Q1 2024 South Plains Financial Inc Earnings Call
Good afternoon, ladies and gentlemen, and welcome to the South Plains Financial Inc. First quarter 'twenty 'twenty four earnings conference call. During today's presentation, all parties will be in a listen only mode. Following the presentation. The conference will be opened for questions with instructions to follow at that time as a reminder.
This conference call is being recorded I would now like to turn the call over to Mr. Steve Crockett, Chief Financial Officer and Treasurer.
Speaker Change: South Plains financial please go ahead Sir.
Steven B. Crockett: You operator, and good afternoon, everyone. We appreciate you joining our earnings conference call with me here today are Curtis Griffith, our chairman and Chief Executive Officer coordination, our President and Brent Bates, our Chief Credit Officer.
Speaker Change: The related earnings press release and earnings presentation are available on the news and events section of our website <unk> Dot bank before.
Steven B. Crockett: Before we begin I'd like to remind everyone that this call may contain forward looking statements and are subject to a variety of risks uncertainties and other factors that could cause actual results to differ materially from those anticipated future results.
Steven B. Crockett: We see our safe Harbor statements in our earnings press release and in our earnings presentation.
Steven B. Crockett: All comments made during today's call are subject to those safe Harbor statements.
Steven B. Crockett: Any forward looking statements presented herein are made only as of today's date and we do not undertake any duty to update such forward looking statements, except as required by law.
Steven B. Crockett: Additionally, during today's call we may discuss certain non-GAAP measures, which we believe are useful in evaluating our performance.
Steven B. Crockett: A reconciliation of these non-GAAP measures to the most comparable GAAP measures can also be found in our earnings release and in the earnings presentation.
Steven B. Crockett: Let me hand, it over to you.
Speaker Change: Thank you, Steve and good afternoon.
Steven B. Crockett: On today's call I will briefly review the highlights of our first quarter 2024 results as well as spend some time on our business philosophy and initiatives to become our customers' primary banking relationship.
Steven B. Crockett: Cory will discuss our loan portfolio as well as our initiatives to drive growth across the bank. Steve will then conclude with a more detailed review of our first quarter financial results.
Cory: Starting on slide four of our earnings presentation I'm pleased with our first quarter results as we've started to see our net interest margin stabilize driven by improved loan yields including interest recoveries combined with a slowing of the rate of deposit cost increases.
Steven B. Crockett: Our loan production was strong through the first quarter, though it was largely offset well.
Steven B. Crockett: Typical seasonal agricultural pay downs as well as the early payoffs of several loans that we've been working to move out of the bank.
Steven B. Crockett: We continue to aggressively manage the credit quality of our loan portfolio as evidenced by our ratio of nonperforming assets to total handsets, which was only 10 basis points at the end of the first quarter.
Steven B. Crockett: Additionally, our classified loans remained near the lowest levels since the start of the pandemic.
Steven B. Crockett: Lastly, while the competition for deposits remains a challenge in the current banking environment, we delivered modest deposit growth as our community base deposit franchise.
Steven B. Crockett: It remains a competitive advantage and we believe provides adequate liquidity to fund loan growth as we move through the year.
Steven B. Crockett: I am proud of our results, which are a testament to our employees our culture and how we do business on these calls we often discuss our focus on relationships that we're looking for a long term customer relationships not transactions.
Steven B. Crockett: Well, we've not spent time talking about on our calls is the purpose behind that as well as our mission statement and values at South Plains. Our core purpose is to use the power of relationships to help people succeed and live better.
Steven B. Crockett: For our customers that means providing personalized advice and solutions to help them achieve their goals.
Steven B. Crockett: Over the years, we've invested in our product and people to ensure that we can do this better than our peers.
Steven B. Crockett: As a result, I believe that we can achieve significant organic growth overtime.
Steven B. Crockett: <unk>, what we have in place today, while also taking advantage of the dislocation that is occurring across our markets.
Steven B. Crockett: This dislocation is creating customer dissatisfaction, which is providing our bankers with the opportunity to move relationships the south plains.
Steven B. Crockett: To further take advantage of this dislocation we've been recruiting experienced treasury management executives to meet the customer demand that we see across our markets. We have also been refining our go to market strategy.
Steven B. Crockett: Focusing more on our customers' needs and challenges, but taking.
Steven B. Crockett: Our solutions based sales approach, we are first identifying our customer's needs and then providing the right product to meet those needs that positions us to win their business and become their primary bank.
Steven B. Crockett: We've already started to see the early signs of success as this approach is resonating with our customers.
Steven B. Crockett: Additionally, we significantly exceed the minimum regulatory levels necessary for the company to be deemed well capitalized and we are focused on both growing the bank. While also returning a steady stream of income to our shareholders through our quarterly dividend. This past week, our board of directors authorized a <unk> 14 per share quarterly debit.
Steven B. Crockett: And which is an 8% increase over our prior dividend levels.
Steven B. Crockett: This will be our 20th consecutive quarterly dividend to be paid on May 13, 2024 for shareholders of record on April 29 2024.
Steven B. Crockett: Our board of Directors also authorized a $10 million stock repurchase program in February given our belief that our shares continue to trade at a discount to intrinsic value.
Steven B. Crockett: Now, let me turn the call over to Corey.
Corey: Thank you Curtis and good afternoon, everyone starting on slide six our loan portfolio held steady through the first quarter as compared to the linked quarter <unk>.
Corey: Importantly, our production in multifamily and single family property loans and general commercial loans.
Corey: We offset $28 million of seasonal agricultural pay downs of $16 million reduction in residential construction loans and a $13 million decline in our indirect auto portfolio.
Corey: Further we had $26 million of principal reduction and watch list loans, it's hardest touched on we continue to aggressively manage the credit quality of our loan portfolio, having moved several loans that were on our watch list out of the bank. We will continue to take a proactive approach to credit and are very pleased with the credit quality of our loan portfolio.
Corey: This was a headwind to the loan growth in the first quarter, we remain confident in our full year guidance of low single digit loan growth.
Corey: Our loan portfolio was 6.53% in the first quarter up 24 basis points as compared to $6 two 9% in the linked quarter.
Corey: Steve will give a little bit more color on the increase in a moment.
Corey: Turning to slide eight we grew loans by $22 million or eight 5% annualized to one point that was $6 billion in our major metropolitan markets of Dallas, Houston and El Paso.
Corey: As compared to the linked quarter.
Corey: Looking forward, we will continue to seek to selectively add lenders across all of our markets, both metro and rural who fit our culture and can bring business to the bank given the continued organic growth opportunities that we see.
Corey: The Permian Basin is a region that is experiencing dislocation is competitor just go through both ownership and leadership changes, which is creating an opportunity to attract high quality loan and deposit relationships to south plains.
Corey: These are relationships that we've been after for several years and in some cases are changing banks for the first time in their careers.
Corey: To bring these relationships to the bank, we've invested in our people branches and infrastructure it.
Corey: It takes time to build your brand new market and we are just beginning to hit our stride is our Citibank brand is starting to gain acceptance in Midland and Odessa. Additionally, the investments we have made across the Permian demonstrate our long term commitment to the market.
Corey: We remain optimistic with organic growth opportunities that we have across our markets and believe we have a long runway ahead of us. So we have experienced recent headwinds which have slowed the loan growth. We didn't have near term opportunities to drive interest income growth with loan repricing as outlined on slide nine.
Corey: As we've been discussing on prior earnings calls, we expect to continue to deliver interest income growth as many lower rate loans continued to experience principal repayments and our rate resets, while we expect the majority of this repricing to begin accelerating in the second half of 2024.
Corey: And into 2025, we believe the loan yields may remain elevated even as the fed begins to cut interest rates at some point in the second half of this year given lower liquidity in the market. This should benefit our net interest income and net interest margin in the third and fourth quarters of this year.
Corey: Turning to slide 10, our indirect auto loan portfolio decreased by approximately $13 billion to $273 $4 million in the first quarter as compared to the end of the fourth quarter of 2023.
Corey: We remain cautious with a focus on maintaining the credit quality of this portfolio through the quarter. We've also seen volumes moderate while competitors are becoming more aggressive at the higher end of the credit spectrum.
Corey: Change in how we price risk in our tactical C in our portfolio gradually shrink.
Corey: Would never sacrifice credit quality for the sake of growth.
Corey: The strong credit quality of our indirect portfolio can be seen in our 30 plus days past due which were 22 basis points in the first quarter down from 40 basis points in the fourth quarter.
Corey: Additionally, we monitor our 10 to 29 day past dues closely as this is where you typically begin to see signs of trouble with the consumer.
Corey: Importantly, we do not see an increase in the level of these past due loans during the first quarter.
Corey: Turning to slide 11.
Corey: We generated $11 $4 million of noninterest income in the first quarter as compared to $9 $1 billion in the linked quarter.
Corey: We recorded a $55000 increase to the fair value of our mortgage servicing right asset during the quarter, which compares to a $1 $5 billion write down in the linked quarter as interest rates that affect the value rose modestly in the first quarter after falling late in the fourth quarter of 2023.
Corey: As we've discussed on prior calls we've aggressively managed our mortgage business to ensure it would run at or near our breakeven pace at the bottom of the cycle, while having the nuclear is in place for the eventual upturn in the residential housing market. We believe our team has managed the cycle well and we're starting to see the benefits as purchase volumes modestly Roes in the first quarter.
Corey: We're also beginning to see successes that our Treasury management business as our team is seeing Hasbro wins, it's hardest touched on earlier.
Corey: We expect to see a moderate increase in fee income for Treasury management, starting in the second quarter as momentum is building for the first quarter noninterest income was 24% of bank revenues as compared to 21% in the fourth quarter of 2023.
Corey: Continued to grow our noninterest income remains a focus of our team.
Corey: Now, let's turn the call over to Steve.
Steven B. Crockett: Thanks, Cory for the first quarter diluted earnings per share was <unk> 64, which.
Steven B. Crockett: Which compares to 61 per share in the linked quarter and 53 in the year ago quarter.
Steven B. Crockett: Turning to slide 13, net interest income was $35 $4 million for the first quarter as compared to $35 $2 million for the linked quarter.
Steven B. Crockett: Interest income increased $1.5 million in the first quarter, primarily due to a 1 million dollar expansion in loan interest income.
Steven B. Crockett: The growth in loan interest income was mainly due to a 24 basis point rise in loan yields.
Steven B. Crockett: Which includes approximately $667000 and recoveries of interest on loans that had previously been maintained on non accrual.
Steven B. Crockett: The overall increase in interest income was largely offset by $1 3 million dollar growth in interest expense in the first quarter given the continued rise in deposit cost.
Steven B. Crockett: Our net interest margin calculated on a tax equivalent basis was 3.56% in the first quarter.
Steven B. Crockett: Compared to 3.52% in the linked quarter.
Steven B. Crockett: The four basis point increase to our NIM was due primarily to higher loan yields, including approximately seven basis points from interest recoveries.
Steven B. Crockett: Partially offset by the rise in our cost of deposits.
Steven B. Crockett: Importantly, our noninterest bearing deposits held steady through the first quarter at 26, 8% of total deposits and helped to mitigate the rise in our funding cost as compared to the linked quarter.
Steven B. Crockett: As outlined on slide 14, our average cost of deposits was 241 basis points in the first quarter, an increase of 17 basis points from the linked quarter.
Steven B. Crockett: Given the rising interest rate environment over the past year, and the resulting increase in competition for deposits, we've had to be proactive in maintaining deposit relationships, which has led to the rise in our funding cost.
Steven B. Crockett: Overall, our core deposit franchise continues to remain steady.
Steven B. Crockett: Looking ahead to the second quarter, we expect modest upward pressure on deposit cost, which could slightly pressure our NIM if loan growth remains subdued.
Steven B. Crockett: However, we continue to expect our NIM to trough through the second quarter of 2024.
Steven B. Crockett: Turning to slide 15, our ratio of allowance for credit losses to total loans held for investment was 1.4% at the end of the first quarter.
Steven B. Crockett: Largely unchanged from the end of the prior quarter.
Steven B. Crockett: We recorded an $830000 provision for credit losses in the first quarter, which was largely attributable to net charge off activity in the quarter.
Steven B. Crockett: Our nonperforming loans totaled $3 $4 million at the end of the first quarter, which was a decrease from $5 $2 million at the end of 2023.
Steven B. Crockett: The allowance for credit losses to nonperforming loans was 248% at March 31 2024.
Steven B. Crockett: Skipping ahead to slide 19, our noninterest expense was $31 $9 million in the first quarter as compared to $36 million in the linked quarter.
Steven B. Crockett: The $1.3 million increase was largely the result of a rise of $1 million in personnel costs, which predominantly came from higher health care insurance cost and an increase in incentive based compensation.
Steven B. Crockett: Looking ahead to the second quarter, we expect noninterest expense to modestly rise from the first quarter's level as mortgage volumes improved through the spring selling season.
Steven B. Crockett: Moving to slide 21.
Steven B. Crockett: We remain well capitalized with tangible common equity to tangible assets of 9.22% at the end of the first quarter largely unchanged from the end of the fourth quarter of 2023.
Steven B. Crockett: Tangible book value per share increased to $23.56 as of the end of the first quarter compared to $23 47.
Steven B. Crockett: At the end of 2023.
Steven B. Crockett: The $8 $7 million of net income after dividends paid was mainly offset by the after tax decrease in fair value of our available for sale Securities net of fair value hedges as a result of increases in long term market interest rates during the period.
Steven B. Crockett: I'll turn the call back to Curtis for concluding remarks.
Curtis C. Griffith: Thank you Steve.
Curtis C. Griffith: I am proud of our results, which clearly demonstrate that the bank is operating at a high level as our margin is beginning to stabilize the credit quality of our loan portfolio is very strong and we have many organic growth initiatives underway that we believe will deliver value to our shareholders.
Speaker Change: To conclude I'd like to thank our employees for their efforts and commitment to both the bank and to our customers. Our continued success would not be possible without their dedication and hard work. Thank you again for your time today operator, please open the line for any questions.
Speaker Change: Yeah, if he would like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue. You May press star two if he would like to remove your question from the queue and for participants using speaker equipment. It may be necessary to pick up your handset before pressing the star keys how are.
Curtis C. Griffith: First question is from Brett rather than with Hefty group. Please proceed.
Brett: Hey, good afternoon, everyone.
Curtis C. Griffith: Right.
Brett: Hey, guys just wanted to start with the Treasury platform and you guys talked about some wins and expecting.
Brett: Fee income to be stronger from here, partially as a result of all of that can you maybe talk a little bit about the magnitude of our fees.
Curtis C. Griffith: See from Treasury and then if any of that showed up in D. D. A.
Curtis C. Griffith: This corner.
Curtis C. Griffith: This is Corey Brad I don't think a lot of that showed up yet because we've gone through a lot of we started out by resetting some of our pricing.
Curtis C. Griffith: We've gone back we've spent a lot of time trying to make sure that we didn't price ourselves out of the market to make sure that we weren't necessarily underpriced in any area.
Curtis C. Griffith: Through that we figured out to visit it was a relatively decent lift probably I would guess on the 10th 10% to 15% range of the increase in days that we'll start seeing coming our way. So I think that's one of them when.
Curtis C. Griffith: When we talk to the fact that we've we think we'll see it we were simply looking at that we weren't even take into consideration the new business that we're just continuing to add on it.
Curtis C. Griffith: And bring in there. So I think we're definitely going to see a lift.
Curtis C. Griffith: Okay.
Curtis C. Griffith: Okay.
Curtis C. Griffith: Yeah.
Speaker Change: Oh, I'm, sorry, I'm sorry.
Curtis C. Griffith: Uh huh.
Curtis C. Griffith: I can't really give you a hard number on me Oh, the total volume will be right.
Curtis C. Griffith: From a personal perspective.
Curtis C. Griffith: Treasury got informed me just a couple of days ago that one of our other outside company accounts as one of the ones that's going to see a pretty significant increase in there. So its sure its going to be significantly more than what we've been paying in say is under the new structure. So again, we will have to work closely with customers and make sure they understand what's going on.
Curtis C. Griffith: But we think we're staying within markets.
Curtis C. Griffith: I do look for a fairly substantial bump in our in.
Curtis C. Griffith: The charges that relate back primarily customer counts and of course <unk>.
Curtis C. Griffith: Got the earnings credit numbers against those two so it just depends on our cash balances and all of that but I'm real pleased with the direction, we're going I think it's going to be.
Curtis C. Griffith: So you will see a meaningful number show up on the noninterest income part.
Curtis C. Griffith: And the Q2.
Curtis C. Griffith: I do want to clarify the week.
Curtis C. Griffith: We've spent a lot of time running impact reports, we know how we know how this is going to impact our customers. We don't think it's going to be a massive impact on any one test for to where it becomes an issue, but we think as it is the overall inclusive level, it's gonna be it's gonna be meaningful. So we've tried to look at it from every direction and feel good about it but I don't I don't think.
Curtis C. Griffith: We stand in a position to fill I think we're gonna jeopardizes ourself with business because its so significant.
Speaker Change: Okay. That's helpful guys and then wanted to talk about capital you know it seems like your ratios are really healthy and I just wanted to get your your sense of appetite for the buyback near term versus maybe keeping some powder dry for M&A and maybe what you saw.
Curtis C. Griffith: He is the right capital levels for the environment we're in.
Speaker Change: Let me, let me take a crack at that one.
Speaker Change: Really we look at capital as having four components and how we might use things first and foremost make sure. We have plenty for organic growth I think we will see some good growth as we keep emphasizing.
Speaker Change: The presentations were given Texas is doing well, there's even with the current rate environment. There's a lot of opportunities. There are pipelines are picking up.
Curtis C. Griffith: We do need to have a first and foremost plenty of capital to back that out we will use some for a buyback.
Curtis C. Griffith: We're probably not going to be as aggressive maybe as we were last year with it but we're going to keep a buyback in place for now.
Curtis C. Griffith: Lord authorized so we'll see how that works at the levels that we feel comfortable acquiring some stock I do think that given the current environment.
Curtis C. Griffith: Buying our own stock as a <unk>.
Curtis C. Griffith: Provides a better and more immediate benefit to our shareholders and buying anybody else in terms of an acquisition. So right now we're looking at.
Curtis C. Griffith: Pursuing bad.
Curtis C. Griffith: And third on the list will keep paying dividends because we do believe we need to have a good.
Curtis C. Griffith: Good cash return back to shareholders, but then.
Curtis C. Griffith: Kind of down in fourth place, we will have some dry powder available for an acquisition is right. They don't happen to come along I, just don't know that we're going to see that until we get.
Curtis C. Griffith: Some normalization of reduction or whatever you want to call. It an overall wise because sterling anybody that we'd be looking at out there.
Curtis C. Griffith: If you try to look at them.
Curtis C. Griffith: Multiple over tangible.
Curtis C. Griffith: One that.
Speaker Change: Did I I don't think you're going to find any good seller would be willing to take it just my opinion.
Speaker Change: Okay.
Speaker Change: That's really helpful. If I could sneak in one last one you talked about some of the credits moving now do you guys think with the pipeline that you know kind of that mid single digit growth number.
Speaker Change: Is still reasonable.
Speaker Change: Does that kind of build from here.
Speaker Change: In the back half or you see some of that more into Q.
Speaker Change: Now. This this is Brett I felt very confident about our single digit.
Speaker Change: I was I mean, you know when you think about AG, the AG portfolio and a seasonal decline that we had in the first quarter and then and then on top of that we exited some credits intentionally and still remain flat. That's an indication of really you know the production that we had go on and we're seeing that pipeline.
Speaker Change: Come on towards the end of the first quarter. So I think I think you know all I can say that even as a start to a light.
Speaker Change: For as early as the second quarter see some good growth in the second quarter.
Speaker Change: You know Brad I mean, okay.
Speaker Change: I'll be talking about exiting a few credits, but I mean, we will license the more I mean, where where we very much work on our portfolio at all times and we built the majority of our portfolio. We're extremely proud of we will do everything we can to retain it but when we start seeing some weak points that we don't think we want to be with it.
Speaker Change: And a little bit more disciplined government, we're gonna start working our way out of them and I'm kind of proud of that.
Speaker Change: Okay, Great appreciate all the color guys.
Speaker Change: Our next question is from Woody lay with <unk>. Please proceed.
Woody Lay: Hey, good afternoon.
Woody Lay: What do you have any.
Woody Lay: Maybe just a follow up on the watch list credits that you did exit where they were they concentrated in in any segments or where they truly just a couple of one offs.
Woody Lay: Well this is Brian again that it was a mix.
Brian: Of credits from small to medium size, the largest being our multifamily credit.
Brian: Okay got it.
Brian: Maybe shifting over to the to the net interest margin I believe in your opening remarks, you said it it could be down modestly in the second quarter.
Brian: I'm, assuming that excluding the impact of the of the interest recovery. So if you strip that out then on an apples to apples basis, it'll be down a couple of basis points from there.
Brian: Yeah. So this this is Steve I mean, yeah, we we had.
Steven B. Crockett: Six seven basis points in that number so we would have been at $3 49.
Brian: Where we're gonna start from start from that number and say it could it could decline slightly from there, but again, there's just a lot of movements in rates and deposit costs really even every single day.
Brian: As we've seen with what's been going on in the.
Brian: In the market you know, our our stance changes a little bit and so we've been hoping that that was we'd be on the upward trend but.
Brian: With moving some of those credits out that had some of that non accrual interest that that allowed us to bump that up a little bit during the quarter.
Speaker Change: Yeah, and then based on the the loan repricing I mean do you think it's realistic the the margin start to expand in the back half of the year.
Speaker Change: Yeah.
Speaker Change: Again, given given what we know today, which was which can change given given the given the markets I would I would say, we should be able to see that I mean, you. Even if you exclude out that those interest recoveries you can see the loan yield is is increasing and as we as we find new.
Speaker Change: Loans are they are at generally at higher rates, we're getting some of the lower lower stuff off the books. So I think we I think we feel good.
Speaker Change: Given given having loan growth you know if if loans I think we said earlier if low.
Speaker Change: Somehow the change if we had additional payoffs maybe them that are not.
Speaker Change: Forecasted you could have a little bit more headwind to the to that but I think given what we see right now that that's reasonable.
Speaker Change: Got it thanks for taking my questions.
Speaker Change: Thank you.
Speaker Change: Our next question is from Stephen Scouten with Piper Sandler. Please proceed.
Stephen Scouten: Hey, good afternoon, everyone I appreciate all the color so far here I'm, just kind of curious on and Brett you talked about a new new loan yields coming on at a bit higher than the average and we're seeing some of that momentum already but I'm wondering if you could give me a feel for where those new loan yields are coming on in the quarter and kind of what the incremental cost of new.
Speaker Change: Deposits has been.
Speaker Change: This is brett as far as the the gross I mean first quarter growth we saw.
Speaker Change: Growth in both multifamily them.
Speaker Change: Most of which was completed construction projects.
Speaker Change: C&I business and some in residential rental properties.
Speaker Change: And then again, we talked about.
Speaker Change: Egg seasonal pay downs, but.
Speaker Change: If I look at our pipeline.
Speaker Change: No.
Speaker Change: I was talking about earlier haven't grown in the first quarter, it's a pretty good mix of C&I business and in real estate.
Speaker Change: And.
Speaker Change: So I mean, that's really where the where the growth is coming from and then it was.
Speaker Change: As far as the cost of deposits have been stable this scoring from a pricing standpoint, though I mean, where we're putting stuff on at prime plus.
Speaker Change: Yeah, we're trying to be very careful about how we do that and making sure that we were doing a good job with floors.
Speaker Change: In most of the things that we're not having trouble getting.
Speaker Change: Yeah on the on the deposit side I mean, you you you do see a mix I mean, it's.
Speaker Change: Obviously, we were able to get some.
Speaker Change: Some some lower cost deposits, we're putting I mean, putting on.
Speaker Change: Some new noninterest bearing although the overall balances were were fairly flat, but I mean, we do still see new business coming in.
Speaker Change: Some of the new lending relationships at that level on the high end I mean, theres definitely stuff that pushes up to five 5% I mean, there's.
Speaker Change: Still a lot of a lot of competition there.
Speaker Change: On all of the deposits again unfortunate Fortunately our liquidity position at the end of the quarter allows.
Speaker Change: It allows for a little bit more room, you know that that'll be accretive to us in the in the short term of getting some of that.
Speaker Change: <unk> deployed into loans.
Speaker Change: One thing that we have been able to do though is is too.
Speaker Change: Strategically move away from our higher cost deposits when it works in all of those are with relationships that we need to bring it back we can bring them back, but we're very much watching that too.
Speaker Change: To that exit those when we can.
Speaker Change: Yeah, No that's very helpful and Corey do you happen to know what you may not have this on hand, but in terms of how much of your book you might have with with floors on our loans at this point in time.
Cory T. Newsom: You bought a company flat footed on that one.
Cory T. Newsom: Steve do you have.
Steven B. Crockett: I do not have that here I'm sure I don't have that handy either I was just like yeah no problem, yeah no problem.
Speaker Change: And then maybe just kind of the last thing I know you said some kind of very early signs of deposit cost pressures starting to ease I guess kind of digging into that a little bit further you know what what exactly are you seeing that gives you. Some encouragement and you just referenced kind of noninterest bearing or at least stabilizing this quarter do you think there was none.
Speaker Change: Sparing deposits can say kindness and this was it 20, maybe 26, 5% of average deposits in that range.
Speaker Change: Yeah.
Speaker Change: I mean.
Speaker Change: We've had we've had good luck in the last quarter, where we're seeing we're seeing some good things.
Speaker Change: However, this quarter, you've got you do have tax payments going out a lot of tax payments and so those that can be from abroad broad base of account types.
Speaker Change: But just I think with with the different different initiatives that we've got which we've talked a little bit about on.
Speaker Change: Treasury management and a few other a few other things that are just trying to trying to grow deposits at a at a reasonable.
Speaker Change: Cost to them.
Speaker Change: I think.
Speaker Change: The increased focus will help will help the success there, but there I mean, they're still gonna be.
Speaker Change: There's a lot of competition that we see every single day of.
Speaker Change: Somebody who's who's showing us what they can get.
Speaker Change: Get another at another institution.
Speaker Change: There is no question that we were facing pressure and I don't I haven't even in the slightest way you want it.
Speaker Change: You get away from that but I will tell you that I think consistently.
Speaker Change: We find ourselves in a larger deposits pricing them.
Speaker Change: Anywhere from 15 to 20 basis points cheaper today than we were doing that three months ago.
Speaker Change: And we're very carefully doing that.
Speaker Change: I'm just looking at what where do you see in the advertising media.
Speaker Change: We are not seeing as many of the really high rate CD specials in our certainly in our Lubbock market.
Speaker Change: As we were saying just a few months ago. So I think.
Speaker Change: Perhaps some of our competitors out there.
Speaker Change: So I think on the books addressed immediate liquidity needs, perhaps and it's a it has reduced a little pressure on that.
Speaker Change: Yeah. That's that's great color, it's glad to good glad to hear some people are being a little bit more rational. So I appreciate all the.
Speaker Change: All the color and congrats on a great quarter.
Speaker Change: Thanks.
Speaker Change: As a reminder, it is star one on your telephone keypad, if he would like to ask a question. Our next question is from Joe <unk> with Raymond James. Please proceed.
Joe: Good afternoon.
Joe: Hey, Joe Joe.
Joe: So I was hoping to circle back on loan growth here and you have to have Andy how much kind of gross production you had in the quarter and then kind of maybe how that's trended versus prior quarters.
Speaker Change: Oh gosh.
Joe: Gosh.
Speaker Change: I don't I do not have that handy, Joe, but I can tell you I mean.
Speaker Change: You know it is.
Speaker Change: For.
Speaker Change: The back half of last year to the first quarter.
Speaker Change: It feel that production is a little better I mean, when you factor in some of the areas I mean different segments are different so in auto we contracted.
Speaker Change: And and that's that's all apart, but well kind of a little bit of industry driven.
Speaker Change: We're not we're not chasing growth in that area, but by pricing too cheap.
Speaker Change: Hum.
Speaker Change: And in other areas as we mentioned earlier with AG being down.
Speaker Change: So no I feel like it was a comparable to the back half of last year, but I do think our pipelines a little bit.
Speaker Change: Better than it was at the beginning of the first quarter right now.
Speaker Change: Joe This is Curtis I think one thing that you can look at I'm looking at slide eight.
Curtis C. Griffith: If you look at what we did in the Metropolitan markets.
Curtis C. Griffith: That was about an eight 5% annualized growth rate in those markets are in that first quarter, even though we were flat overall, we even in most markets. We did have a.
Curtis C. Griffith: A couple of credits that we wanted to exit and I've got out there. That's obviously not a place we have farm loans, but even with others. So I was a couple of reductions that we had that's still 8% growth rate.
Curtis C. Griffith: And while we expect we'll get some growth here in Lubbock and in some of our other rural markets and we will start sending out on some bad loans as well as seasonally as that starts to happen. So I think I still feel pretty good about us hitting at least low single digit growth for the year and it it could be better than that it's just.
Curtis C. Griffith: Like I was saying kind of dependent on the economy.
Speaker Change: Our borrowers attitudes out there on what they can make work in terms of rate right now I.
Speaker Change: I don't think we've had any disappointment in the slightest way of how we held the first part of the second quarter has kicked off.
Speaker Change: Okay I appreciate that.
Speaker Change: And kind of moving over to a treasury management, just kind of want to take a step back and think big picture here.
Speaker Change: So if we look at your refresh for approach can you quantify what success would look like you know from this new initiative, whether that's increased fee income or noninterest bearing deposits over say the next two to three years.
Speaker Change: Yeah.
Speaker Change: So have you been listening and dark meetings [laughter].
Speaker Change: I think it takes both and I think the increased fee income.
Speaker Change: It is.
Speaker Change: He is very much a piece of that but the non interest bearing deposits are bigger I mean from my perspective, driving the overall NIM up with what we're trying to do that's what we were so focused on but you know.
Speaker Change: From a from a treasury side of the thing that I look at.
Speaker Change: We continue to mature in that area in such a good way and the and the success that we're having and it's the it gets it gets out of the closet you just have the level of education, they're willing to put the answer in front of our teams to understand what we can do how we do it and then basically get it down to a lot less service to take care of your clients and I think we're.
Speaker Change: Doing that on a daily basis, and we get better and better at it. The thing is we can talk about treasury Treasury isn't I mean, we don't have a new approach every time, we turn around we just continued to mature while we've had we have good products. We have good teams, but our treasury is at the table at the beginning not at the end when we're sitting here having these discussions.
Speaker Change: I think that's where it's coming from we think it's gonna be very easy to do that.
Speaker Change: Deliberate pretty quickly increase the income.
Speaker Change: That doesn't worry me in the slightest way, but we're focused on the deposits and at the end of the day as we look at pricing on loans or anything else. It all gets down to how we bring operating accounts and everything into the into play with all of this stuff and those are the those are the wins were habit.
Speaker Change: Understood I appreciate the color on that.
Speaker Change: Those are all the questions I had thanks a lot.
Speaker Change: Thanks Christian.
Speaker Change: We have reached the end of our question and answer session I will now turn the call back over to Kirk for closing remarks.
Kirk: Thank you operator, thank you to everyone for participating in our call Tonight.
Kirk: We've had a very solid quarter to begin 2024, I'm pleased with how we're pursuing many opportunities that we have in front of us.
Kirk: Disruptions in several of our markets from changes in other banks ownership and leadership continue to open doors for.
Kirk: For our team to bring high quality customer relationships.
Kirk: So south plains, we continue to recruit talented and experienced bankers in all of our markets. Because we believe that building strong personal relationships with our customers is the key drive growth and profitability.
Speaker Change: I'm very blessed to be a part of our family of employees customers and shareholders and I remain very optimistic about our future.
Speaker Change: Thank you again for your time today.
Speaker Change: Thank you. This will conclude today's conference you may disconnect. Your lines at this time and thank you for your participation.
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