ServisFirst Bancshares, Inc. (NYSE:SFBS) is a bank holding company headquartered in Birmingham, Alabama, with a strong footprint across the Southeastern United States. Over the past two decades, the company has expertly navigated the evolving banking landscape, delivering consistent growth and profitability for its shareholders.
Business Overview ServisFirst Bancshares, Inc. was formed in 2007 as the bank holding company for ServisFirst Bank, which was founded in 2005 in Birmingham, Alabama. The bank initially opened its doors providing a full range of banking services to individuals and businesses in the Birmingham area. In the years following its founding, ServisFirst Bank embarked on a strategic expansion across the Southeastern United States, establishing a presence in Florida, Georgia, North Carolina, South Carolina, Tennessee, and Virginia.
The company's growth strategy has primarily focused on organic expansion, complemented by selective acquisitions. This approach has allowed ServisFirst to steadily increase its presence in the Southeast, establishing itself as a leading community bank in the region. The bank's success can be attributed to its reputation for delivering high-quality customer service and maintaining strong asset quality.
A significant milestone in the company's history came in 2021 when ServisFirst Bank's total assets exceeded $10 billion. This growth subjected the bank to additional regulatory requirements and oversight, which the company successfully navigated while maintaining its strong financial performance.
Throughout its history, ServisFirst has demonstrated resilience in the face of industry challenges. The company weathered the financial crisis of 2008-2009 without significant issues, showcasing the strength of its business model and risk management practices. Additionally, ServisFirst has adapted to evolving regulatory requirements by investing in compliance and technology to meet its obligations.
ServisFirst operates a decentralized business model, with local decision-making by experienced bankers supported by centralized risk and credit oversight. This approach has been instrumental in the company's successful market expansions and ability to attract top talent.
Financial Performance ServisFirst's financial performance has been consistently strong, with the company reporting solid growth across key metrics. As of December 31, 2024, the company reported total assets of $17.35 billion, a 7.6% increase from the prior year. Net income available to common stockholders stood at $227.18 million, up 9.9% year-over-year, translating to diluted earnings per share of $4.16.
For the full year 2024, ServisFirst reported revenue of $946.12 million and net income of $227.24 million. The company generated operating cash flow of $252.91 million and free cash flow of $248.27 million. In the most recent quarter (Q4 2024), revenue reached $126.07 million, representing a 16.3% year-over-year increase, while net income grew to $65.17 million, a 9.9% increase from the same period in the previous year.
The company's net interest margin, a key measure of profitability, has also trended positively, expanding from 2.81% in 2023 to 2.82% in 2024. This improvement can be attributed to ServisFirst's ability to effectively manage its interest rate risk, with a balanced approach to asset and liability repricing. Notably, the net interest margin climbed steadily from 2.57% in Q4 2023 to 2.96% in Q4 2024, demonstrating the company's ability to navigate the changing interest rate environment.
ServisFirst's return on average assets was 1.39% and its return on average common stockholders' equity was 14.98% in 2024, highlighting the company's strong profitability metrics. Additionally, the company's book value grew 12% year-over-year, further underscoring its financial strength.
Loan Growth and Credit Quality ServisFirst's loan portfolio has experienced steady growth, with total loans reaching $12.61 billion as of December 31, 2024, an 8.1% increase from the prior year. The bank has maintained a disciplined underwriting approach, resulting in strong credit quality metrics. Non-performing assets to total assets stood at just 0.26% as of the end of 2024, well below industry averages and generally in line with Q3 2024.
The company's commercial and industrial (C&I) loan portfolio, which comprises 22.8% of total loans, has been a particular area of strength. ServisFirst has leveraged its deep relationships with privately held businesses and professionals to drive consistent C&I loan growth, while maintaining a conservative risk profile.
ServisFirst's loan portfolio is diversified across several key segments:
1. Commercial, Financial, and Agricultural Loans: Totaling $2.87 billion, or 22.77% of the total loan portfolio. 2. Real Estate Construction Loans: Amounting to $1.49 billion, or 11.81% of total loans. 3. Real Estate Mortgage Loans: a. Owner-Occupied Commercial Real Estate Mortgage Loans: $2.55 billion, or 20.21% of the loan portfolio. b. 1-4 Family Mortgage Loans: $1.44 billion, or 11.46% of total loans. c. Non-Owner Occupied Commercial Real Estate Mortgage Loans: $4.18 billion, or 33.17% of the total loan portfolio. 4. Consumer Loans: Totaling $73.63 million, or 0.58% of the total loan portfolio.
The company's allowance for credit losses (ACL) as of December 31, 2024, was $164.46 million, or 1.30% of total loans. The ACL is calculated using a current expected credit losses (CECL) methodology, which considers historical loss experience, current economic conditions, and reasonable and supportable forecasts.
ServisFirst's credit quality remains strong, with annualized net charge-offs of 9 basis points in Q4 2024 and for the full year 2024, an improvement from 10 basis points in 2023.
Geographic Diversification and Expansion ServisFirst's geographic diversification has been a key component of its growth strategy. The company has established a strong presence across the Southeastern U.S., with its largest markets being Alabama, Florida, and Georgia. This diversification has helped to mitigate regional economic risks, while providing opportunities for continued expansion.
ServisFirst Bank operates 33 full-service banking offices located in Alabama, Florida, Georgia, North Carolina, South Carolina, Tennessee, and Virginia. In 2024, the company opened new banking offices in Memphis, Tennessee and Auburn, Alabama, further solidifying its footprint in these attractive markets. ServisFirst's ability to identify and attract experienced banking teams has been instrumental in driving its successful market expansions.
Liquidity ServisFirst Bancshares maintains a strong liquidity position, which is evident from the company's ability to fund its growth and expansion while maintaining a healthy balance sheet. As of December 31, 2024, the company reported cash and cash equivalents of $2.38 billion. ServisFirst also had $537 million in unused federal funds lines of credit with regional banks, providing additional liquidity if needed.
The company's strong liquidity position is further reflected in its financial ratios. ServisFirst reported a debt-to-equity ratio of 0.040, indicating a conservative approach to leverage. Both the current ratio and quick ratio stood at 84.80, demonstrating the company's ability to meet its short-term obligations.
Human Capital Resources As of December 31, 2024, ServisFirst Bancshares had 630 full-time equivalent employees. The company focuses on hiring and developing top talent, with an emphasis on local decision-making and a decentralized business model. This approach has been crucial in attracting experienced banking professionals and driving the company's growth in new markets.
Outlook and Risks Looking ahead, ServisFirst remains well-positioned for continued growth and profitability. The company's strong capital position, with a Common Equity Tier 1 ratio of 11.83% as of December 31, 2024, provides ample flexibility to pursue organic expansion and strategic acquisitions.
ServisFirst expects loan growth to normalize more over the course of 2025, after seeing some C&I loan growth in Q4 2024. The company anticipates loan payoffs to be lower in Q1 2025 compared to Q4 2024. Management is optimistic about loan demand and margin improvement going forward, depending on continued decreases in short-term rates.
The company is open to opportunistic hiring and potential expansion into new markets, especially if there is more M&A activity in the banking industry. This strategy aligns with ServisFirst's historical approach to growth and market expansion.
From a financial perspective, ServisFirst expects its tax rate to be around 19% going forward, which should help support the company's bottom line.
However, the company is not without its risks. As with any financial institution, ServisFirst is subject to interest rate risk, credit risk, and regulatory changes that could impact its operations and profitability. Additionally, the ongoing economic uncertainty stemming from factors such as inflation and geopolitical tensions could pose challenges for the banking sector as a whole.
Conclusion ServisFirst Bancshares, Inc. has established itself as a resilient and well-executed banking franchise in the Southeastern United States. The company's disciplined growth strategy, focus on credit quality, and diversified geographic footprint have contributed to its consistent financial performance and shareholder value creation. With strong liquidity, solid credit metrics, and a clear strategy for future growth, ServisFirst appears well-positioned to continue its impressive track record of growth and profitability as it navigates the evolving banking landscape.