[Management View]
ServisFirst Bancshares management highlighted a notable increase in the loan pipeline in October compared to September, which may drive improved loan growth in upcoming quarters and offset recent weakness from elevated paydowns. Actions to restructure the bond portfolio included the sale of low-yielding securities and reinvestment into higher yields, which is expected to support further net interest margin expansion in subsequent quarters. The increase in nonperforming assets was linked to a single borrower, but management described successful collateral enhancements and ongoing asset resolutions anticipated before the end of Q4. New hires contributed to the full profitability of all operating markets.

[Outlook]
Management expects continued margin expansion due to anticipated Federal Reserve rate cuts. They are targeting deposit cost reductions in excess of future rate cuts. The company is also open to further tax-advantaged investments following the success of a solar tax credit investment.

[Financial Performance]
Sequentially, normalized net interest income increased $8.4 million compared to Q2, with a normalized net interest income increase of $22.7 million year-over-year. Net income grew more than $9 million or 18% from the same quarter last year. The efficiency ratio improved year-over-year, with adjusted efficiency ratio at 33.31%.

[Q&A Highlights]
Question 1: What was the dynamic that pushed the borrower over to nonperforming status, and what's the loan-to-value on the loans?
Answer: The borrower expected a large payment before quarter-end, which did not come in, leading to the move to nonaccrual status. Additional collateral was obtained, and management expects the loan to return to accrual status over the next six months. The loan-to-value is below 1:1, and management feels comfortable with the exposure.

Question 2: What is the cadence of margin improvement, and where are loan yields currently?
Answer: Management expects 7 to 10 basis points improvement in margin each quarter. The normalized spot rate for September was 3.28%, excluding the net interest accrual reversal. Loan yields dropped slightly from 7.07% last quarter to 6.87% this quarter. There is approximately $2 billion worth of opportunity for repricing on loans.

Question 3: Where are you seeing loan pipeline growth and demand for loans?
Answer: Loan demand is spread across various regions, with strong performance in Atlanta and new markets like Memphis and Auburn. Overall loan demand is okay, but more rate cuts are needed to help out loan demand.

Question 4: Can you provide expectations for compensation, salaries, and benefits in the final quarter of the year?
Answer: Noninterest expense is expected to be similar to the third quarter, around $48 million. The efficiency ratio remains best-in-class, and expense increases are a fraction of revenue increases.

Question 5: Are there any new markets on the horizon for ServisFirst?
Answer: Management is interested in Texas, but acknowledges the challenges of entering the market. They emphasize the importance of having the right group of people and offering stability to customers.

Question 6: When was the security sale completed, and is there any incremental benefit to the run rate of securities yields in the NIM in the fourth quarter?
Answer: The security sale was completed in late September, and the full benefit will be seen in the fourth quarter. The expected benefit is around 500 basis points or 250 basis points on $70 million.

[Sentiment Analysis]
Analysts and management maintained a positive tone, focusing on strategic initiatives and future growth opportunities. Management expressed confidence in their ability to manage nonperforming assets and improve margins.

[Quarterly Comparison]
| Metric | Q3 2025 | Q2 2025 | Q3 2024 |
|----------------------------|---------|---------|---------|
| Net Income | $65.6M | $57.2M | $56.6M |
| Diluted EPS | $1.20 | $1.05 | $1.00 |
| Net Interest Income | $133.4M | $125.0M | $110.7M |
| Normalized Net Interest Income | $137.8M | $129.4M | $115.1M |
| Net Interest Margin | 3.09% | 2.97% | 2.80% |
| Normalized Net Interest Margin | 3.19% | 3.08% | 2.90% |
| Efficiency Ratio | 35.22% | 36.90% | 36.90% |
| Adjusted Efficiency Ratio | 33.31% | 34.50% | 34.50% |
| Book Value Per Share | $32.37 | $28.40 | $28.60 |

[Risks and Concerns]
Nonperforming assets increased by approximately $96 million during the quarter, driven by a relationship with a large merchant developer and rehabilitator of multifamily properties. Higher net charge-offs totaled just over $9 million, resulting in an annualized net charge-off to average loan percentage of 0.27%. A loss of $7.8 million was recognized on the sale of bonds.

[Final Takeaway]
ServisFirst Bancshares demonstrated resilience in Q3 2025, with strategic initiatives aimed at improving loan growth and net interest margin. Despite challenges with nonperforming assets, management's proactive measures and successful collateral enhancements provide confidence in future resolutions. The company's focus on expense control and efficiency, along with new market expansions, positions it well for continued growth and profitability.