Executive Summary

Q2 2025 delivered stronger core spread income and loan growth, but GAAP EPS of $1.12 was down 3% QoQ due to an $8.6M securities loss; adjusted EPS rose to $1.21, up 27% YoY, and net interest margin improved to 3.10% from 2.92% in Q1 .
Loans grew $346M (11% annualized) to $13.23B; deposits fell $567M (15.8% annualized) to $13.86B as expected municipal outflows normalized, while liquidity remained strong with $1.71B in cash equivalents (10% of assets) .
Non-interest income plunged to $0.4M on the $8.6M AFS portfolio restructuring loss (payback ~3.8 years), partially offset by a $2.3M legal accrual reversal in interest expense; adjusted NIM was 3.06% and spot margin improved to 3.19% by June .
Management guided to continued NIM expansion (~3.20–3.25% by year end), deposit costs normalizing ~3.57%, and noninterest expense ~$46–$46.5M per quarter, with Treasury Management fee increases effective July 1 and Merchant services ramp as catalysts .

What Went Well and What Went Wrong

What Went Well

Net interest income rose to $131.7M (+6.6% QoQ, +24.4% YoY); NIM improved to 3.10% (adjusted 3.06%) on disciplined pricing and asset repricing; CFO: “We expect our margin to continue to increase throughout the year” .
Loan growth remained robust: +$345.7M to $13.23B (10.8% annualized); CEO: “We did see solid loan growth… pipeline being very robust” .
Capital and book value strengthened: CET1 11.38%; book value/share $31.52 (+14% YoY); CFO: “Tangible book value grew… ending at $31.27 per share” .

What Went Wrong

Non-interest income fell to $0.42M (–$8.48M YoY) due to an $8.6M securities loss; provision rose to $11.3M on higher loan growth and a ~$5M single-loan charge-off; NPAs increased to 0.42% of assets .
Deposits declined to $13.86B (–$567M QoQ) as anticipated municipal outflows normalized; CEO flagged elevated CRE payoffs and “good, not great” loan demand amid higher-rate project feasibility .
Reported deposit cost was artificially lowered by a $2.3M accrual reversal (–7 bps); CFO cautioned reported 3.50% cost would not sustain, guiding back to ~3.57% .

Financial Results

P&L and Margins (GAAP)

Metric	Q4 2024	Q1 2025	Q2 2025
Net Interest Income ($USD Millions)	$123.17	$123.55	$131.69
Total Non-interest Income ($USD Millions)	$8.80	$8.28	$0.42
Provision for Credit Losses ($USD Millions)	$5.70	$6.63	$11.30
Income Before Tax ($USD Millions)	$79.37	$79.09	$76.61
Net Income ($USD Millions)	$65.17	$63.22	$61.42
Diluted EPS ($)	$1.19	$1.16	$1.12
Net Interest Margin (%)	2.96%	2.92%	3.10%
Efficiency Ratio (%)	35.54%	34.97%	33.46%

Q2 2025 Actual vs Wall Street Consensus (S&P Global)

Metric	Consensus	Actual	Surprise
EPS ($)	1.2067*	1.21*	+0.003 (in line) *
Revenue ($USD)	140.26M*	120.81M*	–19.45M miss *
Values retrieved from S&P Global.

Drivers: Revenue miss driven by $8.6M AFS securities loss recorded in non-interest income as part of portfolio restructuring (expected 3.8-year payback), while adjusted margin improved QoQ and spot margin rose through quarter-end .

Segment/Balance Mix

Loans ($USD Millions)	Q4 2024	Q1 2025	Q2 2025
Commercial, Financial & Agricultural	$2,869.9	$2,924.5	$2,952.0
Real Estate – Construction	$1,489.3	$1,599.4	$1,735.4
Real Estate – Mortgage: Owner-occupied	$2,547.1	$2,543.8	$2,557.7
Real Estate – Mortgage: 1–4 Family	$1,444.6	$1,494.2	$1,561.5
Real Estate – Mortgage: Non-owner Commercial	$4,181.2	$4,259.6	$4,338.7
Consumer	$73.6	$65.3	$87.3
Total Loans	$12,605.8	$12,886.8	$13,232.6

KPIs and Capital

KPI	Q4 2024	Q1 2025	Q2 2025
Total Deposits ($USD Millions)	$13,543.5	$14,429.1	$13,862.3
Cash & Cash Equivalents ($USD Millions)	$2,376.6	$3,349.7	$1,710.9
ROAA (%)	1.52%	1.45%	1.40%
ROAE (%)	16.29%	15.63%	14.56%
CET1 (%)	11.42%	11.48%	11.38%
TCE / Tangible Assets (%)	9.25%	8.89%	9.84%
Book Value/Share ($)	$29.63	$30.56	$31.52
Effective Tax Rate (%)	17.89%	20.06%	19.82%
Deposit Cost (Qtr-End, %)	2.77%	2.78%	2.76%

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Net Interest Margin trajectory	H2 2025	No formal range previously disclosed	“End year near 3.20%–3.25%”	Introduced
Deposit Cost (adjusted)	H2 2025	Reported 3.50% in Q2 included legal accrual reversal	Normalize ~3.57% going forward	Maintained/Clarified
Noninterest Expense Run-rate	H2 2025	~$46–$46.5M/quarter (operating plan)	~$46–$46.5M/quarter	Maintained
Treasury Mgmt Fees	Effective 7/1/2025	No prior increases in ~20 years	Fees increased July 1; expect pickup from Q3	Raised
Merchant Services penetration	2025–2026	Early build-out	Targeting increase from ~1% penetration to potentially ~8% among existing customers	Raised ambition
Dividend	Q2 2025	$0.335/share (raised in Q4 2024)	$0.335/share declared for Q2	Maintained

Earnings Call Themes & Trends

Topic	Previous Mentions (Q4 2024 and Q1 2025)	Current Period (Q2 2025)	Trend
NIM and Margin Outlook	NIM improved to 2.96% in Q4; Q1 at 2.92% amid excess cash	NIM 3.10%; adjusted 3.06%; spot margin 3.19 by June; guide to ~3.20–3.25% YE	Improving
Deposit Costs	Q1 average interest-bearing deposit rate 3.40%; excess funding hurt margin	Reported cost 3.50% benefitted from legal accrual reversal; normalize ~3.57%	Stabilizing
Loan Demand/Pipeline	Q4/Q1: steady loan growth and pipeline	Loans +$346M; pipeline “good, not great”; elevated CRE payoffs	Mixed (growth vs payoffs)
Credit Quality	Q4/Q1 NPAs 0.26%/0.40%; allowances ~1.30%	NPAs 0.42%; single ~$5M charge-off; ACL ratio 1.28%	Slightly weaker
Noninterest Income Initiatives	Q4/Q1: BOLI, mortgage, card steady	$8.6M securities loss; Treasury fees increased; Merchant services ramp	Repositioning
Liquidity	Q4/Q1 strong ($2.38B/$3.35B cash)	$1.71B cash (10% assets); total available liquidity $12.35B	Strong

Management Commentary

CEO: “We did see solid loan growth in the quarter. Net of payoffs, our growth was 11% annualized… loan demand is good, not great… elevated payoffs on the commercial real estate side” .
CFO: “We decided to strategically sell about $70 million of bonds… reinvested $62 million… yield average of 6.28%. The expected payback period… is 3.8 years… we expect our margin to continue to increase throughout the year” .
Chief Credit Officer: “Total charge-offs… just under $6.5 million… driven primarily by a charge-off of just over $5 million related to one loan… we haven’t identified any systemic issues” .
CFO: “Adjusted margin is 3.05%… normalized spot rate… increased from 3.06% in March to 3.19% in June… noninterest expense to be in the $46–$46.5 million range per quarter” .

Q&A Highlights

NIM path: Adjusted margin 3.06% in Q2; management anticipates ~10 bps per quarter, ending 2025 ~3.20–3.25% absent Fed cuts .
Deposit dynamics: Reported deposit cost 3.50% reflected a one-time accrual reversal; adjusted ~3.57% expected going forward; deposit growth to match funding needs vs excess .
Hiring/markets: Net FTE up 23 QoQ (14 interns); seven new producers across footprint; focus on Merchant services penetration from ~1% toward ~8% among existing clients .
Repricing: ~$1B fixed-rate loans to reprice over next 12 months; weighted average yield ~4.87% on ~$1.5B cohort; securities cash flows ~$1.9–$2.0B/year .
Loan-to-deposit ratio: Adjusted including Fed funds purchased in mid-80s% range; liquidity and funding described as “in good shape” .

Estimates Context

EPS: S&P Global consensus 1.2067 vs actual 1.21 (slight beat)*. GAAP diluted EPS was $1.12; adjusted EPS was $1.21, reflecting non-GAAP reconciliation for portfolio restructuring and legal accrual reversal .
Revenue: S&P Global consensus $140.26M vs actual $120.81M (miss), largely due to the $8.6M securities loss in non-interest income impacting GAAP revenue recognition in the quarter*.
Values retrieved from S&P Global.

Implication: Street revenue models likely need to reflect lower non-interest income run-rate from the restructuring, while margins and PPNR trend support upward NIM trajectory. Management’s guidance suggests EPS sensitivity positive to margin expansion and fee increases, offset by credit provisioning normalization .

Key Takeaways for Investors

Core spread momentum: NIM improved to 3.10% (adjusted 3.06%); spot margin 3.19% by June; management targets ~3.20–3.25% by YE on repricing and pricing discipline .
Portfolio repositioning: $8.6M securities loss depresses near-term revenue; 3.8-year payback expected with reinvestment at ~6.28% yields, improving forward NII .
Loan growth vs CRE payoffs: Loans +$346M QoQ; pipeline “good, not great” amid higher-rate feasibility; construction balances rising with higher CECL reserve needs .
Credit normalizing: Provision $11.3M; single ~$5M charge-off; NPAs 0.42% vs 0.40% in Q1; ACL 1.28% steady—no systemic issues flagged .
Expense discipline: Efficiency ratio 33.46% (adjusted 31.94%); noninterest expense expected ~$46–$46.5M/quarter; core processing changes to drive savings .
Deposits and pricing: Q2 deposit decline from expected municipal outflows; adjusted deposit cost ~3.57% outlook; Treasury fee increases and Merchant initiatives to lift fees/NIB balances from Q3 .
Capital and book value: CET1 11.38%; book value/share $31.52; dividend maintained at $0.335 in Q2 (12% increase announced in Q4 2024) .

ServisFirst Bancshares, Inc. (SFBS)·Q2 2025 Earnings Summary