ServisFirst Bancshares (SFBS) 16 Oct 232023 Q3 Earnings call transcript

Greetings, and welcome to the ServisFirst Bancshares Third Quarter Earnings Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce you to our host, Davis Mange, Director of Investor Relations. Thank you, Davis.

You may begin.

Good afternoon, and welcome to our third quarter earnings call. from our our Rushing, Bud Chief CFO, some Broughton, Officer; Chief Foshee, Tom then covering Abbott, and Henry Credit highlights have CEO; your our Rodney Operating our we'll We'll take quarter, questions. the Officer; and our cover disclosure. statements forward-looking now I'll

discussion earnings XX-K described factors of results most include recent Actual XX-Q call in forward-looking filings. to the Some differ today from due may statements. and may any in today's projections shared our

are to made only to as of they no I'll the Forward-looking ServisFirst statements duty and date update turn speak assumes the Tom. that, them. With call over

Thank you, review us the and current start you we for I quarter, for the thought I'd Davis. joining Good afternoon, third by where our outlook. calls reviewing thank economic

spring, by large, that And the is started. appears bank banks. The conventional mine rapid we've for to stuff. a resilient, were late included escalation that they year we Much headed They and much they're sort very home buying to now -- interest tightening on The services the most be consuming since we seen over pretty credit hard see was rates. which was and be that deposit economic a demand landing. for point. seen intermediation at close consumer hooked of stuff in when outlook they're it continues for to of wisdom, seems, Going -- back then to living were goods due amazing. were pandemic stuck at to We've

a we've like spot in. So than in we're better bit seems it little been

million combination rates. I week, best he with and and both capital interest to way a I'm at customer the any make more improve of is C&I, can in X.X% the me of. He slowdown $XXX a of that's goods. for demand was have buy earnings, We not credit, down for $XX said I [ higher going CRE is best caution a said ] debt to to borrower pay million way last my and probably seen

thought. our side. We than us we we late cycle are to a in few really, does based any credit and credit forecast prevailing landing think higher because headed it curve watching more for a the little minutes move probably kind don't that's our addition ago. will yield on the our helpful soft I version think more few bit rate and others bank are The run a all curve earnings discuss months the on bank we I for environment, know us they're Abbott of a wrong. as bank. the appear cracks, normal of towards a of longer will Henry -- yield for we recent economic envisioned be a future So for But benefits

sort brief we here. talking that's So get and I'll little of about down are, where overlook into granular a information Start of a deposits. more

focused over really core have seen last We've quarters. X We building results. the on fantastic deposits

deposit growth asked very to the seen with Home banks have they've we've an people Loan outstanding Bank what but Our them can X job, Federal do. brokered advances done combined X And few and we've deposits. demonstrate done

that. and The clients by the It do bit XXXX. end spend committed that of of be received spent have funds, it year. than But a of municipal to the this most most significant can have quickly time be take funding I by know Our more will that to have for I faith spent. end politicians COVID XXXX COVID

down a the Our record pipeline quarter. level is bit from last deposit

sticky. are relationships for for We -- new looking still it's granular We're are looking strong. that

finish. minutes an in a give side, correspondent I when Rodney few the On update will Rushing

we wanted. broad-based in improved set Our were commercial the up XXXX. growth is of year-over-year. our is XX% for will on think accounts deposit indicative our year-over-year, while profitability We This what emphasis stage total liquidity were accounts new over growth, up deposit XX% current which

hand, on the level cash at seeing are stay $X consistently We billion in October.

industry We may liquidity net to disruption. margin, seen reduce We've the are this have affect at it interest the -- pleased level while it during interest built net does this not income.

pleased deposit about with it it So situation. Talk months bit a did the I'm shut We little always loan very tap. trickle back off few ago you turn on as after and with the loans does the started demand. a a

not prior quarter. to pipeline back loan to it XX% Our early is XXXX up it's back from levels And today the is late over though XXXX, levels.

loans have -- grew XX we days, $XX seen in the and increased past of in the million also month September. We activity

C&I increased seeing a we are the think, significant We competitive position, liquidity in and confidence advantage us both our by industry. CRE borrowers, gives

the the in the quarter. On From new we region, there. team quarter. in announced a of Montgomery new we standpoint, XX previously X a added down great the bankers had side, production bankers we head total for We X of were count a

our on year, people This year, have will the rightsizing as be an We we'll coming the towards and group right that of team. the end think are right the adding and go certainly end focused to we we here.

offices and new our and Carolina. improved and North margins. and These do offices Norman region Tallahassee, office Lake the in it Piedmont will sticky community -- Panama banking that's be have granular City similar good to community deposits soon, very banking open will office in offshore Nashville, produce the a We

Rodney So discuss with turn the side. that, it I'll correspondent over to to

total strong just rebound, the Thank fundings quarter Correspondent a deposit had you, $X closing banking billion. over Tom. with

were settlement relationship relationships million pipelines that opened just paid of loans our strong XX correspondent bank year coming relationships correspondent or are correspondent balances XXXX. also expansion September quarter well of you all during banks. The bank remind these geographies. XX% quarter. or and over the remainder at X in rates, Texas markets. I X XX.X% with Correspondent funding new mention for that specialist. also diversified temporary the are Most states. hot $XXX balances the or growth are is the increase to rate not downstream for and participation of division those in need and deposit to as and not market tied in Tennessee relationships from deposit new came new both from market Our new the in sources was was our rates sizes different

you Our This our credit banks new in associations banking X correspondent pipeline that and XX agent our new the of York, card has Officer. growth, has state strong Bankers X have market with in an and correspondent quarter, and determine includes the Missouri Chief that like endorsed third credit in example Montana, as that, our early expanded stages it over this turn summary, would our reach Correspondent the are quarter. And has can to had currently process. American existing the just bank the banks are agent balances program the for for endorsements card if how in they we wide to of Connecticut, various state time. at Abbott, program Virginia, see second New sales Texas, There Credit pipeline Georgia, grown. deposits in to I'll and impressive as participate. We stabilized reviewing fundings Henry

represents quarter had to the the Past to pleased XX% X Thank a down with first drop loans and a strong loans total we're from from quarter, points, third second and very only a were bank's this due basis results. the you, Rodney. reduction quarter. XX% ServisFirst

to Our say the basis quarter XX total XX assets to and decreased points nonperforming assets asset from to quality basis continues quarter. pleased the to remain points I'm third second only in strong, in

a CRE maintain With of the quarter our when prior and continue portfolio, third started consistent at and watch our bank figures list of AD&C risk-based the material it in current to of risk-based to Both CRE bucket. with felt end X.XX%, the AD&C and percentage down the XXXX. are income-producing we to the XXX%. is we had total focus as quarter. AD&C outlook, economic appropriate was its capital We of downgrades no loans and capital to to XX% was and on these ALLL which the monitor from

We on stress our commercial the and as industry internal both CRE estate leader provide review an to via and real external help also testing in We and stress portfolio. analytics entire data real-time data sources. and portfolio

a urban primarily were basis exposure. these are for know Southeast, one and the were points. basis for CRE continues remain charge-offs XX when strongest points our annualized XX I we income were areas, quarter the Charge-offs and exposure of which and to banks. in is quarter related producing And interest only not the office items impacted peer As year-to-date of the any annualized, some Charge-offs SNCs. have or downtown of at CRE material our reminder, the to no charge-offs

continue to Foshee. in to outperform the granular about feel over quarter. With hand We our loan and I'll Bud portfolio diverse it third to that, very good

you, Good Henry. Thank afternoon.

pipelines. loan the deposit and progress are the We growth, with liquidity, pleased third quarter, bank in capital improving very the made with has

have is a loan and growth in of to to goal deposits going of were million more balanced deposit billion that our quarter. We deposit after $X grow on at in related and of noninterest-bearing team flat. in funds. loan $XXX we COVID with saw growth with $XXX focused the A key Our had to in deposit the EPS liquidity quarter improving were third and exceeded end. We quarter with quarters decline a or loans is pleased $X approach in growth, goal stable exception quarter million billion We forward. runoff several the of the total the

of year. loans Examples later are contribute the where rate $XXX will restructured, initiative paid has repricing million our in repricing loans loan Our off expansion $XXX million. to early, been effort. the market

interest opportunity $XXX million new margin billion We are on quarter. which off are loan $X growth. totals in XX% rate is the an combined Loans about today. combined loans Cumulative reduction. Loan quarter with are run $XXX third XX% the and of in of to at best pending were in total to million over third repricing loans $XXX floating repriced and quarter million rate loan the million annualized paid will margin floating loan our EPS repricing of profitability and this fixed-rate versus time. Net effects in loans stabilized third rate. the have $XXX improve on the with paydowns quarter, improve second

net noninterest includes the We September of improvements purchase. improvement the in income ratio both loan-to-deposit card the in in adjusted balance This the was year. XX.X%. quarter credit expect funds over improvement Our saw core mortgage at continued XX, with we XXXX, ratio and correspondent

to growth noninterest the made hold effort reminder, have a noninterest income benefit Discussing debt the quarter on a of an in line As expense we included XXXX. $XXX,XXX. expense, second

expenses. have And XXXX. legal and credit, had we first from fraud. We noncore in the credit credit which million in increased quarter of $XXX,XXX of card case credits, These $X.X check to items experienced X expenses fraud primary of was Problem card increases related fraud.

first We in $XXX,XXX also insurance quarter. the increase FDIC experienced from an

our for any count staffing head expect have and offices. offices We our new existing additional do not built and

quite XX% performing year-over-year. are teams Our grown have accounts new well and

We per continued book growth our in value share.

our Tier X.X%. and XX.XX% was X leverage Our ratio ratio CETX was

continues capital remarks, that back a my Our I'll to to turn and program the over concludes be strength. And Tom.

back almost you, we If managing of made in bank, important extremely list on those important, of going It's which we'll were. they get is that's to XX to most there. we are think, quarters, except performing the take a the the for well per our Thank up all one get we Bud. to but where most share. We've metrics few earnings got earnings a a

performance all think will lead our other future. and So the earnings to share metrics per those improved in we

it you questions. I'd we'll to your for open mind. it on see So have be now up glad what

Fitzsimmons from [Operator comes with first question Kevin Our D.A. Davidson. Instructions]

to there's unpack. the into to contributors margin, a I'm just trying trying but just I -- number know let of I'm

go the conference last in and beginning NIM like the terms maybe there's of contributors and on here call, in we quarter. contributed. couple were a we maybe you the And about fourth stabilizing through expand quarter can talked then there's in looks -- when maybe to think them of third what of kind I

on might it that the seems substantial you earnings in then going have to than it talked the to the coupled looks that's So future, have otherwise and like, less led one had repricing about loan hand, growth but paydowns. maybe help and loans might you like with

And ratio. very don't that to into. growing I at On the it ratio. a not liquidity, know it to -- and But building loan-to-deposit successful quarter, deposits came up managing but side, guess then necessarily the a you I cost funding about you you -- ratio looks talked and that had that comes like

elsewhere? to of And byproduct correspondent billion? a And deliberate $X goal like just -- all big growth. to we way, delta if a was talking in name? Because more pace not that sure and loan saw I'm most case, billion the and saw being this it governed that so deposit funding. movement growth Was about you it growth. a in the banks guys but you exceeding of weigh loan are this was between those by really trying the that of growth put deposit just I'm $X the network Was increased Or

lot, up where know I So goes understand but margin that's helping I set wanted the us to a on just from here.

-- me on Bud deposit some loan But it's repricing, to it repricing give let the swallowed that Probably actual is this have you been numbers. time. to my Yes. point in in by up will improvement take

that. because to increases behind So it net this that's why reprice that the rate to of are seen margin loans, If from we you flowing of the think instead of us, And as well. income reprice flowing starts improve, pretty haven't stabilizes forward point yes, we then more deposits.

our we idea people first And months of the had solely We growing asked focus deposits. thing, XX I think. to course, deposits. that's So ago no of on

that the XXX% almost skewed year XXXX. is plan incentive of Our for

people they've deposits. say, incent incented They to have we do you what them heard me do, you So done to what grown and them do. probably

-- now for we've of sitting months cost grow showing from get think we to regional to a a that the loans, when but incentive of And gone today to had in margin of start advantage we're we obviously, will pretty didn't does and not to back an of call -- a some But that's know, incentive restarted. 'XX weeks might but it having I executives to answer competitive It interest the fair doesn't guess, point. year, excess significant and deposit amount at actually it forward. We try starting Kevin. October is probably think, to net liquidity question, this anything loans our January a rationalizing that's we do costs grow X the again, much in 'XX, have I the we good add last to because -- as putting interest we're you spot. -- pipeline liquidity a all, don't and I net income, our the So special wasn't ago, go the with hurt rationalize the to Fed, couple all that the money at in that with help loan to try your industry. we're a think deposits, we

but that shot, I you No. No, -- -- guess, -- just to -- sounds guys much suspect? mostly lot mean feel that a closer you you too maybe is Tom. and of have in it feel then you're can you -- know 'XX? and do is Fed it it, getting -- moving I I of never feel was -- never but that that to helpful, speed you but parts over like do I you stabilizing it, the here, Is there's expand what do are but it's like just ratio where X it's we're over done quarter, not assuming up to

bidding And money core not Yes. out on big they We We're liquidity. have customers. -- these not We're municipal are mentioned that had are our relationships. clients municipalities. existing with

do reasonable lot not These relationships we're you when to the bidding leave at going municipalities. doesn't to a price Fed But of core on not the money nevertheless, to money. are We're their not tell going we're you with some take profit good that. to won't money client. We a fact, that In hold. get

any have that's we again, -- brokered bottom any -- not it's So not home we don't have don't deposits, advances. bank the and They're line. loan

kind trade most really us places of I we're they could. the of think if So with spot. would a don't industry

just the recall heavy momentum growth, gains year. the typically, more guys over And year correctly. the have course half in loan growth, on And of if Tom, back seen I you loan of it

increase other if pipeline. much on are I -- big of the of -- the pay There's economy. standards. And seemed looking the quarter, And debt. one to you it hand, but hand, cited, a lot There's being the you so rates. heard mentioned the a optimistic more loan were on correct, guys that of impact impact down you the in last it And customers you like on -- tightened

this growth you to going necessarily like leaps grind just So do bounds? loan point, and higher feel in is not at

Yes. We do.

loans like seen with just million projects and in little getting the in $XX confidence I our grew bit in starting again, activity said, days. September, seems lot XX like in things pickup, the really seen month Now the of we've of a are borrowers a and last we've It both C&I more economy -- CRE.

trucking had time, for Kevin. that growing So the -- sources and boats -- try little things after a operating to we do And well. during that's we're in what and to people and to trying we again, weren't being more we're right demand think bit had that buying doing now, equipment creative companies of find loan [indiscernible], airplanes period and of after finance still and to I

So you that's out a to more little are what trying demand the this do loan just really time. times creative have be in finding to We than good. we're do there when

Our with next from comes Raymond Moss question James. Steve

Tom, you the improvement here. loan spoke about pipeline

hearing kind you're what days a growth step-up is seeing and these see million in we'll kind September, quarter loans? of you maybe of $XX in like the feels rate on of growth decent the of for kind say Just fourth curious

ahead, Bud. Go

was went think can that we during X.XX%. that September The rate new loans loans Yes, increase. on

we incentive put we in like be in or extra Tom that and like for it So the an said, feel above, loans fourth would quarter.

mean, I is increase. fourth our best quarter. to loans expect we So quarter always

to kind to going pay looking if X.X%. I up, got rates' still they to is then it's but what I what at pay financing I payoffs mean mean, multifamily looking have. less we're then what Steve, us going them. charging might And we're they're Mae. developer but with we've Fannie Fannie, their Henry X% If is X.XX%, to -- going going I'm at of can't project Abbott. a permanent

I what can't there's predict, So Steve.

in that weighted healthy is. business is mix the pipeline, Or curious, in curious then C&I there little maybe Just mix a kind Great. just and construction a underlying of these days? the towards CRE terms And is more of component?

I lot mean, it's at same think of got a time, the I Yes. bucket. a know we've seeing we mean, a mix. AD&C opportunities, we're I but limited

for selective and we're we're obviously and incentive point certainly for. to being on those more after those So striving opportunities, go trying to looking folks are what C&I our our and and

more with that we was -- we that of a to on Yes, [indiscernible]. not AD&C be sure. bright think that line kind line our on thought might level seems But to with bright a We're to exposure become stay need XXX% the regulators. it

Great.

be just liquidity then of sheet growth achieved And $X thinking sheet. billion about below on healthy Or by Okay. X. the loan -- of terms and just $X you there's you in how it billion a guys of or balance about dip Curious, next funding having the liquidity? for sustained say Are quarter kind that the we on step-up it or to do be growth? may goal willing think loan more Will here, existing balance of deposits liquidity? in let's

in we've Bud? that $XXX Yes. some Fed at got We've I million, got $X treasuries billion are short-term guess today. cash the And about

We do.

We So billion. think, $X.XXX $X.X put that, billion over the time. you could we really loan got of say we bucket into probably

municipal Now the know. as again, spend are you -- going again, to Politicians going find spend way a of it. always to some these deposits they're money,

where people end trying to in a some bit. again, deposits. But are -- with always we've somebody we'll rather right the that it careful we We the So their we're by really we're mean talking a of to years off for it in I about looking on actively walks right. we being it door. business the replace will feel not We're with and loans. other burn the talk done than good take They to just just still are. will burn now, couple a of pocket to hole

here. Got for it. One me last one

Just ratio. on the reserve

flat. guys of have for it this of number a You quarters, built up quarter kind

guys any of Just not comfortable reserve Or are are curious, the as the what climb as -- climbing? you terms auditors ratio of is more kind high hence, up it just as this not credit is and much with or comfortable is go can in with? there maybe

outlook mentioned or quarters. Tom as driver, X kind improved primary in was the think remarks X over of I past the his the economic And

So GDP those. I unemployment going just where where mean to key to depends are, on and able were it of the drivers and we are the maintain outlook model being on that's impact we the kind

they have we Yes. limit I there's -- Unfortunately, we're desires, change left a but -- reserve models as higher subject can not. you think to know. the if all well much loan you a And the our switch -- what can by on bankers loss time were CECL would own nature are

from Dick Piper Sandler. next with question comes Our Graham

you billion for of $X.X with to I you touched the time -- on Do of something just just is that? number sort ideal horizon wanted what's back deployment circle the in that loans. achieving

this I we know don't on point, know. You I I'm know the book get what the quickly don't mean, how don't I why don't laughing Graham. -- books. I know. I can know at And loans off. just pay will

pipeline you loan I pretty but it's tell is $X.X nothing can billion, Our that. like robust,

the So you some born $XX,XXX But Graham. about it Google that question, when that came is weren't is time. the $XX,XXX question was -- which --

enough, fair Fair enough. Okay.

guess last just heading what a it So little the pipeline, mentioned was XQ? more provide that was as just it I into pipeline you talk the into now. heading to about to what quarter then also you it XQ? the than then is Can relates was pipeline smaller bit wanted I deposits And

Probably not let of -- a scientific down. a we but quarter, don't it, dollars it. discuss number, couple me don't Yes, down ever that? hundred the where see, Probably it's last million have and from I I is graham.

it on the book. put we So

got on it we the So book.

deposit to and trying it's costs to rationalize -- So start now, time again, improving profitability. we're

So bit it. be we've got little to smarter about a

strategy I probably start that most floating, fully mean, in and and money adjust of market So how sort a below has funds? the recently. just rate I no growth been seems money costs, Is pipeline indexed look of guys do most that's Fed does your perspective, guess Okay. you for and indexed kind of like what Or as with you And it market that time on front I then deposit to guys? like right? approach more it like the on of that from deposit saying pricing here, guess? at you

Well, percentage what of is using funds. of XXX% not a of on rate? Fed funds, it depends funds, Fed the percent Fed -- is what You're some

So want least -- some what you to got at now. margin Fed and -- Fed margin at -- cash that have and in you have some you sitting we to leave what lot sitting because a of the right got the

other the you course, little start securities? buying a And we given when do but rate question someday, got assets we don't -- Of floating is book. we've we to much the bit buy again on -- securities so got more want

treasuries. So into term, we're I when longer hesitant say X X-year to longer term, to say, move

So be we're because will smart that's to start be it But going we're someday. to just on waiting it have again, -- we're you not do that. it all do not going now, but doing to But might now. smart to we

on one the And front and Understood. just costs. the more follow-up deposit I guess Yes.

money that piece. So market

cause that if we catch So to going rate X.XX% get any, segment probably floating, me for no right? within that on right? correct it's cost, -- have more or any there's hikes, that like, I'm in guess, thing there's lot maturities not that's stick exception if Just around to -- fully no that wrong, So example, up? pricing further of that's I that's going a to

We think so, Graham.

comes with Bishop from Dave question Hovde next Our Group.

operating imply last next And of year? standpoint, were the maybe acceleration successful the year? that this side they very Tom, on revamp growth how of quarter an an maybe incentive does expenses plans, funding From about we operating noted you into the expense the the think obviously, should quarter. the expense into of

third We good caught in already it know to over the I that. we've got -- in number third more fourth accrue more exact we going Dave, the a and to for in the bit the account we're third up. don't but the more but No, quarter accrued quarter, there,

them do. that in and been the -- we started -- to So we successful because deposits what we've don't they at they ask raising already wildly have -- have doing

scenario Got I a And securities even chatter, the lower-yielding maybe, moving circling sell and economic of restructure to the outlook, higher question your answer off But think been profitability. you And the I then it. some portfolio? don't a to lot maybe the stuff, and longer forward. Is margin so. some and know, probably back securities pay outlook borrowings then for we're last interest potential and a potentially liquidity off here of to that or rate there there's improve outlook noted, of maybe the

curious how about that? Just we should think

to hate anything. don't us I but this see say I selling

paid and we'll buy months We'd we think I want time hold maturity. long to if This continue something year. buy, it I to know, X short takes a money. to to term, don't a just we'll do. just treasury I just buy, be back rather earned I -- to

reposition securities. that if lot a of show to what my I drop? And makes rates probably mean salesman run that shows money can always you a you Bloomberg

it. we question, and some forward, for Bud. guess, tax think moving then a rates housekeeping looks should it tax like Good how I Understood. quarter, lower-than-trend about rate this quarter were And No, understood. Got maybe next until XXXX? there

would a rate fourth quarter. XX% say would good I Yes. the for be

XX%?

XX%, yes.

this questions for at turn like further time. floor no over back comments. closing the are to management to There I'd

Thanks.

I think we're done. joining us. everybody, Thank for you,

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