KBRA Affirms Ratings for South Plains Financial, Inc.; Revises Outlook to Positive

KBRA affirms the senior unsecured debt rating of BBB, the subordinated debt rating of BBB-, and the short-term debt rating of K3 for Lubbock, Texas-based South Plains Financial, Inc. (NASDAQ: SPFI) (“the company”). Additionally, KBRA affirms the deposit and senior unsecured debt ratings of BBB+, the subordinated debt rating of BBB, and the short-term deposit and debt ratings of K2 for the lead subsidiary, City Bank. The Outlook for all long-term ratings is revised to Positive from Stable.

Key Credit Considerations

The revision to Positive Outlook from Stable Outlook reflects SPFI’s consistently strong quantitative financial profile, characterized by above-peer earnings and capital, sound asset quality, and a stable funding profile. The company has demonstrated durable earnings performance, consistently generating ROA above 1%, while maintaining a solid NIM of 3.96% at 1H26. Margin performance benefits from above-average loan yields, supported, in part, by the company’s meaningful C&D exposure and higher-yielding specialized C&I lending activities. Profitability is further bolstered by consistently low provision expense, representing just 0.03% of average assets at 1H26, as well as meaningful revenue diversification, with noninterest income accounting for 21% of operating revenue, primarily derived from mortgage banking and other banking fees and services.

SPFI's measured approach to organic and inorganic growth, together with strong internal capital generation, has resulted in a robust capital position, with TCE and CET1 ratios of 10.5% and 14.1%, respectively, at 2Q26, remaining meaningfully above similarly rated peers and providing solid loss-absorption capacity and flexibility to support continued growth. The company also benefits from a well-established branch-based deposit franchise sourced primarily from rural Texas markets, providing a stable foundation for its funding profile. Core deposits represent 89% of total funding, complemented by a meaningful NIB deposit base comprising 25% of total deposits. The strength and stability of the deposit franchise support conservative balance sheet positioning, as reflected by a loan-to-deposit ratio of 82% and limited reliance on wholesale funding, while providing flexibility to fund anticipated mid-single-digit loan growth.

Additionally, asset quality has remained sound over a multi-year period, reflecting conservative underwriting and credit administration, with historically low credit losses and strong reserve coverage (LLR/NPAs of 5.6x). While classified loans increased to 2.1% of total loans at 2Q26, driven, in part, by credits acquired from BOH Holdings, Inc., levels remain broadly consistent with historical trends. Moreover, performance within the legacy SPFI portfolio remains favorable, and credit migration within the acquired portfolio has generally tracked in line with management’s expectations, supporting our view that loss content should remain manageable.

Rating Sensitivities

The Positive Outlook reflects KBRA’s view that an upgrade is likely over the medium term if SPFI sustains profitability, credit performance, and capitalization at levels consistent with higher-rated peers. Further geographic diversification and continued evolution of the company’s risk management infrastructure would also be viewed favorably. Conversely, while a downgrade is not expected over the near term, sustained material weakening in earnings or asset quality, capital levels falling below those appropriate for the rating category, or a meaningful deterioration in the funding profile could result in a revision of the Outlook to Stable or, if sufficiently severe, negative rating action.

To access ratings and relevant documents, click here.

Methodology