Release Date: April 21, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Servisfirst Bancshares Inc (SFBS, Financial) reported a strong start to 2025 with net income of $63.2 million, representing a 26% increase from the first quarter of 2024.
- The company achieved a 9% annualized loan growth in the first quarter, which is notable as this period is typically flat or down.
- Deposit growth was strong, particularly in municipal and correspondent deposits, contributing to a robust liquidity position.
- The tangible book value increased by 3% since the last quarter and 13% from the same quarter a year ago, ending at $30.31 per share.
- The company maintained a low efficiency ratio below 35%, demonstrating effective expense management despite a 5% increase in employee numbers.
Negative Points
- Charge-offs were higher than desired at an annualized rate of 19 basis points, aligning more with pre-COVID levels.
- Nonperforming assets (NPAs) rose in the first quarter, with 70% of the increase related to two specific real estate-secured relationships.
- Net income was slightly down by about $2 million or 3% compared to the fourth quarter of 2024, primarily due to a reduction in day count and changes in the effective tax rate.
- The allowance for loan losses (ALLL) to total loans decreased slightly from 1.30% to 1.28% quarter over quarter.
- Noninterest income declined by 7% compared to the first quarter of 2024, driven by the absence of a one-time BOLI death benefit recorded in the previous year.
Q & A Highlights
Q: Congrats on a great quarter. How are you thinking about deposit trends for the rest of the year, given the strong start in the first quarter?
A: (Thomas Broughton, CEO) We don't expect the same level of growth for the next three quarters. Some municipal deposits will likely run down as the year progresses. (Rodney Rushing, COO) Correspondent balances tend to grow in the first quarter due to tax season, and we've seen that level off since then.
Q: With the strong loan growth this quarter, are you expecting low double-digit growth to continue?
A: (Thomas Broughton, CEO) Yes, we do. Although we still have some payoffs, our growth has been in smaller, steady chunks across various markets, particularly in Florida. (Rodney Rushing, COO) The number of participation opportunities has been steady, with no significant slowdown in projects.
Q: How do you see the trajectory of the net interest margin (NIM) given the current cash balances?
A: (David Sparacio, CFO) We expect cash balances to come down over the next few months, which should help the NIM. The average balances are not as high as the period-end balances, indicating a reduction in cash balances.
Q: Can you provide more details on the nonperforming assets added this quarter?
A: (Henry Abbott, Chief Credit Officer) The nonperformers are medical-related, including a hospital and a doctor with cash flow issues but substantial assets. We feel good about our collateral in these cases.
Q: What is the outlook for operating expenses, and does it include potential new hires?
A: (Thomas Broughton, CEO) The projected range of $46 million to $46.5 million does not include potential new hires. We continue to evaluate new producers, which could impact expenses.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
