ServisFirst Bancshares, Inc.

Good afternoon and welcome to the Service First Bancshares second quarter earnings conference call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your telephone keypad. To withdraw your question, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to Davis Mange, Vice President of Investor Relations. Please go ahead.

Good afternoon, and welcome to our second quarter earnings call. We will have Tom Broughton, our CEO, Bud Foshee, our CFO, and Henry Abbott, our Chief Credit Officer, covering some highlights from the quarter, and then we'll take your questions. I'll now cover our forward-looking statements disclosure. Some of the discussion in today's earnings call may include forward-looking statements. Actual results may differ from any projections shared today due to factors described in the most recent 10-K and 10-Q filings. Forward-looking statements speak only as of the date they are made, and Service First assumes no duty to update them. With that, I'll turn the call over to Tom.

Thank you, Davis, and good afternoon. Thank you for joining our call. I'll talk a little bit about, I'll give you a brief overview of the second quarter. It was a historic quarter in many, many aspects, in many regards. The first and most obvious thing that struck me about the financial statement is we ended the quarter with the highest level of liquidity that we've ever had in the company and by far the most improvement in any one quarter with $1.5 billion in new deposits. We did close over $1 billion in Triple P SBA loans to almost 5,000 borrowers. We have seen the market share reports, and among the loans greater than $150,000, ServiceFirst had a number one market share in both out-of-state Alabama and in Birmingham. I usually don't make self-congratulatory statements on this call and let results speak for themselves, but we do think that is a good sign for the future in that we have strong relationships with the owner managed privately held companies in the state of Alabama and the rest of our footprint. So we think there's good opportunity to grow our bank with those opportunities that we see there. Also from a historic standpoint, it was the largest decline in line utilization in any quarter with a decline from 49% to 40% line utilization, which that is the A huge amount of drop. We saw attributed a lot of it to the pay downs from the Triple P facilities loans to the borrower's lines as well as I think people have just been conservative and cautious and paid down their line where they are able. So it shows the strength of our company. That in turn essentially led to a decline in loans of about $275 million. that we would have had additional loan growth in the quarter of $275 million if we had not seen that decline in line utilization. Most of our PPP income in the quarter was offset by one-time expenses, but I'll be talking about that in a few minutes. We did see a good bit of improvement in all of our asset quality metrics in the quarter with reductions of both NPAs and very low past dues. Henry Abbott is going to discuss a good bit more in terms of asset quality in a few minutes. I know that's a topic certainly during the pandemic and the recession we have had over the last few months. Talking about loan deferrals, that's obviously a subject of huge interest today. Our loan deferrals peaked at the end of May at $1.248 billion. Those deferrals as of July 15th have fallen by over 90% to a current level of $127 million. We expect further declines from there over the next several weeks. So we feel good about where we are. Henry Abbott and I as well can address any questions you have about loan deferrals in our future policy. Our 90-day loan pipeline is down about 20% from the first quarter, which is certainly something you would expect to see given the COVID-19. I think a lot of people hit the pause button on projects. We are seeing more moving forward over the last few weeks, so I think it'll improve. Our total pipeline, including loans greater than 90 days, is consistent with a March 31, end of the quarter. So we think we'll see it get back to normal over the next couple of months. We did make additional loan loss provision in the quarter that would pull us in line with our CECL model. So we can talk about that as you additionally, questions that you have. And also of note, there are loan Loan Loss Reserve and Equity exceeded a billion dollars for the first time in our history, for the first time, so we're certainly proud of that to reach that milestone. I was now going to ask Henry Abbott if he'll give us an update on the effects of pandemic on certain industries and general credit quality update. Henry?