ServisFirst Bancshares, Inc. (NASDAQ:SFBS) Q3 2020 Earnings Conference Call - Final Transcript
Oct 19, 2020 • 05:15 pm ET
Thomas Ashford Broughton III
few quarters. The C&I line utilization is still at historically low levels. And over the past quarter, you describe loan demand, C&I loan demand is fairly tepid. It has improved significantly at the end of the quarter and we're -- part of the reason we've had low line utilization continuum is I think is the PPP loan proceeds. And I think also we have customers that still have low inventories as their supply chains are still not rebuilt from the early days of the pandemic.
So all-in-all, we would expect pretty solid loan growth over the next few quarters with construction loan advances, organic growth, and expected line utilization increase. Talk a minute about the expenses and the expense cuts and I see a lot in the industry written about how the -- all the banks need to look for expense cuts due to tighter margins and lower loan demand. We do try to constantly look for expense savings, which is why one reason we have one of the lowest efficiency ratios in the industry. While we do have a small branch network, the pandemic has proven to us in our -- and even our bank can be more efficient with our branch network and we see opportunities to reduce staffing in the future. We do see opportunities in core processing for expense savings plus additional outsourcing. One thing I'll say about expenses, you can cut expenses to improve profitability but it will not help you reach prosperity.
So our focus will always be on revenue growth. On the deposit side, we continue to see strong deposit inflows, which we attribute in large part to our strong performance in the PPP program. And again, many of these are strong owner-managed companies with limited borrowing, these that that'll make good core deposits in the future. We are asked constantly about mergers and we are open to the right acquisition opportunity. While many might make economic sense, a few are a good cultural fit. And most that we would see out there have a large legacy branch network, which would not be a good fit with ServisFirst. We are generating excess capital, and we'll look at acquisitions on a selective basis. I will say this, I think if you make a lot of acquisitions, you over time become a very mediocre bank, so that's something we would like to avoid. Our board will continue to also look at enhancing our dividend on an annual basis.
I'll now call on Henry Abbott to give a credit update.
Henry F. Abbott
Thank you, Tom. I'm pleased with many aspects of how our bank's loan portfolio performed in the third quarter and throughout the pandemic. For the quarter, we continued to see a significant decrease in deferrals as they burned off most clients who were on a deferral return to normal payments. As of 9/30, we had roughly $28 million of loans that were on some form of a deferral. This represents a 92% decrease from the prior