ServisFirst Bancshares, Inc. Q3 FY2024 earnings call

• Loan Pipeline: Pipeline is strong; loan growth seen in Q2 but delayed in Q3 due to election and customer wait for rate clarity; hospitality loan demand robust but with exposure limits. - Credit Quality: Net charge-offs low, loan loss reserve increased, NPA to total assets at 25 basis points, AD&C as a percent of capital dropped 80%. - Margin: Net income up ~15% QoQ, margin up 9%, benefited from tax credit investments and rate changes; slightly liability sensitive, but repricing of fixed rate loans and securities will continue to drive margin tailwind. - Expenses: Non-interest expenses controlled, efficiency ratio below 37%; core expenses around $45 million quarterly. - New Markets: Making progress in Memphis and Auburn with new bankers hired, taking time to contribute but optimistic for future.

Loans: Loan balances didn't grow in the quarter but had $126 million of early loan payoffs with an average rate of 4.89% and $105 million of loans repriced from low-rate fixed to higher-yielding. Deposits: Had a larger municipal outflow in Q3 but expected return in Q4. Credit Quality: Annualized net charge-off to total average loans was 9 basis points, down from prior quarters; loan loss reserve grew by $4 million to 1.31% of total loans, and a special Hurricane Helena reserve of $2.7 million was created. Net Interest Margin: Increased 9% quarter-over-quarter; yield on interest earning assets rose 11 basis points, while rate on interest bearing liabilities rose 3 basis points. Non-Interest Income: Deposit fees and mortgage fees increased, but credit card net revenue decreased slightly. Core Expenses: Core operating expenses are around $45 million per quarter.

• Expect loan demand rebound in Q4. - Continued margin tailwind from repricing fixed rate loans and securities over next few years. - Tax rate for Q4 expected to be around 19%. - Contribution from new bankers will start to be seen as they gain experience (takes ~6 months).

• Election delay impacting loan closings. - Some customers waiting on further Fed rate cuts affecting loan demand. - Overbuilding in certain commercial real estate segments suppressing new product demand. - Potential for future loan losses though currently benign.

Q: Go into more detail on loan pipeline for Q4 and 2025?

A: Tom mentioned pipeline is strong but Q4 likely not as strong as Q2, but expects decent closings due to year-end; pipeline exists with payoffs and potential loan stays.

Q: Thoughts on loan pricing?

A: New loan rates close to 8%, benefited from $126 million of low fixed rate loans paying off.

Q: Details on large borrower placed on special mention?

A: Total relationship size $97 million, divided into 8 projects, all granular, not substandard.

Q: Impact of cash liquidity on margin?

A: Average cash balance $600 million higher in Q3, which slightly impacted NIM percentage but not dollars; cash will likely come down as funding for loans.

Q: Outlook for core operating expenses?

A: Core expenses still seen around $45 million, with possible adjustments in incentive accrual but no major changes.

Q: Average rate of paid-off loans?

A: $4.89%