ServisFirst Bancshares(SFBS) - 2022 Q1 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company reported a loan growth of just under $500 million for the quarter, exceeding the goal of$100 million per month in net loan growth, excluding PPP loans [7][15] - Average loans, excluding PPP, increased by $731 million in the first quarter, while average PPP loans decreased by$143 million, resulting in a net average growth of $588 million [15] - Noninterest income from credit card income grew to$2.4 million in the first quarter compared to $1.2 million in the same period of 2021 [17] - The net income impact from the March 2022 Fed rate increase was$4.6 million on an annual basis, translating to 0.08 per share [16] Business Line Data and Key Metrics Changes - The company experienced solid growth in all regions, with a notable increase in C&I loan growth, marking the first quarterly improvement in C&I line utilization since the pandemic began [7][8] - Deposits remained flat for the quarter, with a slight decline in correspondent balances due to corporate tax payments [11] - Noninterest expenses increased due to market expansions, with total salaries and benefits rising by 2.8 million [18] Market Data and Key Metrics Changes - The loan loss reserve grew by $2.8 million for the quarter, with the ALLL to total loans ratio at 1.21, slightly down from 1.22 in the previous quarter [25] - Nonperforming assets were reported at$21.4 million, equating to 20 basis points of total assets, a decrease from the first quarter of 2021 [26] Company Strategy and Development Direction - The company is focused on organic growth, particularly in light of ongoing merger activity in the industry, and is optimistic about its growth strategy [59] - The company plans to deploy excess liquidity into securities and loans over the next two years, aiming to average market rates [67][68] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the credit quality of borrowers, noting that they are in better shape than ever before, with strong liquidity and low leverage [30] - The company anticipates a return to more normalized credit results in 2022, aligning with historical performance pre-pandemic [24] Other Important Information - The company added new bankers during the quarter and continues to prioritize recruiting top talent to maintain efficiency [12] - The company expects annual IT expenses to decrease by about 2.4 million in 2023 due to core conversion expenses [20] Q&A Session Summary Question: What prompted the change in the pace of liquidity deployment in the bond portfolio? - The CFO indicated that the change was due to anticipated Fed rate increases and a desire to pace purchases more cautiously [35] Question: Is the loan growth target of 300 million per quarter still realistic? - The CEO noted that the company has been exceeding this target and emphasized the importance of being conservative in forecasts [38] Question: How does the company view loan repricing as the Fed raises rates? - The CFO explained that $717 million repriced in March, and as rates increase, the margin is expected to improve gradually [40] Question: What is the outlook for operating expenses growth? - The CFO suggested a modest increase in noninterest expenses, estimating around a 3$500 million in cash, with plans to incrementally deploy excess liquidity into securities and loans over the next two years [67]