South Plains Financial Q2 2025 Earnings Call Transcript

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Provided by Quartr
July 16, 2025

Key Takeaways

  • Positive Sentiment: Strong net interest margin expansion to 4.07% in Q2, with core NIM up nine basis points excluding one-time recoveries.
  • Negative Sentiment: Elevated loan payoffs, including $49.1 million in multifamily loans, offset new production and are expected to keep loan growth flat to low single digits in Q3.
  • Positive Sentiment: Credit metrics remain solid with 30+ days past due in the indirect auto portfolio improving to 0.32% and an allowance coverage of 1.45%.
  • Positive Sentiment: Capital ratios are robust, with a Common Equity Tier 1 ratio of 13.86% and a Tier 1 leverage ratio of 12.12%, supporting growth and shareholder returns.
  • Neutral Sentiment: Pursuing both organic growth through recruiting experienced lenders in key markets and disciplined M&A opportunities under strict cultural and valuation criteria.
AI Generated. May Contain Errors.
Earnings Conference Call
South Plains Financial Q2 2025
00:00 / 00:00

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Operator

Good afternoon, ladies and gentlemen, and welcome to the South Plains Financial Second Quarter twenty twenty five 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 and 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 Steve Crockett, Chief Financial Officer and Treasurer of South Plains Financial. Please go ahead.

Steven Crockett
Steven Crockett
CFO & Treasurer at South Plains Financial

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 CEO Corey Newsome, our President and Brent Bank's 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 any forward looking statements are subject to risks, uncertainties and other factors that could cause actual results to differ materially from these anticipated future results.

Steven Crockett
Steven Crockett
CFO & Treasurer at South Plains Financial

Please see our Safe Harbor statements in our earnings press release and in our earnings presentation. All comments expressed or implied made during today's call are subject to those Safe Harbor statements. Any forward looking statements made during this call 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. 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. Curtis, let me hand it over to you.

Curtis Griffith
Curtis Griffith
Chairman & CEO at South Plains Financial

Thank you, Steve, and good afternoon. I would like to start by extending our deepest sympathies to all of those impacted by the floods in the Texas Hill Country over the fourth of July weekend, as well as the more recent flooding in our Rioso, New Mexico market, including our employees and customers. This has been a tragic event for those regions and across the states, and we will do our part to help those impacted through this challenging time. Turning to slide four of our presentation. Our second quarter results are a testament to the hard work of our dedicated employees, who I always thank for their commitment to the bank and our customers.

Curtis Griffith
Curtis Griffith
Chairman & CEO at South Plains Financial

Their efforts have positioned us for success, as we continue to achieve margin expansion through the second quarter as our cost of funds declined once again. Additionally, we believe the credit quality of our loan portfolio remains solid, as we aggressively manage the portfolio, proactively address challenges with our customers. As Corey will touch on, our proactive management of our loan portfolio has also contributed to a higher level of early pay downs. Once again, this quarter, which has been expected. Despite this headwind, we achieved modest loan growth in the quarter and continue to have a healthy loan pipeline.

Curtis Griffith
Curtis Griffith
Chairman & CEO at South Plains Financial

We also continued to build capital through the quarter, which positions us for continued growth. I'm very proud to say that our bank sits on a strong foundation. And we believe is positioned to weather potential economic headwinds that may arise from the uncertainty created by the ongoing tariff negotiations and ultimate tariff rates that will be enacted. That said, Texas continues to perform well having delivered healthy economic growth through the second quarter. Against this backdrop, we believe that we are in a strong position to take advantage of opportunities as they present themselves and are pursuing a strategy to increase the assets of the bank centered on both organic growth and M and A.

Curtis Griffith
Curtis Griffith
Chairman & CEO at South Plains Financial

As Corey will cover, our organic growth strategy is focused on expanding our lending capabilities to accelerate the pace of loan growth over time. Our community based deposit franchise continues to provide a stable, lower cost funding source for loan growth across our markets. And our team has done a terrific job growing our loan portfolio over the past five years. We believe that we have opportunities to accelerate that growth as well as continue to push for core deposit growth as we seek to balance our liquidity goals. M and A has also been part of our strategy to grow the bank and an area that we have experienced.

Curtis Griffith
Curtis Griffith
Chairman & CEO at South Plains Financial

Most recently having acquired West Texas State Bank in 2019, which expanded our reach into the Permian Basin. We remain interested in further growing through an accretive acquisition and have already begun to see the pace of industry transactions accelerate. Most notably, Huntington's announced acquisition of Veritex on Monday, which reflects the current political and regulatory environment. We believe this improved climate for deals will also help sellers expectations become more realistic. While we are closely watching the market and are always open to having conversations, we have not yet found an opportunity that makes sense for the bank and our shareholders.

Curtis Griffith
Curtis Griffith
Chairman & CEO at South Plains Financial

We continue to have a strict criteria for a deal and are only interested in acquiring a bank with the right culture and asset liability profile that meets our needs, a stable deposit base and at a valuation that makes sense. We can be patient given the organic growth opportunities that we have across our markets. Importantly, we believe that we are in a strong position to capitalize on opportunities to drive growth as the bank and the company, each significantly exceed the minimum regulatory capital levels necessary to be deemed well capitalized. At 06/30/2025, our consolidated common equity Tier one risk based capital ratio was 13.86. And our Tier one leverage ratio was 12.12%.

Curtis Griffith
Curtis Griffith
Chairman & CEO at South Plains Financial

We have the capital to support our customers as they continue to expand their businesses. 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 and keeping a share buyback program in place. Now, let me turn the call over to Corey.

Cory Newsom
Cory Newsom
President & Director at South Plains Financial

Thank you, Curtis, and hello everyone. Starting on slide five, our loans held for investment increased by $23,100,000 3% annualized to $3,100,000,000 in the second quarter as compared to the linked quarter. We experienced broad based loan growth across our portfolio as we continue to bring solid business to the bank focused on long term customer relationships. Our yield on loans was 6.99 in the second quarter as compared to 6.67% in the linked quarter. Our loan yield was boosted by 23 basis points in the second quarter as a result of a $1,700,000 interest recovery from the full repayment of a loan that had been on non accrual.

Cory Newsom
Cory Newsom
President & Director at South Plains Financial

Excluding this one time gain, the yield on loans was 6.76%, an increase of nine basis points as compared to the first quarter. Looking forward, we expect the yield on our loan portfolio to stabilize near current levels pending further short term interest rate changes by the FOMC. Importantly, our new loan production pipelines remain solid and economic activity continues to be healthy. As we look across our markets, we have a strong position in each of the communities and metro markets where we do business. We also have the capacity within our existing infrastructure and through actively recruiting lenders who fit our culture to grow our lending capabilities as we work to accelerate our loan growth and increase the assets of the bank.

Cory Newsom
Cory Newsom
President & Director at South Plains Financial

We are working to expand our team across our entire footprint and are pleased with the quality of bankers that we are speaking with and who have an interest in joining South Plains. During the second quarter, we recruited several experienced lenders in the Dallas area who have long successful track records and strong relationships in the market. We believe that they will be able to bring new relationships to South Plains, which will be supportive of loan and deposit growth over time. While we believe in the strength of our loan production and new business pipeline, we've continued to experience a heightened level of loan payoffs. We had payoffs of three multi family property loans that totaled $49,100,000 in the second quarter and mitigated our loan growth.

Cory Newsom
Cory Newsom
President & Director at South Plains Financial

We expect this higher level of loan payoffs to continue and that our loan growth will be flat to up low single digits in the third quarter. Skipping to slide seven, loans that are major metropolitan markets of Dallas, Houston and El Paso decreased by $26,000,000 in the second quarter to $1,010,000,000 Of note, the heightened level of loan payoffs in the second quarter exceeded our new loan production in these markets, which drove the decline in loan balances. The good news is that these payoffs included the problem loan we've discussed on prior calls. Importantly, this had been expected and we anticipate that loan payoffs will begin to moderate in the third quarter, though will remain a headwind to loan growth. Looking forward, we are optimistic that the loan growth will reaccelerate given expected economic growth combined with the addition of new lenders in the Dallas market.

Cory Newsom
Cory Newsom
President & Director at South Plains Financial

At quarter end, our major metro loan portfolio represented 32.7% of our total loan portfolio. Keeping to slide 10, our indirect auto loan portfolio modestly decreased to $241,000,000 at the end of the second quarter as compared to $243,000,000 at the end of the linked quarter. We saw a change in behavior as consumers began to slow their spending in May as a result of the expected tariffs, which were announced in early April. This behavior may persist to remain a headwind to indirect auto loan production in the short term. As we discussed on the first quarter call, we've tightened our loan to value requirements in our indirect auto portfolio to ensure we proactively manage the current environment and any potential challenges to come.

Cory Newsom
Cory Newsom
President & Director at South Plains Financial

We are closely monitoring the effects of the expected tariffs on our local economy, the consumer and used car prices as we tightly manage our portfolio. Importantly, we believe the credit quality of our indirect portfolio remains very strong and we're pleased to see our thirty plus days past due loans improved nine basis points to 32 basis points in the second quarter as compared to 41 basis points in the first quarter and 47 basis points in the fourth quarter of twenty twenty four. We believe our tightened credit standards will further protect the bank in the credit profile of our indirect auto portfolio. Looking to the second half of twenty twenty five, we remain cautiously optimistic that economic growth across our Texas markets can remain resilient and continue to expect our loan growth to trend to the lower end of our low to mid single digit range for the full year 2025. Turning to slide 11, we generated $12,200,000 of non interest income in the second quarter as compared to $10,600,000 in the linked quarter.

Cory Newsom
Cory Newsom
President & Director at South Plains Financial

This was primarily due to an increase of $1,500,000 in mortgage banking revenues, mainly from the increase of $1,400,000 in the fair value adjustment of mortgage servicing rights asset as interest rates that affect the value stabilized in the second quarter of twenty twenty five. For the second quarter, interest income was 22% of bank revenues consistent with the first quarter. Continue to grow our non interest income remains a focus of our team. I would now like to turn the call over to Steve.

Steven Crockett
Steven Crockett
CFO & Treasurer at South Plains Financial

Thanks, Corey. For the second quarter, diluted earnings per share were $0.86 compared to $0.72 from the linked quarter. As Corey discussed, there was a $1,600,000 recovery of interest, fees and legal expenses, net of tax related to the full repayment of a loan that had previously been on non accrual. This equated to a one time benefit of $09 per diluted share in the quarter. Starting on slide 13, net interest income was $42,500,000 for the second quarter compared to $38,500,000 in the linked quarter.

Steven Crockett
Steven Crockett
CFO & Treasurer at South Plains Financial

Our net interest margin calculated on a tax equivalent basis was 4.07% in the second quarter as compared to 3.81% in the linked quarter. The rise in our NIM in the second quarter was positively impacted by 17 basis points due to the one time interest recovery that I just mentioned. Excluding this one time gain, our NIM rose nine basis points to 3.9%, primarily due to a five basis point decline in our cost of deposits. As outlined on slide 14, deposits decreased by $53,600,000 to $3,740,000,000 at the end of the second quarter. As we have previously discussed, we experienced a large inflow of public fund deposits during the first quarter, which are higher cost.

Steven Crockett
Steven Crockett
CFO & Treasurer at South Plains Financial

These funds moved back out of the bank in the second quarter due to seasonality. Non interest bearing deposits increased $32,300,000 in the second quarter. This coupled with the decline in public fund deposits contributed to our non interest bearing deposits to total deposits ratio increasing to 26.7% in the second quarter from 25.5% in the linked quarter. The mix shift change in deposits along with the continued drop in CD rates contributed to the five basis point decline in our cost of deposits to two fourteen basis points in the second quarter, down from two nineteen basis points in the linked quarter. Turning to slide 16, our ratio of allowance for credit losses to total loans held for investment was 1.45% at 06/30/2025, an increase of five basis points from the end of the prior quarter.

Steven Crockett
Steven Crockett
CFO & Treasurer at South Plains Financial

We recorded a $2,500,000 provision for credit losses in the second quarter, which was largely attributable to an increase in specific reserves, net charge off activity, increased loan balances and several credit quality downgrades. Skipping ahead to slide 18, our non interest expense was $33,500,000 in the second quarter as compared to $33,000,000 in the linked quarter. Dollars 5 and 13,000 increase from the 2025 was largely the result of an increase of $267,000 in personnel expenses and $144,000 in increased professional service expenses. Moving to slide 20, we remain well capitalized with tangible common equity to tangible assets of 9.98% at the end of the second quarter, an increase of 34 basis points from the end of the first quarter. Tangible book value per share increased to $26.7 as of 06/30/2025, compared to $26.5 as of 03/31/2025.

Steven Crockett
Steven Crockett
CFO & Treasurer at South Plains Financial

The increase was primarily driven by 12,200,000 of net income after dividends paid, partially offset by a $2,300,000 decrease in accumulated other comprehensive income. This concludes our prepared remarks. I will now turn the call back to the operator to open the line for any questions. Operator?

Operator

Thank you. We will now be conducting a question and answer session. You may press star two 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 star keys. One moment please while we poll for questions.

Operator

Our first question comes from the line of Stephen Stouten with Piper Sandler. Please proceed.

Stephen Scouten
Stephen Scouten
MD & Senior Research Analyst at Piper Sandler Companies

Hey, good afternoon, everyone. I guess I'd love to start on kind of the loan pipeline. And I've Corey, I appreciate your comments. You kind of said, I think, lower end of the low to mid single digit loan growth for '25 based on what you're seeing. But just wondering if you can give some color there on what the pipeline looks like maybe quarter over quarter, just so we can kind of frame up what growth could do in the potential absence of the higher repayments.

Brent Bates
Brent Bates
Chief Credit Officer at City Bank

Hi, Stephen, this is Brent. And I think kind of like Corey said, we feel really good about what we're seeing in the pipeline and really our trend in originations. What's really a bit harder to predict or we think can predict the payments that we're getting. But this quarter, our payments were in the neighborhood of $15,000,000 higher than last quarter. And that's really causing us to see second half kind of in that low to mid single digit kind of range. Does that make sense?

Cory Newsom
Cory Newsom
President & Director at South Plains Financial

Stephen, this is Corey. I would just add that yes, while we think the balance of the year, I mean, we're looking at flat to upper low single digits. If you look at the hires that we're trying to do, our intention is not to leave it at that level. And so our goal is to be driving that up probably more to the mid to high after '25. I feel really good about what we're trying to accomplish on some of the hires that we're actually doing.

Cory Newsom
Cory Newsom
President & Director at South Plains Financial

And I never want to take away what we have in place.

Stephen Scouten
Stephen Scouten
MD & Senior Research Analyst at Piper Sandler Companies

Yeah. Yeah. And I mean, maybe leads to my next question is just kind of like, how do you think about that balance of investing in the additional new hires versus the potential for M and A? It sounds like it's kind of a both and strategy. If you were to find the right sort of deal, do you think that would lead you to put some new hire activity on hold?

Stephen Scouten
Stephen Scouten
MD & Senior Research Analyst at Piper Sandler Companies

Or can you continue to kind of do both concurrently, do you think?

Cory Newsom
Cory Newsom
President & Director at South Plains Financial

We have no intention of putting the new hire on effort on hold even if we did find something because we think that there's still some opportunities. I mean, say the same thing and a lot of other people try to say the same thing, but we're a relationship banker bank and if these guys can bring some relationships to us, it just continues to enhance what we're doing. But our focus is not on just trying to grow loans, but trying to grow deposits at the same time. And we are working on some efforts that we think will help continue to expand on that side of it as well.

Stephen Scouten
Stephen Scouten
MD & Senior Research Analyst at Piper Sandler Companies

Okay, great. And then maybe just last thing, any color you can lend on the increase in specific reserves in particular, was that associated with that one large credit that you called out the multifamily loan or is that related to other types of credits?

Brent Bates
Brent Bates
Chief Credit Officer at City Bank

Yes, Stephen, I mean, we just saw we did see a lot of ins and outs and this is Brent, by the way, We saw a lot of ins and outs in criticized assets during the quarter, a lot of good movement out and a little bit coming in. The net effect of that was a slight increase and that slight increase just kind of drove general reserves up. But we did have a couple loans that entered non accrual status that were smaller and we took a conservative approach on them.

Steven Crockett
Steven Crockett
CFO & Treasurer at South Plains Financial

Yeah, Steve, this is Steve. I'll add to that and just say, there was not a specific reserve on that larger credit that we talked about. We this is on a few of the other credits.

Cory Newsom
Cory Newsom
President & Director at South Plains Financial

Stephen, I think it's very nice to have a nice recovery when have some of that stuff happen in the same quarter. So you can just take it for that.

Stephen Scouten
Stephen Scouten
MD & Senior Research Analyst at Piper Sandler Companies

Understood. Yeah, I appreciate all the color guys. Thanks for the time.

Curtis Griffith
Curtis Griffith
Chairman & CEO at South Plains Financial

Thanks. Thanks, David.

Operator

Thank you. Our next question comes from the line of Brett Rabatin with Hovde Group. Please proceed.

Brett Rabatin
Director - Research at Hovde Group

Hey, guys. Good afternoon. I wanted to talk about the the margin some from here. And if I heard you correctly, you kinda talked about the loan yields, you know, kind of being more flattish from here on a on a core basis. And I know we had talked about some potential deposit exception pricing that could lower the cost of funds, but the interest bearing cost of deposits was down two bps.

Brett Rabatin
Director - Research at Hovde Group

Linked quarter, you know, it's it would seem like you'd have a flattish outlook from here, but wanted to get your perspective where we might go from here.

Steven Crockett
Steven Crockett
CFO & Treasurer at South Plains Financial

Yeah, this is Steve. I'll start. Yeah, we've had, you know, the CD book is repricing down. Now CDs are ten eleven percent or so of total deposits. So that's not a huge driver overall, but that is trending the right direction.

Steven Crockett
Steven Crockett
CFO & Treasurer at South Plains Financial

The rest of the book outside Fed movements to rates, I mean, is a little bit slower moving on any of those rates. We we have done a little bit of work toward the end of the quarter on a few of our public fund deposits or a couple of clients like that, that maybe will save a little bit. But, you know, again, the change in Fed drop in rates, there's not big moves to be made, but we will continue to look at those rates.

Cory Newsom
Cory Newsom
President & Director at South Plains Financial

This is Corey. I mean, I do think we'll have some NIM expansion and I mean, we're extremely focused on that and the exception based pricing that we've talked about in the past is no different than what we do. We continue to do on a daily basis, but I think we'll continue to be focused on trying to expand that.

Brett Rabatin
Director - Research at Hovde Group

Okay, that's helpful. And then just back on the M and A topic, we've obviously seen a couple of deals in Texas here the past week or two. Just wanted to hear from you guys' perspective, the environment as you see it in terms of if there are anything that are impediments, is it valuation expectations or other things that, you know, might hold up you guys doing something? And then if you could remind us kind of your your range from an asset perspective, you know, what you might be looking at, that'd be helpful.

Curtis Griffith
Curtis Griffith
Chairman & CEO at South Plains Financial

Brett, this is Curtis. As far as impediments, essentially buyer expectations is probably the biggest one. We're going to look really hard to find somebody with the right culture. If we don't think we've got that, then we don't even really get around to talking about price. But we've got several of the investment bankers that are out there bringing ideas to us.

Curtis Griffith
Curtis Griffith
Chairman & CEO at South Plains Financial

But we've got to get some people a little more motivated to start be willing to accept prices that the market is telling us is the right price. So we're looking, we're working on it. For us, I think it's kind of like we've said before, somewhere down 600, 700,000,000 is probably toward the bottom side of what we'd like to do. And we'd feel okay, going up some number over a billion and for the right trade, maybe even a little higher if one really lined up with all the stars. But we're definitely looking and again, you still got people out there that because of the structure in that bank that we'd be very interested in.

Curtis Griffith
Curtis Griffith
Chairman & CEO at South Plains Financial

They've still got a pretty significant AOCI problem. And nobody really wants to fess up and say, that means I lose, I don't get that money when they sell the bank. And till we get some sellers a little more realistic about where that puts the real price for their bank, It's kind of hard to do the business. But I would say that it's obvious in this regulatory environment has loosened up significantly. And I think as you see more and more deals get announced, maybe we're going to see some of these more entrenched sellers that feel like if they're gonna do something now's the time.

Curtis Griffith
Curtis Griffith
Chairman & CEO at South Plains Financial

Because it's gonna be a lot easier to get deals through the system, I think.

Brett Rabatin
Director - Research at Hovde Group

Okay. And then maybe just one last one on mortgage banking. And I guess depends what happens with rates here, but was curious if you got any thoughts on mortgage banking performance in the back half as you see the environment.

Cory Newsom
Cory Newsom
President & Director at South Plains Financial

Know, Brett, it's been this is Corey, it's been pretty flat. And I think it's still going to be pretty flat. The thing is, as we've said all along, we've kept our infrastructure in place. We are doing mortgages on a consistent basis, but we're not setting the world on fire. But here's the thing, we're not losing any money doing this and we're making sure that we're maintaining these relationships in the process.

Cory Newsom
Cory Newsom
President & Director at South Plains Financial

But to have been able to keep our mortgage operation in the black during some of the most challenging times, I think speaks well of our team. And that's why we've been very reluctant to step away from that because we like the ability to be able to do it. Now, get some rate movement that actually makes some sense, we're ready to go. And so we're really excited about that.

Brett Rabatin
Director - Research at Hovde Group

Okay. Appreciate all the color guys.

Cory Newsom
Cory Newsom
President & Director at South Plains Financial

Thanks.

Operator

Thank you. Our next question comes from the line of Woody Lay with KBW. Please proceed.

Woody Lay
Vice President at Keefe, Bruyette & Woods (KBW)

Good afternoon, guys.

Cory Newsom
Cory Newsom
President & Director at South Plains Financial

Hi, Woody. Hi,

Woody Lay
Vice President at Keefe, Bruyette & Woods (KBW)

Wanted to start on loan yields. Even backing out for the interest recovery, I mean, they saw really nice expansion in the quarter. I was just hoping to get some color on maybe where new loan production rates are coming on and how that compared to the payoffs you saw in the quarter.

Cory Newsom
Cory Newsom
President & Director at South Plains Financial

I think for new rates coming on, this is Corey. I mean, you're seeing low sevens, high sixes on some of the larger, more sophisticated borrowers that we're doing business with. But I mean, we're still trying to collect fees at the same time in doing some of this stuff. We're also doing some stuff trying to hold our position if rates start cutting, that it'll be a little bit of delay in process for our loans to start cutting. So we think there's still some expansion there for us.

Steven Crockett
Steven Crockett
CFO & Treasurer at South Plains Financial

Yeah. The other good thing that helped us besides the one time recovery was just getting that loan off of non accrual. So I mean, we had $20,000,000 in loans there that were not accruing. Just had that have been accruing at a normal rate, yield would have been up in prior quarters as well.

Curtis Griffith
Curtis Griffith
Chairman & CEO at South Plains Financial

Woody, this Curtis. In part of our board committees today, we were going over a list of loans that will be either maturing or hitting a rate reset dates over the next eighteen months or so. And while it's not going to be one huge big spike, there are several large credits in there that will reprice at looking at current numbers, probably reprice a good 200 basis points up from where they are today. So again, it's not going to make them big jump, move the needle enormously in the next three months, but it will help continue to hold that NIM up as we do that as well as bringing new ones on. We just don't know what kind of pay downs we do have.

Curtis Griffith
Curtis Griffith
Chairman & CEO at South Plains Financial

I know we'll get a few more. I think the ones we've had recently and probably will have in this quarter are certainly significant. I personally kind of doubt that we see quite those levels going forward the rest of the year. But it's something we have to work for. If you look at where we would be with new loan production without a couple of these major pay downs on it, we'd be hitting the kind of numbers we'd really like to hit.

Curtis Griffith
Curtis Griffith
Chairman & CEO at South Plains Financial

It's only these big blocks pay downs that kind of skew the numbers back down toward being low single digit.

Cory Newsom
Cory Newsom
President & Director at South Plains Financial

But to keep in mind, I mean, please be very clear that not all of these are that, but if you look at some of the headwinds that we've talked about of some of these pay downs, there's a fair number of those that were very cheap priced loans that we were not sad to see go away. And the biggest one being at zero and taking that all the way up to some stuff that we've got that's got a four in front of it. And we're okay with that.

Woody Lay
Vice President at Keefe, Bruyette & Woods (KBW)

Yeah, that's really helpful color. Maybe shifting over to non interest bearing deposits, you all saw nice growth in the quarter. Was there any strategies that drove that growth or just any color you can provide on the higher balances?

Cory Newsom
Cory Newsom
President & Director at South Plains Financial

No, I'd like to tell you that, I mean, we're just really good at that. But I think the reality is our treasury management solutions just continues to mature. And I mean, we're so proud of the way we work that in line with new loan production. And I think that probably represents the biggest bulk of it. And we're not out great.

Cory Newsom
Cory Newsom
President & Director at South Plains Financial

We don't have something new that we've just done. We're just getting better and better all the time at how we deliver to these clients.

Woody Lay
Vice President at Keefe, Bruyette & Woods (KBW)

Yep. And then last for me, I just wanted to hit on the hiring strategy and just try to sort of get a better idea of the scope or opportunity of hiring that's out there and just how that impacts expense growth from here.

Cory Newsom
Cory Newsom
President & Director at South Plains Financial

It's going to impact expense growth. I mean, we know that and we're okay with that because what we put a pretty short timeline on how long before we break even on new hires. We think it will have some impact on expenses on the short run. But we look at that as, I mean, that's growth development for us. I mean, not only are we trying to impact it from that standpoint, but the things that we're trying to do to improve the loan origination system we have inside the company, making sure that we're prepared for the kind of growth that we're after.

Cory Newsom
Cory Newsom
President & Director at South Plains Financial

So it will definitely have some impact on that. As far as the different areas, I mean, we're pretty much across the board where we're wanting to do some expansion in hires. But you all know, we're very selective of what it takes for us to hire people around here. And we screen them very, very well. And the ones that we've been so lucky to get and successful in actually getting close are ones that we think that are going to fit into our team very, very well.

Woody Lay
Vice President at Keefe, Bruyette & Woods (KBW)

All right, that's all for me. Thanks for taking my questions.

Cory Newsom
Cory Newsom
President & Director at South Plains Financial

Thank

Operator

you. Our next question comes from the line of Joe Yakunis with Raymond James. Please proceed.

Stephen Scouten
Stephen Scouten
MD & Senior Research Analyst at Piper Sandler Companies

Good afternoon. So

Joseph Yanchunis
Joseph Yanchunis
Senior Equity Research Associate at Raymond James Financial

I know this horse has been beat, but I'm going take another swing at it. The strategy behind Dallas. So you've had some loan balance contraction in your metro markets that occurred again in this quarter. Is part of a hiring strategy related to those declining balances? And I guess additionally, I may have missed this, but how many lenders did you hire? And do you have a sense for the size of their book of business?

Cory Newsom
Cory Newsom
President & Director at South Plains Financial

I mean, we've been hiring constantly, probably in the last month, we've hired another couple of lenders. So it's, I mean, we're just continuing to keep adding to this. It's just an ongoing process. So Joe, let's dissect Dallas for a second. The big non accrual loan that paid off was tied to the Dallas market because that's where the lender was that it originated.

Cory Newsom
Cory Newsom
President & Director at South Plains Financial

So that was one of the headwinds that they've had right there. So some of the headwinds like we've been talking about, they're okay. I mean, we've wanted some of this stuff to separate and go find a new spot. So there's some others in there that were some cheap price stuff that we weren't going to, they were going to get repriced and they knew they had to find some other solution for it as well. So I do think that headwind has not just all of a sudden gone away, but I think it's one that we've managed through very well.

Cory Newsom
Cory Newsom
President & Director at South Plains Financial

So there's nothing tied to the fact that we're doing lenders because we've had that headwind right there. Hiring lenders because I mean, have opportunities to hire some very good talent and bring them into our team. And that's what we're focused on. But it's not just Dallas, it is pretty much across the board of where we're strategically trying to identify those that would fit our culture, sides of the credit culture as well, and making sure that the type of business that they do is the type of business that we want to bring onto our books.

Joseph Yanchunis
Joseph Yanchunis
Senior Equity Research Associate at Raymond James Financial

Got it. I appreciate it. And then just kind of one last one for me here. You had a pretty nice gain on non interest bearing deposit balance in the quarter. Do you have a sense for how much of that came from new customers?

Cory Newsom
Cory Newsom
President & Director at South Plains Financial

I don't think that I could even take a shot at that right at this minute. I mean, I think there's a fair amount of it because that's our focus. Mean, every discussion we have over a loan ends up with a discussion over a deposit as well. So I would say that there's some of it contributed to it, but I wouldn't try to go say that was the lion's share by any means.

Curtis Griffith
Curtis Griffith
Chairman & CEO at South Plains Financial

I do know that we've got the message out there that for existing customers that getting those deposits is every bit as important as having their loan. And that message is getting communicated from that loan servicing officer out to the customer. And that gets them a chance to get the treasury management folks in front of them. And I know we have seen a meaningful increase in getting some deposits in from people that we've had a loan with for two, three, four years. It's just nobody pushed very hard to get the deposits and now we are.

Curtis Griffith
Curtis Griffith
Chairman & CEO at South Plains Financial

So it's a combo, but again, I couldn't give you this percentage breakdown. But we are gaining some customers. And sometimes what you see is it's a part of a relationship that we may have a loan to this entity over here. And it may be one that we've had the operating account on, but that's not anything with any real balances in Now we're getting back in front of that, the human being that's the lead in that customer relationship and saying, yeah, but over here in this part of your business, you've got some significant deposits. And we want to show you why we can do a better job for you than the bank you're with.

Curtis Griffith
Curtis Griffith
Chairman & CEO at South Plains Financial

And we're having some success with that. So it's combo with a lot of things. And it's slow, but it's steady. And I think we're gonna keep getting that kind of growth.

Cory Newsom
Cory Newsom
President & Director at South Plains Financial

Joe, I'd like to go back and give a little bit of credit to the fact that I think the way our ICP plan actually works, these lenders are incentivized on deposits as well as on loans, and they're not only incentivized, but they've got metrics that they need to meet. I think that has as much to do with this across the board as anything.

Joseph Yanchunis
Joseph Yanchunis
Senior Equity Research Associate at Raymond James Financial

Understood. I appreciate the thorough answers. Thank you.

Curtis Griffith
Curtis Griffith
Chairman & CEO at South Plains Financial

Thanks, Joe.

Operator

Thank you. There are no further questions at this time. I'd like to turn the floor back over to Curtis Griffith for closing comments.

Curtis Griffith
Curtis Griffith
Chairman & CEO at South Plains Financial

Thanks, operator. Thanks to everybody that participated on today's call. We do believe our second quarter results demonstrate our strong financial position as well as the growing earnings power and the liquidity of the bank. Our markets are generally enjoying healthy economic growth. We see opportunities to accelerate organic loan growth through continuing to hire experienced lenders who can bring high quality customer relationships to the bank.

Curtis Griffith
Curtis Griffith
Chairman & CEO at South Plains Financial

We have a strong position in our markets where we do business and we do believe we can grow market share over time. We also see some opportunities to grow through M and A as the deal environment improves in our industry. That said, though, we will be very selective and ensure any acquisition that we consider makes economic sense for our shareholders. Taken together, we believe we're in an advantageous position to succeed, continue to deliver value to our shareholders as we work to accelerate the growth of South Plains. Thanks again for your time today.

Operator

This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.

Executives
Analysts
    • Stephen Scouten
      MD & Senior Research Analyst at Piper Sandler Companies
    • Brent Bates
      Chief Credit Officer at City Bank
    • Brett Rabatin
      Director - Research at Hovde Group
    • Woody Lay
      Vice President at Keefe, Bruyette & Woods (KBW)
    • Joseph Yanchunis
      Senior Equity Research Associate at Raymond James Financial
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