ServisFirst Bancshares (SFBS)

Regional banking company ServisFirst Bancshares (NYSE:SFBS) fell short of the market’s revenue expectations in Q3 CY2025, but sales rose 10.2% year on year to $136.3 million. Its non-GAAP profit of $1.30 per share was 2.7% below analysts’ consensus estimates.

Company Overview

Founded in 2005 with a focus on serving underserved mid-sized businesses, ServisFirst Bancshares (NYSE:SFBS) is a bank holding company that provides commercial banking services to businesses and professionals through its subsidiary ServisFirst Bank.

Regional banks, financial institutions operating within specific geographic areas, serve as intermediaries between local depositors and borrowers. They benefit from rising interest rates that improve net interest margins (the difference between loan yields and deposit costs), digital transformation reducing operational expenses, and local economic growth driving loan demand. However, these banks face headwinds from fintech competition, deposit outflows to higher-yielding alternatives, credit deterioration (increasing loan defaults) during economic slowdowns, and regulatory compliance costs. Recent concerns about regional bank stability following high-profile failures and significant commercial real estate exposure present additional challenges.

ServisFirst Bancshares competes with larger regional and national banks in its markets, with its five primary competitors being Regions Financial Corporation (NYSE:RF), Wells Fargo & Company (NYSE:WFC), PNC Financial Services Group, Inc. (NYSE:PNC), Truist Financial Corporation (NYSE:TFC), and Synovus Financial Corp. (NYSE:SNV).

In general, banks make money from two primary sources. The first is net interest income, which is interest earned on loans, mortgages, and investments in securities minus interest paid out on deposits. The second source is non-interest income, which can come from bank account, credit card, wealth management, investing banking, and trading fees. Over the last five years, ServisFirst Bancshares grew its revenue at a solid 8.7% compounded annual growth rate. Its growth surpassed the average banking company and shows its offerings resonate with customers, a great starting point for our analysis.

We at StockStory place the most emphasis on long-term growth, but within financials, a half-decade historical view may miss recent interest rate changes, market returns, and industry trends. ServisFirst Bancshares’s annualized revenue growth of 7.4% over the last two years is below its five-year trend, but we still think the results suggest healthy demand. Note: Quarters not shown were determined to be outliers, impacted by outsized investment gains/losses that are not indicative of the recurring fundamentals of the business.

This quarter, ServisFirst Bancshares’s revenue grew by 10.2% year on year to $136.3 million but fell short of Wall Street’s estimates.

Net interest income made up 93.4% of the company’s total revenue during the last five years, meaning ServisFirst Bancshares lives and dies by its lending activities because non-interest income barely moves the needle.

Markets consistently prioritize net interest income growth over fee-based revenue, recognizing its superior quality and recurring nature compared to the more unpredictable non-interest income streams.

The underlying profitability of top-line growth determines the actual bottom-line impact. Banking institutions measure this dynamic using the efficiency ratio, which is calculated by dividing non-interest expenses like personnel, facilities, technology, and marketing by total revenue.

Investors place greater emphasis on efficiency ratio movements than absolute values, understanding that expense structures reflect revenue mix variations. Lower ratios represent better operational performance since they show banks generating more revenue per dollar of expense.

Over the last four years, ServisFirst Bancshares’s efficiency ratio has increased by 4 percentage points, going from 30.6% to 34.6%. Said differently, the company’s expenses have increased at a faster rate than revenue, which usually raises questions unless the company is in high-growth mode and reinvesting its profits into attractive ventures.

ServisFirst Bancshares’s efficiency ratio came in at 35.2% this quarter, falling short of analysts’ expectations by 355.3 basis points (100 basis points = 1 percentage point). This result was 1.7 percentage points better than the same quarter last year.

For the next 12 months, Wall Street expects ServisFirst Bancshares to rein in some of its expenses as it anticipates an efficiency ratio of 30.2%.

We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.

ServisFirst Bancshares’s astounding 10.5% annual EPS growth over the last five years aligns with its revenue performance. This tells us its incremental sales were profitable.

Like with revenue, we analyze EPS over a more recent period because it can provide insight into an emerging theme or development for the business.

For ServisFirst Bancshares, its two-year annual EPS growth of 6.8% was lower than its five-year trend. We still think its growth was good and hope it can accelerate in the future.

In Q3, ServisFirst Bancshares reported adjusted EPS of $1.30, up from $1.10 in the same quarter last year. Despite growing year on year, this print missed analysts’ estimates, but we care more about long-term adjusted EPS growth than short-term movements. Over the next 12 months, Wall Street expects ServisFirst Bancshares’s full-year EPS of $4.86 to grow 21.9%.

Banks operate as balance sheet businesses, with profits generated through borrowing and lending activities. Valuations reflect this reality, emphasizing balance sheet strength and long-term book value compounding ability.

This explains why tangible book value per share (TBVPS) stands as the premier banking metric. TBVPS strips away questionable intangible assets, revealing concrete per-share net worth that investors can trust. On the other hand, EPS is often distorted by mergers and flexible loan loss accounting. TBVPS provides clearer performance insights.

ServisFirst Bancshares’s TBVPS grew at an incredible 13.3% annual clip over the last five years. The last two years show a similar trajectory as TBVPS grew by 12.7% annually from $25.49 to $32.37 per share.

Over the next 12 months, Consensus estimates call for ServisFirst Bancshares’s TBVPS to grow by 13.8% to $36.83, top-notch growth rate.

Leverage is core to a financial firm’s business model (loans funded by deposits). To ensure economic stability and avoid a repeat of the 2008 GFC, regulators require certain levels of capital and liquidity, focusing on the Tier 1 capital ratio.

Tier 1 capital is the highest-quality capital that a firm holds, consisting primarily of common stock and retained earnings, but also physical gold. It serves as the primary cushion against losses and is the first line of defense in times of financial distress.

This capital is divided by risk-weighted assets to derive the Tier 1 capital ratio. Risk-weighted means that cash and US treasury securities are assigned little risk while unsecured consumer loans and equity investments get much higher risk weights, for example.

New regulation after the 2008 financial crisis requires that all firms must maintain a Tier 1 capital ratio greater than 4.5%. On top of this, there are additional buffers based on scale, risk profile, and other regulatory classifications, so that at the end of the day, firms generally must maintain a 7-10% ratio at minimum.

Over the last two years, ServisFirst Bancshares has averaged a Tier 1 capital ratio of 11.2%, which is considered safe and well capitalized in the event that macro or market conditions suddenly deteriorate.

Return on equity, or ROE, quantifies bank profitability relative to shareholder equity - an essential capital source for these institutions. Over extended periods, superior ROE performance drives faster shareholder wealth compounding through reinvestment, share repurchases, and dividend growth.

Over the last five years, ServisFirst Bancshares has averaged an ROE of 17.3%, exceptional for a company operating in a sector where the average shakes out around 7.5% and those putting up 15%+ are greatly admired. This shows ServisFirst Bancshares has a strong competitive moat.

We struggled to find many positives in these results. Its revenue missed and its net interest income fell short of Wall Street’s estimates. Overall, this was a softer quarter. The stock remained flat at $76.11 immediately following the results.

Updated: December 3, 2025 at 11:30 PM EST

We think that the latest earnings result is only one piece of the bigger puzzle. If you’re deciding whether to own ServisFirst Bancshares, you should also grasp the company’s longer-term business quality and valuation.

ServisFirst Bancshares has a few positive attributes, but it doesn’t top our wishlist. Although its revenue growth was mediocre over the last five years, its growth over the next 12 months is expected to be higher. And while ServisFirst Bancshares’s net interest margin limits its operating profit potential compared to other banks that can earn more, all else equal., its TBVPS growth was exceptional over the last five years.

ServisFirst Bancshares’s P/B ratio based on the next 12 months is 2.1x. Beauty is in the eye of the beholder, but we don’t really see a big opportunity at the moment. We're fairly confident there are better investments elsewhere.

Wall Street analysts have a consensus one-year price target of $86.67 on the company (compared to the current share price of $71.66).