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than $10 billion in assets, doesn’t directly work
City and Tallahassee.
with a lot of consumers. Consumer loans, for ex-
The move to slow down loans has been purpose-
ample, made up 0.62% of the bank’s total loans
ful. “We have not been as aggressive in our new
as of March 31, 2023, according to its first quar-
loan growth,” Rushing says. “But I would tell you
ter earnings report.
we’re getting better pricing today than we were a
The bank’s core customers are owner-operators
year ago, much better.”
of small- and mid-sized businesses. With such a
Meanwhile, the bank made a switch more than
simple business model, ServisFirst has always fo-
a year ago to incentivize bankers to grow depos-
cused on loans and loan growth, and had a 100%
its. In the second quarter 2023, the pullback in
loan-to-deposit ratio in the first quarter. Fees
loans helped it reduce its loan-to-deposit ratio
make up only about 5% of revenues, according to
to 94.4%, and “management clearly feels more
the analyst Graham Dick.
comfortable about both the current economic
But does ServisFirst’s model make it particularly vulnerable in today’s environment of high-
outlook and funding environment than earlier this
year,’’ Dick wrote in a note to investors.
cost deposits? Will the bank struggle with slower
Still, investors punished the stock in the early
loan growth in the years ahead? That is what in-
part of this year. The share price fell 13% year-
vestors are asking, according to analysts.
to-date through July 26. Will ServisFirst’s culture
As rates rise, the correspondent division passes
save its performance in the end?
those rate increases over to its bank customers,
That remains to be seen. The bank has grown
which is making ServisFirst’s cost of funds higher.
earnings per share about 10% every year since
Only 39% of its deposits were in noninterest-bear-
2010, Dick says. This is the first year Piper Sandler
ing accounts as of June 30, 2023, according to its
modeled an earnings decline for the bank since its
second quarter earnings report. In fact, the bank
IPO in 2014. But the bank has very little in the way
expects to have a higher cost of funds than peers
of losses in its bond and securities portfolio.
because of its lack of a branch network, and fo-
Perhaps its conservative nature will help the
cus on commercial customers and correspondent
bank in the end. And investors haven’t entirely
banking. The bank’s strategy is to offset those
written this bank off their list. Piper expects it to
costs with firm pricing on loan products and lower
produce a 1.40% return on assets this year and
operating expenses.
14.53% return on tangible common equity.
And the bank had about $6.9 billion in unin-
Tough times could translate into market share
sured deposits out of $11.6 billion as of March
growth for strong players that can acquire talent-
31, although much of that is correspondent bank-
ed commercial lending teams. “The culture, to me,
ing deposits and municipal deposits, which are
is what makes ServisFirst great,” McBride says.
collateralized.
“We have a simple balance sheet ... We view times
D.A. Davidson noted on April 18 that the bank’s
like this, not as difficult, but as an opportunity.”
loan growth train had slowed as of mid-2022, in
part because of payoffs of fixed-rate loans. But the
bank hoped to reaccelerate growth in the second
half of 2023, taking advantage of in-market mergers and acquisitions to get new loans and growth
in markets such as Asheville and Charlotte, in
North Carolina, and the Florida towns of Panama
Naomi Snyder is editor-in-chief of Bank Director.