SOUTH PLAINS FINANCIAL, INC. (SPFI) stock intrinsic value fair value estimate & owner earnings analysis

South Plains Financial is the holding company for City Bank, a commercial and retail bank based in Lubbock, Texas, with a network across West Texas, the Permian Basin, and eastern New Mexico, plus mortgage, investment, and trust businesses. In December 2025 the company agreed to acquire BOH Holdings, parent of Bank of Houston, in an all-stock deal (0.1925 SPFI shares per BOH share, valued at roughly $106 million based on late-November 2025 prices); the deal closed in the second quarter of 2026, adding about $745 million in assets, $625 million in loans, and $603 million in deposits, and giving the company its first real foothold in Houston, the largest and fastest-growing metro in Texas. The new shares issued to BOH shareholders increased the diluted share count by roughly 16%. Over the past several years the bank's underlying earnings power has been steadier than the year-to-year net income numbers suggest. A pandemic-era refinancing boom in 2020-2021 temporarily inflated mortgage-banking income (loan-sale volume ran near $1.4-1.6 billion a year), which then collapsed as rates rose — by 2025 that volume was back down to roughly $290 million and mortgage-related income had fallen by more than half from its peak. Reported 2023 net income was also flattered by a one-time $33.8 million gain on the April 2023 sale of an insurance subsidiary (Windmark), which doesn't reflect the ongoing business. Stripping out these swings, normalized cash earnings have run in a fairly narrow band of roughly $44-67 million a year since 2019 — a bit under $3.50 per share on the current share count, which lines up closely with the $3.44 the bank actually reported in 2025 and gives us some confidence in the estimate. Credit quality has been consistently strong, with problem loans never exceeding six-tenths of one percent of assets over the last three years. Three cases from here: Bear ($62/share): The Houston acquisition proves more disruptive than expected — integration costs run higher than planned, some Bank of Houston commercial relationships leave for other banks during the transition, and a soft patch in the Permian Basin oil patch (the bank carries real, if not dominant, energy-sector lending) pushes credit costs modestly higher. Earnings stall for two to three years before resuming only slow, low-single-digit growth. Base ($93/share): The acquisition closes without major disruption; 2026 is roughly a breakeven year per share as integration costs offset the new business, with modest cost savings and continued but unspectacular growth in the existing Texas/New Mexico franchise taking over from 2027, tapering to a sustainable low-single-digit pace — consistent with what the bank has actually delivered over the last five years, rather than the faster growth of 2018-2022. Bull ($148/share): Houston becomes a genuine second growth market rather than just an add-on, the merger's cost savings are fully realized, and the company continues the share buyback program it has run every year since its 2019 IPO, compounding per-share value faster for longer. None of the cases assumes a return of the extraordinary 2020-2021 mortgage-refinancing volumes; we don't expect that boom to repeat and haven't built it into any scenario. The margin-of-safety price is $60, a level just below the bear-case value, from which the base case implies solid gains if the acquisition performs as expected; it also assumes a couple of clean post-merger quarters. One thing we couldn't fully reconcile from the filings: Bank of Houston's own earnings contribution wasn't broken out in the 10-K, so our estimate of the deal's near-term per-share effect is our own judgment rather than a disclosed figure.