ServisFirst Bancshares(SFBS) - 2025 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company reported earnings per diluted share of $1.58 for Q4 2025, representing a 32% increase from Q3 2025 and a 33% increase from Q4 2024 [9] - Full year earnings per share was $5.25 on an operating basis and $5.06 on a GAAP basis [9] - Net income available to common shareholders was $86.4 million for the quarter and $276.5 million for the year [9] - The tangible book value grew 4% to $33.62 per share [9] - The net interest margin increased from 2.92% in Q1 2025 to 3.38% in Q4 2025 [9][10] Business Line Data and Key Metrics Changes - Loan growth for the quarter was annualized at 12%, with a notable 10% growth in the C&I book during the year, marking the highest growth rate in that segment in several years [4][7] - Non-interest revenue saw a 26% growth from full year 2024 to full year 2025, driven by increased service charges [12] - Non-interest expense remained flat compared to the same quarter last year and increased only 2% for the full year [12] Market Data and Key Metrics Changes - The company has expanded its correspondent banking relationships to 388, including 145 that settle at the Federal Reserve Bank [6] - The new Texas banking team is expected to significantly contribute to growth, with a budgeted growth for 2026 higher than any other region [42] Company Strategy and Development Direction - The company is focused on organic growth, particularly through the expansion in Texas, and aims to attract high-cost deposits back if loan demand remains robust [5][14] - The management is optimistic about the Texas team's performance and anticipates hiring more personnel in the first and second quarters of 2026 [5][42] - The company plans to maintain a strong efficiency ratio while managing expenses related to the new Texas team [44] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about loan demand, particularly in the C&I sector, indicating a positive trend compared to previous quarters [21] - The company is prepared for potential economic fluctuations and is focused on maintaining a disciplined approach to loan pricing and cost management [10][28] - The management expects continued margin expansion throughout 2026, supported by repricing opportunities on low fixed-rate loans [26] Other Important Information - The company recorded net charge-offs of approximately $6.7 million for Q4, primarily related to one credit, with an allowance for loan losses ratio of 1.25% [7][11] - The efficiency ratio dipped below 30% for the quarter, with an adjusted efficiency ratio of around 32% for the full year, marking a 14% improvement over 2024 [10] Q&A Session Summary Question: Trends in loan payoffs and expectations for loan growth - Management noted that projected payoffs have dropped substantially quarter over quarter, indicating a positive trend in loan growth [19] Question: Commercial loan demand outlook - Management rated current commercial loan demand as slightly better than before, particularly in the C&I sector, which has shown significant growth [21] Question: Margin sustainability and fee collection impact - Management indicated that the December margin is a good starting point for 2026, with expectations for continued margin expansion due to disciplined loan pricing [25][26] Question: Charge-off details and non-performing loans - The charge-off was related to a healthcare asset, which was anticipated and reserved for, and management is actively working on a multifamily asset portfolio [32] Question: Tax rate expectations for 2026 - Management plans to continue leveraging tax credits, particularly around solar credits, to manage the tax rate going forward [36] Question: Growth expectations for the Texas team - The Texas team's budgeted growth for 2026 is expected to be higher than any other region, with optimism about their performance in the market [42] Question: Overall expense growth for 2026 - Management anticipates high single-digit expense growth for 2026, primarily due to new hires that are expected to generate revenue [49]