ServisFirst Bancshares, Inc.

with new loan yields of 6.81% and about an even split between variable and fixed rates. We ended the quarter with just slightly less than 49% of our loan book being variable rate-based. We continue to see core deposit growth, and our loan-to-deposit ratio stands at 89%, with our adjusted loan-to-deposit ratio, including correspondent Fed funds purchased, of 77%. As I mentioned, our Fed balances increased significantly during the quarter, about $380 million on average balances versus the fourth quarter, which certainly helps our liquidity but hurts our percentage margin calculation. Additionally, we grew our tangible book value by 3% since last quarter and 13% from the same quarter a year ago, ending at $30.31 per share. We continue to be well capitalized with a common equity Tier 1 capital ratio of 11.4% and risk-based capital ratio of 12.9% for the quarter. On net interest income, for the quarter, it was $123.5 million, which is $21 million higher than first quarter 2024 and just slightly higher than fourth quarter 2024. I will remind you that in first quarter of 2024, we had one extra day due to leap year, and fourth quarter 2024, we had two extra days when compared to first quarter 2025. We feel good about our dollar margin given the reduction in day count. The margin percentage was diluted this quarter by our higher than normal cash balances at the Fed. This excess cash diluted our margin by six basis points this quarter. Over the next 12 months, we will have $1.5 billion of projected cash flow from fixed rate loans at a rate of 4.76% and projected pay downs of mortgage-backed securities of $100 million at a rate of 2.5%. In addition, with tax and audited statements due soon, we anticipate loan repricing opportunities. In 2024, total repricing was $357 million. Year to date for 2025, total loans repriced are $60 million and $95 million are pending. Thus, we anticipate over $1.9 billion in asset repricing over the next 12 months. Our provision expense was down this quarter due to the release of the reserve previously marked for hurricane losses. We have not seen any hurricane loss materialize, so when we unwound that and updated our CECL model, The result was a provision expense of $6.6 million, which is up $2.1 million from first quarter 2024 and $900,000 from fourth quarter. The allowance for credit losses ended the quarter just over $165 million, which is an increase of about $576,000 from fourth quarter, primarily due to the growth in the loan balances. As Henry mentioned, our allowance ratio dropped from 1.30% of total loans in the fourth quarter to 1.28% in the first quarter of 2025. I will point out that we were at 1.28% in the second quarter of 2024 before the general hurricane reserve was established. So this is just a normalization of our allowance level. On non-interest income in first quarter of 2025, we were down about 7% versus first quarter 2024, but this decline was driven by a one-time bully death benefit recorded in 2024. From a normalized rate, we saw an increase of about 7% in non-interest income versus first quarter of 2024, primarily driven by higher service charges on deposit accounts. Versus fourth quarter 2024, non-interest income was down $526,000 due to a lower day count and seasonal declines in credit card and mortgage activity. We expect non-interest income to pick back up in second quarter of 2025. During the quarter, our non-interest expense was down $789,000 versus fourth quarter 2024 and flat versus first quarter 2024. This is a testament to our expense discipline as we have experienced growth of 5% in our number of employees since first quarter 2024. And first quarter always sees a seasonal spike in payroll taxes versus fourth quarter. Payroll expense was down about 5% versus fourth quarter due to the true up of 2024 incentive plan payouts. This incentive reduction was offset by a one-time operational loss we experienced in the first quarter. This resulted in an efficiency ratio below 35%, which we are very proud of. For the remainder of the year, we expect our non-interest expense to be in the $46 to $46.5 million range, obviously fluctuating based on our expansion efforts that Tom mentioned earlier. For the first quarter, our pre-tax net income was relatively flat compared to fourth quarter 2024, which we view as a win considering the fewer dates. Versus the same quarter last year, our pre-tax net income is up over $18 million, or 30%. We continue to focus on organic loan and deposit growth, priced both competitively and profitably. On our income tax provision, we saw an increase driven by less credits. Our 2024 effective tax rate, which was about 18%, increased in the first quarter to about 20%, which is the expected run rate for the remainder of 2025. Now, I will turn it back over to Tom for additional comments.

Thank you, David, and I'm sure you've all seen the 8K we filed a little bit ago after the market closed regarding Henry's career change, and I would like to thank Henry Abbott for all his contributions to our strong credit culture, and we wish him well in his next chapter of his business career. And I know Rodney wants to make a few comments as well about Henry.

Thanks, Tom, and And also, I'd like to thank you, Henry, for the hard work you and all your team put in and accomplished over the last few years. As you make this transition to your next business endeavor, I want to especially thank you for making the transition a smooth, seamless one. Agreeing to work over the next few weeks full-time and then in a consulting role with Jim has made this much easier for all of us. And thank you again and good luck. With your work ethic, I am sure you will be successful in whatever you do. With that, I'll turn it back to Tom.

Thank you, Rodney, and I think we'll now open it up for questions.

Thank you. We'll now be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your headset before pressing the star keys. One moment, please, while we poll for questions. Thank you. Our first question comes from the line of Steven Skoudin with Piper Sandler. Please proceed.

Yeah, good afternoon, everyone. Congrats on a great quarter here. I know you mentioned some influence from municipal deposits, but just kind of curious how you're thinking about deposit trends for the rest of the year, given such a strong start here in the first quarter.

Yeah, Stephen, I wouldn't project that out for the next three quarters. I think some of that is probably on the correspondent side. Rodney can address that. But I think some of the municipal deposits will probably – you know, run down as the course of the year goes on. Rodney, you want to?

Yeah, for the first quarter, correspondent was up a little over $430 million in total fundings from year end. And, you know, in the first quarter, correspondent balances tend to grow and accumulate heading into the tax season. And we have seen that level off since then. But that's where a large chunk of it came from.

Okay, so if I think about that, I mean, that should kind of normalize but still continue to grow. It would be fair to assume kind of cash balances move down in a likewise fashion throughout the year and kind of the NIM maybe pulls back up as the balance sheet remixes. Is that the right way to think about the trajectory of the NIM from here?

Yes, Steven, this is David Sparacio. Yes, we're already actually seeing that come down a bit, the cash balances. We track them on a daily basis. And we're seeing some of that retract as well. So, I mean, you could see the average balances are not nearly as high as the period end balances were. So we expect those cash balances to come down over the next few months.

Okay, great. And then just last thing for me, just kind of curious, I mean, obviously loan growth was fantastic here in the quarter. And just anything kind of anecdotal that you're hearing from customers, if there's been any sort of change in the pipeline or demand kind of post-pandemic? April 2nd and a little bit of this uncertainty that the market seems to be overwhelmed by?

You know, I think there may be a bit of a slowdown, Stephen, but, you know, Main Street is a heck of a lot more durable than Wall Street. And I think the effect is, you know, it helps some companies, it hurts some companies. You know, if you're a If you're a Porsche dealer and they make nothing in the United States, then you probably are pretty concerned right now. We don't bank any Porsche dealers, I don't think, to my knowledge. If you're a Ford dealer, you're feeling pretty good about the 80% of their models assembled and made here, parts and all. We just don't see, certainly it's not, the commercial real estate transactions need short-term interest rates to to come down to improve the environment there a bit, but we think that what we need to see is a combination of asset repricing and growth at the same time, and that'll get us to where we need to be in terms of growing our earnings back to more normal historical levels of profitability in terms of return on assets, return on equity that we enjoy. We don't, at this point, see any significant impact from tariffs. I could be naive, but, you know, things like that that get a big, you know, they carry on about it on CNBC all day long, but people on Main Street don't watch CNBC. They're running their companies and businesses, and, you know, obviously, there's certainly a buy-in aspect if people fear inflation. They tend to spend money now, so they're I think there's as many positive benefits as negative benefits at this point in time, Stephen. We don't see anything odd from our correspondent banks either. We have 390 correspondent banks, so we really capture a pretty good cross-section of the Southeast United States plus more. So I don't think We'd be hearing things, and I think everything is, you know, we don't see anything in our card portfolio, credit card portfolio, anything odd. We don't, you know, everything, even the, seems like the senior housing is healing up a bit. You know, obviously, if you look at the cost of new senior housing and look at what you can buy, there are people out buying senior housing projects today, existing ones, because they They're substantially cheaper than building new, so people are looking to the future a little bit. It hasn't healed up, don't get me wrong, but it's healing a bit. So, you know, I'm reasonably optimistic about the balance of the year, Stephen.

Great. I like it. I appreciate all the color, guys. Thanks for the time.

Thank you.

Thank you. Our next question comes from the line of Steve Moss with Raymond James. Please proceed.

Good afternoon. Hey, Steve. Hey, Tom. Just following up on loan growth here, the pipeline's up. You had a good quarter production. You still thinking low double digits could be a good pace?

Yeah, we do. We still have some payoffs. I was kind of hoping they would go away after the first quarter, but it seems like they... I guess... Not all of them paid off that I had thought would pay off in the first quarter. But, you know, we're not seeing any big projects. All of our growth we've had so far this year is in smaller, you know, chunks, which is good. And, you know, we're seeing nice, steady, granular, you know, growth in the loan portfolio. So, you know, we feel good about – and it's broad-based. It just tends to be in every market. Of course, you know, Florida is by far – probably the best, but we're seeing a lot of opportunity in a lot of places. So I think, I don't know, Rodney, do you have anything else you want to add there?

No, it's been steady from our correspondence. I mean, the number of participation opportunities we're seeing has just, we've not had a spike and we've not had a decline. It's been steady for the first quarter and we've seen several over the last two or three weeks. I mean, it just We've not seen the slowdown in the projects from the downstream banks.

Again, I think the tariff effect has been nil at this point in time.

Right. Okay. That makes sense. And then in terms of just kind of curious, loan pricing for the quarter on new reginations was 684, I guess, new and renewals. Just curious, you know, has that gotten tighter here as the quarter's gone on, or are you kind of still holding, you think, in the high sixes on originations? Just kind of thinking about that roll-on, roll-off dynamic with loans repricing going forward.

I think it's been the same. It's already too tight. Don't get me wrong, Steve. I mean, I'm not happy with the pricing we're achieving today. I think it should be higher given, but obviously people are projecting that we're going to see a downturn in rates at some point in the year. So it's been steady at those levels.

Okay. And then the other question for me here, just on the operating expenses, 46 million to 46 and a half for each quarter for the rest of the year, is that before the potential of new hires?

Yes, that is before any potential new hires. So, I had that comment in there. Tom talked about expansion efforts. You know, we continue to evaluate any new producers out there. And so, if we hire additional, that would add to that baseline. Yes.

Okay. Of course, we continually have a DOGE program ongoing, you know, in terms of evaluating, you know, effectiveness of our producers. So, you know, it's You always, you get some growth and then you have some reductions in force as well, Steve. I hear you there.

I hear you there, Tom. Okay. Sounds good. And last one for me, just on the non-performers. I know you guys said they were not income producing and not speculative AD&C. Just kind of curious, what kind of industries they were to or, you know, any additional call you can give around those non-performers? that were added. Go ahead, Andrew.

Yeah. Um, I mean, those are, I guess I'd say kind of medical related and very different markets. Um, you know, but once again, those are C and I operating, not just, you know, income producing properties.

Okay. Like senior assisted living or kind of curious how to.

No, it's a hospital. Yeah. One's a hospital and then one's a, one's a doctor.

And the doctor, he's just a doctor that's got cash flow issues, but a lot of assets. Yes. He's overextended, but we've got really good collateral and feel good about our collateral with him. He's just, you know, you know what I say about doctors, Steve? Sometimes they get overextended.

That was good, Tom. All right. I'm going to take a pass on that one. But I appreciate all the color here, and thank you very much. Nice quarter.

Thank you.

Thank you. Our next question comes from the line of David Bissip with Hovde Group. Please proceed.

Hey, good evening, gentlemen. Hi, Dave. Hey, Tom, Dave, quick question. You sort of alluded to the influx of liquidity. I think it was Six basis points of NIM pressure. I appreciate the data and the supplement. Looks like your cost of interest-bearing deposits were 342, two basis points above the quarterly average. Is that reflecting some of the pressure from that immunity inflows and just how much do you expect some of that, is there a way to frame the dollar inflow that could flow out over the next couple quarters?

You know, the two funds, the largest influx was municipal and correspondent, and they're higher cost funds. Is that what you mean, Dave? I mean, they're higher cost of funds, so it doesn't, it's not like we have repricing of our existing deposits or anything to that. Is that where you're going with it, Dave?

Yeah, just sort of trying to get a sense, you know, as those muni and correspondent funds sort of trickle about out, can we expect to see that number start to move south, so to speak, that 342 number? you know, where do you see that sort of trending over the next couple months or so?

Yeah, I would expect, as Tom said, we don't expect that municipal deposit base to stick, right? And so we expect it to exit eventually. And so when it does that, it will drop the cost of deposits down because it is higher yielding for that bucket, right?

You know, given our ongoing, you know, excess liquidity, we're always, you know, we are looking for additional levers we can pull to try to improve income without undue increases in risk. We might deploy some liquidity if we can find some avenues to do so, Dave. We're looking. It won't be huge amounts of effect on net income, but it'll be a little bit. When you've got that much cash, every little bit helps.

Got it. Dave, I think you gave some Dan, about the amount, number of loans you expect to reprice over the next 12 months, you might just go through that again real quick.

Thanks. Yeah, we have about $900 million right now that's going to reprice in a year or less. And the weighted average rate right now is 4.76, and that's on the fixed rate book. On the variable rate book, we have about $2.2 billion that's going to reprice. in the next year or less, and the weighted average rate on that is 7.52% right now.

And then we've got the cash flow on fixed rate loans as well. The cash flow on fixed rate loans is, I mean, and paydowns is a billion five. It's 476. Got it.

Perfect. Appreciate the color.

Okay, Dave. Thank you

Thank you. There are no further questions at this time. With that, that concludes today's teleconference call. You may disconnect your lines at this time. Thank you everyone for your participation.