SFBS - Earnings call transcript Q4 2018 | ServisFirst Bancshares, Inc.

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Operator

Good day and welcome to the ServisFirst Bancshares Incorporated Fourth Quarter 2018 Earnings Conference Call and Webcast. All participants will be in listen-only mode. [Operator Instructions] And please note that today’s event is being recorded. And I would now like to turn the conference over to Mr. Davis Mange, Vice President of Investor Relations. your with ahead go conference. Please

Davis Mange

welcome Good call. fourth earnings our afternoon and quarter to

We and our CFO Broughton, will Tom have CEO highlights the covering from Bud quarter. some our Foshee,

cover we can started. take I your We get statements will then will then now and disclosure our questions. forward-looking

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

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

Tom Broughton

get of and it on might the on financials to are seeing, the Good Davis. going for on sort today. am you, specifics and I make do our be over Thank some am I comments more of call lot kind I talk some then and to a I about thought what have so. general am we we so Bud bit we turn glad to a little And of economy you to helpful to afternoon. because that, questions going

would of all, say a of great had end I First quarter, a great year. record we

excited We except of that’s for billion go organic to are in very growth, million. less $X over assets, all than $XXX

on our time so return that. XX our first – with over quarterly XX%, the assets we for years So, very excited billion we last growth also proud organic about go $X.XX that in of exceeded to are are the average XX%

about profitability the the these biggest over they urban year, the Mobile, the I very will new our Alabama their are few could in doing had last we Atlanta I had teams First, very The us am and And say Alabama, to markets Nashville in job on Nashville. I say and I can average like nicely. is and really improved, be successful last markets. mark people Dothan, of proud contributed CEOs doing thought that strong years return very be well. regional question to large but in we are successful and would we assets,

So, those the very they are in, and have are very, oldest we doing urban well. been they are two the markets

recession. Looking don’t any this point people I and damaged have time. made realize of the that Also all investment at on very recession relationships we their signs in business. the or losses companies is economy, years quarterly the have – X we see acquisitions that to last in at I’d month credit XXXX Wachovia in when customers community that to strong joining The managed worried grew of had were bad was X we seem companies about have as greatly it we Wachovia the problems pretty much like a clients recession last us. in moved hours. black Remember out buying in August, month to XX% having financial and point the in was the benefited all

see. quality opportunity see our is very I people difficult we strong. think be Again, don’t other when So, might credit that times

lawsuit had typically any we the XX% is fourth in by quarter. the that’s for are fourth certainly Bud as We is to in about provided quarter, year growth we the very the quarter a Talking charge-off for opportunities cover that see very, certain are bit in do will annualized. see at expected we sure end, try higher why you loss strong from careful end growth. our deposits, expected quarter, that provide make we any every We of to but very

investors for are are interest focused interest short-term the in We share. long-term think the margin, are that our we – managing per we what the best is but goal and We realize to is again, of grow doing earnings on the many shareholders.

growing rate on less core in last it down focus that Fed have pricing we quarters pricing before the December prior have question deposit we a a deposits. seen since we settled to to deposit so increase in seems that, a pressure have From or three So, get than lot, standpoint continued have two the we bit.

it have rate to banks and of Fed part rate often nobody increases think is anytime in now soon right I that an of I expected ahead said any pay Fed XXXX. tend increase expects

seen in deposit assume like quarters. we a the and prior has bit we that we don’t it that’s pressure just I see why down did calmed So pricing have

we have led that run an part do with say. nor our again, proposition not better I I feel run good we ever felt advertisement we while about pricing, that’s our value lead forward. not have with, have margins ad, a should So But going in never we of – we than never that’s really I – what an

front, the fourth in quarter. in the On loans pretty we widespread solid very growth had the quarter,

way were for this we at large closings of the don’t slightly looked portfolio where the in regions construction you kind lend and Again, It’s by the ask, I our we plus and always If but those see just to to just very turned was Atlanta, terms call in where both quarter, shrink only the clients. strong Mobile, growth of the on and Birmingham very loan continues the AD&C there below the in the Nashville, and in answer. there Tampa do no expected on for little lending. focus the growth in declined probably fourth analysts it your year. to we were It quarter just out so estate for what top closings has thought We Bay, real results, really quarter quarter best quarter quarter. is

loan are markets say showing will growth on all the I year-over-year. great the so newer front, And

Then trying workout cases, they loan small most high of companies, and our very the some lenders. they we when I to and are about we FinTech loan to in say – monthly first And don’t into large that. certainly, businesses very, loans. a a payday with is And about be are wouldn’t we we – just we that space. where standards guarantees. and for compete had don’t lenders company pricing, disciplined get they into about pleased that, to we So those make disciplined structure means want foremost we them then to don’t lot that’s are with individuals payments. just been we to And salvage since a it’s and as changed of that we are competition. certainly, do questions we that’s try see about talk we really see be have loans where investors they we non-bank it say high them competitive lenders meet since performance. don’t growth been standards. lot about Also, businesses the the It’s questions so a And small – at to see lending do of of bigger the year certainly people what to lenders. for nothing some And going competitive, time in have – We loosen non-bank and on been always think ahead competitive now XXXX you is I that. get now, there – in we We huge there. few so always see every complicate think and – is of our business the debt those make rates have because I bothered to are XXXX, and some by banks, a unsecured they questions with loan

couldn’t possibly So, people repay.

So, that’s payday why call I them lenders.

quarter. it the had our end, pipeline continues any to we don’t continue that’s We looking solid. have past. And for think the We in very course what they will year the a that the the at reason. kind growth think prior I of loan to are see It’s over up to of from me. be we year-over-year bit see

had we during assets seen our of when have look What normally the so a trying non-customer finding more have type recession we transactional some only do loans. related inflows, that a we own then, or but were gave wouldn’t loans. we big doing we probably mainly earning but loans. customers give good pricing, We didn’t and ever gave transactional we we found deposit pricing time then did, some We hard doing had credit to on bit time was we standards are do. and the really it we gave new that we on changed – We we things on

the felt not are high have at this still enforce to we do We time. we what need So anything standards. think our,

goal. X in On them X to in to in are to Again, the we with trying added all on be we more had and grew X number goal are We markets by million we deposits of a producers. departed. headcount our of loans to still and X and have XXX making progress We bankers. retirement that get $XX the we X million and in efficient $XX producers, quarter

the we to. So, a of people. lot of talk people percentage to do we small hire talk We a

We right that are for looking to reason. cultural for fit and the join want right the us people

encouraged and very So, openings we the new on about are continue are to growth that We in account see front. strong we future. do optimistic

I over Foshee. it turn that, with will So Bud to

Bud Foshee

Fourth very Good Tom. and afternoon. Thanks, quarter was strong. loan growth deposit

deposits As XX%. grew loans annualized Tom basis XX%, mentioned,

$XXX,XXX funding quarter, went related $XXX had loan flows so continue in we that decrease as our deposit quarter. some if basis will we those quarter. to relationships, pay to factor we credits is basis loan XX relationships decreased up the by liability loan increased in was fourth million increases. to to margin been X.XX% margin and increase continue non-accrual relationships so of growth the funds had fourth two kind long increased Fed we deposits, X.XX% an quarter. the our will realize had in of to we costs cost XXX%. by have fourth in with It quarter anticipated reversal Our we the strong fourth increase we strong, that by related discuss from for quarter, third Interest-bearing to correspondent have points. placed X in excess that as interest The in we bank One our points beta on the see did we Also, third growth,

a operating fourth X.XX%. have anticipate status working of of $XX.X we impairment of traditional million moved and It company $X quarter we have to after Credit balance the XX X.XX% we was an to This bank’s no We one C&I accretion a accretion reminder, million. assets. income are For XXXX, loans. was points charge-off non-accrual to the is increased Alabama. wanted range review fourth related loan had One quarter quality, in a prior restructured income their relationships margin of $XXX,XXX. for a million quarters this The $X.X charge-off relationship in in and of impairment total and in liquidate We discuss. basis we just I margin. acquisitions. two And to made to is margin up and

is Alabama. the we other on in senior on liquidating quarter million and total of position our working is XXXX. on exposure are impairment upgrades The make to are a asset. going housing was had credit million $X.X The project loan a about fourth standpoint, some From system we in placed We and non-accrual. $X

online remote are deposit imaging, our capture We banking, platforms. to and going upgrade account

expenses vendor. we $X as have So the $XXX,XXX be will we and we playing million and increased will have new old – vendor between to the

one-time XXXX. that quarter, be charges incentive In the will our those So, $XXX,XXX. was fourth accrual in conversion adjustment for

and when of In of see $XXX,XXX. reduce fourth accrual reminder It’s charge-offs, in quarter are Credit $X.X on guaranteed XX.X%, an fourth we based rate accrual XX.X%, reduce credits but will banking meaningful. adjust and adjustment just that in this on sell trying We from generate $X.X of XXXX is an credit endorsement grow to million. bank. that program you the XXXX strong and of $X,XXX,XXX we from fourth $XXX,XXX, business. year and And great to in made banking we for $X.X was quarter in quarter made our loss additional go to rate for our under we and accrued credits is Tom option adjustment income we working that in quarter And that was quarter our stock Bankers had was in XXXX. stock to XXXX, income. turn each the the our continues that remarks. tax and Non-interest were September, each charge the net made tax provision opportunity we we quarter, were has and and but increase return income, $XXX,XXX non-interest our normally card The Taxes, adjustment fourth business this $X.XX to release the option offs. some adjustment American bank, year-over-year. that that XXXX our we we quarter. found the working the fourth That XX.X%. to file XXXX, was for for The think million year. is down any loans incentive accrual first we credits our Great Also, concludes net to to that Fourth non-interest growth our fourth year, on for government income Tax of news $X.X is small trying the $X.X of were stock We of correspondent going the the mentioned received quarter the million had XX.X%, without tax payment, don’t are without rates contribution back $XXX,XXX adjusted adjustment in million card on year-to-date, income, loan million the of mortgage over it agent grow after to our Davis. projected a mortgage an I option we charge-offs make final will million. XX.X% by XXXX. each my we in in quarter Association back a bank for not hard

Davis Mange

Thank you.

open questions. the lines Let’s for

Operator

the Thank Please Raymond now And question-and-answer be will [Operator James. you. go questioner begin we today ahead. And Wallace William Instructions] the with first will session.

William Wallace

you. Thank gentlemen. afternoon, Good

Tom Broughton

Wallace. Hi,

Bud Foshee

William. Hi,

William Wallace

of Couple you. for questions

advanced closer billion away about puts curious I year, started of whether for billion billion? looking process it to much of in asset tests, So first $XX you at if a strategic layer formal $XX so to expense think the on the still you but have growth not or XXXX. testing. billion. stress crossing are took in the crossed off, stress more like to It almost kind from prepare planning sounds to over that am know for total you a end $X you will if $X over a to they I approach the regulators

So I how your bigger change think ratio you and take if any am as done $XX you have just and that approach that around curious, account efficiency think of planning you kind if you billion? into might picture do

Tom Broughton

expectations, regulatory scrutiny we heightened a cross To foremost, are a in will crossing have have You very for meet our My first question. people a billion last $XX good answer, preparation asking the and over billion. added the half. year, threshold of the $XX and lot we regulatory we year the when

nobody McWilliams less formal stress You that – than testing sure are we changes. certainly the what not be are right, Ms. in required with there significant but will is FDIC before, is not any at weighed has sure will – yet

appropriate no of what be what if have and would of testing, any. will is be she idea We the level required thinking stress

see I without So the just can what it waiting – a what forecast got it you we’re you I we is. we can we’ve – you time, is, run bit, think rate can, – like know but don’t

certainly work, some certainly the what The adequate time. So and here, is selection for most answered leave software, we we do – have testing, getting so – we you anything want they’re add? don’t – Pouncey your certainly to both do can we’ve I prepared got if think stress manage Clarence to think we’ll Bud, Bud is I is some did that. I questions. do out

Bud Foshee

formalized now don’t they’re that’s I utilization I stress of like that of lost is, the you thing events, can XX%, would only market if want liquidity even asking our – to with anything you regulators they’re see say to a make expand a events testing, looking or in events, more C&I think a though I major you to Wally went say we’re up than will probably what have is your team say The those what handle right seeing quarterly you liquidity. that that testing X% they’re type for sure guess,

William Wallace

So pressure? would and be that from that leverage there not like standpoint anticipating I’m much expense an it sounds an at point standpoint, hearing this you’re operating

Bud Foshee

I I don’t mean, think this – so at point. we’re

Tom Broughton

Wally, and the in a we from community. the the year, people regulatory last, a year over back built certainly, add to half office probably pressure

be efficient makes the to the do to So is more in on what added office, layered back front-end that offset that we’re that on we sense. expense trying some

believe if and shoot, you always certainly is bullets, of certainly ways having we a for that income looking that can couple one below charges golden couple bullets you in and our service We’re well silver of pretty need market. are

can need. of So event that’s always a we do certainly is that in something but something competitive we short-term advantage, �� the could a

William Wallace

Okay, thank you.

think look of will loan of years, I ‘XX, and grow the from prepared been mid in past slow ‘XX loan the Tom, said going like double-digits. it expect I growth, in in On it’s low the ‘XX, remarks, if was teens to no your would over, couple you you mentioned back to in high where and your you growth that more but kind reason to

XXXX ‘XX So at should comparison more do the the you could levels back ‘XX in you look as or I of getting accelerate kind to of a teens? from and actually ‘XX think point

Tom Broughton

lines we’ll and have. We’re there’s of which we bit where as do in lending a our certainly, to certainly a that. better than than have something any expectation or lot guys business credit indirect so business we the have units, while you you serious specialty might to better don’t remember no we dry quit have is would of problems loan where certainly is, have particular originating up never do – One no little thing hopeful ‘XX, to paper portfolios,

up can kind loan of origination So we loans good about feel capability. We the our originate. we ramp

people necessary transactional it. the business. loan do more can if to have We We do

our people relax about that for stringent know to while, and requirements bit. following of been a a loan money type pretty could we You’ve us for we you we’re the

relax, we some recession, like the if like we relaxing we pick found much during we the did not could loans, necessary. can credit – booking additional We’re quality, but up it

William Wallace

significantly question, then the than deposit how around loan advertising paying existing I guys figure so total loan this relative if you’re not costs to to deposit – at to look the I deposit the so little growth, And to I Okay. marketing? the deposits, on for really higher, last trying you’re just you’re having costs. the higher into board don’t beta resetting trying your a commentary my much is to across your understand bring you at I that out, it bank push to to significantly increased look but industry, this bit your for you’re way, have if cycle you you foot your deposits also growth to fund median I out it if I’m Tom, want know and customers? I’m just like are if the advertising up. sounds actively just or not by bank rates trying and be the think

Tom Broughton

you the theirs when you’re that citizens your to home, you Well, we getting bidder, highest some retirement retirement senior of is advertise, the kind get borrowers the so bus don’t don’t to take Right. always business. from quality [ph] do and CDs room

deposit to been we can a can always wake we’d be manage had improve so here, we but want they’re beta, competitive, margin try the grow the retail keep net margins we improving customers. means borrowers to They’ve growth having sheet Also, just starting We’re to improving, a have. to is can so income. up We our We retail that to reasonable to low asleep We lose have – back try our up. and be very our income wake to the at corporate of competitive, we now particularly, up. if don’t like trying they’re about very starting to balance two-pronged. We are starting margin. don’t be loan certainly probably our customers net up. But loan wake concerned the customers

– grew competitive a mean, we’re deposit X do what You you share. can – markets of and year, look a that want their I is to you a grow can XX be Fed something grow reduce have have we the per we’re XX our our of and so we somebody we’re that’s continue market odd, funny, a share of to income we’re market stroke share. decrease other out our to think share you Last pen, deposit market significantly growing don’t to all that really was and it is decrease bucks. is because trying as is to our in way improved of of to want proud don’t grow share with market the rate it net might one in we markets, growing market but rates, which to net XX,

William Wallace

for out. time. the appreciate hop I’ll I it. Okay. Thanks

Tom Broughton

Thank you.

Operator

questioner will Inc. Please And the ahead. today Tyler be with next Stafford Stephens, go

Tyler Stafford

guys or afternoon morning, good guys. Hey,

Tom Broughton

Hey, Tyler.

Bud Foshee

Good afternoon, Tyler.

Tyler Stafford

to executive team maybe to just of wanted can for that incentive extent, the credit you this on management hit full-year maybe had you remind start didn’t caused guess, this what goals incentive incentivized? to non-accrual quarter played increase into And What, quarter, just the and that reversal incentive hit us just I this I Hey. that that has how the reversal? you bankers the and kind quality reversal? the

Tom Broughton

an it’s of to and of less exceed bit goals. and goals goals everybody their a science, people what goals, is short some and try fall hit hit their but their everybody of not accrue Tyler, some and we a art

the that people extra of they fall plans. they blend go when and the people their So we certainly short, to them – payout when full achieve go their over and we got you don��t they pay over,

let out out So in we him and we I’ll have in Last short. $XXX,XXX. jump more $XXX,XXX got try to year, precise caught only accrue reversed a you can explanation, second. and we reversed give a Bud should here We

that So don’t again based making sure accrual what this that reducing we happen on certainly and year we’re expect. not

I’ll can Bud, confidence. to that if And add science. a not see art, an is it So you

Bud Foshee

is biggest growth. I on year-over-year Tyler, the think based Yes. thing

before. and strong this bit loan unknown, probably to little So a a the what’s was fourth fourth the really strong quarter year a had than we’ve had deposits, less of always quarter we

So so makes that’s it what hard.

what’s what to know to your your are. You through payouts get December really net incentive growth to is see got

Tom Broughton

I deposits loans. – than more for say must will there’s that payouts I And

this, incentive are about So loans, loan have XX% outstanding like deposit quarter gross our The usually higher. when a deposits, mix in system. a are that’s growth of you is – XX% payments oversimplification the but they

Tyler Stafford

Yes.

Tom Broughton

But general, – on a that��s there’s weight deposits than just in more loans.

like blowout on have I you a when quarter. growth, had So we it just quarter mean was deposit blowout

pay. to got You

So –

Tyler Stafford

about their or incentive banker a trigger more rather just increase a plays not their It’s hitting any, I’m quarter? non-accrual factor much individual out hitting like the much, factored all targets I like guess targets if how the that, Okay. that? – in than into how to reversal credit – the And trying if credit figure you this part B to at

Tom Broughton

nothing had it. non-accruals The to with do

Tyler Stafford

Okay.

Tom Broughton

plan There’s at haircut a regional payout be people did, their – the certain disqualifier level or can certainly their of and reduction this the and certain does. a we for level, charge-offs, certain our CEOs, – it above depends on says. plan a it’s both says – it

Tyler Stafford

– a us couldn’t a Yes, of the give piece with moved can non-accrual us you two information of individual sticking lot I okay. the you on of just non-accrual sure you remember. make the on what wanted give is existing for was you gave the to lot guess that? Did credits gave That that quarter. or to Bud, I increases this these two each reserve I there makes sense. credit just a information just credit,

Tom Broughton

the gave You impairment.

Bud Foshee

X.X. Like the XX.X the was after was total balance is that – and the loan particular the impairment Yes. charge-off on first

Tyler Stafford

Okay.

Bud Foshee

$X $X.X the is is million million. exposure the one, impairment and second The

Tyler Stafford

that, the XXXX? guide, Did missed Okay, have rate got for I you may give it. tax also

Bud Foshee

Yes.

XX.X%. XXXX, For

Tyler Stafford

Okay.

Tom Broughton

don’t short take Tyler. You hand,

Tyler Stafford

then I was it trying And to just catch – all.

Tom Broughton

slow I can with in let meeting short yelled either. down he write time, so, hand the don’t Bud take talk, Bud, a this him me down. me all all

Bud Foshee

next slow I down will quarter.

Tom Broughton

He’s relevant.

Tyler Stafford

just just outlook I’m, just the X.XX%. And on me, okay. make thinking range that That’s last you alright. gave, ‘XX one to right. again, to That’s No. NIM I I guess, X.XX% about the at from want sure,

from ‘XX to the in bps. XX NIM moved trough, peak So

X.XX% volatility X.XX% or what full-year of extent the in ‘XX? ‘XX kind within saw see that X is of NIM range all-in So a quarter-to-quarter we should that that the basis kind points to unlike is the we is range,

Tom Broughton

wouldn’t Well, I’ll interest we the say, fourth non-accrual had explain X.XX% an be reversal. let’s we that had that. If the in at without quarter –

the year predicted with of XX see would loans what don’t we So I would ahead moving up rate what or guess, increase is last a we’re – margin or month that I really really that those no half year. where first rates more so you increases. rates, change ain’t in days much. Fed had days XXXX, Fed that’s banks happened of the increases when down deposit last That’s guess after to that, pricing XX really I drove what but

XXXX I’m and next increases it NIM really out, Fed fourth So quarter for basing no year.

Tyler Stafford

Okay.

but – So it’s NIM correct? a full-year range. that Is

Tom Broughton

Right.

Tyler Stafford

alright. Okay,

Tom Broughton

Right what impacted in like now, you significantly excess the that look had through. we we’re that And if that’s all our anticipating. margin bunch quarter, fourth

Tyler Stafford

Yes, okay.

Tom Broughton

at deposit the Well, is the growth have same to time. outpaced loan which growth, not a problem bad

Tyler Stafford

Sure, absolutely.

clear. was that Now

Thanks. quarter. from Okay, Nice me. That’s guys. it

Tom Broughton

Tyler. Thanks,

Bud Foshee

Tyler. you, Thank

Operator

And will go ahead. Brad be Sandler questioner with O’Neill. Milsaps the today next Please

Peter Ruiz

Ruiz Brad. actually Peter Thanks. It’s for on

Tom Broughton

afternoon. Good Peter. Hey,

Peter Ruiz

questions been just given or of bigger the into that couple taken been here. quarters? wanted you’ve any of of dive verticals portfolio-wide Has Good to seen kind sort noise the afternoon. review of Most that my touch a there on have in but credit of just answered, of we’ve some kind last any

Tom Broughton

Peter, little is Tom need or… this about I bit to you’re expand Broughton. question you a your understand more asking. what Can

Peter Ruiz

Yes.

you know you if maybe one-off of terms within deeper occurrences, know specific that just a at this more commented of have these did are in if there’s dive like portfolio. didn’t guys but if I that wondering verticals have of the guys that? been any portfolio-wide trends that any you like looking or or anything been in Just systemic anything analysis, and just there any sort sort

Tom Broughton

one is at than bit much charge-offs the a little contractors would Certainly, thing like. industry. to lower our have exposure had looked where than been We’ve charge-offs are Yes. that we higher the we’ve

XX so basis or XXXX. in XX in charge-offs XXXX, our points points basis were I think really

our of certainly, review. to is So loans our on very at industry, of careful if are contractor there’s well, founded. is our say, rates, that We’ll what that loan our you every in We going some – bit is the all good by the that. the you? goes but about ServisFirst, at type they time. think But so really of are credits, we well, like quality category They look top one how looks X.XX% that of a of we agricultural firm at said, manufacturer an review portfolio States the have review going certainly get these range don’t to loan – is recession, affect do through we’re ditch if we’re so be it affirm into more The we industry, outside okay, loans risk agricultural, so we about feel going so an United at firm. year I the XX% manufacturing, broadest ditch that every into have to you we

most our exposure is portfolio, given any in industry. less than X% So everything

where – again, So in we we Peter. we about are, our we put we feel that should about broad see don’t good finger really good any credit And trends feel on deterioration.

Peter Ruiz

Okay. for from I’ll now. That’s step it me. back

Tom Broughton

you. Thank

Operator

question-and-answer have may will conclude for now presentation. at today’s session time, your today’s attending call. conference disconnect And our this lines. further so Thank and questions all we no you you this And

ServisFirst Bancshares (SFBS) 22 Jan 192018 Q4 Earnings call transcript