ServisFirst Bancshares Q4 2024 Earnings Call Transcript

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January 27, 2025
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Operator

Greetings, and welcome to the Service First Bancshares 4th Quarter and Full Year Earnings Conference Call. At this time, all participants are in a listen only mode. A question and answer session will follow the formal presentation. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Davis Mange.

Operator

Thank you. You may begin.

Davis Mange
Davis Mange
Senior Vice President & Director of Investor Relations at ServisFirst Bancshares

Good afternoon and welcome to our Q4 earnings call. Today's speakers will cover some highlights from the quarter and then take your questions. We'll have Tom Brodman, our CEO Henry Abbott, our Chief Credit Officer and Ed Woody, our Interim CFO. I'll now cover our forward looking statements disclosure. Some of the discussion in today's earnings call may include forward looking statements.

Davis Mange
Davis Mange
Senior Vice President & Director of Investor Relations at ServisFirst Bancshares

Actual results may differ from any projections shared today due to factors described in our most recent 10 ks and 10 Q filings. Forward looking statements speak only as of the date they are made and February 1 assumes no duty to update them. With that, I'll turn the call over to Tom.

Tom Broughton
Tom Broughton
CEO at ServisFirst Bancshares

Thank you, Davis. Good afternoon and thank you for joining our Q4 conference call.

Tom Broughton
Tom Broughton
CEO at ServisFirst Bancshares

We were really pleased with the quarter and all of our trends turned out to be positive. If we recap the year, we ended with earnings per share, diluted earnings per share up 10% over 2023. And our net interest margin did climb steadily from 2.57% in the Q4 of 2023 to 2.96% in the Q4 of 2024. And also our book value more importantly grew 12% year over year. So in any event, we're really happy how the year ended up and it got better as the year went on.

Tom Broughton
Tom Broughton
CEO at ServisFirst Bancshares

On. And a year ago on the call, I said that loan losses were low and would probably normalize. And here we are a year later and the loan losses were still low and I'm still saying they're going to normalize. But we are Henry will talk about credit in a few minutes, but we don't really see any industries with problems. We just see weak companies that have problems and our use of the borrowers we say that we have to deal with.

Tom Broughton
Tom Broughton
CEO at ServisFirst Bancshares

So on the loan front, we were concerned about we knew we had a pretty good loan pipeline for the Q4, but we were concerned about payoffs in the Q4. Now loan payoffs turned out to be about 40% of our net loan growth excuse me, of our gross loan growth. So we had a net loan growth of $268,000,000 for the quarter. And I will say not all those payoffs were a bad thing, about half of those payoffs were low fixed rate loans. So we're glad to see those payoffs.

Tom Broughton
Tom Broughton
CEO at ServisFirst Bancshares

But we will have some more payoffs in the Q1, but at a much lower level than we saw in the Q4, we believe. So from a C and I loan growth standpoint, we did see some. It was encouraging and we saw the increase in loan line utilization from 36.7% to 38.4% quarter over quarter. Our loan pipeline increased $150,000,000 after the election, which is very positive. And we do expect loan growth to normalize more over the course of 2025.

Tom Broughton
Tom Broughton
CEO at ServisFirst Bancshares

I will mention our 2 new markets Memphis and Auburn Memphis, Tennessee and Auburn, Alabama are making very good progress. And they've really they've been working out of their cars until the last couple of months. So they've just now got an office. So we are proud of how they're doing and optimistic for their future. I think we'll do really well and have great leadership in both of those cities.

Tom Broughton
Tom Broughton
CEO at ServisFirst Bancshares

We did add 4 new producers in the 4th quarter. It's not common to add many in the Q4. You usually see them in the first half of the year. So in any event, we are pleased with those markets. From a deposit standpoint, we did see very nice deposit growth in the quarter, including our non interest bearing deposits.

Tom Broughton
Tom Broughton
CEO at ServisFirst Bancshares

We did see some good growth in our correspondent channel with year over year growth in 28% in funding with now we have 3 78 banks in 30 states that are the correspondent customers. We added 24 new banks in 2024 and 65% of the funding comes from banks that are settled with us or settlement banks. So that was very much positive. So that's a quick overview and I'm going to turn it over to Henry now to discuss credit and more detail.

Henry Abbott
Chief Credit Officer at ServisFirst Bancshares

Thank you, Tom. I'm extremely pleased with the bank's performance in 2024 and more specifically in the Q4. The bank's loan portfolio continued to perform at an exceptional level and our commercial focused business model continues to outperform our peers. As we exited the COVID stimulus error, our bank was at historical lows for most credit metrics a few years ago, and remarkably, we've been able to continue to stay at or near these historic low figures, punctuated by very strong 2024. Annualized net charge offs for the 4th quarter were 9 basis points, and we had 9 basis points in charge offs for the entire year.

Henry Abbott
Chief Credit Officer at ServisFirst Bancshares

This is less than the 10 basis points we had in 2023. I'm very proud and pleased with these minimal charge offs that we experienced in 2024. Our ALLL to total loans was stable throughout the course of 2024, and we ended the year with an allowance for loan loss reserve to total loans of 1.30. Non performing assets to total assets were 26 basis points, which is generally in line with the results for the Q3. We continue to proactively monitor the portfolio to ensure we appropriately understand the potential risk and act accordingly as well as conservatively.

Henry Abbott
Chief Credit Officer at ServisFirst Bancshares

2024 was a very strong and stable year from a credit perspective and with the new administration in place in Washington, we look forward to growing and prospering in 2025 and beyond. Ed, I'll turn it over to you.

Ed Woodie
Ed Woodie
Interim CFO at ServisFirst Bancshares

Thank you, Henry, and good afternoon, everyone. We are very pleased with our 4th quarter results and are upbeat about our earnings momentum heading into the New Year. While we have experienced 4 straight quarters of net interest margin improvement, I'll focus my comments today on linked quarter because recent trends are meaningful to our momentum. Net income was up $5,200,000 over the 3rd quarter or 9% and diluted EPS was up 8%. Net interest income increased 28% on an annualized basis and continues to be a growth leader for net income.

Ed Woodie
Ed Woodie
Interim CFO at ServisFirst Bancshares

Margin increased to $123,200,000 in the 4th quarter compared to $115,100,000 in the 3rd quarter. We continue to benefit from the upward repricing of fixed rate assets and we have successfully managed the cost of liabilities. Earning asset yields decreased by 25 basis points, while interest bearing liability rates decreased by 46 basis points. Net interest margin increased 12 basis points over the prior quarter while holding an additional $370,000,000 in cash, which negatively impacts the net interest margin percentage. We spoke at length last quarter about the interest rate position of our balance sheet being slightly liability sensitive and that hasn't changed.

Ed Woodie
Ed Woodie
Interim CFO at ServisFirst Bancshares

I'd like to offer some more specific numbers that may help with everyone's analysis. Approximately $325,000,000 of our securities are set to mature or pay down during 2025 and those currently yield 3.2%. We have $6,300,000,000 in fixed rate loans and they repriced up 10 basis points during the Q4. We believe we have several more quarters of increasing yield in this portfolio. We have $6,100,000,000 in variable rate loans currently yielding 7.3%.

Ed Woodie
Ed Woodie
Interim CFO at ServisFirst Bancshares

Most of these repriced within 30 days following a rate change. Rates for interest bearing checking deposits dropped from 3.65% at the end of the 3rd quarter to 3.32% at the end of the 4th quarter, indicating a beta of 66%. Non interest bearing demand deposits increased to 20% of total average deposits, up from 19% in the 3rd quarter. Please refer to our supplementary information attached to our press release for further details on our balance sheet structure. We had another good quarter of non interest income.

Ed Woodie
Ed Woodie
Interim CFO at ServisFirst Bancshares

Deposit service charges increased resulting from higher analysis charges and mortgage income increased due to continued strong origination volumes. However, credit card net revenue declined slightly. We had another quarter of successful expense management. We recently directed to $44,800,000 of core expenses per quarter. We believe this has increased modestly to $45,300,000 currently.

Ed Woodie
Ed Woodie
Interim CFO at ServisFirst Bancshares

We are reporting $46,900,000 for the quarter. However, that includes an adjustment to fully fund a shortfall in our health plan, one time EDP costs related to upcoming systems enhancements and the write down of check fraud receivable from other banks. These are offset by a decrease in our annual incentive plan accrual. Our efficiency ratio improved each quarter during the past year. Our tax rate for the quarter was 17.9%, but benefited from a positive adjustment to a tax credit investment, which had delays in construction.

Ed Woodie
Ed Woodie
Interim CFO at ServisFirst Bancshares

Excluding this adjustment, our tax rate was 18.8%, and we believe our prior guidance of a 19% tax rate is still correct. I'll now turn the call back over to Tom for his final thoughts.

Tom Broughton
Tom Broughton
CEO at ServisFirst Bancshares

Thank you, Ed. And we're thinking in the wake of the election, we do see we were optimistic before the election and we're more optimistic after the election because of we are a business bank and the business community overall is very optimistic about the outlook and for the future. And of course, some of that's dependent on a continued downward trend in short term rates, I think, to make projects pencil out a little bit better. I think we're going to have to have some rate cuts over the next year or so. So we do expect loan demand to continue to improve and margins our margins to improve a little bit.

Tom Broughton
Tom Broughton
CEO at ServisFirst Bancshares

Our goal here is to make stock sellers and short sellers remorseful, and we hope there'll be more so in the course of the coming year. We're now opening up for questions.

Operator

Great. Thank you. Our first question is from Stephen Scouten from Piper Sandler. Please go ahead.

Stephen Scouten
Stephen Scouten
Managing Director at Piper Sandler Companies

Yes, thanks. Good afternoon. Just kind of curious, first, if you were surprised to the upside at all about the deposit betas you were able to extract this quarter, that was really nice to see. And kind of how you think about that upside potential for the NIM, Tom, that you spoke to maybe in the current expectations where maybe there's not any additional cuts and maybe an environment where there are additional cuts, kind of how we can think about that trajectory?

Tom Broughton
Tom Broughton
CEO at ServisFirst Bancshares

That's a kind of a tough question. I guess when you have the luxury of having a fair amount of excess cash, you can be pretty disciplined about your interest rate expense management, Stephen. And when you're in a position where you're not, you cannot be. So we're in the have that luxury of having excess cash and we can be pretty disciplined about it. But we I'll just say that we haven't had any pushback and we've been fair and reasonable with our clients.

Tom Broughton
Tom Broughton
CEO at ServisFirst Bancshares

And I'm very surprised to have little pushback because we deal with business clients. Our cost of funds is higher than the average bank to begin with. So we're already paying them a market rate. So I think they're fully expected. If we see any more cuts, they're fully expecting to see some more.

Tom Broughton
Tom Broughton
CEO at ServisFirst Bancshares

Of course, at some point, there's

Tom Broughton
Tom Broughton
CEO at ServisFirst Bancshares

a law

Tom Broughton
Tom Broughton
CEO at ServisFirst Bancshares

of diminishing returns here as rates go lower and lower and lower. On how low we can cut rates and you know that. You know we try to have really nice floors compared nice for us on our loans compared to you know I think what you know used to see in floors a few years ago is much higher today than what we looked for in earlier years. So I think that'll be help us down the road is the loan pricing on the floors on the loans will help us, Steve. I think we'll plop from saving on the expense side to the floors on the loan side will help us, if I answers your question.

Stephen Scouten
Stephen Scouten
Managing Director at Piper Sandler Companies

Yes. No, that's really helpful color, Tom. Appreciate that. And then maybe you said you hired, I think, 4 people here this quarter.

Stephen Scouten
Stephen Scouten
Managing Director at Piper Sandler Companies

Can you talk about

Stephen Scouten
Stephen Scouten
Managing Director at Piper Sandler Companies

how you're thinking about hiring into the New Year, if you expect that to be kind of business as usual and continue to hire good people as they come about? And kind of along those lines, if we see more M and A, which everyone seems to be expecting, would you potentially be more aggressive with dislocation in and around your existing markets?

Tom Broughton
Tom Broughton
CEO at ServisFirst Bancshares

We've always said we're not going to let our budget our budgeted goals that we certainly don't disclose those, but we have those internally. We're not going to let that dictate our strategy. We're going to always be opportunistic about hiring the very best people. We have a couple of irons in the fire, one kind of small and one kind of large in terms of potential expansions. I don't know, we're not anywhere close to maybe on those yet.

Tom Broughton
Tom Broughton
CEO at ServisFirst Bancshares

So we don't know. But yes, if we see merger activity has always helped us because there's always people that fall out of it that are unhappy in terms of the musical chairs. The chairs are arranged differently after the music stops. So we see that as a huge potential upside given the brighter environment for banks, the brighter merger activity. And of course, if I was a bank looking to sell, I mean, you certainly think they would get in line in the next 4 years or certainly before that, while we have a bank friendly at least seemingly bank friendly administration just came into office.

Stephen Scouten
Stephen Scouten
Managing Director at Piper Sandler Companies

Yes, I think you're right about that. And how do you guys just from a strategic perspective, how do you think about that? And do you have a list of, I don't know, 4 or 5 markets that you think about, hey, if the opportunity arose, here's a market we really want to be in? Or kind of how do you think about that potential for expansion?

Tom Broughton
Tom Broughton
CEO at ServisFirst Bancshares

Yes. I've got a list in my drawer. I've got a file on probably 20 different markets, and I've got a list of everybody we've ever talked to over the last 19.5 years in that file of each one or each of those markets. So we dust it off and when mergers announce, we think, oh, okay, who was in that market that we were interested in. So and luckily, we do know have pretty good connectivity in the Southeast to the point to where we think we'll get a call.

Tom Broughton
Tom Broughton
CEO at ServisFirst Bancshares

We have a lot of correspondent bank network that are that Rodney has put together and a lot of friends in the correspondent world that we could try to spot opportunity and they'll spot opportunity for people they're interested in hiring as well. So we tend to work together with other friends in the industry.

Stephen Scouten
Stephen Scouten
Managing Director at Piper Sandler Companies

Got it. Really helpful. Congrats on a great year. Appreciate all the color.

Tom Broughton
Tom Broughton
CEO at ServisFirst Bancshares

Thank you, Steve.

Operator

Our next question is from Steve Moss from Raymond James. Please go ahead.

Steve Moss
Steve Moss
Director - Banking & Arlington at Raymond James Financial

Hi, good afternoon.

Tom Broughton
Tom Broughton
CEO at ServisFirst Bancshares

Hey, Steve.

Steve Moss
Steve Moss
Director - Banking & Arlington at Raymond James Financial

Hey, Tom. With the your upbeat comments here on the

Steve Moss
Steve Moss
Director - Banking & Arlington at Raymond James Financial

loan pipeline here, just kind

Steve Moss
Steve Moss
Director - Banking & Arlington at Raymond James Financial

of curious how you're thinking about loan growth for the upcoming year. You did about 8% or so for the 2024,

Steve Moss
Steve Moss
Director - Banking & Arlington at Raymond James Financial

maybe low double digits or could there be a little bit more

Steve Moss
Steve Moss
Director - Banking & Arlington at Raymond James Financial

prepay temper in that?

Tom Broughton
Tom Broughton
CEO at ServisFirst Bancshares

I hesitate to give any because in 2024, you go back through it, the Q1 was 0, Q2 was really good, Q3, I think, was pretty close to nothing and then Q4 was pretty good. So it's not it's been inconsistent. I don't know that I don't know what you analysts think that we'll see the organic growth rate at for loans. And we still have a problem where rates are too high. The 10 year is too high for people to start new projects in many cases.

Tom Broughton
Tom Broughton
CEO at ServisFirst Bancshares

They don't like the 10 year today. And the short term borrowing cost is really higher than we talked to a lot of our commercial real estate customers and they all say that it's a little bit of an issue. I think our merchant developers are moving ahead pretty well. But the multifamily world still and construction cost is obviously a big issue. And it's not like they can just force down the cost of steel and concrete and lumber with the new administration in place.

Tom Broughton
Tom Broughton
CEO at ServisFirst Bancshares

That's not going to happen. So I'm optimistic, but I'm not counting on anything any substantial improvement. I don't think, Steve, from what we saw in 2024, we had to fight scrap to put together what we did in 2024. And I don't think outside of I see obviously there's a lot of potential in Florida. We see anytime you've got net in migration like the state of Florida has, that's going to lead to increased opportunity.

Tom Broughton
Tom Broughton
CEO at ServisFirst Bancshares

They'll leave that to build more senior housing or active living, I think they call it these days. They're going to have to build more of that eventually in Florida. They'll run out of bedrooms down there for the active livings component. So we're optimistic that Florida will be a help, but certainly we don't have we have a pretty well rounded loan portfolio throughout the Southeast.

Steve Moss
Steve Moss
Director - Banking & Arlington at Raymond James Financial

Got it. Okay. And then in terms of the producers hire, just kind of curious, is it more C and I, CRE? Just kind of how do we think about that? And was it in the new markets or new markets or previous markets, Memphis, Auburn versus elsewhere?

Tom Broughton
Tom Broughton
CEO at ServisFirst Bancshares

Yes. In the Q4, it was a lot of additional Memphis, Auburn, I think maybe 1 Nashville. In the Q1, we've already added 4 in Florida in terms of the in the West Central Florida region. We've already added 4 new bankers down there. So and they all are really out in our company, we only have one dedicated commercial real estate lender.

Tom Broughton
Tom Broughton
CEO at ServisFirst Bancshares

And he is in Nashville and he is from Texas and he has probably half his customers are in Texas or half are in other places, Henry, that would be fair to say, including Tennessee. So but everybody else is a sort of a at least has a C and I bent, and they do some commercial real estate as well.

Steve Moss
Steve Moss
Director - Banking & Arlington at Raymond James Financial

Okay. Got it. And then in terms of just on the margin here, I heard I mentioned the cash flows from the securities portfolio. Just curious, just updated thoughts on fixed rate asset repricing for the loan portfolio here. What cash flows for the upcoming year?

Steve Moss
Steve Moss
Director - Banking & Arlington at Raymond James Financial

There's been any change these days?

Ed Woodie
Ed Woodie
Interim CFO at ServisFirst Bancshares

Yes. We talked about it last quarter and I think it's little changed this quarter. We're still looking at about $1,500,000 of fixed rate loans that are repricing in the 1st year. And then you add to it the $300,000,000 we talked about in securities and that gets us back up to that $1,800,000,000 I think we talked about last quarter. And so that $1,500,000,000 of fixed rate loans are coming off in the high fours.

Ed Woodie
Ed Woodie
Interim CFO at ServisFirst Bancshares

We think they're coming on back on in the high sixes.

Steve Moss
Steve Moss
Director - Banking & Arlington at Raymond James Financial

Okay.

Steve Moss
Steve Moss
Director - Banking & Arlington at Raymond James Financial

And in terms of just the margin trends, I assume the margin was expanding every quarter. Was the December margin fair to assume it was above 3% at this point? I'm just kind of curious how you guys are thinking about that for over the near term.

Ed Woodie
Ed Woodie
Interim CFO at ServisFirst Bancshares

Yes, it is right around that 3% except for if we're holding excess on balance sheet liquidity on our books that tends to impact that net interest margin percentage. So you're probably seeing in the mid-290s as opposed to 3% but for that item.

Steve Moss
Steve Moss
Director - Banking & Arlington at Raymond James Financial

Okay.

Ed Woodie
Ed Woodie
Interim CFO at ServisFirst Bancshares

Yes. We're going to be more like say about

Ed Woodie
Ed Woodie
Interim CFO at ServisFirst Bancshares

$2,000,000,000 in excess volumes, our margin would be in that 3% range.

Tom Broughton
Tom Broughton
CEO at ServisFirst Bancshares

I guess, we tend to correspondence Rodney Rosen is sitting here. They tend to when they see a peak in the Q4 in terms of deposit balances,

Tom Broughton
Tom Broughton
CEO at ServisFirst Bancshares

they do. And that happened this quarter as it has in previous years, up for the Q4. And our existing customers will be flat usually through the first and halfway through the second quarter.

Steve Moss
Steve Moss
Director - Banking & Arlington at Raymond James Financial

Okay.

Steve Moss
Steve Moss
Director - Banking & Arlington at Raymond James Financial

Got you. Appreciate all that color. And then just one last one for me in terms of the non performer that I know was under contract to be sold and then it fell through. Just kind of curious if you have any update on timing of potential resolution?

Henry Abbott
Chief Credit Officer at ServisFirst Bancshares

Don't have any immediate update. It's still one we're working on a lot of attention, but there's nothing that's definitive at this time.

Tom Broughton
Tom Broughton
CEO at ServisFirst Bancshares

It's under a contract, but they haven't let's put it this way, any sale is going to be at a multiple of our debt amount. So we're fine, but there are other creditors out there and that's why they're trying to get everybody paid in full, which may be a little bit difficult to do. So there's always we have a there's a backup buyer potentially as well. So we don't feel like there's any risk of loss there with that asset.

Henry Abbott
Chief Credit Officer at ServisFirst Bancshares

Yes. I think that's a good statement of risk of loss, but yet it's just going to take time.

Steve Moss
Steve Moss
Director - Banking & Arlington at Raymond James Financial

Great. Okay. Well, really appreciate all the color here and nice quarter guys. Thank you very much.

Tom Broughton
Tom Broughton
CEO at ServisFirst Bancshares

Thank you, Steve.

Operator

Our next question is from Dave Bishop from Hovde Group. Please go

Operator

ahead.

David Bishop
Director at Hovde Group

Hey, good evening, gentlemen.

Tom Broughton
Tom Broughton
CEO at ServisFirst Bancshares

Dave, how are you doing?

David Bishop
Director at Hovde Group

I'm good, Tom. How are you doing?

Tom Broughton
Tom Broughton
CEO at ServisFirst Bancshares

Good, bud.

David Bishop
Director at Hovde Group

Hope the snow didn't bury you too much. A quick question for you. I appreciate the supplemental disclosures in terms of the loan originations, you'll pull back a little bit, I think right on top of 7%, 7.10% end of the quarter. Just curious how they've trended post quarter, any sort of material movement in those origination yields?

Ed Woodie
Ed Woodie
Interim CFO at ServisFirst Bancshares

No.

Henry Abbott
Chief Credit Officer at ServisFirst Bancshares

Go ahead, Ed.

Ed Woodie
Ed Woodie
Interim CFO at ServisFirst Bancshares

No, Dave. I think that's about right.

Tom Broughton
Tom Broughton
CEO at ServisFirst Bancshares

We're looking at a better a little bit of a more of a balance between fixed and floating rate loans where we're doing some more fixed rate than we were doing practically none, let's say, a year ago that we're now as we approach being asset neutral, let me liability sensitive neutral and asset sensitive neutral, we're looking at a little bit better mix of some fixed and floating rate loans, Dave.

David Bishop
Director at Hovde Group

And in terms of the pipeline composition, I know the percentage of commercial industrial loans has sort of declined over the years as commercial real estate construction picked up. I'm just curious if there's more of a C and I component that might bring over operating accounts with some moving forward.

Tom Broughton
Tom Broughton
CEO at ServisFirst Bancshares

Well, the interesting thing is a lot of the C and I like our I looked at our service charges December over December and then they're up 20% year over year, which says we've got a lot more accounts on the books and a lot more activity. And many of those accounts are non borrowing accounts today. Many of the good C and I accounts don't borrow or they may have a line that's inactive and nothing no usage in it. So it's sort of the interesting thing. A lot of the C and I we bring in either has no deposits or is 100% deposits.

Tom Broughton
Tom Broughton
CEO at ServisFirst Bancshares

So it's sort of an interesting phenomenon there on C and I side. Got it. And as you sort of

David Bishop
Director at Hovde Group

look at the crystal ball from a credit perspective, you noted in the preamble, obviously, net charge offs are very well behaved here. What would it take to maybe say move that from like say the 10 basis point to 20 basis point level will be a collapse in unemployment? Just curious of what would have to happen to really have a draconian impact to that loss rate?

Tom Broughton
Tom Broughton
CEO at ServisFirst Bancshares

If it goes to 30 basis points 1 quarter, don't be surprised, Dave. I mean, don't get used to the 10 is not reality over a long period of time. And that's why we need the margin expansion to very few commercial banks can sustain a 10 basis points to 15 basis point charge off rate over a long period of time. And I've always said that on average, good banks are 25 basis points or less on average. And so but that means we might have a year when we spike to 35 or we might you know, so if we got back to 25, don't you know, I don't the wheels have come off.

Tom Broughton
Tom Broughton
CEO at ServisFirst Bancshares

That's just sort of back to a normal level. But like again, we I said in my script, we don't see weaknesses in any particular industry. I mean there's some industries, obviously, senior housing has been everybody knows, has had some issues. Trucking has had issues as well. And the weak borrowers have long since filed bankruptcy in both those industries.

Tom Broughton
Tom Broughton
CEO at ServisFirst Bancshares

We've got a few that are not might be struggling a bit, but they're going to make it to the other side. But outside of that, they're randomly just companies that are just poorly operated in whatever industry they're in. Andrew, do you want to add anything to that?

Henry Abbott
Chief Credit Officer at ServisFirst Bancshares

No, I agree. I don't think there's, as you asked one specific thing whether it's unemployment or otherwise that's going to drive it up. It's just going to be a deterioration in certain borrowers, nothing specific to industries or asset class. It's just weaker projects or weaker players.

Tom Broughton
Tom Broughton
CEO at ServisFirst Bancshares

I would think I would speculate and a speculation, speculation, Dave, that the only thing unemployment will have anything to do with is residential A, D and C. I think there's probably a pretty high correlation between we could see some and we just don't have the kind of exposure. We kind of learned a lesson after 2,008,009. 'eight, 'nine things have gone well for 15 years and you tend to get lulled to thinking lot inventories never going to become worthless, that would be it. So I think outside of that on the commercial side, I just don't see losses being affected by an increase in unemployment.

Tom Broughton
Tom Broughton
CEO at ServisFirst Bancshares

I could be wrong, but my experience over the years has been that I think residential A, D and C is tied to unemployment.

David Bishop
Director at Hovde Group

Got it. And then maybe a question for Rodney. I know the puts and takes of the correspondent banking group can be cyclical. The increase in end of period borrowings period to period, does that reflect timing of fund flows or funding of loan growth? Just curious if that's related to the corresponding banking group.

David Bishop
Director at Hovde Group

Thanks.

Tom Broughton
Tom Broughton
CEO at ServisFirst Bancshares

It's both. You have the 4th quarter that where liquidity builds with our customers and we have 374 correspondent banks now or thereabouts. And the other thing is we added 20 4 relationships during the year. The largest market in growth was Texas followed by which we hired some new producers there almost 2 years ago and then followed by Tennessee. And we added some producers in Tennessee who are doing well.

Tom Broughton
Tom Broughton
CEO at ServisFirst Bancshares

So it's new accounts and in addition that 4th quarter liquidity growth.

David Bishop
Director at Hovde Group

Got it. Appreciate the color.

Tom Broughton
Tom Broughton
CEO at ServisFirst Bancshares

Thank you.

Operator

This concludes the question and answer session. I'd like to turn the floor back to management for any closing comments.

Tom Broughton
Tom Broughton
CEO at ServisFirst Bancshares

Thank you everybody for joining us on the call. Appreciate your investment in our company.

Operator

This concludes today's teleconference. You may disconnect your lines at this time. Thank you again for your participation.

Executives
    • Davis Mange
      Davis Mange
      Senior Vice President & Director of Investor Relations
    • Tom Broughton
      Tom Broughton
      CEO
    • Ed Woodie
      Ed Woodie
      Interim CFO
Analysts
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