ServisFirst Bancshares, Inc. (NASDAQ:SFBS) is a bank holding company that has demonstrated consistent earnings growth and prudent risk management over the years. The company's wholly-owned subsidiary, ServisFirst Bank, provides commercial banking services through full-service banking offices located in Alabama, Florida, Georgia, North and South Carolina, Tennessee, and Virginia.

Financials

In the latest quarter ended March 31, 2024, ServisFirst Bancshares reported net income of $50.0 million, compared to $57.9 million in the same period of the prior year. For the full year 2023, the company reported annual net income of $206.9 million on revenue of $813.2 million, with annual operating cash flow of $198.0 million and annual free cash flow of $194.1 million.

The company's performance in the first quarter of 2024 was marked by strong deposit growth of 16% annualized, as well as robust loan growth of 15% annualized. CEO Tom Broughton noted that the company's deposit pipeline remains solid, and the loan pipeline has increased 10% over the prior quarter. The growth was broad-based across the company's footprint, with the new Auburn-Opelika market and the Memphis team in Tennessee contributing to the positive momentum.

Credit Quality

ServisFirst's credit quality continues to be a standout, with non-performing assets to total assets at 0.22% as of March 31, 2024. Chief Credit Officer Henry Abbott highlighted that the bank's disciplined approach to underwriting and diversified loan portfolio have enabled it to navigate the current economic environment well. Annualized net charge-offs were only 0.06% for the first quarter of 2024, down from 0.05% in the same period of the prior year.

Net Interest Margin

The company's net interest margin (NIM) expanded to 2.79% in the first quarter of 2024, up from 2.66% in the fourth quarter of 2023, driven by both balance sheet growth and the repricing of fixed-rate loans and securities. CFO Kirk Pressley noted that the company expects the NIM tailwind to continue for more than a few quarters, as the yield on interest-earning assets is expected to rise further while the cost of funds is anticipated to increase at a slower pace.

Geographic Diversification

In terms of geographic diversification, ServisFirst's loan portfolio is well-spread across its markets, with no single state accounting for more than 25% of total loans as of March 31, 2024. The company has also been actively expanding its presence in newer markets, such as Texas and Tennessee, where it has seen strong growth in the correspondent banking business.

Revenue and Expenses

On the revenue front, the company's core non-interest income grew at a robust pace of nearly 70% annualized in the first quarter, excluding the impact of a one-time BOLI death benefit recognized in the previous quarter. This growth was driven by strong performance in mortgage banking, credit card income, and deposit fees.

While non-interest expenses increased in the first quarter due to investments in new markets, the implementation of a new accounting standard for tax credit partnerships is expected to reduce the volatility of these expenses going forward. The company's income tax rate is also anticipated to be around 20% for the remainder of 2024.

Capital Position

ServisFirst's capital position remains strong, with a Common Equity Tier 1 ratio of 11.50% and a Total Risk-Based Capital ratio of 12.65% as of March 31, 2024. The company's book value per share grew 13% on a linked-quarter annualized basis, reflecting its ability to generate consistent earnings growth while maintaining a solid capital base.

Outlook

Looking ahead, the company remains optimistic about its prospects for the remainder of 2024. Broughton highlighted that the company's liquidity and deposit growth are attracting new customers, as some incumbent banks may be constrained in their ability to fund loan demand. The company's loan pipeline remains robust, and management expects the yield on interest-earning assets to continue to grow at a faster pace than the increase in the cost of interest-bearing liabilities.

Conclusion

In conclusion, ServisFirst Bancshares has demonstrated its ability to deliver consistent earnings growth, maintain strong credit quality, and prudently manage its balance sheet. The company's diversified geographic footprint, expanding presence in newer markets, and focus on relationship banking have positioned it well to capitalize on the current economic environment. With a solid capital position and a positive outlook for the remainder of 2024, ServisFirst Bancshares appears poised to continue its track record of shareholder value creation.