ServisFirst Bancshares, Inc.

Good day, and welcome to the Service First Bankshear's Incorporated Third 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. Please note this event is being recorded. I would now like to turn the conference over to Davis Mains, Director of Investor Relations. Please go ahead, sir.

Good afternoon, and welcome to our Third Quarter Earnings Call. We'll 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 our 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 us on our call. I'll talk a few minutes about our loan growth for the quarter. We had $369 million of net loan growth for the quarter, which is an annualized growth rate of 18%. Our goal has been to have a monthly loan growth goal of $100 million a month, and we've exceeded that goal over the last two quarters. We certainly were pleased to see. We had thought that we would see line utilization improve in the second half of the year, but we saw no improvement this past quarter. We do not know when we will see an improvement in line utilization given the continued low inventories at our customers and supply chain issues that continued but we certainly expect it to be a tailwind for us at some point in the future. So that's certainly something to look forward to. We did see net paydowns in commercial industrial loan balances in the quarter, excluding triple P loans. Well, this is both the result of the second round of triple P stimulus, as well as we're seeing very strong profitability in our customer base in commercial industrial companies. Loan growth for the quarter was highest in the west of central Florida, Charleston, Dothan, and northwest Florida regions. And looking at our loan pipeline is about 10% above last quarter and is back at historically high levels. We've looked back at our pre-pandemic pipelines, and our pipelines today are roughly double where we were prior to the pandemic. On the deposit side, we do continue to see deposit growth, though most of the growth was in our correspondent division this quarter. Other regions are seeing a flattening in growth during the quarter. Most of the correspondent division growth is attributed to new account growth in the South Florida market, with an addition of a key banker in South Florida. Our non-instrument accounts doubled in the quarter, in correspondence from $500 million to $1 billion. A few minutes to talk about capital. When we started the pandemic 18 months ago, we were under $10 billion in assets, and I remember analysts and investors were asking us what are our plans to do with all our excess capital, and our answer was it's nice to have excess capital on hand to fund future growth. Eighteen months later, we're all at all but at $15 billion in assets, so we're quite happy we had the capital support of a bigger balance sheet. The question now is how much of the deposit growth is transitory, if any. I don't think any of us know the answer to that question, but what certainly seems logical is that as the massive stimulus, fiscal stimulus wears off, our deposits will flatten or decline slightly over the next couple of years. As of this morning, we're sitting on $4.6 billion in cash at the Fed, and we do have a negative carry on that $4.6 billion. I did see an analyst report recently saying we're in the top 10 for cash as a percentage of assets, and Bud will go over our plans in a few minutes to invest those funds over time. So on the Hiring front, we continue to have many conversations, more than in the past few years. Again, more merger activity has led to more discussions with more teams. Early in the pandemic, we took a very conservative approach and did not really tell everybody that we talked to that we really didn't want to hire anybody or do anything during the early part of the pandemic. We just thought the best thing to do was be conservative. And that's usually the best thing to do in the banking business is almost always to be conservative. So that's something we'll continue to look at, and we see many opportunities. Our goal is to only bring in a small number of very high-quality bankers. So now I'd like to turn it over to Henry Abbott, our chief credit officer, to talk about our credit situation.