Earnings call transcript Q2 2023

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Operator

Good afternoon, ladies and gentlemen. And welcome to the South Plains Financial Second Quarter 2023 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.

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

Steve Crockett

the Thank is We our Officer. to appreciate Cory Newsom, quarter of good Chief our Chairman afternoon, Credit in Curtis President; available section Executive today and today’s News call. our complement second Officer; Chief here conference XXXX and you, our presentation earnings and Griffith, Slide spfi.bank. me are our on deck and your Events discussion Operator, participation With everyone. website Brent Bates,

that begin, call are we I’d those of factors Before like a results to cause to contain and risks, from remind anticipated everyone to statements future could and materially other that this results. forward-looking uncertainties variety may subject actual differ

Any Safe today’s herein statement statements, that except not subject by two of earnings those to forward-looking undertake press our this and All such forward-looking see presentation. do call during Safe update deck our law. Harbor comments statements any we on release only afternoon in made Harbor are are as the slide issued as was today’s and presented statements. Please duty date to slide of made required

can and we earnings we slide be certain our may the measures during slide performance. Additionally, call, found presentation. today’s useful of non-GAAP believe measures, at on end release in reconciliation these also discuss most XX non-GAAP GAAP the deck comparable which of are the A our evaluating beginning of measures to

you. over to it hand me let Curtis,

Curtis Griffith

our more allocation competitor will financial in which results, a in more loan then mergers an review of to discuss of sale and our from benefit detail of the call, and closed conclude results. in markets. with key how priorities detailed will our quarter our Thank following as I XXXX we continue capital Steve Cory good portfolio on April. the you, will highlights today’s provide On as update well review Steve, second afternoon. Windmark, briefly our

start, of am company very with our to for that pleased the results a especially strength culture second our our the and have such I industry. in commitment quarter environment highlight challenging to customers employees our To and our as they our

strong second thank like I’d the our hard quarter employees their exited and seen results this in can work, clearly a have once financial quarter. for position We to in our again be which

call, today’s I are to hope key away. there that take Turning you points six will

our deposits demonstrating First, deposit stable of franchise. the remained our further quarter, the community-based through second strength

steady higher continued rise the cost despite market held loan environment, level March’s rate margin are rising Second, offsetting yields as net of from interest the interest funds. our our in

the loan we benefited in organic from second very loans competition selective our loan we across pipeline our continue the maintain with underwriting said, fund to we strong as be Third, quarter as we combined in lower That robust a was markets. that our growth new discipline.

profile did portfolio in loan will credit though the our non-accrual on detail improved through the of Fourth, a I which have quarter one touch more moment. addition, in second we

Tier our this as built ratio sale to capital average increased further X XX.X%. quarter through and earnings of capital the we our Fifth, to Windmark assets

into sale reinvested strategically we able recorded investment were proceeds to the the our we to improvement given the securities advantageous believe that a sold as lastly, And loans. sale the new which gains quarter portion securities we portfolio from in be Windmark achieve yield with we of we the combined

net common or or quarter. of per $X.XX the income This $X.XX more $X.XX quarter diluted XXXX. per diluted million earnings diluted results $XX.X four earnings million earnings detail Turning per share, income second year or share the in to of of We first to our in $X.X million our to compared share for as net ago delivered slide presentation. $XX.X of on compares

incentive quarter call, The sale transaction wholly-owned first our in sale the of after-tax subsidiary Windmark, securities transaction. expenses, April $XX.X per compensation quarter. of in proceeds transaction loss we we the on triggered an the insurance million resulted by investment all-cash during of As and Citibank’s completed income $X.XX share in in less quarter for onetime second net sale the the the discussed on realized the second our

Excluding these $X.XX items, we per share. earned

was Given loss reinvested sell X% that portfolio, the efficient are income future our a a the the the and the of that the earnings and the of will boost transaction help made net believe sold more gain periods that our will to $X.X in Windmark given in operations. million securities large decision quarter. we allowance million. we securities resulted realized we from from recorded, strategic we which future We $XX second investment this incremental replace than loss X.X% in yielding proceeds income and approximately of yielding were The tax

in second our the in We Turning mergers. many recent competitive markets to our with loan as combined economic growth loans portfolio. quarter, dislocation to X.X% experience grew of customer continue from healthy we

Additionally, in to are we some team on the as will which new to is Cory our competitors allowing in larger back markets, bank touch detail. more seeing relationships pull bring

in We million loan the The recorded million was the for of compared a $X quarter in in primarily the provision quarter, for growth provision as to strong XXXX. credit losses second first of $X.X million in specific previously on we that $X.X in classified $XX.X related that of placed credit million delivered one relationship totaling reserves increase a non-accrual May was XXXX. and to the quarter

for and see of business XXXX. we directed larger was liquidation in that currently third quarter from the borrower expect credit is in to which a starting repayments This

to specific concern. going that While continues is a relationship business we performance, there longer no recorded a given placed the and the payment be on reserve non-accrual

of through the portfolio touch in quality quarter. second the overall more detail, continued credit As our to Steve on improve will

were $X.XX estimates budget these second provision expectations. per the note, $X.XX of share provision Of Higher approximately and for our in was expense consensus expense million recorded quarter. above

the a second will we the items of the in of year share quarter, bank, and benefit the fully and run quarter’s for loan earnings the improved half all the $X.XX bodes from yields. believe we the was second provision well which loan growth result, as As per excluding increased rate second one-time

June billion XXXX, to first or at We end to deposits compared X.X% the XX, grew XXXX. of quarter $XX.X $X.XX as million the

primarily deposit grown in a million an partially was $XX public had to in brokered Our funds, deposits, million which million by the prior $XX offset growth during due $XXX increase reduction quarter.

deposits are we continue cost making as related Ultimately, our overall manage We deposit of to will and a build effort gathering funds. grow to deposit manage we out our levels concerted interest capabilities costs. core and strive to

end, strong deposits rural were of also position At major competitive markets markets metropolitan only highlights our XX% of in and The five, stability which in liquidity Paso. on that of XX% with slide our position Houston our and El further the Plains deposit holds. quarter seen franchise be Dallas, can our South

balance deposit is only approximately $XX,XXX total average our estimated or of an our and XX% deposits are Additionally, account uncollateralized. uninsured

untapped in We billion strong quarter with of believe we second position the liquidity capacity. a ended $X.XX borrowing also

We from have availability the million Reserve’s from Home the Federal of Federal of the Bank and of capacity million Term Discount Loan from $XXX of $X.XX billion Window Federal availability Funding Program. Bank Dallas, $XXX Reserve’s

present otherwise to both they capital organic take and as ample have of growth advantage themselves. opportunities We

in and authorized May a during quarter Given liquidity Directors for position, program million of million. Board repurchase the shares stock $XX our XXX,XXX back our $X.X second approximately and capital we bought strong

grow opportunities and We not do continue bank. that results intrinsic our to are the further see reflect believe that and our we the to shares below value strong trading

be uncertain our combined the will sector. dislocation we environment, said, economic with capital That with of cautious given banking the the

generated the will best We broad review from uses range the for continue to to Windmark determine be capital patient the and a of options sale.

This be to per our be our XX, As part announced allocation, XXth a capital last of a dividend dividend of public shareholders on record week. XXXX, on since and been $X.XX over for a will of paid Directors dividend consecutive of authorized Board through quarterly four our stream XX, again steady July for our focus shareholders quarterly our August returning years as share going ago quarterly has XXXX. income

unemployment To we Economic cautiously challenging a low. is looking navigating is second successfully our half markets, while into optimistic steady the remains conclude, the are remarkably of and environment holding year. in growth what remain

we capital opportunities the bank. take our the maintain advantage to will and market look conservatively We grow as continue to in of

to turn Now let me the Cory. call over

Cory Newsom

and good everyone. Thanks, afternoon, Curtis,

investment broad-based by million of organic first X.X% Loans during $XXX.X loan Demand or residential compared the energy. growth six. slide for in across quarter both quarter highlighted increased real was commercial by markets industry our and on Turning the XXXX. second to sectors mortgage, held and estate

end fortunate We contributed quarter to the pipeline were to loan a growth. strong this which second with

created we from credit benefited Additionally, continued dislocation as customer well competitor several the reduction quarter. to in from the mergers, the by competitors through a availability as ease from competitive as environment

is this to to opportunity high relationships We Plains. customer an quality believe long-term South bring

risk credit sacrifice our will quality growth. high-quality improved, on and has environment standards competitive we with loans the we maintaining remain return We funding not as good profile. underwriting are for While focused

X.XX% loan to yield in the Our in was quarter X.XX% compares second which the first of quarter, XXXX.

to continue contributing price proactively interest a costs. which account rising new loans for is higher to to environment, market rate We funding

funding We pressure are remain the beginning we of mitigate on and to focused as managing loan continue peak second growth to deposit the to that half costs believe yields look our year. and margin to

by grew of or to Houston added lenders Dallas, as we loan compared continue these the have El bringing $XX customer XXXX. by to our and the commercial markets first X.X% portfolio major we their The million new eight, our portfolios bank. loan quarter of slide metropolitan to to markets Skipping grow Paso that in relationships in

cautious with We on are closely and watching will expenses. we the a grow as focus Texas economy be

in strong Texas market a XXXX, people exists State Permian quarter and are been investing the experienced perspective. this increase have with both gathering order deposit potential Since an in Bank demand. Basin technology acquisition into is facilities, another our our in as completing that pleased this in tap from in West lending to and with we region we we loan

early but It believe certainly are to running and we are the in time are has take growth We our our share. we pandemic the beginning the us operations back, stages taken that of Permian. in set well and

growth moderate full Therefore, expect pleased loan the interest of rates range, we year, but for higher guidance for the loan single-digit full to single-digit with given impact low to be the expect year to six growth growth year low loan loan meaningfully together, XXXX. double-digit high are the we of is of our above in prior Taken which of first months demand. the on our growth

of slide approximately billion total end, Skipping XX.X% we $X.X our which exposure at portfolio ahead our to in portfolio. real estate loan loan of XX, quarter represented commercial have

X.X% represented at Our of and portfolio our office our portfolio loan XX.X% of the total exposure end CRE quarter. second of the

office exposure is of of medical Of exposure. comprised owner-occupied and XX% office note, XX% our our offices

strong portfolio largest and office performing our guarantors. is credits Our have well

We in stress our challenges. continue to for portfolio test individual credits the

economy the were discuss the of slow. second credit will the which Steve confidence overall quality to through As improved portfolio quarter, if loan provides our

first level treasury I our enhancing management As liquidity how education on are treasury growing competition our the we deposits. we want team and focus for on needs. not as our products. in strategically be adding call, to includes discussed our solutions identifying on enhancing on business, of than of all we quarter’s team just we providing deliver expense. is have This and If The to focus earnings better we win the aspects

we We our degree as and this on a meaningful the franchise over look to income our on a We medium-term. deposit further impact believe long-term. for can lesser build relationships initiative the our fee deposit have core base to focus

first to our the to in loan auto million XX, million XXXX. portfolio end to decreased the compared the $XXX.X Turning by $X.X quarter second of slide as quarter indirect

Our level building time, credit of year while modestly profiles. loan to indirect replacing been runoff over strategy with the auto portfolio this some higher the loans out strong with or reduce has

XX% is portfolio loan are credit portfolio positions of of is XXX portfolio a was the also score a which to the cycles. indirect with resilience XXX super maintaining with underwriting prime XX% credit XXX, was auto a of disciplined strong economic better, originated which of for prime. and The at approach We across profile or originated credit the score to varying

the million which second we in the included of $XX.X from generated $XX.X quarter, million Turning to non-interest of income slide sale gain Windmark. XX,

Windmark. which reduction income, the primarily was in a non-interest due million mortgage quarter of The million increase to income banking of revenue the activities million increase $XX.X in from $XX.X million by activities a of sale XXXX. in to due generated $X compares we gain, $X.X of this to interest partially Excluding first offset

pickup During loan the compared $XXX million originations $XX spring the the selling to as million, second normal XXXX, $XX quarter in to increased million first mortgage of the quarter, given from season.

rise first write-up in was fair given the in our of compared in the market portfolio quarter $XXX,XXX second rights million write-down Additionally, there quarter, the value to mortgage interest $X a XXXX, of of the servicing as in rates.

mortgage in mortgage origination second division, activities breakeven quarter. secondary servicing which Our excludes was the

and cross-selling. as will incremental long in the forward, through is profitable business mortgage business drive as it remain Looking we

For first was as excluding Windmark XXXX. income XX% revenues, the to gain quarter of for second the compared of bank quarter, non-interest XX% one-time in the

the To remain results strong delivered environment. believe current we second conclude, we quarter, we the through well for and positioned

strategically is that taking makes and add market are occurring share We the in where are always to it market lenders talented dislocation our given customer looking sense.

We growth while strive organic on driving we the earnings to mitigating deposit pressure will focus grow bank. continue of to the margin power as

will over I now to the turn call Steve.

Steve Crockett

yields, $XX.X of of Thanks, first XX. $XX.X XXXX. modest The as million slide in offset Cory. was rise million loan on for the quarter, the million quarter increase interest increase in compared short-term primarily Starting due increase second result income the to interest rates. the Net income in for was the to $X.X and $X.X expense interest to a average balances a by million higher due interest largely loan

a Our margin in to net X.XX% calculated quarter, the X.XX% compared basis tax quarter on XXXX. as interest in second the of was equivalent first

NIM point by to compared as as our increase XXXX. corresponding the our organic XX of first of impacted a loan points second This first basis of compared our basis partially quarter XX deposits of to combined the Our loan was in cost the growth, quarter XXXX. the in offset increase in with was quarter yields by

XX second of to the and our Importantly, XXXX March has basis dropped NIM in points steady month through held the quarter. X.XX%

challenging on focused managing environment. We profitability this in more remain our

XXX the second points in XXX basis basis the XXXX. an of was Our quarter points quarter, first of from deposits cost increase average in

to Given the deposit cost. our the year, rise maintaining rate have the we funding rising through interest to led of proactive which be environment in had has relationships,

Importantly, slide rely organic on not to on while outlined we have time to continued core deposits, see as having deposit XX. growth

first slightly deposits total During total in was decreased non-interest-bearing deposits deposit relatively compared quarter, quarter the XX.X% to mix our XXXX. as second the stable of of deposits, of as XX.X% to

allowance to believe reserved XX, we XXXX. to to was of at that appropriately credit XX, to June is our XXXX, as losses for X.XX% Turning XX, portfolio compared continue at slide remains March ratio loans loan total X.XX% our

quarter in recorded the non-accrual provision quarter for that XX was assets million on relationship May million our XXXX. placed specific first quarter. losses attributable and $XX.X $X.X basis points non-performing As earlier, placed larger a of totaling in loan the in XX previously Due classified the non-accrual, Curtis being reserves touched our due second the to was to we credit on in on XXXX. basis largely million to provision of points second to the assets The total in from organic to ratio in quarter relationship increased $X.X growth one credit

non-performing classified to said, million XX, in loans paid loans $XX approximately XXXX. the $XX $X first million That in Further, second July week during from classified quarter million million off at declined the March of a with XXXX. full $X.X relationship

environment, the continued the States credit to make which due uncertain, are losses the United remain that in in rising dislocations persistent future periods. the conditions and market impacting levels in consumers sector, recent may provision banking economic additional businesses for future inflation necessary Nevertheless, and interest rate

and our to related The $X.X the primarily expense million the the the of quarter million $X.X compared ahead million transaction slide the due incentive-based on Keeping of transaction loss was second sale of expenses first quarter, in was from XXXX. to securities. and XX, non-interest to $XX.X compensation $XX.X increase Windmark as million in

non-interest and not second As our the expenses quarter quarters. related to as a future we in for do see result, expect $XX.X million expense we core transaction additional the

expense in wage operations, manage our allowed manage market. has based personnel to deficiencies as Importantly, across bank on by closely us implementing activity the and we to the adapt which the managing we personnel inflation our continue to current

manage expect the we looking offsets continued third non-interest as to the add non-interest to talent selectively costs. be to to we to increase and will of flat for based our said, quarter XXXX on keep expense or Looking year slightly expense That rising team. ahead, continue we

the with the tangible of of slide from of quarter, XX, X.XX% the to quarter by we assets X.XX% partially at the income end an at the to second well ahead repurchases. Moving of first paid, equity after tangible $XX.XX increase end $X.XX remain capitalized common driven The Tangible dividends million per offset by book XXXX. second $XX.X quarter. value in during was by increased share in share net to $X.X increase million

Let me turn to call concluding back the for Curtis remarks.

Curtis Griffith

banking continue of Thank quarter I challenging navigate our the is second spite loans the turmoil value you, grew our and franchise results a the industry to of future. we as To am quarter, of successfully Steve. while which the environment Plains testament deposits very position we proud and Through conclude, Plains. in in maintaining in profitability March, South South to a for the through

also to portion sale securities Additionally, strategically improved we tax portfolio added of sheet balance for believe of power our advantaged enabling growth, earnings investment the to of bank. a the has capital further which Windmark way, us while sell the in a our

continue to further strive to bank enhance value look power we our the create as will for to capital for shareholders. the opportunities We to deploy of earnings

Thank you line time again please the your questions. for any open for Operator, today.

Operator

ahead. with comes Instructions] Brady question Please Thank go you. [Operator Your Gailey first from KBW.

Brady Gailey

Good Thanks. guys. afternoon, Hey.

Steve Crockett

Hi, Brady.

Cory Newsom

Brady. Hi,

Curtis Griffith

Hi, Brady.

Brady Gailey

just what business of NPA. is What and Maybe $XX color type happened the little that more on million there? a

Cory Newsom

is Cory, this Brady. Well,

So that’s a C&I business.

borrower of one script the our So a in directed it is hoped liquidation. when we kind little this about things a up would color you that of about and talked pick being

lot of of businesses got different a and lot a You in that’s guy a industries. different

a didn’t kind business. to. type out It it wanted he -- expanded of He related got really like work into into

shut of kind down, decision made it in he -- self-liquidate So his discretion, own the to self-liquidate.

account for appropriately. always stuff We going our are to

a other we have businesses other income this guarantee strong guy But sheet, debt. businesses from that can has lot balance those of actually network, very this strong and

of just window to caught it -- a So but good that it. we about we it for feel needed appropriately, kind in account got pretty

Brady Gailey

then $XX.X you right. of when rate quarter slightly basing run that what expenses are Okay. talk to being core about flat off that the you All off are second that you that And Is of kind million. up, basing of of?

Steve Crockett

Steve. This expenses, around of transaction after at and we million. correct. right those That’s kind $XX.X for normalize -- looking for That’s Yeah. cost that additional what so that the we are is

Brady Gailey

a loan growth? XX% Then, right. Maybe just this that I more little level kind loan mean, drove on linked-quarter of mean, All was quarter, color annualized. of growth incredible what I

Cory Newsom

Brent of it this clean and on kick Yeah. I will kind up up let one.

in we been mean, way with have a long opportunities with this relationships. We pipeline. to the for a I that quarter team we and have good talked have in place time good about pick up it our the

I of walked want worked. mean at have some I we I a mean, if cherry you Brent? happened, we some and it. to really could very mean, that But and stuff we of in markets just away it -- just conservative, picked look disruption different I the we have lot are really done, mean from that’s the been of we didn’t

Brent Bates

-- you had energy. We we quarter. the lot some have as pipeline Growth non-owner-occupied owner-occupied, growth centered through storage, in some in second there, industrial as pulled Yeah. well the single-family a multifamily and

it But South markets. more the between the side and metro was of the Plains company mix a

a of So second in a going mix, that’s kind the added still our growth blend of quarter. a it for we had pipeline we have tailwind sure a book to anticipate to that construction be of continue that near-term, pretty to and on and fundings good to we

I paydowns quarter. we to in what going second the a were thought were our lighter be little they think than

about through last lot good know feel attributed we quarter. too, kind to overall, a that it, that of this but really I quarter, about So talked we it pulled

Brady Gailey

basis should half the your then margin outlook All Maybe down how was margin this back me, the And about year. linked-quarter. XX trend of right. the in finally points on for

Steve Crockett

Yeah.

I we we kind but same quarter that NIM -- for March, quarter, right looked So through we March, of the level, were the not mean -- of are at about of held steady X.XX%. we month where the

quarter So second we stayed that during and the consistent were fortunate pretty at level.

mean, challenge a every it’s day. I

have we out in there. issues and NIM, are we they deposits I to to So so is much as some compression as minimize pricing hope on face still think, We and got that can. competitive that on so just

Cory Newsom

This is Cory.

we the that will I new think on that continue possible. flat stuff as our getting pricing the loans, to as funding, are hopefully keep our

Curtis Griffith

some putting Curtis. is this are And agree Brady, the said we the to that, And books are from loans benefit now. what they I with that going on get we

some those putting You full and are of on yielding we are quarter those. now of the the did, some off going a have largely a We low to of loans funded of books. as lot and noted, we up back are the sell securities

where the construction the their to steps the going in now funding that And other equity. are basically do in pipeline, with put we of the be providing still stage customers in

the push on to We loans. going are up to continue yield

some can It’s deposit stay with do just deposit increase are we the a because cost, in costs question we know more. up of up moving

going that deposits We deposit do down. to one sometimes all as have is to are the we we not keep can We reacting fast it as to maybe do. lends mix think itself

it’s that, and But a will would compression. be NIM a to little say I see going more we challenge,

as We in to little hold we I’d expect quarter. both going it firm and up as tightening fourth a quarter But can. third are it

Brady Gailey

Thank it. Got guys. Okay. you,

Curtis Griffith

Thanks, Brady.

Steve Crockett

Brady. Thanks,

Operator

with comes ahead. Hovde question Brett Group. next Please go from Your Rabatin

Brett Rabatin

for everybody. Thanks my question. afternoon, Hey. Good taking

Steve Crockett

Brett. Hi,

Brett Rabatin

terms to Is betas not on what then in deposits, -- Curtis X.XX% deposits any only those go just of during you or any is deposits XQ. rate be there us added and color just the back a broker I catch-up give cost there wanted you to on XQ? could quarter and around of that in concern Cory, the not might there average

Curtis Griffith

little to bit to market. that some year be where the our accounts quarter interest-bearing at should of I catch-up moves in in were have a big take some rate, I some -- I don’t -- we late see had of really they year try coming all. below -- for you we of think made that in Well, do see care unless mean, the don’t I some movement early we they a felt last like

feel I have, I are of good type it mix that’s we But think proud what I are the about of. doing. back markets the some the and pretty goes mean in of we actually and a lot especially rural what of to so no, deposits we

a coming. on passing So I quarter see catch-up Steve, don’t really the...

Brett Rabatin

Okay.

Steve Crockett

I mean, as brokered, was to will I Yeah. end the added as just I towards far just that the mean bit. that add little quarter. a of

So that there wasn’t not quarter it deposit. at the a necessarily mean, full the a tight -- and full so end of I fed there, cost in. definitely range funds upper costlier is of it is a

So But the those that the increase Curtis funded -- costs were deposit flip the will have our as that quarter. we on the said, during quarter. side, loans for entire got loans not

a that new So of that those full to worth are so quarter’s different will we been cases, -- X% to being earnings offset in on that on help X%-plus cost. put have at have loans

Cory Newsom

our Yes. But to Brett, we we a manage are way different and… much are -- I costs don’t the and as broker I than overall using anybody else. mean

Brett Rabatin

Okay.

Cory Newsom

it’s think working… we …

Curtis Griffith

Yeah.

Cory Newsom

… throughout year. the

Brett Rabatin

Yeah.

Curtis Griffith

get bunch as been we there really money What take while that’s going to of it’s whole in not we you indicated, to to CD new if in. a better that -- we trying inexpensive, specials after with have something it’s have than run able our that’s do out markets, think and north take that, to of going going X% to but are

don’t and CDs. that are so if in deposit you still in see hold mix, trying can lower ours to all much levels, line, we to we just little have And our we do a more

with with door. CDs to having that are out walk we bunch CDs the not they maturing rates So are there to jumbo a deal and to got higher going up have of really be we particularly or

if, have when down down is quickly pull able to that money those at rates and point, we accounts of rates back market the to customer A would keep not lot transaction and are and things back that and an win, on kind accounts in do those competitively it ours we we some will of of so adjust able be there, are and comps. type relationship rates go a flexibility

Brett Rabatin

helping but accounts really helpful. of guys That’s you fairly XQ end impressed past that was your know DDA over Are of not down XQ. $XX are you stable just I fairly has new Okay. shift was from million year, period bunch to only And then the it been change mix interest-bearing. to that’s keep non-interest-bearing a stable seeing opening or away up I

Cory Newsom

couple a of it’s of -- deposits such I and quarters. focus are I it’s think, talked are about last the when I loans real. are coming we that mean have mean, we in relationships the approving Well, and this actually

have I and we mean, -- looks relationship conversation what loan out over sit approvals we the start like. we down positive literally, and a

that of And pretty doing so demands much we helped those are when more making focus keep a stable. us and we it’s are it

Steve Crockett

move those helping in Yeah. ones I new mean are out, we are coming that. to seeing some mitigate but

Brett Rabatin

Okay. last on And then just quick one me for the loans.

attribute movement color any or the obviously, market or growth additional the in growth you to XQ hikes of kind XQ. growth share You on people strong rate getting stuff had done pipeline, just pipeline? any the in really talked about additional a any front Would and strong loan to the relative strong in of

Curtis Griffith

Yeah.

will Brent, one. that off course. I start Of with you let

Brent Bates

quarter The majority we funding the of off. start had during that expansions loan will existing I Brent. new was relationships. is our This of

to that long had for had that an maybe opportunity credit they either of In place the So most relationships another to from venture. one to maturing time these they another raise a wanted acquire, are to some move but acquire. cases, capital

company. of relationship of of and came that majority metro the the construction expansion fundings for that clients new in markets of was their existing the we and outside us Plains our booked are to in But funding side both as business the South

Cory Newsom

beat -- in mean, rate, is catch going they with movement. is floating trying funding to that of on all, I it of would doing don’t going your with of Brett, I part probably much are a so to think catch are a the rate I we Yeah. the trying because for what at question people to anyway.

in, all it’s going of It’s to we we face done, to whatever rate that trying floating we stuff are to to so they are are knowing and going And saw some that some go, increases that, -- going most coming the come. follow get of to movie. have stuff people you

Curtis Griffith

that ship’s Yeah. sailed things back what them But pretty are saw think, We are at and floating. look Cory I favorable definitely that them. already was XXXX. happening pretty we on I It quarter said, was in and second lot booking rates right of obvious a now, as think

we business And some particularly over and we sales to are yes, in of next institution our the I the continue markets see Texas that have related think consolidations we are quarters. that and out some West going couple up of picking seen, to to

not People new they terribly indicated, and that are over Brent and now with room. in are and happy they already got have us what bank entire over got with of to move or as either we cases well relationship to some and the have X going us the take are they relationships, move some to had looking maybe a as they ownership

and already We are going have them. fairly the them we on look to transition to to have the bring a it’s and easy underwriting credits at for

and QX key was see will that more QX. and a it trend in think I we think I QX So of

see to think slowdown. the we already slow. some overall, are But, I actually The But has is don’t rate us going and going of increase to I backwards. definitely a going pipeline see shrunk

through think the we loans year. the out continue will to of grow I balance

Cory Newsom

some to over job sure our time, still good Well, sure care we more of really markets. our and that just leaderships but making Brett, we have on it. taking know is of place, done everything the teams, as focused in time making you mean, have that I with are right in metro spent would one markets, we a add rural I

leadership in good of are opportunities we good to picking that, the in make deposits share those some areas are. good where seeing and of some loan and opportunities up rural So markets take those

to both want we So of of balance both and that take metro our they sheet, care sides meaning knowing are beneficial. rural

Brett Rabatin

Okay. Great. Appreciate the all color.

Curtis Griffith

Thanks, Brett.

Steve Crockett

Thank you.

Cory Newsom

Brett. Thanks,

Operator

Graham question Dick Piper with Please ahead. Next go Sandler.

Graham Dick

evening, Good Hey. guys.

Curtis Griffith

Hi, Graham.

Steve Crockett

Hi, Graham.

Graham Dick

guys looking in I by are to impacted M&A over you out right move that point and maybe has just looking you that, of are say, are kind recently guys, with they guess, lenders maybe I to at unhappy being their done there kind of banks So a that look bank happy customers and about that last M&A other been side have not stick of and to wanted with at with, bank that there and it’s the years now looking deposit loans there at or all it have, of make liquidity the know capital the couple base but the bank last you of or bit, and guys opportunities? isn’t hires you slowed or are of just kind wondering have guys you I position if or at your down current made and a inorganic with a handful capital now the to -- you of have for a environment. over like doesn’t hires the hires lot

Cory Newsom

what and and we so So, are I you ones up just described just everything would we what so that. bring we leader bring mean, different about market, just like. market picked a deposits and mean, with lot I just it’s and opportunity to that’s But go I going excited say, it of with in loans, it real a will and

make frequently, frequently. said higher I mean I to we hires, tell interview it, will we are we hire mean, you going and -- I that we but don’t I mean, strategic selective

We very we it’s bring and make of to and going fit be that looking very, long-term that can sure what the come careful part to be are that a how gets relationships team are about fit who on for. a

we we are doing are we backing and we we years for have down consistent we making been the but built why have with done, what this hires. it’s truly have. strategic selective that’s not -- from that we very team And are caliber very And it,

Graham Dick

I bit little the done the expect? through What yield baked one you going do What your more Okay. back I loan Fed wanted much half month is they you might said of of to feel be after yields more topping just or a you that have a out they of Yeah. have I yields, touch All are expansion that. right. a if the kind end NIM is new in shifting loan as guess, bit. on little margin. to hike loan sort I assume maybe I -- bit. on guess, just the pretty this to yield of, guess you contract the into And know after if you year? year then loan maybe the assumptions you

Steve Crockett

I loans far So as help and putting mean, to I are loans as we Brent will on again, out. go, get me

mean Xs, when even have say, in they they the We Xs, fixed. so been than I higher are loans mid-upper upper I are putting that. slightly on would maybe

off -- good got that -- those lower in. and thing off the lot portfolio indirect so paying that our have We amortizes a are rates, faster is, have we back got lower coming yields that and some while stuff is had

I I around in the hopefully QX, yield. mean, we went expansion range should size, QX. So, in show that I still are loan had mean decent the the in points we in to for basis given quarter. say, I will that we roughly, out see guess, -- especially basis given growth points we XX should -- XX We a overall

Cory Newsom

you the rates, ones that the the So some trying are little we book. was think was I look what in if mean, -- at some felt you those I of to of Steve stuff talking what explain fixed

lot on books of as that, So very floating it be we that’s a I prime made have will well. think, plus the to beneficial too,

Brent Bates

Yes. This Brent. is

and much have short lower on on direct rate. calls off portfolio then alluding those higher that was in a are you to, duration And rolled have Steve rates. little have most part for -- by indirect that replaced $XXX variable portfolio You really got of the of what over been a million that loans construction portfolio rates

Ag seeing that rate is you And going lift with a the variable the for second So year. to funding half Ag, same segment. are in of be

in yield. that see you should So lift some

Cory Newsom

mean, I you a of of I missing can we competitive. that not I challenge. -- while, got a stay it’s over don’t because you kind there kind I you rate was -- The now. charge-off thing to think believe in don’t opportunities that are I that’s But, have interesting, still I -- mean, that’s not I mean, -- right for mean, other get.

are is, we them that on losing not we over But are sitting around though, think, relationship want to, so I that quality, a the this is it, tie I mean, that credit want to. think we I our competitive, rates we get to down

Graham Dick

I reserve it’s know for that the you guys looking in guys provision. that a you is to for higher Okay. I the I would provision a you about. or are about said million that might with is last But segue there line just what you the have the guess and little $X.XX growth there specific you is for that saying you perfect going at that’s this obviously, talked budgeted quarter, anything or bit year expect of lower? million rest -- $X.XX higher take I the forward good guys mean, talking

Steve Crockett

let our that during I loan I will always and mean be will We charge-offs I -- along -- we -- to mean, this in. with let be. I growth. and this definitely of I want mean, Brent quarter point, mean, we where at net I would is do hop some Steve. the start hope net have typically, that’s

that to I point. there we up a that, healthy ramp the got think have I currently there’s this So think of the don’t economy, view at out needs given reserve view any and

Brent Bates

seeing the Yeah. trends level are This really feel the in we is about risk Brent. not broad reserve We good and portfolio.

does like that’s provision largely this of in the by I and going near-term. the going likely What to driven quarter likely at the be portfolio will is the least like be the think, mix to total and just growth. driver be to going most portfolio it really, So look the

Curtis Griffith

is this Graham, Curtis.

economy. are we we be credit are cautious taking out problems in account hard probably because -- reserve into more She she to lot on and there it’s not are our than still that, uncertainty do peer to peer, think have CECL we We and have are than higher just we watches we that run pretty a it’s trying going us. we know the cautious. model worked and We of overall the

more and we that But one, the will have try frankly, for some today, a and soft to have fairly describing more one be been today. know be comes. looks like are if happen we to and what and a prepared don’t just but maybe we we recession like It going short-lived there one-offs just well

to in and But we even look there direction. of be we falls that do for do up may now are to pretty if non-performing where losses withstand we whatever stays move reserve But But can see building well to underwritten that we we big on just status. we think still cautious trends we us. don’t the are don’t have some credits that level be think ills make going out sure right real

Graham Dick

guys. All right. Appreciate Thanks, it.

Steve Crockett

you. Thank

Curtis Griffith

you. Thank

Operator

Raymond Yanchunis comes Joe next Your Instructions] Please question from [Operator with James. ahead. go

Joe Yanchunis

afternoon. Good

Cory Newsom

Joe. Hi,

Steve Crockett

Hi, Joe.

Curtis Griffith

afternoon. Good

Joe Yanchunis

reduction modestly would take what strategy the on touched it? horizon curious, and this size So time to I reduce the your of you low the portfolio indirect and you auto of was is how to like

Brent Bates

We so are sorry, we a I if Brent. is have -- the now some routinely caused like there duration pretty confusion. it. This replacing But that stable Right rate. may we are is portfolio keeping short I that in segment. cheap

into that we contracting, isn’t higher producing churning into that higher the was the unit but is trying think I have growth portfolio I production rate necessarily to in or that make point was rate it’s loans.

that rates kind think And a industry I little itself up, driving bit. frankly, yeah, of the the we the really bit, down that’s because percentage just in has a little portfolio but come has are and contracted

we contraction pretty think contract industry I don’t to I some, are the our out and of share of unless continues see good. fair meanwhile getting So volume that a yield but significant increasing still our

Cory Newsom

stuff be. down it think, only up our compared the to view $X.X as the going won And you the I credit. I where don’t CFEB were to of I good we have top mean have majority be placed to that will of strategically we We mean it. we at cheapest I them on the million, we lot we mean quarter-over-quarter. not the Part if around. you we we want be [ph], at -- portfolio for to and are in to are Yeah. do really -- we how look if look our cheapest way is, stack

Joe Yanchunis

year-end, to deposits, about over to interest-bearing Understood. still do XX% of previously And gain moving guided of kind a deposit you you holds? by think that cumulative

Curtis Griffith

anomaly I now. will to probably this. Steve end think there. we little a into kind some This still something we pop this Curtis. I stay of kind started that out of up below that on jump in I us let We up upper when see to managed here. is for is unless real said

deposits, being not as are as in of and high larger place, what they relationships fairly we a as as keep Steve? just we see level. currently communities of can market I hold the are or can XX% rural to that in that we long But based with those lower as volatile percentage we some think,

Steve Crockett

said that now said. earlier, you are we I in come of level. been that it mean, pressure at or what it as we we just can there’s below. costs But with maintain able level agree feel day. right still slightly deposit every we every monitoring that We I below on and have to day

Joe Yanchunis

handy. last it. what the quarter. Perfect. about in recent in then Maybe opportunity was I appreciate growth curious that to for loan And the talked kind of one a know is, and Permian the was the have here lot like that you me deposit you market I in

Steve Crockett

quick. real that Let can see what pull and me I grab

Curtis Griffith

That’s decent still the are often lot there’s we given liquidity and a industries. and area is with Steve the of good come business where strong deposit down ancillary up, quite there there market, growth While an nature that gas and oil the looking definitely of loan that do getting news in relationships. loans our the

the in, companies well seeing So and a but with those it and idea up opportunities that whole is us pop we to as families long time relationships those we are like and more. are as fast, happen the getting real move stay doesn’t those opportunities more

combination, you leadership have seen think, that of of well for as and do they we having of the banks have looking as a markets, changes Lubbock others Steve, in in those as get have seen That’s at. the in some the as that have [ph] something/ in they kind we the with market been little I that a here of little dissatisfaction some been

Steve Crockett

of quarter. in excuse about significant about our of were -- growth the loan think XX% XX%, a region the not me, I mean slightly, Yeah. during I but amount. Deposits the Permian was up

Joe Yanchunis

you Understood. questions. my taking for Thank

Steve Crockett

Thanks, Joe.

Curtis Griffith

Thanks.

Cory Newsom

you. Thank

Operator

over like remarks. floor would for I you. the to Thank closing turn to Curtis

Curtis Griffith

very thank Thank this who all Thank employees call to all Operator. you make possible. a of today’s and who you participated you, sincere you in outstanding our to

good very strong I we position. at As exited financial said We a had beginning, quarter. the a

deposit and as costs to through rate in environment. maintain quarter deposits this stable higher profitability we the Our work remained

bank. also balance it delivered quarter, year. moderate from growth will to we The yields the We do improve expect the continuing of we loans portfolio credit rise we maintaining but mitigate the as in through continue excellent of in importantly, grow conservatively strict loan Very our the credit loan standards these costs. profile to deposit are underwriting help and the the our higher expected

of liquidity, with present Finally, do strong well-capitalized opportunities to remain themselves. take returns improve advantage we shareholder as they

in I Have again. So Financial. truly what about Plains excited you our I for and day. all a see future am South Citibank Thank good

Operator

This concludes today’s teleconference.

You may disconnect for your lines you thank participation. your and

South Plains Financial (SPFI) 25 Jul 232023 Q2 Earnings call transcript