ServisFirst Bancshares(SFBS) - 2023 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The bank's total deposit growth for the quarter was $854 million, with a year-over-year increase of 12.3% [36][40] - Non-performing assets to total assets decreased from 16 basis points in the second quarter to 15 basis points in the third quarter [38] - Charge-offs for the quarter were 15 basis points annualized, with year-to-date annualized charge-offs at only 11 basis points [39] Business Line Data and Key Metrics Changes - The loan pipeline increased by 74% over the prior quarter, with loans growing by $87 million in September [24][50] - The bank's correspondent banking division saw a strong deposit rebound, closing the quarter with total fundings just over $2 billion [36] - Past due loans to total loans were down to only 8 basis points, representing a 45% reduction from the second quarter [38] Market Data and Key Metrics Changes - The bank's liquidity position was reported at $2 billion, which is a significant competitive advantage in the industry [34][66] - The adjusted loan-to-deposit ratio at September 30, 2023, was 80.5% [67] Company Strategy and Development Direction - The bank is focused on building core deposits and has seen fantastic results over the last four quarters [23] - A new community banking office is set to open in the Piedmont region, similar to existing offices in other locations, aimed at producing good, granular, and sticky deposits [35] - The bank plans to rationalize deposit costs as profitability improves and is implementing a special incentive to grow loans from October 15 to January 15 [45][76] Management's Comments on Operating Environment and Future Outlook - Management noted that the economic outlook has improved, with consumer resilience observed since the pandemic [5][22] - The bank expects loan growth to increase, particularly in the fourth quarter, driven by a robust loan pipeline and increased borrower confidence [99] - Management believes that the higher for longer interest rate environment will benefit future earnings for the bank [33] Other Important Information - The bank's CET1 ratio was reported at 10.69%, and the Tier-1 leverage ratio was 9.35%, indicating strong capital [43] - The bank has no brokered deposits and no federal home loan bank advances, which positions it favorably compared to peers [77] Q&A Session Summary Question: What contributed to the margin stabilization and future outlook? - Management indicated that improvements in loan repricing are being offset by deposit repricing, but they expect net income to benefit as loans are repriced [46][75] Question: What is the outlook for loan growth? - Management expressed optimism for loan growth, citing a significant increase in the loan pipeline and a special incentive to boost loan production [99] Question: How does the bank plan to manage liquidity and funding for loan growth? - The bank currently has $2 billion in cash and is focused on maintaining liquidity while being selective in loan growth [102] Question: What is the strategy regarding the reserve ratio? - Management stated that the reserve ratio has been maintained due to comfort with credit quality, and they are not planning significant changes at this time [103]