ServisFirst Bancshares Reports Third-Quarter 2026 Results

Servisfirst Bancshares (NYSE: SFBS ) reported third-quarter financial results on Monday. The transcript from the company's third-quarter earnings call has been provided below. This transcript is brought to you APIs. For real-time access to our entire catalog, please visit for a consultation.

View the webcast at Summary Servisfirst Bancshares reported modest loan growth with outstanding loans reaching over $14.7 billion, representing a 10% annualized growth rate. The company noted higher payoffs but expressed optimism for future closings due to an increased loan pipeline. Noninterest-bearing deposits grew by 12% year-over-year, despite allowing some large municipal deposits to roll off due to rate competition. Strategic initiatives to boost deposit growth are underway, with expectations for improved results in the fourth quarter.

Net income for the third quarter was $87.3 million, or $0.80 per diluted share, marking a 23% adjusted EPS growth from the previous year. The net interest margin remained stable at 3.63%, with asset yields and deposit costs showing favorable trends. The company completed a 2-for-1 stock split and announced a share repurchase plan for 2 million shares, indicating potential use of excess capital. The Houston expansion remains a critical focus, with 22 bankers driving growth in loans and deposits.

The company expects startup losses in Houston to decline as the market matures. Management reported strong capital positions with stockholders' equity surpassing $2 billion for the first time, and tangible book value per share increasing by 14.4% year-over-year. Credit quality indicators showed a slight increase in nonperforming assets, but nonaccrual loans decreased, and provisions for loan losses were increased to cover potential risks. Operational expenses saw a temporary increase due to non-recurring costs, impacting the efficiency ratio, which remains best-in-class at around 30%.

Full Transcript OPERATOR Greetings. Welcome to the Servisfirst 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-0 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. Davis Mange (Treasurer) Good afternoon and welcome to our third quarter earnings call. We'll have Tom Bralton, our CEO, Jim Harper, our Chief Credit Officer, and David Sparacio, our CFO, 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 statements speak only as of the date they are made.

Servisfirst assumes no duty to update them. With that, I'll turn the call over to Tom. Tom Bralton (Chief Executive Officer) 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 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—talking about it—a large group of bankers out there. They're doing a great job 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. And you know the rate competition is primarily coming from G-SIB banks rather than regional banks. So 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 noninterest-bearing deposits and we have seen good growth year over year of 12% in noninterest-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 history, you know, even larger than when we started the Birmingham bank.

So it's very much a work in progress, but we're very optimistic about the future there. We do expect the startup losses to begin to decline over the next few quarters as they do have a solid loan and deposit pipeline. So with that I'll turn it over to Jim Harper for a credit update. Jim Harper (Chief Credit Officer) 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 in loans at 6/30/26. 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, it continues to be challenging to pin down a reliable estimate of payoff activity. Turning to credit quality, while total nonperforming assets increased slightly on a quarter-over-quarter basis, nonaccrual loans decreased by approximately $9.6 million during the quarter to $161.8 million.

The net decline in nonaccruals 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 totaled $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 2 basis points from June and covers our nonaccrual loans 118%, up from 107% last quarter. David's up next with an overview of our quarterly financial performance. David Sparacio (Chief Financial Officer) Thank you, Jim, and good afternoon, everyone. Before I get into the numbers, a quick housekeeping note.

We completed our 2-for-1 stock split during the quarter, so every per-share figure that I referenced today, including prior periods, is adjusted for that split. The story of the third quarter is consistent with what we have been telling you all year. We continue to increase our revenue through asset growth and a wider margin while holding a best-in-class efficiency ratio, and that combination continues to produce top quartile returns. For the third quarter of 2026, we reported net income of $87.3 million, or $0.80 per diluted share.

That compares to $0.78 in the second quarter, up 2.6% on a linked quarter basis. Last year's third quarter included a $7.8 million pre-tax loss on securities; excluding that, adjusted diluted EPS from a year ago, $0.65. So on an adjusted basis we grew earnings per share 23%. For the first nine months of 2026, net income was $256 million, up 28% from adjusted EPS of $1.84 in 2025.

Pre-provision net revenue was $120.7 million, up 1.8% from the second quarter and up 26% from an adjusted pre-provision net revenue a year ago. Net interest income was $159.8 million, up $4.2 million, or 2.7% from the second quarter, and up $26.4 million, or nearly 20% from a year ago. Net interest margin was 3.63%, unchanged from last quarter on a GAAP basis. But as you'll recall, the second quarter included a recovery of interest income from a payoff on a nonaccrual relationship which added about five basis points to margin.

Excluding that recovery, our margin expanded about 5 basis points this quarter and it is up 54 basis points from 3.09% a year ago. On the asset side, total loan yields were 6.24% compared to 6.23% last quarter. Investment yields were 3.85%, up from 3.82% last quarter and 3.60% a year ago. The securities portfolio was $1.56 billion at quarter end, down nearly $290 million from a year ago, as we continue to deploy portfolio cash flows into loans.

As we have mentioned in the past, we continue to have low fixed-rate loans repricing in the next 12 months. We currently have about $1.5 billion of loans with a weighted average yield of 5.08%, plus we have a normal cash flow and covenant violation flow that allow us to gain yield in our loan portfolio. Additionally, we are restructuring some securities and other non-lending assets in the fourth quarter to improve the margin in future periods, so we expect to continue our margin expansion into 2027. On the funding side, despite the increase in benchmark rates, our average cost of interest-bearing deposits was flat at 2.80% and is down 61 basis points from a year ago.

We were also encouraged to see average interest-bearing checking balances grow by about $378 million in the quarter at a cost of 1.58%. Our average rate on federal funds purchased, which is primarily our correspondent banking funding, was 3.78% compared to 3.74% last quarter and 4.46% a year ago. On noninterest income, we came in at $13.1 million for the quarter, which was up from $12.9 million in the second quarter and up 23% from $10.6 million on an adjusted basis a year ago. Bank-owned life insurance income was the biggest driver at $4.3 million, up 81% year over year and 5% linked quarter, reflecting the policies we added over the past year.

Service charges on deposit accounts were $3.4 million, up 4% year over year and 3% linked quarter, and credit card income held steady at $2.4 million for the quarter. Noninterest expense was $52.2 million for the quarter, up 4.5% on a linked quarter basis and 8.8% year over year. Of this year-over-year increase, $4.2 million—40% of that—is the full impact of the Houston market. The remaining expense increase of $2.4 million is composed mostly of non-recurring expenses experienced during the quarter.

This expense growth rate is a fraction of our revenue growth, which grew 20% year over year. Our efficiency ratio is 30.20% compared to 29.65% last quarter and 35.22% a year ago, or 33.31% adjusted. Our effective tax rate for the quarter was 17.20% compared to 19.94% last quarter and 16.81% a year ago. The linked quarter decline reflects investment tax credits we purchased during the quarter.

These continue to give us a meaningful benefit and we will keep evaluating similar opportunities. Turning to the balance sheet, as Jim mentioned, our ending loans were $14.7 billion, up $259 million from the second quarter, or 7.1% annualized, and up $1.43 billion, or 10.7% from a year ago. Average loans grew $320 million, or 8.9% annualized. Over the past year, growth has been balanced between C&I loans, up 15%, and investor real estate, up about 16%.

Capital continued to build. Stockholders' equity passed $2 billion for the first time at $2.04 billion. Common equity tier 1 capital to risk-weighted assets was 11.98% on a preliminary basis, up 49 basis points from 11.49% a year ago. Total risk-based capital was 13.26%.

Our tier 1 leverage ratio was 11.11%. And tangible common equity to tangible assets rose to 11.05%, up 33 basis points on a linked quarter and nearly 100 basis points year over year. Tangible book value per share was $18.51, up 14.4% year over year. On liquidity, we ended the quarter with $1.19 billion in cash and cash equivalents, along with $1.56 billion in securities.

We continue to have no FHLB advances and no brokered deposits. Our funding remains core and relationship driven. To sum up the third quarter, earnings per share grew 33% year over year. Our core margin expanded again.

Loans grew more than 10%. Our efficiency ratio stayed around 30%. Credit metrics improved and book value per share is up 14%. We are generating capital faster than we are using it, which gives us real flexibility as we head into the fourth quarter.

And with our newly approved share repurchase plan, we expect to deploy some of that excess capital in a value-added way. With that, we will now take your questions. OPERATOR Excellent. 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 that your line is in the question queue. You may press star-2 if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.

We will now poll for questions. Our first question is from Steven Scouten of Piper Sandler. You may proceed with your question. Steven Scouten (Analyst at Piper Sandler) Yeah, good afternoon.

Thanks. Maybe if I could start on the margin. I know, David, you said it feels like you have additional upside into '27 and it looks like the margin was maybe 3.68 in the final month, so up another five basis points. Just kind of wondering, you know, magnitude of change.

If you still think we're kind of in this 4 to 5 bips a quarter range or if, with the potential for, you know, another December hike, if any of that math changes. Would you guys be slightly liability sensitive, and kind of any underlying assumptions within that would be great. David Sparacio (Chief Financial Officer) Yeah, no, Stephen, this is David. And, you know, I still expect it in that five to seven basis point increase range.

You know, I mentioned it: we still have about $1.5 billion of low fixed rate loans repricing. The average rate on those is about 5.08%. You know, our going-on rate, or the average rate for renewals and new loans, was 6.59% in the quarter, so we still have some room to grow there. You know, the more important piece of it, I think, is deposit cost.

We were able to be selective on deposit costs as the Fed raised rates this quarter, and so we were able to tamp down any increases in our deposit costs, and we expect to do the same thing for any future hikes. You know, Tom mentioned in his comments about the expensive municipal deposits that we let walk away because we were being outbid by a G-SIB. And so, you know, it's going to be opportunistic pricing on deposits, and it's going to be disciplined on the asset side as we get those repricing opportunities in front of us.

And so, yeah, I don't expect anything— I mean, we still, you know, 53% of our loan book is variable rate, and so, you know, we're going to have some upside potential in existing variable rate loans as well that get a higher yield as the Fed is raising rates. So, I mean, you throw all that in and we still have room for expansion. It's just going to be at a slower pace than what we saw earlier in this year. But the point is it's still expansion at the end of the day.

Steven Scouten (Analyst at Piper Sandler) Okay, that's really helpful, thank you. And then it sounds like the pipelines are building. Loan demand is good, I guess. You know, Houston is still in relatively early stages.

So if we have, like, continued strong loan growth, how much of an impediment is the loan-to-deposit ratio where it sits today? And, you know, could deposit growth be a constraint on loan growth if it can't, you know, match the robust loan growth you guys have been delivering? Tom Bralton (Chief Executive Officer) You know, given a choice, this is Tom, of course, Steve. Given a choice, we always prefer to need deposits rather than need loans because we can find the deposits.

But you can't just go find the loans, as you well know. It's just—they just don't—you know, you've got to have loan demand. And so if we can have the loan demand, then we'll come up with ways to, you know, match off with deposits. And this is typically the time of year we have really good, you know, deposit growth in the fourth quarter.

So we anticipate that again, and our deposit pipeline is good, so we're optimistic on that front. We've always found a way to grow deposits. Steven Scouten (Analyst at Piper Sandler) Yeah, no, that's fair. And I think, Tom, you mentioned some deposit initiatives underway.

Anything specific there that you could comment on? Just give us an idea of where you might look to drive deposit growth here? Tom Bralton (Chief Executive Officer) No. Well, we do it individually by region, and each region has their own unique, you know, goals and ways to grow deposits.

So that is something we work, you know, all 12 regions on—or 13 including Correspondent. So we feel like we have some good initiatives underway, and, you know, you've got to go to where you find deposits first of all—you know, where's the money? You know, so. Steven Scouten (Analyst at Piper Sandler) Absolutely, there's no doubt.

Okay, well, thank you for the time.