ServisFirst’s Interest Margin Held Steady After Two Quarterly Gains

The Tip Desk · October 21, 2026 · 3 min read

ServisFirst’s third-quarter net interest margin held at 3.63%, with a prior-quarter recovery masking further improvement, while quarter-end deposits contracted.

ServisFirst Bancshares (SFBS), the Birmingham, Alabama-based bank holding company, held its third-quarter net interest margin at 3.63%, ending two quarters of reported expansion. The margin had increased 15 bps in the first quarter and another 10 bps in the second. Net interest income nevertheless rose to $159.8 million from $155.6 million in the second quarter.

The flat margin included a qualification: the second quarter had benefited from a $1.9 million interest recovery on a credit relationship previously on nonaccrual status. ServisFirst said that, excluding the recovery, its third-quarter margin improved 5 bps sequentially. Average interest-bearing deposit costs held at 2.80%, compared with 3.41% a year earlier, while loan yields were 6.24%, against 6.34% a year earlier.

Loan growth continued alongside a contraction in quarter-end funding. Ending loans rose 10.7% YoY and 1.8% QoQ to $14.74 billion, while ending deposits fell 3.2% QoQ to $14.09 billion. Average deposits gave a steadier picture, at $14.33 billion against $14.32 billion in the second quarter.

Cash and cash equivalents declined to $1.19 billion at September’s end from $1.46 billion at June’s end. Federal funds purchased stood at $1.97 billion, compared with $1.49 billion a year earlier. The deposit contraction followed increases in both preceding quarters.

Higher credit costs absorbed much of the sequential increase in net interest income. The provision for loan losses rose to $14.9 million from $11.7 million in the second quarter. The annualized net charge-off rate increased 10 bps to 0.21% from 0.11%, with construction loans accounting for $7.0 million of the quarter’s $9.2 million in gross charge-offs.

Nonperforming assets remained at 0.96% of total assets, but their composition shifted. Nonaccrual loans declined to $160.1 million from $169.7 million in June, while other real estate owned and repossessed assets increased to $14.9 million from $4.8 million. The allowance for credit losses covered 1.28% of ending loans.

Operating expenses also increased, reaching $52.2 million from $50.0 million in the second quarter. The efficiency ratio deteriorated to 30.20% from 29.65%, moving above 30% after remaining below that level in the first two quarters. ServisFirst attributed the year-over-year increase in salary and benefit expenses primarily to the full impact of its Houston expansion.

Noninterest income provided a larger contribution than a year earlier, totaling $13.1 million against $2.8 million. That comparison included a $7.8 million securities loss in the prior-year quarter. Excluding securities results, noninterest income increased to $13.0 million from $10.6 million; higher bank-owned life insurance income accounted for most of that increase.

Net income reached $87.3 million, or $0.80 a share, compared with $85.8 million, or $0.78 a share, in the second quarter. Those per-share figures reflected the two-for-one stock split completed during the quarter. The effective tax rate fell to 17.21% from 19.94%; ServisFirst said purchases of investment tax credits reduced third-quarter tax expense.

Chief Executive Tom Broughton said loan activity was improving and the loan pipeline continued to grow. Preliminary common equity tier 1 capital increased to 11.98% from 11.83% in June. After quarter-end, ServisFirst announced its first stock repurchase program, authorizing purchases of up to two million shares through December 31, 2027.