ServisFirst Bancshares (NYSE:SFBS) executives highlighted accelerating earnings momentum, continued net interest margin expansion, and early progress in a new Texas buildout during the company’s fourth-quarter and full-year 2025 earnings call. Management also addressed credit developments, including a fourth-quarter charge-off tied largely to one healthcare-related credit, and discussed expectations for loan growth, expenses, and margin performance heading into 2026.
Loan and deposit trends
CEO Tom Broughton said fourth-quarter loan growth came in “really in line” with pipeline projections, with annualized loan growth of 12% for the quarter. He added that the company’s pipeline increased 11% quarter over quarter, and that the pipeline net of projected payoffs rose 80%—though he cautioned that projected payoffs may be understated. Still, Broughton said it appeared that the “payoff headwind is diminishing to some extent,” and characterized the pipeline as an inexact measure but one that has been indicative of trends over several quarters.
On deposits, Broughton said ServisFirst continued to manage down higher-cost deposits—primarily municipal deposits—both during the quarter and over the course of the year. He said the company believed it could attract those types of deposits back if robust loan demand required it.
Texas expansion and correspondent banking updates
Broughton said the company is “very excited” about its new Texas banking team based in Houston, which joined in early December. The group has been working in temporary space while opening an office and has been productive early, according to management. Broughton said ServisFirst has nine members on the Houston team and anticipates additional hiring in the first and second quarters of the year, describing it as a larger initial team than the company has hired in recent market openings since 2005.
In response to an analyst question about how Texas could impact 2026, Broughton said the team’s budgeted growth for 2026 is higher than any other region and noted the hires are primarily C&I lenders. He also said the company’s commercial real estate exposure has been reduced, citing commercial real estate at under 300% of capital and AD&C at 71% of capital.
Broughton also reviewed the company’s correspondent banking footprint, including 388 correspondent banks, with 145 settling at the Federal Reserve Bank. He said the company’s agent credit card program is endorsed by the American Bankers Association and 12 state banking associations, with 150 agent credit card banks and a pipeline of prospective clients across 27 states. During the past year, he said Ohio and Maryland state banking associations were added as endorsers.
Earnings, margin expansion, and operating performance
CFO David Sparacio said the company recorded fourth-quarter earnings per diluted share of $1.58, up 32% from the third quarter of 2025 and up 33% from the fourth quarter of 2024. For the full year, he reported operating earnings per share of $5.25 and GAAP earnings per share of $5.06. Net income available to common shareholders was $86.4 million for the quarter and $276.5 million for the year.
Sparacio said adjusted net income generated a return on average assets of 1.62% for the year and a return on common equity of nearly 17%. Tangible book value increased 4% during the quarter to $33.62 per share.
Net interest margin expanded over the year, rising from 2.92% in the first quarter to 3.38% in the fourth quarter. Sparacio attributed the expansion to disciplined loan pricing, including a 40% increase in loan fee collection, as well as deposit rate reductions in the fourth quarter. He said the company continues to benefit from repricing opportunities in low fixed-rate assets.
When asked about margin expectations, Sparacio said the December spot margin was a good starting point for 2026 and that the company expects margin expansion to continue through 2026. He explained that loan fee income increased after the company added a metric to banker incentives tied to fee collection.
Repricing opportunity, expenses, and credit metrics
Sparacio provided details on repricing potential, saying roughly $1 billion of low fixed-rate loans will reprice during 2026. He said the weighted average yield on those loans is 5.18% compared with a “going-on” rate of about 6.47%, representing roughly 130 basis points of yield opportunity on that subset. He added that this does not include roughly $700 million in additional cash flows, and noted that in 2025 the company saw about $300 million in repricing tied to covenant violations and loan modifications. In total, he described an approximate $2 billion repricing opportunity over the next 12 months.
On funding, Sparacio said the company responded aggressively to rate cuts, allowing it to reduce the cost of interest-bearing liabilities by 40 basis points versus the prior quarter and by 65 basis points versus the year-ago quarter. He said the company experienced an 83 deposit beta during the 2025 declining rate cycle.
Credit metrics were described as “normalized.” Harper reported fourth-quarter net charge-offs of about $6.7 million, with the majority tied to one credit, and full-year 2025 charge-offs of 21 basis points. The allowance to total loans ended the year at 1.25%. Nonperforming assets to total assets ended the year at 97 basis points, up from 26 basis points at the end of fiscal 2024 and roughly in line with 96 basis points at the end of the third quarter; Harper said the year-over-year increase was largely driven by exposure to a single merchant developer that had been previously discussed. In the Q&A, management said the fourth-quarter charge-off related to a healthcare asset and was not surprising, noting it had been largely reserved prior to the charge-off. Management said it continues working with the borrower tied to a multifamily/workforce housing nonperformer discussed previously and that the borrower is in the process of trying to sell most of the portfolio tied to eight loans.
On the income statement, Sparacio said service charges rose on the year, reflecting fee increases implemented July 1 and driving 26% growth from full-year 2024 to full-year 2025. Mortgage banking fee income increased 11% year over year, which he said was driven by increased mortgage volume. Excluding adjustments, operating non-interest revenue was up 12% for the year.
Expenses remained controlled, with non-interest expense flat versus the year-ago quarter and down about 3% versus the linked quarter. For the full year, non-interest expense rose about 2%. Looking ahead, Sparacio said expenses are expected to grow as the bank builds its Texas franchise, but the company expects efficiency to remain strong. In the Q&A, he said the company is budgeting high single-digit expense growth for 2026, driven mainly by producers rather than back-office additions. He and Broughton said the efficiency ratio may rise from below 30% in the fourth quarter to a range around 30% to 33% in 2026 due to the near-term expense impact of Texas hires before those bankers build meaningful balances.
Sparacio also noted balance sheet actions during 2025, including securities losses recorded in the second and third quarters tied to a bond portfolio restructuring. He said the remaining portfolio has little embedded loss, reflected in a small unrealized loss in accumulated other comprehensive income. On liabilities, deposits grew 5% year over year and fed funds purchased declined 26%, which he attributed to downstream correspondent banks positioning for year-end. The company paid down $30 million of holding company sub-debt during the quarter at a cost of 4.5%, and Sparacio said the dividend was recently increased consistent with the company’s capital return policy. He also said ServisFirst continues to operate without brokered deposits or FHLB debt.
Closing the call, Broughton said the company ended 2025 with a strong finish and noted that all markets were profitable except the newest market, Texas. Management reiterated optimism for 2026 and continued focus on efficiency, growth investments, and disciplined balance sheet management.
About ServisFirst Bancshares (NYSE:SFBS)
ServisFirst Bancshares, Inc is a bank holding company headquartered in Birmingham, Alabama, and the parent of ServisFirst Bank. The company specializes in commercial banking services, catering primarily to small and mid-sized businesses, professionals and entrepreneurs. Its product portfolio encompasses commercial real estate lending, commercial and industrial loans, deposit accounts, treasury management and other ancillary banking products designed to meet the financial needs of its clients.
ServisFirst Bank offers a full suite of deposit products, including interest-bearing checking, money market accounts and certificates of deposit, as well as a variety of loan products.
