ServisFirst Bancshares, Inc.

Greetings. Welcome to the Service First Bank Share Second 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, Head of Investor Relations. Thank you. You may begin.

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 projection shared today through the factors described in our most recent 10-K and 10-Q files. Forward-looking statements speak only as if 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 second quarter call. I'm going to, before Bud talks about the numbers, I'm going to give a few highlights of the quarter. On the loan side, obviously the loan growth was extremely strong in the quarter, excluding Triple P loans. Loans grew $803 million in the quarter. One factor is there were really no payoffs in the quarter, and we expect those to accelerate in the third and fourth quarters, which will moderate the loan growth. We still see a strong pipeline of loans, but we do expect to be more offset with payoffs in the third and the fourth quarters. On the deposit side, we did see some runoff in the correspondent deposits that are making making loans and buying securities just like we are. And as well, they, you know, our customers are experiencing very strong profitability. So they are, um, uh, tax payments were up a good bit in March and April, uh, above normal. So that affected deposit levels as well. I think we'll probably be back to more typical patterns of deposits, uh, pre pandemic for, for most of the bank's history would see, you know, deposits decline in the first quarter, kind of be flat in the second quarter, and then grow in the third and the fourth quarter of the year. I was going to talk for a minute about loan quality. Obviously, that's on everybody's mind, and we talk about it at our board meetings and our management meetings often, of course. With the prospect of a possible recession ahead, we're often asked about what we're seeing. First, Henry Abbott will talk in a minute about our loan quality, but our loan quality metrics are the best we've ever had as far as I can remember. Hopefully, we've been very proactive in loss recognition. We certainly want to be proactive if we are facing a recession. We want to be proactive in loss recognition as quickly as possible. In terms of loan underwriting, I've had investors say, have you changed your underwriting? The answer is no. We want to be consistent year in and year out. Good banks are very consistent on underwriting. They don't change. They don't blow with the wind. When times are good and times are bad, they underwrite exactly the same way. Certainly, we stress test every loan that we make. We certainly do a stress test on it. I think we have a pretty good system and have a good track record. of performance over the years. We do say we're a disciplined growth company that sets high standards for performance. I can assure you our credit team is looking for cracks on the economy. Henry and his group are constantly looking. On the C&I side, any of the problems that we see are people that just aren't good business people. It's not really because of any meltdown in one economic area, one type of business or On the CRE side, the big question there is, will cap rates move up? As of now, they really haven't. The investors are looking for yield on high-quality reef-type products. I call it CD replacement investments in multifamily industrial and residential rental products. What really gives me the ability to sleep well at night to an extent, is that we see strong migration continue into the southeast, and I think it will offset some of the recessionary forces if we do experience a recession. Frankly, I don't think a little bit of a slowdown would be all that bad for the economy. I got kind of spoiled the last couple of years when we were traveling. All the nicer hotels were pretty inexpensive, and now that's not the case anymore. I'm back in the less expensive hotels, so I'm kind of missing that. We have a few hospitality operators that are customers, and they are reporting very strong occupancy and very high rates. So that wouldn't be all bad to have a little bit of a slowdown there. In terms of talent, we added the most new bankers in a quarter. We've ever added 15 in a quarter. We think we brought in some top talent into our company. If I had to say what I think is one of the strengths of our company is that we've not had any turnover in senior leadership in our banks, in our regions over the last 17 years. We've had a few retirements, but we've not had any turnover and we've had very loyal executive team in the bank. We do want to be the best place for a commercial banker to be. I think an absence of bureaucracy at our company is attractive to many bankers. So I'll stop there and let Bud cover some of the financial aspects, Bud.