ServisFirst Bancshares, Inc.

Greetings and welcome to the Service First Bank Shares fourth quarter earnings call. At this time, all participants are in a listen-only mode. A brief 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. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, David Malmge, Director of Investor Relations. Thank you, David. You may begin.

Good afternoon, and welcome to our fourth 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 statement. Speak only as of the date they are made. Service first assumes no duty to update them. With that, I'll turn the call over to Tom. Thank you, Davis. Good afternoon and welcome to our fourth quarter conference call. I do want to make a few comments on the year I think are in order before we move on to the 2023 outlook. We certainly are pleased with the results of the year. It's the second straight year that our Earnings per share growth exceeded 20%. Also, our return on equity exceeded 21%, and our efficiency ratio was 29%. And I must say this trifecta of 20s was due to the hard work of the best bankers in the industry. They actually do a pretty good job of making an average bank CEO look better than average, so I appreciate what they do to make us successful and Thank them for everything they've done for our company and for our shareholders. However, though, there's little time to celebrate success as our shareholders do want to know what we plan to do in 2023. So we'll move on and talking about a little bit about the year and going forward. In talking about liquidity, our bankers have focused on building deposits since the middle of 2022. We have seen a steady increase in the deposit pipeline over the last four months. We're certainly pleased with the process and we're consistently seeing the deposit pipeline at 150% of the loan pipeline. This is a BUDL cover. We did grow liquidity in the fourth quarter and we're very pleased with our progress there. Fortunately, we built our bank with core deposits, which are primarily commercial, not any brokered CDs and Federal Home Loan Bank advances. Our clean balance sheet is a tremendous asset in the current environment. On the loan side, we did see good loan growth in the fourth quarter. We always see robust loan demand in the fourth quarter. There's some year-end draws for company balance sheet purposes that we see. That's always strong. We do see some slowdown in our loan pipeline. It's mostly due to our being more selective on rate terms and structure. and focusing on our core customers. Banks are in a much better position than in many years on the loan front. We are certainly in a stronger position. It will take time to see the improvement in loan yields, but it will come in the next couple of years. From a team standpoint, we brought in eight outstanding new bankers in the fourth quarter, and we now have 154 producers. While we are focused on cost containment in 2023, the door is always open for outstanding bankers. I'm going to turn it over to Bud Foshee now.

Thank you, Tom. Good afternoon. Liquidity, our liquid assets increased by $470 million from September 30th to December 31st. We expect this positive trend to continue in 2023 and as we anticipate low double-digit deposit growth versus high single-digit loan growth. Our net interest margin, Triple P fees and interest income were $102,000 in the fourth quarter of 2022 compared to $5.1 million in the fourth quarter of 2021. Year-to-date Triple P fees and interest income were $7.7 million in 2022 No triple P fee income is anticipated for 2023. Deposits increased by $500 million in the fourth quarter. Our net interest margin by quarter, starting with the fourth quarter of 21, it was 2.71. First quarter of 22, 2.89. The second quarter, 3.26, third quarter, 3.64, and in the fourth quarter of 22, it was 3.52. Our loan loss provision, our allowance for credit losses to total loans was 1.25% at December 31st, 22, and that is unchanged from September 30th of 2022. Our net charge-offs to average loans were 0.06% for the fourth quarter of 2022. Non-interest income credit card income was $2.3 million in the fourth quarter versus $2.2 million in the fourth quarter of 2021. Our net interest cap income was $162,000 for the fourth quarter and $7 million year-to-date. We anticipate the net income to be zero in 2023 as the cap matures in May of 2023. Non-interest expenses, salaries and benefits. As a result of our market expansions, total salaries increased by $572,000 in the fourth quarter and by $6 million year-over-year. Fourth quarter 2022 incentive expense was 3.2 million versus 4.3 million for the third quarter of 2022. We had net new ads to staff of 13 employees during the fourth quarter and 71 for 2022 year to date. Capital, the bank's tier one capital leverage ratio has improved by 192 basis points since December 31st, 2021. The ratio was 7.79 at 12-31-21 and it improved to 9.71 at 12-31-22. Tax credits, we have taken steps to extend the benefit period of some of our proprietary tax credits. I'll turn the program over now to Henry.