SFBS Q4 Deep Dive: Loan Growth, Margin Expansion, and Texas Expansion Define Results

Regional banking company ServisFirst Bancshares (NYSE:SFBS) announced better-than-expected revenue in Q4 CY2025, with sales up 19.7% year on year to $157.9 million. Its non-GAAP profit of $1.58 per share was 14.2% above analysts’ consensus estimates.

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StockStory’s Take

ServisFirst Bancshares delivered a strong fourth quarter, with management attributing the positive performance to disciplined loan growth, expanded net interest margins, and ongoing cost control. The company’s leadership highlighted an annualized loan growth rate of 12% for the quarter, coupled with deposit cost reductions and improved efficiency ratios. CEO Tom Broughton pointed to the bank’s success in managing down high-cost deposits and highlighted the early momentum from the newly established Texas banking team as key contributors. CFO David Sparacio emphasized that net interest margin expansion was driven by effective loan repricing and a reduction in interest-bearing deposit costs, while noninterest revenue benefited from increased service charges and mortgage banking activity.

Looking ahead, ServisFirst Bancshares’ guidance is shaped by expectations for ongoing margin expansion, steady loan demand, and further growth from its Texas operations. Management is optimistic about repricing opportunities on low fixed-rate loans, which could add significant yield in the current rate environment. Broughton stated that the Texas team’s growth is budgeted to outpace all other regions in 2026, reflecting high expectations for commercial and industrial lending. Sparacio noted, “We expect continued margin expansion throughout 2026,” while also acknowledging that expense growth tied to new hires will be offset by revenue generation as the Texas franchise matures.

Key Insights from Management’s Remarks

Management identified several operational and strategic factors that shaped Q4 performance, including geographic expansion, loan repricing, and disciplined deposit cost management.

• Loan growth momentum: The company achieved 12% annualized loan growth in the quarter, with management noting a substantial improvement in the loan pipeline and a reduction in projected payoffs. CEO Tom Broughton described the trend as “trending in the right direction,” indicating optimism about further loan growth.
• Texas market entry: The new Houston-based Texas banking team was highlighted as a significant strategic move, already showing productivity despite operating in temporary office space. Management emphasized that the team is larger and more experienced than previous expansions, with the expectation of hiring more bankers in early 2026.
• Net interest margin expansion: The bank’s net interest margin improved, driven by disciplined loan pricing and deposit rate reductions. CFO David Sparacio attributed this to a 40% increase in loan fee collection, aggressive deposit rate management, and ongoing repricing opportunities on low fixed-rate assets.
• Cost control and efficiency: Operating efficiency improved, with the efficiency ratio dipping below 30% for the quarter. Noninterest expenses remained flat year-over-year and declined compared to the prior quarter, reflecting tight cost management even as investments in new markets continue.
• Credit quality and portfolio shifts: Credit metrics remained stable overall, with a single healthcare credit generating most charge-offs in the quarter. Meanwhile, the company reduced its commercial real estate exposure, and saw the highest growth in its commercial and industrial loan book in years, indicating a shift toward more diversified lending.

Drivers of Future Performance

Management’s outlook for 2026 centers on margin expansion, disciplined expense growth, and further scaling of the Texas market as pivotal themes.

• Texas expansion and hiring: The bank plans to further build out its Texas team, budgeting for the region’s loan and deposit growth to outpace other markets. Management views the Texas franchise as a key driver of new business, particularly in commercial and industrial loans, and expects initial expense drag to be offset as the team ramps up revenue generation.
• Repricing and margin resilience: Ongoing repricing of approximately $1 billion in low fixed-rate loans and the presence of rate floors on variable-rate loans are expected to support net interest margin expansion. Sparacio indicated that these factors could add up to 130 basis points in yield, even amid uncertain interest rate movements.
• Expense growth and efficiency targets: While high single-digit expense growth is anticipated due to new hires, management expects the efficiency ratio to remain in the low-30% range as revenue from new markets ramps. Strategic hiring is prioritized, with Broughton stating the company is willing to exceed budgeted hiring targets if quality candidates are available.

Catalysts in Upcoming Quarters

In the coming quarters, our team will be monitoring (1) the pace and profitability of Texas market expansion, including the integration and productivity of new hires; (2) further net interest margin expansion driven by loan repricing and disciplined deposit management; and (3) evolving credit quality trends, especially regarding resolution of legacy nonperforming assets and ongoing diversification of the loan portfolio. Strategic hiring and operating efficiency will also remain key markers of execution.

ServisFirst Bancshares currently trades at $85.38, up from $76.33 just before the earnings. In the wake of this quarter, is it a buy or sell? Find out in our full research report (it’s free).

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