ServisFirst Bancshares, Inc. (SFBS) Earnings

Management highlights

• Loan growth was solid with 7% annualized, and forward loan pipeline over 90 plus days was the strongest in history. • Deposit growth was 8% annualized in first quarter, exceeding expectations. • Net interest margin continued to improve. • Efficiency ratio dropped below 30% in first quarter, the best in class. • Hired 32 new FTEs in last 12 months, 75% frontline employees. • Houston team leased 26,000 square feet, 18 bankers on board with building pipelines, and closed first loan in Texas in March.

Guidance

• Expect net interest margin to expand seven to nine basis points given a flat rate environment. • Have about $2 billion opportunity for low fixed rate loans renewing, normal payment cash flows, covenant violations, and modifications in next 12 months. • If Fed reduces rates once, will aggressively drop deposit rates and see significant benefit from deposit repricing. • Expect margin expansion from asset side with loan repricing, such as $1.2 billion in fixed rate loan maturities in next 12 months with weighted average yield 5.19% and going on rate for new loans 6.5%.

Segment performance

On the loan side, loan growth was 7% annualized for the quarter. Deposit growth was 8% annualized in the first quarter. Net interest income for the first quarter of 2026 was $148.2 million, up from $146.5 million in the fourth quarter and $123.6 million a year ago. The net interest margin expanded to 3.53%. Net income for the first quarter of 2026 was $83 million, or $1.52 per diluted share, or $1.54 on a normalized basis. Return on average assets was 1.89% for the quarter, and return on average common equity was 17.91%.

Risks & headwinds

• Gasoline prices could trickle into the whole economy if not moderated in next 60 - 90 days. • Uncertainty regarding Fed's rate decisions, especially in light of events like the war in the Mideast which may impact rate projections. • Complexity in resolving issues with large borrowers involving dozens of special purpose entities, with slow and steady progress expected.

Analyst Q&A

• Q: Tom, it sounds like you're pretty encouraged about the trends you're seeing around loan and deposit growth for the remainder of the year. How much have you seen out of the new Texas team now that they've kind of started booking loans?

  A: I think they have a robust pipeline. It takes time to build a pipeline, but towards the end of the year, we think we'll certainly see some success in closing and help with loan growth for the whole year. Loan growth's not great, there's price and credit term competition.

• Q: In terms of average earning assets this year relative to maybe the loan book, do you think maybe that average earning asset growth can more closely match the growth in loans that you expect to see?

  A: We're going to continue to see growth in our assets. We saw about 8% in loan growth year over year. We continue to look at investments and have good deposit growth, so I would expect average assets to rise in line with loan growth.

• Q: On the expense side, there was a large move in other non-interest expense. Can you give any detail on that and if this is kind of a good run rate to think about into the second quarter and beyond?

  A: In first quarter of 2025, there was a pretty large operational loss about $1.8 million. In this quarter, we saw a $1.2 million benefit from a reduction in the special assessment from the FDIC from the spring of 2023 crisis. I would advise not to use the 4.4 number as another operating expense go-forward model, think it's closer to a 5.5 number.

• Q: Following up on expenses and the efficiency ratio, how do you guys think about the expense trajectory for the remainder of the year as you make investments?

  A: We're going to continue to grow as an organization. Built into that, we have a fairly sizable complement of the Texas franchise which are not producing revenue yet. Our biggest expenses are employees with merit increases driving salary and benefit expense up. I think we're not going to dip too much lower than the high 29 efficiency ratio today. Expense growth is mid to high single digits.

• Q: On the margin here, how much additional margin expansion you expect, and on the $2 billion in loans repricing, maturing, cash flows, what's the incremental pickup versus on the roll-off yields versus the roll-on yields?

  A: I expect the margin to expand seven to nine basis points given a flat rate environment. We have about $1.2 billion in loan maturities that are fixed rate, low fixed rate loan maturities in the next 12 months with weighted average yield 5.19 today and going on rate for new loan activity is 6.5, so we'll see some decent sized pickup on that loan repricing.

• Q: With regard to the large borrower, $100 million borrower, what's the status of that work?

  A: None of our borrowers to date have filed bankruptcy. We're continuing to proactively work with the borrower and related entities to try to find the best path forward on all eight of the ones we have. Slow and steady progress, expecting good progress in the next two quarters.

• Q: Circling back to the Texas market expansion, how big you think that Texas market could get for you over time?

  A: I would think it would be more like a B instead of an M on the number in terms of opportunity in three to four year period. Virtually all loans from that franchise are C&I in nature. We are seeing our deposit relationships as well.

• Q: On the operating spend side, does the $3.8 million apply as a good run rate for the Boldy line moving forward?

  A: That's correct because we had a $1 million headwind related to the fourth quarter prior period adjustment, so 3.8 would be a more realistic trend going forward.

• Q: From a credit perspective, any significant new non-accrual inflows or backfills?

  A: One or two relatively small ones, not terribly material.

• Q: On the margin outlook, is most of the expected margin expansion predicated more on the earning asset side or a combination of earning asset and funding costs going lower?

  A: It's predominantly on the earning asset side. We have about a $1.3 billion book in time deposits that are going to reprice, but it's not going to be significant enough to really move the needle on deposit costs, it's going to come from the asset side.