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ServisFirst Bancshares, Inc. (SFBS)·Q3 2025 Earnings Summary

Executive Summary

  • Q3 2025 delivered adjusted diluted EPS of $1.30 and GAAP EPS of $1.20; adjusted EPS rose 18.2% YoY, with NIM at 3.09% and continued margin expansion despite a non-accrual interest reversal and a $7.8M AFS bond loss .
  • Loans and deposits grew 7.9% and 7.3% YoY, respectively; book value per share increased 13.3% YoY to $32.62; CET1 rose to 11.49% .
  • Credit costs elevated: NPA/Assets increased to 0.96% (from 0.42% in Q2), driven by a large real-estate secured relationship placed on non-accrual; allowance/loans steady at 1.28% .
  • Management guided continued NIM improvement (7–10 bps per quarter) and deposit cost reductions alongside Fed cuts; expects strong Q4 loan growth and a FY25 effective tax rate ~18.9% due to solar tax credits .

What Went Well and What Went Wrong

What Went Well

  • Net interest margin expansion with normalized NIM at 3.19% after excluding the non-accrual interest reversal; adjusted NIM 3.09% and adjusted efficiency ratio 33.31% .
  • Broad-based loan and deposit growth with liquidity strength (cash and equivalents $1.77B; no FHLB/brokered deposits); book value per share up to $32.62 .
  • Management execution: “All of our regions and markets were solidly profitable…our newer offices have reached profitability” — Tom Broughton (CEO) .

What Went Wrong

  • Credit metrics worsened: NPA/Assets rose to 0.96% (from 0.42% in Q2) due to a large multifamily redeveloper relationship; annualized net charge-offs increased to 27 bps .
  • Non-interest income fell sharply due to realized bond losses ($7.8M in Q3; $8.6M in Q2), masking underlying fee growth (service charges, mortgage banking, credit cards) .
  • Loan growth in Q3 below expectations due to higher payoffs; management expects stronger closings in Q4 as pipeline improved >10% m/m and ~40% YoY .

Financial Results

Income Statement and Ratios (GAAP; adjusted where noted)

MetricQ1 2025Q2 2025Q3 2025
Net Interest Income ($MM)$123.553 $131.687 $133.448
Non-Interest Income ($MM)$8.277 $0.421 $2.833
Provision for Credit Losses ($MM)$6.630 $11.296 $9.463
Net Income ($MM)$63.224 $61.424 $65.571
Diluted EPS (GAAP)$1.16 $1.12 $1.20
Adjusted Diluted EPS$1.16 $1.21 $1.30
Net Interest Margin (%)2.92% 3.10% 3.09%
Efficiency Ratio (%)34.97% 33.46% 35.22%
Adjusted Efficiency Ratio (%)—31.94% 33.31%
ROAA (%)1.45% 1.40% 1.47%
ROACE (%)15.63% 14.56% 14.88%

Balance Sheet and Credit KPIs

MetricQ3 2024Q2 2025Q3 2025
Total Assets ($MM)$16,449.178 $17,378.628 $17,584.199
Loans, Ending ($MM)$12,338.226 $13,232.560 $13,311.967
Total Deposits ($MM)$13,146.529 $13,862.319 $14,106.922
CET1 (%)11.25% 11.38% 11.49%
NPA / Assets (%)0.25% 0.42% 0.96%
Allowance / Loans (%)1.30% 1.28% 1.28%
Annualized Net Charge-offs / Avg Loans (%)0.09% 0.20% 0.27%

Operating Yield/Cost KPIs

KPIQ1 2025Q2 2025Q3 2025
Loan Yield (%)6.28% 6.37% 6.34%
Securities Yield (%)3.31% 3.37% 3.60%
Cost of Interest-Bearing Deposits (%)3.40% 3.33% (3.41% adjusted) 3.41%

Loans by Type (Ending Balances, $MM)

TypeQ3 2024Q2 2025Q3 2025
Commercial, Financial & Agricultural$2,793.989 $2,952.028 $2,945.784
Real Estate – Construction$1,439.648 $1,735.405 $1,532.285
Owner-Occupied Commercial Mortgage$2,441.687 $2,557.711 $2,680.055
1–4 Family Mortgage$1,409.981 $1,561.461 $1,625.296
Non-Owner-Occupied Commercial Mortgage$4,190.935 $4,338.697 $4,448.710
Consumer$61.986 $87.258 $79.837
Total Loans$12,338.226 $13,232.560 $13,311.967

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Net Interest Margin trajectoryNear-term quarterly~7–10 bps improvement per quarter (implied trajectory)Continues: normalized Sept spot ~3.28%; expect additional rate-cut tailwinds in Q4Maintained/clarified
Deposit CostsNear-termManage down more than Fed cutsContinue reducing deposit costs alongside further Fed cutsEmphasized reduction
Bond Portfolio RestructuringFY 2025Restructuring underway (Q2)Completed late Q3 sale ($83.4M at loss); do not anticipate continued restructuringCeasing further actions
Effective Tax RateFY 2025~20% (implied pre-credit)~18.9% for FY25; will evaluate similar credits for futureLowered via solar tax credits
Loan GrowthQ4 2025Pipeline buildingExpect strong Q4 closings; pipeline +10% m/m, ~40% YoY; payoffs as % of pipeline down to 30% vs 41% YoYUpbeat outlook

Earnings Call Themes & Trends

TopicPrevious Mentions (Q1 & Q2 2025)Current Period (Q3 2025)Trend
Net Interest MarginQ1 NIM 2.92%; Q2 NIM 3.10%; adjusted NIM 3.06% with legal accrual reversal Reported NIM 3.09%; normalized NIM 3.19%; expect 7–10 bps quarterly improvement Improving sequentially
Deposit CostsQ1 cost of interest-bearing deposits 3.42%; Q2 3.41% (Q/E) Q3 average 3.41%; management to reduce costs beyond Fed cuts Stable to declining
Securities PortfolioQ2 AFS loss $8.6M as part of restructuring Q3 sale $83.4M at $7.8M loss; reinvested at ~6.14% yield; no further restructuring anticipated Reset complete; future lift to yields
Credit QualityQ1 NPA/Assets 0.40%; Q2 0.42% NPA/Assets 0.96% due to large multifamily redeveloper; added collateral; anticipate resolutions Deteriorated; actively remediating
Tax StrategyNo special credits noted in Q1; typical rates ~20% Solar tax credit lowers FY25 ETR to ~18.9% ETR reduced
Loan Growth & PipelineQ1/Q2 loan growth strong (2.2% and 2.7% QoQ) Q3 loan growth below expectations due to payoffs; pipeline +10% m/m, +40% YoY; Q4 expected strong Near-term soft; outlook positive
Geographic ExpansionN/AInterest in Texas contingent on hiring the right local team Evaluating opportunities
NDFI/Fraud ExposureN/ANDFI exposure <$71M (<1% of loans); avoidance of high-fraud categories Conservative stance

Management Commentary

  • CEO Tom Broughton: “All of our regions and markets were solidly profitable…our newer offices have reached profitability.”
  • CFO David Sparacio on normalized performance: “Normalized net income for the quarter [is] $73.8 million or $1.35 EPS…normalized net interest income $137.8 million…normalized NIM 3.19%.”
  • Credit update (Chief Credit Officer Jim Harper): The NPA increase was “driven by a relationship…with a large…multifamily properties [developer].” Additional collateral obtained; asset sales and corporate actions expected to produce liquidity in coming quarters .
  • Deposit strategy: “As the Federal Reserve cuts rates, [our] opportunity [is] to manage down our deposit cost, at least more than the Fed cut.”
  • Portfolio actions: Sold $83.4M low-yield bonds at loss and reinvested at 6.14% yields; payback expected ~3 years; no further restructuring anticipated .

Q&A Highlights

  • Credit clarification: Non-performer moved to non-accrual due to a delayed large payment; bank obtained substantial additional collateral, with LTV now “below one-to-one” and sales/LOIs underway across properties .
  • Margin cadence: Normalized September NIM at ~3.28%; management expects 7–10 bps quarterly improvement, supported by Fed cuts not fully reflected in Q3 .
  • Expense outlook: Q2 had incentive accrual true-up; Q3 back to normal run rate; expect Q4 non-interest expense similar to Q3 (~$48MM) with best-in-class low-30s efficiency .
  • Strategic opportunities: Exploring Texas expansion contingent on hiring the right local team; leveraging customer referrals for growth .
  • Securities trade timing: Completed late Q3, benefits to flow through fully in Q4 .

Estimates Context

MetricQ1 2025Q2 2025Q3 2025
EPS Consensus Mean1.1833*1.2067*1.3367*
EPS Actual (Adj/GAAP used by consensus)1.16*1.21*1.30*
Revenue Consensus Mean ($MM)134.100*140.259*146.800*
Revenue Actual ($MM)125.200*120.812*126.818*

Values retrieved from S&P Global.*

  • Q3 2025: Adjusted EPS of $1.30 was modestly below consensus $1.3367; revenue of $126.8M was below $146.8M consensus.*
  • Q2 2025: Adjusted EPS of $1.21 slightly exceeded $1.2067; revenue of $120.8M missed $140.3M.*
  • Q1 2025: EPS $1.16 and revenue $125.2M were below consensus $1.1833 and $134.1M.*

Key Takeaways for Investors

  • Underlying margin trajectory remains favorable (normalized NIM 3.19%, securities reinvestment at >6% yields, deposit cost reduction plan), positioning for sequential NII gains into Q4 despite headline noise from bond losses .
  • Credit watch: Elevated NPA from a single real-estate relationship; management took collateral and expects asset sales to de-risk; monitor resolutions in late Q4/Q1 .
  • Fee momentum: Service charges, mortgage banking, and credit card income improved, partially offsetting securities losses; continued focus on non-interest income growth .
  • Capital and liquidity strong (CET1 11.49%, TCE/TA 10.06%, cash & equivalents $1.77B); no FHLB or brokered deposits — attractive defensive profile in a volatile rate backdrop .
  • Q4 setup: Loan pipeline up >10% vs September and ~40% YoY; management expects strong closings; potential catalysts include further NIM expansion and lower deposit costs alongside expected Fed cuts .
  • Tax rate tailwind: FY25 ETR ~18.9% due to solar credits; management evaluating additional opportunities — modest EPS leverage if repeated .
  • Stock reaction drivers: Miss vs consensus on adjusted EPS and revenue, offset by clearer NIM path, capital strength, and Q4 growth expectations; near-term sentiment likely hinges on credit resolution headlines and NIM delivery .

[Press Release and 8-K Q3 2025]
[Press Release Q3 2025 duplicate publication]
[Earnings Call Q3 2025]
[Q2 2025 8-K/Press Release]
[Q1 2025 8-K/Press Release]