
Time deposits
    
438,697
      
4,172
      
3.81
%
    
392,778
      
3,977
      
4.07
%
Short-term borrowings
    
18
      
—
      
0.00
%
    
3
      
—
      
0.00
%
Notes payable & other longer-term
borrowings
    
—
      
—
      
0.00
%
    
—
      
—
      
0.00
%
Subordinated debt
    
64,031
      
835
      
5.23
%
    
63,845
      
835
      
5.26
%
Junior subordinated deferrable interest debentures
    
46,393
      
735
      
6.35
%
    
46,393
      
856
      
7.42
%
Total interest-bearing liabilities
  
$
2,875,918
    
$
21,632
      
3.02
%
  
$
2,724,446
    
$
23,320
      
3.44
%
                                                 
Noninterest-bearing liabilities:
                                                
Noninterest-bearing deposits
  
$
990,343
                    
$
960,106
                  
Other liabilities
    
63,679
                      
70,854
                  
Total noninterest-bearing liabilities
    
1,054,022
                      
1,030,960
                  
Stockholders’ equity
    
448,909
                      
413,348
                  
Total liabilities and stockholders’ equity
  
$
4,378,849
                    
$
4,168,754
                  
                                                 
Net interest income
          
$
42,724
                    
$
36,111
          
Net interest spread
                    
3.11
%
                    
2.54
%
Net interest margin(3)
                    
4.07
%
                    
3.63
%

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Table of Contents
   
Six Months Ended June 30,
  
   
2025
    
2024
  
   
Average
Balance
    
Interest
    
Yield/
Rate
    
Average
Balance
    
Interest
    
Yield/
Rate
  
   
(Dollars in thousands)
  
Assets:
                                    
Interest-earning assets:
                                    
Loans(1)
  
$
3,084,563
    
$
104,471
      
6.83
%
  
$
3,048,569
    
$
99,519
      
6.56
%
Investment securities – taxable
    
509,431
      
9,392
      
3.72
%
    
543,817
      
10,796
      
3.99
%
Investment securities – non-taxable
    
152,716
      
2,029
      
2.68
%
    
155,831
      
2,046
      
2.64
%
Other interest-earning assets(2)
    
421,899
      
8,606
      
4.11
%
    
262,345
      
6,020
      
4.61
%
Total interest-earning assets
    
4,168,609
      
124,498
      
6.02
%
    
4,010,562
      
118,381
      
5.94
%
Noninterest-earning assets
    
169,222
                      
177,882
                  
Total assets
  
$
4,337,831
                    
$
4,188,444
                  
                                                 
Liabilities and Shareholders’ Equity:
                                                
Interest-bearing liabilities:
                                                
NOW, savings and money market deposits
  
$
2,314,562
    
$
31,401
      
2.74
%
  
$
2,253,704
    
$
35,649
      
3.18
%
Time deposits
    
440,297
      
8,488
      
3.89
%
    
383,816
      
7,643
      
4.00
%
Short-term borrowings
    
11
      
—
      
0.00
%
    
3
      
—
      
0.00
%
Notes payable & other longer-term
borrowings
    
—
      
—
      
0.00
%
    
—
      
—
      
0.00
%
Subordinated debt
    
64,008
      
1,670
      
5.26
%
    
63,822
      
1,670
      
5.26
%
Junior subordinated deferrable interest
debentures
    
46,393
      
1,468
      
6.38
%
    
46,393
      
1,717
      
7.44
%
Total interest-bearing liabilities
  
$
2,865,271
    
$
43,027
      
3.03
%
  
$
2,747,738
    
$
46,679
      
3.42
%
                                                 
Noninterest-bearing liabilities:
                                                
Noninterest-bearing deposits
  
$
962,557
                    
$
959,219
                  
Other liabilities
    
64,875
                      
70,856
                  
Total noninterest-bearing liabilities
    
1,027,432
                      
1,030,075
                  
Shareholders’ equity
    
445,128
                      
410,631
                  
Total liabilities and shareholders’
equity
  
$
4,337,831
                    
$
4,188,444
                  

                                               
Net interest income
          
$
81,471
                    
$
71,702
          
Net interest spread
                    
2.99
%
                    
2.52
%
Net interest margin(3)
                    
3.94
%
                    
3.60
%

(1)
Average loan balances include nonaccrual loans and loans held for sale.
(2)
Includes income and average balances for interest-earning deposits at other banks, nonmarketable securities, federal funds sold, and other miscellaneous interest-earning assets.
(3)
Net interest margin is calculated as the annualized net interest income, on a fully tax-equivalent basis, divided by average interest-earning assets.

29
Table of Contents
Increases and decreases in interest income and interest expense result from changes in average balances (volume) of interest-earning assets and interest-bearing liabilities, as well as changes in average interest rates. The following tables set forth the effects of changing rates and volumes on our net interest income during the period shown. Information is provided with respect to (i) effects on interest income attributable to changes in volume (change in volume multiplied by prior rate) and (ii) effects on interest income attributable to changes in rate (changes in rate multiplied by prior volume). Change applicable to both volume and rate have been allocated to volume.

  
Three Months Ended June 30,
  

 
2025 over 2024
  

 
Change due to:
    
Total
  

 
Volume
    
Rate
    
Variance
  

 
(Dollars in thousands)
  
Interest-earning assets:
                  
Loans
  
$
196
    
$
3,119
    
$
3,315
  
Investment securities – taxable
    
(248
)
    
(337
)
    
(585
)
Investment securities – non-taxable
    
(21
)
    
14
      
(7
)
Other interest-earning assets
    
2,606
      
(404
)
    
2,202
  
Total interest-earning assets
    
2,533
      
2,392
      
4,925
  
                         
Interest-bearing liabilities:
                        
NOW, Savings, MMDAs
    
837
      
(2,599
)
    
(1,762
)
Time deposits
    
465
      
(270
)
    
195
  
Short-term borrowings
    
—
      
—
      
—
  
Notes payable & other borrowings
    
—
      
—
      
—
  
Subordinated debt
    
2
      
(2
)
    
—
  
Junior subordinated deferrable interest debentures
    
—
      
(121
)
    
(121
)
Total interest-bearing liabilities
    
1,304
      
(2,992
)
    
(1,688
)
                         
Net change
  
$
1,229
    
$
5,384
    
$
6,613
  

   
Six Months Ended June 30,
  
   
2025 over 2024
  
   
Change due to:
    
Total
  
   
Volume
    
Rate
    
Variance
  
   
(Dollars in thousands)
  
Interest-earning assets:
                  
Loan
  
$
1,175
    
$
3,777
    
$
4,952
  
Investment securities – taxable
    
(683
)
    
(721
)
    
(1,404
)
Investment securities – non-taxable
    
(41
)
    
24
      
(17
)
Other interest-earning assets
    
3,661
      
(1,075
)
    
2,586
  
Total interest-earning assets
    
4,112
      
2,005
      
6,117
  
                         
Interest-bearing liabilities:
                        
NOW, Savings, MMDAs
    
963
      
(5,211
)
    
(4,248
)
Time deposits
    
1,125
      
(280
)
    
845
  
Short-term borrowings
    
—
      
—
      
—
  
Notes payable & other borrowings
    
—
      
—
      
—
  
Subordinated debt
    
5
      
(5
)
    
—
  
Junior subordinated deferrable interest debentures
    
—
      
(249
)
    
(249
)
Total interest-bearing liabilities
    
2,093
      
(5,745
)
    
(3,652
)
                         
Net change
  
$
2,019
    
$
7,750
    
$
9,769
  

Net interest income for the three months ended June 30, 2025 was $42.5 million, compared to $35.9 million for the three months ended June 30, 2024, an increase of $6.6 million, or 18.4%, and was comprised of an increase of $4.9 million in interest income and a decrease of $1.7 million in interest expense. The growth in interest income was primarily attributable to an increase of $3.3 million in loan interest income, which was a result of growth of $12.0 million in average loans outstanding and an increase of 39 basis points in the yield on loans. The $3.3 million increase in loan interest income included a recovery of $1.7 million in interest during the second quarter of 2025, related to a full repayment of a loan that had previously been on nonaccrual. This recovery positively impacted the net interest margin by 17 basis points and the loan yield by 23 basis points during the second quarter of 2025. The $1.7 million decrease in interest expense was primarily related to a 42 basis point decrease in the interest rate paid on interest-bearing deposits over the same period in 2024, partially offset by an increase of $151.3 million in average interest-bearing deposits. Additionally, average noninterest-bearing demand deposits increased $30.2 million for the three months ended June 30, 2025 as compared to the three months ended June 30, 2024.

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For the three months ended June 30, 2025, net interest margin and net interest spread were 4.07% and 3.11%, respectively, compared to 3.63% and 2.54%, respectively, for the same period in 2024, which reflects the changes in interest income and interest expense discussed above. The loan interest recovery noted above positively affected net interest margin and net interest spread by 17 basis points.

Net interest income for the six months ended June 30, 2025 was $81.0 million, compared to $71.3 million for the six months ended June 30, 2024, an increase of $9.8 million, or 13.7%, and was comprised of an increase of $6.1 million in interest income and a decrease of $3.7 million in interest expense. The growth in interest income was attributable to increases of $5.0 million in loan interest income and $2.6 million in interest income on other interest-earning assets, partially offset by a decrease of $1.4 million in interest income on securities. The increase in loan interest income resulted from growth of $36.0 million in average loans outstanding and an increase of 27 basis points in the yield on loans, which included the $1.7 million loan interest recovery noted above. The increase in interest income on other interest-earning assets was primarily due to an increase of $134.7 million in average other interest-bearing assets, partially offset by a decline of 50 basis points in the interest rate paid on those assets. The decrease in interest income on securities was primarily due to a decline in the interest recorded on fair value hedges on municipal securities as the indexed market rate declined during the last half of 2024. The $3.7 million decrease in interest expense was primarily related to a 37 basis point decrease in the rate paid on interest-bearing deposits over the same period in 2024, partially offset by an increase of $117.3 million in average interest-bearing deposits.

For the six months ended June 30, 2025, net interest margin and net interest spread were 3.94% and 2.99%, respectively, compared to 3.60% and 2.52%, respectively, for the same period in 2024, which reflects the changes in interest income and interest expense discussed above. The loan interest recovery noted above positively affected net interest margin and net interest spread by 8 basis points.

Provision for Credit Losses

Credit risk is inherent in the business of making loans. We establish an allowance for credit losses (“ACL”) through charges to earnings, which are shown in the consolidated statements of comprehensive income (loss) as the provision for credit losses. Credit losses on loans are charged against the allowance when management believes the uncollectibility of a loan balance is confirmed. The provision for credit losses is determined by conducting a quarterly evaluation of the adequacy of our ACL and charging the shortfall or excess, if any, to the current quarter’s expense. This has the effect of creating variability in the amount and frequency of charges to our earnings. The provision for credit losses and the amount of allowance for each period are dependent upon many factors, including loan growth, net charge offs, changes in the composition of the loan portfolio, delinquencies, management’s assessment of the quality of the loan portfolio, the valuation of problem loans and the general economic conditions in our market areas.

The Company recorded a provision for credit losses of $2.5 million for the three months ended June 30, 2025, compared to $1.8 million for the three months ended June 30, 2024. The increase in provision of $700 thousand was largely attributable to an increase in specific reserves during the three months ended June 30, 2025.

The Company recorded a provision for credit losses for the six months ended June 30, 2025 of $2.9 million, compared to $2.6 million for the six months ended June 30, 2024. The increase in provision of $300 thousand was largely attributable to an increase in specific reserves, partially offset by a decrease in net charge-offs for the six months ended June 30, 2025, compared to the same period in 2024.

The provision for credit losses is a significant factor in the Company’s operating results. For further discussion regarding the provision for credit losses and management’s assessment of the adequacy of the ACL for loans, see “Allowance for Credit Losses for Loans” and “Asset Quality” under “Financial Condition” in this Item 2, below.

Noninterest Income

While interest income remains the largest single component of total revenues, noninterest income is an important contributing component. The largest portion of our noninterest income is associated with our mortgage banking activities. Other sources of noninterest income include service charges on deposit accounts, and bank card services and interchange fees.

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The following table sets forth the major components of our noninterest income for the periods indicated:

   
Three Months Ended
June 30,
    
Six Months Ended
June 30,
  
   
2025
    
2024
    
Increase
(Decrease)
    
2025
    
2024
    
Increase
(Decrease)
  
   
(Dollars in thousands)
  
Noninterest income:
                                    
Service charges on deposit accounts
  
$
2,098
    
$
1,949
    
$
149
    
$
4,239
    
$
3,762
    
$
477
  
Bank card services and interchange fees
    
3,771
      
4,052
      
(281
)
    
7,150
      
7,113
      
37
  
Mortgage banking activities
    
3,606
      
3,397
      
209
      
5,719
      
7,342
      
(1,623
)
Investment commissions
    
426
      
450
      
(24
)
    
860
      
884
      
(24
)
Fiduciary income
    
694
      
720
      
(26
)
    
1,432
      
1,474
      
(42
)
Other income and fees(1)
    
1,570
      
2,141
      
(571
)
    
3,390
      
3,543
      
(153
)
Total noninterest income
  
$
12,165
    
$
12,709
    
$
(544
)
  
$
22,790
    
$
24,118
    
$
(1,328
)

(1)
Other income and fees includes income and fees associated with the increase in the cash surrender value of life insurance, safe deposit box rental, check printing, collections, legal settlements, wire transfer, Small Business Investment Company (“SBIC”) investments, income from sweep accounts, and other miscellaneous services.

Noninterest income for the three months ended June 30, 2025 was $12.2 million, compared to $12.7 million for the three months ended June 30, 2024, a decrease of $544 thousand, or 4.3%. Significant changes in the components of noninterest income are detailed below.

Service charges on deposit accounts - Income from service charges on deposit accounts increased $149 thousand, or 7.6%, for the three months ended June 30, 2025 as compared to the same period in 2024. The increase was primarily the result of treasury management initiatives taken to drive growth throughout 2024.

Bank card services and interchange fees - Income from bank card services and interchange fees decreased $281 thousand, or 6.9%, for the three months ended June 30, 2025 as compared to the same period in 2024. The decrease was primarily the result of $315 thousand of incentives and rebates, which were recorded in second quarter of 2024, compared to being recorded in the first quarter in 2025.

Mortgage banking activities - Income from mortgage banking activities increased $209 thousand, or 6.2%, to $3.6 million for the three months ended June 30, 2025 from $3.4 million for the three months ended June 30, 2024. This increase was mainly the result of a $156 thousand negative fair value adjustment to our mortgage servicing rights portfolio in the second quarter of 2025 compared to a negative fair value adjustment of $680 thousand in the second quarter of 2024. The fair value of the mortgage servicing rights portfolio is affected by movements in market interest rates, which declined less during the second quarter of 2025 as compared to the same period of 2024. This increase was partially offset by a decrease in net gain on sales of loans of $133 thousand and a decline of $10.0 million in originations of loans held for sale in the second quarter of 2025 as compared to the same period of 2024.

Other income and fees - Other income and fees decreased $571 thousand, or 26.7%, for the three months ended June 30, 2025 as compared to the same period in 2024. The decrease was primarily the result of a decrease of $523 thousand in income from SBIC investments.

Noninterest income for the six months ended June 30, 2025 was $22.8 million, compared to $24.1 million for the six months ended June 30, 2024, a decrease of $1.3 million, or 5.5%. Significant changes in the components of noninterest income are detailed below.

Service charges on deposit accounts - Income from service charges on deposit accounts increased $477 thousand, or 12.7%, for the six months ended June 30, 2025 as compared to the same period in 2024. The increase was primarily the result of treasury management initiatives taken to drive growth throughout 2024.

Mortgage banking activities - Income from mortgage banking activities decreased $1.6 million, or 22.1%, to $5.7 million for the six months ended June 30, 2025 from $7.3 million for the six months ended June 30, 2024. This decrease was mainly the result of a decline of $1.1 million in the fair value adjustment of the mortgage servicing rights assets as interest rates that affect the fair value rose during the first half of 2024 compared to interest rates falling in the first half of 2025. Additionally, mortgage loan originations declined $14.4 million, or 9.5%, in the current year period as compared to the prior year period.

Other income and fees - Other income and fees decreased $153 thousand, or 4.3%, for the six months ended June 30, 2025 as compared to the same period in 2024. The decrease was primarily the result of a decrease of $463 thousand in income from SBIC investments, partially offset by increases in income from sweep accounts and gains on sales of fixed assets.

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Noninterest Expense

The following table sets forth the major components of our noninterest expense for the periods indicated:

   
Three Months Ended
June 30,
    
Six Months Ended
June 30,
  
   
2025
    
2024
    
Increase
(Decrease)
    
2025
    
2024
    
Increase
(Decrease)
  
   
(Dollars in thousands)
  
Noninterest expense:
                                    
Salaries and employee benefits
  
$
19,708
    
$
19,199
    
$
509
    
$
39,149
    
$
38,187
    
$
962
  
Occupancy expense, net
    
3,972
      
4,029
      
(57
)
    
7,999
      
7,949
      
50
  
Professional services
    
1,874
      
1,738
      
136
      
3,604
      
3,221
      
383
  
Marketing and development
    
919
      
860
      
59
      
1,824
      
1,614
      
210
  
IT and data services
    
1,181
      
1,086
      
95
      
2,345
      
2,076
      
269
  
Bankcard expenses
    
1,579
      
1,516
      
63
      
3,033
      
2,913
      
120
  
Appraisal expenses
    
236
      
229
      
7
      
428
      
456
      
(28
)
Other expenses(1)
    
4,074
      
3,915
      
159
      
8,191
      
8,086
      
105
  
Total noninterest expense
  
$
33,543
    
$
32,572
    
$
971
    
$
66,573
    
$
64,502
    
$
2,071
  

(1)
Other expenses include items such as banking regulatory assessments, telephone expenses, postage, courier fees, directors’ fees, and insurance.

Noninterest expense for the three months ended June 30, 2025 was $33.5 million compared to $32.6 million for the three months ended June 30, 2024, an increase of $1.0 million, or 3.0%. Significant changes in the components of noninterest expense are detailed below.

Salaries and employee benefits - Salaries and employee benefits increased $509 thousand, or 2.7%, from $19.2  million for the three months ended June 30, 2024 to $19.7 million for the three months ended June 30, 2025. This increase was primarily driven by annual salary adjustments, which became effective in January of 2025.

Professional services - Professional services increased $136 thousand, or 7.8% from $1.7 million for the three months ended June 30, 2024 to $1.9 million for the three months ended June 30, 2025. This increase was primarily driven by consulting services related to the Company’s lending platform during the second quarter of 2025.

Other expenses - Other expenses increased $159 thousand, or 4.1%, from $3.9 million for the three months ended June 30, 2024 to $4.1 million for the three months ended June 30, 2025. This was primarily the result of an increase of $110 thousand in the ineffective portion of fair value hedges.

Noninterest expense for the six months ended June 30, 2025 was $66.6 million, compared to $64.5 million for the six months ended June 30, 2024, an increase of $2.1 million, or 3.2%. Significant changes in the components of noninterest expense are detailed below.

Salaries and employee benefits - Salaries and employee benefits increased $1.0 million, or 2.5%, from $38.2 million for the six months ended June 30, 2024 to $39.1 million for the six months ended June 30, 2025. This increase was primarily driven by annual salary adjustments, which became effective in January of 2025.

Professional services - Professional services increased $383 thousand, or 11.9% from $3.2 million for the six months ended June 30, 2024 to $3.6 million for the six months ended June 30, 2025. This increase was primarily driven by consulting services related to the Company’s lending platform during the first two quarters of 2025.

IT and data services - IT and data services increased $269 thousand, or 13.0%, from $2.1 million for six months ended June 30, 2024 to $2.3 million for the six months ended June 30, 2025. The increase is primarily a result of the continued rising cost of technology services.

Financial Condition

Our total assets increased $131.4 million, or 3.1%, to $4.36 billion at June 30, 2025, compared to $4.23 billion at December 31, 2024. Our gross loans held for investment increased $43.9 million, or 1.4%, to $3.10 billion at June 30, 2025, compared to $3.06 billion at December 31, 2024. Our securities portfolio decreased $7.2 million, or 1.3%, to $570.0 million at June 30, 2025, compared to $577.2 million at December 31, 2024. Total deposits increased $118.1 million, or 3.3%, to $3.74 billion at June 30, 2025, compared to $3.62 billion at December 31, 2024.

Loan Portfolio

Our loans represent the largest portion of earning assets, greater than our securities portfolio or any other asset category, and the quality and diversification of the loan portfolio is an important consideration when reviewing the Company’s financial condition. We originate substantially all of the loans in our portfolio, except certain loan participations that are independently underwritten by the Company prior to purchase.

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Loans held for investment increased $43.9 million, or 1.4%, to $3.10 billion at June 30, 2025, compared to $3.06 billion at December 31, 2024. The growth in loans remained relationship-focused and occurred broadly across the portfolio, partially offset by decrease in multi-family property loans and hospitality loans.

The following table shows the contractual maturities of our loans held for investment portfolio at June 30, 2025:

   
Due in
One Year or
Less
    
Due after One Year
Through Five Years
    
Due after Five
Years
Through
Fifteen Years
    
Due after
Fifteen Years
    
Total
  
   
(Dollars in thousands)
  
Commercial real estate
  
$
188,027
    
$
549,433
    
$
282,957
    
$
64,892
    
$
1,085,309
  
Commercial - specialized
    
160,823
      
103,011
      
73,671
      
41,563
      
379,068
  
Commercial - general
    
125,179
      
224,614
      
182,437
      
88,704
      
620,934
  
Consumer:
                                        
1-4 family residential
    
34,300
      
119,752
      
104,672
      
331,211
      
589,935
  
Auto loans
    
2,938
      
171,227
      
84,028
      
—
      
258,193
  
Other consumer
    
7,920
      
39,058
      
16,611
      
—
      
63,589
  
Construction
    
82,250
      
16,572
      
424
      
2,704
      
101,950
  
Total loans
  
$
601,437
    
$
1,223,667
    
$
744,800
    
$
529,074
    
$
3,098,978
  

The following table shows the distribution between fixed and adjustable interest rate loans for maturities greater than one year as of June 30, 2025:
   
Fixed
Rate
    
Adjustable
Rate
  
   
(Dollars in thousands)
  
Commercial real estate
  
$
369,319
    
$
527,963
  
Commercial - specialized
    
77,091
      
141,154
  
Commercial - general
    
206,671
      
289,084
  
Consumer:
                
1-4 family residential
    
341,558
      
214,077
  
Auto loans
    
255,255
      
—
  
Other consumer
    
55,669
      
—
  
Construction
    
517
      
19,183
  
Total loans
  
$
1,306,080
    
$
1,191,461
  

At June 30, 2025, there was $1.58 billion in adjustable rate loans, with $897.9 million of these loans that mature or reprice in the next twelve months. Of these loans that mature or reprice in the next twelve months, $573.0 million will reprice immediately upon changes in the underlying index rate, with the remaining $324.9 million being subject to rate floors above the current index or a future repricing date. The Wall Street Journal prime rate is the predominate index used by the Bank. Further as of June 30, 2025, there is $207.3 million of fixed rate loans that mature in the next twelve months.

The Bank is primarily involved in real estate, commercial, agricultural and consumer lending activities with customers throughout Texas and Eastern New Mexico. We have a collateral concentration, as 73.5% of our loans were secured by real property as of June 30, 2025, compared to 73.7% as of December 31, 2024. We believe that these loans are not concentrated in any one single property type and that they are geographically dispersed throughout the areas we serve. Although the Bank has diversified portfolios, its debtors’ ability to honor their contracts is substantially dependent upon the general economic conditions of the markets in which it operates, which consist primarily of agribusiness, wholesale/retail, oil and gas and related businesses, healthcare industries and institutions of higher education. Commercial real estate loans and residential construction loans represent 38.3% of loans held for investment as of June 30, 2025 and represented 40.1% of loans held for investment as of December 31, 2024. Further, 96% of the total dollar amount of these loans are secured by collateral located in the state of Texas.

We have established concentration limits in the loan portfolio for commercial real estate loans and unsecured lending, among other loan types. All loan types are within established limits. We use underwriting guidelines to assess the borrowers’ historical cash flow to determine debt service, and we further stress test the debt service under higher interest rate scenarios. Financial and performance covenants are used in commercial lending to allow us to react to a borrower’s deteriorating financial condition, should that occur.

Commercial Real Estate. Our commercial real estate portfolio includes loans for commercial property that is owned by real estate investors, construction loans to build owner-occupied properties, and loans to developers of commercial real estate investment properties and residential developments. Residential construction loans are broken out separately below. Commercial real estate loans are subject to underwriting standards and processes similar to our commercial loans. These loans are underwritten primarily based on projected cash flows for income-producing properties and collateral values for non-income-producing properties. The repayment of these loans is generally dependent on the successful operation of the property securing the loans or the sale or refinancing of the property. Real estate loans may be adversely affected by conditions in the real estate markets or in the general economy. The properties securing our real estate portfolio are diversified by type and geographic location. This diversity helps reduce the exposure to adverse economic events that affect any single market or industry.

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Commercial real estate loans decreased $33.8 million, or 3.0%, to $1.09 billion as of June 30, 2025 from $1.12 billion as of December 31, 2024. The decrease was primarily driven by decreases of $58.9 million in multi-family loans and $22.6 million in hospitality loans, partially offset by increases in residential and commercial land development loans and other commercial loans.

Commercial – General and Specialized. Commercial loans are underwritten after evaluating and understanding the borrower’s ability to operate profitably. Underwriting standards have been designed to determine whether the borrower possesses sound business ethics and practices, to evaluate current and projected cash flows to determine the ability of the borrower to repay their obligations as agreed, and to ensure appropriate collateral is obtained to secure the loan. Commercial loans are primarily made based on the identified cash flows of the borrower and, secondarily, on the underlying collateral provided by the borrower. Most commercial loans are secured by the assets being financed or other business assets, such as real estate, accounts receivable, or inventory, and typically include personal guarantees. Owner-occupied real estate is included in commercial loans, as the repayment of these loans is generally dependent on the operations of the commercial borrower’s business rather than on income-producing properties or the sale of the properties. Commercial loans are grouped into two distinct sub-categories: specialized and general. Commercial related loans that are considered “specialized” include agricultural production and real estate loans, energy loans, and finance, investment, and insurance loans. Commercial related loans that contain a broader diversity of borrowers, sub-industries, or serviced industries are grouped into the “general category.” These include goods, services, restaurant & retail, construction, and other industries. Performance of these loans is subject to operating and cash flow results of the borrower, with risk in the volatility of operating results for particular industries.

Commercial specialized loans decreased $9.9 million, or 2.5%, to $379.1 million as of June 30, 2025 from $389.0 million as of December 31, 2024. This decrease was primarily due to net repayments of $18.7 million in seasonal agricultural-related loans, partially offset by an increase in energy sector loans. Operating agriculture loans were slower to fund up in the second quarter of 2025 as compared to the second quarter of 2024.

Commercial general loans increased $63.6 million, or 11.4%, to $620.9 million as of June 30, 2025 from $557.4 million as of December 31, 2024. The increase was primarily due to increases broadly across this segment.

Consumer. We utilize a computer-based credit scoring analysis to supplement our policies and procedures in underwriting consumer loans. Our loan policy addresses types of consumer loans that may be originated and the collateral, if secured, which must be perfected. The relatively smaller individual dollar amounts of consumer loans that are spread over numerous individual borrowers also minimize our risk. Residential real estate loans are included in consumer loans. We generally require mortgage title insurance and hazard insurance on these residential real estate loans. All consumer loans are generally dependent on the risk characteristics of the borrower’s ability to repay the loan, a consideration of the debt to income ratio, employment and income stability, the loan-to-value ratio, and the age, condition and marketability of the collateral.

Consumer and other loans increased $25.9 million, or 2.9%, to $911.7 million as of June 30, 2025, from $885.8 million as of December 31, 2024. The growth in these loans was a result of increases of $3.7 million in consumer auto loans and $23.5 million in residential mortgage loans, partially offset by a decrease of $1.3 million in other consumer loans. As of June 30, 2025, our consumer loan portfolio was comprised of $589.9 million in 1-4 family residential loans, $258.2 million in auto loans, and $63.6 million in other consumer loans. The consumer auto loan portfolio experienced growth in the first quarter of 2025 before beginning to decline in the second quarter of 2025 as new loan originations have slowed due to economic pressures and uncertainties.

Construction. Loans for residential construction are for single-family properties to developers, builders, or end-users. These loans are underwritten based on estimates of costs and completed value of the project. Funds are advanced based on estimated percentage of completion for the project. Performance of these loans is affected by economic conditions as well as the ability to control costs of the projects.

Construction loans decreased $1.9 million, or 1.8%, to $102.0 million as of June 30, 2025 from $103.9 million as of December 31, 2024.

The commercial real estate and construction categories comprise the Company’s nonowner-occupied real estate loans. Total nonowner-occupied real estate loans were $1.19 billion at June 30, 2025 and $1.22 billion at December 31, 2024. Nonowner-occupied commercial real estate loans are made up of income-producing commercial real estate property loans and construction, acquisition, and development property loans. As of June 30, 2025, total income-producing commercial real estate property loans totaled $830.9 million and was comprised of $257.0 million of multi-family property loans, $182.6 million of retail property loans, $138.4 million of office property loans, $38.4 million in hospitality loans, and $214.4 million in other property loans. Other property loans include types such as industrial, warehouse, mini-storage, and convenience stores. As of June 30, 2025, total construction, acquisition, and development property loans totaled $356.4 million and was comprised of $101.9 million in residential construction property loans and $254.5 million of commercial construction and other land development loans. The weighted average loan-to-value of income-producing nonowner-occupied commercial real estate loans was approximately 55% at June 30, 2025. The weighted average loan-to-value of nonowner-occupied office commercial real estate loans was approximately 58% at June 30, 2025.

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Owner-occupied commercial real estate loans totaled $413.3 million at June 30, 2025 and $366.8 million at December 31, 2024.

We are a party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of our customers. These financial instruments include commitments to extend credit and standby letters of credit. Those instruments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the consolidated balance sheets. The Company’s exposure to credit loss in the event of nonperformance by the other party to the financial instrument for commitments to extend credit and standby letters of credit to our customers is represented by the contractual or notional amount of those instruments. Commitments to extend credit and standby letters of credit are not recorded as an asset or liability by the Company until the instrument is exercised. The contractual or notional amounts of those instruments reflect the extent of involvement we have in particular classes of financial instruments.

Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. The Company uses the same credit policies in making commitments and conditional obligations as they do for on-balance sheet instruments. The amount and nature of collateral obtained, if deemed necessary by the Company upon extension of credit, is based on management’s credit evaluation of the potential borrower.

Standby letters of credit are conditional commitments issued by the Company to guarantee the performance of a customer to a third party. Those guarantees are primarily issued to support public and private short-term borrowing arrangements. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers. The Company holds collateral supporting those commitments for which collateral is deemed necessary.

The following table summarizes commitments we have made as of the dates presented.

   
June 30,
2025
    
December 31,
2024
  
   
(Dollars in thousands)
  
Commitments to grant loans and unfunded commitments under lines of credit
  
$
557,466
    
$
537,688
  
Standby letters of credit
    
12,531
      
18,696
  
Total
  
$
569,997
    
$
556,384
  

Allowance for Credit Losses for Loans

The ACL for loans is established for future expected credit losses through a provision for credit losses charged to earnings. Management evaluates the appropriate level of the ACL on a quarterly basis. The analysis takes into consideration the results of an ongoing loan review process, the purpose of which is to determine the level of credit risk within the portfolio and to ensure proper adherence to underwriting and documentation standards. Additional allowances are provided to those loans which appear to represent a greater than normal exposure to risk. The quality of the loan portfolio and the adequacy of the ACL is assessed by regulatory examinations and the Company’s internal and external loan reviews. The ACL consists of two elements: (1) specific valuation allowances established for expected losses on specifically analyzed loans and (2) collective valuation allowances calculated using comparable and quantifiable information from both internal and external sources about past events, including historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amount. Expected credit losses are estimated over the contractual term of the loans and adjusted for expected prepayments.

36
Table of Contents
To determine the adequacy of the ACL on loans, the Company applied a dual credit risk rating (“DCRR”) methodology that estimates each loan’s probability of default and loss given default to calculate the expected credit loss to non-analyzed loans. The DCRR process quantifies the expected credit loss at the loan level for the entire loan portfolio. Loan grades are assigned by a customized scorecard that risk rates each loan based on multiple probability of default and loss given default elements to measure the risk of the loan portfolio. The ACL estimate incorporates the Company’s DCRR loan level risk rating methodology and the expected default rate frequency term structure to derive loan level life of loan estimates of credit losses for every loan in the portfolio. The estimated credit loss for each loan is adjusted based on one-year through the cycle estimate of expected credit loss to a life of loan measurement that reflects current conditions and forecasts. The life of loan expected loss is determined using the contractual weighted average life of the loan adjusted for prepayments. Prepayment speeds are determined by grouping the loans into pools based on segments and risk rating. After the life of loan expected losses are determined, they are adjusted to reflect the Company’s reasonable and supportable economic forecast over a selected range of a one to two years. The Company has developed regression models to project net charge-off rates based on macroeconomic variables (“MEVs”), typically a one-year period is used. MEV’s considered in the analysis consist of data gathered from the St. Louis Federal Reserve Research Database (“FRED”), such as, federal funds rate, 10-year treasury rates, 30-year mortgage rates, crude oil prices, consumer price index, housing price index, unemployment rates, housing starts, gross domestic product, and disposable personal income. These regression models are applied to the Company’s economic forecast to determine the corresponding net charge-off rates. The projected net charge-off rates for the given economic scenario are used to adjust the through the cycle expected losses. Qualitative adjustments are also made to ACL results for additional risk factors that are relevant in assessing the expected credit losses within our loan segments. These qualitative factor (“Q-Factor”) adjustments may increase or decrease management’s estimate of the ACL by a calculated percentage based upon the estimated level of perceived risk within a particular segment. Q-Factor risk decisions consider concentrations of the loan portfolio, expected changes to the economic forecasts, large relationships, and other factors related to credit administration, such as borrower’s risk rating and the potential effect of delayed credit score migrations. Management quantifiably identifies segment percentage Q-Factor adjustments using a scorecard risk rating system scaled to historical loss experience within a segment and management’s perceived risk for that particular segment. In addition to the loan level evaluations, nonaccrual loans with a balance of $250 thousand or more are individually analyzed based on facts and circumstances of the loan to determine if a specific allowance amount may be necessary. Specific allowances may also be established for loans whose outstanding balances are below the above threshold when it is determined that the risk associated with the loan differs significantly from the risk factor amounts established for its loan category.

The ACL for loans was $45.0 million at June 30, 2025, compared to $43.2 million at December 31, 2024, an increase of $1.8 million, or 4.1%. The increase is primarily a result of a provision for credit losses on loans of $2.8 million being recorded during the six months ended June 30, 2025 largely attributable to growth of $43.9 million in loans held for investment and an increase in specific reserves, partially offset by net charge-offs of $1.0 million during the period. The Company continues to closely monitor credit quality in light of the ongoing economic uncertainty caused by, among other factors, the prolonged elevated interest rate environment, stronger than expected employment data in recent periods, continued uncertainty regarding U.S. trade and tariff policy and the lingering inflationary pressures, and the risk of the resurgence of elevated levels of inflation, in the United States and our market areas. Accordingly, additional provisions for credit losses may be necessary in future periods.

The following table provides an analysis of the ACL for loans and other data during the periods indicated.

   
Three Months Ended
June 30,
    
Six Months Ended
June 30,
  
   
2025
    
2024
    
2025
    
2024
  
   
(Dollars in thousands)
  
Average loans outstanding during the periods
                        
Commercial real estate
  
$
1,096,884
    
$
1,114,782
    
$
1,112,634
    
$
1,102,062
  
Commercial – specialized
    
378,668
      
398,661
      
379,246
      
379,510
  
Commercial – general
    
598,036
      
529,762
      
580,014
      
524,826
  
Consumer:
                                
1-4 family residential
    
583,520
      
568,792
      
574,743
      
553,526
  
Auto loans
    
261,078
      
282,908
      
260,010
      
290,729
  
Other consumer
    
64,236
      
70,553
      
64,278
      
71,812
  
Construction
    
100,254
      
102,844
      
101,288
      
112,384
  
Loans held for sale
    
11,882
      
14,299
      
12,350
      
13,720
  
Total average loans outstanding during the periods
  
$
3,094,558
    
$
3,082,601
    
$
3,084,563
    
$
3,048,569
  
                                 
Net charge-offs (recoveries) during the periods
                                
Commercial real estate
  
$
—
    
$
(1
)
  
$
—
    
$
85
  
Commercial – specialized
    
(47
)
    
(11
)
    
(81
)
    
(44
)
Commercial – general
    
31
      
328
      
85
      
670
  
Consumer:
                                
1-4 family residential
    
(41
)
    
(2
)
    
(48
)
    
169
  
Auto loans
    
353
      
253
      
603
      
413
  
Other consumer
    
162
      
209
      
423
      
430
  
Construction
    
—
      
—
      
(5
)
    
—
  
Total net charge-offs (recoveries) during the periods
  
$
458
    
$
776
    
$
977
    
$
1,723
  
                                 
Ratio of net charge-offs (recoveries) to average loans during the periods
                                
Commercial real estate
    
0.00
%
    
0.00
%
    
0.00
%
    
0.01
%
Commercial – specialized
    
(0.01
)%
    
0.00
%
    
(0.02
)%
    
(0.01
)%
Commercial – general
    
0.01
%
    
0.06
%
    
0.01
%
    
0.13
%
Consumer:
                                
1-4 family residential
    
(0.01
)%
    
0.00
%
    
(0.01
)%
    
0.03
%
Auto loans
    
0.14
%
    
0.09
%
    
0.23
%
    
0.14
%
Other consumer
    
0.25
%
    
0.30
%
    
0.66
%
    
0.60
%
Construction
    
0.00
%
    
0.00
%
    
0.00
%
    
0.00
%
Total ratio of net charge-offs (recoveries) to average loans during the periods
    
0.01
%
    
0.03
%
    
0.03
%
    
0.06
%

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Table of Contents
The following table provides other loan data as of the dates indicated.
   
June 30,
    
December 31,
  
   
2025
    
2024
  
   
(Dollars in thousands)
  
             
Total loans held for investment outstanding
  
$
3,098,978
    
$
3,055,054
  
Nonaccrual loans
  
$
7,797
    
$
22,102
  
Allowance for credit losses on loans
  
$
45,010
    
$
43,237
  
Ratio of allowance to total loans held for investment
    
1.45
%
    
1.42
%
Ratio of allowance to nonaccrual loans
    
577.27
%
    
195.62
%
Ratio of nonaccrual loans to total loans held for investment
    
0.25
%
    
0.72
%

Net charge-offs totaled $458 thousand and were 0.06% (annualized) of average loans outstanding for the three months ended June 30, 2025, compared to $776 thousand and 0.10% (annualized) for the three months ended June 30, 2024. The decrease in net charge-offs in the second quarter of 2025 was primarily the result of a decrease of $297 thousand in general commercial net charge-offs in the second quarter of 2025 compared to the same period in 2024, mainly from several larger recoveries. Net charge-offs totaled $1.0 million and were 0.06% (annualized) of average loans outstanding for the six months ended June 30, 2025, compared to $1.7 million and 0.11% (annualized) for the six months ended June 30, 2024. The decrease in net charge-offs for the six months ended June 30, 2025 was primarily the result of a decrease of $362 thousand in charge-offs and an increase of $223 thousand in recoveries of general commercial loans in the first two quarters of 2025 compared to the same period in 2024. The allowance for credit losses on loans as a percentage of loans held for investment was 1.45% at June 30, 2025 and 1.42% at December 31, 2024.

Specific reserves for individually evaluated loans totaled $1.1 million at June 30, 2025 as compared to $552 thousand at December 31, 2024. There were several credit quality downgrades during the second quarter of 2025 which necessitated the additional reserves.

While the entire ACL for loans is available to absorb losses from any part of our loan portfolio, the following table sets forth the allocation of the ACL for loans for the periods presented and the percentage of allowance in each classification to total allowance:

   
June 30, 2025
    
December 31, 2024
  
   
Amount
    
% of Total
    
Amount
    
% of Total
  
   
(Dollars in thousands)
  
Commercial real estate
  
$
15,706
      
34.9
%
  
$
15,973
      
36.9
%
Commercial – specialized
    
4,881
      
10.8
%
    
4,640
      
10.7
%
Commercial – general
    
7,228
      
16.1
%
    
6,874
      
15.9
%
Consumer:
                                
1-4 family residential
    
11,150
      
24.8
%
    
9,677
      
22.4
%
Auto loans
    
2,995
      
6.7
%
    
3,015
      
7.0
%
Other consumer
    
1,102
      
2.4
%
    
1,115
      
2.6
%
Construction
    
1,948
      
4.3
%
    
1,943
      
4.5
%
Total allowance for credit losses
  
$
45,010
      
100.0
%
  
$
43,237
      
100.0
%

Asset Quality

Loans are considered delinquent when principal or interest payments are past due 30 days or more. Delinquent loans may remain on accrual status between 30 days and 90 days past due. Loans on which the accrual of interest has been discontinued are designated as nonaccrual loans. Typically, the accrual of interest on loans is discontinued when principal or interest payments are past due 90 days or when, in the opinion of management, there is a reasonable doubt as to collectability in the normal course of business. When loans are placed on nonaccrual status, all interest previously accrued but not collected is reversed against current period interest income. Income on nonaccrual loans is subsequently recognized only to the extent that cash is received and the loan’s principal balance is deemed collectible. Loans are restored to accrual status when loans become well-secured and management believes full collectability of principal and interest is probable.

38
Table of Contents
Loans that exhibit characteristics different from their pool characteristics are evaluated on an individual basis. Loans evaluated individually are not included in the collective ACL evaluation. Income from loans on nonaccrual status is recognized to the extent cash is received and when the loan’s principal balance is deemed collectible. Depending on a particular loan’s circumstances, we analyze loans for specific allowance based upon either the present value of expected future cash flows discounted at the loan’s effective interest rate, the loan’s observable market price, or the fair value of the collateral less estimated costs to sell if the loan is collateral dependent. A loan is considered collateral dependent when repayment of the loan is based solely on the liquidation of the collateral. Fair value, where possible, is determined by independent appraisals, typically on an annual basis. Between appraisal periods, the fair value may be adjusted based on specific events, such as if deterioration of quality of the collateral comes to our attention as part of our problem loan monitoring process, or if discussions with the borrower lead us to believe the last appraised value no longer reflects the actual market for the collateral. The specific allowance amount on a collateral-dependent loan is charged-off to the allowance if deemed not collectible and the impairment amount on a loan that is not collateral-dependent is set up as a specific reserve.

Real estate we acquire as a result of foreclosure or by deed-in-lieu of foreclosure is classified as other real estate owned (“OREO”) until sold and is initially recorded at fair value less costs to sell when acquired, establishing a new cost basis. OREO and repossessed assets are reported as foreclosed assets.

Nonperforming loans include nonaccrual loans and loans past due 90 days or more. Nonperforming assets consist of nonperforming loans plus foreclosed assets.

At June 30, 2025, our total nonaccrual loans were $7.8 million, or 0.25% of total loans held for investment, as compared to $22.1 million, or 0.72% of total loans held for investment, at December 31, 2024. These loans within this amount that exceeded $250 thousand were specifically analyzed and specific valuation allowances were established as necessary and included in the ACL for loans as of June 30, 2025 to cover any probable loss.

Nonperforming loans were $10.5 million at June 30, 2025 and $24.0 million at December 31, 2024. This decrease of $13.5 million is predominantly due to a $19.0 million credit that was repaid in full during the second quarter of 2025. This decrease was partially offset with two credits totaling $5.5 million being placed on nonaccrual status during the second quarter of 2025.

Classified loans include loans graded as substandard or doubtful. At June 30, 2025, classified loans totaled $66.9 million, an increase of $17.8 million from the total of $49.1 million at December 31, 2024. This was primarily the result of the downgrade of a $32 million multi-family property loan, partially offset by the payoff of a $19 million multi-family property loan during the second quarter of 2025.

Occasionally, the Company modifies loans to borrowers in financial distress by providing principal forgiveness, term extensions, an other than insignificant payment delay, or interest rate reduction. When principal forgiveness is provided, the amount of forgiveness is charged-off against the ACL for loans. Typically, one type of concession, such as term extension, is granted initially. If the borrower continues to experience financial difficulty, another concession, such as principal forgiveness, may be granted. In some cases, the Company provides multiple types of concessions on one loan. The Company closely monitors the performance of loans that are modified to borrowers experiencing financial difficulty to understand the effectiveness of its modification efforts. Upon the Company’s determination that a modified loan has subsequently been deemed to not be fully collectible, the uncollectible amount is written off. Therefore, the amortized cost basis of the loan is reduced by the uncollectible amount and the ACL for loans is adjusted by the same amount.

If a borrower on a restructured accruing loan has demonstrated performance under the previous terms, is not experiencing financial difficulty and shows the capacity to continue to perform under the restructured terms, the loan will remain on accrual status. Otherwise, the loan will be placed on nonaccrual status until the borrower demonstrates a sustained period of performance, which generally requires six consecutive months of payments.

Securities Portfolio

The securities portfolio is the second largest component of the Company’s interest-earning assets, and the structure and composition of this portfolio is important to an analysis of the financial condition of the Company. The securities portfolio serves the following purposes: (i) it provides a source of pledged assets for securing certain deposits and borrowed funds, as may be required by law or by specific agreement with a depositor or lender; (ii) it provides liquidity to even out cash flows from the loan and deposit activities of customers; (iii) it can be used as an interest rate risk management tool, since it provides a large base of assets, the maturity and interest rate characteristics of which can be changed more readily than the loan portfolio to better match changes in the deposit base and other funding sources of the Company; and (iv) it is an alternative interest-earning asset when loan demand is weak or when deposits grow more rapidly than loans.

The securities portfolio consists of securities classified as either held-to-maturity or available-for-sale. Securities consist primarily of state and municipal securities, mortgage-backed securities and U.S. government sponsored agency securities. We determine the appropriate classification at the time of purchase. All held-to-maturity securities are reported at amortized cost, adjusted for premiums and discounts that are recognized in interest income using the interest method over the period to maturity. All available-for-sale securities are reported at fair value.

Our securities portfolio decreased $7.2 million, or 1.3%, to $570.0 million at June 30, 2025, compared to $577.2 million at December 31, 2024. The decrease was primarily due to $10.2 million in maturities, prepayments and calls, net of purchases, partially offset by a $4.3 million increase in the fair value of securities available for sale at June 30, 2025 as compared to December 31, 2024.

39
Table of Contents
Certain securities have fair values less than amortized cost and, therefore, contain unrealized losses. At June 30, 2025, the fair value of the Company’s securities available for sale was $87.5 million lower than the amortized cost. At June 30, 2025, the Company evaluated whether the decline in fair value has resulted from credit losses or other factors. Within this evaluation, management considers the extent to which fair value is less than amortized cost, any changes to the rating of the security by rating agency, and adverse conditions specifically related to the security, among other factors. Based on management’s evaluation no unrealized losses on securities were determined to be due to credit loss. Additionally, we anticipate full recovery of amortized cost with respect to these securities by maturity, or sooner in the event of a more favorable market interest rate environment. We do not intend to sell these securities and it is not probable that we will be required to sell them before recovery of the amortized cost basis, which may be at maturity, thus no ACL or losses have been recognized or realized in the consolidated financial statements for securities in the portfolio.

The following table sets forth certain information regarding contractual maturities and the weighted average yields of our investment securities as of the date presented. Expected maturities may differ from contractual maturities if borrowers have the right to call or prepay an obligation with or without call or prepayment penalties.

   
As of June 30, 2025
  
   
Due in One
Year or Less
    
Due after One Year
Through Five Years
    
Due after Five Years
Through Ten Years
    
Due after
Ten Years
  
   
Amortized
Cost
    
Weighted
Average
Yield
    
Amortized
Cost
    
Weighted
Average
Yield
    
Amortized
Cost
    
Weighted
Average
Yield
    
Amortized
Cost
    
Weighted
Average
Yield
  
   
(Dollars in thousands)
  
Available-for-sale
                                                
State and municipal
  
$
2,294
      
1.79
%
  
$
4,984
      
2.72
%
  
$
9,160
      
2.51
%
  
$
181,115
      
2.30
%
Residential mortgage-backed securities
    
18
      
1.99
%
    
1,469
      
2.01
%
    
608
      
2.88
%
    
314,046
      
2.28
%
Commercial mortgage-backed securities
    
—
      
—
      
—
      
—
      
45,934
      
2.22
%
    
—
      
—
  
Collateralized mortgage obligations
    
—
      
—
      
—
      
—
      
66,069
      
4.96
%
    
4,736
      
—
  
Asset-backed and other amortizing securities
    
—
      
—
      
—
      
—
      
2,590
      
3.16
%
    
12,452
      
2.75
%
Other securities
    
—
      
—
      
—
      
—
      
12,000
      
4.47
%
    
—
      
—
  
Total available-for-sale
  
$
2,312
      
1.79
%
  
$
6,453
      
2.56
%
  
$
136,361
      
3.79
%
  
$
512,349
      
2.33
%

   
As of December 31, 2024
  
   
Due in One
Year or Less
    
Due after One Year
Through Five Years
    
Due after Five Years
Through Ten Years
    
Due after
Ten Years
  
   
Amortized
Cost
    
Weighted
Average
Yield
    
Amortized
Cost
    
Weighted
Average
Yield
    
Amortized
Cost
    
Weighted
Average
Yield
    
Amortized
Cost
    
Weighted
Average
Yield
  
   
(Dollars in thousands)
  
Available-for-sale
                                                
State and municipal
  
$
2,919
      
1.75
%
  
$
4,508
      
2.30
%
  
$
3,388
      
2.18
%
  
$
188,773
      
2.29
%
Residential mortgage-backed securities
    
—
      
—
      
1,976
      
2.04
%
    
693
      
2.82
%
    
318,352
      
2.19
%
Commercial mortgage-backed securities
    
—
      
—
      
—
      
—
      
46,601
      
2.22
%
    
—
      
—
  
Collateralized mortgage obligations
    
—
      
—
      
—
      
—
      
68,780
      
5.26
%
    
4,917
      
5.23
%
Asset-backed and other amortizing securities
    
—
      
—
      
—
      
—
      
2,864
      
3.16
%
    
13,243
      
2.75
%
Other securities
    
—
      
—
      
—
      
—
      
12,000
      
4.47
%
    
—
      
—
  
Total available-for-sale
  
$
2,919
      
1.75
%
  
$
6,484
      
2.22
%
  
$
134,326
      
4.00
%
  
$
525,285
      
2.27
%

40
Table of Contents
Deposits

Deposits represent the Company’s primary and most vital source of funds. We offer a variety of deposit products including demand deposits accounts, interest-bearing products, savings accounts and certificate of deposits. We put continued effort into gathering noninterest-bearing demand deposit accounts through loan production, customer referrals, marketing staffs, mobile and online banking and various involvements with community networks.

Total deposits at June 30, 2025 were $3.74 billion, representing an increase of $118.1 million, or 3.3%, compared to $3.62 billion at December 31, 2024. The increase since December 31, 2024 consisted of increases of $54.8 million in interest-bearing deposits and $63.3 million in non-interest-bearing deposits. As of June 30, 2025, 26.7% of total deposits were comprised of noninterest-bearing demand accounts, 62.0% of interest-bearing non-maturity accounts and 11.3% of time deposits.

The following table shows the deposit mix as of the dates presented:

   
June 30, 2025
    
December 31, 2024
  
   
Amount
    
% of Total
    
Amount
    
% of Total
  
   
(Dollars in thousands)
  
Noninterest-bearing deposits
  
$
998,759
      
26.7
%
  
$
935,510
      
25.8
%
NOW and other transaction accounts
    
1,244,023
      
33.3
%
    
498,718
      
13.8
%
Money market and other savings
    
1,072,010
      
28.7
%
    
1,741,988
      
48.1
%
Time deposits
    
424,146
      
11.3
%
    
444,660
      
12.3
%
Total deposits
  
$
3,738,938
      
100.0
%
  
$
3,620,876
      
100.0
%

The following table summarizes our average deposit balances and weighted average rates paid on deposits, on an annualized basis, for the periods indicated.

   
Three Months Ended June 30,
  
   
2025
    
2024
  
   
Average
Balance
    
Weighted
Average Rate
    
Average
Balance
    
Weighted
Average Rate
  
   
(Dollars in thousands)
  
Noninterest-bearing deposits
  
$
990,343
      
0.00
%
  
$
960,106
      
0.00
%
Interest-bearing deposits:
                                
NOW and interest-bearing demand accounts
    
1,250,852
      
2.64
%
    
482,212
      
3.90
%
Savings accounts
    
132,428
      
0.81
%
    
133,422
      
0.93
%
Money market accounts
    
943,499
      
3.14
%
    
1,605,793
      
3.17
%
Time deposits
    
438,697
      
3.81
%
    
392,778
      
4.07
%
Total interest-bearing deposits
    
2,765,476
      
2.91
%
    
2,614,205
      
3.33
%
Total deposits
  
$
3,755,819
      
2.14
%
  
$
3,574,311
      
2.43
%

   
Six Months Ended June 30,
  
   
2025
    
2024
  
   
Average
Balance
    
Weighted
Average Rate
    
Average
Balance
    
Weighted
Average Rate
  
   
(Dollars in thousands)
  
Noninterest-bearing deposits
  
$
962,557
      
0.00
%
  
$
959,219
      
0.00
%
Interest-bearing deposits:
                                
NOW and interest-bearing demand accounts
    
1,086,742
      
2.78
%
    
490,506
      
3.80
%
Savings accounts
    
133,356
      
0.81
%
    
134,891
      
0.92
%
Money market accounts
    
1,094,464
      
2.92
%
    
1,628,307
      
3.18
%
Time deposits
    
440,297
      
3.89
%
    
383,816
      
4.00
%
Total interest-bearing deposits
    
2,754,859
      
2.92
%
    
2,637,520
      
3.30
%
Total deposits
  
$
3,717,416
      
2.16
%
  
$
3,596,739
      
2.42
%

In February 2025, the Company ended its deposit sweep program, whereby certain transaction accounts were being restructured into two legally separate accounts: a checking (transaction) account and a money market (non-transaction) account. After ending the program, the balance for these accounts is all reported in NOW and interest-bearing demand accounts. Previously, the balance was allocated between NOW and interest-bearing demand accounts and money market accounts.

Time deposits issued in amounts of more than $250 thousand represent the type of deposit most likely to affect the Company’s future earnings because of interest rate sensitivity. The effective cost of these funds is generally higher than other time deposits because the funds are usually obtained at premium rates of interest.

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Table of Contents
The scheduled maturities of time deposits of more than $250 thousand as of June 30, 2025 follows:

(Dollars in thousands)
  
Three
Months
    
Three to
Six Months
    
Six to
12 Months
    
After
12 Months
    
Total
  
   
$
46,980
    
$
23,249
    
$
35,206
    
$
6,446
    
$
111,881
  

The estimated amount of uninsured deposits as of June 30, 2025 was $1.33 billion. This represented approximately 36% of total deposits. Excluding collateralized public fund deposits, uninsured and uncollateralized deposits was 28% as of June 30, 2025.

Borrowed Funds

In addition to deposits, we may utilize advances from the FHLB and other borrowings as a supplementary funding source to finance our operations.

FHLB Advances. The FHLB allows us to borrow, both short and long-term, on a blanket floating lien status collateralized by first mortgage loans and commercial real estate loans as well as FHLB stock. At June 30, 2025 and December 31, 2024, we had total remaining borrowing capacity from the FHLB of $1.29 billion and $1.11 billion, respectively, with no outstanding balance. We had no FHLB borrowings during the three and six months ended June 30, 2025 or 2024.

The Company may use FHLB letters of credit to pledge to certain public deposits. There was no outstanding balance of FHLB letters of credit at June 30, 2025, The outstanding balance at December 31, 2024 was $75.0 million.

Federal Reserve Bank of Dallas. The Bank has a line of credit with the Federal Reserve Bank of Dallas (the “FRB”). The amount of the line is determined on a monthly basis by the FRB. The line is collateralized by a blanket floating lien on all agriculture, commercial and consumer loans. The amount of the line was $668.2 million and $654.0 million at June 30, 2025 and December 31, 2024, respectively, with no outstanding balance. We had no FRB borrowings during the three and six months ended June 30, 2025 or 2024.

Lines of Credit. The Bank has uncollateralized lines of credit with multiple banks as a source of funding for liquidity management. The total amount of the lines was $138.6 million and $140.0 million as of June 30, 2025 and December 31, 2024, respectively. As of June 30, 2025, we had $1.4 million in short-term borrowings.  There were no short-term borrowings as of December 31, 2024.

Subordinated Debt. In December 2018, the Company issued $14.1 million of subordinated notes that have a maturity date of December 2030 and an average fixed rate of 6.41% for the first seven years. After the fixed rate period, these notes will float at the Wall Street Journal prime rate, with a floor of 4.0% and a ceiling of 7.5%. These notes pay interest quarterly, are unsecured, and may be called by the Company at any time after the remaining maturity is five years or less. Additionally, these notes are intended to qualify for Tier 2 capital treatment, subject to regulatory limitations.

On September 29, 2020, the Company issued $50.0 million in subordinated notes. Proceeds were reduced by approximately $926 thousand in debt issuance costs. These notes have a maturity date of September 2030 with a fixed rate of 4.50% for the first five years. After the expiration of the fixed rate period, these notes will reset quarterly at a variable rate equal to the then current three-month Secured Overnight Financing Rate, as published by the Federal Reserve Bank of New York, plus 438 basis points. These notes pay interest semi-annually, are unsecured, and may be called by the Company at any time after the remaining maturity is five years or less. Additionally, these notes are intended to qualify for Tier 2 capital treatment, subject to regulatory limitations.

As of June 30, 2025, the total amount of subordinated debt outstanding was $64.1 million less approximately $46 thousand of remaining debt issuance costs for a total balance of $64.1 million.

Junior Subordinated Deferrable Interest Debentures and Trust Preferred Securities. Between March 2004 and June 2007, the Company formed three wholly-owned statutory business trusts solely for the purpose of issuing trust preferred securities, the proceeds of which were invested in junior subordinated deferrable interest debentures. The trusts are not consolidated and the debentures issued by the Company to the trusts are reflected in the Company’s consolidated balance sheets. The Company records interest expense on the debentures in its consolidated financial statements. The amount of debentures outstanding was $46.4 million at June 30, 2025 and December 31, 2024. The Company has the right, as has been exercised in the past, to defer payments of interest on the securities for up to twenty consecutive quarters. During such time, corporate dividends may not be paid. The Company is current in its interest payments on the debentures.

The chart below indicates certain information, as of June 30, 2025, about each of the statutory trusts and the junior subordinated deferrable interest debentures, including the date the junior subordinated deferrable interest debentures were issued, outstanding amounts of trust preferred securities and junior subordinated deferrable interest debentures, the maturity date of the junior subordinated deferrable interest debentures, and the interest rates on the junior subordinated deferrable interest debentures.

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Table of Contents
Name of Trust
  
Issue
Date
  
Amount of
Trust Preferred
Securities
    
Amount of
Debentures
    
Stated
Maturity Date of
Trust Preferred
Securities and
Debentures(1)
  
Interest Rate of
Trust Preferred
Securities and
Debentures(2)(3)
   
(Dollars in thousands)
South Plains Financial Capital Trust III
  
2004
  
$
10,000
    
$
10,310
      
2034
  
3-mo. CME Term SOFR + 291 bps; 7.19%
South Plains Financial Capital Trust IV
  
2005
    
20,000
      
20,619
      
2035
  
3-mo. CME Term SOFR + 165 bps; 5.97%
South Plains Financial Capital Trust V
  
2007
    
15,000
      
15,464
      
2037
  
3-mo. CME Term SOFR + 176 bps; 6.08%
Total
      
$
45,000
    
$
46,393
          

(1)
May be redeemed at the Company’s option.
(2)
Interest payable quarterly with principal due at maturity.
(3)
Rate as of last reset date, prior to June 30, 2025.

Liquidity and Capital Resources

Liquidity

Liquidity refers to the measure of our ability to meet the cash flow requirements of depositors and borrowers, while at the same time meeting our operating, capital and strategic cash flow needs, all at a reasonable cost. We continuously monitor our liquidity position to ensure that assets and liabilities are managed in a manner that will meet all short-term and long-term cash requirements. We manage our liquidity position to meet the daily cash flow needs of customers, while maintaining an appropriate balance between assets and liabilities to meet the return on investment objectives of our shareholders.

Our liquidity position is supported by management of liquid assets and access to alternative sources of funds. Our liquid assets include cash, interest-bearing deposits in correspondent banks, federal funds sold, and fair value of unpledged investment securities. Other available sources of liquidity include wholesale deposits, and additional borrowings from correspondent banks, FHLB advances, and the Federal Reserve discount window. At June 30, 2025, the Bank had the capacity to borrow funds from the FHLB and the Federal Reserve discount window of up to approximately $1.3 billion and $668.2 million, respectively.

Our short-term and long-term liquidity requirements are primarily met through cash flow from operations, redeployment of prepaying and maturing balances in our loan and investment portfolios, and increases in customer deposits. Other alternative sources of funds will supplement these primary sources to the extent necessary to meet additional liquidity requirements on either a short-term or long-term basis.

Management believes that the Company has adequate liquidity to meet its obligations. However, if general economic conditions, potential recession in the United States and our market areas, the impacts related to or resulting from bank failures and any uncertainty in the banking industry, including the associated impact to the Company and other financial institutions of any regulatory changes or other mitigation efforts taken by government agencies in response thereto, increased competition for deposits and related changes in deposit customer behavior, changes in market interest rates, the resurgence of elevated levels of inflation or inflationary pressures in the United States and our market areas, or other events, cause these sources of external funding to become restricted or are eliminated, the Company may not be able to raise adequate funds or may incur substantially higher funding costs or operating restrictions in order to raise the necessary funds to support the Company’s operations and growth.

Capital

Total stockholders’ equity increased to $454.1 million as of June 30, 2025, compared to $438.9 million as of December 31, 2024, an increase of $15.1 million, or 3.4%. The increase from December 31, 2024 was primarily the result of $26.9 million in net income for the six months ended June 30, 2025 and an increase in accumulated other comprehensive income (“AOCI”) of $375 thousand related to fair value changes in available for sale securities and related fair value hedges, partially offset by $4.9 million of dividends paid and $8.5 million in repurchases of common stock for the six months ended June 30, 2025.

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Table of Contents
We are subject to various regulatory capital requirements administered by the federal and state banking regulators. Failure to meet regulatory capital requirements may result in certain mandatory and possible additional discretionary actions by regulators that, if undertaken, could have a direct material effect on our financial statements. Under capital adequacy guidelines and the regulatory framework for “prompt corrective action” (described below), we must meet specific capital guidelines that involve quantitative measures of our assets, liabilities and certain off-balance sheet items as calculated under regulatory accounting policies. The capital amounts and classifications are subject to qualitative judgments by the federal banking regulators about components, risk weightings and other factors. Qualitative measures established by regulation to ensure capital adequacy required us to maintain minimum amounts and ratio of common equity tier 1 (“CET1”) capital, tier 1 capital and total capital to risk-weighted assets and of tier 1 capital to average consolidated assets, referred to as the “leverage ratio.”

The risk-based capital ratios measure the adequacy of a bank’s capital against the riskiness of its assets and off-balance sheet activities. Failure to maintain adequate capital is a basis for “prompt corrective action” or other regulatory enforcement action. In assessing a bank’s capital adequacy, regulators also consider other factors such as interest rate risk exposure; liquidity, funding and market risks; quality and level of earnings; concentrations of credit, quality of loans and investments; risks of any nontraditional activities; effectiveness of bank policies; and management’s overall ability to monitor and control risks.

As of June 30, 2025 and December 31, 2024, both we and the Bank met all the capital adequacy requirements to which we and the Bank were subject. At June 30, 2025, we and the Bank were “well capitalized” under the regulatory framework for prompt corrective action. Management believes that no conditions or events have occurred since June 30, 2025 that would materially adversely change such capital classifications. From time to time, we may need to raise additional capital to support our and the Bank’s further growth and to maintain our “well capitalized” status.

The table below reflects the Company’s (on a consolidated basis) and the Bank’s capital ratios as of the dates indicated.

   
June 30, 2025
    
December 31, 2024
  
   
Amount
    
Ratio
    
Amount
    
Ratio
  
   
(Dollars in thousands)
  
Consolidated:
                        
Total capital (to risk-weighted assets)
  
$
647,191
      
18.17
%
  
$
631,713
      
17.86
%
Tier 1 capital (to risk-weighted assets)
    
538,588
      
15.12
%
    
523,535
      
14.80
%
CET 1 capital (to risk-weighted assets)
    
493,588
      
13.86
%
    
478,535
      
13.53
%
Tier 1 capital (to average assets)
    
538,588
      
12.12
%
    
523,535
      
12.04
%
                                 
City Bank:
                                
Total capital (to risk-weighted assets)
  
$
527,722
      
14.82
%
  
$
520,788
      
14.73
%
Tier 1 capital (to risk-weighted assets)
    
483,178
      
13.57
%
    
476,574
      
13.48
%
CET 1 capital (to risk-weighted assets)
    
483,178
      
13.57
%
    
476,574
      
13.48
%
Tier 1 capital (to average assets)
    
483,178
      
10.88
%
    
476,574
      
10.96
%

Community Bank Leverage Ratio

On September 17, 2019, the federal banking agencies jointly finalized a rule to be effective January 1, 2020 and intended to simplify the regulatory capital requirements described above for qualifying community banking organizations that opt into the Community Bank Leverage Ratio (“CBLR”) framework, as required by Section 201 of the EGRRCPA. The final rule became effective on January 1, 2020, and the CBLR framework became available for banks to use beginning with their March 31, 2020 Call Reports. Under the final rule, if a qualifying community banking organization opts into the CBLR framework and meets all requirements under the framework, it will be considered to have met the well-capitalized ratio requirements under the “prompt corrective action” regulations described above and will not be required to report or calculate risk-based capital. In order to qualify for the CBLR framework, a community banking organization must have a tier 1 leverage ratio of greater than 9%, less than $10 billion in total consolidated assets, and limited amounts of off-balance sheet exposures and trading assets and liabilities. Although the Company and the Bank are qualifying community banking organizations, the Company and the Bank have elected not to opt in to the CBLR framework at this time and will continue to follow the Basel III capital requirements as described in Part I, Item 1, “Business,” under the subheading “Supervision and Regulation—Regulatory Capital Requirements,” in the 2024 Annual Report on Form 10-K.

Treasury Stock

We repurchased stock in accordance with its previously-announced stock repurchase program during the three and six months ended June 30, 2025. For the three months ended June 30, 2025, we repurchased 9,046 shares of common stock for a total of $276 thousand. For the six months ended June 30, 2025, we repurchased 259,046 share of common stock for a total of $8.5 million. These shares were retired immediately upon repurchase and not included in treasury stock. See Part II, Item 2, “Unregistered Sales of Equity Securities and Use of Proceeds,” of this Form 10-Q for further information.

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Table of Contents
Interest Rate Sensitivity and Market Risk

As a financial institution, our primary component of market risk is interest rate volatility. Our interest rate risk policy provides management with the guidelines for effective funds management, and we have established a measurement system for monitoring our net interest rate sensitivity position. We have historically managed our sensitivity position within our established guidelines.

Interest rate sensitivity involves the relationships between rate-sensitive assets and liabilities and is an indication of the probable effects of interest rate fluctuations on the Company’s net interest income. Interest rate-sensitive assets and liabilities are those with yields or rates that are subject to change within a future time period due to maturity or changes in market rates. The model is used to project future net interest income under a set of possible interest rate movements. The Company’s Investment/Asset Liability Committee (“ALCO Committee”) reviews this information to determine compliance with the limits set by the Bank’s board of directors.

Fluctuations in interest rates will ultimately impact both the level of income and expense recorded on most of our assets and liabilities, and the market value of all interest-earning assets and interest-bearing liabilities, other than those which have a short term to maturity. Interest rate risk is the potential of economic losses due to future interest rate changes. These economic losses can be reflected as a loss of future net interest income and/or a loss of current fair market values. The objective is to measure the effect on net interest income and to adjust the balance sheet to minimize the inherent risk while at the same time maximizing income.

We manage our exposure to interest rates by structuring our balance sheet in the ordinary course of business. Based upon the nature of our operations, we are not subject to foreign exchange or commodity price risk. We do not own any trading assets.

Our exposure to interest rate risk is managed by the ALCO Committee, in accordance with policies approved by the Bank’s board of directors. The ALCO Committee formulates strategies based on appropriate levels of interest rate risk. In determining the appropriate level of interest rate risk, the ALCO Committee considers the impact on earnings and capital on the current outlook on interest rates, potential changes in interest rates, regional economies, liquidity, business strategies and other factors. The ALCO Committee meets regularly to review, among other things, the sensitivity of assets and liabilities to interest rate changes, the book and market values of assets and liabilities, commitments to originate loans and the maturities of investments and borrowings. Additionally, the ALCO Committee reviews liquidity, cash flow flexibility, maturities of deposits and consumer and commercial deposit activity. Management employs methodologies to manage interest rate risk, which include an analysis of relationships between interest-earning assets and interest-bearing liabilities and an interest rate shock simulation model.

We use interest rate risk simulation models and shock analyses to test the interest rate sensitivity of net interest income and fair value of equity, and the impact of changes in interest rates on other financial metrics. Contractual maturities and re-pricing opportunities of loans are incorporated in the model. The average lives of non-maturity deposit accounts are based on decay assumptions and are incorporated into the model. All of the assumptions used in our analyses are inherently uncertain and, as a result, the model cannot precisely measure future net interest income or precisely predict the impact of fluctuations in market interest rates on net interest income. Actual results will differ from the model’s simulated results due to timing, magnitude and frequency of interest rate changes as well as changes in market conditions and the application and timing of various management strategies.

On a quarterly basis, we run a simulation model for a static balance sheet and other scenarios. These models test the impact on net interest income from changes in market interest rates under various scenarios. Under the static model, rates are shocked instantaneously and ramped rates change over a 12-month and 24-month horizon based upon parallel and non-parallel yield curve shifts. Parallel shock scenarios assume instantaneous parallel movements in the yield curve compared to a flat yield curve scenario. Non-parallel simulation involves analysis of interest income and expense under various changes in the shape of the yield curve. Our internal policy regarding internal rate risk simulations currently specifies that for gradual parallel shifts of the yield curve, estimated net interest income at risk for the subsequent one-year period should not decline by more than 7.5% for a 100 basis point shift, 15% for a 200 basis point shift, and 22.5% for a 300 basis point shift.

The following table summarizes the simulated change in net interest income over a 12-month horizon as of the dates indicated update:


    
June 30,
2025
    
December 31,
2024
  
Change in Interest Rates (Basis Points)
    
Percent Change in
Net Interest Income
    
Percent Change in
Net Interest Income
  
+300
      
(3.35
)%
    
(4.63
)%
+200
      
(2.11
)%
    
(3.02
)%
+100
      
(1.06
)%
    
(1.54
)%
-100
      
(0.21
)%
    
0.01
%
-200
      
0.17
%
    
1.69
%

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Table of Contents
Impact of Inflation

Our consolidated financial statements and related notes included elsewhere in this Form 10-Q have been prepared in accordance with GAAP. GAAP requires the measurement of financial position and operating results in terms of historical dollars, without considering changes in the relative value of money over time due to inflation or recession.
 
The Company’s asset and liability structure is substantially different from that of an industrial company in that virtually all assets and liabilities of the Company are monetary in nature. Management believes the impact of inflation on financial results depends upon the Company’s ability to react to changes in interest rates and by such reaction, reduce the inflationary impact on performance. Interest rates do not necessarily move in the same direction, or at the same magnitude, as the prices of other goods and services. However, other operating expenses do reflect general levels of inflation. Management seeks to manage the relationship between interest rate-sensitive assets and liabilities in order to protect against wide net interest income fluctuations, including those resulting from inflation. Various information shown elsewhere in this Report will assist in the understanding of how well the Company is positioned to react to changing interest rates and inflationary trends. In particular, additional information related to the Company’s interest rate-sensitive assets and liabilities is contained in this Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of this Report under the heading “Interest Rate Sensitivity and Market Risk.”

Non-GAAP Financial Measures

Our accounting and reporting policies conform to GAAP and the prevailing practices in the banking industry. However, we also evaluate our performance based on certain additional financial measures discussed in this Report as being non-GAAP financial measures. We classify a financial measure as being a non-GAAP financial measure if that financial measure excludes or includes amounts, or is subject to adjustments that have the effect of excluding or including amounts, that are included or excluded, as the case may be, in the most directly comparable measure calculated and presented in accordance with GAAP as in effect from time to time in the U.S. in our consolidated statements of comprehensive income (loss), balance sheets or statements of cash flows. Non-GAAP financial measures do not include operating and other statistical measures or ratios or statistical measures calculated using exclusively either financial measures calculated in accordance with GAAP, operating measures or other measures that are not non-GAAP financial measures or both.

The non-GAAP financial measures that we discuss in this Report should not be considered in isolation or as a substitute for the most directly comparable or other financial measures calculated in accordance with GAAP. Moreover, the manner in which we calculate the non-GAAP financial measures that we discuss in this Report may differ from that of other companies reporting measures with similar names. It is important to understand how other banking organizations calculate their financial measures with names similar to the non-GAAP financial measures we have discussed in this Report when comparing such non-GAAP financial measures.

Tangible Book Value Per Common Share. Tangible book value per share is a non-GAAP measure generally used by investors, financial analysts and investment bankers to evaluate financial institutions. The most directly comparable GAAP financial measure for tangible book value per common share is book value per common share. We believe that the tangible book value per common share measure is important to many investors in the marketplace who are interested in changes from period to period in book value per common share exclusive of changes in intangible assets. Goodwill and other intangible assets have the effect of increasing total book value while not increasing our tangible book value.

Tangible Common Equity to Tangible Assets. Tangible common equity to tangible assets is a non-GAAP measure generally used by investors, financial analysts and investment bankers to evaluate financial institutions. We calculate tangible common equity, as described above, and tangible assets as total assets less goodwill, core deposit intangibles and other intangible assets, net of accumulated amortization. The most directly comparable GAAP financial measure for tangible common equity to tangible assets is total common stockholders’ equity to total assets. We believe that this measure is important to many investors in the marketplace who are interested in the relative changes from period to period of tangible common equity to tangible assets, each exclusive of changes in intangible assets. Goodwill and other intangible assets have the effect of increasing both total stockholders’ equity and assets while not increasing our tangible common equity or tangible assets.

The following table reconciles, as of the dates set forth below, total stockholders’ equity to tangible common equity and total assets to tangible assets and then presents book value per common share, tangible book value per common share, total stockholders’ equity to total assets, and tangible common equity to tangible assets:

   
June 30, 2025
    
December 31, 2024
  

 
(Dollars in thousands)
  
Total stockholders’ equity
  
$
454,074
    
$
438,949
  
Less:  Goodwill and other intangibles
    
(20,732
)
    
(21,035
)
Tangible common equity
  
$
433,342
    
$
417,914
  
                 
Total assets
  
$
4,363,674
    
$
4,232,239
  
Less:  Goodwill and other intangibles
    
(20,732
)
    
(21,035
)
Tangible assets
  
$
4,342,942
    
$
4,211,204
  
                 
Shares outstanding
    
16,230,475
      
16,455,826
  
                 
Total stockholders’ equity to total assets
    
10.41
%
    
10.37
%
Tangible common equity to tangible assets
    
9.98
%
    
9.92
%
Book value per share
  
$
27.98
    
$
26.67
  
Tangible book value per share
  
$
26.70
    
$
25.40
  

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Table of Contents
Critical Accounting Policies and Estimates

Our accounting and reporting policies conform to GAAP and conform to general practices within the industry in which we operate. To prepare consolidated financial statements in conformity with GAAP, management makes estimates, assumptions and judgments based on available information. These estimates, assumptions and judgments affect the amounts reported in the consolidated financial statements and accompanying notes. These estimates, assumptions and judgments are based on information available as of the date of the consolidated financial statements and, as this information changes, actual results could differ from the estimates, assumptions and judgments reflected in the consolidated financial statements. In particular, management has identified several accounting policies that, due to the estimates, assumptions and judgments inherent in those policies, are critical in understanding our consolidated financial statements. We evaluate our estimates on an ongoing basis.

The following is a discussion of the critical accounting policies and significant estimates that we believe require us to make the most complex or subjective decisions or assessments. Additional information about these policies can be found in Note 1 of the Company’s consolidated financial statements as of December 31, 2024.

Allowance for Credit Losses. The allowance for credit losses includes credit losses on loans as well as the off-balance-sheet credit exposure, which is reported as a component of other liabilities on our consolidated balance sheets. The ACL for loans is established for future expected credit losses through a provision for credit losses charged to earnings. Expected losses are calculated using comparable and quantifiable information both internal and external about past events, including historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amount. Expected credit losses are estimated over the contractual term of the loans and adjusted for expected prepayments when appropriate. The ACL for loans is affected by charge-offs, recoveries and the provision for credit losses on loans.

The ACL for loans is evaluated on a quarterly basis by management and is based upon management’s review of the collectability of the loans in light of historical experience, the nature and volume of the loan portfolio, adverse situations that may affect the borrower’s ability to repay, estimated value of any underlying collateral, and prevailing economic conditions. This evaluation is inherently subjective, as it requires estimates that are susceptible to significant revision as more information becomes available. The determination of the adequacy of the ACL for loans is based on estimates that are particularly susceptible to significant changes in the economic environment and market conditions. Loan losses are charged against the allowance when management believes the uncollectibility of a loan balance is confirmed.

Mortgage Servicing Rights. When mortgage loans are sold with servicing retained, servicing rights are initially recorded at fair value with the consolidated statement of comprehensive income (loss) effect recorded in net gain on sale of loans. Fair value is based on market prices for comparable mortgage servicing contracts, when available, or alternatively, is based on a valuation model administered by a third-party that calculates present value of estimated future servicing income. The fair values of servicing rights are subject to significant fluctuations in valuation model assumptions as a result of changes in estimated and actual prepayment speeds and default rates and losses. Estimating prepayment speed and/or discount rates within ranges that market participants would use in determining the fair value of the MSR requires significant management judgment.

Recently Issued Accounting Pronouncements

See Note 1, Summary of Significant Accounting Policies, in the notes to the consolidated financial statements included elsewhere in this Form 10-Q regarding the impact of new accounting pronouncements.

Item 3.
Quantitative and Qualitative Disclosure about Market Risk

The Company manages market risk, which, as a financial institution is primarily interest rate volatility, through the ALCO Committee of the Bank, in accordance with policies approved by its board of directors. The Company uses an interest rate risk simulation model and shock analysis to test the interest rate sensitivity of net interest income and fair value of equity, and the impact of changes in interest rates on other financial metrics. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Interest Rate Sensitivity and Market Risk” herein for a discussion of how we manage market risk.

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Table of Contents
Item 4.
Controls and Procedures

Evaluation of Disclosure Controls and Procedures

As of the end of the period covered by this Form 10-Q, the Company carried out an evaluation, under the supervision and with the participation of its management, including its Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of its disclosure controls and procedures. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management was required to apply judgment in evaluating its controls and procedures. Based on this evaluation, the Company’s Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, or the Exchange Act) were effective as of the end of the period covered by this Form 10-Q.

Internal Control over Financial Reporting

There were no changes in the Company’s internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the three months ended June 30, 2025 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
48
Table of Contents
PART II. OTHER INFORMATION

Item 1.
Legal Proceedings

The Company and its subsidiaries are subject to various legal actions, as described in our Annual Report on Form 10-K for the year ended December 31, 2024 (the “2024 Annual Report on Form 10-K”) filed with the SEC on March 7, 2025. Except as described in our 2024 Annual Report on Form 10-K, we are not presently involved in any other litigation, nor to our knowledge is any litigation threatened against us, that in management’s opinion would result in any material adverse effect on our financial position or results of operations or that is not expected to be covered by insurance.

Item 1A.
Risk Factors

In evaluating an investment in any of our securities, investors should consider carefully, among other things, information under the heading “Cautionary Notice Regarding Forward-Looking Statements” in Part I, Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” of this Form 10-Q and the risk factors previously disclosed under the heading “Risk Factors” in Part I, Item 1A of our 2024 Annual Report on Form 10-K. Management believes there have been no material changes in the risk factors disclosed by the Company in Part I, Item 1A, “Risk Factors,” of the 2024 Annual Report on Form 10-K. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or operating results.
 
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds

Issuer Purchases of Equity Securities

On February 21, 2025, the Company’s board of directors approved a stock repurchase program pursuant to which the Company may, from time to time, purchase up to $15.0 million of its outstanding shares of common stock (the “Program”). The shares can be repurchased from time to time through various means, including open market purchases and privately negotiated transactions. Open market repurchases under the Program will be conducted in accordance with the limitations set forth in Rule 10b-18 promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and other applicable legal requirements. Repurchases under the Program may also be made pursuant to a trading plan under Rule 10b5-1 under the Exchange Act, which would permit shares to be repurchased by the Company when the Company might otherwise be precluded from doing so because of self-imposed trading blackout periods or other regulatory restrictions. The extent to which the Company repurchases its shares, and the manner, timing and amount of such repurchases, will depend upon a variety of factors, including the performance of the Company’s stock price, general market and economic conditions, regulatory requirements, availability of funds, and other relevant considerations, as determined by the Company. The Company may, in its discretion, begin, suspend or terminate repurchases at any time prior to the Program’s expiration, without any prior notice. The Program does not obligate the Company to repurchase any particular number or amount of shares of the Company’s common stock and there is no guarantee as to the exact number or value of shares that will be repurchased by the Company under the Program.
 
The following table summarizes the share repurchase activity for the three months ended June 30, 2025.

   
Total Shares
Repurchased
    
Average Price
Paid Per Share
    
Total Dollar Amount
Purchased Pursuant to
Publicly-Announced Plans
    
Maximum Dollar Amount
Remaining Available for
Repurchase Pursuant to
Publicly-Announced Plans
  
April 2025
    
9,046
    
$
30.46
    
$
275,584
    
$
6,474,416
  
May 2025
    
—
      
—
      
—
      
6,474,416
  
June 2025
    
—
      
—
      
—
      
6,474,416
  
Total
    
9,046
                          

Item 3.
Defaults upon Senior Securities

Not applicable.

Item 4.
Mine Safety Disclosures

Not applicable.

Item 5.
Other Information

During the quarter ended June 30, 2025, no director or officer of the Company adopted, modified, or terminated a “Rule 10b5-1 trading arrangement” or a “non-Rule 10b5-1 trading arrangement,” as each term is defined in Item 408 of Regulation S-K.

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Table of Contents
Item 6.
Exhibits

Exhibit
Number
Description
3.1
Amended and Restated Certificate of Formation of South Plains Financial, Inc. (incorporated by reference to Exhibit 3.1 to the Company’s Registration Statement on Form S-1 filed with the SEC on April 12, 2019) (File No. 333-230851).
 
 
3.2
Second Amended and Restated Bylaws of South Plains Financial, Inc. (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed with the SEC on November 1, 2021) (File No. 001-38895).
 
 
31.1*
Certification by Chief Executive Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934, as amended.
 
 
31.2*
Certification by Chief Financial Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934, as amended.
 
 
32.1**
Section 1350 Certification of Chief Executive Officer.
 
 
32.2**
Section 1350 Certification of Chief Financial Officer.
 
 
101*
The following material from South Plains Financial, Inc.’s Form 10-Q for the quarter ended June 30, 2025, formatted in XBRL (eXtensible Business Reporting Language), filed herewith: (i) Consolidated Balance Sheets, (ii) Consolidated Statements of Comprehensive Income, (iii) Consolidated Statements of Changes in Stockholders’ Equity, (iv) Consolidated Statements of Cash Flows, and (v) Notes to Unaudited Consolidated Financial Statements.
 
 
104*
Cover Page Interactive Data File (formatted as Inline XBRL).

*
Filed with this Form 10-Q

**
Furnished with this Form 10-Q

50
Table of Contents
SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
South Plains Financial, Inc.



Date:
August 5, 2025
By:
/s/ Curtis C. Griffith


Curtis C. Griffith


Chairman and Chief Executive Officer



Date:
August 5, 2025
By:
/s/ Steven B. Crockett


Steven B. Crockett


Chief Financial Officer and Treasurer


51

Source: View Original Filing on SEC EDGAR

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South Plains Financial

NASDAQ:SPFI

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SPFI Latest SEC Filings

Sep 11, 2025
[144] South Plains Financial, Inc. SEC Filing
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[13F-HR] South Plains Financial, Inc. SEC Filing
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[8-K] South Plains Financial, Inc. Reports Material Event

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