ServisFirst Bancshares, Inc.

Greetings. Welcome to the Service First Bancshares Third 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 Mr. Davis Mange, Treasurer. Thank you. You may begin.

Good afternoon and welcome to our Third Quarter Earnings Call. We'll have Tom Broughton, our CEO, Jim Harper, our Chief Credit Officer, and David Sparacio, our CFO, covering some highlights from the quarter, 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. Service First assumes no duty to update them. With that, I'll turn the call over to Tom. Thank you, Davis. Good afternoon, and thank you for joining our third quarter conference call. I'll give you a few quick highlights of the quarter, followed by Jim Harper, our Chief Credit Officer, and David Sparacio, our Chief Financial Officer. On the loan side, while the growth in the loan book was lower than we would like, we think it was a combination of unexpected payoffs and loans not closing as expected during the quarter. We did see some low fixed rate loans pay off in the quarter, which is always good for our earnings per share. So that's very much positive. We did see some good growth in C&I loans in the third quarter, which is very positive and like seeing that. On the loan pipeline, you know, I went back and looked at the pipeline three months ago and it was very solid. and it was at record levels, but 40% of the total pipeline was over 90 days. So in this quarter, the total pipeline less than 90 days is up 58% over last quarter. So we think that is a good indicator of future closings over the next few months. We do see that our Houston pipeline continues to build. We have a large, we're talking about it's a large group of bankers out there They're doing a great job and getting off to a good start. On the deposit side, we did allow some large municipal deposits to roll off in the quarter due to rate competition. The rate competition is primarily coming from GCF banks rather than regional banks. We couldn't compete at that rate and chose to not compete. We do have some deposit initiatives underway. and expect good results in the fourth quarter. We have emphasized non-interest-bearing deposits and we have seen good growth year-over-year of 12% in non-interest-bearing deposits, so that's a positive for the bank. We did add six new bankers during the quarter, including two in Houston. We do have, as I mentioned, we have 22 bankers there now and it's the largest startup in our Tim Parker for a credit update.

Good afternoon. As Tom mentioned, third quarter loan growth was muted relative to second quarter 2026 performance as we ended the quarter with just over $14.7 billion in outstanding loans versus just under $14.5 billion of loans at 63026. However, those figures did represent loan growth year-to-date of over $1 billion and produced an annualized growth rate of 10%. Anecdotally, loan activity does seem to have picked up in recent weeks, so early indications are that we're on pace to finish the year strong. On the topic of payoffs, we did experience higher payoffs in the third quarter versus the second quarter, and while we do our best to handicap expected payoff activity on a forward-looking basis, given the uneven nature of payoffs over the course of this year and the current rate environment, continues to be challenging to pin down a reliable estimate of payoff activity. Turning to credit quality, while total non-performing assets increased slightly on a quarter-over-quarter basis, non-accrual loans decreased by approximately $9.6 million during the quarter to $161.8 million. The net decline in non-accruals was driven by the successful resolution of two problem credits during the quarter, as well as the movement of two loans into our OREO portfolio. Lastly, I'll address net charge-offs and provision activity for the quarter. Charge-offs total $7.7 million for the third quarter and are $19.8 million year-to-date, equating to 21 basis points annualized. Regarding provisions, we increased our Allowance for loan losses by approximately $7.2 million to $189 million as of the end of the quarter. And that allowance increased slightly to 1.28% of loans, which was up two basis points from June and covers our non-accrual loans 118%, up from 107% last quarter. David's up next with an overview of our quarterly financial performance.