South Plains Financial, Inc. Q4 FY2023 Earnings Call

Good morning, ladies and gentlemen, and welcome to the South Plains Financial, Inc. Fourth Quarter and Full Year 2023 Earnings Conference Call. During today's presentation, all parties will be in a listen-only mode. Following the presentation, the conference will be open for questions with instructions to follow at that time. As a reminder, this conference call is being recorded. I would now like to turn the call over to Mr. Steve Crockett, Chief Financial Officer and Treasurer of South Plains Financial. Mr. Crockett, please go ahead, sir.

Thank you, operator, and good morning, everyone. We appreciate your participation in our earnings conference call. With me here today are Curtis Griffith, our Chairman and Chief Executive Officer; Cory Newsom, our President; and Brent Bates, our Chief Credit Officer. The related earnings press release and earnings presentation are available on the News & Events section of our website spfi.bank. Before we begin, I'd like to remind everyone that this call may contain forward-looking statements that 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 statement in our earnings press release or on slide two of the earnings presentation. All comments 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 measures, which we believe are useful in evaluating our performance. A reconciliation of these non-GAAP measures to the most comparable GAAP 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 2023 results as well as provide an update on our capital allocation priorities. Cory will discuss our loan portfolio as well as our initiatives to drive deposit and fee income growth in the year ahead. Steve will then conclude with a more detailed review of our fourth quarter financial results. I would like to start by thanking our employees for their efforts and commitment to both the bank and our customers during an extremely challenging year for our industry. Our success would not be possible without their dedication and hard work. As shown on slide four of our earnings presentation, we delivered 9.7% loan growth for the full year driven by the expansion of our lending platform, combined with a resilient economy as Texas continues to benefit from in-migration and a favorable business climate. If inflation continues to moderate and the Federal Reserve begins to reduce their benchmark interest rate, we expect economic growth to accelerate as we look to the second half of 2024. Looking back at the past year, our community-based deposit franchise grew modestly, which is impressive given the significant dislocation that occurred following the failures of Silicon Valley Bank and Signature Bank in the first quarter. For the full year, our core deposits grew 1%, excluding brokered deposits to $3.26 billion, which demonstrates the resilience of our franchise combined with our strong customer relationships. At quarter-end, 81% of our deposits were in our rural markets with 19% in our major metropolitan markets of Dallas, Houston and El Paso. Additionally, our average deposit account balance is approximately $36,000 with only an estimated 16% of our total deposits being uninsured or uncollateralized. The credit quality of our loan portfolio also remained strong through the fourth quarter as our classified loans have remained at the lowest level since the start of the pandemic as we ended the year. Lastly, we increased our return on average assets to 1.54% for the full year 2023 as compared with 1.47% for the full year 2022. We also completed the sale of our Windmark Crop Insurance subsidiary in April for a pre-tax gain of $33.8 million. The gain that we recorded positioned us to strategically sell $56 million of investment securities at a loss in a tax-efficient manner and reinvest those proceeds into higher-yielding loans. Given our strong capital and liquidity position, our Board of Directors authorized a $15 million stock repurchase program in May, which has been exhausted. We repurchased 218,000 shares in the fourth quarter and a total of 686,000 shares during 2023. Through the year, our Board has believed that our shares have traded below intrinsic value, and we have been aggressive buying our stock in the open market. Looking to the year ahead, we will maintain our liquidity and continue to watch for opportunities to expand the bank and our earnings power. M&A is an area of interest and we believe you will see transactions take place in the market as sellers' expectations are becoming more realistic. The decline in interest rates at the end of the year also led to a recovery in bank securities portfolios, which will increase the probability that we will see deal volumes pick up. However, we will only be interested in acquiring the bank with the right culture, excess liquidity, a stable deposit base and at a valuation that makes sense for us and our shareholders. In the meantime, we remain focused on organic growth while returning a steady stream of income to our shareholders through our quarterly dividend. Our Board of Directors again authorized a $0.13 per share quarterly dividend as announced last week. This will be our 19th consecutive quarterly dividend to be paid on February 12th, 2024 for shareholders of record on January 29th, 2024. Now I'll turn the call over to Cory.

Thank you, Curtis, and hello, everyone. Starting on slide six, loans held for investment increased $20.6 million or 2.8% annualized as compared to the linked quarter. Loan demand was primarily in commercial real estate during the quarter and was partially offset by an approximate $10 million decline in our indirect auto portfolio. As we've said on previous calls, we're carefully managing our indirect auto portfolio with a focus on maintaining the portfolio's credit quality while reinvesting a portion of the monthly principal amortization into higher-yielding loans. The yield on our loan portfolio was 6.29% in the fourth quarter as compared to 6.1% in the linked quarter. We continue to price new loans to account for the higher interest rate environment that we are operating in combined with the upward pressure on our deposit costs. Skipping to slide eight, we grew loans by $44 million or 17.8% annualized to $1.04 billion in our major metropolitan markets of Dallas, Houston and El Paso as compared to the linked quarter. Our metro markets continue to be an important source of loan growth and more than offset the paydowns that we experienced in our community markets as well as the expected decline in our indirect auto portfolio. We remain in a hiring mode as we look for good lenders who fit our culture and can bring new business to the bank though we'll remain extremely selective. Turning to slide nine. Demand across our markets remains healthy as we continue to experience solid economic growth, though we continue to be selective in who we do business with and what loans we underwrite. As a result, we expect low single-digit loan growth for 2024, though we expect to continue to deliver interest income growth as many lower rate loans continue to experience principal repayments and/or rate resets. While we expect the majority of this repricing to begin accelerating in the second half of 2024, we believe loan yields will remain elevated, even if the Fed begins to cut interest rates given lower liquidity in the market which will benefit our net interest income, NIM, in the third and fourth quarters. In conjunction with our effort to drive loan growth, we also need to deliver deposit growth while stabilizing our noninterest-bearing deposit balances. Though our lenders have always had an emphasis on deposits as part of their incentive compensation plan, we have brought a renewed focus on the type and value of these deposits. More specifically, true core deposits and noninterest-bearing balances now carry more weight in these plans. Better said, we are focused on the profitability of the whole relationship. We're also getting much better at putting in loan covenants to new loan originations centered on deposit requirements and liquidity maintenance agreements. While we've always targeted this, we're getting much better negotiating these covenants. Treasury management is another area where we have made real progress as we've improved our team, our product and our capabilities over the last year. During the fourth quarter, we recruited a senior treasury management executive from a top seven US bank to head this business, which follows several additions to our team as we improve the talent of this group. I'm so excited with the level of people and product that we have today, which is unmatched in our history. We're also doing a better job than we ever have in making sure we align the right treasury products with the customer's financial needs, thus allowing us to continue to drive both deposit growth and fee income. Turning to slide 11. We generated $9.1 million of noninterest income in the fourth quarter as compared to $12.3 million in the third quarter. This decline was largely due to a $2.9 million decline in mortgage banking revenues, which includes a $2.2 million decline in the fair market value adjustment to our mortgage servicing rights portfolio. Importantly, we've aggressively managed our mortgage banking expense base as volumes have decreased over the last 18 months with a focus on maintaining profitability. While this downturn in mortgage originations has been the most severe in more than three decades, we've experienced negligible lawsuits while maintaining our mortgage capabilities for the eventual turn in volumes as mortgage rates continue to decline. And as I mentioned, we expect our initiatives in treasury management to begin to impact fee income beginning in the second quarter. For the fourth quarter, noninterest income was 21% of bank revenues as compared to 26% in the third quarter of 2023. To conclude, we delivered strong results through the fourth quarter. I believe we will remain well positioned. That said, we're not standing still and are aggressively addressing the current environment to manage deposit cost pressures while accelerating fee income growth. We need to stabilize our noninterest-bearing deposits and grow our deposit franchise in order to position us to take advantage of improving loan demand as we move through 2024. I'm confident that we have the right people and plan, and I'm excited about the opportunities ahead. I will now turn the call over to Steve.

Thanks, Cory. For the fourth quarter, diluted earnings per share was $0.61, which compares to $0.78 per share in the linked quarter. We recorded a $1.5 million write-down at the fair value of our mortgage servicing rights asset during the quarter as compared to a $700,000 write-up in the linked quarter. The current quarter impact on our earnings per share was $0.07 after tax. Turning to slide 13. Net interest income was $35.2 million for the fourth quarter as compared to $35.7 million for the linked quarter. Our loan production in the third quarter, combined with the rise in new loan rates lifted the yield on our loan portfolio by 19 basis points in the fourth quarter, resulting in a $1.7 million increase in loan interest income. The rise in loan interest income was offset by a $1.3 million increase in interest expense due to the rise in short-term interest rates on interest-bearing liabilities and a decrease of $900,000 in the income on other interest-earning assets as average investable liquidity declined in the fourth quarter. Our net interest margin calculated on a tax equivalent basis held steady at 3.52% in the fourth quarter as compared to the linked quarter. Higher loan balances and loan yields offset the rise in our cost of deposits and the decline in noninterest-bearing deposits. As outlined on slide 14, our average cost of deposits was 224 basis points in the fourth quarter, an increase of 17 basis points from the linked quarter. Given the rising interest rate environment through the year, we've had to be proactive in maintaining deposit relationships, which has led to the rise in our funding cost. Overall, our core deposit franchise continues to remain steady with only a slight decrease in the fourth quarter. As Cory touched on, we put initiatives in place designed to stabilize our noninterest-bearing deposit balances while also driving core deposit growth. We expect these initiatives to begin to have an impact as we move through 2024. In the meantime, we expect continued upward pressure on deposit costs, which will modestly pressure our NIM. That said, we expect our NIM to trough through the first half of 2024. Turning to slide 15. Our ratio of allowance for credit losses to total loans held for investment was 1.41% at December 31st, 2023, which is unchanged from the end of the prior quarter. We recorded a $600,000 provision for credit losses in the fourth quarter, which was largely attributable to our organic loan growth as well as net charge-off activity in the quarter. Skipping ahead to slide 19. Our noninterest expense was $30.6 million in the fourth quarter as compared to $31.5 million in the linked quarter. The $900,000 decrease was largely due to lower mortgage costs as we continue to manage through the decline in mortgage volumes. That said, we would expect noninterest expense to modestly rise through the first half of 2024 as mortgage volume increase through the spring selling season. Moving ahead to slide 21. We remain well capitalized with tangible common equity to tangible assets of 9.21% at the end of the fourth quarter, an increase from 8.4% at the end of the third quarter of 2023. The increase was largely driven by $32.9 million increase in accumulated other comprehensive income or AOCI, and $8.2 million of net income after dividends paid. AOCI was positively impacted by decreases in long-term market interest rates during the fourth quarter. I'll turn the call back to Curtis for concluding remarks.

Thank you, Steve. To conclude, I'm very proud of our performance over the past year. Our community-based deposit franchise remained resilient, while our lenders continue to drive high-quality loan growth that contributed to our strong earnings growth in 2023. We also sold Windmark, which provided capital for share repurchases as well as a strategic reposition of a portion of our securities portfolio. The bank is operating very well as we enter 2024, but we know we have much more to do. As Cory outlined, we have initiatives in place that we believe will stabilize our noninterest-bearing deposit balances, grow core deposits and drive fee income growth. This will provide improved liquidity for loan growth looking to the second half of 2024, when we expect to see a meaningful portion of our loan portfolio reprice and an acceleration in the Texas economy from already healthy levels. We expect competitor liquidity to fund new loans in our markets to be limited and believe we will be well positioned to add high-quality customers and attractive loans to our portfolio. We also expect our fee income to improve starting in the second quarter. We remain optimistic on the year ahead as we focus on delivering value to our shareholders. Thank you again for your time today. Operator, please open the line for any questions.

Thank you. We'll now be conducting a question-and-answer session. Our first question today is from Graham Dick from Piper Sandler. Your line is now live.

Hey, good morning, guys.

Good morning, Graham.

I just wanted to start on loan growth. I heard your guidance there for low single-digit growth, which I guess aligns with the last two quarters pretty well, but for the full year 2023, 10% is definitely slower. And then also for you to sort of frame that up with, I guess, what you see between your community markets and in the metro markets because it sounds like the growth in the metro markets has been pretty strong, which is a little different than some of the metro-focused or headquartered banks in Texas. So I just would like to hear maybe what you are doing differently to grow loans faster there? And then also how the community banking payoffs might play into that low single-digit growth?

Graham, this is Curtis. Yes, I believe a significant portion of our growth is due to the excellent hires we've made in various markets over the past few years, and now we're starting to see the benefits of that. It remains somewhat challenging to achieve growth in the more rural areas, but we're also observing positive activity there. I'll have Brent Bates provide further details on this and share his perspective on what we can expect moving into 2024.

This is Brent. Last year, in '23, we saw a real strong growth in the first half and closer to that 3% second half of the year. And I think what we're expecting this year is still to see some tailwinds from our construction portfolio, advances in the first half of the year on the construction portfolio, which is predominantly multifamily and industrial projects in our metro markets and still see some pullback in residential construction. And then we're still seeing good activity from our existing clients even out in our rural markets. So I think the low single-digit growth for '24 is realistic. It's attainable and definitely '24, I would expect to be much more of a smooth growth period than 2023 was.

Graham, this is Cory. I think we need to remember that we are being much more selective about what we choose to fund. We've had the opportunity to consider several transactions that we decided to pass on. We don’t believe it’s the right time for those, either for us or for some of our clients. So we have intentionally pulled back a little, and we are comfortable with that.

Yes, definitely makes sense, and that's helpful, Brent. Thanks for that. And I guess just moving to the margin a little bit, it was flat quarter-over-quarter. I know you guys said that you're calling for a trough maybe in the first half of the year. I was wondering if you'd be willing to maybe give an idea of where you see that trough. I mean, is that low 3.40s or is it just slightly below this level? Just trying to get an idea for the trends going forward given we saw flat margin quarter-over-quarter. And it seems like the rate environment should get a little bit better to start the year, but obviously, still very competitive out there.

Yes, this is Steve. I'll begin, and then Cory or Curtis can join in. We were fortunate to maintain flat performance during the fourth quarter. However, we continue to experience pricing pressure, especially on deposits. While we did raise deposit costs during the quarter, the rate of growth has slowed down, and we anticipate that it will continue to increase, but overall growth has been slowing. We hope to see some relief based on interest rate decisions, although the first three weeks of the year have shown mixed signals, with indications of a downward trend followed by a slight uptick, not specifically related to us but observable in the treasury market and other rates. We are hopeful to maintain our net interest margin close to its current level. A slight decrease is possible; I don't want to specify an exact number, but a drop of around 3 to 7 basis points could be realistic. However, we will do everything possible to keep it close to where it is today.

Graham, this is the first quarter where we feel confident enough to start implementing minor changes in our less rate-sensitive deposits across the company. This is significant because it reflects our newfound comfort level in making small rate reductions overall. While these adjustments will be gradual and may take time to have a noticeable impact, it demonstrates our willingness to take this step.

No, absolutely, definitely does. And I guess just stand here with the NIM. So is some of the trough that's going to happen, I guess, the pressure in one half, is that because the fixed rate repricing is weighted towards the back half of the year, Curtis, did I hear that correctly?

We definitely have more of that repricing that will occur as we get to the second half of '24. We have some going along, but it accelerates a lot more as we get to the second half.

One other point. This is the time of year that our ag loans do pay down. And in the big scheme of things, it's not a significant number, but it does move things a penny or two here and there because most of those operating lines were priced up at current rates, as we went through 2023, and they'll be priced at current rates when they renew and they start drawing up again in '24. But there is a little drop there, and it will be in some of our higher-yielding notes that are out there right now.

Okay. That makes sense. I just want to clarify the adjustments related to mortgage servicing. You mentioned there was a $1.5 million negative adjustment this quarter compared to last quarter, which corresponds to the $700,000 write-up. So the difference between the two quarters is the $2.2 million, correct?

Yes. Yes.

Okay. All right. I just wanted to make sure I understood that correctly. All right. That's all from me guys. Thank you.

Thanks, Graham.

Thanks.

Thank you. Our next question today is coming from Brett Rabatin from Hovde Group. Your line is now live.

Hey, guys. Good morning.

Good morning.

Good morning.

Wanted to first just talk about the deposit initiatives. And you talked quite a bit about stabilizing DDA. And I know you're hopeful for treasury management to possibly be a part of that. Can you guys maybe go through a little bit on the stabilization of DDA, what that entails in terms of product or strategy? How you're going to achieve that? And then just maybe talk a little bit about the growth of deposits and where you expect that to come from?

Good morning, Brett. This is Cory. We've discussed our sales in detail. While we would like to report a quick change in treasury performance, that's not realistic. Our efforts are focused on a long-term initiative that emphasizes building relationships. A significant part of this involves enhancing our lending connections and prioritizing deposit collection. In the past, we maintained a general focus on deposits, but we've now become more selective about the types of deposits we pursue. We are integrating this focus into our loan agreements by requiring full operating accounts and similar criteria. As we continue to improve our treasury delivery, we are refining our leadership and enhancing our team. We are also prioritizing education for our lenders and staff. This is not a quick process; it's a marathon, and we believe we are progressing in the right direction with our deposit initiative. We are consistently analyzing the value of deposits to identify which ones are reliable and essential for our profitability.

Okay. That's helpful. I appreciate that. The other thing I wanted to ask about was the expenses going forward. Obviously, they've been managed well the past year and maybe some of that mortgage incentive compensation going down, which should probably revert some this year, but as you indicated, aside from the mortgage piece, are there pressure points inflationary or otherwise that would drive expenses in '24 relative to '23?

Brett, this is Steve. One aspect we didn't specifically discuss earlier but mentioned earlier this year involves some of our technology initiatives, particularly our transition to the cloud, which will lead to increased expenses. Some of this is related to the build-out and infrastructure, which will result in more depreciation during the current year. There's always some inflationary pressure on various items, but I don't anticipate a significant increase in noninterest expense, excluding mortgage-related changes, unless there's a substantial shift in volume and production. Beyond that, we should be closer to the Q3 figures. We were around $31.5 million compared to $30.6 million. While I don't expect to reach that level, Q4 was likely lower than what we will see moving forward.

This is Cory. I think in line with what Steve mentioned, I do expect the mortgage sector to improve from the expense figure in the second half. We are preparing for that and are proud of how we managed the mortgage business over the past 18 months. We maintained a net zero focus, ensuring we kept our capabilities intact while staying adaptable, as we have always committed to doing. Now, we believe we are set up to have the right production levels in place to fully capitalize on the anticipated improvements in the second half of the year.

Okay. Good color there.

Brett, this is Curtis. I want to make one more quick point. I'm providing this as a reason, not an excuse. As we have expanded our team with high-quality individuals, we are doing so in what I believe is the toughest market for banking talent I've seen in my 50 years in this industry. Bringing on the right people, which we know is essential, will result in higher personnel costs to attract and retain them. This will create some additional strain, but over time, it will generate significant revenue for us. We need the right people across all sectors, not just lenders, and while it’s expensive, we won’t lose sight of that.

Okay. That's helpful. If I could sneak in one last one. You guys mentioned M&A in the call, and it sounds like you're somewhat optimistic that you'll see some activity and maybe you guys will be able to do a deal that makes sense to add to the platform. Can you guys talk about, from here, some folks' strategy has evolved, they're now looking to maybe buy more rural franchises that are deposit funded versus metro markets. Can you guys just talk about what's your M&A strategy would be from here from a geography perspective and what you'd look for a community bank to bring to your platform?

I'll stick with my previous statements. We believe we know what we're looking for, which is a bank with the right culture, as that is our primary focus. We're not interested in forcing a culture that doesn't align with ours. We've witnessed too many failures in the past. We're looking for excess liquidity, a stable deposit base, and sensible valuation. Given the emphasis on excess liquidity and a stable deposit base, we're primarily considering more rural markets in Texas. You're correct, and it appears that others are starting to recognize this as well. For a long time, there has been a lack of interest in banks in smaller communities, but that trend is changing. We've received some inquiries and will be having discussions, but we are still far from finalizing any deals. If the right opportunity arises, which includes the right size and other factors, we believe we have the capital and the team to make it successful. However, after observing the challenges in our Lubbock market and the Permian Basin over the past couple of years, we want to avoid the difficulties encountered by some other acquirers. I'll leave it at that.

Brett, this is Cory. It's kind of interesting though that you talked about the fact that people are starting to recognize the value of some of these rural deposits. We always have. That's the thing that back even when we went public in '19, we had discussions around this. We have always seen the value of the rural deposits. And I think that probably puts us in a better position than a lot of the other ones that are just kind of changing their focus and looking at it. But I do think that we're very good at it and we're very focused on being community-minded when we lead some of these rural markets.

If you're going to have do well in those smaller markets, you really have to understand that you have to be the hometown bank, no matter where your headquarters are, and that's always been our philosophy in all of our smaller markets.

Okay, great. That's really helpful. Thanks for all the color.

Thanks, Brett.

Thank you. Our next question is coming from Joe Yanchunis from Raymond James. Your line is now live.

Good morning. Sorry about that. Are you able to hear me?

Hi, Joe.

Yes, Joe. We can. Go ahead.

Perfect. So just kind of piggyback off that rate question, what's your model sensitivity to a 25 basis point rate cut? And as we think about that, what kind of deposit betas are you assuming on the way down?

I'll start by mentioning that we are indeed sensitive to liabilities. While I don't have the exact details regarding the 25 basis point reduction in front of me, approximately 20% of our deposit portfolio is linked to the short-term rate and would adjust downwards significantly within roughly 30 days due to that decline. This also includes a substantial portion of our public fund holdings and brokered deposits, along with various indexed accounts. For a complete 1% drop, we anticipate an increase of around 3% in net interest income, though I don't have specifics down to the 25 basis point level.

This is Curtis. One important point to mention is our cautious approach to increasing our CD balances. We have not been offering any specials, so most of our deposits are in transaction accounts, which allows us to adjust those rates relatively quickly. Regarding treasury management, we can definitely make adjustments since it can be done in very small increments, particularly with our earnings credit rate. As we utilize this for treasury management, we will be proactive in making adjustments when rates do decrease.

Perfect. I appreciate that. And last one for me here. As asset qualities, it's remained pretty strong throughout the December quarter. So as we think about this next year, is there a potential if we move through the year and we hit the soft landing that we could start to see some reserve relief for you, which would be somewhat of a tailwind. Just kind of curious your thoughts of kind of provisioning year-over-year in the credit outlook.

Joe, this is Brent. We're still seeing, I mean, past dues normalizing and occasional credits that have deteriorated. We're just working hard. I mean it's where we wound up at the end of the quarter was because of the work we accomplished during the quarter of exiting some, repairing some, downgrading a few. So we're still seeing some activity coming in and out of there. And I think it kind of really all depends on the long-term effect of the rate rise and how that moves through the economy and we still are modeling in our model, having some more stress than we have today in the overall economy. If we don't see that at some point in time, of course, we're going to reassess it. But right now, we're still kind of thinking there's still a chance of a little bit of volatility in the overall economy. So when we, I guess, move away from that thinking process, there's a potential we would see some reversal out of there.

From our perspective, we are seeing sufficient rate relief. Our volume is expected to increase enough that we will likely mitigate this quickly from a growth perspective. While we would prefer to see relief in this area, we are not reliant on it for our earnings objectives.

I believe we will continue to take a conservative approach regarding our reserves. This helps everyone feel more secure. There are metrics that support this strategy. Currently, we aren’t facing significant issues in our portfolio. However, as Brent mentioned, when we do identify a problem, we address it immediately to prevent it from escalating. We aim to be as prudent as possible regarding our reserves. If the analysis shows that we can reduce our reserves, we will do so. Yet, as Cory pointed out, we hope to see enough organic growth moving into 2024 to offset any necessary adjustments due to overall economic improvement. Personally, I still see many uncertainties ahead, one of which is the upcoming election in November, which makes it difficult to predict the future. Therefore, we will remain cautious.

Joe, you know we're conservative and we're always going to underpromise and over-deliver whenever we can.

Got it. All right. Well, I appreciate you taking my questions. Thank you.

Thanks, Joe.

Thanks, Joe.

Thank you. We've reached the end of our question-and-answer session. I'd like to turn the floor back over to Curtis for any further closing comments.

Thanks, operator. Thank all of you for joining our call this morning. You've heard us discuss we are entering '24 in a real solid position. We think we have some good opportunities for growth in the bank and to highlight just a few of those one more time. We do have an improved treasury management team. We think that's going to drive both fee income and core deposit growth during the year. We are getting a gradual remixing of loan and securities portfolios into higher-yielding loans. And coupled with what we expect is low single-digit loan growth if the Texas economy remains healthy, we'll drive our net interest income growth. And as we've touched on multiple times, mortgage has certainly been challenging over the last several months, but we remain positioned to handle some improving volumes. And I think we're getting a build-up out there of needs for some financing that is going to start breaking loose as rates begin to come down, we're going to be well positioned for that. And most importantly, the credit quality of our loan portfolio does remain solid. So I'm excited for the year ahead. We thank you all for your time today and we hope to see you again soon. Thanks.

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