ServisFirst earnings rose sharply in the third quarter of 2026 as higher net interest income supported profit, although loan growth fell short of management’s expectations and quarter-end deposits declined. The bank reported net income of $87.3 million for the quarter ended September 30, up from $65.6 million a year earlier, in results released October 19.
Key Takeaways
- Diluted earnings per share rose 33% year over year to $0.80; growth was 23% on an adjusted basis.
- Loans increased 10.7% from a year earlier, but quarter-end deposits fell 3.2% from June.
- Management expects further margin expansion and targets Houston breakeven in the first half of 2027.
Table of Contents
- ServisFirst earnings benefit from higher lending income
- Loan growth outpaces quarter-end deposits
- Credit measures improve, but multifamily losses remain
- Houston expansion raises costs as buybacks begin cautiously
- Conclusion
ServisFirst earnings benefit from higher lending income
The company’s third-quarter 2026 results announcement showed diluted earnings per share increasing from $0.60 a year earlier and $0.78 in the preceding quarter. All share and per-share figures reflect the two-for-one stock split completed during the quarter, including retrospective adjustments to comparative periods.
The distinction between reported and adjusted growth matters: adjusted diluted EPS increased from $0.65 a year earlier to $0.80, a gain of 23%. The adjusted figures are non-GAAP measures, separate from reported earnings.
Net interest income reached $159.8 million, up 2.7% from the second quarter and nearly 20% from a year earlier. Net interest margin was unchanged sequentially at 3.63%, but improved five basis points when excluding a loan-interest recovery that benefited the previous quarter.
CFO David Sparacio said he expects margin expansion of five to seven basis points per quarter, continuing into 2027 at a slower pace than earlier in 2026. He cited low fixed-rate loans repricing at higher rates and deposit-cost discipline. Those expectations are guidance, not achieved results.
| Item | Details |
|---|---|
| Repurchase authorization | Up to 2 million common shares through December 31, 2027. |
| Common equity Tier 1 ratio | 11.98%, compared with 11.49% a year earlier. |
| Stockholders’ equity | $2.04 billion at September 30, 2026. |
| Efficiency ratio | 30.20%, versus 29.65% in Q2 2026 and 35.22% in Q3 2025. |
Loan growth outpaces quarter-end deposits
Ending loans increased $258.8 million from June to $14.74 billion, representing 7.1% annualized growth. CEO Tom Broughton said unexpected repayments and delayed closings left growth below the bank’s ambitions, despite a larger near-term pipeline.
Quarter-end deposits fell $461.4 million to $14.09 billion. Average deposits, however, were broadly stable at $14.33 billion, illustrating the difference between balances held through the quarter and the September 30 snapshot.
Broughton said the bank allowed some large municipal deposits to leave rather than match competing rates offered primarily by global systemically important banks. Noninterest-bearing deposits remained 12% above their year-earlier level, while the average interest-bearing deposit rate held at 2.80%.
Management expects the fourth quarter to be a stronger deposit season, but that remains an expectation rather than evidence that the quarter-end decline has reversed.
Credit measures improve, but multifamily losses remain
Nonaccrual loans declined approximately $9.6 million to $161.8 million. The allowance rose to 1.28% of loans from 1.26% in June and covered 118% of nonaccrual loans, compared with 107% in the preceding quarter.
The improvement did not eliminate credit costs. Chief Credit Officer James Harper said the bank took a charge-off of just over $7 million on a large multifamily relationship. The bank is pursuing an orderly liquidation of eight credits and hopes to complete the process over the next two to four quarters.
Harper said the increase in the allowance ratio was spread across the portfolio rather than driven by specific impaired credits.
Houston expansion raises costs as buybacks begin cautiously
Noninterest expense rose 8.8% year over year to $52.2 million, with Houston expansion contributing to higher salary and benefit costs. Sparacio estimated that roughly $2 million of quarterly expenses were nonrecurring and guided to an expense run rate of approximately $50 million to $51 million per quarter.
Houston had 22 bankers at quarter-end. Broughton described an approximately $200 million pipeline for the remainder of 2026 and said he expects the market to reach breakeven in the first or second quarter of 2027.
After quarter-end, ServisFirst announced its first share repurchase program. Broughton said execution would be cautious, with maintaining capital for organic growth remaining the priority. The authorization does not mean the bank has already purchased the shares.
Conclusion
The fourth quarter will provide the next test of management’s deposit-growth expectations and lower expense guidance, while the multifamily liquidation and Houston’s path to breakeven remain unfinished operating priorities.
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