SFBS - Earnings call transcript Q3 2019 | ServisFirst Bancshares, Inc.

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Operator

Good day. And welcome to the ServisFirst Bancshares Incorporated Third Quarter Earnings Conference Call. All participants will be in a listen-only mode [Operator Instructions]. After today's presentation, there will be an opportunity to ask questions [Operator Instructions]. Please note this event is being recorded.

to for conference ServisFirst like Mange, to now Relations Investor Bank. would turn over the Davis I Please go ahead.

Davis Mange

Good afternoon. quarter earnings And welcome to our third call.

our statements then take Tom and questions. started. I from have our cover your then quarter, CFO, our we now Foshee, get forward-looking the will will highlights and covering we We and will some disclosure Broughton, Bud CEO can

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

only speak update statements and ServisFirst day no as Forward-looking they them. are made, of the to duty assumes

I will the that, to turn Tom. over With call

Tom Broughton

Thank you, Davis and good afternoon to everybody.

I'd new the Director elected numbers, we're background Mettler mention I thrilled of Charleston Chris Mettler. technology have jump Director new Chris been He Chris like a of on has our and company. to Directors. Board into we to a today, has Before as

he'll the holding So we well. and the as be for asset think company Bank great a really

joining So for and to Chris thank you we welcome us.

margin regards it Bud the talk In up to our very point didn't of basis like. unexpected. range. we pleased was We plans to had were bring is bit little going anything it back not And a all-in-all, quarter, to to we about slippage, the XXX

And on. growth. the later that we're flexibility given mention something deposit I'll our have that's strong working So we

the third growth in modest. The was loan quarter

in tremendous loans XX% have do any to pay Last Florida. plus didn't the that loan have in Birmingham had We Our loan closings affected quarter, we was best region has and growth downs year-over-year. the some are CRE Nashville quarter, The tend in The growth. West we lumpiness. up quarter. large growth

quarter just it's lumpy. This

media with seem many focus you boats cautious the war if requests economic to likely. the given all airplanes and economy I new call, does trade and on it. it ask about thought We is, the can finance you tell got China clients outlook hadn't that are somebody about And always ask and every I the and more really

sign So the that a cautious be are tends being to little that bit people side. a on

Our pipeline the of projects. they're projected Even medical and quarter several is C&I than quarter. we projects, the net higher going -- over financing. much it good payoffs is last they're have a CRE a bond to fourth They're up bit in -- projects, they're normal, not around

higher. of can do side So flip lower can't permanent that some to market when the rates is go are with you rates people things that interest

be on. of our So though some projects project will back, new good for projects those start those will clients construction backfill will most be of when

XX typically So fourth reason quarter, no and had in add quarter. good this have the We we year. don't same bankers in We there's we one did the third in expect each expect cities. the great a we bankers team the three three and Florida closings that Charleston, to

So we an people year-to-date, outstanding bankers. of bankers of new just XX group hired new

trainees total have today. excluding bankers -- have We we XXX

upgrades substantial people And year-over-year. XXXX. annualized based proud quarter. XXXX mentioned this people strong I XX% these of earlier, broad quarter this the very growth added don't overhead it's growth, the have have the year. regions in year. numbers outstanding for deposit the for new certainly we've The new hires. this we've growth. They our added significant very reflect really Seven and some XX we've had staff XX% in We're added new year. of do this will a deposit was We've But an we and that

home broker we've never loan we other banks, service. a our or had manage And we have lot have do never accepted a have soliciting margin. We of deposits, Federal many -- to used bank flexibility advances. Unlike

been We've the to liquidity. bit So but trying thing and of good problem, it have that's have. is substantial down, a to manage excess a champagne it we

Bud's talk new XXXX, in it's of limit revenue to on, do to going the a is to focused XXXX. initiatives, we about good the so. something expense for time but We'll think One we've production hiring control. never personnel It's

we're at control, look of also our the and providing fees at vendor So costs going all clients. look to our through cost and expense services

more Bud So to it I'll turn on the now over detail to get numbers. into

Bud Foshee

the million in That points. second Thanks, the in the quarter. loans points factors. Xst, LIBOR, third XX Tom from it's Also, LIBOR, excess index. from Average X.XX% margin Xnd did in third August X.XX% from basis It interest we ahead went good afternoon. June the and in third cuts. XX September moving is Fed decreased that Couple have XXth basis quarter $XXX $XXX to points increased rate August decrease basis quarter. so decreased XX and of Net XX decreased loans quarter, of XXth to tied day and by rate to base million to funds by in

a rates The we've note, On in the bearing September. to is and our is September, at again of interest in X.XX for and decreased July, in rates X.XX to positive October X.XX July estimate deposit Fed lowered DDAs after X.XX. cut our lowered cost August,

would be on X see it improvement for to to I margin. if basis the you. our points XXX,XXX detail different points have we anyone October, email components, me XXX,XXX, in For like basis margin an increase to of X that'll

cut loans, margin Also to a have will Fed plan accretion acquisitions. on and will with the just no committee related reminder, $XX add meet income XXrd cut month. basis ALCO we as to we will add without also. points both deposit The develop a October our X rate to A in million rates, that and in

income. Non-interest

million bank we added for program card versus and this correspondent increased grow, for quarter-over-quarter credit $XXX,XXX. the this endorsement continues Association credit year-to-date and income Our Earlier XX Bankers program, year, XXXX. banks American XXXX bank an XXXX, card increase agent we've $X.X to in to received

any million October, versus $XXX,XXX. it not XXXX equivalent of yield owned government early tax X.XX. if quarter-over-quarter year-to-date. sell on that bank reminder, And to A The guaranteed of life increased insurance. XX banking non-interest income loans XXXX, income. generate In mortgage insurance we is Our purchase Bank grew $XXX,XXX do the

should increased not our third $XXX,XXX teams plan. have Tom lending budgeting to based what anticipated We connected key to cutting added spending, is would new necessary is area; processing efficiencies cost new based justify plan be, end for performed; This XXXX. our to on is mentioned, by you we've to one we budgeting payouts expense. activities in and versus shouldn't on see area zero not budgeting a expense year And they or quarter accrual consider in incentive plan; should first, improved traditional it's that Non-interest how a based we [wired] what XXXX, prior second performed be that remove; to is activities. and last be year

Loan provision. loss

larger quarter been third offs $X.X our proactive were on charge were net credits. $X.X offs and unimpaired million. Our million, We've charge million $X.X when problem paired

on Our can Officer, Abbott, Henry answer and Chief Credit related the questions. is call your credit

the had XXst. operated The time, Bank was Alabama Alabama program At third State roughly consisting and in on loan $XX starts of This terminated effective was this quarter. this notified the over Management the onetime guarantees guaranteed Service we program book loans. program. that participated wrote potential XX reserve, in in losing $X.X based State is loans July in loan credit us million. Department of is of of that a the and payment loss million is favor the and total this life in $XX portfolio. this loan decided downgrades to million Banking million loan $X.X

the lending fee the the General on the it this rolled Bank's collateral credit when commitment. Bank These have and land will Thus, met that criteria. situation. in shortfall loans required enhanced program, otherwise had the other to X% risk, monetized were loans enhanced in not

XX.XX% option It's of The Taxes, XX.X% tax rate million. XXXX year-to-date was credits $X.X $X.X tax without million. without rate for is for XXXX XX.X%. option stock credits of stock XX.X%,

Third credits without quarter XX.X%, option $XXX,XXX. XX.X% stock XXXX was at

option the XXXX, rate of $XXX,XXX. without XX%, XX.X% of quarter was stock Third credits

remainder of the XXXX, tax rate For is XX.X%. projected

Shareholder gain value, including and up unrealized value value. gain, excluding is year-over-year, Book book AFS XX% on securities up the year-over-year. is unrealized XX%

to comments. turn program my concludes over I'll This back And Tom. the

Tom Broughton

outlook to don't certainly Thank a the we the standpoint, an obviously, it -- certainly, recession be followed media. see on you, We that focus is horizon the seems Bud. economic but in from

coming, recession. if well there's Our recession a we're is thought prepared for a

strong very sheet. have balance We

very -- argue capital have and have over defense I've argued always the not the a that income potential years, best the to against with profitability. strong you losses. regulators regulators talking that's against The of strong losses, to I've true. any We defense always is offset is stream loss best

our sheet, quality credit pristine. is Our our non-performing balance assets,

are one half percent non-performing assets to of assets. Our one

where there's recession. a see prepared we're in the are coming, So like anybody we as if recession we well United States. we as If

open up So with questions. we'll it that, for

Operator

you. Thank

[Operator session question-and-answer the begin now Instructions]. will We

ahead. come Our Tyler first today will Stephens. go from with Stafford Please question

Tyler Stafford

the on start let's Bud, Maybe margin.

different basis So basis quarter can points increase I line basis just the expect said if build. that how but the appreciate points commentary in components X X the seasonally margin, usually deposit particularly basis here? the you to fourth you and to on the And that's you given go walk X costs, points X high liquidity a on could just over email Could you us. on get that. we to that And through increase, points that the

for hear pretty I so interest what that step think I you October said correctly? down. cost is Did bearing X.XX expect, sizable you

Bud Foshee

excess say we're in billion that -- and was a bearing excess in X.XX loans estimating CDs. our does that's reprice September once October. that mean, But got, $XXX interest decreased so October. DDAs, cuts, we're funds yes, prime it then all loans far reset -- $X.XX you've That's It prime not let's you've have million, got month, rate immediate that after include big get the decrease. I X.XX a

has earnings. a positive on So that impact definitely

Don't what Fed course cut trajectory through in loans once like prime and XX loans in through, -- to that on of how through rate lowered rates October, go impact kind reset. on going detail a current margin. when September. when those reach that day reset Fed The went or then the component, Funds so you that month much we when the LIBOR we calculating purchase would the and reset know

Tyler Stafford

expect get you the still would But improvement quarter? fourth an if we do point cut, for basis that October

Bud Foshee

Yes. we the in cut know, something September in address. Fed we Because after a or we've we'll have got Fed just said, July. once rate like to it's on back you 'XX. even to did we outcome, with enough the when cuts, cut much without steeper Tom as our plan didn't really cut And Like have cut rates a

Tyler Stafford

Okay…

Bud Foshee

I real $XXX that's the really funds didn't -- mean, -- what's impact is up that, and mean, a key. decreasing and in we goes it million on excess is quarter, third when big has that forecast It's of that margin. the I your kind

Tyler Stafford

year? this from quarter if last Would go liquidity high a expect isn't different fourth pretty years. standpoint, to I several seasonally for you But something back

Bud Foshee

what growth, anticipate we're loan historical growth guess look based think loan, have that's that's standpoint we And traditionally a so would I is if we mean Well, higher. a we… the fourth on where are from think is I a I stronger quarter higher from loan -- -- or I you This for we'll data I standpoint. mean at behind budget

Tyler Stafford

Yes.

Bud Foshee

…we loan growth. think the

Tyler Stafford

Just X/XX the was? or last XXth from on cost you Do have deposit total, the margin. total me September

Bud Foshee

X.XX total Total was for cost.

Tyler Stafford

couple then A questions maybe credit. And just to there. shifting over gears of

then $XX rating of So lost loans, increase? status $XX What in Can credit in million guarantee. the just of at those many And talk you point, non-accruals. this that million loans the from of about on loans, the at type were what increase you X/XX? a included standpoint loans was how the that the

Bud Foshee

components. Chief Henry our Abbott about he's those going is -- to talk Credit

Henry Abbott

today, our all the I'd one relationship And guess, the current that mentioned, program all hit loss pool Status end say was collateral very associated Bud loan first. increase current of the driver question driver on end were that of $XX but loans minimal. primary I But non-accrual has at that one the quarter, was I loan -- guess well, our as guarantee relationship. light were mean pool those credit market, were but the Nashville non-accruals. been of except The of have loans rural I'll of one million hospital loans. with loss in the typically, was was of And but in roughly the the that I out the at all systems that and in primary jump current increase

Tyler Stafford

I'm make And then clear. just from credit, me just the on FDIC sure lastly to just

back run million go the So this that in of Would to your you fourth expense? of rate flip credit insurance FDIC quarter to the the expect $X.X got and you kind quarter. forward towards historical

Bud Foshee

a Right, it from say we gathered Yes, guess, will fourth quarter. will. you I what in that the normal be could expense,

Tom Broughton

primarily really half We've in Tom. gotten this the got we the is for that a indication is to credit the the third can confusing, quarter some for equal very of what it's -- fourth you American Tyler, got you Association, Bankers' expect quarter.

But I more -- maybe don't it's out to that's -- seem we lot, out that's understand around there whole find be can't number. So specificity found nevertheless this can't a target. why but you moving a

Tyler Stafford

it guys. all That's Thanks for me. right. Okay,

Tom Broughton

And to in hopefully… you if earnings be build revenue or to the we from add do fourth have margin it'll that, neutral, excess from can liquidity assume neither standpoint away so it'll a take quarter,

Operator

next Our Milsaps come Please ahead. question O'Neill. will Brad go Sandler from with

Brad Milsaps

I the appreciate side X Loan all of linked so NIM, sheet. the balance basis yields, about points want other guess, or I to color were quarter. on just maybe the the talk down

kind to we loan just also what that then extent of in Just you books. loan floors, an kind they might the third you have expect and cut. are how if guys kind then quarter October new you? kind yields come of be on curious And maybe get the if how might that of what to the as compares that of And protect would

Bud Foshee

Yes, let about talk floors first. me

We $X.X the has million loan have end we million floors the X.X rate [Multiple $XXX in to well rate that $XXX got of million. billion September, -- -- was Rate XX%. floor [indiscernible] equal floating X.X It floor, the at to loans of or rate end rate at of June. loans. Speakers] increased floating

a rate that So cuts, with impact. two Fed had big

The went -- just little yields. -- say September. Loan in loan a at look let me yields bit let's down the

million $XXX normal lower do run a to $XXX it rate in couple million July, in loan was had September. said just to credits, lower $XXX like rate had of with $XXX in because the it on August, is yield, I've million of But $XXX million loans…. our Some million

Tom Broughton

Non-accrual drop status primary credit is on in loan the reason yield. the for the rural healthcare

Bud Foshee

a cut non-accrual had in had the we reversals quarter. Yes, we some -- third

Brad Milsaps

the loans the have floors of XX% that are said Is you what And heard? that at floor. I

Bud Foshee

rate. our has portfolio rate floor a of No, variable XX%

Brad Milsaps

it. was some XXX got million… Okay, And odd then it

Bud Foshee

XXX million at the September. end floor is of Yes, at rate the

Brad Milsaps

are know year. probably kind then And I digits up expenses, Last in high you know on couple just right in efficient? early. this room it's or or speak, to But hold kind pull you guys closer tracking you XXXX, you guys to years, kind to is to so is think process digit have So you budget of that to maybe can much of something mid-single guys single back? double growth of follow-up really this I there now. been are the digits cut,

Tom Broughton

hard to to going looking at And our hard we're with going drive Brad, expenses. look vendor Yes, every us expense. and pair help every the We're we're partner us ask vendors. at to

XXXX. next this We people us Brad. adding but added, at think lot revenue they'll very overhead new So personnel goal, achievable for production added pay a we're we year, we an achievable, added, we Certainly, off in it's to significant look have. always like XX the think year. continuing in We've we've

would that performance. with have are not really to satisfied where try this -- we not was draw we is like this a this if yield, we're is good and year, not So standard our the of not line

not sending So satisfied message our not the we're this we're throughout performance. company certainly is that satisfactory and

Brad Milsaps

a true full step typically you got on fourth pretty back Does things it adjustment kind an have you sounds a mean, third that as quarter, the And I the guys quarter. you in take in particularly accrual fourth personnel. into of like up?

Tom Broughton

that'll that, of year, had -- be year we'll want are if that good because out can tell from we've do. just we haven't than we going accrued, we to bonus news accruals to have. we pay Brad, down I the But you kind accrual Well, certainly, last hope management got more and be

Operator

will Our next Fitzsimmons come Davidson. D.A. Kevin with question from

Kevin Fitzsimmons

describing Just follow-up wanted focus you thought Brad's on to on producers. right. you going thought then sure I initially I just I when the clarify were you of one. just say hires, going heard just question, but were to new hiring to revenue you I cost continue Number hold that. going I make heard -- to with wanted it cutting that you were was to off I to were

Tom Broughton

I we'll don't they dunks, certainly, revenue Yes. continue to for slam Kevin. themselves to production pay people, mean need be they quickly. very hire need But don't

Kevin Fitzsimmons

And likely new what look willingness it, about your is it less -- Tom, lap? And team? say entering depends make you a falls hiring to your would does new at what in just a is -- focus, that it markets? it it is be entering by market Or

Tom Broughton

we at look to talk -- we group somewhere. people to I people, talk mean, to mean, all Yes. monthly, talk I to we the least -- a time.

out over certainly the they're in think our about or They're not open new XX $X not don't break -- be have to a the of rule don't month to going new at market million. they'll are effect we're going mean -- and startup all. us million, they're $X we expansion -- market, most period not to minimize losses So to terms part don't an I a big us. I make

resources. opportunities to to laser But more to been. we're of winning focus on certainly our new -- open make But managers have we we more And want certainly, quickly. their we're always to rationalize a meeting as have profitability

have So we somebody new, on rationalize today. to they've then If -- bring they hand want got. need to do with the they on need they to resources what we

Kevin Fitzsimmons

both? more little credit. -- is we downturn, very a I about or this And a we're more it cost have it it margin at Is is be process or on if cuts, know, more feel ahead focus. the then is lower at But whole prepared due just with potentially you it of good and you environment decision to the said looking looking increased of to dealing

Tom Broughton

reaction to kind recession the of going it's -- a that We had. we respect, in a acceptable, And kind reaction and just sends probably just this acceptable performance. not to that's year is since a year to And -- to not been pretty earnings it's this a this No, the we're this a we've -- not good -- year has for this purely call Kevin. is message not not double-digit we're increase, getting -- is that's expect. everybody ready that to that, of

Operator

Our Wallace Raymond William next with from question will James. come

William Wallace

maybe in bit a I was credit. little to hoping more dig on

that was in on So drove increase? quarter off believe you third hospital a facility, mission, the there Nashville the $XX first I million said

Tom Broughton

Yes, it's office. in primary that's out of our national driver non-accrual. Yes,

Tom Broughton

them, credit and it for liquidation It's been was about be through assets. unsecured a we've to we've hired And but we're then of judge. over going of the until [indiscernible] talking we'll resolution represent have who in part while, the go New But ahead, -- with There's creditor get money, Wally. a a some Jersey [indiscernible] fighting can't the have just final from to we sale it money. same on to we bankruptcy gotten

William Wallace

Was with charge year a off quarter? last there the associated this in third

Tom Broughton

third in year Last the quarter?

William Wallace

Yes.

Tom Broughton

a fiscal… had We tough No.

William Wallace

Okay.

So this credit? what the was that charge quarter for

Tom Broughton

Charge this that quarter million. $X associated with roughly credit -- was this

William Wallace

the sat. up of then And year your million, they little quarter, kind in fourth and jumped $XX then a last over non-accruals

talk feels just one quarter, like they're or feels you and last couple it's credits? have a off or come that So that kind And of sitting, can one they're sitting. moved Was about just credit why in of others they've on. that it just like -- and quarter was coming

Tom Broughton

that. I'll quarter. up fourth on the specifically remember don't I follow

for mean one take combination instance, charge proactive the a some time. think was the had loan of being we increase are for it. of we on been a quite we it's of credits. the non-accrual did that drivers in I I net And loss I removing both. offs on sold mean in

and just to impaired felt to that of roughly very was. it XX% had we quarter. for our was offs almost our we what that we sell loss charge like net need So But

So I mean on actively that's your question we're think if cycle, working do I through was… what the

Bud Foshee

Wally. should next the through takes a a There's -- Things that starting is some the filed it's forever, resolution C&I largest good. with on this will bankruptcy, C&I credit is going have we Only that been The it pretty bankruptcy week. But credit be process. one

William Wallace

low quarter four the I'm digging your now over still guess, reason understand pretty loans are we're year is million. just approaching big million, that's because $X I jump NPAs in third And a quarters. in relatively non-accrual just were I but $XX last that and your

sense in or are any larger increase just So to trying get of going we're of I offs, as I'm a of So you're just anything that the that any inflows, stress couple commentary is whether credits the seeing bad? in seeing one always to system. know or your signs not outside

I'm to over get sense of just jump big a quarter? So the fourth why trying

Bud Foshee

million move we roughly like Yes, that was quarter. $XX I of one this mean, said, we credit

additional And NPA largest credit. Tom some resolution to mentioned, we're hoping our get downs bankruptcy, we thus on through get one second some is pay that

William Wallace

that you well? And moved there in third mentioned, off the that quarter Tom, one as was

Henry Abbott

did This Abbott. we so reduced quarter. I non-accrual credit and yes, is Henry a the sold And in mention it third

Tom Broughton

assisted was facility… living It

Henry Abbott

was sold Roughly, that million impaired for. we credit to what $X it And and close it we by roughly had the was half. debt

William Wallace

So non-accruals million. saying? what $X.X that that by reduced you're Is

Henry Abbott

Net, yes.

Tom Broughton

half… for impaired had We

William Wallace

And correctly, the then and guaranteed I payment a applied entire balance the million you you to that $X.X $X.X you had, reserves through to million if received expense? provision program understand end

Tom Broughton

correct. Yes,

William Wallace

Okay.

So…

Tom Broughton

that of XXth, $XXX,XXX… I'm And the September on we one I'm obviously small, I there looking serious has for that with non-accrual but one last it, Yes, might actually and non-performing identify is in the was here asset -- that what loan issues that. it don't anything at be some saying something of our is And pretty pool, non-accrual in year, the Wally. there're list see be might credit

William Wallace

not…? are things But

Tom Broughton

out found they there's anything. in [tar stay take on they're themselves those [XX.XX] in books. [credits], about -- they like that of estate the good recession they move get forever and they We fast trouble some just get of your deals fairly out not just resolve a here real the trouble bag], thing quickly. We -- No, ages, C&I

get can't You of rid them.

William Wallace

provisioning into releasing you payment have So, a on substantially? reserves moved you expense, [negligible] pretty reserves, been the have provision expense, your had would that not you would had

Tom Broughton

have. would we Yes,

William Wallace

model? really have -- X] changing your the what I driving -- mean, in any assumptions [FAS that been So would

Tom Broughton

thing. Well, completely payment. we've million we was a bad payment got -- this that This $X.X a It's not received.

William Wallace

So or model? the anything there's underlying on in no assumptions the changes

Tom Broughton

No. I lower loan mean, growth. you had

you So like that for to growth, have that. much loan don't provide something

William Wallace

I'm trying of… Yes, get sense just to

Tom Broughton

would impact an we have reserve that what definitely had Yes, in put on the pool.

William Wallace

the have some the And that reimbursement. told that they some Do quarter some banks FDIC no be -- -- with us reimbursement you think going as do one what consistent on heard Is first you or question there's -- to or last in well. addition not know?

Tom Broughton

We've heard different that [Multiple Wally. half -- get stories. I've what don't be, you the quarter the wait quarter, a But according know, We're such going there's of mystery, quite third them. in I to fourth in should Speakers] heard got yes, you and to

Bud Foshee

Yes, book it's wait what fund it. and till confusing it -- when we'll get do. level the gets we they certain just I'd we'll then to real

Tom Broughton

I paying to a reduced rate. rather I'd credit. don't Frankly, want have at just people keep a

people people not what As to don't. have it, want could payment I banks made about be way They or The they banks have -- to payments, the all up a you don't the when to do. pay fail. need making think they

at So this, opinion. pay the [indiscernible] a solve not if But I'd didn't my they it reduced ask -- did rather rate.

William Wallace

appreciate time non-accrual of I the appreciate on for Fair some the it. up. moving I bucket. enough. and I've Thanks parts the color your taken commentary it. of

Operator

well presentation as may disconnect. are you conference. Thank Instructions] this [Operator conclude now attending question question-and-answer questions further today's session, for as and you in will queue. the today's time, And At no today's this there

ServisFirst Bancshares (SFBS) 21 Oct 192019 Q3 Earnings call transcript