South Plains Financial Q1 2024 Earnings Call Transcript

Quartr
Provided by Quartr
April 25, 2024

There are 9 speakers on the call.

Operator

Good afternoon, ladies and gentlemen, and welcome to South Plains Financial Inc. First Quarter 2024 Earnings Conference Call. During today's presentation, all parties will be in a listen only mode. 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.

Operator

I would now like to turn the call over to Mr. Steve Crockett, Chief Financial Officer and Treasurer of South Plains Financial. Please go ahead, sir.

Speaker 1

Thank you, operator, and good afternoon, everyone. We appreciate you joining our earnings conference call. With me here today are Curtis Griffin, our Chairman and Chief Executive Officer Corey Newsome, our President and Brent Bates, our Chief Credit Officer. The related earnings press release and earnings presentation are available on 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.

Speaker 1

Please see our Safe Harbor statements in our earnings press release and in our earnings presentation. 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 required by law. Additionally, during today's call, we may discuss certain non GAAP measures, which we believe are useful in evaluating our performance. 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.

Speaker 1

Curtis, let me hand it over to you.

Speaker 2

Thank you, Steve, and good afternoon. On today's call, I will briefly review the highlights of our Q1 2024 results as well as spend some time on our business philosophy and initiatives to become our customers' primary banking relationship. Corey 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 Q1 financial results. Starting on Slide 4 of our earnings presentation, I'm pleased with our Q1 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.

Speaker 2

Our loan production was strong through the Q1, though it was largely offset by our 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. We continue to aggressively manage the credit quality of our loan portfolio as evidenced by our ratio of non performing assets to total assets, which was only 10 basis points at the end of the Q1. Additionally, our classified loans remain near the lowest level since the start of the pandemic. Lastly, while competition for deposits remains a challenge in the current banking environment, we delivered modest deposit growth as our community based deposit franchise remains a competitive advantage and we believe provides adequate liquidity to fund loan growth as we move through the year. I am proud of our results, which are a testament to our employees, our culture and how we do business.

Speaker 2

On these calls, we often discuss our focus on relationships that we're looking for long term customer relationships and not transactions. What 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. For our customers, that means providing personalized advice and solutions to help them achieve their goals. Over the years, we've invested in our product and people to ensure that we can do this better than our peers.

Speaker 2

As a result, I believe that we can achieve significant organic growth over time by leveraging what we have in place today, while also taking advantage of the dislocation that is occurring across our markets. This dislocation is creating customer dissatisfaction, which is providing our bankers with the opportunity to move relationships to South Plains. 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 by focusing more on our customers' needs and challenges. By taking a solutions based sales approach, we are first identifying our customers' needs and then providing the right product to meet those needs.

Speaker 2

That positions us to win their business and become their primary bank. We've already started to see the early signs of success as this approach is resonating with our customers. 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 $0.14 per share quarterly dividend, which is an 8% increase over our prior dividend levels. This will be our 20th consecutive quarterly dividend to be paid on May 13, 2024 for shareholders of record on April 29, 2024.

Speaker 2

Our Board of Directors also authorized a $10,000,000 stock repurchase program in February, given our belief that our shares continue to trade at a discount to intrinsic value. Now let me turn the call over to Corey.

Speaker 3

Thank you, Curtis, and good afternoon, everyone. Starting on Slide 6, our loan portfolio held steady through the Q1 as compared to the linked quarter. Importantly, our production in multifamily and single family property loans and general commercial loans largely offset $28,000,000 of seasonal agricultural paydowns, a $16,000,000 reduction in residential construction loans and a $13,000,000 decline in our indirect auto portfolio. Further, we had $26,000,000 of principal reduction in watch list loans. As Curtis touched on, we continue to aggressively manage the credit quality of our loan portfolio having moved several loans that are on our watchlist out of the bank.

Speaker 3

We will continue to take a proactive approach to credit and are very pleased with the credit quality of our loan portfolio. So this was a headwind to the loan growth in the Q1. We remain confident in our full year guidance of low single digit loan growth. The yield on our loan portfolio was 6.53% in the 1st quarter, up 24 basis points as compared to 6.29% in the linked quarter. Steve will give a little bit more color on the increase in a moment.

Speaker 3

Skipping to Slide 8, we grew loans by $22,000,000 or 8.5 percent annualized to $1,060,000,000 in our major metropolitan markets of Dallas, 1,000,000,000 in our major metropolitan markets of

Speaker 4

Dallas, Houston and El Paso as compared to the

Speaker 3

linked quarter. Looking forward, we will continue to selectively add lenders across all of our markets, both metro and rural to fit our culture and can bring business to the bank given the continued organic growth opportunities that we see. The Permian Basin is a region that is experiencing 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. 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. To bring these relationships to the bank, we've invested in our people, branches and infrastructure.

Speaker 3

It takes time to build your brand in a new market and we are just beginning to hit our stride as our Citibank brand is starting to gain acceptance in Midland and Odessa. Additionally, the investments that we have made across the Permian demonstrate our long term commitment to the market. We remain optimistic with organic growth opportunities that we have across our markets and believe we have a long runway ahead of us. Though we've experienced recent headwinds, which have slowed loan growth, we do have near term opportunities to drive interest income growth with loan repricing as I mentioned on slide 9. As we've been discussing on prior earnings calls, we expect to continue to deliver interest income growth as many lower rate loans continue to experience principal repayments and or rate reset.

Speaker 3

While we expect the majority of this repricing to begin accelerating in the second half of twenty twenty four and into 2025, we believe the loan yields may remain elevated even if 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 3rd 4th quarters of this year. Turning to Slide 10. Our indirect auto loan portfolio decreased by approximately $13,000,000 to $273,400,000 in the 1st quarter as compared to the end of Q4 of 2023. We remain cautious with a focus on maintaining the credit quality of this portfolio.

Speaker 3

Through the quarter, we've also seen volumes moderate while competitors are becoming more aggressive at the higher end of the credit spectrum. We're not changing how we price risk and our company will see in our portfolio gradually shrink. We will never sacrifice credit quality for the sake of growth. The strong credit quality of our indirect portfolio can be seen in a 30 plus days past due, which were 22 basis points in the 1st quarter, down from 40 basis points in the 4th quarter. 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.

Speaker 3

Importantly, we do not see an increase in the level of these past due loans during the Q1. Turning to Slide 11. We generated $11,400,000 of non interest income in the Q1 as compared to $9,100,000 in the linked quarter. This was primarily due to an increase of $2,300,000 in mortgage banking revenues. We recorded a $55,000 increase to the fair value of our mortgage servicing asset during the quarter, which compares to a $1,500,000 write down in the linked quarter.

Speaker 3

As interest rates that affect the value rose modestly in the Q1 after falling late in the Q4 of 2023. As we've discussed on prior calls, we've aggressively managed our mortgage business to ensure it would run at or near a breakeven pace at the bottom of the cycle while having the nucleus in place for the eventual upturn in the residential housing market. We believe our team has managed the cycle well and we are starting to see the benefits as purchase volumes modestly rose in the Q1. We're also beginning to see successes in our treasury management business as our team is seeing customer wins as Curtis touched on earlier. We expect to see a moderate increase in fee income for treasury management starting in the 2nd quarter as momentum is building.

Speaker 3

For the Q1, non interest income was 24% of bank revenues as compared to 21% in the Q4 of 2023. Continue to grow our non interest income remains a focus of our team. I would now like to turn the call over to Steve.

Speaker 1

Thanks Corey. For the Q1, diluted earnings per share was $0.64 which compares to $0.61 per share in the linked quarter and $0.53 in the year ago quarter. Turning to Slide 13, net interest income was $35,400,000 for the 1st quarter as compared to $35,200,000 for the linked quarter. Interest income increased $1,500,000 in the 1st quarter, primarily due to a $1,000,000 expansion in loan interest income. The growth in loan interest income was mainly due to a 24 basis point rise in loan yields, which includes approximately $667,000 in recoveries of interest on loans that had previously been maintained on non accrual.

Speaker 1

The overall increase in interest income was largely offset by $1,300,000 growth in interest expense in the Q1 given the continued rise in deposit costs. Our net interest margin calculated on a tax equivalent basis was 3.56% in the 1st quarter as compared to 3.52% in the linked quarter. The 4 basis point increase to our NIM was due primarily to higher loan yields including approximately 7 basis points from interest recoveries, partially offset by the rise in our cost of deposits. Importantly, our non interest bearing deposits held steady through the Q1 at 26.8% of total deposits and help to mitigate the rise in our funding cost as compared to the linked quarter. As outlined on Slide 14, our average cost of deposits was 2 41 basis points in the Q1, an increase of 17 basis points from the linked quarter.

Speaker 1

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 costs. Overall, our core deposit franchise continues to remain steady. Looking ahead to the Q2, we expect modest upward pressure on deposit costs, which could slightly pressure our NIM if loan growth remains subdued. However, we continue to expect our NIM to trough through the Q2 of 2024. 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, largely unchanged from the end of the prior quarter.

Speaker 1

We recorded an $830,000 provision for credit losses in the Q1, which was largely attributable to net charge off activity in the quarter. Our non performing loans totaled $3,400,000 at the end of the Q1, which was a decrease from $5,200,000 at the end of 2023. Our allowance for credit losses to non performing loans was 1248 percent at March 31, 2024. Skipping ahead to Slide 19, our non interest expense was $31,900,000 in the first quarter as compared to $30,600,000 in the linked quarter. The $1,300,000 increase was largely the result of a rise of $1,000,000 in personnel costs, which predominantly came from higher healthcare insurance costs and an increase in incentive based compensation.

Speaker 1

Looking ahead to the Q2, we expect non interest expense to modestly rise from the Q1's level as mortgage volumes improve through the spring selling season. Moving to Slide 21, we will remain well capitalized with tangible common equity to tangible assets of 9.22 percent at the end of the Q1, largely unchanged from the end of the Q4 of 2023. Tangible book value per share increased to $23.56 as of the end of the first quarter, compared to $23.47 as of the end of 2023. The $8,700,000 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. I'll turn the call back to Curtis for concluding remarks.

Speaker 2

Thank you, Steve. 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. 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.

Speaker 2

Operator, please open the line for any questions.

Speaker 4

Thank

Operator

Our first question is from Brett Rabatin with Hovde Group. Please proceed.

Speaker 5

Hey, good afternoon, everyone.

Speaker 4

Hi, Brett.

Speaker 5

Hey, guys. I wanted to start with the treasury platform and you guys talked about some wins and expecting fee income to be stronger from here, partially as a result of that. Can you maybe talk a little bit about the magnitude of fees we might see from treasury? And then if any of that showed up in DDA this quarter?

Speaker 3

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. And we've gone back, we 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. Through that, we figured out that there was a relatively decent lift, probably I would guess on the 10%, 15% range of increase in fees that we'll start seeing coming our way. So I think that's one of the when we talked to the fact that we think we'll see it, we were simply looking at that.

Speaker 3

We weren't even taking into consideration the new business that we're just continuing to add on and bring in there. So I think we're definitely going to see a lift.

Speaker 5

Okay.

Speaker 2

I can't really give you a hard number on the what the total volume will be, but from a personal perspective, our treasury guide informed me just a couple of days ago that one of our other outside company accounts is one of the ones that's going to see a pretty significant increase in there. So it's going to be significantly more than what we've been paying in fees under the new structure. So again, we'll have to work closely with customers and be sure they understand what's going on, but we think we're staying within market. But I do look for a fairly substantial bump in the charges that were laid back primarily to customer accounts. And of course, you've got earnings credit numbers against those 2.

Speaker 2

So it just depends on the account balances and all of that. But I'm real pleased with the direction we're going. I think it's going to be something you will see a meaningful number show up on the non interest income part by end of Q2.

Speaker 3

I do want to clarify that we Brett, we've spent a lot of time running impact reports. 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 customer to where it becomes an issue. But we think as an overall inclusive level, it's going to be meaningful. So we've tried to look at it from every direction and feel good about it.

Speaker 3

But I don't think we stand in a position to feel like that we're going to jeopardize ourselves with business because it's so, so significant. Okay.

Speaker 5

That's helpful guys. And then wanted to talk about capital. It seems like your ratios are really healthy. And I just wanted to get your sense of appetite for the buyback near term versus maybe keeping some powder dry for M and A and maybe what you see as the right capital levels for the environment we're in?

Speaker 2

Let me take a crack at that one. Really, we look at capital as having 4 components on how we might use things. 1st and foremost, be sure we have plenty for organic growth. I think we will see some good growth as we keep emphasizing in the presentations we're giving. Texas is doing well.

Speaker 2

There's even with the current rate environment, there's a lot of opportunities there. Our pipelines are picking up. And we do need to have 1st and foremost plenty of capital to back that up. We will use some for a buyback. 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.

Speaker 2

That's what the Board 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, buying our own stock is provides a better and more immediate benefit to our shareholders than buying anybody else in terms of an acquisition. So right now, we're looking at pursuing that. And 3rd on the list, we'll keep paying dividends because we do believe we need to have a good cash return back to shareholders.

Speaker 2

But then coming down in 4th place, we will have some dry powder available for an acquisition if the right deal happen to come along. I just don't know that we're going to see that until we get some normalization or reduction or whatever we want to call it in overall rates, because nearly anybody that we'd be looking at out there, if you try to look at a multiple over tangible, it would be one that today I don't think you're going to find any good seller that would be willing to take it, just my opinion.

Speaker 5

Okay. That's really helpful. If I could sneak in one last one, you talked about some of the credits moving out. Do you guys think with the pipeline that kind of that mid single digit growth number is still reasonable? And does that kind of build from here in the back half or do you see some of that more in 2Q?

Speaker 6

This is Brent. I feel very confident about our single digit growth. I mean, when you think about the Ag portfolio seasonal decline that we had in the Q1, And then on top of that, we exited some credits potentially and still remain flat. That's an indication of really the production that we have going. And we're seeing that pipeline come up toward the end of the Q1.

Speaker 6

So I think I can see that even as start to make fruit as early as the second quarter, see some good growth in the second quarter.

Speaker 3

Brett, I

Speaker 1

mean,

Speaker 3

we talked about exiting a few credits, but I mean we'll exit some more. I mean we very much work our portfolio at all times. And I mean we've got 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 in a little bit more difficult environment, we're going to start working our way out of them.

Speaker 3

And I'm kind of proud of that.

Speaker 5

Okay, great. Appreciate all the color guys.

Operator

Our next question is from Woody Lay with KBW. Please proceed.

Speaker 7

Hey, good afternoon.

Speaker 3

Hi, Woody.

Speaker 7

Maybe just a follow-up on those watch list credits that you did exit. Were they concentrated in any segments or were they truly just a couple of one offs?

Speaker 6

Well, this is Brent again. It was a mix of credits from small to kind of medium sized, the largest being a multifamily credit.

Speaker 7

Okay, got it. Maybe shifting over to the net interest margin. I believe in your opening remarks, you said it could be down modestly in the second quarter. I'm assuming that excluding the impact 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?

Speaker 1

Yes. So this is Steve. I mean, yes, we had 7 basis points in that number. So we would have been at 3.49%. We're going to start from that number and say it could decline slightly from there.

Speaker 1

But again, there's just a lot of movements in rates and deposit costs really even every single day as we've seen what's been going on in the market, our stance changes a little bit. And so we've been hoping that that was we'd be on the upward trend. But with moving some of those credits out that had some of that non accrual interest that allowed us to bump that up a little bit during the quarter.

Speaker 7

Yes. And then based on the loan repricing, I mean, do you think it's realistic the margin starts to expand in the back half

Speaker 1

of the year? Again, given what we know today, which can change given the markets, I would say we should be able to see that. I mean, even if you exclude out that, those interest recoveries, you can see the loan yield is increasing. And as we fund new loans, they are at generally at higher rates. We're getting some of the lower stuff off the books.

Speaker 1

So I think we feel good given having loan growth. If loans, I think we said earlier, if loan somehow change, if we had additional payoffs maybe that are not forecasted, you could have a little bit more headwind to that, but I think given what we see right now that's reasonable.

Speaker 7

Got it. Thanks for taking my questions.

Speaker 3

Yes. We appreciate it.

Operator

Our next question is from Stephen Scouten with Piper Sandler. Please proceed.

Speaker 4

Hey, good afternoon, everyone. I appreciate all the color so far here. Just kind of curious on Brett, you're talking about new loan yields coming on a bit higher than the average and we're seeing some of that momentum already. But I wonder 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

Speaker 7

in new deposits has been?

Speaker 6

This is Brent. As far as the growth, I mean, 1st quarter growth, we saw growth in both multifamily, most of which was completed construction projects, C and I business and some in residential rental properties. And again, we talked about ag seasonal pay downs. But if I look at our pipeline that I was talking about earlier having grown in the Q1, it's a pretty good mix of C and I business and real estate. And so I mean, that's really where the growth is coming from.

Speaker 6

And then as far as the cost of deposits on our Stegua.

Speaker 3

This is Corey. From a pricing standpoint though, I mean we're putting stuff on it Prime Plus. We're trying to be very careful about how we do that and making sure that we're doing a good job with floors in most of these and we're not having trouble getting it.

Speaker 1

Yes. On the deposit side, I mean, you do see a mix. I mean, it's obviously, we're able to get some lower cost deposits we're putting I mean, putting on some new non interest bearing, although the overall balances were fairly flat. But I mean, we do still see new business coming in with some of the new lending relationships at that level. On the high end, I mean, there's definitely stuff that pushes up to 5%.

Speaker 1

I mean, there's still a lot of competition there on the deposits. Fortunately, our liquidity position at the end of the quarter allows for a little bit more room that will be accretive to us in the shorter term of getting some of that deployed into loans.

Speaker 3

I think one thing that we have been able to do though is to strategically move away some cost deposits when it works. And then all of those are with relationships that we need to bring it back, we can bring it back. But we're very much watching that to exit those when we can.

Speaker 4

Yes. That's very helpful. And Corey, do you happen to know, you may not have this offhand, but in terms of how much of your book you might have with floors on the loans at this point in time?

Speaker 3

You might have copied flat footed on that one. Steve, do you have

Speaker 1

I did not have that here in front of me.

Speaker 6

I don't have that handy either. I was just like

Speaker 4

Yes, no problem. Yes, no problem. And then maybe just kind of the last thing, I know you said some kind of very early signs of deposit cost pressure starting to ease. I guess kind of digging into that a little bit further. What exactly are you seeing that give you some encouragement?

Speaker 4

And you just referenced kind of non interest bearing sort of at least stabilizing this quarter. Do you think those non interest bearing deposits can stay kind of in this was it 20 maybe 26.5 percent of average deposits in that range?

Speaker 1

I mean, we've had good luck last quarter. We're seeing some good things. 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 a broad base of account types. But just I think with the different initiatives that we've got, which we talked a little bit about on treasury management and a few other things that are just trying to grow deposits at a reasonable cost to them.

Speaker 1

I think the increased focus will help the success there. But there I mean, there's still going to be there's a lot of competition and we see it every single day of somebody who's showing us what they can get at another institution.

Speaker 3

There is no question that we're facing pressure. And I don't even in the slightest way want to get away from that. But I will tell you that I think consistently we find ourselves on larger deposits pricing them anywhere from 15 to 20 basis points cheaper today than we were doing that 3 months ago. And we're very carefully doing that.

Speaker 2

And just looking at what we see in the advertising media, we are not seeing as many of the really high rate CD specials in our certainly in our Lubbock market, as we were seeing just a few months ago. So I think perhaps some of our competitors out there have got enough of those they think on the books and addressed immediate liquidity needs perhaps and it has reduced oil pressure on that.

Speaker 4

Yes. That's great color. It's glad to hear some people are being a little bit more rational. So appreciate all the color and congrats on a great quarter here.

Speaker 1

Thank you. Thanks, Jamie. Thanks.

Operator

Our next question is from Joe Pantginis with Raymond James. Please proceed.

Speaker 8

Good afternoon.

Speaker 1

Hey, Joe. Hey, Joe.

Speaker 8

So I was hoping to circle back on loan growth here. And do you have to have handy how much kind of gross production you had in the quarter? And then kind of maybe how that's trended versus prior quarters?

Speaker 6

Gosh, I do not have that handy, Joe. But I can tell you, I mean, it's from the back half of last year to the first quarter, it feel the 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 contract it. And that's on purpose.

Speaker 6

Well, kind of a little bit industry driven. We're not chasing growth in that area by pricing too cheap. And in other areas, as we mentioned earlier, with ag being down, so no, I feel like it was comparable to the back half of last year. But I do think our pipeline is a little bit better than it was at the beginning of the Q1 right now.

Speaker 2

So this is Curtis. I think one thing that you can look at, I'm looking at Slide 8. If you look at what we did in the metropolitan markets, that was about an 8.5% annualized growth rate in those markets in that Q1 even though we were flat overall. We even in those markets, we did have a couple of credits that we wanted to exit and got out of there. That's obviously not a place we have farm loans.

Speaker 2

But even with those couple of reductions that we had, that's still 8.5% growth rate. And while we expect we'll get some growth here in Lubbock and in some of our other rural markets, and we will start funding up on some ag 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 could be better than that. It's just like everything kind of dependent on the economy and our borrowers attitudes out there on what they can make work in terms of rate right now.

Speaker 3

I don't think we've had any disappointment in the slightest way of how the first part of the second quarter has kicked off.

Speaker 8

Okay. I appreciate that. And kind of moving over to treasury management, just kind of want to take a step back and think big picture here. So if we look at your refresh approach, can you quantify what success would look like from this new initiative, whether that's increased fee income or non interest bearing deposits over, say, the next 2 to 3 years?

Speaker 3

You've been listening to our meetings. I think it takes both. And I think the increased fee income 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 are so focused on.

Speaker 3

But from a treasury side of the thing that I look at, we continue to mature in that area in such a good way. And the success that we're having and it gets down to the quality, it gets down to the level of education that we're willing to put the effort in front of our teams to understand what we can do, how we do it and then basically get it down to a white glove service to take care of your clients. And I think we're doing that on a daily basis and we get better and better at it. The thing is we can talk about treasury and treasury isn't I mean, we don't have a new approach every time we turn around. We just continue to mature what we've had.

Speaker 3

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. And I think that's where it's coming from. We think it's going to be very easy to deliver pretty quickly increase fee income. That doesn't worry me in the slightest way.

Speaker 3

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 play with all of this stuff. And those are the wins we're having.

Speaker 8

Understood. I appreciate the color on that. Those are all the questions I had. Thanks a lot.

Speaker 3

Thanks, Joe. Thanks, Joe.

Operator

We have reached the end of our question and answer session. I will now turn the call back over to Curtis Griffiths for closing remarks.

Speaker 2

Thank you, operator. Thank you to everyone for participating in our call today. We've had a very solid quarter to begin 2024. I'm pleased with how we're pursuing the many opportunities that we have in front of us. The disruptions in several of our markets from changes in other banks' ownership and leadership continue to open doors for our team to bring high quality customer relationships to South Plains.

Speaker 2

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 to our growth and profitability. I'm very blessed to be a part of our family of employees, customers and shareholders, and I remain very optimistic about our future. Thank you again for your time today.

Operator

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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South Plains Financial Q1 2024
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