Will average earning assets growth more closely match the expected loan growth this year, unlike the previous year?

Yes, management expects average earning assets to rise in line with loan growth, supported by continued deposit growth and investment opportunities. “So I would expect average assets to rise in line with loan growth.”

Can you provide more detail on the large move in other noninterest expense and clarify the expected run rate for future quarters?

The Q1 2025 figure was inflated by a $1.8 million operational loss, and Q1 2026 benefited from a $1.2 million FDIC special assessment reduction. The go-forward run rate for other operating expense is closer to $5.5 million, not the reported $4.4 million. “I think it's closer to a $5.5 million number.”

Given the sub-30% efficiency ratio, how do you view the expense trajectory for the remainder of the year, considering ongoing investments?

Maintaining below 30% is a 'flattening point.' While there will be increases due to employee merit increases and Texas expansion, no major back-office investments are planned. Expense growth is projected to be mid- to high single digits, not double digits. “I would say mid- to high single digits. I wouldn't put it in the double digit on expense growth.”

SFBS

ServisFirst Bancshares (SFBS) Q1 FY26 earnings call: guidance and Q&A

Earnings call· Mar 2026 (Q1 FY26)· Financials· Apr 20, 2026

Source: earnings call transcript

Executive summary

ServisFirst Bancshares Q1 FY26 — Strong Profitability and Strategic Growth

ServisFirst Bancshares delivered a strong Q1 FY26, marked by continued net interest margin expansion and industry-leading efficiency, with diluted EPS up 33% year-over-year. The bank achieved solid loan and deposit growth, supported by a robust forward pipeline and strategic investments in the Texas market. Management remains focused on disciplined expense control and proactive credit quality management amidst a dynamic rate environment and ongoing competition.

Highlights

Net interest margin expanded to 3.53%, up 15 basis points linked-quarter and 61 basis points year-over-year.
Efficiency ratio dropped below 30% for the second consecutive quarter, reaching 29.81%.
Normalized diluted EPS increased 33% year-over-year to $1.54.
Loan growth was solid at 7% annualized in Q1, with payoffs diminishing to 20-25% of bookings.
Deposit growth exceeded expectations, increasing 8% annualized in Q1.

Concerns

Net charge-offs were $8.3 million, primarily due to the final resolution of one troubled credit.
Nonperforming assets to total assets slightly increased to 100 basis points from 97 basis points at fiscal year-end '25.
Loan yields experienced an 11 basis point step down to 6.18% linked-quarter.
Management noted potential economic impact from rising gasoline prices in the next 60-90 days.

Guidance & targets

Category	Target	Timeline	Confidence
Net interest margin expansion	7 to 9 basis points expansion high materiality	Ongoing	High
Expense growth	mid- to high single digits medium materiality	Full year FY26	Medium
Effective tax rate	modestly below our peers low materiality	Full year FY26	Medium
Nonperforming assets reduction	approximately $17 million reduction medium materiality	Near-term	High

SFBS operating KPIs by quarter

SFBS operating KPIs stated on its earnings calls, by fiscal quarter
KPI	This call Mar 2026 Q1 FY26	Jun 2026 Q2 FY26	Sep 2026 Q3 FY26	Change vs prior quarter
Efficiency ratio	29.81% We are very pleased that the efficiency ratio came in at 29.81%, the second consecutive quarter below 30%. Source: earnings call transcript	29.65% Despite that growth, our efficiency ratio came in at 29.65%, the third consecutive quarter below 30% and a meaningful improvement from 33.46% a year ago. Source: earnings call transcript	30.2% Our efficiency ratio is 30.20% compared to 29.65% last quarter and 35.22% a year ago or 33.31% adjustment. Source: earnings call transcript	+0.6 pt
Common equity tier 1 ratio (CET1)	11.86% Common equity Tier 1 capital to risk-weighted assets reached 11.86% on a preliminary basis, up 21 basis points from year-end and up 38 basis points from 1 year ago. Source: earnings call transcript	11.83% Common equity Tier 1 capital risk to weighted assets reached 11.83% on a preliminary basis, relatively flat from 11.86% last quarter and up 45 basis points from a year ago. Source: earnings call transcript	11.98% Common equity Tier 1 capital to risk-weighted assets was 11.98% on a preliminary basis, up 49 basis points from 11.49% a year ago. Source: earnings call transcript	+0.2 pt

Operating figures the company stated on at least two of the calls shown, checked against each call's transcript. Click a figure to read the sentence. A dash means it was not stated that quarter.

Risks & headwinds

Credit quality (large troubled borrower) Q1 FY26, ongoing

$8.3M in net charge-offs associated with one credit

Mitigation:Actively and aggressively managing NPAs; expecting good progress on resolution in the next 2 quarters (6 months).

Rising gasoline prices impact on economy next 60-90 days

Could trickle into the whole economy

Mitigation:Implied monitoring of macro environment, no specific mitigation stated.

Price and credit term competition in lending ongoing

Competitors happy with 10% ROE may beat on terms/rates vs. SFBS targeting 20% ROE

Mitigation:Company tries not to take part in aggressive competition, focusing on profitable growth.

Nonperforming assets (NPAs) level Q1 FY26

100 bps of total assets at quarter end (up from 97 bps FY25 end)

Mitigation:Confident in near-term reductions of approximately $17 million from specific asset resolutions.

What to watch in Q2 FY26

Texas market loan/deposit growth

By year-end FY26

Current First loan closed in March, robust pipeline

Target Significant contribution to overall loan growth

Why it matters

The Texas expansion is a key strategic investment for future growth, and its success is crucial for the bank's long-term trajectory.

I don't know exactly what the closing percentages would be on that, Stephen. But it's a lot of names. It's a lot of new deals with people they've worked with over the years. So we are optimistic that they'll end on -- 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 -- if we fall short in our pipeline of where we think we are already, we think it will certainly help push us to a more optimistic tone of loan growth for the whole year.

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Q&A highlights

What are the expectations for loan and deposit growth for the remainder of the year, and how is the new Texas team contributing to this potential growth?

Management is optimistic about the Texas team's robust pipeline, expecting significant contributions by year-end. Loan growth is rated B+ due to competition, but payoffs have moderated to 20-25% of bookings. Deposit growth exceeded expectations in Q1.

“So we are optimistic that they'll end on -- 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 -- if we fall short in our pipeline of where we think we are already, we think it will certainly help push us to a more optimistic tone of loan growth for the whole year.”

asked by Stephen Scouten · answered by Thomas Broughton

2 min read 6 chapters

Detailed narrative

Strong Q1 Performance and Profitability

ServisFirst reported net income of $83 million, or $1.52 per diluted share ($1.54 normalized), representing a 33% year-over-year increase. The bank achieved a return on average assets of 1.89% and a return on average common equity of 17.91%, reflecting strong industry-leading returns. Net interest income reached $148.2 million, up from $123.6 million a year ago, driven by continued net interest margin expansion.

Loan and Deposit Dynamics

The bank experienced solid loan growth of 7% annualized in Q1, a period typically less robust for loan activity. Loan payoffs have significantly diminished, now representing 20-25% of new bookings, down from 50% previously. The forward loan pipeline (90-plus days) is reported as the strongest in the company's history.

Deposit growth also exceeded expectations, growing 8% annualized in Q1, with the funding base remaining entirely core and relationship-driven.

Efficiency and Expense Management

ServisFirst maintained its best-in-class efficiency, with the efficiency ratio dropping below 30% to 29.81% for the second consecutive quarter. Total noninterest expense was $47.4 million, up 2.8% year-over-year. The primary driver of expense increase was salaries, up 13% linked-quarter and 17% year-over-year, attributed to the Texas team build-out and seasonal payroll taxes. Management expects mid- to high single-digit expense growth for the full year.

Credit Quality and Asset Management

Net charge-offs for Q1 were $8.3 million, largely associated with the final resolution of one long-troubled credit. The allowance to total loans remained static at 125 basis points. Nonperforming assets to total assets increased slightly to 100 basis points. However, management expressed confidence in near-term reductions of approximately $17 million in NPAs from specific assets, with good visibility into their resolution.

Texas Market Expansion

The strategic expansion into Texas is progressing, with the Houston team securing office space and having 18 bankers on board. The first loan in Texas, a large supply chain company, closed in March. The team's forward pipeline is robust, and management anticipates the Texas market will contribute billions in opportunities over a 3-4 year period, primarily in C&I loans and deposits.

Capital and Liquidity Position

The bank's capital position continued to strengthen, with Common Equity Tier 1 capital to risk-weighted assets reaching 11.86%, up 21 basis points linked-quarter and 38 basis points year-over-year. Total capital to risk-weighted assets was 13.13%, and tangible common equity to total tangible assets stood at 10.46%.

Liquidity remains strong with $1.84 billion in cash, representing approximately 10% of total assets, and no FHLB advances or broker deposits.

Summary of the company's earnings call; see how call summaries are prepared. Not investment advice.