Participants

Steven Crockett; Chief Financial Officer, Treasurer; South Plains Financial Inc

Curtis Griffith; Chairman of the Board, Chief Executive Officer; South Plains Financial Inc

Cory Newsom; President, Director; South Plains Financial Inc

Brent Bates; Chief Credit Officer; South Plains Financial Inc

Woody Lay; Analyst; Keefe, Bruyette & Woods, Inc

Brett Rabatin; Analyst; Hovde Group

Stephen Scouten; Analyst; Piper Sandler & Co

Joseph Yanchunis; Analyst; Raymond James

Presentation

Operator

Good morning, ladies and gentlemen and welcome to the South Plains Financial Inc fourth quarter, 2024 earnings conference call. (Operator Instructions). As a reminder, this conference call is being recorded. I would now like to turn the call over to Steve Crockett, Chief Financial Officer and Treasurer of South Plains Financial. Please go ahead.

Steven Crockett

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; Cory 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 risks, 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.

Curtis Griffith

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 Winmark, the bank's wholly owned insurance subsidiary in the second quarter of 2023 which resulted in a $22.9 million onetime gain net of charges and taxes. Our diluted earnings per share of $1.32. Excluding this onetime gain, we outperformed 2023 by $0.62 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 one risk-based capital ratio was 13.53% and our tier one leverage ratio was 12.4%. 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 $0.15 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 26th 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, but we have not yet seen an opportunity that meets our high hurdle for our team to pursue.
Our acquisition criteria remain 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.

Cory Newsom

Thank you, Curtis and good morning, everyone. Starting on slide 6, 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 continue 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 8, loans in our major metropolitan markets of Dallas Houston and El Paso increased by $9 million in the fourth quarter to $1.6 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 at Midland and Odessa. At quarter end, our major metro loan portfolio represented 34.6% of our total loan portfolio continued to demonstrate not only the scale that our lenders have achieved but also the opportunity that lays ahead for organic loan growth.
Skipping to slide10, 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 low 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 CACCO 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. It 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 billion 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 reoccurring 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. Continue to grow our non-interest income remains a focus for our team.
I'd now like to turn the call over to Steve.

Steven Crockett

Thanks, Cory. For the fourth quarter diluted earnings per share was $0.96 compared to $0.66 from the linked quarter. Of note, our fourth quarter earnings were positively impacted by $0.07 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 length 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 points increase to our nim was primarily due to an 18 basis points 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 to 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, a 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, 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 onetime benefits that we experience 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.

Curtis Griffith

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.

Question and Answer Session

Operator

(Operator Instructions)
Woody Lay, KBW.

Woody Lay

Hey, good morning guys.

Steven Crockett

Hey, Woody, good morning.

Woody Lay

We wanted to start with the loan yield in the fourth quarter. I mean, it was pretty impressive to see that the relatively flat quarter-over-quarter, given the rate cuts. Any color on what allowed the loan yield to remain stable? There wasn't a sort of onetime interest benefit was there?

Steven Crockett

Hey, Woody, this is Steve. There was a little bit less than less than $200,000 of non-accrued interest that we got not necessarily out of line with what we see in other quarters. Really, -- you between that and just having loans pay off, we had some loans paying off that were at the, at 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 bigtime non-recurring item.

Woody Lay

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

Steven Crockett

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

Cory Newsom

We do this as Cory. 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 over pricing on the cost side.

Curtis Griffith

We Discourage. And like for everybody, this a lot's going to depend on what the fed decides to do. If they move forward with more rate cuts and the third President indicated, he'd sure like to see that. We'll see where we go but certainly rate cuts in our case will likely help our them. It may not be, 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 NIM 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.

Woody Lay

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

Brent Bates

Yes, Woody, this is Brent. It's a combination, I think of all those factors we have. A 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.

Woody Lay

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

Operator

Brett Rabatin, Hovde Group.

Brett Rabatin

Hey, guys, good morning. Wanted to start on the payoffs if 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 that, 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 digits. So I was just hoping for some additional color on that.

Cory Newsom

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

Brent Bates

Brett, I mean, we are striving to overdeliver 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 a significant excess liquidity and decided to reduce 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 we may see a little bit more of that with customers selling assets and that could be, I think we're thinking that that could be repeated in the first, maybe second quarter. But, we still feel confident in our pipeline and ability to that production will pace those if that makes sense.

Cory Newsom

For 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.

Brett Rabatin

Okay. And then the other thing I wanted to ask about was just M&A and your capital ratio has gotten pretty healthy. And 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 is there a lot of interest from community banks at this point? What your outlook is for the potential acquisition market?

Curtis Griffith

And this 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 looking at this as a real opportunity that as you well know it 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 shareholder's long term. And, something that there's, 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 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 taxes well. So, my guestimation is we'll probably have something to talk about maybe later in the year, but we don't know until we really see it. It's that the environment for doing something is certainly better than what it's been.

Cory Newsom

This is Cory. I think the one thing that I would tell you though is if you look at it, I don't think we ever been as well positioned as we are today to do an acquisition. And that's, we just got to find the right one and we are very, very much focused on it.

Brett Rabatin

Okay. Appreciate the call guys.

Operator

Stephen Scouten, Piper Sandler.

Stephen Scouten

Hey, 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 the where the portfolio yields are rolling off at?

Steven Crockett

Yes, 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, some there'd be some in the high but that low lower end probably.

Stephen Scouten

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

Cory Newsom

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

Stephen Scouten

Yes. 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 field dynamic.

Steven Crockett

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

Stephen Scouten

Okay. So still potentially getting a 152 basis points pick up on some of that fixed rate loan book as it reprices.

Cory Newsom

Yes. And I think one thing Steven keep in mind, 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. And so I mean, we really try to stay competitive, we try to profit to market and 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 a lot of our stuff off of.

Stephen Scouten

No, for sure. And I'm just kind of thinking about the NIM dynamic, I know obviously I think your name 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?

Curtis Griffith

Yes, 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 with keep rates exactly where they are. And if our business pipeline moves as we think it will, you'll see a lot, a moderate increase in NIM. 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.

Stephen Scouten

No, that's great. Okay, and maybe just for me, in full Honestly, 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. What the potential drilling activity down in the Gulf of America could do for, in your view, your economies kind of, I mean, how that price of oil could affect your economies and overall loan demand, how you're thinking about that?

Cory Newsom

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

Brent Bates

Yes, 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, that this region is probably the lowest cost producer area in the country. And obviously, the highest volume so there is a lot of activity, and you see it when you drive 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.

Cory Newsom

And I think if you look at this, I mean, if you look at the size of the bank, if you look at the size of customers that we actually bank in those markets. There are a lot of times the lower-class provider and they're seeing good opportunities in the markets right now. I mean, we're continuing to see good lending opportunities as a result of it as well.

Curtis Griffith

On a more macro scale that again. Now nobody wants to see oil price down in the 50s, at least in our parts of Texas. But so I don't think we'll see that, but as we know, 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 all I 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 well.
We don't win into that market as such, you can really see offshore drilling pick up for the next 2 years to 4 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.

Cory Newsom

Stephen. Just one last thing. Just know that we underwrite a much cheaper role.

Stephen Scouten

Got it. Yes, that's helpful. And that's kind of what I was hoping to hear is in it 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 cost 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 premium should be more insulated from any negative impacts in other parts of the country. Is what I hear you saying.

Curtis Griffith

Yes, absolutely sure.

Stephen Scouten

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

Operator

Joseph Yanchunis, Raymond James.

Joseph Yanchunis

Good morning,

Brent Bates

Joe, how are you?

Joseph Yanchunis

Oh, I'm doing great. So 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 with the bank.

Cory Newsom

Before. I mean, the good thing for us though is we have a lot to come up for repricing that are not up for renewal, which plays a big role in what we do.

Brent Bates

That's right. Yes, that's so that's repricing, those aren't all maturing. 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. So 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.

Cory Newsom

And Jim, 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.

Joseph Yanchunis

No, that's very helpful and then just kind of shifting over to credit, in the prior quarters, you've discussed optimism around resolving, rather chunky multifamily pro problem loan. Can you provide an update on how that process is progressing?

Brent Bates

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

Cory Newsom

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.

Joseph Yanchunis

Understood. That's all for me. Thank you for any more questions.

Curtis Griffith

Thanks Joe.

Operator

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.

Curtis Griffith

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 last week. A 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 I look forward to visiting with you if you ever have any questions for us. Thank you.

Operator

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.