South Plains (SPFI) Q2 2025 Earnings Transcript

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DATE

• Wednesday, July 16, 2025, at 5 p.m. EDT

CALL PARTICIPANTS

• Chairman & CEO — Curtis Griffith
• President & CEO — Cory T. Newsom
• Chief Financial Officer — Steven Crockett
• Chief Banking Officer — Brent Bates

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TAKEAWAYS

• Loan Portfolio: Loans held for investment increased by $23.1 million, or 3% annualized, to $3.1 billion compared to the prior quarter, despite anticipated elevated paydowns.
• Loan Yield: Yield on loans was 6.99% in the second quarter, up from 6.67% in the linked quarter; excluding a one-time $1.7 million interest recovery, the yield was 6.76%.
• Net Interest Margin (NIM): Net interest margin was 4.07%, up from 3.81% linked quarter; excluding the one-time gain, NIM rose nine basis points to 3.9% due to declining deposit costs.
• Non-Interest Income: Non-interest income totaled $12.2 million, increasing from $10.6 million in the prior quarter, primarily due to a $1.4 million gain in the fair value of mortgage servicing rights.
• Earnings Per Share: Diluted earnings per share (GAAP) were $0.86 for the second quarter, up from $0.72 in the linked quarter, with a one-time benefit of $0.09 from a recovered non-accrual loan.
• Deposits: Deposits decreased by $53.6 million to $3.74 billion, reflecting the seasonal withdrawal of higher-cost public fund deposits, offset by a $32.3 million increase in non-interest-bearing deposits.
• Deposit Mix: The non-interest-bearing to total deposit ratio rose to 26.7% in the second quarter from 25.5% in the linked quarter.
• Cost of Deposits: Cost declined to 2.14% in the second quarter from 2.19% in the linked quarter, supported by declining rates on certificates of deposit and a change in deposit mix.
• Credit Metrics: Allowance for credit losses to total loans was 1.45%, an increase of five basis points, with a $2.5 million provision reflecting increased reserves and credit downgrades.
• Capital Ratios: Common equity tier one risk-based capital ratio was 13.86%; tier one leverage ratio was 12.12%; tangible common equity to tangible assets reached 9.98%, up 34 basis points.
• Expense Management: Non-interest expense increased by $513,000 to $33.5 million, attributed mainly to higher personnel and professional service expenses.
• Organic Growth Strategy: Management detailed continued recruitment of experienced lenders, particularly in Dallas, and expects these hires to support future loan and deposit growth.
• M&A Outlook: Management remains selective on acquisitions, citing strict criteria around culture, asset-liability profile, deposit stability, and valuation; “We can be patient given the organic growth opportunities.”
• Tariff Exposure: Consumer loan demand, notably in indirect auto, has softened since May 2025 in response to expected tariffs announced in April, which may present a near-term headwind for loan production.

SUMMARY

South Plains Financial (NASDAQ:SPFI) reported rising loan balances, margin expansion, and higher non-interest income, driven by a one-time loan recovery and ongoing funding cost improvements. Management indicated continued progress on strategic hiring, stating the addition of several experienced lenders in Dallas is expected to improve loan origination capacity and deposit acquisition. Full-year 2025 loan growth guidance was set at the lower end of the company's low to mid-single-digit range, as sustained loan paydowns and consumer response to tariff expectations are identified as current constraints.

• Steven Crockett stated, “Our net interest margin calculated on a tax-equivalent basis was 4.07%. ... positively impacted by 17 basis points due to the one-time interest recovery.”
• Cory Newsom commented, “We recruited several experienced lenders in the Dallas area who have long successful track records… [which] will be supportive of loan and deposit growth over time.”
• Allowance for credit losses rose chiefly due to “an increase in specific reserves, net charge-off activity, increased loan balances, and several credit quality downgrades,” according to Steven Crockett.
• Organic growth will remain the primary operational focus, while the company continues to watch for accretive M&A but asserts no immediate deals are pending as “[w]e have not yet found an opportunity that makes sense.”
• Consumer response to tariffs impacted indirect auto loan activity, and this behavior “may persist to remain a headwind to indirect auto loan production in the short term.”

INDUSTRY GLOSSARY

• Mortgage Servicing Rights (MSR): The contractual right to service a mortgage loan and collect related fees, which may be marked to fair value depending on rate movements.
• Non-Accrual Loan: A loan on which interest is no longer being accrued due to concerns about full repayment of principal or interest.

Full Conference Call Transcript

Curtis Griffith: 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 Riederso, New 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.

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 Cory will touch on, our proactive management of our loan portfolio has also contributed to a higher level of early paydowns 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. 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&A.

As Cory 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&A has also been part of our strategy to grow the bank. In an area that we have experienced.

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.

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%.

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 Cory.

Cory Newsom: Thank you, Curtis, and hello, everyone. Starting on slide five, our loans held for investment increased by $23.1 million or 3% annualized to $3.1 billion 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 $1.7 million interest recovery from the full repayment of a loan that had been on non-accrual.

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 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.

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 multifamily property loans that totaled $49.1 million in the second quarter, and mitigated our loan growth. 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 in our major metropolitan markets of Dallas, Houston, and El Paso decreased by $26 million in the second quarter to $1.01 billion. 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. At quarter end, our major metro loan portfolio represented 32.7% of our total loan portfolio. Tipping to slide 10, our indirect auto loan portfolio modestly decreased to $241 million at the end of the second quarter as compared to $243 million 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. 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 2024. 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 2025, 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 $12.2 million of non-interest income in the second quarter as compared to $10.6 million in the linked quarter. This was primarily due to an increase of $1.5 million in mortgage banking revenues, mainly from the increase of $1.4 million in the fair value adjustment of mortgage servicing rights asset, as interest rates that affect the value stabilized in the second quarter of 2025.

For the second quarter, non-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. Thanks, Corey.

Steve Crockett: 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 $1.6 million 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 9¢ per diluted share in the quarter. Starting on slide 13, net interest income was $42.5 million for the second quarter compared to $38.5 million in the linked quarter. 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 $53.6 million to $3.74 billion 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. These funds moved back out of the bank in the second quarter due to seasonality. Non-interest-bearing deposits increased $32.3 million 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, a 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.

We recorded a $2.5 million provision 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 $33.5 million in the second quarter as compared to $33 million in the linked quarter. $513,000 increase from the 2025 was largely the result of an increase of $267,000 in personnel expenses and a $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 $26.05 as of 03/31/2025. The increase was primarily driven by $12.2 million of net income after dividends paid, partially offset by a $2.3 million 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. If you would like to ask a question, please press 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star key. One moment, while we poll for questions.

Operator: Our first question comes from the line of Stephen Scouten with Piper Sandler. Please proceed.

Stephen Scouten: Hey, good afternoon, everyone. I guess I'd love to start on kind of the loan pipeline, and I've I Corey, I appreciate your comments. You kind of said, I think, lower end of the low to mid-single-digit loan growth for 'twenty-five, 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: Hi, Steven. This is Brent. And, you know, I think kinda 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 we've we can predict the payments that we're we're getting. But you know, this quarter, our payments were, you know, in the neighborhood of $15 million higher than last quarter, and that's that's really, you know, causing us to see the second half kinda in that in that lows low to mid-single-digit kinda range. Is that makes sense.

Cory Newsom: Steven, I would this is Corey. I would just 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 in after '25. I feel really good about what we're what we're trying to accomplish on the on some of the hires that we're actually doing. And we and I never wanna take away what we have in place.

Stephen Scouten: Yeah. And, I mean, that maybe leads to my next question. It's just kinda, like, how do you think about that balance of investing in the you know, additional new hires versus the potential for M&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, or can you continue to kinda do both concurrently? Do you think?

Cory Newsom: We have no intention of putting a new hire new hire on effort on hold, even if we did find something. We think that there's still some opportunities. I mean, I mean, we 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. Our focus is not on just trying to grow loans, but trying to grow deposits at the same time. And we're we are we are working on some efforts that we think will help continue to expand on that side of it as well.

Stephen Scouten: 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: Yeah. Steve Steven, I mean, we just saw we didn't see a lot of ends and outs, and this is Brent, by the way. We saw a lot of ins and outs and criticized assets during the quarter. 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 kinda drove general reserves up. But we did have we did have a couple loans that entered non-accrual status that were smaller, and we took a conservative approach on them.

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

Cory Newsom: Steven, I think it's Got it. It's very nice to have a nice recovery when in have some of that stuff happen in the same quarter. So, if you can just take it for that.

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

Operator: Thanks. Thanks, David.

Operator: Our next question comes from the line of Brett Rabatin with Of The Group. Please proceed.

Brett Rabatin: Hey, guys. Good afternoon. Wanted to talk about 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. 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.

Steve Crockett: Yeah. This is Steve. I'll start. Yeah. We're we've had you know, the CD book is repricing down now CDs are 10-11% or so of total deposits. So that's not a that's not a huge driver overall, but that is that is trending the right direction. The rest of the book outside of outside of Fed movements to rates. I mean, it is a little bit slower moving on any of those rates.

We did 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 maybe will save a little bit, but you know, again, absent the change in Fed drop in rates, it's there's not big moves to be made, but we will continue to look at look at those rates.

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

Brett Rabatin: Okay. That's helpful. And then just back on the M&A topic, you know, we've we've obviously seen a couple deals, you know, in Texas here the past week or two. And just wanted to hear, you know, from you guys' perspective, the environment as you see it, in terms of you know, if there are anything if there if there are any things that are impediments, is it 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 range from an asset perspective, you know, what you might be looking at that'd be helpful.

Curtis Griffith: Brett, this is Curtis. As far as impediments, yeah, essentially, by our expectations is probably the biggest one. Gonna look really hard to find somebody with the right culture. If we don't 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, but we gotta get some people a little more motivated to, to start know, be willing to accept the prices that the market is telling us is the right price. So we're we're looking. We're working on it. For us, think it's kinda like we've said before.

Somewhere down in, you know, $107,100,000,000 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, you know, for the right trade. Maybe even a little higher if one really lined up with all the stars. But, but we're definitely looking. And, again, still got people out there that, because of the structure in that bank, that we'd be very interested in, they've still got a pretty significant AOCI problem. And you know, 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 kinda hard to do the business, but, I would say that it's obvious in this in this regulatory environment has loosened up significantly. And I think as you see more and more deals get announced, maybe, we're gonna see some of these more entrenched sellers that feel like if they if they're gonna do something, now's the time. Because it's gonna be a lot easier to get deals through the system, I think.

Brett Rabatin: Okay. And then maybe just one last one on mortgage banking and, you know, 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: You know, Brett, it's been this is Corey. It's been pretty flat. Think it's still gonna be pretty flat. The thing is we've said all along, we've we've kept our infrastructure in place. We are we do 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. But to have been able to keep our mortgage operation in the black during some of the most challenging times, I think 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. Now get some rate movement that actually makes some sense, We're ready to go. And so we're we're really excited about that.

Brett Rabatin: Okay. Appreciate all the color, guys.

Operator: Thanks. Thank you. As a reminder, please press star 1 to ask a question. Our next question comes from the line of Woody Lay with KBW. Please proceed.

Woody Lay: Hey, good afternoon, guys. Wanted to start on loan yields, you know, 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: I think for new rates come on, this is Corey. I mean, you're saying low sevens, high sixes on some of the 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 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 loan to start cutting. So we think there's still some expansion there for us.

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

Curtis Griffith: And what is 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 you know, while it's not gonna be one huge big spike, there are several large credits in there that will reprice at you know, looking at current numbers, probably reprice a good 200 basis points up from where they are today. So, again, it's not gonna make the big jump move the needle enormously, you know, 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. 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, you know, it's something we have to work for.

If you if you look at where we would be with new loan production, without a couple of these major pay downs on it, we'd we'd be hitting the kind of numbers we'd really like to hit. It's only these, these big blocks pay downs that kinda skew the numbers back down toward being you know, low single digit.

Cory Newsom: But to keep in mind, I mean, in please leave very clear that not all not all of these are that. If you look at some of headwinds that we've talked about of some of these pay downs, there's a fair number of those that were very cheap price 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: Yeah. That's really helpful color. Maybe shifting over to noninterest-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: 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 our treasury management solutions just continues to mature. And mean, we're so 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. I mean, we're not out 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: And then last for me, I just wanted to hit on the hiring strategy and just try to sorta get a better idea of you know, the scope or opportunity of hiring that's out there and just how that impacts expense growth from here.

Cory Newsom: It's going to impact expense growth. I mean, we know that, and we're okay with that because well, we put a pretty short timeline on how long before we break even. On new hires. We think it's 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, we're 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. 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 tires. And but you all know we're very selective of what it takes to get for us to hire people around here. And we screen them very, very well. And the ones that we've been so successful so lucky to get and successful in actually getting close, ones that we think that are going to fit into our team very, very well.

Woody Lay: Alright. That's all for me. Thanks for taking my question.

Cory Newsom: What do you say?

Steve Crockett: Thank you.

Operator: Our next question comes from the line of Joe Yanchunis with Raymond James. Please proceed.

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

Cory Newsom: 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 let's let's dissect Dallas for a second. The big the big nonaccrual loan paid off was tied to the Dallas market. Because that's where that's where the lender was that it originated So that was one of the headwinds that they've they've had right there. So some of the headwinds that 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 gonna and then they were gonna 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. So there's nothing tied to the fact that we're doing lenders because we've had that headwind right there. Hire lenders because, I mean, we 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, both 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.

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

Cory Newsom: I don't think that I could even take a shot at that rep this minute. I mean, I think there's a fair amount of it because that's that's our focus. I mean, I 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 contributing to it, but I wouldn't try to go say that was the lion's share by any means.

Curtis Griffith: I do know I've got with other companies. 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, that loan servicing officer out 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. So, that's it's a combo.

But I again, I couldn't give you this percentage breakdown. But we do we are gaining some customers. And sometimes what you see is it's your part of a relationship. That we may have a loan to this entity over here, and it may be one that we've we've had the operating account on, but that's not anything with any real balances in it. 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 wanna show you why we can do a better job for you than the bank you're with.

And we're having some success with that. So it's combo, a lot of things, and you know, it's slow, but it's steady. Think we're gonna keep getting that of growth.

Cory Newsom: Joe, I'd 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 we're these lenders are incentivized on deposits as well as on loans, 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.

Joe Yanchunis: Understood. I, appreciate the thorough answer. Answers. Thank you.

Curtis Griffith: 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: 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. 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. 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&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.

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