South Plains Financial (SPFI) risk factors, FY2025 10-K

Risks Related to Our Business

1. 01The Company is subject to interest rate risk and changes in market interest rates or capital markets could affect our revenues and expenses, the value of assets and obligations, and the availability and cost of capital or liquidity
2. 02Our business has been and may continue to be adversely affected by current conditions in the financial markets and economic conditions generally
3. 03The Company’s Investment Portfolio Could Incur Additional Losses or Fair Value Could Deteriorate
4. 04We may grow through acquisitions, a strategy which may not be successful or, if successful, may produce risks in successfully integrating and managing the acquisitions and may dilute our shareholders
5. 05We may not be able to adequately measure and limit our credit risk, which could lead to unexpected losses
6. 06Many of our loans are to commercial borrowers, which have a higher degree of risk than other types of loans
7. 07We may be subject to additional credit risk with respect to loans that we make to other lenders
8. 08Because a portion of our loan portfolio is comprised of real estate loans, negative changes in the economy affecting real estate values and liquidity could impair the value of collateral securing our real estate loans and result in loan and other losses
9. 09Our commercial real estate loan portfolio exposes us to risks that may be greater than the risks related to other mortgage loans
10. 10Our portfolio of indirect dealer lending exposes us to increased credit risks
11. 11The small to medium-sized businesses that we lend to may have fewer resources to weather adverse business conditions, which may impair their ability to repay a loan, and such impairment could adversely affect our results of operations and financial condition
12. 12Agricultural lending and volatility in commodity prices may adversely affect our financial condition and results of operations
13. 13Sustained volatility in oil prices and the energy industry, including in Texas, could lead to increased credit losses in our energy portfolio, weaker demand for energy lending, and adversely affect our business, results of operations and financial condition
14. 14Changes in U.S. trade policies and other factors beyond the Company’s control, including the imposition of tariffs and retaliatory tariffs, may adversely impact our business, financial condition and results of operations
15. 15Climate change and government action and societal responses may materially affect the Company’s business and results of operations
16. 16The amount of nonperforming assets may increase and can take significant time and resources to resolve
17. 17The properties that we own and certain foreclosed real estate assets could subject us to environmental risks and associated costs
18. 18Our largest loan relationships make up a material percentage of our total loan portfolio43% rewritten
19. 19Our largest deposit relationships currently make up a material percentage of our deposits and the withdrawal of deposits by our largest depositors could force us to fund our business through more expensive and less stable sources
20. 20Liquidity risk could impair our ability to fund operations and meet our obligations as they become due and could jeopardize our financial condition
21. 21Deposit outflows may increase reliance on borrowings and brokered deposits as sources of funds
22. 22Customers could pursue alternatives to bank deposits, causing us to lose a relatively inexpensive source of funding
23. 23We continually encounter technological changes which could result in us having fewer resources than many of our competitors to continue to invest in technological improvements
24. 24We may be adversely impacted by an economic downturn or a natural disaster affecting one or more of our market areas
25. 25Mortgage originations have decreased due to higher interest rates and declines in refinance activity, and this trend may continue
26. 26Market conditions could have a material impact on our ability to sell originated mortgages in the secondary market
27. 27The value of our mortgage servicing rights can be volatile
28. 28Our risk management framework may not be effective in mitigating risks or losses to us
29. 29We are dependent on the use of data and modeling in our management’s decision-making and faulty data or modeling approaches could negatively impact our decision-making ability or possibly subject us to regulatory scrutiny in the future
30. 30There are investment performance, fiduciary and asset servicing risks associated with our trust operations
31. 31We are exposed to cybersecurity risks associated with our internet-based systems and online commerce security, and our information systems could experience an interruption, failure, breach in security, or cyber-attack
32. 32Our operations could be interrupted if our third-party service providers experience difficulty, terminate their services or fail to comply with banking regulations
33. 33We are subject to certain operating risks related to employee error and customer, employee and third-party misconduct, which could harm our reputation and business
34. 34We rely heavily on our management team and the unexpected loss of key officers may adversely affect our operations
35. 35Our ability to develop, retain and recruit additional successful bankers is critical to the success of our business strategy, and any failure to do so could adversely affect our business, financial condition, results of operations and future prospects
36. 36Competition from other financial intermediaries may adversely affect our profitability
37. 37If we fail to maintain effective internal control over financial reporting, we may not be able to accurately report its financial results or prevent fraud
38. 38The obligations associated with being a public company require significant resources and management attention
39. 39Our equity compensation plan will cause dilution and increase our costs, which will reduce our income
40. 40Negative public opinion could damage our reputation and adversely impact our earnings
41. 41We may be adversely affected by the soundness of other financial institutions

Risks Related to Our Regulatory Environment

1. 42We operate in a highly regulated environment and the laws and regulations that govern our operations, corporate governance, executive compensation and accounting principles, or changes in them, or failure to comply with them, could adversely affect us
2. 43We are subject to commercial real estate lending guidance issued by the federal banking regulators that impacts our operations and capital requirements
3. 44Legislative and regulatory actions taken now or in the future may increase our costs and impact our business, governance structure, financial condition or results of operations
4. 45Many of our new activities and expansion plans require regulatory approvals, and failure to obtain them may restrict our growth
5. 46The Federal Reserve may require the Company to commit capital resources to support the Bank
6. 47As a regulated entity, we and the Bank must maintain certain required levels of regulatory capital that may limit our and the Bank’s operations and potential growth
7. 48Bank regulatory agencies periodically examine our business, including compliance with laws and regulations, and our failure to comply with any supervisory actions to which we become subject as a result of such examinations could materially and adversely affect us
8. 49If we fail to maintain sufficient capital under regulatory requirements, whether due to losses, an inability to raise additional capital or otherwise, that failure could adversely affect our financial condition, liquidity and results of operations, as well as our ability to maintain regulatory compliance
9. 50Failure to maintain and implement adequate programs to combat money laundering and terrorist financing could have serious reputational consequences for us
10. 51Regulations relating to privacy, information security and data protection could increase our costs, affect or limit how we collect and use personal information and adversely affect our business opportunities
11. 52We face increased risk under the terms of the CRA, as we accept additional deposits in new geographic markets
12. 53We are subject to federal and state fair lending laws, and failure to comply with these laws could lead to material penalties
13. 54Our financial condition, earnings and asset quality could be adversely affected if our consumer facing operations do not operate in compliance with applicable regulations

Risks Related to Our Common Stock

1. 55An active public trading market may not be sustained
2. 56The market price of our common stock could be volatile and may fluctuate significantly, which could cause the value of an investment in our common stock to decline, result in losses to our shareholders and litigation against us
3. 57Future equity issuances, including through our current or any future equity compensation plans, could result in dilution, which could cause the price of our shares of common stock to decline
4. 58We may issue shares of preferred stock in the future, which could make it difficult for another company to acquire us or could otherwise adversely affect holders of our common stock
5. 59Our directors and executive officers have significant control over our business
6. 60Our bylaws have an exclusive forum provision, which could limit a shareholder’s ability to obtain a favorable judicial forum for disputes with us or our directors, officers or other employees21% rewritten
7. 61Our dividend policy may change without notice, and our future ability to pay dividends is subject to restrictions
8. 62We are a bank holding company and our only source of cash, other than issuances of securities, is distributions from the Bank
9. 63An investment in our common stock is not an insured deposit and is subject to risk of loss