ServisFirst Bancshares, Inc. (SFBS)·Q1 2025 Earnings Summary

Executive Summary

• Q1 2025 delivered solid fundamentals: EPS was $1.16 (up 26% YoY) on strong deposit (+$886M) and loan (+$281M) growth; PPNR rose 31% YoY while efficiency improved to 35.0% .
• Against S&P Global consensus, EPS was a slight miss (actual $1.16 vs $1.18*) and S&P “Revenue” was below ($125.2M* vs $134.1M*); management cited fewer days in the quarter, a higher effective tax rate (20% vs ~18% in 2024), and elevated cash at the Fed that diluted NIM by ~6 bps as near‑term headwinds .
• Credit normalized: NPAs/Assets rose to 0.40% and annualized NCOs to 19 bps, driven by previously impaired, individually evaluated credits; ACL/Loans eased to 1.28% with hurricane reserve release, but dollar ACL increased .
• Liquidity and capital remained strong (cash $3.35B; CET1 11.48%); deposit growth skewed to municipal and correspondent balances that management expects to seasonally run down, a potential NIM tailwind as cash normalizes .
• 2025 setup: OpEx guided to ~$46.0–$46.5M per quarter and tax rate ~20%; asset repricing pipeline (>$1.9B over 12 months) and fixed‑rate run‑off (weighted ~4.76%) provide earnings levers alongside steady loan demand; new Chief Credit Officer appointed .

What Went Well and What Went Wrong

• What Went Well

  • PPNR strength and expense discipline: PPNR reached ~$85.7M and efficiency ratio improved to 34.97%; CFO: “This resulted in an efficiency ratio below 35%, which we are very proud of.”
  • Robust balance sheet momentum: Ending deposits +$886M QoQ (26% annualized) and loans +$281M QoQ (9% annualized), with liquidity of $3.35B and CET1 at 11.48% .
  • Healthy growth outlook and market expansion: “Loan pipeline is up 10% from January… we continue to look at new market expansions in the Southeast.” .

• What Went Wrong

  • NIM percentage diluted by excess cash: CFO quantified ~6 bps dilution from elevated Fed cash in Q1; loan yields also declined QoQ (6.28% vs 6.43% in Q4) .
  • Credit normalization: NPAs/Assets increased to 0.40% (from 0.26% in Q4), annualized NCOs to 0.19% (vs 0.09% in Q4), tied to previously impaired, individually analyzed loans; two relationships (real estate‑secured, medical‑related) drove much of NPA uptick .
  • Noninterest income down YoY on BOLI compare and seasonal softness: Noninterest income fell 7% YoY, with prior‑year BOLI death benefit driving the comp; mortgage and card were seasonally softer vs Q4 .

Financial Results

Income and margin snapshot

Balance and capital

Yield and rate KPIs

Loans by type (end of period)

Credit metrics

Versus estimates (S&P Global definitions)

Note: For banks, S&P “Revenue” can differ from company “net interest income + noninterest income” (company total was $131.83M) .
Values with asterisks are retrieved from S&P Global.

Guidance Changes

Earnings Call Themes & Trends

Management Commentary

• Strategy and growth: “With our strong balance sheet, we are looking at opportunities for new and expanded customer relationships and we continue to look at new market expansions in the Southeast.” — Tom Broughton, CEO .
• Quarter drivers: “We reported net income of $63.2 million, diluted EPS of $1.16 and pre‑provision net revenue of $85.7 million… The margin percent is diluted this quarter by our higher‑than‑normal cash balances at the Fed… diluted our margin by 6 basis points this quarter.” — David Sparacio, CFO .
• Credit tone: “Charge‑offs were… 19 basis points… more in line with pre‑COVID benchmarks… two relationships… both real estate secured.” — Henry Abbott, CCO .
• Deposit outlook/NIM path: “Municipal deposits will probably run down… We’re already seeing [cash balances] come down… expect cash balances to come down over the next few months.” — Management .
• Operating framework: “For the remainder of the year, we expect our noninterest expense to be in $46 million to $46.5 million… our effective tax rate… about 20%… expected run rate for the remainder of 2025.” — CFO .

Q&A Highlights

• Deposits and NIM trajectory: Seasonal normalization of municipal/correspondent inflows should reduce cash at the Fed, supporting NIM; management is already seeing cash balances retrace .
• Loan growth and pricing: Low‑double‑digit loan growth is plausible; new originations around high‑6s yields; pricing “already too tight,” but steady; mix roughly even fixed/variable in new production .
• OpEx guide and hiring: OpEx guided to $46–$46.5M per quarter before incremental hires tied to expansion; hiring remains opportunistic .
• NPA color: Two medical‑related, real‑estate‑secured relationships (one a hospital, one a physician with strong collateral) drove most of the NPA increase .
• Repricing runway: ~$900M fixed repricing in ≤12 months at ~4.76%; ~$2.2B variable repricing at ~7.52%; ~$100M MBS paydowns at ~2.5% .

Estimates Context

• Q1 2025 vs S&P Global consensus: EPS $1.16 vs $1.18* (slight miss); S&P “Revenue” $125.2M* vs $134.1M* (miss). Company “net interest income + noninterest income” totaled $131.83M, which differs from S&P’s bank revenue definition .
• Implications: Fewer days in Q1 vs Q4, higher effective tax rate (20%), and elevated cash balances at the Fed (~6 bps NIM dilution) explain the small EPS shortfall; as seasonal deposits recede and cash normalizes, NIM should benefit .

Values with asterisks are retrieved from S&P Global.

Key Takeaways for Investors

• Core profitability is improving: PPNR up ~31% YoY with efficiency ~35%, underscoring controllable expense momentum even as the rate backdrop evolves .
• Near‑term NIM recovery levers: Seasonal runoff of higher‑cost municipal/correspondent deposits and lower excess cash should support margin; management is already seeing balances retrace .
• Visible asset repricing pipeline: ~$1.5B fixed (~4.76%) and ~$2.2B variable (~7.52%) repricing within 12 months, plus ~$100M MBS at ~2.5%—a constructive backdrop for earnings as pricing resets .
• Credit normalizing from benign levels: Higher NPAs and NCOs reflect specific, collateralized relationships and previously impaired credits; ACL/Loans at 1.28% with dollar ACL up supports resilience .
• 2025 guideposts: OpEx ~$46–$46.5M/quarter and ~20% tax rate set the baseline; consistent loan demand and disciplined pricing remain key to delivering mid‑teens ROE .
• Capital/liquidity remain strengths: CET1 11.48% and on‑balance‑sheet cash of $3.35B (18% of assets) provide flexibility to pursue growth and manage NIM .
• Organizational depth: Appointment of a new Chief Credit Officer (Jim Harper) supports ongoing growth with prudent credit oversight during a credit normalization phase .

Appendix: Additional Data Points

• Deposit and loan growth QoQ: Deposits +$885.6M (26.3% annualized); Loans +$281.0M (9.0% annualized) .
• Company “total revenue” proxy (NII + noninterest income): $131.83M .
• CET1, Total capital: 11.48% and 12.93%, respectively .