ServisFirst Bancshares, Inc. (NASDAQ:SFBS) Q3 2020 Earnings Conference Call - Final Transcript

Oct 19, 2020 • 05:15 pm ET

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ServisFirst Bancshares, Inc. (NASDAQ:SFBS) Q3 2020 Earnings Conference Call - Final Transcript

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Q & A
Operator
Operator

[Operator Instructions] And our first question today will come from Kevin Fitzsimmons with D.A. Davidson. Please go ahead.

Analyst
Kevin Fitzsimmons

Hey. Good afternoon, guys. How are you?

Executive
Thomas Ashford Broughton III

Hey, Kevin.

Executive
William M. Foshee

Hi, Kevin.

Analyst
Kevin Fitzsimmons

Appreciate all the detail you all provided. Just a couple of follow ups here. I noticed the allowance ratio. Despite the charge-off, which looks like it's emanating from one lumpy loan in a particular industry like you described. But the allowance ratio largely was stable to even slightly down. So, based on what you see here, Tom, would you -- do you think you're at peak reserve level in terms of having to build that reserve further not including whatever you may do when you retroactively adopt CECL but just thinking about the next two or three quarters whether the days of -- the lion's share of reserve build you think is behind you. Thanks.

Executive
Thomas Ashford Broughton III

Yeah. Well, we're above CECL today. Our CECL model would call for our reserve to be about $3 million lower than it is today. So we're above CECL if that answers that question. Kevin, we -- I realize that -- of course nobody has the crystal ball. And, I also would point out that actual loan loss reserve levels is that you were a regulator yourself, as I always tell regulators, the best defense against losses is profitability. And we have profitability. And that is the very best defense against any future loan losses. So we don't see any reason to think that we need substantially higher loan loss reserves today or certainly we would have provided for them during the quarter. We still do have a fairly large PPP loan fees that'll -- who knows when the SBA will start paying loans. We've tended a few loans to the SBA totaling $45 million. They paid three loans out of $45 million, total of $145,000. So it's just not any money. So I don't know when they'll start and do that and when our customers will tender the loans to us for us to send them to the SBA. So, I don't know if it answered your question, Kevin?

Analyst
Kevin Fitzsimmons

Yeah, that's great, Tom. I appreciate that. Maybe just shifting gears, I know Bud you provided a lot of detail on rates coming down on the funding side and what was driving the margin compression this quarter. Can you, just from a more top-level, help us in how to view the likely trajectory of the margin going forward here over the next several quarters, whether you want to take that from the stated margin or whether you view it more as a core level, excluding some of the lumpy items that you described? Thanks.

Executive
William M. Foshee

Yeah. Kev, the hardest thing to predict is going to be the liquidity. I mean, we're $1.6 billion at the end of September. We've been at the $1.5 billion, $1.6 billion level for a while. That's -- I mean, for the margin to increase, that's really got to change. And loan production did pick