South Plains Financial, Inc.

Good morning, ladies and gentlemen, and welcome to the South Plains Financial, Inc. Fourth Quarter 2024 Earnings Conference Call. During today's presentation, all parties will be in a listen-only mode. Following the presentation, the conference will be open for questions with instructions to follow at that time. As a reminder, this conference call is being recorded. I would now like to turn the call over to Steve Crockett, Chief Financial Officer and Treasurer of South Plains Financial. Please go ahead.

Thank you, operator, and good morning, everyone. We appreciate you joining our earnings conference call. With me here today are Curtis Griffith, our chairman and CEO, Corey Newsom, our president, and Brent Bates, the 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 this call may contain forward-looking statements and are subject to a variety of risk, uncertainties, and other factors that could cause actual results to differ materially from those anticipated future results. Please see our safe harbor statements in our earnings press release and in our earnings presentation. All comments expressed or implied made during today's call are subject to those safe harbor statements. Any forward-looking statements presented herein are made only as of today's date and we do not undertake any duty to update such forward-looking statements, except as required by law. Additionally, during today's call, we may discuss certain non-GAAP financial measures, which we believe are useful in evaluating our performance. A reconciliation of these non-GAAP financial measures to the most comparable GAAP financial measures can also be found in our earnings release and in the earnings presentation. Curtis, let me hand it over to you.

Thank you, Steve, and good morning. On today's call, I will briefly review the highlights of our full year 2024 results, as well as provide an update on our capital allocation priorities. Corey will discuss our loan portfolio and the strong underlying demand that we are seeing, which is being partially offset by the continued headwinds of unexpected payoffs. Steve will then conclude with a more detailed review of our fourth quarter financial results. To start, I am very proud of our performance this past year as we successfully managed through a challenging environment and delivered solid financial results. We managed our liquidity to optimize our profitability and return metrics while maintaining a conservative approach to underwriting and risk management. We believe that we are well positioned to take advantage of the opportunities that we see in the year ahead as we expect the pace of economic growth to improve while the headwinds that we all experienced in 2024 appear to be diminishing. Turning to slide four of our presentation, we delivered diluted earnings per share of $2.92 for the full year as compared to $3.62 in 2023. As a reminder, we sold Windmark the bank's wholly owned insurance subsidiary in the second quarter of 2023, which resulted in a $22.9 million one-time gain, net of charges and taxes, our diluted earnings per share of $1.32. Excluding this one-time gain, we outperformed 2023 by 62 cents per diluted share. We grew our loan portfolio 1.4% for the full year, as the loan production that built through the year helped us effectively manage the decline in our indirect auto portfolio, as well as heightened level of loan payoffs and paydowns. As we discussed on our third quarter call, we are seeing real optimism across our customer base that is translating into the strongest new business production pipeline that we've seen in more than two years. This bodes positively for the year ahead where we expect to deliver low to mid-single digit loan growth for the full year 2025. We take pride in conservatively managing the bank as we strive to always under-promise and over-deliver as we did this past year. Turning to the other side of our balance sheet, our community-based deposit franchise held steady at $3.6 billion in 2024 as compared to December 31, 2023. Through the year, we carefully controlled our liquidity to optimize our margin and returns, as can be seen in the fourth quarter, where we managed our deposits down by approximately $50 million, while also experiencing our typical seasonal declines in our escrow accounts, which decreased by approximately $35 million. Our core customer deposit accounts held steady. through the quarter and we expect to see deposit balances rebuild as loan growth occurs through the year ahead. We will carefully add liquidity to match the pace of loan growth through the year. Our community-based deposit franchise remains a competitive advantage for South Plains with 79% of our deposits in our rural markets and 21% in our major metropolitan markets of Dallas, Houston, and El Paso. Given the makeup of our deposit franchise, we were able to reprice some of our deposits lower in the fourth quarter, which was a primary factor in driving our NIM higher by 10 basis points, and which Steve will discuss more in a moment. As we have said many times, we will never sacrifice credit quality for loan growth, and I'm very pleased with the continued strong credit quality of our loan portfolio as we enter 2025. we believe that we are well positioned for varying economic conditions. For the full year, we delivered return on average assets of 1.17% and an efficiency ratio of 65.1%. Looking ahead, we also believe that we continue to be 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 December 31, 2024, our consolidated common equity Tier 1 risk-based capital ratio was 13.53%, and our Tier 1 leverage ratio was 12.04%. Additionally, our loans held for investment to deposit ratio stood at 84% at year end. Given our capital position, we remain focused both growing the bank while also returning a steady stream of income to our shareholders through our quarterly dividend. As previously announced this week, our Board of Directors authorized a 15 cents per share quarterly dividend, which will be our 23rd consecutive quarterly dividend. We also have a $10 million stock repurchase program in place, which will expire no later than February 26, 2025. Our board will consider authorizing another share repurchase plan next month, as we generally believe it's important to have a buyback in place to have flexibility during volatile market environments. As we commented last quarter, we expect our buyback activity to remain more muted as we balance liquidity for growth as well as being mindful of the continued economic uncertainty that exists. Looking forward, we still expect community bank M&A activity to pick up in the coming quarters with the growing optimism that deals can now be completed much quicker under the new presidential administration and despite unrealized securities losses on bank balance sheets growing. We expect to be even more diligent looking at potential acquisitions in this environment though we have not yet seen an opportunity that meets our high hurdle for our team to pursue. Our acquisition criteria remains focused on having a strong cultural fit with minimal dilution to our shareholders, a reasonable earn back, while making real sense for the bank and our shareholders. As activity picks up, we will remain disciplined while also weighing any deal against the economics of buying back our own shares. We see substantial organic growth ahead and are comfortable staying on the sidelines and benefiting from any disruption that does occur in our markets from competitor transactions, much like what we have experienced over the last few years. Now, let me turn the call over to Corey.

Thank you, Curtis, and good morning, everyone. Starting on slide six, our loan portfolio increased $17.7 million to $3.06 billion in the fourth quarter as compared to the linked quarter. We experienced loan growth in commercial owner-occupied real estate, which more than offset the payoffs and paydowns that we continued to experience through the fourth quarter, combined with the typical seasonal decline in agricultural balances. The yield on our loan portfolio was 6.69% in the fourth quarter and was essentially unchanged from the prior quarter. We were able to keep the yield constant despite the decline in short-term rates that occurred in September through December. Looking forward, we could experience a slight decline in the yield on our loan portfolio as we continue to have maturities and repayments across a wide range of interest rate segments. Skipping to slide eight, loans in our major metropolitan markets of Dallas, Houston, and El Paso increased by $9 million in the fourth quarter to $1.06 billion. Our major metro markets also experienced elevated loan payoffs again this quarter, which impacted growth. That said, Underlying loan demand has been strong across El Paso and Houston, as well as in our Permian markets of Midland and Odessa. At quarter end, our major metro loan portfolio represented 34.6% of our total loan portfolio continue to demonstrate not only the scale that our lenders have achieved, but also the opportunity that lays ahead for organic loan growth. Skipping to slide 10. Our indirect auto portfolio held relatively steady at $236 million at the end of the fourth quarter as compared to $235 million at the end of the linked quarter. We've carefully managed the portfolio through the year with a focus on maintaining its credit quality as competitors have been more aggressive at the higher or better end of the credit spectrum while volumes have declined. This has resulted in $15 million decline in loan balances through 2024, and while we anticipated this decline, it has been a significant headwind to loan growth. Importantly, we are confident that the portfolio can stabilize at current levels given the recent decline in rates combined with improved volumes and more rational pricing. This stabilization will allow our strong underlying CRE and C&I loan demand that we are seeing begin to translate to growing loan balances. I would also add that the credit quality of our indirect auto portfolio has remained strong through the cycle with 30-plus days past due at 47 basis points, a modest rise from the 34 basis points in the third quarter. Looking ahead to the first quarter, we expect our loan growth to be relatively flat as we typically see agricultural loans continue to pay off seasonally early in the year, while loan payoffs could be continued at an elevated pace. Importantly, the underlying momentum in our business continues to build as our customers are becoming more optimistic and activity is accelerating. This can also be seen in our new business pipeline, which continues to be at the highest level since the middle of 2022. Turning to slide 11, we generated $13.3 million of non-interest income in the fourth quarter as compared to $10.6 million in the length quarter. This was primarily due to an increase of $3.1 billion in mortgage banking revenues resulting mainly from an increase of $3.5 million in the fair value adjustment of mortgage servicing rights as interest rates that affected the value increased in the fourth quarter. The growth in the mortgage income was partially offset by approximately $700,000 of non-recurring insurance proceeds received for the property damage in the third quarter of 2024. Overall, we have effectively managed the decline in mortgage volumes, having kept the business profitable at the trough of the cycle through disciplined expense management. We believe our mortgage business is well positioned to take advantage of the eventual pickup in residential purchase volumes when rates gradually decline and we're optimistic looking to the spring selling season. For the fourth quarter, non-interest income was 26% of bank revenues as compared to 22% in the third quarter. Continuing to grow our non-interest income remains the focus of our team. I'd now like to turn the call over to Steve.

Thanks, Corey. For the fourth quarter, diluted earnings per share was 96 cents, compared to 66 cents from the linked quarter. Of note, our fourth quarter earnings were positively impacted by 7 cents per share after tax for the fair value adjustment of the mortgage servicing rights assets as mortgage interest rates rose in the fourth quarter. Turning to slide 13, net interest income was $38.5 million for the fourth quarter, as compared to $37.3 million for the linked quarter. The rise in net interest income was largely due to a $1.6 million decline in interest expense, partially offset by a decrease of $243,000 in loan interest income. Our net interest margin, calculated on a tax equivalent basis, was 3.75% in the fourth quarter, as compared to 3.65% in the linked quarter. The 10 basis point increase to our NIM was primarily due to an 18 basis point decline in our cost of deposits in the quarter, as compared to the prior quarter, as we effectively repriced our interest-bearing deposits as the Fed reduced their short-term interest rate. At year end, our non-interest-bearing deposits decreased 25.8% of total deposits, as compared to 26.9% in the linked quarter, largely due to the seasonal decline in mortgage escrow balances. As outlined on slide 14, deposits decreased by $94.8 million to $3.62 billion at December 31st. Our cost of deposits was 229 basis points in the fourth quarter, a decrease of 18 basis points from the linked quarter. Turning to slide 15, our ratio of allowance for credit losses to total loans held for investment was 1.42% at December 31st, 2024. an increase of one basis point from the end of the prior quarter. We recorded a $1.2 million provision for credit losses in the fourth quarter, which was largely attributable to net charge-off activity and by increased loan balances during the quarter. Our non-performing loans totaled $24 million at the end of the fourth quarter, a slight decrease from $24.7 million in the third quarter. Skipping ahead to slide 18. Our non-interest expense was $29.9 million in the fourth quarter as compared to $33.1 million in the linked quarter. The $3.2 million decrease from the third quarter of 2024 was largely a result of a decline of $1.4 million in personnel expenses, primarily from decreased health insurance costs of approximately $675,000 as annual rebates were received in the current quarter. Additionally, we had a $400,000 reduction in mortgage commissions as mortgage activity slowed in the current quarter, given the rise in mortgage interest rates. Looking ahead to the first quarter of 2025, we expect non-interest expense to be more in line with the third quarter's level, given the number of one-time benefits that we experienced in the fourth quarter and including annual salary adjustments. Moving to slide 21, We remain well capitalized with tangible common equity to tangible assets of 9.92% at the end of the fourth quarter, an increase of 15 basis points from the end of the third quarter. Tangible book value per share decreased to $25.40 as of December 31st, 2024, compared to $25.75 as of September 30th, 2024. The decrease was primarily driven by an $18.2 million decrease in accumulated other comprehensive income as the fair value of available for sale securities decreased, partially offset by $14 million of net income after dividends paid. I'll give the call back to Curtis for concluding remarks.

Thank you, Steve. To conclude, and as I said, I am very proud of our financial results. We have effectively managed our liquidity to optimize our profitability and returns while taking proactive steps to ensure that we maintain the credit quality of our loan portfolio. Importantly, we are experiencing strong underlying loan demand, which we believe will begin to come through as our payoffs begin to return to more normal levels. We remain optimistic that economic growth is set to accelerate under the new administration and are well-positioned to drive organic growth across both our community and metropolitan markets as we focus on expanding the bank and delivering value to all of our stakeholders. I would also like to thank our employees for their hard work over the last year. They are the key to our success, and I am grateful for their continued commitment to our bank and our customers. Thank you again for your time today. Operator, please open the line for any questions.

Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment please while we poll for questions. Thank you. Our first question comes from the line of Woody Lay with KBW. Please proceed with your question.

Hey, good morning, guys. Hey, Woody. Good morning. I wanted to start with the loan yield in the fourth quarter. I mean, it was pretty impressive to see that be relatively flat quarter over quarter given the rate cuts. Any color on what allowed the loan yield to remain stable? There wasn't an sort of one-time interest benefit, was there?

Hey, Woody, this is Steve. There was a little bit less than $200,000 of non-accrued interest that we got, not necessarily out of line with what we see in other quarters. You know, really, between that and just having loans pay off, you know, we had some loans paying off that were at the end Lower rates, quite frankly, which we were glad to see. Even some of the 4%, 5% loans pay off. And then some of the new loans being booked that are at rates higher than what the average is. So overall, again, we were very pleased with where that ended up.

But no real one big-time non-recurring item.

Got it. That's helpful. And then any expectations near term for the margin? Do you think it can remain stable around the 375 level, or is there a chance that it could even move higher?

We've had a lot of discussion about that. We're going to be more conservative, as you know, in what we would say. I would hope we could keep it where it's at and hopefully incrementally improve, but a lot of that's really going to depend on loan growth and where that kind of ends up. I mean, you'll see us at deposit costs will still come down just a little bit as we've flush out the rate cuts that were done midway through the quarter and things like that. And loan yields may trend down slightly just depending on how that ends up for a full quarter after those cuts. But overall, with the right loan growth, I think we could see it stabilize and maybe grow incrementally.

Woody, this is Corey. I think the one thing that's going to help us do that is the fact that our liquidity position is where it is.

It just gives us some opportunities to make sure we're not overpricing on the cost side.

Yeah, that's a good point. Yeah, and like for everybody, you know this, a lot's going to depend on what the Fed decides to do. If they move forward with more rate cuts, and the president indicated he'd sure like to see that, you know, we'll see where we go. But certainly rate cuts in our case will – likely help our NEM. It may not be, you know, again, one for one, but I think we would continue to gain by lower short-term rates. But we'll just have to see where that goes. But I kind of agree with Corey and Steve. We've got a lot of things in place that we should still see minor improvements in the NEM, but may not be quite as strong as what we saw in the fourth quarter. But I think we'll continue to get some improvements through the year.

Right. Well, y'all have consistently been beating the NIM guide. Um, so we'll see how it turns out. Um, lastly on the loan pipeline, I mean, it's great to hear all the color around the, um, the new customer activity. Just is that concentrated in any one segment? And then is it, is it a reflection of new hires or is it just, um, you know, a reflection of hard work?

Yeah, Woody, this is Brent. Um, You know, it's a combination, I think, of all those factors. We have good production from new hires. But really, I think we've got a lot of optimism we're seeing from our clients and capital outlays that they're planning to make. And our pipeline is much better than it was this time last year. So we feel optimistic about it, too.

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

Thanks, Woody. Thanks, Woody. Thanks.

Our next question comes from the line of Brett Rabitin with Hovde Group. Please proceed with your question.

Hey, guys. Good morning.

Hi, Brett.

I wanted to start on the payoffs. You talked about it quite a bit, but if you gave it, I missed the number, but the number of or dollar amount of payoffs. that you guys had in the quarter, and then it sounds like the pipeline continues to build. I guess I'm a little surprised you're being a little conservative and saying low to mid single-digit loan growth. I thought that number might be more mid to high single-digit, so I was just hoping for some additional color on that.

Hey, Brent, you're surprised we're being conservative.

You know how we're going to be.

Yeah, Brett, I mean, you know, we are striving to over-deliver on that, but payments were higher in the fourth quarter, and frankly, some of that's nothing to apologize for. Our clients had experienced some liquidity events. We had several that had liquidity events, either decided to – sell their real estate or had significant excess liquidity and decided to reduce debt. And that's good for them. And we're fine with that. I mean, we want to see our clients succeed in what they do. So, you know, we may see a little bit more of that with customers selling assets. And that could be, I think we're thinking that could be repeated in the first, maybe second quarter, but we still feel confident in our pipeline and ability that production will outpace those, if that makes sense.

Brett, one of the things that I was kind of pleased to see on a number of the payoffs that we had, I mean, you're going to have the seasonal stuff that comes along. You're going to have the stuff that we have no control over. But what was really nice is to see some of the transactions we had that were life events that actually happened to people that converted into investment opportunities for us on the other side that stayed here. And it goes back to the relationship aspect of what we fight for daily.

Okay. And then the other thing I wanted to ask about was just M&A and your capital ratio has gotten pretty healthy. I don't know if you're thinking about using the buyback more at some point, but just you briefly mentioned M&A and talking about that. Can you talk maybe a little bit more about what you're seeing from maybe potential partners and, you know, is there a lot of interest from community banks at this point? What's your outlook is for the potential acquisition market?

This is Curtis. We continue to see an increase, I think, in the number of ideas that are pitched to us by the investment bankers. They're They're looking at this as a real opportunity. As you well know, they've had a couple of pretty lean years. So far, we haven't really seen anything that we liked quite well enough to get down to really trying to negotiate pricing on it. Indications are that you've got a lot of sellers of good banks that are still expecting probably a higher multiple than the market's ready to give right now. And as we keep saying, we want the right deal. We'd rather not do anything at all rather than do one that's not going to benefit our shareholders long term. And that's not just banking, but if you look at it, so many businesses out there make a larger acquisition and their stock suffers for quite a while. And so we see no point in doing that. We want to do something that everybody's going to like and see the real value of and that the the acquired institution would be very happy to be joining our fold. So we're going to keep our eyes out, and we do continue to see more and more opportunities out there, both in our part of the state and other parts of Texas as well. So my guesstimation is we'll probably have something to talk about maybe later in the year, but we don't know until we really see it. The environment for doing something is certainly better than what it's been.

And, Brett, this is Corey. I think the one thing that I would tell you, though, is if you look at us, I don't think we've ever been as well positioned as we are today to do an acquisition. And we've just got to find the right one.

But we are very, very much focused on it.

Okay. Appreciate all the call, guys. Thanks, Brett. Thanks, Brett.

Our next question comes from the line of Stephen Scouten with Piper Sandler. Please proceed with your question.

Yeah, good morning, everyone. Thanks. I'm not sure, Steve, if you gave this data earlier to one of the questions. I might have missed it, but can you give us a feel for where new loan yields are coming on versus maybe some of where the portfolio yields are rolling off at?

Yeah, I would say they're in the seven range. It could be all over in the sevens, but Generally, probably in the low to mid, there would be some in the high, but that lower end probably.

Gotcha. And that's coming off the books. Where is some of these fixed rate loans repriced on the average?

Yeah, I think so. I mean, help me understand your question again.

Yeah. So, I mean, what is it? Your total average yield is like 669, but I imagine some of the fixed rate loans that are coming off the books and repricing in that 7% range are probably more in the, I don't know, 4% to 5% range, I would guess. There's probably some five-year-old loans that are in that range, but just trying to get a feel for that kind of on-off yield dynamic.

Yes. We've got some there, but quite frankly, we've had some, you know, we've had some payoffs of of loans at the higher yields as well. But yeah, the fixed rate stuff generally is going to be in the upper fours and fives that have been coming off.

Okay. So still potentially getting a 150, 200 basis point pickup on some of that fixed rate loan book as it reprices?

Yes. And I think one thing to keep in mind is If you look at the quality of our portfolio, it's never going to be the highest portfolio out there because the credit quality is good. We really try to stay competitive. We try to price it to market. I really do feel good about the stuff that we're seeing coming in, whether it's the spreads around Prime. That's what we really price a lot of our stuff off of.

Yeah, no, for sure. I'm just kind of thinking about the NIM dynamic. I know, obviously, I think your NIM would respond best With some lower rates given slight liability sensitivity, but with the fixed rate loan book, I would think you could still see some NIM expansion throughout the year in a stable rate environment. Would you agree with that?

Yeah, this, Curtis, I absolutely would. That's the reason I still feel confident we'll get some NIM expansion moving through 25 because, again, just to keep rates exactly where they are. And if our business pipeline moves as we think it will, you'll see a moderate increase in them. Nothing dramatic, but we'll continue to move up, probably not down. And if we got slightly lower short-term rates, it should move a little more in our favor, I think.

Yeah, yeah, no, that's great. Okay, and maybe just for me, you know, in full honesty, I've been getting most of my Texas economic information from the show Landman, so I'd love to get kind of your thoughts on that. what the potential drilling activity down in the Gulf of America could do for, in your view, your economies. I mean, how that price of oil could affect your economies and overall loan demand, how you're thinking about that.

Brett, everybody's having to buy more insurance for these oil blowouts that are happening apparently now. So that's probably going to impact it. We're price of oilers right now. We're seeing our service guys are, I mean, they're very optimistic about what their future is right now.

Yeah, I would 100% agree with that. I think there's a lot of optimism in the Permian and in our markets, just in part because of just energy prices. You know, this region is probably the lowest cost to produce area in the country and obviously the highest volume. So there is a lot of activity and you you see it when you drive down there. It's just, so I think we'll have opportunities around that. And frankly, that's a part of the reason why our pipeline has expanded so much, I think, is just optimism around general economies.

I think if you look at the, I mean, if you look at the size of the bank, you look at the size of the customers that we actually bank in those markets, there are a lot of times the lower cost provider and they're seeing good opportunities

uh in those markets right now i mean we're continuing to see good lending opportunities as a result of it as well on a more macro scale uh that again now nobody wants to see oil price down in the 50s at least in our parts texas uh but uh so i don't think we'll see that but as we know uh One of Mr. Trump's new good friends, apparently, is going to get arm twisted to push the world rate down some. We'll see where it goes. But realistically, if oil prices stay about where they are, the somewhat relaxed regulations, we'll see more drilling than what we've seen. And you make a good point. While we don't lend into that market as such, you could really see offshore drilling pick up for the next two to four years. And for places like Houston, generally, that's a good macro event for that economy. It will really help drive overall business in the Houston market.

Stephen, just one last thing. Just know that we underwrite to much cheaper oil. Yes.

Got it. Got it. Yeah, that's helpful. And that's kind of what I was hoping to hear. And that's helpful. That sounds like the Permian maybe in and of itself as an area could do a little bit better given its lower costs. to produce. So let's say drilling activity, it hasn't happened yet, but it does take down the price per barrel in the 60s or whatever. The Permian should be more insulated from any negative impacts in other parts of the country is what I hear you saying.

Yes, absolutely. Sure.

Got it. That's super helpful. Thank you guys for the color. Congrats on a great 24.

Thanks.

As a reminder, if you would like to ask a question, press star one on your telephone keypad. Our next question comes from the line of Joe Yancunas with Raymond James. Please proceed with your question.

Good morning. Joe, how are you? I'm doing great.

So I kind of want to start on loans here for a moment. I appreciate the detail in the deck on the loans coming up for renewal. But as they come up for renewal, do you have a sense, kind of historically speaking, for how much of these loans you typically retain versus what's being rolled off? Just trying to get a little deeper sense into that repricing opportunity with how much stays at the bank.

Brent, the good thing for us, though, is we have a lot that come up for repricing that are not up for renewal, which plays a big role in what we do. That's right.

Yeah, so that's repricing. Those aren't all maturing loans. I mean, we've so far been pretty successful at retention of repriced loans. Of course, there are times, and that's part of the payoff experience we've had in the fourth quarter, where customers have just decided to take advantage of gains and recapture equity and projects, and that's okay, too. I mean, we retain those relationships that may have lost the loan, but retain the relationship. It's kind of tough to predict who's going to decide to do that, but as far as the ones that we wanted to retain, we've retained them.

And, Joe, one thing that helps us is the ones that are up for repricing and not necessarily maturity, the refi penalty still stays. So that's always on the table. So we at least have that try to help us from a negotiation standpoint.

We don't wait until these things are right at maturity. We're working them way early. Yeah, that's very helpful.

And then just kind of shifting over to credit, you know, in the prior quarters, you know, you've discussed optimism around resolving, you know, rather chunky multifamily problem loan. You know, can you provide an update on how that process is progressing?

Yeah, it's paying and we're working the plan just like we'd expected. So, I still feel really good about our credit quality and the trends and direction. We're not unique in the fact that we'll see other challenges, I'm sure, and we'll work through those as we get them. But as far as where we're at today, I'm optimistic with not only what we've done, but what I expect we'll do in the future.

I think we've done a good job of trying to identify what challenges we think we're going to have and start working them early. Understood. That's all for me. Thank you for any more questions. Thanks, Joe. Thanks, Joe.

Thank you. Mr. Griffith, we have no further questions at this time. I would like to turn the floor back over to you for closing comments.

Thank you, operator. As we've said today, South Plains Financial is well positioned for many opportunities and for what we believe multiple economic scenarios. Our customer optimism is the best in a long time. I've seen some material, I'll give credit to Mr. Tom Brown's newsletter of last week. National survey data shows that small business optimism is at its highest since 2018. And we do think that's going to translate into some loan growth for us and just better economic conditions all over. So our credit quality remains strong. We're always aware of the risks out there. We're going to continue to work on that. We'll continue to focus on controlling expenses and increasing them. And we'll be ready if the right M&A deal comes along. And we'll continue to be looking for opportunities in all those sectors. We thank you for your time today and look forward to visiting with you if you ever have any questions for us. Thank you.

Ladies and gentlemen, this does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation and have a wonderful day.