ServisFirst Bancshares, Inc.

Greetings. Welcome to the Service First Bank Shares fourth quarter earnings call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note this conference is being recorded. I will now turn the conference over to your host, Davis Mange, Director of Investor Relations. Thank you. You may begin.

Good afternoon, and welcome to our fourth 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 our most recent 10-K and 10-Q files. Forward-looking statements speak only as of the date they are made, and service first assumes no duty to update. that, I'll turn the call over to Tom. Thank you, Davis, and good afternoon, and thank you for joining us on our call, and I'll give a few highlights before I turn it over to Toshi. If you're new to our call, you'll notice that we don't read to you from the press release in any way, so we assume everybody on the phone can read the press release without our reading it to you. I'll talk a little bit about loans. As you can imagine, we're pretty well pleased with a quarter if you perused our release already. We did have loans grew $878 million in the quarter, which is well above our $100 million per month loan goal and is certainly a record for quarterly loan growth. Of course, $878 million excludes triple P payoffs. For the year, our West Central Florida region had the highest growth rate, followed by Birmingham, Dothan, Alabama, Columbus, Georgia, and Nashville. For the year, all of the growth came in the commercial real estate category, and we actually had a decline in commercial industrial loan balances. We did see some commercial industrial line loan growth, in the fourth quarter with growth there of about $100 million. The C&I commitments did increase by $250 million in the fourth quarter, so that's 30% annualized growth for the fourth quarter. That also had the effect of keeping the line utilization rate flat with the prior quarter. I mean, it was marginally improved, but not enough to matter. And talking about our loan pipeline, As you would expect after a quarter with such large loan growth, our pipeline was down from the last quarter. However, if you compare it to one year ago, our pipeline is 47% higher than one year ago. So we are pleased with the pipeline. We do see activity. And we typically don't see very modest loan growth In the first quarter, I think we've had maybe one or two years out of 16 where we had pretty decent net loan growth in the first quarter. So we don't usually see it, but we do expect we'll make it up as the loan year goes on. We do expect some growth this year from construction line draws. That'll certainly be a nice tailwind for loan growth. We did expect to see an idle line utilization soon. improved in the back half of 2021, but it did not materialize as we expected. Hopefully, we'll see some improvement in that utilization rate as 2022 moves along. I will say this about our bankers' execution on the triple paycheck protection program. The second round in 2021, our bankers did an excellent job of performing. as they did in 2020 with the first round, and that's led to many new opportunities with commercial and small business customers, and I think it's certainly enhanced our reputation for service first to our customers. So we're very pleased with where we are in the market, and it's certainly improved our brand recognition and enhanced our brand value, we think. On the deposit side, we continue to see growth in deposits. Certainly at a more normalized level than we saw earlier in the pandemic, the growth rate was 12% annualized in the fourth quarter, which is more in line with normal annual growth rates. After the pandemic surge, our correspondent division did experience a decline in deposits in the fourth quarter as our correspondent banks began to deploy some of their excess liquidity in loans and securities. This is the time of year we start having sincere, earnest conversations with different teams about joining the bank. They normally don't move until after incentive payments during the first quarter, which is February, March, April period. We are having discussions with quite a few bankers in new geographic regions. We don't have anything to add at this point in time. Again, we're not trying to add large numbers of bankers, but trying to add look for a very small number of high-quality bankers to add to our bank. So that's certainly, we are optimistic on that front for this year. So that will conclude my initial remarks, and I'll turn the program over to Bud Foshee, our Chief Financial Officer. Bud?

Thank you, Tom. Good afternoon. Liquidity, we discussed the company's plan to purchase $100 million of 15-year mortgage-backed securities and five and seven-year treasuries on the third quarter call. Our net investment security growth in the fourth quarter was $325 million. We also decided to retain a portion of our mortgage originations for the fourth quarter. We sold $6 million to investors and retained $53 million. For our margin, loan growth exclusive of Triple P forgiveness was $878 million for the fourth quarter. Average loans exclusive of Triple P increased by $542 million in the fourth quarter. The average Triple P loans decreased by $163 million for net average growth of 379 million. Triple P fees and interest income were 5.8 million in the fourth quarter compared to 6.4 million in the third quarter. Also, an increase of 831 million in average excess funds decreased the margin by 15 basis points in the fourth quarter. Non-interest expenses Salaries increased 698,000 compared fourth quarter 2021 to 2020. Majority of this increase was in West Central Florida as we added production staff and opened the Orlando office. We hired 17 new producers in 2021. Also, we increased our incentive accrual by 700,000 in the fourth quarter. Year-to-date 2021 incentive expense was $17 million versus $12.3 million for year-to-date 2020. We also invested in a new market tax credit during the fourth quarter. The investment write-down increased non-interest expense by $3.1 million for the quarter, but was more than offset by an income tax reduction of $4.1 million. We accrued $3 million related to termination fees for the change in our core vendor. This reduced the fourth quarter fully diluted EPS by $0.04 to $0.99. Unfunded commitment reserve, we had a $1.7 million credit in the fourth quarter of 21 versus a charge of $1.2 million in the fourth quarter of Our LIBOR cap, which we purchased a few years ago, we rode up the value by $839,000 in the fourth quarter of 21 versus a write-down of $61,000 in the fourth quarter of 2020. Non-interest income, credit card income continues to grow, $2.2 million in the fourth quarter. versus $913,000 in the fourth quarter of 2020. Spend was $229 million in 2021 versus $168 million in 2020. And year-to-date 2021 spend was $815 million versus $601 million year-to-date 2020. That concludes my remarks, and I'll turn it over to Henry.