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 the fourth quarter, representing a 32% increase from the third quarter of 2025 and a 33% increase from the fourth quarter of 2024 [9] - Full year earnings per share was $5.25 on an operating basis and $5.06 on a GAAP basis, with net income available to common shareholders at $86.4 million for the quarter and $276.5 million for the year [9] - The return on average assets was 1.62% for the year, and the return on common equity was nearly 17% [9] - The tangible book value grew 4% to $33.62 per share [9] Business Line Data and Key Metrics Changes - Loan growth for the quarter was annualized at 12%, with a significant increase in the loan pipeline, which rose by 11% quarter-over-quarter [3] - The C&I book experienced nearly 10% growth during the year, marking the highest growth rate in that segment in several years [7] - Non-interest revenue saw a 26% growth from the full year 2024 to 2025, driven by increased service charges [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 [5] - The new Texas banking team is expected to drive growth, with a focus on C&I lending rather than commercial real estate [49] Company Strategy and Development Direction - The company is focused on organic growth, particularly through the expansion in Texas, which is expected to contribute significantly to loan balances and deposits in 2026 [49] - The efficiency ratio is expected to remain in the low 30s as the Texas team builds its book of business [51] - The company is actively managing its loan portfolio and has a disciplined approach to loan pricing, which has contributed to margin expansion [10][30] 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 [24] - The company is prepared for potential economic fluctuations and is focused on maintaining strong liquidity levels without reliance on brokered deposits [15] - Management noted that while there are challenges in hiring due to competition, they are committed to bringing in quality talent to support growth [60] Other Important Information - The company paid down $30 million of subordinated debt at a cost of 4.5% [14] - The company has no brokered deposits or FHLB debt, maintaining a strong liquidity position [15] Q&A Session Summary Question: Trends in loan payoffs and expectations for loan growth - Management noted that projected payoffs have decreased significantly this quarter, leading to a more optimistic outlook for loan growth [21] Question: Economic backdrop and commercial loan demand - Management rated current commercial loan demand as slightly better than before, indicating a positive trend in C&I growth [24] Question: Margin expectations and fee collection impact - Management indicated that the December margin is a good starting point for 2026, with expectations for continued margin expansion [30] Question: Charge-offs 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 multifamily assets [36] Question: Tax rate expectations for 2026 - Management plans to continue leveraging tax credits, particularly around solar credits, to manage the tax rate going forward [43] Question: Growth expectations for the Texas team - The Texas team's budgeted growth for 2026 is higher than any other region, with expectations for significant contributions to loan balances [49] Question: Overall expense growth for 2026 - Management anticipates high single-digit expense growth for 2026, primarily driven by new hires that will generate revenue [57]