Q2 2024 South Plains Financial Inc Earnings Call
Operator: Good afternoon, ladies and gentlemen, and welcome to the South Plains Financial Geek second quarter 2024 earnings conference call. During today's presentation, all parties will be Following the presentation, the conference will be open 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 of South Plains Finance. Please go ahead.
Good afternoon, ladies and gentlemen, and welcome to the South Plains Financial Inc. Second quarter 2024 earnings Conference call.
Speaker Change: Today's presentation, all parties will be in a listen only mode.
Speaker Change: 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.
Steven B. Crockett: I'd now like to turn the call over to Mr. Steve Crockett, Chief Financial Officer, and Treasurer of South Plains Financial. Please go ahead Sir.
Steven B. Crockett: Thank 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, Cory Newsom, our president, and Brent Bates, our chief credit officer.
Steven B. Crockett: Thank 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, Corey Knutson, our President and Brent Bates, our Chief Credit Officer.
Steven B. Crockett: The related earnings press release and earnings presentation are available in the news and events section of our website, spfi.bank. 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. Please see our Safe Harbor statements in our earnings press release and in our earnings presentation.
Speaker Change: The related earnings press release and earnings presentation are available on our news and events section of our website S. P. If I don't bank.
Speaker Change: 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.
Speaker Change: Please 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. 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. Additionally, during today's call, we may discuss certain non-GAAP financial measures, which we believe are useful in evaluating our performance. A reconciliation of these non-GAAP financial measures to the most comparable GAAP financial measures can also be found in our earnings release and in the earnings presentation.
Speaker Change: All comments made during today's call are subject to the safe Harbor statements.
Speaker Change: 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.
Speaker Change: Additionally, during today's call, we may discuss certain non-GAAP financial measures, which we believe are useful in evaluating our performance.
Speaker Change: A reconciliation of these non-GAAP financial measures to the most comparable GAAP financial measures can also be found in our earnings release and in the earnings presentation.
Steven B. Crockett: Curtis, I'll hand it over to you.
Speaker Change: Let me hand, it over to you.
Curtis C. Griffith: Thank you, Steve, and good afternoon. On today's call, I will briefly review the highlights of our second quarter 2024 results, as well as discuss our efforts to drive our profitability and returns as we continue to strive to be a high-performing bank. 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 second quarter financial results. Starting on slide four of our earnings presentation, we delivered second quarter diluted earnings per share of 66 cents as compared to 64 cents in the first quarter of 2024.
Speaker Change: Thank you, Steve and good afternoon.
Curtis C. Griffith: Strength in the quarter came from robust organic loan growth, which lifted the yield on our loan portfolio and contributed to our margin expansion. We also continued to closely manage our liquidity with a focus on maximizing the profitability and returns of the bank. This led to a modest reduction in customer deposits as we worked to keep deposit costs steady through the quarter.
Speaker Change: On today's call I will briefly review the highlights of our second quarter 2024 results as well as discuss our efforts to drive our profitability and returns as we continue to strive to be a high performing bank.
Speaker Change: Cory will discuss our loan portfolio as well as our initiatives to drive growth across the bank.
Speaker Change: Steve will then conclude with a more detailed review of our second quarter financial results.
Steve: Starting on slide four of our earnings presentation, we delivered second quarter diluted earnings per share of 66 cents as compared to 64 cents in the first quarter of 'twenty 'twenty four.
Steve: Strength in the quarter came from robust organic loan growth, which lifted the yield on our loan portfolio and contributed to our margin expansion.
Steve: We also continued to closely manage our liquidity with a focus on maximizing the profitability and returns of the bank. This led to a modest reduction in customer deposits as we work to keep deposit cost steady through the quarter.
Curtis C. Griffith: Importantly, we believe competitive pressures for deposits have started to ease while new loan yields have remained robust, leading to our solid MIM expansion in the quarter. Looking to the second half of the year, we expect our NIM expansion to moderate as deposit costs are likely to move modestly higher while loan growth returns to more normal levels, as Cory will discuss in a moment. Strength in the quarter also led to further improvement in our efficiency ratio, which declined to 66.7% as compared to 67.9% in the linked quarter, while our return on average assets improved three basis points to 1.07% as compared to the first quarter. We also grew our tangible book value per share to $24.15 at June 30, as compared to $23.56 at March 31, 2024.
Steve: Importantly, we believe competitive pressures for deposits have started to ease while new loan yields have remained robust leading to our solid ma'am expansion in the quarter.
Steve: Looking to the second half of the year, we expect our NIM expansion to moderate as deposit costs are likely to move modestly higher while loan growth returns to more normal levels as Corey will discuss in a moment.
Cory T. Newsom: Strength in the quarter also lapped a further improvement in our efficiency ratio, which declined to 66.7% as compared to 67, 9% on a linked quarter, while our return on average assets improved three basis points to 1.07% as compared to the first quarter.
Cory T. Newsom: We also grew our tangible book value per share to $24.15 at June 30th as compared to $23.56 at March 31, 'twenty 'twenty four.
Curtis C. Griffith: I am very pleased with the steady financial progress that we continue to deliver, which is a credit to our employees and their commitment to the bank and our customers. I am also pleased that our performance is being recognized more broadly, as Forbes magazine ranked Citibank 12th on their 2024 Best Banks in America list, while S&P Global Market Intelligence ranked us the 28th best performing U.S. community bank with assets between $3 and $10 billion in 2023.
Speaker Change: I am very pleased with the steady financial progress that we continue to deliver which is a credit to our employees and their commitment to the bank and our customers.
Speaker Change: I'm also pleased that our performance is being recognized more broadly as Forbes magazine ranked Citibank well and there are 2024 best banks in America list, well S&P Global market intelligence ranked us the 28th best performing U S community bank with assets between three and $10 billion in <unk>.
Speaker Change: 23.
Curtis C. Griffith: This speaks to our management team's focus on operating South Plains at a high level while maximizing value for all our stakeholders. Turning to credit, we continue to aggressively manage the credit quality of our loan portfolio. During the second quarter, we moved a substandard multifamily property loan in Houston to nonaccrual. This is a loan that we have had rated substandard since June of last year and have been closely monitoring and proactively working on the credit over that time period. This is not a surprise nor a reflection of the multifamily market in Houston or in any of our markets.
Speaker Change: This speaks to our management teams focus on operating South plains at a high level, while maximizing value for all our stakeholders.
Speaker Change: Turning to credit we continue to aggressively manage the credit quality of our loan portfolio. During the second quarter, we moved a substandard multifamily property loan in Houston to non accrual. This is alone that we have had rated sub standard since June of last year and have been closely monitoring and proactively working all the.
Speaker Change: Over that time period. This is not a surprise nor a reflection of the multifamily market in Houston or in any of our markets. As we have discussed on prior calls we have a strong credit culture that is focused on identifying problems early working with our borrowers and taking the appropriate steps to resolve challenges.
Curtis C. Griffith: As we have discussed on prior calls, we have a strong credit culture that is focused on identifying problems early, working with our borrowers, and taking the appropriate steps to resolve challenges. We continue to vigorously stress test the credit quality of our loan portfolio in order to identify potential problems early and then work to remediate them. We will never sacrifice credit quality for growth, especially in the current environment where we are starting to see a few stresses in the national economy. We are fortunate to operate in Texas, where the economy remains healthy with a growing population and a business-friendly state government.
Speaker Change: We continue to vigorously stress test the credit quality of our loan portfolio in order to identify potential problems early and then work to remediate them.
Speaker Change: We will never sacrifice credit quality for growth, especially in the current environment well, we are starting to see a few stresses in the national economy.
Speaker Change: We are fortunate to operate in Texas, where the economy remains healthy with a growing population and a business friendly state government.
Curtis C. Griffith: We will remain cautious and vigilant given the current high interest rate environment. As a result, we are aggressively preparing for whatever environment may come over the next few quarters and have confidence in the credit quality of our loan portfolio. While the economic outlook may be uncertain, we believe that we are in a strong position as the bank and the company each significantly exceed the minimum regulatory levels necessary to be deemed well capitalized.
Speaker Change: We will remain cautious and vigilant given my current high interest rate environment.
Speaker Change: As a result, we are aggressively preparing for whatever environment might come over the next few quarters and I have confidence in the credit quality of our loan portfolio.
Speaker Change: While the economic outlook may be uncertain, we believe that we are in a strong position as the bank and the company each significantly exceed the minimum regulatory levels necessary to be deemed well capitalized.
Curtis C. Griffith: At June 30, 2024, the consolidated common equity tier one risk-based capital ratio was 12.61%, and our tier one leverage ratio was 11.81%. Additionally, our loans held for investment to deposit ratio stood at 85% at quarter end. Given our capital position, we remain focused on growing the bank while also returning a steady stream of income to our shareholders through our quarterly dividends. Yesterday, our board of directors authorized a 14 cents per share quarterly dividend, which will be our 21st consecutive quarterly dividend to be paid on August 12, 2024 for shareholders of record on July 29, 2024.
Speaker Change: At June 32020 for the consolidated common equity tier one risk based capital ratio was 12.61% and our tier one leverage ratio was 11 eight 1%.
Speaker Change: Additionally, our loans held for investment to deposit ratio stood at 85% at quarter end.
Speaker Change: Given our capital position, we remain focused on both growing the bank. While also returning a steady stream of income to our shareholders through our quarterly dividend yes.
Speaker Change: Yesterday, our board of directors authorized a 14 cents per share quarterly dividend, which will be our 20 <unk> consecutive quarterly dividend to be paid on August 12, 2024 for shareholders of record on July 29 2024.
Curtis C. Griffith: We also have a $10 million stock repurchase program in place, which our board authorized in February. However, we had limited buyback activity through the second quarter as we balanced liquidity for growth as well as being mindful of the limited trading volume of our shares. To conclude, the bank is doing well and is positioned, we believe, to drive organic growth across both our community and metropolitan markets while being well prepared for varying economic conditions as we have proactively managed the credit quality of our loan portfolio to ensure we're staying ahead of any challenges. I'm excited for the many opportunities that lay ahead. Now, let me turn the call over to Cory.
We also have a $10 million stock repurchase program in place, which our board authorized in February.
Speaker Change: We had limited buyback activity through the second quarter as we balance liquidity for growth as well as being mindful of the limited trading volume of our shares.
Speaker Change: To conclude the bank is doing well and is positioned we believe to drive organic growth across both our community and metropolitan markets, well be well prepared for varying economic conditions as we proactively manage the credit quality of our loan portfolio to ensure we're staying ahead of any challenges I'm excited for them.
Speaker Change: The opportunities that lay ahead now let me turn the call over to Corey.
Cory T. Newsom: Thank you, Curtis, and good afternoon, everyone. Starting on slide 6, we grew our loan portfolio by $82.5 million, or 10.9% annualized, in the second quarter as compared to the linked quarter. Our loan groups remain relationship-focused and occur primarily in direct energy loans, seasonal agriculture-related loans, and Single Family Property Loans.
Cory T. Newsom: Thank you Curtis and good afternoon, everyone.
Cory T. Newsom: Starting on slide six we grew our loan portfolio of about $82 $5 million or 10.9% annualized in the second quarter as compared to the linked quarter.
Cory T. Newsom: Our loan growth remained relationship focused and occurred primarily in direct energy loans seasonal agricultural related loans.
Cory T. Newsom: As I will touch on, this loan growth was partially offset by the expected decline in our consumer auto loan portfolio. We also experienced an approximately $20 million loan payoff in the second quarter, which was at a below market interest rate and provided us with the opportunity to redeploy the liquidity at a market rate. Looking forward, we continue to expect low to mid-single-digit loan growth for the full year 2024. Our guidance is based on the expectation that we could continue to experience payoffs through the second half of the year.
Cory T. Newsom: And single family property levels.
Cory T. Newsom: Touch on this loan growth was partially offset by the expected decline in our consumer auto loan portfolio.
Cory T. Newsom: We also experienced an approximate $20 million loan pay off in the second quarter, which was at a below market interest rate and provides us the opportunity to redeploy the liquidity at a market rate looking.
Cory T. Newsom: Looking forward, we continue to expect low to mid single digit loan growth for the full year 2024.
Cory T. Newsom: Our guidance is based on an expectation that we could continue to experience payoffs through the second half of the year.
Cory T. Newsom: Additionally, several of our bigger construction and development loans have largely been funded through the second quarter, so this tailwind that we've been experiencing is set to decline. Overall, if our payoffs are lower than anticipated, we would expect full-year loan growth to be at a high end of our range. The yield on our loan portfolio was 6.6% in the second quarter, up 7 basis points as compared to 6.53% in the linked quarter.
Cory T. Newsom: Additionally, several of our bigger construction and development loans have largely been funded through the second quarter. So this tailwind that we've been experiencing is set to decline.
Cory T. Newsom: Overall, if our payoffs were lower than anticipated, we would expect full year loan growth to be at the high end of our range the yield on our loan portfolio was six 6% in the second quarter up seven basis points as compared to $6 five 3% in the linked quarter as we moved through the year. It is expected that the federal reserve may begin to reduce their benchmark interest.
Cory T. Newsom: As we move through the year, it is expected that the Federal Reserve may begin to reduce their benchmark interest rate by 25 or 50 basis points. It all depends on their ability to bring inflation closer to their 2% target.
Cory T. Newsom: 25, or 50 basis points, depending on their ability to bring inflation closer to the 2% target.
Cory T. Newsom: We continue to believe that a lack of liquidity in our markets may keep new loan yields elevated while rates begin to decline, which will be supportive of our margin and net interest income growth. Skipping to slide 8, we grew loans by $8 million or 3% annualized to $1.07 billion in our major metropolitan markets of Dallas, Houston, and El Paso as compared to the full quarter.
Cory T. Newsom: We continue to believe that a lack of liquidity in our markets, making new loan yields elevated while rates began to decline, which will be supported by our margin and net interest income growth.
Cory T. Newsom: Skipping to slide eight we grew loans by $8 million or 3% annualized to one point of $7 billion in our major metropolitan markets of Dallas.
Cory T. Newsom: Houston, and El Paso, as compared to the linked quarter.
Cory T. Newsom: Our growth was impacted by the $20 billion paid out in El Paso, which I previously mentioned. Our major metropolitan loan portfolio now represents 34.5% of our total loan portfolio, which speaks to the scale that our lenders have achieved. Looking forward, we continue to benefit from dislocation caused by competitive mergers, which continue to provide opportunities for our team to take share and move relationships to South Plains. The Permian Basin is also a region that continues to experience dislocation as competitors go through both ownership and leadership changes, which is creating an opportunity to attract high-quality loan and deposit relationships to South Plains.
Cory T. Newsom: Our growth was impacted by the $20 billion paid out in El Paso, which I previously mentioned.
Cory T. Newsom: Our major Metropolitan loan portfolio now represents 34, 5% of our total loan portfolio, which speaks to the scale that our lenders have achieved.
Cory T. Newsom: Looking forward, we continued to benefit from dislocation caused by competitive mergers, which continues to provide opportunities for our team to take share in new relationships to sampling.
Cory T. Newsom: The Permian Basin is also a region that continues to experience dislocation as competitors go through both the ownership and leadership changes, which is creating an opportunity to attract high quality loan.
Cory T. Newsom: Deposit relationships to South plains.
Cory T. Newsom: As I discussed on our first quarter call, we've invested in our people, branches, and infrastructure in the Permian and are hitting our stride as our Citibank brand continues to gain acceptance in the region. The loan growth that we've been experiencing should drive interest income growth in the quarter ahead, while we have opportunities to reprice loans as outlined on slide 9. As we have been discussing, we expect to continue to deliver interest income growth as many lower-rate loans continue to experience principal repayments and or rate resets. We expect the pace to continue through the third quarter.
Cory T. Newsom: As I discussed on our first quarter call, we've invested in our people branches and infrastructure in the Permian that are hitting our stride as our Citibank brand continues to gain acceptance in the region.
Cory T. Newsom: The loan growth that we've been experiencing should drive interest income growth in the quarter ahead, while we have opportunities to reprice loans as outlined on slide nine it.
Cory T. Newsom: As we have been discussing we expect to continue to deliver interest income growth as many lower rate loans continued to experience principal repayments, Andrew a rate reset.
Andrew: We expect the pace to continue through the third quarter.
Cory T. Newsom: According to slide 10, our indirect auto loan portfolio declined $19.7 million to $253.7 million at the end of the second quarter. We remain cautious with a focus on maintaining the credit quality of this portfolio as competitors continue to be more aggressive at the higher end of the credit spectrum while volumes have declined. We're not changing how we price risk and are comfortable seeing our portfolio gradually shrink. As Curtis said, we will never sacrifice credit quality for the sake of growth.
Speaker Change: Turning to slide 10, our indirect auto loan portfolio declined $19 $7 million to $253 $7 million at the end of the second quarter, we remain cautious with a focus on maintaining the credit quality of this portfolio as competitors continue to be more aggressive at the higher end of the credit spectrum, while volumes have declined.
We're not changing how we price risk and are kept will see in our portfolio gradually shrink as Carter said, we will never sacrifice credit quality for the sake of growth.
Cory T. Newsom: This can be further seen in the indirect portfolio's strong credit quality, where 30-plus days past due were 21 basis points in the second quarter, essentially flat from 22 basis points in the first quarter. Additionally, our 10- to 29-day past dues are an early indicator that the consumer is having challenges, and ours continue to hold steady through the second quarter. Turning to slide 11, we generated $12.7 million of non-interest income in the second quarter as compared to $11.4 million in the linked form.
Carter: This can be further scene in the indirect portfolio strong credit quality, where 30 plus days past due were 21 basis points in the second quarter essentially flat from 22 basis points in the first quarter.
Carter: Additionally, our 10 to 29 day past dues are early indicators that the consumer is having challenges and Irish continued to hold steady through the second quarter.
Turning to slide 11, we generated $12 $7 million of noninterest income in the second quarter as compared to $11.4 million.
Cory T. Newsom: This was primarily due to increases of $1 million in bank card service charges and interchange revenue, mainly as a result of continued growth in customer card usage and incentives received during the period. Additionally, $408,000 in income from investments in small business investment companies and incremental growth in our treasury management business. These increases were partially offset by a decrease of $548,000 in mortgage banking revenues, which included a decrease of $735,000 in the Fair Value Adjustment of the Mortgage Servicing Rights Asset.
Carter: In the linked quarter.
Carter: This was primarily due to increases of $1 million in bank card service charges and interchange revenue, mainly as a result of continued growth and customer card usage and incentives received during the period.
$408000 of income from investments in small business investment companies and incremental growth that our treasury management business.
Carter: These increases were partially offset by a decrease of $548000 in mortgage banking revenues, which included a decrease of $735000 in the fair value adjustment of the mortgage servicing rights assets.
Cory T. Newsom: For the second quarter, non-interest income was 26% of bank revenues as compared to 24% in the first quarter. To continue to grow our non-interest income remains a focus of our... I would now like to turn the call over to Steve.
Carter: For the second quarter noninterest income was 26% of bank revenues as compared to 24% in the first quarter.
Carter: To grow our noninterest income remains a focus of our team I would now like to turn the call over to Steve. Thanks.
Steven B. Crockett: For the second quarter, diluted earnings per share was $0.66, which compares to $0.64 per share in the linked quarter. Turn to slide 13.
Steve: Thanks, Laurie for the second quarter diluted earnings per share was <unk> 66 cents, which compares to 64 cents per share in the linked quarter.
Steve: Turning to slide 13.
Steven B. Crockett: That interest income was $35.9 million for the second quarter as compared to $35.4 million for the linked quarter. Interest income increased $481,000 in the second quarter as compared to the linked quarter, primarily due to a $1.6 million rise in loan interest income and a decrease of $930,000 in interest income on other interest-earning assets. The growth in loan interest income was mainly due to an increase in average loans of $68.1 million and a rise of seven basis points in the yield on loans, for net interest margin calculated on a tax equivalent basis, 3.63% in the second quarter, as compared to 3.56% in the linked course.
Steve: Interest income was $35 $9 million for the second quarter as compared to $35 $4 million for the linked quarter.
Steve: Interest income increased $481000 in the second quarter as compared to the linked quarter, primarily due to a $1.6 million rise in loan interest income and a decrease of $930000 in interest income on other interest earning assets.
The growth in loan interest income was mainly due to an increase in average loans was $68 $1 million and a rise of seven basis points in the yield on loans.
Steve: Our net interest margin calculated on a tax equivalent basis was 363% in the second quarter.
Steve: As compared to 3.56% in the linked quarter.
Steven B. Crockett: The seven basis point increase to our NIM was due primarily to higher loan yields that more than offset the rise in our cost of deposits. However, non-interest-bearing deposits declined modestly through the second quarter to 26.3% of total deposits, as compared to 26.8% in the linked quarter. As outlined on slide 14, our average cost of deposits was 243 basis points in the second quarter, an increase of 2 basis points from the linked quarter, as competition for deposits eased through the quarter.
Steve: The seven basis point increase to our NIM was due primarily to higher loan yields that more than offset the rise in our cost of deposits.
Steve: Our noninterest bearing deposits declined modestly through the second quarter to 26, 3% of total deposits as compared to 26, 8% in the linked quarter.
Steve: As outlined on slide 14, our average cost of deposits was 243 basis points in the second quarter, an increase of two basis points from the linked quarter as the competition for deposits has eased through the quarter.
Steven B. Crockett: Importantly, we have been aggressively managing our funding costs to maximize our profitability, which has led to a modest decline in our deposit base during the quarter. We continue to pursue initiatives to drive organic deposit growth to match our liquidity needs as we work to drive loan growth through the second half of the year. We will continue to prudently manage our liquidity as we focus on our profitability and return.
Importantly, we have been aggressively managing our funding costs to maximize our profitability, which has led to a modest decline in our deposit base in the quarter.
Steve: We continue to pursue initiatives to drive organic deposit growth to match, our liquidity needs as we work to drive loan growth through the second half of the year.
Steve: We will continue to prudently manage our liquidity as we focus on our profitability and returns.
Steve: Turning to slide 15, our ratio of allowance for credit losses to total loans held for investment.
Steven B. Crockett: Turning to slide 15, the ratio of allowance for credit losses to total loans held for investment was 1.40% at June 30, 2024, unchanged from the end of the prior quarter. We recorded a $1.8 million provision for credit losses in the second quarter, which was largely attributable to net charge-off activity, increased loan balances, and higher non-performing loans during the quarter. As Curtis touched on, our non-performing loans totaled $23.5 million at the end of the second quarter, an increase of $20 million from the first quarter due to a previously classified $20.6 million multi-family property credit that was placed on non-accrual status after the maturity date was accelerated.
Steve: It was 1.40% at June 32024 unchanged from the end of the prior quarter.
Steve: We recorded a $1.8 million provision for credit losses in the second quarter, which was largely attributable to net charge off activity increased loan balances and higher nonperforming loans during the quarter.
As Curtis touched on our nonperforming loans totaled $23 $5 million at the end of the second quarter, an increase of $20 million from the first quarter due to a previously classified $26 million multifamily property credit that was placed on non accrual status. After the maturity date was accelerated.
Steve: Skipping ahead to slide 18, our noninterest expense was $32 $6 million in the second quarter as compared to $31 $9 million in the linked quarter.
Steven B. Crockett: Skipping ahead to slide 18, our non-interest expense was $32.6 million in the second quarter as compared to $31.9 million in the linked quarter. The $642,000 increase was largely the result of a rise of $436,000 in mortgage commission expense as loan originations increased. Looking ahead to the third quarter, we expect non-interest expense to modestly rise from the second quarter's level. Moving to slide 20, we remain well capitalized with tangible common equity to tangible assets of 9.44% at the end of the second quarter, an increase of 22 basis points from the end of the first quarter. Handable book value per share increased to $24.15 as of June 30, 2024, compared to $23.56 as of March 31, 2024. The increase was primarily driven by $8.8 million of net income after dividends paid.
Steve: $642000 increase was largely the result of a rise of $436000 in mortgage Commission expense.
Steve: As loan originations increased.
Steve: Looking ahead to the third quarter, we expect noninterest expense to modestly rise from the second quarter's level.
Steve: Moving to slide 20, we remain well capitalized with tangible common equity to tangible assets of $9 four 4% at the end of the second quarter, an increase of 22 basis points from the end of the first quarter.
Steve: Tangible book value per share increased to $24.15 as of June 32024, compared to $23.56 as of March 31 2024.
Steve: The increase was primarily driven by $8.8 million of net income after dividends paid.
Steven B. Crockett: I'll turn the call back to Curtis for his concluding remarks.
Speaker Change: I'll turn the call back to Curtis for concluding remarks.
Curtis C. Griffith: Thank you, Steve. To conclude, I'm very proud of our second quarter results as we continue to focus on maximizing our profitability and returns as we strive to deliver value for all of our stakeholders. Through the quarter, we generated healthy loan growth while keeping our funding costs relatively stable, which led to an expansion of our NIM. Looking forward, we are seeing a slight easing of competitive pressures on deposit costs, good opportunities to expand lending across our markets, and are making progress on growing our non-interest income. I believe we're well positioned to further grow the bank, and I remain optimistic about the future of South Plains Bank. Thank you again for your time today. Operator, please open the line for any questions.
Curtis C. Griffith: Thank you Steve to conclude I'm very proud of our second quarter results as we continue to focus on maximizing our profitability and returns as we strive to deliver value for all of our stakeholders.
Speaker Change: Through the quarter, we generated healthy loan growth, while keeping our funding costs relatively stable, which led to an expansion of our NIM.
Speaker Change: Looking forward, we are seeing a slight easing of competitive pressures on deposit costs, good opportunities to expand lending across our markets and are making progress on growing our noninterest income I believe we're well positioned to further grow the bank and I remain optimistic on the future for South Plains. Thank you again for your time today.
Speaker Change: Operator, please open the line for any questions.
Speaker Change: Thank you at this time, we will be conducting a question and answer session. If you would like to ask a question. Please press star one on your telephone keypad. Your confirmation tone will indicate your line is in the question you.
Operator: Thank you. At this time, we will be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the start button. Our first question comes from the line of Brett Rabatin with OBD Group. Please proceed with your question.
Speaker Change: Maybe first start to see what like to remove your question from the queue for participants using speaker equipment. It may be necessary to pick up your handset before pressing you'd start.
Speaker Change: Our first question comes from the line of Matt.
Speaker Change: Robert Lin with Oh D Group. Please proceed with your question.
Speaker Change: Hey, good afternoon, everyone.
Brett D. Rabatin: Hey, good afternoon, everyone. I wanted to start with the fee income and the bank card. You know, is the second quarter level of fees a good run rate to build off of from here, or do you expect any of those various buckets to be different relative to the second quarter in the back half of the year?
Speaker Change: I wanted to start I.
Matt: I wanted to start with the fee income and the bank card you know what.
Speaker Change: It's the second quarter level of fees is that kind of a good run rate to build off off from here or do you or do you expect any of those various buckets to be different relative to the second quarter in the back half of the year.
Speaker Change: Yeah, Brett this is Steve it quite elevated.
Steven B. Crockett: Yeah, Brent, this is Steve. It's a bit elevated on the bank card side. There are some annual rebates and a few things that make that a little bit higher, usually in the second quarter, for $400,000 or so probably, but outside of that, overall, non-interest income. Those other line items should be pretty good run rates outside of maybe what a mortgage might do.
Speaker Change: On on the on the Bank card side, there's just there's some annual rebates and a few a few things that makes that a little bit higher.
Speaker Change: Usually in the second quarter you know.
Speaker Change: Or 400000, or so probably but outside of that our overall noninterest income.
Speaker Change: Those other line items should be pretty pretty good run rate outside of maybe what was mortgage might do.
Curtis C. Griffith: Okay, that's helpful. And then Curtis, you talked about the deposit pressures maybe easing a little bit. Can you give us any examples of that? You know, whether it's being able to reprice some 5% CDs lower, or when you say easing, can you maybe quantify that a little more?
Speaker Change: Okay.
Speaker Change: That's helpful and then Curtis you gave.
Speaker Change: Can you talk about the deposit pressures, maybe easing a little but can you give us any examples of that you know, whether it's being able to reprice, some 5% C d's lower or when you say easing can you maybe quantify that a little more.
Curtis C. Griffith: I think I'd say that we're just seeing fewer ads out in the local media about yeah right to start with a six there might still be a few out there and there is definitely still some out there that are in the fives, but we're just not seeing the three.
Curtis C. Griffith: I think I'd say that we're just seeing fewer ads in the local media about rates that start with a six. There might still be a few out there, and there's definitely still some out there that are in the fives, but we're just not seeing the...
Cory T. Newsom: The ad dollars are being spent, I guess, to try to move business over. And we certainly have some competitors who are still very hungry for deposits, and we've kind of taken the position that we're not going to see a whole lot of stuff run off, but we're going to keep reasonable liquidity, and if some high-cost deposits want to move elsewhere, we'll give them a chance. But right now, that's the way I kind of summarize it, that the advertising dollars being spent to promote very high-interest CDs or money market accounts have kind of diminished in most of our markets.
Speaker Change: The adult AD dollars being spent I guess, a two in front of both silver and we certainly have some competitors who are still very hungry for deposits and we've kind of taken a position that we're going to.
Speaker Change: Say, a whole lot of stuff run off, but we're going to keep reasonable liquidity and there's some high cost deposits won't move elsewhere, we'll give them a chance.
Brett: But right now, which and that's the way I kind of summarize it but my advertising dollars being spent to promote very high and proceed as are our money market accounts is kind of diminished and in most of our markets. So Brett. This is Cory I hope you're doing good how would I think I would just tack on with that though we have.
Cory T. Newsom: So, Brent, this is Cory. I hope you're doing good. I think I would just tack on to that, though: we have been working at reducing some of the rates that we have on some of our deposits, and we're not seeing any runoff that's coming with it. Now, we're not going to be so naive to think that we're going to cut them down and try to replace them. It's too much of a challenge to go chase new dollars, but we have been slowly dialing that down.
Brett: Working at reducing some of the rates that we have on some of our deposits and we're not seeing any run off that's coming with it now we're not gonna be so naive to think that we're going to kind of down and try to replace them as too much of a challenge to go chase new dollars, but we have been slowly down that down a little bit.
Brett D. Rabatin: Okay. If I could sneak in one last one around that multi-family loan, you know, can you provide any color on... appraisal, you know, if you have a specific reserve on it, and then just how you see that loan working off the non-accrual bucket?
Speaker Change: Okay.
Speaker Change: If I could sneak in one last one around that multi family loan you know can you provide any color on you know.
Appraisal you know if you have you do you have a specific reserve on it and then just how you see that long working off the non accrual bucket.
Cory T. Newsom: So, Brett, this is Cory. So, I'm going to first tell you kind of how we got where we ended up with this one. You know, we've sat around and had this discussion with you guys on many occasions about how we try to identify problems early, and this is a perfect example of this. I mean, we identified this credit well over a year ago and have been working towards trying to get it resolved.
Speaker Change: So Brent this is Corey so I'm going to first tell you kind of how we got where we ended up with this one.
Cory T. Newsom: We sit around and had this discussion with you guys on many occasions about how we try to identify problems early and this is a perfect example of this I mean, we've identified this this credit.
Speaker Change: Well over a year ago.
Speaker Change: And had been working toward trying to to get it resolved.
Cory T. Newsom: I would think that this one is fully accounted for. I think that's probably where I'm going to stop with it on that. I would tell you that I don't, we don't view this credit as being systemic with what people are talking about with multifamily. We think this one's isolated in its own right.
Speaker Change: I would think that this one is fully accounted for I think that's probably is probably where I'm going to stop with it on that.
Speaker Change: I would tell you that I don't we don't view this credit has been.
Speaker Change: Sustained it with what people are talking about with multifamily. We think this one is isolated in its own right.
Cory T. Newsom: And I think we're in the process of working our way out of this one, but I think I'm really proud of the fact that we identified it. It falls right in line with the things that we have set back and talked about, trying to identify these credits early and try to work our way through them. We've got a pretty good history of that, and this is just one example of it.
Speaker Change: And I think where we're in the process, we're working our way out of this one but I think I'm really proud of the fact that way we identify if it falls right in line with the things that we have set back and talked about trying to do and how these credits early and try to work our way through.
Speaker Change: And with that we've got a pretty good history of that and this is just one example of it.
Speaker Change: Yeah.
Brett D. Rabatin: Okay, thanks. I appreciate all the color. Thanks, Brett.
Speaker Change: Okay. Thanks, I appreciate all the color.
Brett: Thanks, Brett.
Brett: [laughter].
Operator: Thank you. Our next question comes from the line of Joe Yanchunis with Raymond James. Please proceed with your question.
Speaker Change: Thank you. Our next question comes from the line of Joe <unk> with Raymond James. Please proceed with your question.
Joe <unk>: Good afternoon.
Joe: Hey, Joe.
Joseph Peter Yanchunis: So, over the past few quarters, your metro markets have been delivering the lion's share of the loan growth, and I understand there was a $20 million paydown, as you said, at El Paso. But is there anything to call out for the outside loan growth coming from your rural markets, and do you expect that trend to continue for the balance of the year?
Joe <unk>: So over the past few quarters your metro markets I've been deliberating, the lion's share of the loan growth and I understand there was a $20 million pay down I believe you said at El Paso.
Speaker Change: But is there anything to call out for the outsized loan growth coming from your rural markets and do you expect that trend to continue for the balance of the year.
Brent A. Bates: Yeah, Joe, this is Brent. Our pipelines have been pretty stable throughout this year, and what I would say is it is getting a little bit more granular. The average loan balance coming in is going to be a little bit smaller, but the total pipeline stays about the same. So we've got a pretty good mix, but it is becoming less of a metro and more of our other markets.
Speaker Change: Yes, Joe this is brent or pipelines or had been pretty stable.
Speaker Change: Throughout this year and what I would say is it is getting a little bit more granular our average loan balance coming in we think is going to be a little bit smaller, but the total pipeline staying about the same so we've got a pretty good mix, but it is becoming less this year, becoming less metro and more oh.
Speaker Change: Our other markets.
Brent A. Bates: You know, if you look at what really makes up some of the non-metro for us, I mean, bringing stuff back into West Texas and the Permian and stuff, we've had great business in these markets. So it's a nice complement to what we're doing in the metro.
Yeah. We you know if you look at what really makes up some of the well the non metro for US I mean for him to step back into West, Texas in the Permian and stuff I mean, we had great business in these markets. So it's a nice complement to what we're doing in the metro stuff.
Speaker Change: Yeah.
Steven B. Crockett: No, absolutely. Okay. And then, perhaps I missed this in the materials, but did you quantify how much stock you repurchased in the quarter? And kind of given the recent run in the stock, can you shed some light on your appetite for share repurchase activity from here?
Speaker Change: No absolutely, Okay, and then perhaps I missed this in the materials did you quantify how much stock repurchases in the quarter.
Speaker Change: And kind of given the recent run in the stock can you shed some color on your appetite for share repurchase activity from here.
Speaker Change: Yeah.
Steven B. Crockett: Yeah, I'll start. It was a nominal amount in the buyback and really kind of occurred in the earlier part of the quarter. I think we talked maybe a little bit last quarter about, you know, we've got the buyback in place, but we were fairly aggressive with it in the previous buyback plan, but we were going to be a little bit more cautious with where that is. But I'll let Curtis talk, and I'll pull up that number, but it's definitely not a significant number.
Speaker Change: Yeah, I'll I'll start English.
Speaker Change: It was it was a nominal nominal amount in in the buyback and really really kind of.
Speaker Change: Occurred in the early in the earlier part of.
Speaker Change: Of the quarter.
Speaker Change: Can you talk maybe a little bit last last quarter about you know we've got the buyback in place but.
Speaker Change: We were fairly aggressive with it in the previous.
Speaker Change: Buyback plan, but we were going to be a little bit a little bit more a little bit more cautious in.
Speaker Change: And where that is but it's oh I'll, let her just talking I'll I'll pull up that number but it's not it's definitely not a test.
Speaker Change: A significant number.
Curtis C. Griffith: Joe, of course, we're very pleased with the recent run-up. I'd like to think some of that's just recognizing some value that we bring in, but we also understand, obviously, it's a very broad-based increase in most bank stocks out there. I guess the market is beginning to realize that bank stocks have generally all been undervalued for quite a while now, and maybe some money's moving back out of some of the high-flying tech stocks and finding a home in the financials, and I figure we're a beneficiary of that a little bit.
Speaker Change: Of course, we're very.
Very pleased at the recent run up.
Speaker Change: I would like to think some of that's just recognizing some value that we bring in but we also understand obviously, it's a very broad based increase to most bank stocks out there is I guess the market begins to realize the bank stocks have generally all been undervalued for quite a while now and maybe some monies moving back out.
Speaker Change: Some of the high flying Tech stocks, and finding a home and the financials.
Speaker Change: Figure, we're a beneficiary of that for a little bit, but yeah. We still want to have a plan in place in case, we do see some decline in there to be supportive of the market, but Uh huh I've also we'd be we'd be pretty slow to be adding anything in there in terms of buyback.
Curtis C. Griffith: But yeah, we still want to have the plan in place in case we do see some decline in there to be supportive of the market, but at current levels, we'd be pretty slow to be adding anything in terms of buyback. We'll just see where the market goes from here, but we're getting on up there, and I Yeah, we...
Speaker Change: Where the market goes from here, but.
Speaker Change: Where we're getting on up there and I think some more I'll, just say reasonable prices I guess on how the stocks been trying to quietly.
Yeah.
Curtis C. Griffith: Yeah, we bought about 12-13,000 shares back during the quarter. How's it going, Matt? Good. I paid $300,000 or $400,000 for it.
Speaker Change: Yeah.
We bought about 12 or 13000 shares back during the quarter.
Speaker Change: Yeah.
Speaker Change: That's about right.
Speaker Change: Three three or $400000 for it.
Speaker Change: Yeah.
Speaker Change: Yeah.
Steven B. Crockett: Okay, and then last one for me here, given the forward curve, can you discuss the impact on low yields with a 25 base point rate cut?
Speaker Change: Okay, and then last one for me here given the forward curve can you discuss the impact to loan yields.
Speaker Change: With a 25 basis point breakout.
Steven B. Crockett: Yeah, I'll, I'll start. I mean, with the we we've been looking at this on ongoing and, you know, we really think A 25-basis point cut... It's going to be closer to neutral to us, I would say, just, again, given the assumptions we've got and the repricings that we know about, it's going to take a few more.., rate cuts before you would start to see anything above that, but 25, you could see in the short term maybe a little bit, a little bit of more expense than or a little bit less interest income than you would see reduction in interest expense just until we're able to, a few of the deposits, they may not reprice on the same day as you'd see a rate cut, but we do have, we do have a, public funds and a few other deposits that are directly tied to an index that we would see some relief on.
Speaker Change: Yeah, I'll I'll start I mean with the way we've been looking at this on an ongoing and you know we really think.
25 basis point cut.
Speaker Change: It's going to be closer to neutral to us I would say just again given our given the assumptions we've got in the repricing that we know about it.
It's going to take us, it's going to take a few more.
Rate cuts before you would start to see anything above that but 25.
Speaker Change: You you can see in the in the short term, maybe a little bit a little bit of more <unk>.
Speaker Change: Expense then.
Speaker Change: Uh huh.
Speaker Change: Or little bit less interest income than you would see reduction in interest expense just until we're able to a few of the deposits. They may not reprice on the same day is as you'd see a rate cut but we.
Speaker Change: We do have we do have.
Speaker Change:
Speaker Change: How 'bout phones and a few other deposits that are directly tied to an index that we would see some see some relief on but it's just going to take a few more rate cuts before we start to see a.
Steven B. Crockett: It's going to take a few more rate cuts before we start to see a more meaningful benefit. And Joe, I think I would just go on with what Steve says. I think if you look at it... kind of in, I think, in a worst-case scenario, it's neutral. I think we would work, as we do on a consistent basis, to try to take advantage of it in every way possible. But I think even in the worst case, it's just neutral.
Speaker Change: A more meaningful benefit until I think I would just go on what Steve said I think if you look at it.
Speaker Change: Kind of in it I think in the worst case scenario it's neutral.
Speaker Change: We would work.
Speaker Change: As we do on a consistent basis to try to take advantage of any and every way possible, but even I think even in a worst case, it's just neutral to us.
Joseph Peter Yanchunis: understood. Thank you for taking my questions.
Speaker Change: Understood. Thank you for taking my questions.
Joe <unk>: Thanks, Joe.
Yeah.
Operator: Thank you. Our next question comes from the line of Woody Lay with KVW. Please proceed with your question.
Wood Neblett Lay: Thank you. Our next question comes from the line of Woody lay with <unk>. Please.
Speaker Change: Please proceed with your question.
Wood Neblett Lay: Hey guys, I wanted to start on loan growth. It was pretty impressive, especially given the paydowns you saw in the quarter. Could you just talk through the appetite your customers have for credit in this current environment?
Wood Neblett Lay: Hey, guys wanted to wanted to start on loan growth I mean, it was pretty impressive, especially given the.
Wood Neblett Lay: The pay downs you saw in the quarter. It could could you just talk through.
Wood Neblett Lay: So would it be appetite your customers have for credit in this current environment.
Wood Neblett Lay: Yeah.
Brent A. Bates: Yeah, and this is Brent. One of the things I think that were mentioned, one of the things that drove our growth this quarter was the ag operating lines, about $25 million of that funding. And, you know, while we're seeing a good pipeline and good volume, and it's been pretty steady over the last couple quarters, it's certainly less than it has been in the past few years. But, you know, I feel like it's sustainable.
Wood Neblett Lay: Yeah, and this is Brent.
Speaker Change: One of the things that I think was mentioned.
Speaker Change: One of the things that drove our growth this quarter was was AG operating.
Speaker Change: Operating wise about 25 million of that funding.
Speaker Change: And you know what.
Speaker Change: While we're seeing a good pipeline and good volume and its been pretty steady over the last couple of quarters.
Speaker Change: Suddenly less than it has been in the last past few years.
Brent A. Bates: The types of deals we're seeing are kind of across the board, but the C&I loans that really drove our growth this quarter were mostly M&A-related, strategic transactions with wealthy families that were, you know, making a strategic decision about their business. And we're still seeing a little bit of that right now that makes sense for us makes sense for them.
Speaker Change: But you know I feel like it's sustainable with the types of deals we're seeing are kind of across the board.
Speaker Change: But that's the the C&I loans.
Speaker Change: Hum.
Speaker Change: Uh huh.
Speaker Change: It really drove our growth this quarter were at.
Speaker Change: Mostly M&A related strategic transactions are with.
Speaker Change: With wealthy families that were.
Speaker Change: You know me.
Speaker Change: Making a strategic decision about their business.
Speaker Change: And we're still seeing a little bit of that right now.
Speaker Change: Makes sense for us makes sense for them.
Curtis C. Griffith: Woody, this is Curtis. One of the other things, and we've hit on this several times, we had some fairly significant construction projects going, and while there were not new loans on the books in the quarter, they were loans that still hadn't completed their construction, so there were still draws out there. We're not completely to the end of that, but we're getting fairly close, and I would say that we are not seeing the volume of new construction lending coming in that we had nine months ago, so that's one effect.
Really it is Curtis one of the other things and we get on this several times.
Speaker Change: We had some fairly significant construction projects going and well, they're not new loans on the books in the quarter. They were loans that still haven't completed the construction. So they were still draws out there we're not completely but at the end of that but we're getting fairly close and I would say that what we are.
Speaker Change: Not seeing the volume of new construction lending coming in but we had nine months ago. So that's that's one effect you saw a nice bump out there and some well balances but weren't truly book.
Curtis C. Griffith: You saw a nice bump out there in some loan balances that weren't truly new books; they were just continuing. That's one reason. We're being pretty cautious, I think, that we'll still get some growth in the third and fourth quarters. I do believe that.
Speaker Change: Books, they will just continue.
Speaker Change: That's one reason, we're being pretty cautious I think that will third and fourth quarter, we'll still get some growth.
Speaker Change: But it's probably not going to be as to what we saw here in the second quarter.
Cory T. Newsom: But it's probably not going to be at the level we saw here in the second quarter. Woody, I think we should go one step further, though. We're sitting here in the latter part of July right now. We actually have a crop in the field. We hadn't had a crop in the field in two years, so we hadn't funded up, even to this point in the year. We hadn't had agricultural funding even to where we are now, for the most part, our anticipated funding for a long time.
Speaker Change: What do you think we go one step further though we're sitting here latter part of July right now, we actually have a crop in the field. We had added proppant the field in two years. So we hadn't funded up even into even at this point in the year, we hadn't had AG fundings, even to where we are for the most part are anticipated.
Speaker Change: In a long time, so if you couple that with some of that.
Cory T. Newsom: So if you couple that with some of the additional lung growth that we're feeding, we're going to be conservative in what we think is going to be out there, and we're going to be careful about the type of stuff that gets through our credit culture.
Speaker Change: Additional loan growth that we see.
Speaker Change: We're gonna be conservative in what we think it's going to be out there and we're gonna be come about type of stuff that gets through our credit culture, but.
Speaker Change: I'm, telling you you get little bit of add that into this year that we hadn't had in a couple of years.
Cory T. Newsom: We gave a little bit of Agdad into it this year that we hadn't had in a couple of years.
Curtis C. Griffith: Now, the ag loans traditionally, when we have a good crop, you'll see some fairly significant funding in the third quarter, and while we'll get some paydowns during the calendar year, we really won't see much until fairly late in the fourth quarter, so we'll get the benefit of that for most of the next two quarters out there as those fundings get on the books too. So, and as Cory said, we're glad to have it because we just haven't had much in the last couple of years.
Speaker Change: No bank loans traditionally when we have a good crop you'll see some fairly significant fundings in the third quarter.
Speaker Change: And while we will get some pay downs.
Speaker Change: During the calendar year.
Speaker Change: We really won't see much until fairly late in the fourth quarter. So we'll get the benefit of that for most of the next two quarters. After those first time things get off the books. So and of course. He said we're going to have it because we just haven't had much the last couple of years.
Brent A. Bates: Yeah, that's really helpful, Culler. And then I think you also mentioned growth in direct energy loans during the quarter. Could you quantify the growth in that segment?
Speaker Change: Yeah, No. That's really helpful color and then I think you also mentioned our growth in the indirect energy won them in the quarter could you quantify the growth in that segment.
Brent A. Bates: Yeah, it was about 50, 50 million. It's really energy-related transactions. There's service business there. There was a corporate bridge transaction. And so some of that may be temporary funding, but good business, good overall business with deposit and other fee income business. So some of that will be temporary, but it's really energy-related more on the service side than I would say directing in people. Yeah, we're
Speaker Change: Yeah. It was about a 50 50.
Speaker Change: 50 million.
It's really energy related transactions.
Speaker Change: Transactions are there.
Speaker Change: Our service business there there was a corporate bridge transactions.
Speaker Change: And so some of that may be temporary fundings, but a good business good Oh overall business with deposit.
Speaker Change: And other fee income business so.
Speaker Change:
Speaker Change: And some of that will be temporary but.
Speaker Change: It's it's really energy related more on the service side, and then I would say directing N P.
Curtis C. Griffith: Yeah, we didn't suddenly decide to loan a bunch of money to people to go dig oil wells. So just to be clear, now, the loans are very much energy-related, as Brent says, but we didn't suddenly change direction and start funding a bunch of exploration loans.
Yeah, we were we Didnt suddenly decided there are a bunch of money to people to go dig a hole wells. So just to be clear no loans are very much energy related or sprint chance, but we didnt, we didnt suddenly change direction and start to make a bunch of exploration wells.
Cory T. Newsom: Yep, got it. And then lastly, you called out some initiatives implemented in order to boost deposit growth. Would you have any more detail on those initiatives?
Speaker Change: Yep got.
Speaker Change: And then lastly are you caught out them and niche initiatives implemented in order to boost deposit growth just any any detail you can provide on those initiatives.
Cory T. Newsom: I don't think, I don't think that there's any one smoking gun out there. And for us to sit there trying to tell you that, I think, would be a disservice. But, I mean, I think we do a really good job, from a customer service standpoint, chasing the treasury. We talk about treasury all the time, but I'm telling you, our team is amazing. And what we've been able to pull together, and we have continued to expand that, but it all gets down to deliverables. And so it's just one aspect of what we're doing, I mean, throughout the bank. So is there one smoking gun? Nah. I don't think so either.
Speaker Change: I don't think I don't think that there's.
Speaker Change: I mean, there's always eat one smoking gone out there and for us to sit there trying to tell you that I think we'd be remiss, but.
Speaker Change: I mean, I think we I think we do a really good job from a customer service standpoint, chasing the trace where he talked about treasury all the time, but I'm, telling you our team is amazing and what we've been able to pull together and we have continued to expand that but it all gets down to deliverables and so its just one aspect of what we're doing I mean throughout the bank. So.
Speaker Change: They're one secret smoking gun.
Speaker Change: Oh interesting either but I think you can see where we're maintaining deposit levels that I mean, some working.
Cory T. Newsom: But I think you can see we're maintaining deposit levels that, I mean, some are working.
Speaker Change: Yeah.
Wood Neblett Lay: Definitely. All right. Thanks for taking my questions.
Speaker Change: Definitely alright, thanks for taking my question.
Speaker Change: So you can take easily.
Speaker Change: Thank you.
Operator: Thank you. And our next question comes from the line of Stephen Scouten with Piper Stenberg. Please proceed with your question.
Speaker Change: And our next question comes from the line of Stephen Scouten with Piper Sandler. Please proceed with your question.
Stephen Kendall Scouten: Hey, thanks guys. Good afternoon. I wanted to just revisit that conversation around rate cuts and how you're Valent Cheat might respond. Are you guys still?
Stephen Kendall Scouten: Hey, Thanks, guys good afternoon.
Stephen Kendall Scouten: I wanted to just revisit that conversation around rate cuts and how your.
Balance sheet might respond are you.
Stephen Kendall Scouten: Still.
Stephen Kendall Scouten: modestly liability sensitive overall. And can you remind me what amount of the book is kind of truly floating? I think it was maybe in the 15-16% of loans that are truly floating, right? But there's the refresher there.
Speaker Change: Modestly liability sensitive overall and can you remind me what what amount of the book is kind of truly floating I think it was maybe in the 15, 16% of loans that are truly floating rate, but just a refresher there.
Steven B. Crockett: Yes, we are still slightly liability-sensitive at this point, but very, very slightly given what we're estimating for different pay-downs and different things on the loan side. As far as the mix, yeah, there's about... Nineteen percent of the portfolio that's variable that would reprice immediately.
Speaker Change: Yes, we are we're still slightly liability sensitive.
At this point, but.
Speaker Change: Very slightly.
Speaker Change: Given given.
Speaker Change: What we're estimating.
Estimating on others.
Speaker Change: A lot of different pay.
Pay downs and different things on the loan side as far as a part of the mix Yeah Theres about.
Speaker Change: At 19, 19%.
Speaker Change: The portfolio, that's that's variable that would that would reprice immediately.
Stephen Kendall Scouten: Got it. Okay. Very helpful. Thank you.
Speaker Change: Got it okay helpful. Thank you and then on the.
Curtis C. Griffith: And then on the loan growth commentary, it sounds like things will continue at a nice pace, maybe not quite as rapid as we saw this quarter, but how do you think about overall balance sheet growth beyond that? Obviously, you did have strong growth this quarter, but, you know, average earning assets were actually down. So I'm just kind of wondering how that mix will play out and if you think you'll see actual balance sheet growth along with loan growth moving forward.
Speaker Change: Loan growth commentary it sounds like things will continue at a nice pace, maybe not quite as rapid as we saw this quarter, but how do you think about overall balance sheet growth beyond that.
Speaker Change: Obviously, you did have strong growth this quarter, but you know average earning assets were actually down to just kind of wondering how that mix will play out and if you think you'll you'll see actual balance sheet growth along with the loan growth moving forward.
Speaker Change: I I wouldn't look for really large asset growth, but are waiting we've still been working hard in some of our markets Permian in particular.
Speaker Change: To add to the team and get more relationships in the bank. So we're not trying to shrink the bank by any means but we are trying to do is rationally are maintained the proper.
Curtis C. Griffith: maintain the proper liquidity out there to not be paying interest on money that we really don't have any good use for. And, particularly, if we do get back into an environment of Fed rate cuts, we want to be proactive in trying to plan for those and not be tying up a lot of high-cost deposits for a long time. So we continue to lean toward paying very competitive rates on our now accounts and money market accounts, and we'll continue to utilize that tool in markets that we see chances to expand in.
Speaker Change: Liquidity out there to not be paying interest on the money that we really don't have any good use for and particularly if we do get back into a an environment of fed rate cuts.
Speaker Change: We want to be proactive and trying to plan for Bose and not be paying down a lot of high cost deposits for a long time. So we continue to wane toward paying a very competitive right on.
Speaker Change: <unk> now accounts money market accounts.
Speaker Change: And I will continue to utilize that too.
Speaker Change: In markets that we see tranches to expand and we have seen some pretty good deposit growth even in our metro markets and I think that that's going to continue again, we're not trying to grow it any superfast price, but as long as we can get a fairly steady.
Curtis C. Griffith: We have seen some pretty good deposit growth even in our metro markets, and I think that's going to continue. Again, we're not trying to grow at any super fast pace, but as long as we can get a fairly steady low to mid-level percentage of asset growth annualized, I think we're pretty happy with that right now in this environment.
Speaker Change: Low to mid level percentage of asset growth annualized I think we're pretty happy with that right now in this environment.
Cory T. Newsom: Yeah, that makes a lot of sense. And then, I guess, lastly, oh, I'm sorry, Cory, go ahead.
Speaker Change: Yeah that makes a lot of things and then I guess lastly, Oh I'm sorry go ahead.
Cory T. Newsom: No, I mean, I think you just go with what Curtis was talking about. I mean, we're trying to figure it out. How much of the rate cut it's going to take to really have that next boost in loan growth and loan demand that really comes in? Our focus is making sure that we're prepared ahead of time to be able to fund that. And you couple that with an election that's coming up, and I mean, we talk about this election all the time, but it's coming fast.
Speaker Change: No I mean, I think I mean, you just go with what parties was talking about I mean, what we're trying to figure out.
Speaker Change: How much of the rate that it's going to take to really have that next boost in loan growth and low demand. It really comes in and we.
Speaker Change: Our focus is making sure that we're prepared ahead of time to be able to fund that.
Speaker Change: And you couple that with election has come in and I mean, we talk about the selection, but its kind of an asked.
Cory T. Newsom: And so as futile rate cuts are implemented, if there are one or two this year, or what happens after the first year, we're just trying to make sure we're prepared from the funding side. Because we do see, we still see the demand that's here, and we know of different projects that are just waiting for some improvement.
Speaker Change: So with you as futile rate cuts in there if there's one or two this year or what happens after the first of the year. We're just trying to make sure. We're prepared from the funding side, because we do see we still see the demand is here and we know different projects that are just waiting for some improvement.
Stephen Kendall Scouten: Yeah, makes sense. And I guess along those lines, your internal capital bill for the last several quarters has been Stephen Scouten, Brady Gailey, Wood Lay, Graham Dick, Cory Newsome, Stephen Scouten, Brady Gailey.
Speaker Change: Yeah makes sense and then I guess, along those lines your internal capital build the last several quarters has been.
Speaker Change: Normally robust and it sounds like maybe share repurchase not all that attractive at these levels. So.
Speaker Change: Is that really stayed in that dry powder for growth it could be coming down the line or is it M&A or can you kind of walk me through what how you think about those capital usage priority.
Curtis C. Griffith: Well, in this environment, and Cory mentioned earlier, with the uncertainties out there, the election, the geopolitical things around the world, we could see some major upsets here and there, and I'd a lot rather have a little too much capital than too little. So we're going to continue to try to maintain a solid growth rate in that. If the right opportunity comes along for an M&A deal, we've got some, as you say, dry powder to use on it. But first and foremost, we want to be sure that we're well capitalized.
Speaker Change: Well in this environment Hmm Corie mentioned earlier with the uncertainties out there.
Speaker Change: The election.
Speaker Change: The geopolitical thing around the world.
We could see some major upsets here and there and I'd, rather have a little too much capital and too little so we're going to continue to try to maintain a solid growth rate in that if the right opportunity comes along for an M&A deal. We've got some dry powder to use on it but first and foremost we want to be sure.
Speaker Change: Or was it we're well capitalized with whatever organic growth. So it comes our way. So that's that's really job one right there.
Cory T. Newsom: Stephen, also, keep in mind that we have a little bit of sub-debt that we're trying to make sure we're very well-prepared in position to take care of based on how rates reset on it. And so, I mean, you go back and look at everything.
Speaker Change: And then also keep in mind, we had a little bit of sub debt that we're trying to make sure we're very well prepared and positioned to take care of it based on how rate reset on it and so I mean, if you go back and look at it if you want to talk about buyback we were conscious of where we're where we're trading from a trading volume on a consistent basis I mean, because we want to get better at that we want to make sure.
Cory T. Newsom: If you want to talk about buyback, we're conscious of where we're trading from a trading volume on a consistent basis. I mean, because we want to get better at that. We want to make sure we're prepared for whatever growth, whatever opportunities might come.
Speaker Change: We're prepared for whatever growth whatever opportunities might kind of I mean, we've seen some M&A activity recently, but not a lot, but it may open back up so who knows we just want to be ready.
Unnamed Speaker: Yep, yep. I love it.
Speaker Change: Yep Yep a lot of.
Stephen Kendall Scouten: Yep, I love it. I was like, optionality is always good. Appreciate it all the time, guys.
Unnamed Speaker: I was like, optionality's always good. Appreciate all the time, guys.
Speaker Change: Optionality is always good I appreciate all the time guys.
Speaker Change: Thank you.
Unnamed Speaker: And we have received the end of the question in the next session now.
Operator: Thank you. And we have reached the end of the question and answer session. I'll now turn the call back over to Curtis Griffith for closing.
Thank you and we have reached the end of the question and answer session I'll now turn the call back over to encourage Griffith for closing remarks.
Curtis Griffith: Now, I'll turn the call back over to Curtis Griffith for close remarks.
Curtis C. Griffith: Thank you, operator. Thanks, everybody that participated on the call today. We do think we're well positioned now for whatever may come our way. We do face potential challenges, as we just said, out there in the national economy and perhaps the world. And while we can't plan for everything, we still believe here that being cautious and conservative in our approach to the handling of our capital and our depositors' funds is the right thing to do.
Curtis C. Griffith: Thank you operator, and thanks, everybody that participated on the call. Today are we do think we are well positioned now for whatever might come our way.
Curtis Griffith: Thank you, operator.
Curtis Griffith: Thanks everybody to participate in on the call today. We do think we are in a real position now for whatever might come our way. We do face potential challenges, as we just said out there in the national economy and perhaps the world situation.
Speaker Change: We do face potential challenges as we just said out there and they are the national economy, and perhaps the world situation.
Curtis Griffith: And while we can't plan for everything, we still believe here that being cautious and conservative in our approach to handling of our capital and our depositors' funds is the right thing to do. So we love the markets that we're in. We think we will continue to have expansion opportunities in those markets. And we have some awesome people out there on the team that continue to work very hard every day to bring that business into City Bank and South Plains Financial. And they're the reason that we can do what we can do. So I always want to say thank you to everyone of them because we wouldn't be here without them.
Speaker Change: While we camped or planned for everything.
Speaker Change: We still believe here that are being cautious and conservative in our approach to handling of our capital and in our deposit response is the right thing to do so we love the markets that we're in we think we will continue to have expansion opportunities in those markets and we have some awesome people out there on the team that.
Curtis C. Griffith: So we love the markets that we're in. We think we will continue to have expansion opportunities in those markets, and we have some awesome people out there on the team that continue to work very hard every day to bring that business into Citibank and South Plains Financial. And they're the reason that we can do what we can do. So I always want to say thank you to every one of them, because we wouldn't be here without them. And with that, I will close the call.
Speaker Change: We need to work very hard every day to bring that business into Citi bike in South Plains financial and they are the reason that we can do what we can do right I always want to say thank you to every one of them because we wouldn't be here without them.
Curtis Griffith: We would bet I will close the call. Thank you.
Speaker Change: I will close the call. Thank you.
Operator: Thank you, and this concludes today's conference, and you may disconnect your line. Thank you for your participation.
Unnamed Speaker: Thank you, and this concludes today's conference.
Speaker Change #100: Thank you and this concludes today's conference you may disconnect. Your lines at this time. Thank you for your participation.
Unnamed Speaker: And you may disconnect your lives at this time. Thank you for your participation.
Speaker Change: Yeah.
Speaker Change: Yeah.
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Speaker Change: Okay.
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