U.S. Markets close in 5 hrs 1 min

Edited Transcript of SFBS earnings conference call or presentation 15-Jul-19 9:15pm GMT

Q2 2019 ServisFirst Bancshares Inc Earnings Call

Birmingham Jul 17, 2019 (Thomson StreetEvents) -- Edited Transcript of ServisFirst Bancshares Inc earnings conference call or presentation Monday, July 15, 2019 at 9:15:00pm GMT

TEXT version of Transcript

================================================================================

Corporate Participants

================================================================================

* Davis S. Mange

ServisFirst Bancshares, Inc. - VP IR Accounting Manager

* Henry F. Abbott

ServisFirst Bancshares, Inc. - Senior VP & Chief Credit Officer

* Thomas Ashford Broughton

ServisFirst Bancshares, Inc. - Chairman, President & CEO

* William M. Foshee

ServisFirst Bancshares, Inc. - Executive VP, CFO, Treasurer & Secretary

================================================================================

Conference Call Participants

================================================================================

* Bradley Jason Milsaps

Sandler O'Neill + Partners, L.P., Research Division - MD of Equity Research

* Tyler Stafford

Stephens Inc., Research Division - MD

* William Jefferson Wallace

Raymond James & Associates, Inc., Research Division - Research Analyst

================================================================================

Presentation

--------------------------------------------------------------------------------

Operator [1]

--------------------------------------------------------------------------------

Good day, and welcome to the ServisFirst Bancshares, Inc. Second Quarter Earnings Conference Call. (Operator Instructions) Please note, this event is being recorded.

I would like to now turn the conference over to Davis Mange. Please go ahead.

--------------------------------------------------------------------------------

Davis S. Mange, ServisFirst Bancshares, Inc. - VP IR Accounting Manager [2]

--------------------------------------------------------------------------------

Good afternoon, and welcome to our second quarter earnings call. We will have Tom Broughton, our CEO; and Bud Foshee, our CFO, covering some highlights from the quarter, and we'll then take your questions. I will now cover our forward-looking statements disclosure and then we can get started.

Some of the discussion in today's earnings call may include forward-looking statements subject to assumptions, risks and uncertainties. Actual results may differ from any projections shared today due to factors described in our most recent 10-K and 10-Q filings. Forward-looking statements speak only as of the date they are made, and ServisFirst assumes no duty to update.

With that, I'll turn the call over to Tom.

--------------------------------------------------------------------------------

Thomas Ashford Broughton, ServisFirst Bancshares, Inc. - Chairman, President & CEO [3]

--------------------------------------------------------------------------------

Thank you, Davis, and good afternoon, and welcome to our call. If you are new to our call, you'll find that we don't read the press release that we sent out earlier, we only cover other materials, we assume everybody can read, and we won't review any of that material. So to cover the quarter, pretty norm, good quarter. All in all, it was eventful in terms of staffing. We added some significant new bankers in the quarter. We added 4 in Nashville. We added 4 in Sarasota, Naples market and 2 in Birmingham and 1 in Mobile. Our total number of producers is up from 133 to 136 in the quarter that included 2 retirements and 6 departed.

We continue to focus on improving our loan and deposit portfolio sizes of our commercial bankers, and we think, we are the banker of choice for many good commercial bankers. We've never used a headhunter. We found the people directly or they found us, and we don't -- never have used a recruiter. So we think for several reasons, we are the bank of choice for commercial bankers. So if you're a commercial banker, thinking about joining us and you're listening the call, I've got a few things that I think are pertinent to say.

First of all, we are a customer-centric bank. We focus on service above all else. That is important to our bankers. Also, I think, we are unique, in that we are a founder-led company, and I have the unique ability to fight bureaucracy that something that commercial bankers detest and our bankers do note, they call me and I can respond and help them in any way they need help, including to cut through some red tape. And we certainly -- as a founder-led company, we think we can respond to changing market conditions more quickly than many of our competitors.

We also are very responsive on credit needs in a very timely manner. Sometimes the answer is no, but we can make a decision very, very quickly. We think our regional CEO and Board model is unique and enables our bankers to serve class better than our competitors.

And last, we also focus on core relationships rather than on transactions. Our hiring phase is greater than in recent years, and we're talking to more bankers than probably ever in our history.

We've hired larger number of trainees in the past year. I think I mentioned it on the last call that we are hiring trainees. We think those people certainly are not producers today, but they will be in the future and some of our very best production people started at the bank here as trainees some years ago. So we are -- have ramped up hiring of trainees.

We have a new office opened in Fairhope, and we're also planning a new office in Fort Walton Beach, Florida, and we also have selected office space in Sarasota market. So we are -- hope to have being there in August. So all 3 of these offices are a little bit unique in that they've received support from an adjacent region to reduce back-office expense. Typically, on the credit side, they are receiving support, we can elaborate as necessary.

It's pretty clear today that the stock markets are not rewarding growth. Our PA is pretty much in line with many others that don't have our growth profile. However, we will continue to focus on high quality, sound growth as we have for the past 14 years.

Also, if we had a growth rate at a much lower level, like many of our competitors, it's easier to support that growth. It's expensive to grow quickly. You have to have your back office staffed to support that level of growth. So you have to plan ahead, you have to hire ahead, you sort of to have stair-step overhead increases to support that growth. And we would. I mean it's not cheap to support that growth.

We do continue to build excess capital. I know many of our competitors have -- are either buying back stock or have announced buybacks, and what I see doesn't appear to be terribly accretive to earnings. We do plan to use the excess capital at the appropriate time, any acquisitions that we make would need to be a good cultural fit for us and not just financial engineering as we see with many acquisitions today. So we do plan to use the excess capital at the appropriate time.

We think the true value of advancing core relationships, that's why we have always shared national credits unless we have a direct relationship, and again, that's why we don't have special relating areas because those are transactional rather than relationship oriented.

We did have a nice bit of growth in the quarter. Our loans grew 19% annualized. The growth was led by the regions of Birmingham and Atlanta. On the deposit side, we grew 18% annualized with broad-based growth. In most every region, there's been very robust growth.

From a pipeline standpoint, I know that analysts increasingly are a little bit sarcastic about -- I've seen some notes about people announcing they have a solid pipeline but don't have loan growth. So I'm little reluctant to keep covering the pipeline, but I will. Compared to the last 2 quarters, our pipeline is up substantially. It's up over 10% compared to the last 2 quarters.

I would caution you though the -- we do have a 90 -- over 90-day bucket in the pipeline. It's usually nothing in there, but it's pretty large this quarter. So some of the growth we would expect to have after the end of the quarter this -- for the excess amount of the pipeline that we have.

Bud is going to talk in a minute about rate cut, what it would do to us. Where we think we are, we have continued to be -- to focus not on net margin -- net interest margin maintenance, but we have continued to focus on growth and growth in net income. We think that's the appropriate strategy. We continue to try to attract core relationships to the bank. We have been successful. We're getting more looks than ever before, and we feel good about where we are. I will look at some metrics, very few people would look at or have access to. But the thing I'll focus on is the number of new accounts we're opening. And we're opening a significant numbers of new accounts year-over-year. So I feel really good about where we are from a competitive standpoint.

We certainly think we've done some work and looking at the rate cut, which it appears to be reasonably certain at this point in the next couple of weeks, and we think we can maintain and improve margins a bit, so.

Bud, I will turn it over to you now to cover the financials.

--------------------------------------------------------------------------------

William M. Foshee, ServisFirst Bancshares, Inc. - Executive VP, CFO, Treasurer & Secretary [4]

--------------------------------------------------------------------------------

Thanks, Tom. Good afternoon. Our net interest margin decreased from 3.56% in the first quarter to 3.44% in the second quarter. One factor in this decline was an increase in our excess funds of $104 million, along with a decline in the yield of 6 basis points. Another factor was a decrease in the 30-day LIBOR rate in the second quarter. So we have $900 million in loans, tied to this index. Tom mentioned the funding costs. Funding our loan growth contributed to an increase in deposit costs of 9 basis points.

On a comparative basis, if excess funds for the second quarter of 2019 were at the same level as excess funds in the second quarter of 2018, our second quarter margin would have been 3.63%. Our net interest margin range for the second half of 2019 is 3.45% to 3.55%, and we have a plan to address deposit pricing when the Fed decreases the fed funds rate. A reminder, we have no accretion income related to acquisitions.

I want to add a comment about our cost of interest-bearing deposits, which was 1.74% at June 30. We performed an internal study to determine the total cost of our deposits. The study includes salaries and related overhead for producers and support staff, and it also includes our system costs. Based on this study, our total costs at interest-bearing deposits would be 2.31% at June 30. We believe this total cost compares very favorably to our peers, who have 100-plus officers.

Salaries, our year-over-year increase is $2.450 million. We added a team in Sarasota, which will be part of our West Florida market, and we also added to our team in the Nashville market.

Net increase in total producers year-over-year is 11. We added a purchase card and merchant services director. Also we have 2 employees that are full-time sales in the credit card area to accommodate referrals from the American Bankers Association endorsed agent credit card program. We have new production offices, Pensacola Mortgage, Fort Walton, LPO, which Tom mentioned will be a full-service office in the future. Net adds for credit analysts and portfolio managers were 14. This was needed based on our loan growth and to develop new lenders.

Noninterest income. Our credit card income continues to grow $701,000 year-to-date increase and $380,000 quarter-over-quarter 2019 versus 2018.

And we have added 10 banks in 2019 to our agent credit card program. Reminder, we do not sell any government-guaranteed loans to generate noninterest income.

Loan loss provision. Our second quarter net charge-offs were $3.7 million. $2.7 million were impaired loans, and we get unimpaired charge-offs of $1 million. In the second quarter, we had new impairments on 2 credits.

Our tax rate, our year-to-date tax rate for 2019 is 20.2%, 21.2% without stock option credits of $958,000. For 2018, the year-to-date rate was 18.9%, 21.2% without stock option credits of $1.9 million. Quarter-to-date rate for 2019 was 20.7%, 21.2% without stock option credits of $186,000. Second quarter of 2018, the rate was 19.9% or 21% without stock option credits of $457,000. For the remainder of 2019, the projected tax rate is 21.3%.

I will now turn the call back over to Davis Mange.

--------------------------------------------------------------------------------

Davis S. Mange, ServisFirst Bancshares, Inc. - VP IR Accounting Manager [5]

--------------------------------------------------------------------------------

Thank you. With that, we will open up the floor for any questions.

================================================================================

Questions and Answers

--------------------------------------------------------------------------------

Operator [1]

--------------------------------------------------------------------------------

(Operator Instructions) The first question comes from Brad Milsaps from Sandler O'Neill.

--------------------------------------------------------------------------------

Bradley Jason Milsaps, Sandler O'Neill + Partners, L.P., Research Division - MD of Equity Research [2]

--------------------------------------------------------------------------------

I appreciate all the color. Just, Bud, I was going to see if you could talk a little bit more about the margin guidance of 3.45% to 3.55%, what are you guys assuming that the Fed does in terms of potentially reducing short-term rates and then maybe just a little more around your planned -- how quickly can you -- do you think you can reduce funding cost.

--------------------------------------------------------------------------------

William M. Foshee, ServisFirst Bancshares, Inc. - Executive VP, CFO, Treasurer & Secretary [3]

--------------------------------------------------------------------------------

Yes. I don't -- I think we're like everybody else. We're not going to drop all rates on special accounts day 1, but we feel like we can do that shortly after the Fed makes the decision at the end of July. And really from a margin standpoint, we're sitting here with $850 million or so in excess funds, which at this time of the year, which is very high for us. We feel like that will decrease in the second half of the year just kind of how growth goes in the second half of each year. So I can't give you -- I don't know specific days. We'll have a outcome meeting tomorrow to go over more in detail by customer, by region, what we would do when Fed drops rates, which we think is going to be in July.

--------------------------------------------------------------------------------

Bradley Jason Milsaps, Sandler O'Neill + Partners, L.P., Research Division - MD of Equity Research [4]

--------------------------------------------------------------------------------

If they were to do more beyond July, do you think you could kind of hold the NIM? Obviously, the earning asset mix is a big part of it, if you could get the liquidity back down to 3% or 4% of earning assets like it was 1 year ago. But if the Fed were to do more than 1, how would you think about things playing out?

--------------------------------------------------------------------------------

William M. Foshee, ServisFirst Bancshares, Inc. - Executive VP, CFO, Treasurer & Secretary [5]

--------------------------------------------------------------------------------

It's a good question. I don't know. It's just hard to predict rates. Everybody has kind of cut back on all these special rates to a degree. I think that really depends on your competition. We can't go dropping rates and everybody else do the same. I don't have a great answer for that right now. It's not -- because we just haven't gone through that with the fed decrease lately.

--------------------------------------------------------------------------------

Thomas Ashford Broughton, ServisFirst Bancshares, Inc. - Chairman, President & CEO [6]

--------------------------------------------------------------------------------

But I mean -- Brad, this is Tom. This -- we just cannot allow the margin to go any lower. All right? So that's your answer is we're going to keep it at this level or work it back up a bit.

--------------------------------------------------------------------------------

Bradley Jason Milsaps, Sandler O'Neill + Partners, L.P., Research Division - MD of Equity Research [7]

--------------------------------------------------------------------------------

Got it. And then, Tom, you talked a lot about growth, and it's been expensive to grow. Obviously, you've done a lot of hiring of late. Should I construe your comments more that you're going to kind of maintain this kind of high single-digit expense growth rate as you digest some of these new hires? It sounds like the pipeline for new hires is pretty strong. So is that really what you're trying to continue to kind of reiterate that the expenses probably -- can it continue to kind of run at this clip to the extent you continue to expand?

--------------------------------------------------------------------------------

Thomas Ashford Broughton, ServisFirst Bancshares, Inc. - Chairman, President & CEO [8]

--------------------------------------------------------------------------------

No. I hope, we'll work it down. I mean we've added significant resources, especially on the loan operations and on the credit side in the past year. We hope we can -- we're staffed at a level now that it'll carry us a good while, Brad. So we hope that in the future that these -- that the expense mode we've had in the last year will come back down.

--------------------------------------------------------------------------------

Operator [9]

--------------------------------------------------------------------------------

The next question comes from Tyler Stafford with Stephens.

--------------------------------------------------------------------------------

Tyler Stafford, Stephens Inc., Research Division - MD [10]

--------------------------------------------------------------------------------

Maybe I'll start where Brad left off, just thinking about expenses. If the Fed does cut, and we are in a more challenging revenue backdrop. I guess how much flexibility do you think you have on slowing expense growth more? I mean is there any interest in doing that as kind of an offset to revenue pressures? Or it sounds like the hiring pipeline and then the new branches that you're going to be opening are still pretty active. So if the revenue picture does get more challenging, would you expect to, I guess, incrementally slow expense growth? Or is it going to be more of the same like you mentioned?

--------------------------------------------------------------------------------

William M. Foshee, ServisFirst Bancshares, Inc. - Executive VP, CFO, Treasurer & Secretary [11]

--------------------------------------------------------------------------------

Well, we don't plan on our margin drop anymore, first of all. So that -- if you're asking, if it can be a nonprofitable business model, we won't continue. The answer would be no, we wouldn't. But we had a lot better margins when rates were a lot lower than they are now. So we think our margins can improve, not decline. So we're not looking at that as a realistic option to see margins decline further. We do have the luxury of having a fair amount of excess funds on the balance sheet, we could absorb a fair amount deposit run-off necessary, but -- even though, the higher rate pay in national-type players, I see them, you see them out there, you see they're producing rates they're paying on Internet accounts, they're reducing rates they're paying on CD. So we think there's opportunity for us, but we see the opportunity continue to expand our business and do it profitably, and we will look forward to growing the bank.

--------------------------------------------------------------------------------

Tyler Stafford, Stephens Inc., Research Division - MD [12]

--------------------------------------------------------------------------------

Okay. Just on the updated margin guidance, just to be clear. Does that have any Fed cuts in it, I wasn't clear? For the back half of the year, that's just status quo putting some liquidity to work and...

--------------------------------------------------------------------------------

William M. Foshee, ServisFirst Bancshares, Inc. - Executive VP, CFO, Treasurer & Secretary [13]

--------------------------------------------------------------------------------

No. We're certain that this can be a quarter cut at end of July.

--------------------------------------------------------------------------------

Thomas Ashford Broughton, ServisFirst Bancshares, Inc. - Chairman, President & CEO [14]

--------------------------------------------------------------------------------

Yes. That and just liquidity -- reduction in liquidity over the second half of the year.

--------------------------------------------------------------------------------

Tyler Stafford, Stephens Inc., Research Division - MD [15]

--------------------------------------------------------------------------------

Okay. I missed that. So it does include the quarter cut. Got it. Is there a normal level of liquidity we should think about that's kind of implied in that updated margin outlook?

--------------------------------------------------------------------------------

William M. Foshee, ServisFirst Bancshares, Inc. - Executive VP, CFO, Treasurer & Secretary [16]

--------------------------------------------------------------------------------

I would say, 5% to 7% of assets, maybe in that range, I don't know. I say that, but we've been probably over $800 million for most of the year. So that might not be a good estimate. I have underestimated our liquidity all year long. So it is a champagne problem. This time last year, we were $100 million in excess funds. So we came up with a plan to grow deposits and also it's worth commenting, not the whole takeaway, but we'll take that.

--------------------------------------------------------------------------------

Tyler Stafford, Stephens Inc., Research Division - MD [17]

--------------------------------------------------------------------------------

Yes. Okay. And then maybe Tom, just going back to one of your prepared comments. I think I would agree that the market is not rewarding your growth right now. So I guess, just given that the margin pressure this quarter and the lowered outlook on the margin, is there any thoughts or interest in slowing that growth at all at this point to be a little more selective in terms of the margin that you're putting on the balance sheet today, given your comments that it doesn't appear the market's rewarding that growth?

--------------------------------------------------------------------------------

Thomas Ashford Broughton, ServisFirst Bancshares, Inc. - Chairman, President & CEO [18]

--------------------------------------------------------------------------------

Well, I mean, I -- we think we have a good business model, Tyler. We will continue to doing it the way we've been doing it for the last 14 years. Certainly, we are not. We don't think we're compromising on anything in terms of future profitability. We think margins have hit a low and there's only upside from here. We think the second quarter will be the low point and it will prove in the third/fourth quarter into the future.

--------------------------------------------------------------------------------

Tyler Stafford, Stephens Inc., Research Division - MD [19]

--------------------------------------------------------------------------------

Okay. And then just lastly from me that the loans 90 days past due have doubled. Any comments on what was in that, if it was 1 credit, multiple credits, just curious on that.

--------------------------------------------------------------------------------

Thomas Ashford Broughton, ServisFirst Bancshares, Inc. - Chairman, President & CEO [20]

--------------------------------------------------------------------------------

Henry Abbott is our Chief Credit Officer, I think he's with us today.

--------------------------------------------------------------------------------

Henry F. Abbott, ServisFirst Bancshares, Inc. - Senior VP & Chief Credit Officer [21]

--------------------------------------------------------------------------------

Yes. We have historically had 1 credit that was on there, and we grew that by 1 other credit. So we've got 2 credits that consist of that 90-day plus past due. One of those should clear up here in the next week, and we'll continue to carry the one that we have carried. But yes, that was just 1 large creditor was added and should be cleared up shortly.

--------------------------------------------------------------------------------

Davis S. Mange, ServisFirst Bancshares, Inc. - VP IR Accounting Manager [22]

--------------------------------------------------------------------------------

Tyler, you there?

--------------------------------------------------------------------------------

Thomas Ashford Broughton, ServisFirst Bancshares, Inc. - Chairman, President & CEO [23]

--------------------------------------------------------------------------------

No. He said he was done. He said he'd jump off.

--------------------------------------------------------------------------------

Operator [24]

--------------------------------------------------------------------------------

(Operator Instructions) The next question comes from William Wallace with Analyst (sic) [Raymond James & Associates].

--------------------------------------------------------------------------------

William Jefferson Wallace, Raymond James & Associates, Inc., Research Division - Research Analyst [25]

--------------------------------------------------------------------------------

Not to beat a dead horse, but on the NIM, Bud, in your prepared remarks, you made a comment about what the margin would have been had you been running at the same levels of liquidity as of the last 2Q. Can you repeat that number?

--------------------------------------------------------------------------------

William M. Foshee, ServisFirst Bancshares, Inc. - Executive VP, CFO, Treasurer & Secretary [26]

--------------------------------------------------------------------------------

Yes. If we were at the same level, the NIM would have at 3.63% in 2019.

--------------------------------------------------------------------------------

William Jefferson Wallace, Raymond James & Associates, Inc., Research Division - Research Analyst [27]

--------------------------------------------------------------------------------

And if you had -- it was last year that kind of first, second quarters. Is that sort of the optimal level that you prefer to run your liquidity at if you could control it?

--------------------------------------------------------------------------------

William M. Foshee, ServisFirst Bancshares, Inc. - Executive VP, CFO, Treasurer & Secretary [28]

--------------------------------------------------------------------------------

No. But June of last year, we got down to about $100 million in funds. We were definitely too low from that standpoint. I would say, obviously, optimal level would be about 5% of assets, just hard to say quarterly how that's going to take place.

--------------------------------------------------------------------------------

William Jefferson Wallace, Raymond James & Associates, Inc., Research Division - Research Analyst [29]

--------------------------------------------------------------------------------

Understood. Okay. So 3.63% is not -- you could -- you wouldn't have wanted to be there because of what -- rate card, you're running a little bit lower on liquidity than you would feel comfortable at. So it's probably somewhere lower than that, if you kind of think about "optimal liquidity" understanding that you can't necessarily control that, is that...

--------------------------------------------------------------------------------

William M. Foshee, ServisFirst Bancshares, Inc. - Executive VP, CFO, Treasurer & Secretary [30]

--------------------------------------------------------------------------------

Yes. That's right. Yes, you're right.

--------------------------------------------------------------------------------

William Jefferson Wallace, Raymond James & Associates, Inc., Research Division - Research Analyst [31]

--------------------------------------------------------------------------------

Okay. Okay. So -- and you might have said, but your guide, the 3.45% to 3.55%. Can you quantify how much liquidity you -- that includes deploying?

--------------------------------------------------------------------------------

William M. Foshee, ServisFirst Bancshares, Inc. - Executive VP, CFO, Treasurer & Secretary [32]

--------------------------------------------------------------------------------

No. I didn't really have a specific number. Like Tom was saying, we feel like we've hit the low mark at 3.45%, 3.44% and that excess liquidity will decrease in the second half of the year. Exactly when, I don't know, but I mean, that's just kind of a -- we think that will improve from that reduction in excess liquidity.

--------------------------------------------------------------------------------

William Jefferson Wallace, Raymond James & Associates, Inc., Research Division - Research Analyst [33]

--------------------------------------------------------------------------------

Okay. Understood. I guess if we look at the 10-Q, your model shows roughly 4 basis points of pressure per roughly 25 basis point Fed cut. I think we're all just trying to figure out what the NIM is, understanding that the low order mark today, a lot of that is because of all the liquidity...

--------------------------------------------------------------------------------

William M. Foshee, ServisFirst Bancshares, Inc. - Executive VP, CFO, Treasurer & Secretary [34]

--------------------------------------------------------------------------------

Right.

--------------------------------------------------------------------------------

William Jefferson Wallace, Raymond James & Associates, Inc., Research Division - Research Analyst [35]

--------------------------------------------------------------------------------

So I was trying to get a sense. Maybe it would help if you can quantify what the Fed impact would be if liquidity was the exact same as it is today? Are you able to quantify that?

--------------------------------------------------------------------------------

William M. Foshee, ServisFirst Bancshares, Inc. - Executive VP, CFO, Treasurer & Secretary [36]

--------------------------------------------------------------------------------

We think this is going to be slightly higher, Wally.

--------------------------------------------------------------------------------

William Jefferson Wallace, Raymond James & Associates, Inc., Research Division - Research Analyst [37]

--------------------------------------------------------------------------------

So the NIM will go up with the Fed cut?

--------------------------------------------------------------------------------

William M. Foshee, ServisFirst Bancshares, Inc. - Executive VP, CFO, Treasurer & Secretary [38]

--------------------------------------------------------------------------------

Yes.

--------------------------------------------------------------------------------

William Jefferson Wallace, Raymond James & Associates, Inc., Research Division - Research Analyst [39]

--------------------------------------------------------------------------------

If liquidity stays the same?

--------------------------------------------------------------------------------

William M. Foshee, ServisFirst Bancshares, Inc. - Executive VP, CFO, Treasurer & Secretary [40]

--------------------------------------------------------------------------------

Not 15 bps, but it will go up a few.

--------------------------------------------------------------------------------

William Jefferson Wallace, Raymond James & Associates, Inc., Research Division - Research Analyst [41]

--------------------------------------------------------------------------------

Okay. So we'll see that in the Q when you guys file the new interest rate sensitivity. Right now, it's just down. And I'm not trying to push, I'm just trying to get the model figured out.

--------------------------------------------------------------------------------

William M. Foshee, ServisFirst Bancshares, Inc. - Executive VP, CFO, Treasurer & Secretary [42]

--------------------------------------------------------------------------------

You're -- tell me, what you're looking at, Wally, by shows down.

--------------------------------------------------------------------------------

William Jefferson Wallace, Raymond James & Associates, Inc., Research Division - Research Analyst [43]

--------------------------------------------------------------------------------

Your interest rate sensitivity analysis, where you show net interest income percent changed if the Fed is up. I think -- it's a shock if it's up 100 or 200 or down and then down 100 or 200? It's really like...

--------------------------------------------------------------------------------

William M. Foshee, ServisFirst Bancshares, Inc. - Executive VP, CFO, Treasurer & Secretary [44]

--------------------------------------------------------------------------------

We don't like -- if you go down 100, we don't get shocked. How about that?

--------------------------------------------------------------------------------

William Jefferson Wallace, Raymond James & Associates, Inc., Research Division - Research Analyst [45]

--------------------------------------------------------------------------------

I agree, but we're trying to...

--------------------------------------------------------------------------------

William M. Foshee, ServisFirst Bancshares, Inc. - Executive VP, CFO, Treasurer & Secretary [46]

--------------------------------------------------------------------------------

Yes. Because everyone has a good -- okay, now you need to look at. Yes, that's just not a good gauge based on how we have to do the immediate 100 shock.

--------------------------------------------------------------------------------

William Jefferson Wallace, Raymond James & Associates, Inc., Research Division - Research Analyst [47]

--------------------------------------------------------------------------------

Okay. Okay.

--------------------------------------------------------------------------------

William M. Foshee, ServisFirst Bancshares, Inc. - Executive VP, CFO, Treasurer & Secretary [48]

--------------------------------------------------------------------------------

That's a regulator's job. That would be his job.

--------------------------------------------------------------------------------

William Jefferson Wallace, Raymond James & Associates, Inc., Research Division - Research Analyst [49]

--------------------------------------------------------------------------------

Yes. Okay. So you don't change any betas or anything in the model, you just plug in down a 100 and that's it, right? That's what they require?

--------------------------------------------------------------------------------

William M. Foshee, ServisFirst Bancshares, Inc. - Executive VP, CFO, Treasurer & Secretary [50]

--------------------------------------------------------------------------------

Yes. That's just regulator deal.

--------------------------------------------------------------------------------

William Jefferson Wallace, Raymond James & Associates, Inc., Research Division - Research Analyst [51]

--------------------------------------------------------------------------------

Okay. And then moving on my last question. Just, Tom, maybe if you could talk about if you're seeing any changes in any of your markets from a demand perspective, whether it's to the positive or the negative?

--------------------------------------------------------------------------------

Thomas Ashford Broughton, ServisFirst Bancshares, Inc. - Chairman, President & CEO [52]

--------------------------------------------------------------------------------

Yes. We see a fairly robust loan demand right now, Wally. We feel good about where we are. I mean I have seen those national statistics. We're just -- we don't want to be a national -- we don't want to be the main on anything. Anything we do, we want to be with the high end of success level. So we see good -- our pipeline's robust of loans. We feel good about where we are, we see good quality loans. We don't see -- there are no -- the industries appear to be in a big decline that you don't know about, and one of our credits, the charge-off was a rural hospital was in liquidation. We know what's been happening in rural hospitals for quite some time. Luckily, we don't have much rural hospital credit. So they're kind of going away. So to a certain extent...

--------------------------------------------------------------------------------

William Jefferson Wallace, Raymond James & Associates, Inc., Research Division - Research Analyst [53]

--------------------------------------------------------------------------------

So you're feeling good about all your markets?

--------------------------------------------------------------------------------

Thomas Ashford Broughton, ServisFirst Bancshares, Inc. - Chairman, President & CEO [54]

--------------------------------------------------------------------------------

Yes, we do. We really do.

--------------------------------------------------------------------------------

Operator [55]

--------------------------------------------------------------------------------

This concludes our question-and-answer session. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.