ServisFirst Bancshares Q1 Earnings Call Highlights

Key Points

• ServisFirst saw stronger-than-typical Q1 loan activity with loan payoffs moderating and a forward loan pipeline described as the strongest in its history, while deposits grew at an 8% annualized rate and management cited roughly $2 billion of near-term loan repricing opportunity.
• Financial performance improved: net interest income rose to $148.2 million, net interest margin expanded to 3.53%, and EPS was $1.52 ($1.54 normalized), a 33% year-over-year increase, with an efficiency ratio remaining below 30%.
• Credit and balance-sheet position stayed solid—net charge-offs were about $8.3 million, allowance for credit losses at 125 bps, NPAs ~1% of assets with ~$17 million of expected near-term reductions—and capital/liquidity were strong with CET1 around 11.86% and $1.84 billion in cash while the bank builds its new Texas franchise.

ServisFirst Bancshares NYSE: SFBS executives said the company opened 2026 with solid loan and deposit growth, continued net interest margin expansion, and disciplined expense control, while also investing in a new Texas banking presence that management expects to contribute more meaningfully later in the year.

Loan growth, pipeline strength, and moderating payoffs

CEO Thomas Broughton said the company was “really pleased” with its start to the year, pointing to stronger-than-typical first quarter loan activity and an easing of loan payoffs that have weighed on growth in recent years. “We are seeing loan payoffs begin to diminish compared to the last two years,” Broughton said, adding that quarter-to-date performance early in the second quarter has also been positive.

Broughton described the company’s forward loan pipeline beyond 90 days as the strongest in its history, though he cautioned that longer-dated pipelines have lower close rates than 30-day activity. He said the pipeline includes “a long list of new relationships across all of our markets in a variety of industries.”

Chief Credit Officer Jim Harper said loan growth in the first quarter was 7% annualized, and he also noted that loan activity increased late in the quarter.

During the Q&A, Broughton acknowledged ongoing competition on pricing and terms, saying ServisFirst has tried not to participate in deals that don’t meet its return hurdles. He rated loan growth as “a B+,” noting competitive dynamics where some peers may accept lower returns on equity.

Broughton also said loan payoffs relative to originations have improved meaningfully. After previously citing roughly $0.50 of payoffs for every $1 of new loans, he told analysts the ratio has trended down, describing it as closer to $0.30 and potentially “20%-25% of bookings” more recently.

Deposit growth, funding costs, and margin expansion

Broughton said deposits grew at an 8% annualized rate in the first quarter, which he said exceeded expectations given the company typically sees more deposit growth in the second half of the year. He added that management is focused on managing deposit costs to improve margins.

CFO David Sparacio reported net interest income of $148.2 million in the first quarter, up from $146.5 million in the fourth quarter of 2025 and $123.6 million a year earlier. Net interest margin expanded to 3.53%, up 15 basis points from the prior quarter and 61 basis points year-over-year. Sparacio attributed the improvement to continued repricing of low fixed-rate loans and the “full quarterly impact” of Federal Reserve rate cuts from the fourth quarter.

Sparacio said average interest-bearing deposit costs fell to 2.79%, down 22 basis points from the fourth quarter and 61 basis points from the prior year, as higher-rate time deposits mature and renew at market rates. Loan yields were 6.18%, down 11 basis points linked-quarter, which Sparacio said reflected normal variability in a declining-rate environment and “does not represent any systemic pricing pressure.”

Looking ahead, Sparacio said the company continues to see meaningful loan repricing opportunities. He cited roughly a $2 billion opportunity over the next 12 months from low fixed-rate loans renewing, cash flows, covenant violations, and modifications, and said about $2.9 billion in fixed-rate loans mature in the next three years “at a price below our current going on rate for loans.” In response to analyst questions, Sparacio said $1.2 billion of low fixed-rate loan maturities over the next 12 months carry a weighted average yield of 5.19% compared with a “going-in rate for new loan activity” of 6.5%, while emphasizing repricing outcomes will vary by loan.

On margin outlook, Sparacio reiterated expectations for 7 to 9 basis points of expansion in a flat-rate environment, while noting uncertainty around the Fed’s path and the impact of energy prices on the economy. In another exchange, he said future margin benefit is expected to come “predominantly on the earning assets,” though he also highlighted a $1.3 billion book of time deposits with an estimated five-month remaining duration that will reprice in coming quarters.

Earnings, fee income trends, and expense discipline

Sparacio said the company earned $83 million in the first quarter, or $1.52 per diluted share, and $1.54 per share on a normalized basis. That compared with $1.16 per diluted share in the first quarter of 2025, representing a 33% year-over-year increase in earnings per share. Return on average assets was 1.89% and return on average common equity was 17.91%.

He said first quarter EPS declined from $1.58 in the fourth quarter of 2025 largely due to non-recurring items and calendar effects. The fourth quarter included a $4.3 million non-recurring bank-owned life insurance (BOLI) death benefit in non-interest income, and the first quarter included a $1 million prior-period adjustment to BOLI income that Sparacio described as a headwind.

Non-interest income totaled $10.8 million, down from $15.7 million in the fourth quarter. Sparacio said the decline was “almost entirely” due to the prior quarter’s BOLI death benefit. He added that, excluding BOLI items, non-interest income was up about 4% versus the fourth quarter and showed solid organic growth year-over-year.

• Service charges were $3.3 million, flat sequentially despite fewer days and up 29% year-over-year, reflecting service charge rate increases implemented in July 2025.
• Mortgage banking revenue was $1.9 million, up 14% from the fourth quarter due to higher secondary market volumes.
• Net credit card income increased 12% year-over-year to $2.2 million.

Non-interest expense was $47.4 million, up from $46.7 million in the fourth quarter and up 2.8% from the year-ago quarter. Sparacio said the efficiency ratio was 29.81%, the second consecutive quarter below 30%.

Salaries increased 13% linked-quarter and 17% year-over-year, which Sparacio attributed to building out the Texas team and seasonally higher payroll taxes in the first quarter. In the Q&A, management said it does not expect efficiency to move materially below current levels, and Sparacio suggested modeling expense growth in the “mid- to high-single-digit” range for the year.

Executives also discussed notable items affecting “other operating expenses.” Sparacio said the year-ago period included a $1.8 million operational loss, and the current quarter benefited from a $1.2 million reduction tied to the FDIC special assessment related to the spring 2023 banking crisis. He advised analysts not to use the quarter’s roughly $4.4 million level as a forward run rate, suggesting it is “closer to a 5.5 number.”

Credit metrics and expected near-term NPA reductions

Harper reported net charge-offs of about $8.3 million in the first quarter, “most of which” related to the remaining balance of one credit and represented the final resolution of a long-troubled borrower. The allowance for credit losses remained at 125 basis points of total loans, unchanged from year-end 2025.

Non-performing assets (NPAs) were 100 basis points of total assets at quarter end, slightly higher than the 97 basis points reported at fiscal year-end 2025. However, Harper said the company expects near-term reductions in NPAs of approximately $17 million, citing the U.S. Coast Guard’s purchase of a private university campus and the assumption of two other loans by a long-term customer.

Asked about non-accrual inflows, Harper said there were “one or two relatively small ones” and none he would classify as material. He also addressed a large borrower discussed previously, emphasizing that none of ServisFirst’s borrowers in that relationship have filed for bankruptcy and describing the workout process as “slow and steady,” with expectations for progress over the next two quarters.

Texas expansion, capital strength, and liquidity

Broughton said ServisFirst ended the quarter with 161 producers and added 32 new full-time employees over the past 12 months, with 75% in frontline roles. He said the Houston team has leased an office location requiring a 26,000-square-foot buildout. The company had 18 bankers on board in the market at quarter end and closed its first Texas loan in March, which Broughton described as a large supply chain company with long-term contracts.

In response to analyst questions, Broughton said he expects the Texas opportunity over a three- to four-year period to be “more like a B instead of an M” and described the current mix as “virtually all C&I,” including C&I deposit relationships.

Sparacio said the company’s effective tax rate was 17.83%, down from 19.72% in the fourth quarter and 20.06% a year earlier, which he attributed to the purchase of investment tax credits during the quarter.

On capital and liquidity, Sparacio reported Common Equity Tier 1 capital of 11.86% on a preliminary basis and a Tier 1 leverage ratio of 10.71%. He said the company ended the quarter with $1.84 billion in cash, about 10% of total assets, and emphasized that ServisFirst had no FHLB advances and no brokered deposits.

About ServisFirst Bancshares NYSE: SFBS

ServisFirst Bancshares, Inc is a bank holding company headquartered in Birmingham, Alabama, and the parent of ServisFirst Bank. The company specializes in commercial banking services, catering primarily to small and mid-sized businesses, professionals and entrepreneurs. Its product portfolio encompasses commercial real estate lending, commercial and industrial loans, deposit accounts, treasury management and other ancillary banking products designed to meet the financial needs of its clients.

ServisFirst Bank offers a full suite of deposit products, including interest-bearing checking, money market accounts and certificates of deposit, as well as a variety of loan products.

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