UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

_________________________

FORM 10-Q

(Mark one)

☒

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 ~~FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2017~~

		FOR THE QUARTERLY PERIOD ENDED ~~JUNE 30, 2017~~MARCH 31, 2018

☐

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _______to_______

Commission file number 001-36452

SERVISFIRST BANCSHARES, INC.

(Exact Name of Registrant as Specified in Its Charter)

Delaware	26-0734029
(State or Other Jurisdiction of	(I.R.S. Employer
Incorporation or Organization)	Identification No.)

2500 Woodcrest Place, Birmingham, Alabama	35209
(Address of Principal Executive Offices)	(Zip Code)

~~850 Shades Creek Parkway, Birmingham, Alabama 35209~~

~~(Address of Principal Executive Offices) (Zip Code)~~

(205) 949-0302

(Registrant's Telephone Number, Including Area Code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Name of exchange on which registered
Common stock, par value $.001 per share	The NASDAQ Stock Market LLC

Securities registered pursuant to Section 12(g) of the Act:

None

(Title of Class)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or Section 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ~~[X]~~ ☒ No ~~[_]~~☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

☒ Yes ~~[X]~~ No ☐~~[_]~~

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the ~~definitions~~definition of “large accelerated ~~filer”,~~filer,” “accelerated ~~filer”,~~filer,” “non-accelerated filer,” “smaller reporting ~~company”~~company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act (Check one):

Large accelerated filer ~~[X]~~ ☒ Accelerated filer ~~[_]~~ ☐ Non-accelerated filer ~~[_]~~ ☐ Smaller reporting company ~~[_]~~ ☐ Emerging growth company ~~[_]~~☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act ~~[_]~~☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the ~~Exchange~~ Act). Yes ~~[_]~~☐ No ~~[X]~~☒

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practical date.

Class	Outstanding as of ~~July 28, 2017~~April 27, 2018
Common stock, $.001 par value	~~52,932,230~~53,147,169

TABLE OF CONTENTS

EX-31.01 SECTION 302 CERTIFICATION OF THE CEO

EX-31.02 SECTION 302 CERTIFICATION OF THE CFO

EX-32.01 SECTION 906 CERTIFICATION OF THE CEO

EX-32.02 SECTION 906 CERTIFICATION OF THE CFO

PART 1. FINANCIAL INFORMATION

ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS

SERVISFIRST BANCSHARES, INC.

CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share amounts)

	June 30, 2017			December 31, 2016			March 31, 2018			December 31, 2017
	(Unaudited)			(1)			(Unaudited)			(1)
ASSETS
Cash and due from banks	$	71,181		$	56,855		$	64,912		$	86,213
Interest-bearing balances due from depository institutions		134,694			566,707			53,311			151,849
Federal funds sold		49,443			160,435			197,882			239,524
Cash and cash equivalents		255,318			783,997			316,105			477,586
Available for sale debt securities, at fair value		438,808			422,375			560,635			538,080
Held to maturity debt securities (fair value of $80,532 and $63,302 at June 30, 2017 and December 31, 2016, respectively)		79,257			62,564
Restricted equity securities		1,037			1,024
Held to maturity debt securities (fair value of $250 at March 31, 2018 and December 31, 2017)								250			250
Equity securities								1,026			1,034
Mortgage loans held for sale		5,673			4,675			4,522			4,459
Loans		5,343,688			4,911,770			5,928,327			5,851,261
Less allowance for loan losses		(55,059	)		(51,893	)		(62,050	)		(59,406	)
Loans, net		5,288,629			4,859,877			5,866,277			5,791,855
Premises and equipment, net		51,797			40,314			58,624			58,900
Accrued interest and dividends receivable		16,770			15,801			20,261			20,661
Deferred tax assets		26,392			27,132
Deferred tax assets, net								11,468			13,022
Other real estate owned and repossessed assets		3,891			4,988			5,748			6,701
Bank owned life insurance contracts		125,896			114,388			128,296			127,519
Goodwill and other identifiable intangible assets		14,855			14,996			14,652			14,719
Other assets		21,276			18,317			23,871			27,598
Total assets	$	6,329,599		$	6,370,448		$	7,011,735		$	7,082,384
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposits:
Noninterest-bearing	$	1,373,353		$	1,281,605		$	1,407,592		$	1,440,326
Interest-bearing		4,021,457			4,138,706			4,569,795			4,651,348
Total deposits		5,394,810			5,420,311			5,977,387			6,091,674
Federal funds purchased		300,226			355,944			326,399			301,797
Other borrowings		55,075			55,262			64,739			64,832
Accrued interest payable		3,513			4,401			7,823			4,971
Other liabilities		8,889			11,641			6,090			11,506
Total liabilities		5,762,513			5,847,559			6,382,438			6,474,780
Stockholders' equity:
Preferred stock, Series A Senior Non-Cumulative Perpetual, par value $0.001 (liquidation preference $1,000), net of discount; no shares authorized or outstanding at June 30, 2017 and December 31, 2016		-			-
Preferred stock, par value $0.001 per share; 1,000,000 authorized and undesignated at June 30, 2017 and December 31, 2016		-			-
Common stock, par value $0.001 per share; 100,000,000 shares authorized; 52,909,362 shares issued and outstanding at June 30, 2017, and 52,636,896 shares issued and outstanding at December 31, 2016		53			53
Preferred stock, par value $0.001 per share; 1,000,000 authorized and undesignated at March 31, 2018 and December 31, 2017								-			-
Common stock, par value $0.001 per share; 100,000,000 shares authorized; 53,147,169 shares issued and outstanding at March 31, 2018, and 52,992,586 shares issued and outstanding at December 31, 2017								53			53
Additional paid-in capital		217,271			215,932			217,536			217,693
Retained earnings		348,517			307,151			416,311			389,554
Accumulated other comprehensive income		743			(624	)
Accumulated other comprehensive loss								(5,105	)		(198	)
Total stockholders' equity attributable to ServisFirst Bancshares, Inc.		566,584			522,512			628,795			607,102
Noncontrolling interest		502			377			502			502
Total stockholders' equity		567,086			522,889			629,297			607,604
Total liabilities and stockholders' equity	$	6,329,599		$	6,370,448		$	7,011,735			7,082,384

~~(1) Derived from audited financial statements.~~

(1)

derived from audited financial statements

See Notes to Consolidated Financial Statements.

SERVISFIRST BANCSHARES, INC.

CONSOLIDATED STATEMENTS OF INCOME

(In thousands, except share and per share amounts)

(Unaudited)

	Three Months Ended June 30,					Six Months Ended June 30,					Three Months Ended March 31,
	2017		2016			2017		2016			2018		2017
Interest income:
Interest and fees on loans	$	59,912	$	49,210		$	115,468	$	96,457		$	69,674	$	55,556
Taxable securities		2,274		1,238			4,361		2,507			2,745		2,087
Nontaxable securities		752		834			1,517		1,692			656		765
Federal funds sold		287		210			806		283			551		519
Other interest and dividends		313		558			903		1,072			383		590
Total interest income		63,538		52,050			123,055		102,011			74,009		59,517
Interest expense:
Deposits		6,321		4,633			12,303		8,994			9,621		5,982
Borrowed funds		1,650		1,526			3,133		2,947			1,952		1,483
Total interest expense		7,971		6,159			15,436		11,941			11,573		7,465
Net interest income		55,567		45,891			107,619		90,070			62,436		52,052
Provision for loan losses		4,381		3,800			9,367		5,859			4,139		4,986
Net interest income after provision for loan losses		51,186		42,091			98,252		84,211			58,297		47,066
Noninterest income:
Service charges on deposit accounts		1,382		1,306			2,736		2,613			1,585		1,354
Mortgage banking		1,064		901			1,963		1,569			518		899
Credit card income		1,189		572			2,368		1,041			1,578		1,179
Securities (losses) gains		-		(3	)		-		(3	)
Securities gains												4		-
Increase in cash surrender value life insurance		785		655			1,509		1,279			777		724
Other operating income		385		416			775		783			407		390
Total noninterest income		4,805		3,847			9,351		7,282			4,869		4,546
Noninterest expenses:
Non-interest expenses:
Salaries and employee benefits		12,031		10,733			23,744		21,800			13,296		11,713
Equipment and occupancy expense		2,265		2,023			4,505		4,008			1,954		2,250
Professional services		808		999			1,579		1,737			805		771
FDIC and other regulatory assessments		1,081		803			2,078		1,553			1,133		997
OREO expense		56		41			132		490
Other real estate owned expense												316		76
Other operating expenses		5,634		4,905			11,104		9,206			6,008		5,460
Total noninterest expenses		21,875		19,504			43,142		38,794
Total non-interest expenses												23,512		21,267
Income before income taxes		34,116		26,434			64,461		52,699			39,654		30,345
Provision for income taxes		9,952		7,558			17,778		13,867			7,051		7,826
Net income		24,164		18,876			46,683		38,832			32,603		22,519
Preferred stock dividends		31		23			31		23
Dividends on preferred stock												-		-
Net income available to common stockholders	$	24,133	$	18,853		$	46,652	$	38,809		$	32,603	$	22,519

Basic earnings per common share	$	0.46	$	0.36		$	0.88	$	0.74		$	0.61	$	0.43

Diluted earnings per common share	$	0.45	$	0.36		$	0.86	$	0.73		$	0.60	$	0.42

See Notes to Consolidated Financial Statements.

SERVISFIRST BANCSHARES, INC. ~~AND SUBSIDIARIES~~

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In thousands)

(Unaudited)

Three Months Ended
June 30, Six Months Ended
June 30,
2017 2016 2017 2016
Net income $ 24,164 $ 18,876 $ 46,683 $ 38,832
Other comprehensive income, net of tax:
Unrealized holding gains arising during period from securities available for sale, net of tax of $201 and $736 for the three and six months ended June 30, 2017, respectively, and $272 and $1,256 for the three and six months ended June 30, 2016, respectively 374 520 1,367 2,354
Reclassification adjustment for net losses on sale of securities, net of tax of $1 for the three and six months ended June 30, 2016 - 2 - 2
Other comprehensive income, net of tax 374 522 1,367 2,356
Comprehensive income $ 24,538 $ 19,398 $ 48,050 $ 41,188

	Three Months Ended March 31,
	2018			2017
Net income	$	32,603		$	22,519
Other comprehensive (loss) income, net of tax:
Unrealized holding (losses) gains arising during period from securities available for sale, net of (benefit) tax of $(1,340) and $534 for 2018 and 2017, respectively		(4,910	)		993
Reclassification adjustment for gains on sale of securities, net of tax of $1 for 2018		3			-
Other comprehensive (loss) income, net of tax		(4,907	)		993
Comprehensive income	$	27,696		$	23,512

See Notes to Consolidated Financial Statements.

SERVISFIRST BANCSHARES, INC.

CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY

THREE MONTHS ENDED MARCH 31, 2018 AND 2017

(In thousands, except share amounts)

(Unaudited)

											Accumulated
					Additional						Other					Total
	Preferred		Common		Paid-in			Retained			Comprehensive			Noncontrolling		Stockholders'
	Stock		Stock		Capital			Earnings			Income			Interest		Equity
Balance, December 31, 2016	$	-	$	53	$	215,932		$	307,151		$	(624	)	$	377	$	522,889
Common dividends declared, $0.05 per share		-		-		-			(2,641	)		-			-		(2,641	)
Issue 175,500 shares of common stock upon exercise of stock options		-		-		926			-			-			-		926
Issue 125 shares of REIT preferred stock		-		-		-			-			-			125		125
Stock-based compensation expense		-		-		337			-			-			-		337
Other comprehensive income, net of tax		-		-		-			-			993			-		993
Net income		-		-		-			22,519			-			-		22,519
Balance, March 31, 2017	$	-	$	53	$	217,195		$	327,029		$	369		$	502	$	545,148

Balance, December 31, 2017	$	-	$	53	$	217,693		$	389,554		$	(198	)	$	502	$	607,604
Common dividends declared, $0.11 per share		-		-		-			(5,846	)		-			-		(5,846	)
Issue 173,836 shares of common stock upon exercise of stock options		-		-		852			-			-			-		852
30,003 shares of common stock withheld in net settlement upon exercise of stock options		-		-		(1,247	)		-			-			-		(1,247	)
Stock-based compensation expense		-		-		238			-			-			-		238
Other comprehensive income, net of tax		-		-		-			-			(4,907	)		-		(4,907	)
Net income		-		-		-			32,603			-			-		32,603
Balance, March 31, 2018	$	-	$	53	$	217,536		$	416,311		$	(5,105	)	$	502	$	629,297

See Notes to Consolidated Financial Statements.

SERVISFIRST BANCSHARES, INC.

~~CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY~~

~~(In thousands, except share amounts)~~

~~(Unaudited)~~

Common
Stock Additional
Paid-in
Capital Retained
Earnings Accumulated
Other
Comprehensive
Income Noncontrolling
Interest Total
Stockholders'
Equity
Balance, December 31, 2015 $ 52 $ 211,546 $ 234,124 $ 3,048 $ 377 $ 449,147
Common dividends paid, $0.04 per share - - (2,095 ) - - (2,095 )
Common dividends declared, $.04 per share - - (2,099 ) - - (2,099 )
Preferred dividends paid - - (23 ) - - (23 )
Issue 549,500 shares of common stock upon exercise of stock options - 2,339 - - - 2,339
Stock based compensation expense - 640 - - - 640
Other comprehensive income, net of tax - - - 2,356 - 2,356
Net income - - 38,832 - - 38,832
Balance, June 30, 2016 $ 52 $ 214,525 $ 268,739 $ 5,404 $ 377 $ 489,097

Balance, December 31, 2016 $ 53 $ 215,932 $ 307,151 $ (624 ) $ 377 $ 522,889
Common dividends paid, $0.05 per share - - (2,641 ) - - (2,641 )
Common dividends declared, $0.05 per share - - (2,645 ) - - (2,645 )
Preferred dividends paid - - (31 ) - - (31 )
Issue 272,466 shares of common stock upon exercise of stock options - 717 - - - 717
Issue 125 shares of REIT preferred stock - - - - 125 125
Stock based compensation expense - 622 - - - 622
Other comprehensive income, net of tax - - - 1,367 - 1,367
Net income - - 46,683 - - 46,683
Balance, June 30, 2017 $ 53 $ 217,271 $ 348,517 $ 743 $ 502 $ 567,086

~~See Notes to Consolidated Financial Statements.~~

~~SERVISFIRST BANCSHARES, INC.~~

CONSOLIDATED STATEMENTS OF CASH FLOWS

~~(In~~(In thousands) (Unaudited)

	Six Months Ended June 30,						Three Months Ended March 31,
	2017			2016			2018			2017
OPERATING ACTIVITIES
Net income	$	46,683		$	38,832		$	32,603		$	22,519
Adjustments to reconcile net income to net cash provided by
Deferred tax		4			440
Deferred tax expense (benefit)								1,554			(369	)
Provision for loan losses		9,367			5,859			4,139			4,986
Depreciation		1,501			1,480			832			752
Accretion on acquired loans		(267	)		(624	)		(72	)		(143	)
Amortization of core deposit intangible		141			176			67			72
Net amortization of debt securities available for sale		1,999			1,288			623			1,001
(Increase) decrease in accrued interest and dividends receivable		(969	)		211
Decrease (increase) in accrued interest and dividends receivable								400			(250	)
Stock-based compensation expense		622			640			238			337
(Decrease) increase in accrued interest payable		(888	)		507
Increase (decrease) in accrued interest payable								2,852			(187	)
Proceeds from sale of mortgage loans held for sale		71,518			61,054			24,720			32,501
Originations of mortgage loans held for sale		(70,553	)		(59,169	)		(24,265	)		(33,526	)
Loss on sale of debt securities available for sale		-			3
Gain on sale of debt securities available for sale								(4	)		-
Gain on sale of mortgage loans held for sale		(1,963	)		(1,569	)		(518	)		(899	)
Net (gain) loss on sale of other real estate owned and repossessed assets		(53	)		39
Net gain on sale of other real estate owned and repossessed assets								-			(36	)
Write down of other real estate owned and repossessed assets		4			397			254			-
Losses of tax credit partnerships		7			176
Operating losses (income) of tax credit partnerships								29			(22	)
Increase in cash surrender value of life insurance contracts		(1,509	)		(1,279	)		(777	)		(724	)
Net change in other assets, liabilities, and other operating activities		(9,379	)		(7,563	)		(3,790	)		3,202
Net cash provided by operating activities		46,265			40,898			38,885			29,214
INVESTMENT ACTIVITIES
Purchase of debt securities available for sale		(60,627	)		(15,119	)
Purchase of securities available for sale								(54,666	)		(53,885	)
Proceeds from maturities, calls and paydowns of securities available for sale								20,376			23,357
Proceeds from sale of debt securities available for sale		-			6,085			5,100			-
Proceeds from maturities, calls and paydowns of debt securities available for sale		45,325			34,255
Purchase of debt securities held to maturity		(20,786	)		(439	)
Proceeds from maturities, calls and paydowns of debt securities held to maturity		4,093			1,203
Purchase of securities held to maturity								-			(9,786	)
Proceeds from maturities, calls and paydowns of securities held to maturity								-			293
Purchase of equity securities		(10	)		(708	)		-			(10	)
Increase in loans		(438,253	)		(325,496	)		(78,664	)		(243,562	)
Purchase of premises and equipment		(12,984	)		(5,267	)		(556	)		(6,844	)
Purchase of bank-owned life insurance contracts		(10,000	)		(10,000	)
Expenditures to complete construction of other real estate owned		-			(3	)
Proceeds from sale of other real estate owned and repossessed assets		1,547			1,575			874			426
Investment in tax credit partnerships		-			(2,491	)
Net cash used in investing activities		(491,695	)		(316,405	)		(107,536	)		(290,011	)
FINANCING ACTIVITIES
Net increase in non-interest-bearing deposits		91,748			132,201
Net (decrease) increase in interest-bearing deposits		(117,249	)		311,706
Net (decrease) increase in federal funds purchased		(55,718	)		68,070
Net (decrease) increase in non-interest-bearing deposits								(32,734	)		10,835
Net decrease in interest-bearing deposits								(81,553	)		(69,614	)
Net increase in federal funds purchased								24,602			2,297
Repayment of Federal Home Loan Bank advances		(200	)		(200	)		(100	)		(100	)
Proceeds from sale of preferred stock, net		125			-			-			125
Proceeds from exercise of stock options and warrants		717			2,339
Proceeds from exercise of stock options								852			926
Taxes paid in net settlement of tax obligation upon exercise of stock options								(1,247	)		-
Dividends paid on common stock		(2,641	)		(2,095	)		(2,650	)		(2,105	)
Dividends paid on preferred stock		(31	)		(23	)
Net cash (used in) provided by financing activities		(83,249	)		511,998
Net (decrease) increase in cash and cash equivalents		(528,679	)		236,491
Net cash used in financing activities								(92,830	)		(57,636	)
Net decrease in cash and cash equivalents								(161,481	)		(318,433	)
Cash and cash equivalents at beginning of period		783,997			352,235			477,586			783,997
Cash and cash equivalents at end of period	$	255,318		$	588,726		$	316,105		$	465,564
SUPPLEMENTAL DISCLOSURE
Cash paid for:
Interest	$	16,324		$	11,434		$	8,721		$	7,652
Income taxes		22,363			17,546			2,902			652
Income tax refund		(182	)		-			-			(181	)
NONCASH TRANSACTIONS
Other real estate acquired in settlement of loans	$	586		$	2,036		$	175		$	553
Internally financed sales of other real estate owned		185			1,157			-			49
Dividends declared		2,645			2,099			5,846			2,641

~~See Notes to Consolidated Financial Statements.~~

SERVISFIRST BANCSHARES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

~~June 30, 2017~~March 31, 2018

(Unaudited)

NOTE 1 - GENERAL

The accompanying consolidated financial statements in this report have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission, including Regulation S-X and the instructions for Form 10-Q, and have not been audited. These consolidated financial statements do not include all of the information and footnotes required by U.S. generally accepted accounting principles (“U.S. GAAP”) for complete financial statements. In the opinion of management, all adjustments necessary to present fairly the consolidated financial position and the consolidated results of operations for the interim periods have been made. All such adjustments are of a normal recurring nature. The consolidated results of operations are not necessarily indicative of the consolidated results of operations which ServisFirst Bancshares, Inc. (the “Company”) ~~and its consolidated subsidiaries, including ServisFirst Bank (the “Bank”),~~ may achieve for future interim periods or the entire year. For further information, refer to the consolidated financial statements and footnotes included in the Company’s Form 10-K for the year ended December 31, ~~2016.~~

On December 20, 2016, the Company effected a two-for-one split of its common stock in the form of a stock dividend. Except where specifically indicated otherwise, all reported amounts in this Form 10-Q have been adjusted to give effect to this stock split.2017.

All reported amounts are in thousands except share and per share data.

Revenue Recognition

Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers (“ASC 606”), provides guidance for reporting revenue from the entity’s contracts to provide goods or services to customers. The guidance requires recognition of revenue to depict the transfer of goods or services to customers in an amount that reflects the consideration that it expects to be entitled to receive in exchange for those goods or services recognized as performance obligations are satisfied.

The majority of our revenue-generating transactions are excluded from the scope of ASC 606, including revenue generated from financial instruments, such as securities and loans. Revenue-generating transactions that are within the scope of ASC 606, classified within non-interest income, are described as follows:

Deposit account service charges – represent service fees for monthly activity and maintenance on customer accounts. Attributes can be transaction-based, item-based or time-based. Revenue is recognized when our performance obligation is completed which is generally monthly for maintenance services or when a transaction is processed. Payment for such performance obligations are generally received at the time the performance obligations are satisfied.

Credit card rewards program membership fees – represent memberships in our credit card rewards program and are paid annually by our cardholders at the time they open an account and on each anniversary. Revenue is recognized ratably over the membership period.

Other non-interest income primarily includes income on bank owned life insurance contracts, letter of credit fees and gains on sale of loans held for sale, none of which are within the scope of ASC 606.

NOTE 2 - CASH AND CASH EQUIVALENTS

Cash on hand, cash items in process of collection, amounts due from banks, and federal funds sold are included in cash and cash equivalents.

NOTE 3 - EARNINGS PER COMMON SHARE

Basic earnings per common share are computed by dividing net income ~~available to common stockholders~~ by the weighted average number of common shares outstanding during the period. Diluted earnings per common share include the dilutive effect of additional potential common shares issuable under stock ~~options and warrants. All reported amounts in this Form 10-Q have been adjusted to give effect to the two-for-one stock split discussed above.~~options.

	Three Months Ended March 31,
	2018		2017
	(In Thousands, Except Shares and Per Share Data)
Earnings per common share
Weighted average common shares outstanding		53,082,322		52,745,335
Net income available to common stockholders	$	32,603	$	22,519
Basic earnings per common share	$	0.61	$	0.43

Weighted average common shares outstanding		53,082,322		52,745,335
Dilutive effects of assumed conversions and exercise of stock options and warrants		1,101,078		1,388,387
Weighted average common and dilutive potential common shares outstanding		54,183,400		54,133,722
Net income available to common stockholders	$	32,603	$	22,519
Diluted earnings per common share	$	0.60	$	0.42

Three Months Ended June 30, Six Months Ended June 30,
2017 2016 2017 2016
(In Thousands, Except Shares and Per Share Data)
Earnings per common share
Weighted average common shares outstanding 52,864,761 52,425,726 52,805,378 52,340,390
Net income available to common stockholders $ 24,133 $ 18,853 $ 46,652 $ 38,809
Basic earnings per common share $ 0.46 $ 0.36 $ 0.88 $ 0.74

Weighted average common shares outstanding 52,864,761 52,425,726 52,805,378 52,340,390
Dilutive effects of assumed conversions and exercise of stock options and warrants 1,235,843 1,026,800 1,311,694 952,684
Weighted average common and dilutive potential common shares outstanding 54,100,604 53,452,526 54,117,072 53,293,074
Net income available to common stockholders $ 24,133 $ 18,853 $ 46,652 $ 38,809
Diluted earnings per common share $ 0.45 $ 0.36 $ 0.86 $ 0.73

NOTE 4 - SECURITIES

The amortized cost and fair value of available-for-sale and held-to-maturity securities at ~~June 30, 2017~~March 31, 2018 and December 31, ~~2016~~2017 are summarized as follows:

	Amortized Cost		Gross Unrealized Gain		Gross Unrealized Loss			Market Value		Amortized Cost		Gross Unrealized Gain		Gross Unrealized Loss			Fair Value
June 30, 2017	(In Thousands)
Securities Available for Sale
U.S. Treasury and government sponsored agencies	$	56,778	$	419	$	(72	)	$	57,125
Mortgage-backed securities		241,613		1,267		(1,609	)		241,271
State and municipal securities		139,273		1,298		(159	)		140,412
Total		437,664		2,984		(1,840	)		438,808
Securities Held to Maturity
Mortgage-backed securities		27,858		303		(224	)		27,937
State and municipal securities		5,890		306		-			6,196
Corporate debt		45,509		890		-			46,399
Total	$	79,257	$	1,499	$	(224	)	$	80,532

December 31, 2016
Securities Available for Sale
March 31, 2018										(In Thousands)
Available for sale debt securities
U.S. Treasury and government sponsored agencies	$	45,998	$	382	$	(126	)	$	46,254	$	58,025	$	5	$	(777	)	$	57,252
Mortgage-backed securities		228,843		1,515		(3,168	)		227,190		294,582		609		(6,874	)		288,318
State and municipal securities		139,504		1,120		(694	)		139,930		123,123		522		(856	)		122,789
Corporate debt		8,985		16		-			9,001		91,409		1,376		(509	)		92,276
Total		423,330		3,033		(3,988	)		422,375	$	567,139	$	2,512	$	(9,016	)	$	560,635
Securities Held to Maturity
Held to maturity debt securities
State and municipal securities										$	250	$	-	$	-		$	250
Total										$	250	$	-	$	-		$	250

December 31, 2017
Available for sale debt securities
U.S. Treasury and government sponsored agencies										$	55,567	$	38	$	(249	)	$	55,356
Mortgage-backed securities		19,164		321		(245	)		19,240		278,177		1,006		(2,685	)		276,498
State and municipal securities		5,888		315		(12	)		6,191		134,641		761		(553	)		134,849
Corporate debt		37,512		374		(15	)		37,871		69,996		1,416		(35	)		71,377
Total	$	62,564	$	1,010	$	(272	)	$	63,302	$	538,381	$	3,221	$	(3,522	)	$	538,080
Held to maturity debt securities
State and municipal securities										$	250	$	-	$	-		$	250
Total										$	250	$	-	$	-		$	250

The amortized cost and fair value of debt securities as of ~~June 30,~~March 31, 2018 and December 31, 2017 by contractual maturity are shown below. Actual maturities may differ from contractual maturities of mortgage-backed securities since the mortgages underlying the securities may be called or prepaid with or without penalty. Therefore, these securities are not included in the maturity categories along with the other categories of debt securities.

	March 31, 2018				December 31, 2017
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
	(In thousands)
Available for sale debt securities
Due within one year	$	45,864	$	45,909	$	22,122	$	22,172
Due from one to five years		194,445		193,930		160,773		160,563
Due from five to ten years		29,371		29,472		73,362		74,684
Due after ten years		2,877		3,006		3,947		4,163
Mortgage-backed securities		294,582		288,318		278,177		276,498
	$	567,139	$	560,635	$	538,381	$	538,080

Held to maturity debt securities
Due from one to five years	$	250	$	250	$	250	$	250
	$	250	$	250	$	250	$	250

June 30, 2017 December 31, 2016
Amortized
Cost Fair Value Amortized
Cost Fair Value
(In thousands)
Debt securities available for sale
Due within one year $ 11,487 $ 11,516 $ 28,270 $ 28,400
Due from one to five years 155,256 156,552 152,347 153,003
Due from five to ten years 28,918 29,082 13,870 13,782
Due after ten years 390 387 - -
Mortgage-backed securities 241,613 241,271 228,843 227,190
$ 437,664 $ 438,808 $ 423,330 $ 422,375

Debt securities held to maturity
Due from one to five years $ 3,250 $ 3,266 $ 250 $ 250
Due from five to ten years 34,246 35,005 34,251 34,617
Due after ten years 13,903 14,324 8,899 9,195
Mortgage-backed securities 27,858 27,937 19,164 19,240
$ 79,257 $ 80,532 $ 62,564 $ 63,302

All mortgage-backed securities are with government-sponsored enterprises (GSEs) such as Federal National Mortgage Association, Government National Mortgage Association, Federal Home Loan Bank, and Federal Home Loan Mortgage Corporation.

The following table identifies, as of ~~June 30, 2017~~March 31, 2018 and December 31, ~~2016,~~2017, the Company’s investment securities that have been in a continuous unrealized loss position for less than 12 months and those that have been in a continuous unrealized loss position for 12 or more months. At ~~June 30, 2017, nine~~March 31, 2018, 73 of the Company’s ~~813~~797 debt securities had been in an unrealized loss position for 12 or more months. The Company does not intend to sell these securities, and it is more likely than not that the Company will not be required to sell the securities before recovery of their amortized cost, which may be maturity; accordingly, the Company does not consider these securities to be other-than-temporarily impaired at ~~June 30, 2017.~~March 31, 2018. Further, the Company believes any deterioration in value of its current investment securities is attributable to changes in market interest rates and not credit quality of the issuer.

	Less Than Twelve Months					Twelve Months or More					Total					Less Than Twelve Months					Twelve Months or More					Total
	Gross Unrealized Losses			Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses			Fair Value		Gross					Gross					Gross
	(In Thousands)															Unrealized					Unrealized					Unrealized
June 30, 2017
U.S. Treasury and government sponsored agencies	$	(72	)	$	4,859	$	-		$	-	$	(72	)	$	4,859
Mortgage-backed securities		(1,813	)		144,440		(20	)		1,021		(1,833	)		145,461
State and municipal securities		(143	)		32,820		(16	)		1,582		(159	)		34,402
Total	$	(2,028	)	$	182,119	$	(36	)	$	2,603	$	(2,064	)	$	184,722
																Losses			Fair Value		Losses			Fair Value		Losses			Fair Value
December 31, 2016
																(In Thousands)
March 31, 2018:
U.S. Treasury and government sponsored agencies	$	(126	)	$	10,865	$	-		$	-	$	(126	)	$	10,865	$	(635	)	$	54,191	$	(142	)	$	2,881	$	(777	)	$	57,072
Mortgage-backed securities		(3,413	)		174,225		-			-		(3,413	)		174,225		(4,046	)		200,071		(2,828	)		71,042		(6,874	)		271,113
State and municipal securities		(698	)		64,502		(8	)		1,021		(706	)		65,523		(716	)		64,676		(140	)		6,642		(856	)		71,318
Corporate debt		(15	)		3,034		-			-		(15	)		3,034		(509	)		26,389		-			-		(509	)		26,389
Total	$	(4,252	)	$	252,626	$	(8	)	$	1,021	$	(4,260	)	$	253,647	$	(5,906	)	$	345,327	$	(3,110	)	$	80,565	$	(9,016	)	$	425,892

December 31, 2017:
U.S. Treasury and government sponsored agencies																$	(151	)	$	33,401	$	(98	)	$	2,926	$	(249	)	$	36,327
Mortgage-backed securities																	(986	)		140,432		(1,699	)		75,903		(2,685	)		216,335
State and municipal securities																	(450	)		66,637		(103	)		6,648		(553	)		73,285
Corporate debt																	(35	)		6,955		-			-		(35	)		6,955
Total																$	(1,622	)	$	247,425	$	(1,900	)	$	85,477	$	(3,522	)	$	332,902

NOTE 5 – LOANS

The following table details the Company’s loans at ~~June 30, 2017~~March 31, 2018 and December 31, ~~2016:~~2017:

							March 31,			December 31,
	June 30, 2017			December 31, 2016			2018			2017
	(Dollars In Thousands)						(Dollars In Thousands)
Commercial, financial and agricultural	$	2,123,498		$	1,982,267		$	2,329,904		$	2,279,366
Real estate - construction		395,398			335,085			506,050			580,874
Real estate - mortgage:
Owner-occupied commercial		1,272,659			1,171,719			1,349,679			1,328,666
1-4 family mortgage		565,121			536,805			581,498			603,063
Other mortgage		931,788			830,683			1,099,482			997,079
Subtotal: Real estate - mortgage		2,769,568			2,539,207			3,030,659			2,928,808
Consumer		55,224			55,211			61,714			62,213
Total Loans		5,343,688			4,911,770			5,928,327			5,851,261
Less: Allowance for loan losses		(55,059	)		(51,893	)		(62,050	)		(59,406	)
Net Loans	$	5,288,629		$	4,859,877		$	5,866,277		$	5,791,855


Commercial, financial and agricultural		39.74	%		40.36	%		39.30	%		38.96	%
Real estate - construction		7.40	%		6.82	%		8.54	%		9.93	%
Real estate - mortgage:
Owner-occupied commercial		23.82	%		23.86	%		22.77	%		22.71	%
1-4 family mortgage		10.57	%		10.93	%		9.81	%		10.30	%
Other mortgage		17.44	%		16.91	%		18.54	%		17.04	%
Subtotal: Real estate - mortgage		51.83	%		51.70	%		51.12	%		50.05	%
Consumer		1.03	%		1.12	%		1.04	%		1.06	%
Total Loans		100.00	%		100.00	%		100.00	%		100.00	%

The credit quality of the loan portfolio is summarized no less frequently than quarterly using categories similar to the standard asset classification system used by the federal banking agencies. The following table presents credit quality indicators for the loan loss portfolio segments and classes. These categories are utilized to develop the associated allowance for loan losses using historical losses adjusted for current economic conditions defined as follows:

Pass – loans which are well protected by the current net worth and paying capacity of the obligor (or obligors, if any) or by the fair value, less cost to acquire and sell, of any underlying collateral.

Special Mention – loans with potential weakness that may, if not reversed or corrected, weaken the credit or inadequately protect the Company’s position at some future date. These loans are not adversely classified and do not expose an institution to sufficient risk to warrant an adverse classification.

Substandard – loans that exhibit well-defined weakness or weaknesses that currently jeopardize debt repayment. These loans are characterized by the distinct possibility that the institution will sustain some loss if the weaknesses are not corrected.

Pass – loans which are well protected by the current net worth and paying capacity of the obligor(s) or by the fair value, less cost to acquire and sell, of any underlying collateral.

Substandard – loans that exhibit well-defined weakness or weaknesses that presently jeopardize debt repayment. These loans are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected.

Doubtful – loans that have all the weaknesses inherent in loans classified substandard, plus the added characteristic that the weaknesses make collection or liquidation in full on the basis of currently existing facts, conditions, and values highly questionable and improbable.

Loans by credit quality indicator as of ~~June 30, 2017~~March 31, 2018 and December 31, ~~2016~~2017 were as follows:

June 30, 2017	Pass		Special Mention		Substandard		Doubtful		Total
													Special
March 31, 2018											Pass		Mention		Substandard		Doubtful		Total
	(In Thousands)										(In Thousands)
Commercial, financial and agricultural	$	2,051,745	$	40,323	$	31,430	$	-	$	2,123,498	$	2,272,468	$	32,900	$	24,536	$	-	$	2,329,904
Real estate - construction		384,442		7,582		3,374		-		395,398		497,846		6,623		1,581		-		506,050
Real estate - mortgage:
Owner-occupied commercial		1,255,649		11,098		5,912		-		1,272,659		1,338,307		7,401		3,971		-		1,349,679
1-4 family mortgage		559,579		1,256		4,286		-		565,121
1-4 family mortgage												576,792		1,599		3,107		-		581,498
Other mortgage		914,552		13,662		3,574		-		931,788		1,078,797		13,732		6,953		-		1,099,482
Total real estate mortgage		2,729,780		26,016		13,772		-		2,769,568
Total real estate - mortgage												2,993,896		22,732		14,031		-		3,030,659
Consumer		55,169		55		-		-		55,224		61,623		4		87		-		61,714
Total	$	5,221,136	$	73,976	$	48,576	$	-	$	5,343,688	$	5,825,833	$	62,259	$	40,235	$	-	$	5,928,327

December 31, 2016	Pass		Special Mention		Substandard		Doubtful		Total
													Special
December 31, 2017											Pass		Mention		Substandard		Doubtful		Total
	(In Thousands)										(In Thousands)
Commercial, financial and agricultural	$	1,893,664	$	61,035	$	27,568	$	-	$	1,982,267	$	2,225,084	$	27,835	$	26,447	$	-	$	2,279,366
Real estate - construction		324,958		5,861		4,266		-		335,085		572,657		6,691		1,526		-		580,874
Real estate - mortgage:
Owner-occupied commercial		1,158,615		6,037		7,067		-		1,171,719		1,317,113		7,333		4,220		-		1,328,666
1-4 family mortgage		531,868		2,065		2,872		-		536,805		598,222		1,599		3,242		-		603,063
Other mortgage		818,724		11,224		735		-		830,683		976,348		18,122		2,609		-		997,079
Total real estate mortgage		2,509,207		19,326		10,674		-		2,539,207
Total real estate - mortgage												2,891,683		27,054		10,071		-		2,928,808
Consumer		55,135		76		-		-		55,211		62,083		42		88		-		62,213
Total	$	4,782,964	$	86,298	$	42,508	$	-	$	4,911,770	$	5,751,507	$	61,622	$	38,132	$	-	$	5,851,261

Loans by performance status as of ~~June 30, 2017~~March 31, 2018 and December 31, ~~2016~~2017 were as follows:

June 30, 2017	Performing		Nonperforming		Total

March 31, 2018							Performing		Nonperforming		Total
	(In Thousands)						(In Thousands)
Commercial, financial and agricultural	$	2,118,113	$	5,385	$	2,123,498	$	2,320,887	$	9,017	$	2,329,904
Real estate - construction		393,021		2,377		395,398		506,050		-		506,050
Real estate - mortgage:
Owner-occupied commercial		1,270,411		2,248		1,272,659		1,349,373		306		1,349,679
1-4 family mortgage		564,200		921		565,121		580,953		545		581,498
Other mortgage		931,788		-		931,788		1,099,482		-		1,099,482
Total real estate mortgage		2,766,399		3,169		2,769,568
Total real estate - mortgage								3,029,808		851		3,030,659
Consumer		55,176		48		55,224		61,633		81		61,714
Total	$	5,332,709	$	10,979	$	5,343,688	$	5,918,378	$	9,949	$	5,928,327

December 31, 2016 Performing Nonperforming Total

(In Thousands)
Commercial, financial and agricultural $ 1,974,975 $ 7,292 $ 1,982,267
Real estate - construction 331,817 3,268 335,085
Real estate - mortgage:
Owner-occupied commercial 1,165,511 6,208 1,171,719
1-4 family mortgage 536,731 74 536,805
Other mortgage 830,683 - 830,683
Total real estate mortgage 2,532,925 6,282 2,539,207
Consumer 55,166 45 55,211
Total $ 4,894,883 $ 16,887 $ 4,911,770


December 31, 2017	Performing		Nonperforming		Total
	(In Thousands)
Commercial, financial and agricultural	$	2,269,642	$	9,724	$	2,279,366
Real estate - construction		580,874		-		580,874
Real estate - mortgage:
Owner-occupied commercial		1,328,110		556		1,328,666
1-4 family mortgage		602,604		459		603,063
Other mortgage		997,079		-		997,079
Total real estate - mortgage		2,927,793		1,015		2,928,808
Consumer		62,127		86		62,213
Total	$	5,840,436	$	10,825	$	5,851,261

Loans by past due status as of ~~June 30, 2017~~March 31, 2018 and December 31, ~~2016~~2017 were as follows:

June 30, 2017	Past Due Status (Accruing Loans)
March 31, 2018															Past Due Status (Accruing Loans)
	30-59 Days		60-89 Days		90+ Days		Total Past Due		Non-Accrual		Current		Total Loans								Total Past
															30-59 Days		60-89 Days		90+ Days		Due		Non-Accrual		Current		Total Loans
	(In Thousands)														(In Thousands)
Commercial, financial and agricultural	$	6,311	$	317	$	968	$	7,596	$	4,417	$	2,111,485	$	2,123,498	$	309	$	10,495	$	418	$	11,222	$	8,599	$	2,310,083	$	2,329,904
Real estate - construction		-		-		-		-		2,377		393,021		395,398		-		7,619		-		7,619		-		498,431		506,050
Real estate - mortgage:
Owner-occupied commercial		4,498		-		-		4,498		2,248		1,265,913		1,272,659		115		3,664		-		3,779		306		1,345,594		1,349,679
1-4 family mortgage		376		703		-		1,079		921		563,121		565,121		564		1,365		217		2,146		328		579,024		581,498
Other mortgage		980		-		-		980		-		930,808		931,788		381		14,827		-		15,208		-		1,084,274		1,099,482
Total real estate - mortgage		5,854		703		-		6,557		3,169		2,759,842		2,769,568		1,060		19,856		217		21,133		634		3,008,892		3,030,659
Consumer		49		8		48		105		-		55,119		55,224		19		24		43		86		38		61,590		61,714
Total	$	12,214	$	1,028	$	1,016	$	14,258	$	9,963	$	5,319,467	$	5,343,688	$	1,388	$	37,994	$	678	$	40,060	$	9,271	$	5,878,996	$	5,928,327

December 31, 2016 Past Due Status (Accruing Loans)
30-59 Days 60-89 Days 90+ Days Total Past
Due Non-Accrual Current Total Loans

(In Thousands)
Commercial, financial and agricultural $ 710 $ 40 $ 10 $ 760 $ 7,282 $ 1,974,225 $ 1,982,267
Real estate - construction 59 - - 59 3,268 331,758 335,085
Real estate - mortgage:
Owner-occupied commercial - - 6,208 6,208 - 1,165,511 1,171,719
1-4 family mortgage 160 129 - 289 74 536,442 536,805
Other mortgage 95 811 - 906 - 829,777 830,683
Total real estate - mortgage 255 940 6,208 7,403 74 2,531,730 2,539,207
Consumer 52 17 45 114 - 55,097 55,211
Total $ 1,076 $ 997 $ 6,263 $ 8,336 $ 10,624 $ 4,892,810 $ 4,911,770

December 31, 2017	Past Due Status (Accruing Loans)
							Total Past
	30-59 Days		60-89 Days		90+ Days		Due		Non-Accrual		Current		Total Loans
	(In Thousands)
Commercial, financial and agricultural	$	1,410	$	5,702	$	12	$	7,124	$	9,712	$	2,262,530	$	2,279,366
Real estate - construction		56		997		-		1,053		-		579,821		580,874
Real estate - mortgage:
Owner-occupied commercial		-		3,664		-		3,664		556		1,324,446		1,328,666
1-4 family mortgage		430		850		-		1,280		459		601,324		603,063
Other mortgage		5,116		-		-		5,116		-		991,963		997,079
Total real estate - mortgage		5,546		4,514		-		10,060		1,015		2,917,733		2,928,808
Consumer		131		23		48		202		38		61,973		62,213
Total	$	7,143	$	11,236	$	60	$	18,439	$	10,765	$	5,822,057	$	5,851,261

The allowance for loan losses is maintained at a level which, in management’s judgment, is adequate to absorb credit losses inherent in the loan portfolio. The amount of the allowance is based on management’s evaluation of the collectability of the loan portfolio, including the nature of the portfolio, credit concentrations, trends in historical loss experience, specific impaired loans, economic conditions, and other risks inherent in the portfolio. Allowances for impaired loans are generally determined based on collateral values or the present value of the estimated cash flows. The allowance is increased by a provision for loan losses, which is charged to expense, and reduced by charge-offs, net of recoveries. In addition, various regulatory agencies, as an integral part of their examination process, periodically review the allowance for losses on loans. Such agencies may require the Company to recognize adjustments to the allowance based on their judgments about information available to them at the time of their examination.

The methodology utilized for the calculation of the allowance for loan losses is divided into four distinct categories. Those categories include allowances for non-impaired loans (ASC 450), impaired loans (ASC 310), external qualitative factors, and internal qualitative factors. A description of each category of the allowance for loan loss methodology is listed below.

Non-Impaired Loans. Non-impaired loans are grouped into the following homogeneous loan pools by loan ~~type and are the following:~~type: commercial and industrial, construction and development, commercial real estate, second lien home equity lines of credit, and all other loans. Each loan pool is stratified by internal risk rating and multiplied by a loss allocation percentage derived from the loan pool historical loss rate. The historical loss rate is based on an age weighted 5five year history of net charge-offs experienced by pool, with the most recent net charge-off experience given a greater weighting. This results in the expected loss rate per year, adjusted by a qualitative adjustment factor and a years-to-impairment factor, for each pool of loans to derive the total amount of allowance for non-impaired loans.

Impaired Loans. Loans are considered impaired, when based on current information and events, it is probable that the Bank will be unable to collect all amounts due according to the original terms of the loan agreement. The collection of all amounts due according to contractual terms means that both the contractual interest and principal payments of a loan will be collected as scheduled in the loan agreement. Impaired loans are measured based on the present value of expected future cash flows discounted at the loan’s effective interest rate, at the loan’s observable market price or the fair value of the underlying collateral. The fair value of collateral, reduced by costs to sell on a discounted basis, is used if a loan is collateral-dependent. Fair value estimates for specifically impaired collateral-dependent loans are derived from appraised values based on the current market value or “as is” value of the property, normally from recently received and reviewed appraisals. Appraisals are obtained from certified and licensed appraisers and are based on certain assumptions, which may include construction or development status and the highest and best use of the property. These appraisals are reviewed by our credit administration department, and values are adjusted downward to reflect anticipated disposition costs. Once this estimated net realizable value has been determined, the value used in the impairment assessment is updated for each impaired loan. As subsequent events dictate and estimated net realizable values decline, required reserves may be established or further adjustments recorded.

External Qualitative Factors. The determination of the portion of the allowance for loan losses relating to external qualitative factors is based on consideration of the following factors: gross domestic product growth rate, changes in prime rate, delinquency trends, peer delinquency trends, ~~year-over-year~~year over year loan growth and state unemployment rate trends. Data for the three most recent periods is utilized in the calculation for each external qualitative component. The factors have a consistent weighted methodology to calculate the amount of allowance due to external qualitative factors.

Internal Qualitative Factors. The determination of the portion of the allowance for loan losses relating to internal qualitative factors is based on the consideration of criteria which includes the following: number of extensions and deferrals, single pay and interest only loans, current financial information, credit concentrations and risk grade accuracy. A self-assessment for each of the criteria is made with a consistent weighted methodology used to calculate the amount of allowance required for internal qualitative factors.

The following table presents an analysis of the allowance for loan losses by portfolio segment and changes in the allowance for loan losses for the three ~~and six~~ months ended ~~June 30, 2017~~March 31, 2018 and ~~June 30, 2016.~~March 31, 2017. The total allowance for loan losses is disaggregated into those amounts associated with loans individually evaluated and those associated with loans collectively evaluated.

Commercial
financial and
agricultural Real estate -
construction Real estate -
mortgage Consumer Total

(In Thousands)
Three Months Ended June 30, 2017
Allowance for loan losses:
Balance at March 31, 2017 $ 28,707 $ 4,825 $ 19,962 $ 398 $ 53,892
Charge-offs (3,067 ) (40 ) (106 ) (33 ) (3,246 )
Recoveries 16 14 2 - 32
Provision 3,471 339 534 37 4,381
Balance at June 30, 2017 $ 29,127 $ 5,138 $ 20,392 $ 402 $ 55,059

Three Months Ended June 30, 2016
Allowance for loan losses:
Balance at March 31, 2016 $ 22,839 $ 5,005 $ 16,901 $ 400 $ 45,145
Charge-offs (1,412 ) (355 ) (191 ) (31 ) (1,989 )
Recoveries 1 39 2 - 42
Provision 2,227 590 888 95 3,800
Balance at June 30, 2016 $ 23,655 $ 5,279 $ 17,600 $ 464 $ 46,998

Six Months Ended June 30, 2017
Allowance for loan losses:
Balance at December 31, 2016 $ 28,872 $ 5,125 $ 17,504 $ 392 $ 51,893
Charge-offs (5,922 ) (40 ) (372 ) (108 ) (6,442 )
Recoveries 206 30 4 1 241
Provision 5,971 23 3,256 117 9,367
Balance at June 30, 2017 $ 29,127 $ 5,138 $ 20,392 $ 402 $ 55,059

Six Months Ended June 30, 2016
Allowance for loan losses:
Balance at December 31, 2015 $ 21,495 $ 5,432 $ 16,061 $ 431 $ 43,419
Charge-offs (1,462 ) (736 ) (191 ) (49 ) (2,438 )
Recoveries 4 55 99 - 158
Provision 3,618 528 1,631 82 5,859
Balance at June 30, 2016 $ 23,655 $ 5,279 $ 17,600 $ 464 $ 46,998

As of June 30, 2017
Allowance for loan losses:
Individually Evaluated for Impairment $ 4,457 $ 921 $ 1,779 $ - $ 7,157
Collectively Evaluated for Impairment 24,670 4,217 18,613 402 47,902

Loans:
Ending Balance $ 2,123,498 $ 395,398 $ 2,769,568 $ 55,224 $ 5,343,688
Individually Evaluated for Impairment 31,430 3,420 16,171 - 51,021
Collectively Evaluated for Impairment 2,092,068 391,978 2,753,397 55,224 5,292,667

As of December 31, 2016
Allowance for loan losses:
Individually Evaluated for Impairment $ 6,607 $ 923 $ 622 $ - $ 8,152
Collectively Evaluated for Impairment 22,265 4,202 16,882 392 43,741

Loans:
Ending Balance $ 1,982,267 $ 335,085 $ 2,539,207 $ 55,211 $ 4,911,770
Individually Evaluated for Impairment 27,922 4,314 13,350 3 45,589
Collectively Evaluated for Impairment 1,954,345 330,771 2,525,857 55,208 4,866,181

	Commercial,
	financial and			Real estate -			Real estate -
	agricultural			construction			mortgage			Consumer			Total
	(In Thousands)
	Three Months Ended March 31, 2018
Allowance for loan losses:
Balance at December 31, 2017	$	32,880		$	4,989		$	21,022		$	515		$	59,406
Charge-offs		(1,088	)		-			(381	)		(88	)		(1,557	)
Recoveries		4			7			42			9			62
Provision		3,991			(858	)		923			83			4,139
Balance at March 31, 2018	$	35,787		$	4,138		$	21,606		$	519		$	62,050

		Three Months Ended March 31, 2017
Allowance for loan losses:
Balance at December 31, 2016	$	28,872		$	5,125		$	17,504		$	392		$	51,893
Charge-offs		(2,855	)		-			(266	)		(75	)		(3,196	)
Recoveries		190			16			2			1			209
Provision		2,500			(316	)		2,722			80			4,986
Balance at March 31, 2017	$	28,707		$	4,825		$	19,962		$	398		$	53,892

		As of March 31, 2018
Allowance for loan losses:
Individually Evaluated for Impairment	$	5,877		$	120		$	432		$	49		$	6,478
Collectively Evaluated for Impairment		29,910			4,018			21,174			470			55,572

Loans:
Ending Balance	$	2,329,904		$	506,050		$	3,030,659		$	61,714		$	5,928,327
Individually Evaluated for Impairment		24,536			1,625			16,328			87			42,576
Collectively Evaluated for Impairment		2,305,368			504,425			3,014,331			61,627			5,885,751

		As of December 31, 2017
Allowance for loan losses:
Individually Evaluated for Impairment	$	4,276		$	120		$	1,163		$	50		$	5,609
Collectively Evaluated for Impairment		28,604			4,869			19,859			465			53,797

Loans:
Ending Balance	$	2,279,366		$	580,874		$	2,928,808		$	62,213		$	5,851,261
Individually Evaluated for Impairment		26,447			1,571			12,404			88			40,510
Collectively Evaluated for Impairment		2,252,919			579,303			2,916,404			62,125			5,810,751

The following table presents details of the Company’s impaired loans as of ~~June 30, 2017~~March 31, 2018 and December 31, ~~2016,~~2017, respectively. Loans which have been fully charged off do not appear in the ~~tables.~~table.

June 30, 2017 For the three months
ended June 30,
2017 For the six months
ended June 30,
2017
Recorded
Investment Unpaid
Principal
Balance Related
Allowance Average
Recorded
Investment Interest
Income
Recognized
in Period Average
Recorded
Investment Interest
Income
Recognized
in Period

(In Thousands)
With no allowance recorded:
Commercial, financial and agricultural $ 6,003 $ 6,016 $ - $ 6,213 $ 66 $ 6,272 $ 137
Real estate - construction 46 48 - 49 1 49 2
Real estate - mortgage:
Owner-occupied commercial 2,398 2,564 - 2,584 37 2,601 76
1-4 family mortgage 2,674 2,674 - 2,678 29 2,716 51
Other mortgage 732 732 - 733 10 734 21
Total real estate - mortgage 5,804 5,970 - 5,995 76 6,051 148
Consumer - - - - - - -
Total with no allowance recorded 11,853 12,034 - 12,257 143 12,372 287

With an allowance recorded:
Commercial, financial and agricultural 25,427 27,127 4,457 27,760 257 27,525 541
Real estate - construction 3,374 3,374 921 3,374 14 3,374 28
Real estate - mortgage:
Owner-occupied commercial 7,774 7,774 1,205 7,774 55 7,547 134
1-4 family mortgage 1,613 1,613 260 1,617 20 1,644 42
Other mortgage 980 980 314 983 12 990 25
Total real estate - mortgage 10,367 10,367 1,779 10,374 87 10,181 201
Consumer - - - - - - -
Total with allowance recorded 39,168 40,868 7,157 41,508 358 41,080 770

Total Impaired Loans:
Commercial, financial and agricultural 31,430 33,143 4,457 33,973 323 33,797 678
Real estate - construction 3,420 3,422 921 3,423 15 3,423 30
Real estate - mortgage:
Owner-occupied commercial 10,172 10,338 1,205 10,358 92 10,148 210
1-4 family mortgage 4,287 4,287 260 4,295 49 4,360 93
Other mortgage 1,712 1,712 314 1,716 22 1,724 46
Total real estate - mortgage 16,171 16,337 1,779 16,369 163 16,232 349
Consumer - - - - - - -
Total impaired loans $ 51,021 $ 52,902 $ 7,157 $ 53,765 $ 501 $ 53,452 $ 1,057

	March 31, 2018
							For the three months
							ended March 31, 2018
									Interest
			Unpaid				Average		Income
	Recorded		Principal		Related		Recorded		Recognized
	Investment		Balance		Allowance		Investment		in Period
	(In Thousands)
With no allowance recorded:
Commercial, financial and agricultural	$	6,176	$	6,953	$	-	$	6,165	$	71
Real estate - construction		628		631		-		632		8
Real estate - mortgage:
Owner-occupied commercial		2,604		2,771		-		2,789		38
1-4 family mortgage		2,258		2,258		-		2,256		25
Other mortgage		5,090		5,090		-		5,114		63
Total real estate - mortgage		9,952		10,119		-		10,159		126
Consumer		38		38		-		39		1
Total with no allowance recorded		16,794		17,741		-		16,995		206

With an allowance recorded:
Commercial, financial and agricultural		18,360		25,182		5,877		19,809		147
Real estate - construction		997		997		120		997		14
Real estate - mortgage:
Owner-occupied commercial		3,664		3,664		-		3,664		50
1-4 family mortgage		850		850		151		850		12
Other mortgage		1,862		1,862		281		1,862		20
Total real estate - mortgage		6,376		6,376		432		6,376		82
Consumer		49		49		49		50		1
Total with allowance recorded		25,782		32,604		6,478		27,232		244

Total Impaired Loans:
Commercial, financial and agricultural		24,536		32,135		5,877		25,974		218
Real estate - construction		1,625		1,628		120		1,629		22
Real estate - mortgage:
Owner-occupied commercial		6,268		6,435		-		6,453		88
1-4 family mortgage		3,108		3,108		151		3,106		37
Other mortgage		6,952		6,952		281		6,976		83
Total real estate - mortgage		16,328		16,495		432		16,535		208
Consumer		87		87		49		89		2
Total impaired loans	$	42,576	$	50,345	$	6,478	$	44,227	$	450

											December 31, 2017
																	For the twelve months
																	ended December 31, 2017
	December 31, 2016																		Interest
							For the twelve months ended December 31, 2016						Unpaid				Average		Income
	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized in Period		Recorded		Principal		Related		Recorded		Recognized
											Investment		Balance		Allowance		Investment		In Period
	(In Thousands)										(In Thousands)
With no allowance recorded:
Commercial, financial and agricultural	$	1,003	$	1,003	$	-	$	992	$	64	$	10,036	$	16,639	$	-	$	16,417	$	571
Real estate - construction		938		1,802		-		1,159		3		574		577		-		663		31
Real estate - mortgage:
Owner-occupied commercial		2,615		2,778		-		2,884		166		2,640		2,806		-		2,875		159
1-4 family mortgage		1,899		1,899		-		1,901		102		2,262		2,262		-		2,289		93
Other mortgage		940		940		-		965		60		746		746		-		727		44
Total real estate - mortgage		5,454		5,617		-		5,750		328		5,648		5,814		-		5,891		296
Consumer		3		5		-		6		-		38		39		-		42		3
Total with no allowance recorded		7,398		8,427		-		7,907		395		16,296		23,069		-		23,013		901

With an allowance recorded:
Commercial, financial and agricultural		26,919		31,728		6,607		26,955		1,162		16,411		16,992		4,276		17,912		651
Real estate - construction		3,376		3,376		923		3,577		68		997		997		120		997		56
Real estate - mortgage:
Owner-occupied commercial		6,924		6,924		348		6,934		362		3,914		3,914		601		3,801		215
1-4 family mortgage		972		972		274		313		19		980		980		281		1,113		54
Other mortgage		-		-		-		-		-		1,862		1,862		281		1,862		80
Total real estate - mortgage		7,896		7,896		622		7,247		381		6,756		6,756		1,163		6,776		349
Consumer		-		-		-		-		-		50		50		50		42		3
Total with allowance recorded		38,191		43,000		8,152		37,779		1,611		24,214		24,795		5,609		25,727		1,059

Total Impaired Loans:
Commercial, financial and agricultural		27,922		32,731		6,607		27,947		1,226		26,447		33,631		4,276		34,329		1,222
Real estate - construction		4,314		5,178		923		4,736		71		1,571		1,574		120		1,660		87
Real estate - mortgage:
Owner-occupied commercial		9,539		9,702		348		9,818		528		6,554		6,720		601		6,676		374
1-4 family mortgage		2,871		2,871		274		2,214		121		3,242		3,242		281		3,402		147
Other mortgage		940		940		-		965		60		2,608		2,608		281		2,589		124
Total real estate - mortgage		13,350		13,513		622		12,997		709		12,404		12,570		1,163		12,667		645
Consumer		3		5		-		6		-		88		89		50		84		6
Total impaired loans	$	45,589	$	51,427	$	8,152	$	45,686	$	2,006	$	40,510	$	47,864	$	5,609	$	48,740	$	1,960

Troubled Debt Restructurings (“TDR”) at ~~June 30, 2017,~~March 31, 2018, December 31, ~~2016~~2017 and ~~June 30, 2016~~March 31, 2017 totaled ~~$16.4~~$18.8 million, ~~$7.3~~$20.6 million and ~~$6.8~~$7.3 million, respectively. At ~~June 30, 2017,~~March 31, 2018, the Company had a related allowance for loan losses of ~~$3.1~~$5.1 million allocated to these TDRs, compared to ~~$2.3~~$4.3 million at December 31, ~~2016~~2017 and ~~$1.0~~$2.3 million at ~~June 30, 2016. TDR activity by portfolio segment~~March 31, 2017. There were no modifications made to new TDRs or renewals of existing TDRs for the three ~~and six~~ months ended ~~June 30, 2017 is presented in the table below.~~March 31, 2018 and 2017.

Three Months Ended June 30, 2017 Six Months Ended June 30, 2017
Number of
Contracts Pre-
Modification
Outstanding
Recorded
Investment Post-
Modification
Outstanding
Recorded
Investment Number of
Contracts Pre-
Modification
Outstanding
Recorded
Investment Post-
Modification
Outstanding
Recorded
Investment
(In Thousands)
Troubled Debt Restructurings
Commercial, financial and agricultural 5 $ 7,205 $ 7,205 5 $ 7,205 $ 7,205
Real estate - construction 1 997 997 1 997 997
Real estate - mortgage:
Owner-occupied commercial 2 3,664 3,664 2 3,664 3,664
1-4 family mortgage 1 850 850 1 850 850
Other mortgage - - - - - -
Total real estate mortgage 3 4,514 4,514 3 4,514 4,514
Consumer - - - - - -
9 $ 12,716 $ 12,716 9 $ 12,716 $ 12,716

Three Months Ended June 30, 2016 Six Months Ended June 30, 2016
Number of
Contracts Pre-
Modification
Outstanding
Recorded
Investment Post-
Modification
Outstanding
Recorded
Investment Number of
Contracts Pre-
Modification
Outstanding
Recorded
Investment Post-
Modification
Outstanding
Recorded
Investment
(In Thousands)
Troubled Debt Restructurings
Commercial, financial and agricultural 1 $ 366 $ 366 1 $ 366 $ 366
Real estate - construction - - - - - -
Real estate - mortgage:
Owner-occupied commercial - - - - - -
1-4 family mortgage - - - - - -
Other mortgage 1 234 234 1 234 234
Total real estate mortgage 1 234 234 1 234 234
Consumer - - - - - -
2 $ 600 $ 600 2 $ 600 $ 600

~~There were no~~No TDRs ~~which defaulted during the three and six months ended June 30, 2017 and 2016, and~~ which were modified in the previous twelve months (i.e., the twelve months prior to default). defaulted during the three months ended March 31, 2018 or 2017. For purposes of this disclosure, default is defined as 90 days past due and still accruing or placement on nonaccrual status. ~~As of June 30, 2017, the Company’s TDRs have all resulted from term extensions, rather than from interest rate reductions or debt forgiveness.~~

NOTE 6 - EMPLOYEE AND DIRECTOR BENEFITS

Stock Options

At ~~June 30, 2017,~~March 31, 2018, the Company had ~~stock-based compensation~~stock incentive plans as described below. The compensation cost that has been charged to earnings for the plans was approximately ~~$285,000~~$238,000 and ~~$622,000~~$337,000 for the three ~~and six~~ months ended ~~June 30,~~March 31, 2018 and 2017, ~~and $297,000 and $640,000 for the three and six months ended June 30, 2016.~~respectively.

The Company’s 2005 Amended and Restated Stock ~~Option~~Incentive Plan allows for the grant of stock options to purchase up to 6,150,000 shares of the Company’s common stock. The Company’s 2009 Amended and Restated Stock Incentive Plan authorizes the grant of up to 5,550,000 shares and allows for the issuance of Stock Appreciation Rights, Restricted Stock, Stock Options, Non-stock Share Equivalents, Performance Shares or Performance Units. Both plans allow for the grant of incentive stock options and non-qualified stock options, and option awards are granted with an exercise price equal to the fair market value of the Company’s common stock at the date of grant. The maximum term of the options granted under the plans is ten years.

The Company estimates the fair value of each stock option award using a Black-Scholes-Merton valuation model ~~that uses~~which incorporates the assumptions noted in the following table. Expected volatilities are based on an index of southeastern United States publicly traded banks. The expected term for options granted is based on the short-cut method and represents the period of time that options granted are expected to be outstanding. The risk-free rate for periods within the contractual life of the option is based on the U. S. Treasury yield curve in effect at the time of grant.

	2017			2016			2018			2017
Expected volatility		29.00	%		29.00	%		23.43	%		29.00	%
Expected dividends		0.44	%		0.63	%		1.07	%		0.43	%
Expected term (in years)		6.25			6.25			6			6
Risk-free rate		2.09	%		1.87	%		2.67	%		2.08	%

The weighted average grant-date fair value of options granted during the ~~six~~three months ended ~~June 30,~~March 31, 2018 and 2017 was $10.41 and ~~June 30, 2016 was $11.84 and $11.80,~~$11.91, respectively.

The following table summarizes stock option activity during the ~~six~~three months ended ~~June 30, 2017~~March 31, 2018 and ~~June 30, 2016:~~2017:

	Shares			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (years)		Aggregate Intrinsic Value								Weighted
								(In Thousands)						Weighted		Average
Six Months Ended June 30, 2017:
														Average		Remaining
														Exercise		Contractual		Aggregate
											Shares			Price		Term (years)		Intrinsic Value
																			(In Thousands)
Three Months Ended March 31, 2018:
Outstanding at January 1, 2018												1,666,834		$	10.68		5.5	$	51,377
Granted												10,250			41.21		9.9		(4	)
Exercised												(173,836	)		4.90		3.4		6,244
Forfeited												(1,000	)		25.41		8.5		15
Outstanding at March 31, 2018												1,502,248			11.54		5.5	$	43,978

Exercisable at March 31, 2018												672,600		$	5.48		3.9	$	23,770

Three Months Ended March 31, 2017:
Outstanding at January 1, 2017		2,026,334		$	9.00		6.2	$	57,636			2,026,334		$	9.00		6.2	$	57,636
Granted		51,500			37.95		9.6		(80	)		51,500			38.10		9.8		(89	)
Exercised		(292,000	)		4.98		4.4		9,169			(175,500	)		5.28		5.0		5,459
Forfeited		(32,000	)		21.96		8.6		(462	)		(27,000	)		21.55		8.8		401
Outstanding at June 30, 2017		1,753,834			10.28		5.9	$	45,777
Outstanding at March 31, 2017												1,875,334			9.96		6.2	$	49,540

Exercisable at June 30, 2017		811,736		$	5.20		4.4	$	25,303

Six Months Ended June 30, 2016:
Outstanding at January 1, 2016		2,498,834		$	6.66		6.3	$	42,743
Granted		227,000			19.76		9.7		1,120
Exercised		(549,500	)		4.26		4.4		11,230
Forfeited		(13,000	)		19.41		9.2		69
Outstanding at June 30, 2016		2,163,334			8.57		6.6	$	38,891

Exercisable at June 30, 2016		687,536		$	6.09		6.0	$	14,989
Exercisable at March 31, 2017												928,236		$	5.12		4.6	$	29,013

As of ~~June 30, 2017,~~March 31, 2018, there was ~~approximately $2.3 million~~$1,847,000 of total unrecognized compensation cost related to non-vested stock options. The cost is expected to be recognized on the straight-line method over the next ~~2.7~~2.4 years.

Restricted Stock

The Company ~~has issued 488,376 shares of~~periodically grants restricted stock ~~to certain officers, of which 368,700~~awards that vest upon service conditions. Dividend payments are ~~vested.~~made during the vesting period. The value of restricted stock ~~awards~~ is determined to be the current value of the Company’s stock, and this total value will be recognized as compensation expense over the vesting period. As of ~~June 30, 2017,~~March 31, 2018, there was ~~$575,000~~$841,000 of total unrecognized compensation cost related to non-vested restricted stock. ~~The cost is expected~~As of March 31, 2018, non-vested restricted stock had a weighted average remaining time to ~~be recognized evenly over the remaining 1.5 years~~vest of ~~the restricted stock’s vesting period.~~1.6 years.

NOTE 7 - DERIVATIVES

The Company has entered into agreements with secondary market investors to deliver loans on a “best efforts delivery” basis. When a rate is committed to a borrower, it is based on the best price that day and locked with the investor for the customer for a 30-day period. In the event the loan is not delivered to the investor, the Company has no risk or exposure with the investor. The interest rate lock commitments related to loans that are originated for later sale are classified as derivatives. The fair values of the Company’s agreements with investors and rate lock commitments to customers as of ~~June 30, 2017~~March 31, 2018 and December 31, ~~2016~~2017 were not material.

NOTE 8 – RECENTLY ADOPTED ACCOUNTING PRONOUNCEMENTS

In ~~March 2016,~~February 2018, the FASB issued ASU ~~2016-09,~~2018-02, ~~Compensation – Stock Compensation~~Income Statement - Reporting Comprehensive Income (Topic ~~718): Improvements to Employee Share-Based Payment Accounting~~ ~~(“ASU 2016-09”), which is intended to simplify several aspects~~220); Reclassification of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. ASU 2016-09 is effective for annual periods beginning after December 15, 2016, and interim periods within those annual periods. Early adoption was permitted. The Company elected to early adopt the provisions of this ASU during the second quarter of 2016, and retrospectively apply the changes in accounting for stock compensation back to the first quarter of 2016. Accordingly, the Company recognized a reduction in its provision for income taxes during the quarter and six months ended June 30, 2017 of $1.4 million and $3.5 million, respectively, compared to $1.2 million and $3.5 million during the quarter and six months ended June 30, 2016, respectively. Prior to the adoption of ASU 2016-09, such tax benefits were recorded as an increase to additional paid-in capital.

~~In March 2016, the FASB issued ASU 2016-07~~~~, Investments – Equity Method and Joint Ventures (Topic 323), Simplifying the Transition to the Equity Method of Accounting~~Certain Tax Effects from Accumulated Other Comprehensive Income. The amendments ~~eliminate the requirement that when an investment qualifies for use of the equity method as~~in this ASU require a result of an increase in the level of ownership interest or degree of influence, an investor must adjust the investment, results of operations, and retained earnings retroactively on a step-by-step basis as if the equity method had been in effect during all previous periods that the investment had been held. The amendments require that the equity method investor add the cost of acquiring the additional interest in the investeereclassification from / to the current basis of the investor’s previously held interest and adopt the equity method of accounting as of the date the investment becomes qualified for equity method accounting. The amendments require that an entity that has an available-for-sale equity security that becomes qualified for the equity method of accounting recognize through earnings the unrealized holding gain or loss in accumulated other comprehensive income atand to / from retained earnings for stranded tax effects resulting from the ~~date~~change in the ~~investment becomes qualified for use~~newly enacted federal corporate income tax rate. Consequently, the amendments in this ASU eliminates the stranded tax effects associated with the change in the federal corporate income tax rate in the Tax Cuts and Jobs Act of ~~the equity method.~~2017. The amendments in this ASU are effective for all entities for fiscal ~~years, and interim periods within those fiscal years,~~year beginning after December 15, ~~2016.~~2018 with early adoption allowed. The ~~amendments should be applied prospectively upon their effective date~~Bank elected to ~~increase the level~~early adopt this ASU as of ~~ownership interest or degree~~December 31, 2017. The effect of ~~influence that result in~~ the adoption of this ASU was to decrease accumulated other comprehensive income by $43,000 with the ~~equity method.~~offset to retained earnings as recorded in the statement of changes in stockholders' equity. This represents the difference between the historical corporate income tax rate and the newly enacted 21% corporate income tax rate.

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606), which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. The ASU replaces most existing revenue recognition guidance in GAAP. The new standard was effective for the Company on January 1, 2018. Adoption of ~~this standard has~~ASU 2014-09 did not ~~affected~~have a material impact on the Company’s consolidated financial ~~statements.~~statements and related disclosures as the Company’s primary sources of revenues are derived from interest and dividends earned on loans, investment securities, and other financial instruments that are not within the scope of ASU 2014-09. The Company’s revenue recognition pattern for revenue streams within the scope of ASU 2014-09, including but not limited to service charges on deposit accounts and credit card fees, did not change significantly from current practice. See below for additional information related to revenue generated from contracts with customers.

In January ~~2017,~~2016, the FASB issued ASU ~~2017-03,~~ 2016-01, ~~Accounting Changes~~Financial Instruments Overall (Topic 825): Recognition and ~~Error Corrections~~ ~~(Topic 250) and~~ ~~Investments – Equity Method~~Measurement of Financial Assets and ~~Joint Ventures~~Financial Liabilities ~~(Topic 323)~~ ~~– Amendments to SEC Paragraphs Pursuant to Staff Announcements at~~. The amendments in ASU 2016-01: (a) require equity investments (except for those accounted for under the ~~September 22, 2016 and November 17, 2016 EITF Meetings.~~ ~~ASU 2017-03 provides amendments~~equity method of accounting or those that ~~add paragraph 250-10-S99-6 which includes the text of "SEC Staff Announcement: Disclosure~~result in consolidation of the ~~Impact That Recently Issued Accounting Standards Will Have on~~investee) to be measured at fair value with changes in fair value recognized in net income; (b) simplify the ~~Financial Statements~~impairment assessment of equity securities without readily determinable fair values by requiring a ~~Registrant When Such Standards Are Adopted in a Future Period” (in accordance with Staff Accounting Bulletin (SAB) Topic 11.M). Registrants are required~~qualitative assessment to identify impairment; (c) eliminate the requirement for public business entities to disclose the ~~effect that recently issued accounting standards will have on their financial statements when adopted in a future period. In cases where a registrant cannot reasonably~~method and significant assumptions used to estimate the ~~impact~~fair value that is required to be disclosed for financial instruments measured at amortized cost on the balance sheet; (d) require public business entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes; (e) require an entity to present separately in other comprehensive income, the portion of the ~~adoption, then additional qualitative disclosures~~total change in the fair value of a liability resulting from a change in the instrument-specific credit risk when the entity has elected to measure the liability at fair value in accordance with the fair value option for financial instruments; (f) require separate presentation of financial assets and financial liabilities by measurement category and form of financial assets on the balance sheet or the notes to the financial statements; and (g) clarify that an entity should ~~be considered~~evaluate the need for a valuation allowance on a deferred tax asset related to ~~assist~~available-for-sale securities in combination with the ~~reader~~entity’s other deferred tax assets. The amendments in ~~assessing~~this ASU became effective for the ~~significance~~Company on January 1, 2018. Accordingly, the calculation of fair value of the ~~standard's~~loan portfolio was refined to incorporate exit pricing, but had no material impact on ~~its financial statements. The Company has enhanced its disclosures regarding the impact recently issued accounting standards adopted in a future period will have on its accounting and~~our fair value disclosures. See Note 10 – Fair Value Measurement.

NOTE 9 -– RECENT ACCOUNTING PRONOUNCEMENTS

~~In May 2014, the FASB issued ASU No. 2014-09,~~ ~~Revenue From Contracts With Customers~~ (Topic 606). These amendments affect any entity that either enters into contracts with customers to transfer goods or services or enters into contracts for the transfer of nonfinancial assets unless those contracts are within the scope of other standards (e.g., insurance contracts or lease contracts). This ASU will supersede the revenue recognition requirements in Topic 605, Revenue Recognition, and most industry-specific guidance, and creates a Topic 606, Revenue from Contracts with Customers. The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. This ASU also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract. The ASU allows for either full retrospective or modified retrospective adoption. In August 2015, the FASB issued ASU 2015-14, ~~Revenue From Contracts With Customers (Topic 606): Deferral of the Effective Date.~~ ~~This ASU defers the effective date of ASU 2014-09,~~ ~~Revenue From Contracts With Customers (Topic 606)~~, by one year. The new guidance is effective for interim and annual reporting periods beginning after December 15, 2017. The Company’s revenue has been more significantly weighted towards net interest income on financial assets and liabilities, which is explicitly excluded from the scope of the new standard, and noninterest income has not been as significant. The Company has begun to scope its general ledger revenue items and assess its contracts with customers to identify its performance obligations and will continue to evaluate the impact of adoption on its noninterest income and on its disclosures.

~~In January 2016, the FASB issued ASU 2016-01,~~~~Financial Instruments Overall (Topic 825): Recognition and Measurement of Financial Assets and Financial Liabilities~~. The amendments in ASU 2016-1: (a) require equity investments (except for those accounted for under the equity method of accounting or those that result in consolidation of the investee) to be measured at fair value with changes in fair value recognized in net income; (b) simplify the impairment assessment of equity securities without readily determinable fair values by requiring a qualitative assessment to identify impairment; (c) eliminate the requirement for public business entities to disclose the method and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost on the balance sheet; (d) require public business entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes; (e) require an entity to present separately in other comprehensive income, the portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk when the entity has elected to measure the liability at fair value in accordance with the fair value option for financial instruments; (f) require separate presentation of financial assets and financial liabilities by measurement category and form of financial assets on the balance sheet or the notes to the financial statements; and (g) clarify that an entity should evaluate the need for a valuation allowance on a deferred tax asset related to available-for-sale securities in combination with the entity’s other deferred tax assets. The amendments in this ASU are effective for public companies for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. The Company is evaluating the provisions of this ASU to determine the potential impact the new standard will have on the Company’s consolidated financial statements.

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). The FASB issued this ASU to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet by lessees for those leases classified as operating leases under current U.S. GAAP and disclosing key information about leasing arrangements. The amendments in this ASU are effective for public business entities for annual periods, and interim periods within those annual periods, beginning after December 15, 2018. Early application of this ASU is permitted for all entities. In January 2018, the FASB issued a proposal to allow an additional transition method that would allow entities to not apply the guidance in ASU 2016-02 in the comparative periods presented in the financial statements and instead recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. The Company leases many of its banking offices under lease agreements it classifies as operating leases. ~~The Company is currently evaluating the impact that the new guidance will have on its consolidated financial statements.~~ Management currently anticipates recognizing a right-of-use asset and a lease liability associated with its long-term operating ~~leases.~~leases, which among other things, will increase the amount of risk-weighted assets it reports in the calculation of its regulatory capital ratios.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which is essentially the final rule on use of the so-called CECL model, or current expected credit losses. Among other things, the amendments in this ASU require the measurement of all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. Financial institutions and other organizations will now use forward-looking information to better inform their credit loss estimates. Many of the loss estimation techniques applied today will still be permitted, although the inputs to those techniques will change to reflect the full amount of expected credit losses. In addition, the ASU amends the accounting for credit losses on available-for-sale debt securities and purchased financial assets with credit deterioration. For SEC filers, the amendments in this ASU are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019, with later effective dates for non-SEC registrant public companies and other organizations. Early adoption will be permitted for all organizations for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. The Company ~~is currently evaluating~~has contracted with a third-party provider to implement enhanced modeling techniques that incorporate the ~~impact of the~~loss measurement requirements in these amendments ~~in this ASU on its consolidated financial statements, and is collecting data that will be needed to produce historical inputs into any models created~~ as ~~a result~~part of adopting ~~this~~the ASU.

In March 2017, the FASB issued ASU 2017-08, Receivables – Nonrefundable Fees and Other Costs (Subtopic 310-20), Premium Amortization on Purchased Callable Debt Securities. The amendments shorten the amortization period for certain callable debt securities held at a premium. Specifically, the amendments require the premium to be amortized to the earliest call date. The amendments do not require an accounting change for securities held at a discount; the discount continues to be amortized to maturity. The amendments in this ASU are effective for public business entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. Early adoption is permitted. The amendments should be applied on a modified retrospective basis, with a cumulative-effect adjustment directly to retained earnings as of the beginning of the period of adoption. The amendments in this ASU will not impact the Company’s financial statements as it has always amortized premiums to the first call date.

~~In May 2017, the FASB issued ASU No. 2017-09,~~ ~~Compensation - Stock Compensation (Topic 718)~~, ~~Scope of Modification Accounting~~. The amendments provide guidance on determining which changes to the terms and conditions of share-based payment awards require an entity to apply modification accounting under Topic 718. The guidance is effective for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017. Early adoption is permitted, including adoption in an interim period. The amendments in this ASU should be applied prospectively to an award modified on or after the adoption date. The Company is currently evaluating the impact of the amendments in the ASU on the its consolidated financial statements.

NOTE 10 - FAIR VALUE MEASUREMENT

Measurement of fair value under U.S. GAAP establishes a hierarchy that prioritizes observable and unobservable inputs used to measure fair value, as of the measurement date, into three broad levels, which are described below:

~~Level 1: Quoted prices (unadjusted) in active markets that are accessible at the measurement date for assets or liabilities. The fair value hierarchy gives the highest priority to Level 1 inputs.~~

~~Level 2: Observable prices that are based on inputs not quoted on active markets, but corroborated by market data.~~

~~Level 3: Unobservable inputs are used when little or no market data is available. The fair value hierarchy gives the lowest priority to Level 3 inputs.~~

Level 1:

Quoted prices (unadjusted) in active markets that are accessible at the measurement date for assets or liabilities. The fair value hierarchy gives the highest priority to Level 1 inputs.

Level 2:

Observable prices that are based on inputs not quoted on active markets, but corroborated by market data.

Level 3:

Unobservable inputs are used when little or no market data is available. The fair value hierarchy gives the lowest priority to Level 3 inputs.

In determining fair value, the Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible and also considers counterparty credit risk in its assessment of fair value.

Debt ~~Securities~~Securities.. Where quoted prices are available in an active market, securities are classified within Level 1 of the hierarchy. Level 1 securities include highly liquid government securities such as U.S. Treasuries and exchange-traded equity securities. For securities traded in secondary markets for which quoted market prices are not available, the Company generally relies on pricing services provided by independent vendors. Such independent pricing services are to advise the Company on the carrying value of the securities available for sale portfolio. As part of the Company’s procedures, the price provided from the service is evaluated for reasonableness given market changes. When a questionable price exists, the Company investigates further to determine if the price is valid. If needed, other market participants may be utilized to determine the correct fair value. The Company has also reviewed and confirmed its determinations in discussions with the pricing source regarding their methods of price discovery. Securities measured with these techniques are classified within Level 2 of the hierarchy and often involve using quoted market prices for similar securities, pricing models or discounted cash flow calculations using inputs observable in the market where available. Examples include U.S. government agency securities, mortgage-backed securities, obligations of states and political subdivisions, and certain corporate, asset-backed and other securities. In cases where Level 1 or Level 2 inputs are not available, securities are classified in Level 3 of the hierarchy.

Impaired Loans. Impaired loans are measured and reported at fair value when full payment under the loan terms is not probable. Impaired loans are carried at the present value of expected future cash flows using the loan’s existing rate in a discounted cash flow calculation, or the fair value of the collateral if the loan is collateral-dependent. Expected cash flows are based on internal inputs reflecting expected default rates on contractual cash flows. This method of estimating fair value does not incorporate the exit-price concept of fair value described in ~~ASC~~Accounting Standards Codification (“ASC”) 820-10 and would generally result in a higher value than the exit-price approach. For loans measured using the estimated fair value of collateral less costs to sell, fair value is generally determined based on appraisals performed by certified and licensed appraisers using inputs such as absorption rates, capitalization rates, and market comparables, adjusted for estimated costs to sell. Management modifies the appraised values, if needed, to take into account recent developments in the market or other factors, such as changes in absorption rates or market conditions from the time of valuation, and anticipated sales values considering management’s plans for disposition. Such modifications to the appraised values could result in lower valuations of such collateral. Estimated costs to sell are based on current amounts of disposal costs for similar assets. These measurements are classified as Level 3 within the valuation hierarchy. Impaired loans are subject to nonrecurring fair value adjustment upon initial recognition or subsequent impairment. A portion of the allowance for loan losses is allocated to impaired loans if the value of such loans is deemed to be less than the unpaid balance. Impaired loans are reviewed and evaluated on at least a quarterly basis for additional impairment and adjusted accordingly based on the same factors identified above. The amount recognized as an impairment charge related to impaired loans that are measured at fair value on a nonrecurring basis was ~~$2,329,000 and $5,307,000~~$2,345,000 during the three ~~and six~~ months ended ~~June 30, 2017, respectively,~~March 31, 2018, and ~~$1,634,000 and $2,546,000~~$2,978,000 during the three ~~and six~~ months ended ~~June 30, 2016, respectively.~~March 31, 2017.

Other Real Estate Owned. Other real estate assets (“OREO”) acquired through, or in lieu of, foreclosure are held for sale and are initially recorded at the lower of cost or fair value, less selling costs. Any write-downs to fair value at the time of transfer to OREO are charged to the allowance for loan losses subsequent to foreclosure. Values are derived from appraisals of underlying collateral and discounted cash flow analysis. Appraisals are performed by certified and licensed appraisers. Subsequent to foreclosure, valuations are updated periodically and assets are marked to current fair value, not to exceed the new cost basis. In the determination of fair value subsequent to foreclosure, management also considers other factors or recent developments, such as changes in absorption rates and market conditions from the time of valuation, and anticipated sales values considering management’s plans for disposition, which could result in adjustment to lower the property value estimates indicated in the appraisals. These measurements are classified as Level 3 within the valuation hierarchy. A loss on the sale and write-downs of OREO of ~~$7,000~~$254,000 and ~~$36,000~~$30,000 was recognized ~~for~~during the three ~~and six~~ months ended ~~June 30,~~March 31, 2018 and 2017, ~~respectively, and $248,000 and $436,000 for the three and six months ended June 30, 2016,~~ respectively. These charges were for write-downs in the value of OREO subsequent to foreclosure and losses on the disposal of OREO. OREO is classified within Level 3 of the hierarchy.

There ~~were no~~was one residential real estate loan ~~foreclosures~~with a balance of $175,000 foreclosed and classified as OREO as of ~~June 30, 2017,~~March 31, 2018 compared to ~~$189,000~~none as of December 31, ~~2016.~~2017.

No residential real estate loans were in the process of being foreclosed as of ~~June 30,~~March 31, 2018 and December 31, 2017.

The following table presents the Company’s financial assets and financial liabilities carried at fair value on a recurring basis as of ~~June 30, 2017~~March 31, 2018 and December 31, ~~2016:~~2017:

									Fair Value Measurements at March 31, 2018 Using
									Quoted Prices in
									Active Markets		Significant Other		Significant
	Fair Value Measurements at June 30, 2017 Using								for Identical		Observable Inputs		Unobservable
	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total		Assets (Level 1)		(Level 2)		Inputs (Level 3)		Total
Assets Measured on a Recurring Basis:	(In Thousands)								(In Thousands)
Available-for-sale securities:
Available for sale debt securities:
U.S. Treasury and government sponsored agencies	$	-	$	57,125	$	-	$	57,125	$	-	$	57,252	$	-	$	57,252
Mortgage-backed securities		-		241,271		-		241,271		-		288,318		-		288,318
State and municipal securities		-		140,412		-		140,412		-		122,789		-		122,789
Corporate debt										-		85,673		6,603		92,276
Total assets at fair value	$	-	$	438,808	$	-	$	438,808	$	-	$	554,032	$	6,603	$	560,635

									Fair Value Measurements at December 31, 2017 Using
									Quoted Prices in
									Active Markets		Significant Other		Significant
	Fair Value Measurements at December 31, 2016 Using								for Identical		Observable Inputs		Unobservable
	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total		Assets (Level 1)		(Level 2)		Inputs (Level 3)		Total
Assets Measured on a Recurring Basis:	(In Thousands)								(In Thousands)
Available-for-sale securities
Available for sale debt securities:
U.S. Treasury and government sponsored agencies	$	-	$	46,254	$	-	$	46,254	$	-	$	55,356	$	-	$	55,356
Mortgage-backed securities		-		227,190		-		227,190		-		276,498		-		276,498
State and municipal securities		-		139,930		-		139,930		-		134,849		-		134,849
Corporate debt		-		9,001		-		9,001		-		64,877		6,500		71,377
Total assets at fair value	$	-	$	422,375	$	-	$	422,375	$	-	$	531,580	$	6,500	$	538,080

The following table presents the Company’s financial assets and financial liabilities carried at fair value on a nonrecurring basis as of ~~June 30, 2017~~March 31, 2018 and December 31, ~~2016:~~2017:

									Fair Value Measurements at March 31, 2018 Using
									Quoted Prices in
									Active Markets		Significant Other		Significant
	Fair Value Measurements at June 30, 2017 Using								for Identical		Observable		Unobservable
	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total		Assets (Level 1)		Inputs (Level 2)		Inputs (Level 3)		Total
Assets Measured on a Nonrecurring Basis:	(In Thousands)								(In Thousands)
Impaired loans	$	-	$	-	$	43,864	$	43,864	$	-	$	-	$	36,098	$	36,098
Other real estate owned and repossessed assets		-		-		3,891		3,891		-		-		5,748		5,748
Total assets at fair value	$	-	$	-	$	47,755	$	47,755	$	-	$	-	$	41,846	$	41,846

									Fair Value Measurements at December 31, 2017 Using
									Quoted Prices in
									Active Markets		Significant Other		Significant
	Fair Value Measurements at December 31, 2016 Using								for Identical		Observable		Unobservable
	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total		Assets (Level 1)		Inputs (Level 2)		Inputs (Level 3)		Total
Assets Measured on a Nonrecurring Basis:	(In Thousands)								(In Thousands)
Impaired loans	$	-	$	-	$	37,437	$	37,437	$	-	$	-	$	34,901	$	34,901
Other real estate owned and repossessed assets		-		-		4,988		4,988
Other real estate owned										-		-		6,701		6,701
Total assets at fair value	$	-	$	-	$	42,425	$	42,425	$	-	$	-	$	41,602	$	41,602

The fair value of a financial instrument is the current amount that would be exchanged in a sale between willing parties, other than in a forced liquidation. Fair value is best determined based upon quoted market prices. However, in many instances, there are no quoted market prices for the Company’s various financial instruments. In cases where quoted market prices are not available, fair values are based on estimates using present value or other valuation techniques. Those techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. Accordingly, the fair value estimates may not be realized in an immediate settlement of the instrument. Current U.S. GAAP excludes certain financial instruments and all nonfinancial instruments from its fair value disclosure requirements. Accordingly, the aggregate fair value amounts presented may not necessarily represent the underlying fair value of the Company.

The following methods and assumptions were used by the Company in estimating its fair value disclosures for financial instruments:

~~Cash and due from banks:~~ ~~The carrying amounts reported in the statements of financial condition approximate those assets’ fair values.~~

Debt securities: Where quoted prices are available in an active market, securities are classified within Level 1 of the hierarchy. Level 1 securities include highly liquid government securities such as U.S. treasuries and exchange-traded equity securities. For securities traded in secondary markets for which quoted market prices are not available, the Company generally relies on prices obtained from independent vendors. Such independent pricing services are to advise the Company on the carrying value of the securities available for sale portfolio. As part of the Company’s procedures, the price provided from the service is evaluated for reasonableness given market changes. When a questionable price exists, the Company investigates further to determine if the price is valid. If needed, other market participants may be utilized to determine the correct fair value. The Company has also reviewed and confirmed its determinations in discussions with the pricing service regarding their methods of price discovery. Securities measured with these techniques are classified within Level 2 of the hierarchy and often involve using quoted market prices for similar securities, pricing models or discounted cash flow calculations using inputs observable in the market where available. Examples include U.S. government agency securities, mortgage-backed securities, obligations of states and political subdivisions, and certain corporate, asset-backed and other securities. In cases where Level 1 or Level 2 inputs are not available, securities are classified in Level 3 of the fair value hierarchy.

Equity securities: ~~Fair values for other investments are considered to be their cost as they are redeemed at par value.~~

~~Federal funds sold:~~The carrying ~~amounts reported~~value of Federal Home Loan Bank and Federal Reserve Bank stock approximates fair value based on the redemption provision of the investments. Within equity securities, we hold and investment in a fund that qualifies us for Community Reinvestment Act credits. This investment is classified in Level 1 of the ~~statements of financial condition approximate those assets’~~ fair ~~values.~~value hierarchy.

Mortgage loans held for sale:Loans are committed to be delivered to investors on a “best efforts delivery” basis within 30 days of origination. Due to this short turn-around time, the carrying amounts of the Company’s agreements approximate their fair values.

Bank owned life insurance contracts:The carrying amounts in the statements of ~~condition approximate these assets’ fair value.~~

~~Loans, net:~~ For variable-rate loans that re-price frequently and with no significant change in credit risk, fair value is based on carrying amounts. The fair value of other loans (for example, fixed-rate commercial real estate loans, mortgage loans and industrial loans) is estimated using discounted cash flow analysis, based on interest rates currently being offered for loans with similar terms to borrowers of similar credit quality. Loan fair value estimates include judgments regarding future expected loss experience and risk characteristics. The method of estimating fair value does not incorporate the exit-price concept of fair value as prescribed by ASC 820 and generally produces a higher value than an exit-price approach. The measurement of the fair value of loans is classified within Level 3 of the fair value hierarchy.

~~Deposits:~~ The fair values disclosed for demand deposits are, by definition, equal to the amount payable on demand at the reporting date (that is, their carrying amounts). The carrying amounts of variable-rate, fixed-term money market accounts and certificates of deposit approximate their fair values. Fair values for fixed-rate certificates of deposit are estimated using a discounted cash flow calculation using interest rates currently offered for deposits with similar remaining maturities. The fair value of the Company’s time deposits do not take into consideration the value of the Company’s long-term relationships with depositors, which may have significant value. Measurements of the fair value of certificates of deposit are classified within Level 2 of the fair value hierarchy.

~~Federal funds purchased:~~ ~~The carrying amounts in the statements of~~financial condition approximate these assets’ fair value.

~~Other borrowings:~~ The fair values of other borrowings are estimated using a discounted cash flow analysis, based on interest rates currently being offered on the best alternative debt available at the measurement date. These measurements are classified as Level 2 in the fair value hierarchy.

~~Loan commitments:~~ The fair values of the Company’s off-balance-sheet financial instruments are based on fees currently charged to enter into similar agreements. Since the majority of the Company’s other off-balance-sheet financial instruments consists of non-fee-producing, variable-rate commitments, the Company has determined they do not have a distinguishable fair value.

The carrying amount, estimated fair value, and placement in the fair value hierarchy of the Company’s financial instruments as of ~~June 30, 2017~~March 31, 2018 and December 31, ~~2016~~2017 are presented in the following table. This table includes those financial assets and liabilities that are not measured and reported at fair value on a ~~recurring basis or~~ nonrecurring basis.

									March 31, 2018				December 31, 2017
	June 30, 2017				December 31, 2016				Carrying				Carrying
	Carrying Amount		Fair Value		Carrying Amount		Fair Value		Amount		Fair Value		Amount		Fair Value
	(In Thousands)								(In Thousands)
Financial Assets:
Level 1 inputs:
Cash and due from banks	$	205,875	$	205,875	$	623,562	$	623,562	$	118,223	$	118,223	$	238,062	$	238,062

Level 2 inputs:
Available for sale debt securities		438,808		438,808		422,375		422,375	$	554,032	$	554,032	$	531,580	$	531,580
Held to maturity debt securities		33,748		34,133		25,052		25,431
Restricted equity securities		1,037		1,037		1,024		1,024
Equity securities										1,026		1,026		1,034		1,034
Federal funds sold		49,443		49,443		160,435		160,435		197,882		197,882		239,524		239,524
Mortgage loans held for sale		5,673		5,855		4,675		4,736		4,522		4,522		4,459		4,459
Bank owned life insurance contracts		125,896		125,896		114,388		114,388		128,296		128,296		127,519		127,519

Level 3 inputs:
Debt securities held to maturity		45,509		46,399		37,512		37,871
Level 3 Inputs:
Available for sale debt securities									$	6,603	$	6,603	$	6,500	$	6,500
Held to maturity debt securities										250		250		250		250
Loans, net		5,288,629		5,283,824		4,859,877		4,872,689		5,830,178		5,769,403		5,756,954		5,712,441

Financial liabilities:
Financial Liabilities:
Level 2 inputs:
Deposits	$	5,394,810	$	5,391,665	$	5,420,311	$	5,417,320	$	5,977,387	$	5,969,531	$	6,091,674	$	6,086,085
Federal funds purchased		300,226		300,226		355,944		355,944		326,399		326,399		301,797		301,797
Other borrowings		55,075		56,339		55,262		54,203		64,739		65,799		64,832		65,921

NOTE 11 – SUBSEQUENT EVENTS

The Company has evaluated all subsequent events through the date of this filing to ensure that this Form 10-Q includes appropriate disclosure of events both recognized in the financial statements as of ~~June 30, 2017,~~March 31, 2018, and events which occurred subsequent to ~~June 30, 2017~~March 31, 2018 but were not recognized in the financial statements. As of the date of this filing, there were no subsequent events that the Company believed require recognition or disclosure.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis is designed to provide a better understanding of various factors relating to the results of operations and financial condition of ServisFirst Bancshares, Inc. (the “Company”) and its ~~wholly-owned~~wholly owned subsidiary, ServisFirst Bank (the “Bank”). This discussion is intended to supplement and highlight information contained in the accompanying unaudited consolidated ~~financial statements~~balance sheets as of March 31, 2018 and December 31, 2017 and consolidated statements of income for the three ~~and six~~ months ended ~~June 30, 2017~~March 31, 2018 and ~~June 30, 2016.~~March 31, 2017.

Forward-Looking Statements

Statements in this document that are not historical facts, including, but not limited to, statements concerning future operations, results or performance, are hereby identified as “forward-looking statements” for the purpose of the safe harbor provided by Section 21E of the Securities Exchange Act of 1934 and Section 27A of the Securities Act of 1933. The words “believe,” “expect,” “anticipate,” “project,” “plan,” “intend,” “will,” “would,” “might” and similar expressions often signify forward-looking statements. Such statements involve inherent risks and uncertainties. The Company cautions that such forward-looking statements, wherever they occur in this quarterly report or in other statements attributable to the Company, are necessarily estimates reflecting the judgment of the Company’s senior management and involve a number of risks and uncertainties that could cause actual results to differ materially from those suggested by the forward-looking statements. Such forward-looking statements should, therefore, be considered in light of various factors that could affect the accuracy of such forward-looking statements, ~~including:~~including, but not limited to: general economic conditions, especially in the credit markets and in the Southeast; the performance of the capital markets; changes in interest rates, yield curves and interest rate spread relationships; changes in accounting and tax principles, policies or guidelines; changes in legislation or regulatory requirements; changes in our loan portfolio and deposit base; possible changes in laws and regulations and governmental monetary and fiscal policies; the cost and other effects of legal and administrative cases and similar contingencies; possible changes in the creditworthiness of customers and the possible impairment of the collectability of loans and the value of collateral; the effect of natural disasters, such as hurricanes and tornados, in our geographic markets; and increased competition from both banks and non-banks. The foregoing list of factors is not exhaustive. For discussion of these and other risks that may cause actual results to differ from expectations, please refer to “Cautionary Note Regarding Forward Looking Statements” and “Risk Factors” in our most recent Annual Report on Form 10-K and our other SEC filings. If one or more of the factors affecting our forward-looking information and statements proves incorrect, then our actual results, performance or achievements could differ materially from those expressed in, or implied by, forward-looking information and ~~statements contained herein.~~statements. Accordingly, you should not place undue reliance on any forward-looking statements, which speak only as of the date made. ~~ServisFirst Bancshares, Inc.~~The Company assumes no obligation to update or revise any forward-looking statements that are made from time to time.

Business

We are a bank holding company under the Bank Holding Company Act of 1956 and are headquartered in Birmingham, Alabama. Our wholly-owned subsidiary, ServisFirst Bank, an Alabama banking corporation, provides commercial banking services through ~~nineteen~~20 full-service banking offices located in Alabama, Tampa Bay, Florida, the panhandle of Florida, the greater Atlanta, Georgia metropolitan area, Charleston, South Carolina, and Nashville, Tennessee. Through the bank, we originate commercial, consumer and other loans and accept deposits, provide electronic banking services, such as online and mobile banking, including remote deposit capture, deliver treasury and cash management services and provide correspondent banking services to other financial institutions.

Our principal business is to accept deposits from the public and to make loans and other investments. Our principal sources of funds for loans and investments are demand, time, savings, and other deposits. Our principal sources of income are interest and fees collected on loans, interest and dividends collected on other investments and service charges. Our principal expenses are interest paid on savings and other deposits, interest paid on our other borrowings, employee compensation, office expenses and other overhead expenses.

Overview

As of ~~June 30, 2017,~~March 31, 2018, we had consolidated total assets of ~~$6.33~~$7.01 billion, ~~a decrease of $40.8~~down $70.6 million, or ~~0.6%~~1.0%, from ~~$6.37~~total assets of $7.08 billion at December 31, ~~2016. This decrease in total assets resulted from a $528.7 million decrease in balances held at the Federal Reserve Bank (“FRB”) and federal funds sold.~~2017. Total loans were ~~$5.34~~$5.93 billion at ~~June 30, 2017,~~March 31, 2018, up ~~$431.9~~$77.0 million, or ~~8.8%~~1.3%, from ~~$4.91~~$5.85 billion at December 31, ~~2016.~~2017. Total deposits were ~~$5.39~~$5.98 billion at ~~June 30, 2017, a decrease of $25.5~~March 31, 2018, down $114.3 million, or ~~0.5%~~1.9%, from ~~$5.42~~$6.09 billion at December 31, ~~2016.~~2017.

Net income available to common stockholders for the ~~three months~~quarter ended ~~June 30, 2017~~March 31, 2018 was ~~$24.1~~$32.6 million, ~~an increase of $5.2~~up $10.1 million, or ~~27.5%~~44.9%, from ~~$18.9~~$22.5 million for the ~~corresponding period in 2016.~~quarter ended March 31, 2017. Basic and diluted earnings per common share were ~~$0.46~~$0.61 and ~~$0.45,~~$0.60, respectively, for the three months ended ~~June 30, 2017,~~March 31, 2018, compared to ~~basic~~$0.43 and ~~diluted earnings per common share of $0.36 for the corresponding period in 2016.~~

Net income available to common stockholders for the six months ended June 30, 2017 was $46.7 million, an increase of $7.9 million, or 20.4%, from $38.8 million for the corresponding period in 2016. Basic and diluted earnings per common share were $0.88 and $0.86, respectively, for the six months ended June 30, 2017, compared to $0.74 and $0.73,$0.42, respectively, for the corresponding period in ~~2016.~~2017. An increase in net interest income of $10.4 million and a decrease in income tax expense of $775,000 for the comparative periods contributed to the increase in net income. Partially offsetting these were increases in salary expenses and other operating expenses. Changes in income and expenses are more fully explained in “Results of Operations” below.

Critical Accounting Policies

The accounting and financial policies of the Company conform to U.S. ~~generally accepted accounting principles (“U.S. GAAP”)~~GAAP and to general practices within the banking industry. To prepare consolidated financial statements in conformity with U.S. ~~GAAP,~~generally accepted accounting principles, management makes estimates and assumptions based on available information. These estimates and assumptions affect the amounts reported in the financial statements and the disclosures provided, and future results could differ. The allowance for loan losses, valuation of foreclosed real estate, deferred taxes, and fair value of financial instruments are particularly subject to change. Information concerning our accounting policies with respect to these items is available in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” in our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2016.~~2017.

Financial Condition

Cash and Cash Equivalents

At ~~June 30, 2017,~~March 31, 2018, we had ~~$49.4~~$197.9 million in federal funds sold, compared to ~~$160.4~~$239.5 million at December 31, ~~2016.~~2017. We also maintain balances at the Federal Reserve Bank of Atlanta, which earn interest. At ~~June 30, 2017,~~March 31, 2018, we had ~~$133.0~~$51.8 million in balances at the Federal Reserve, compared to ~~$565.1~~$150.3 million at December 31, ~~2016. This~~2017. Our decrease ~~was a~~in federal funds sold and balances at the Federal Reserve were the result ~~in our lower levels~~ of ~~excess liquidity due to~~ loan growth and a ~~slight decrease~~decline in deposits during the first ~~half~~quarter of ~~2017.~~2018.

~~Debt~~Investment Securities

Debt securities available for sale totaled ~~$438.8~~$560.6 million at ~~June 30, 2017~~March 31, 2018 and ~~$422.4~~$538.1 million at December 31, ~~2016. Debt~~2017. Investment securities held to maturity totaled ~~$79.3~~$0.3 million at ~~June 30, 2017~~March 31, 2018 and ~~$62.6~~$0.3 million at December 31, ~~2016.~~2017. We had pay downs of ~~$24.3~~$12.0 million on mortgage-backed securities and calls and maturities of ~~$16.7 million on municipal and corporate securities, and calls of $8.2~~$9.6 million on municipal securities and subordinated notes during the six months ended June 30, 2017. We bought $55.8 million in mortgage-backed securities, $12.0 million in municipal securities, $2.9 million in U.S. Treasury securities and $11.0 million in subordinated notes during the first ~~six~~three months of ~~2017. Seven~~2018. We bought $2.9 million of U.S. Treasury and government sponsored agency securities, $22.2 million of municipal securities and $29.2 million of mortgage-backed securities ~~and four subordinated notes bought were classified as held to maturity. All other securities bought are classified as available for sale.~~during the first three months of 2018.

The objective of our investment policy is to invest funds not otherwise needed to meet our loan demand to earn the maximum return, yet still maintain sufficient liquidity to meet fluctuations in our loan demand and deposit structure. In doing so, we seek to balance the market and credit risks against the potential investment return, make investments compatible with the pledge requirements of any deposits of public funds, maintain compliance with regulatory investment requirements, and assist certain public entities with their financial needs. The investment committee has full authority over the investment portfolio and makes decisions on purchases and sales of securities. The entire portfolio, along with all investment transactions occurring since the previous board of directors meeting, is reviewed by the board at each monthly meeting. The investment policy allows portfolio holdings to include short-term securities purchased to provide us with needed liquidity and longer term securities purchased to generate level income for us over periods of interest rate fluctuations.

Each quarter, management assesses whether there have been events or economic circumstances indicating that a security on which there is an unrealized loss is other-than-temporarily impaired. Management considers several factors, including the amount and duration of the impairment; the intent and ability of the Company to hold the security for a period sufficient for a recovery in value; and known recent events specific to the issuer or its industry. In analyzing an issuer’s financial condition, management considers whether the securities are issued by agencies of the federal government, whether downgrades by bond rating agencies have occurred, and industry analysts’ reports, among other things. As we currently do not have the intent to sell these securities and it is not more likely than not that we will be required to sell these securities before recovery of their amortized cost basis, which may be at maturity, ~~and impairment positions at June 30, 2017 are interest-rate driven,~~ no declines are deemed to be other than temporary. We will continue to evaluate our investment securities for possible other-than-temporary impairment, which could result in non-cash charges to earnings in one or more future periods.

All securities held are traded in liquid markets. As of ~~June 30, 2017,~~March 31, 2018, we owned certain restricted securities of ~~First National Bankers~~the Federal Home Loan Bank with an aggregate book value and market value of ~~$0.4 million,~~$30,000 and certain securities of ~~a fund that invests~~First National Bankers Bank in ~~Community Reinvestment Act-qualifying real estate with a book value and market value of $0.5 million, and securities of a bank holding company in Georgia with a book value and market value of $0.1~~which we invested $0.4 million. Upon termination of our membership in the Federal Home Loan Bank of Atlanta during the fourth quarter of 2016, we redeemed all but approximately $30,000 of our FHLB restricted stock. This remaining restricted stock in the FHLB is a required holding as long as our principal reducing advances are outstanding. We had no investments in any one security, restricted or liquid, in excess of 10% of our stockholders’ equity.

The ~~Bank~~Company does not invest in collateralized debt obligations (“CDOs”). We have ~~$45.5~~purchased $92.3 million of bank holding company subordinated ~~notes.~~notes since 2016. All ~~of these notes~~such bonds were rated BBB or better by Kroll Bond Rating Agency at the time of our investment in them. All other corporate bonds had a Standard and Poor’s or Moody’s rating of A-1 or better when purchased. The total investment portfolio ~~at June 30, 2017~~as of March 31, 2018 has a combined average credit rating of AA.

The carrying value of investment securities pledged to secure public funds on deposit and for other purposes as required by law was ~~$285.8~~$266.8 million and ~~$257.6~~$284.2 million as of ~~June 30, 2017~~March 31, 2018 and December 31, ~~2016,~~2017, respectively.

Loans

We had total loans of ~~$5.34~~$5.93 billion at ~~June 30, 2017, an increase of $431.9 million,~~March 31, 2018, up $0.08 billion, or ~~8.8%~~1.3%, compared to ~~$4.91~~$5.85 billion at December 31, ~~2016.~~2017. At ~~June 30, 2017,~~March 31, 2018, the percentage of our total loans in each of our ~~regions were~~markets was as follows:

	Percentage of Total Loans in MSA
Birmingham-Hoover, AL MSA		43.1	%
Huntsville, AL MSA		~~9.9~~9.5	%
Dothan, AL MSA		~~9.6~~9.1	%
Montgomery, AL MSA		~~7.4~~6.4	%
Mobile, AL MSA		~~6.0~~6.4	%
Total Alabama MSAs		~~76.0~~74.5	%
Pensacola-Ferry Pass-Brent, FL MSA		~~6.5~~6.3	%
Tampa-St. Petersburg-Clearwater, FL MSA		~~1.8~~2.6	%
Total Florida MSAs		~~8.3~~8.9	%
Atlanta-Sandy Springs-Roswell, GA MSA		~~4.1~~4.5	%
Nashville-Davidson-Murfreesboro-Franklin, TN MSA		~~8.5~~8.6	%
Charleston-North Charleston, SC MSA		~~3.1~~3.5	%

Asset Quality

The allowance for loan losses is established and maintained at levels management deems adequate to absorb anticipated credit losses from identified and otherwise inherent risks in the loan portfolio as of the balance sheet date. In assessing the adequacy of the allowance for loan losses, management considers its evaluation of the loan portfolio, past due loan experience, collateral values, current economic conditions and other factors considered necessary to maintain the allowance at an adequate level. Our management believes that the allowance was adequate at ~~June 30, 2017.~~March 31, 2018.

The following table presents the allocation of the allowance for loan losses for each respective loan category with the corresponding percentage of loans in each category to total loans. Management believes that the comprehensive allowance analysis developed by our credit administration group is in compliance with all current regulatory guidelines.

June 30, 2017 Amount Percentage of loans
in each category
to total loans
(In Thousands)
Commercial, financial and agricultural $ 29,127 39.74 %
Real estate - construction 5,138 7.40 %
Real estate - mortgage 20,392 51.83 %
Consumer 402 1.03 %
Total $ 55,059 100.00 %

December 31, 2016 Amount Percentage of loans
in each category
to total loans
Percentage
of loans in
each
category to
March 31, 2018 Amount total loans
(In Thousands) (In Thousands)
Commercial, financial and agricultural $ 28,872 40.36 % $ 35,787 39.30 %
Real estate - construction 5,125 6.82 % 4,138 8.54 %
Real estate - mortgage 17,504 51.70 % 21,606 51.12 %
Consumer 392 1.12 % 519 1.04 %
Total $ 51,893 100.00 % $ 62,050 100.00 %
Percentage
of loans in
each
category to
December 31, 2017 Amount total loans
(In Thousands)
Commercial, financial and agricultural $ 32,880 38.96 %
Real estate - construction 4,989 9.93 %
Real estate - mortgage 21,022 50.05 %
Consumer 515 1.06 %
Total $ 59,406 100.00 %
25

Nonperforming Assets

Total nonperforming loans, which include nonaccrual loans and loans 90 or more days past due and still accruing, decreased ~~$5.9 million~~ to ~~$11.0~~$9.9 million at ~~June 30, 2017,~~March 31, 2018 compared to ~~$16.9~~$10.8 million at December 31, ~~2016.~~2017. Of this total, nonaccrual loans ~~were $10.0~~of $9.3 million at ~~June 30, 2017, compared to $10.6~~March 31, 2018 represented a net decrease of $1.5 million from nonaccrual loans at December 31, ~~2016, a decrease of $0.6 million.~~2017. Excluding credit card accounts, there ~~was one loan~~were three loans 90 or more days past due and still accruing totaling ~~$1.0 million,~~$629,000 at March 31, 2018, compared to ~~two~~no loans ~~totaling $6.2 million~~90 or more days past due and still accruing at December 31, ~~2016.~~2017. Troubled Debt Restructurings (“TDR”) at ~~June 30, 2017~~March 31, 2018 and December 31, ~~2016~~2017 were ~~$16.4~~$18.8 million and ~~$7.3~~$20.6 million, respectively. ~~One relationship totaling $12.7 million, which includes nine loans of various types, was newly classified as TDR for the three and six months ended June 30, 2017.~~ There were no loans newly classified as a TDR ~~and two~~or renewals of existing TDRs ~~totaling $600,000~~ for the three ~~and six~~ months ended ~~June 30, 2016. These TDRs are the result of term extensions rather than interest rate reductions~~March 31, 2018 or ~~forgiveness of debt.~~2017.
29

OREO and repossessed assets decreased to ~~$3.9~~$5.7 million at ~~June 30, 2017,~~March 31, 2018, from ~~$5.0~~$6.7 million at December 31, ~~2016.~~2017. The total number of OREO and repossessed asset accounts ~~decreased to 9 at June 30, 2017, compared to~~was 12 atfor both March 31, 2018 and December 31, ~~2016.~~2017. The following table summarizes OREO and repossessed asset activity for the ~~six~~three months ended ~~June 30, 2017~~March 31, 2018 and ~~2016:~~2017:

Six months ended June 30, Three months ended March 31,
2017 2016 2018 2017
(In thousands) (In thousands)
Balance at beginning of period $ 4,988 $ 5,392 $ 6,701 $ 4,988
Transfers from loans and capitalized expenses 586 2,036 175 553
Proceeds from sales (1,547 ) (1,575 ) (874 ) (426 )
Internally financed sales (185 ) (1,157 ) - (49 )
Write-downs / net gain (loss) on sales 49 (436 ) (254 ) 36
Balance at end of period $ 3,891 $ 4,260 $ 5,748 $ 5,102

The following table summarizes our nonperforming assets and TDRs at ~~June 30, 2017~~March 31, 2018 and December 31, ~~2016:~~2017:

March 31, 2018 December 31, 2017
June 30, 2017 December 31, 2016 Number of Number of
Balance Number of
Loans Balance Number of
Loans Balance Loans Balance Loans
(Dollar Amounts In Thousands) (Dollar Amounts In Thousands)
Nonaccrual loans:
Commercial, financial and agricultural $ 4,417 8 $ 7,282 13 $ 8,599 15 $ 9,712 18
Real estate - construction 2,377 3 3,268 5 - - - -
Real estate - mortgage:
Owner-occupied commercial 2,248 2 - - 306 1 556 2
1-4 family mortgage 921 1 74 1 328 1 459 2
Other mortgage - - - - - - - -
Total real estate - mortgage 3,169 3 74 1 634 2 1,015 4
Consumer - - - - 38 1 38 1
Total Nonaccrual loans: $ 9,963 14 $ 10,624 19 $ 9,271 18 $ 10,765 23

90+ days past due and accruing:
90+ days past due and accruing:
Commercial, financial and agricultural $ 968 1 $ 10 1 $ 418 3 $ 12 3
Real estate - construction - - - - - - - -
Real estate - mortgage:
Owner-occupied commercial - - 6,208 1 - - - -
1-4 family mortgage - - - - 217 1 - -
Other mortgage - - - - - - - -
Total real estate - mortgage - - 6,208 1 217 1 - -
Consumer 48 14 45 10 43 19 48 24
Total 90+ days past due and accruing: $ 1,016 15 $ 6,263 12 $ 678 23 $ 60 27

Total Nonperforming Loans: $ 10,979 29 $ 16,887 31 $ 9,949 41 $ 10,825 50

Plus: Other real estate owned and repossessions 3,891 9 4,988 12 5,748 12 6,701 12
Total Nonperforming Assets $ 14,870 38 $ 21,875 43 $ 15,697 53 $ 17,526 62

Restructured accruing loans:
Commercial, financial and agricultural $ 7,205 5 $ 354 1 $ 10,328 6 $ 11,438 6
Real estate - construction 997 1 - - 997 1 997 1
Real estate - mortgage:
Owner-occupied commercial 3,664 2 - - 3,664 2 3,664 2
1-4 family mortgage 850 1 - - 849 1 850 1
Other mortgage - - 204 1 - - - -
Total real estate - mortgage 4,514 3 204 1 4,513 3 4,514 3
Consumer - - - - - - - -
Total restructured accruing loans: $ 12,716 9 $ 558 2 $ 15,838 10 $ 16,949 10

Total Nonperforming assets and restructured accruing loans $ 27,586 47 $ 22,433 45
Total Nonperforming assets and
restructured accruing loans $ 31,535 63 $ 34,475 72

Ratios:
Nonperforming loans to total loans 0.21 % 0.34 % 0.17 % 0.19 %
Nonperforming assets to total loans plus other real estate owned and repossessions 0.28 % 0.44 % 0.26 % 0.30 %
Nonperforming assets plus restructured accruing loans to total loans plus other real estate owned and repossessions 0.52 % 0.46 % 0.53 % 0.59 %

30 26

The balance of nonperforming assets can fluctuate due to changes in economic conditions. We have established a policy to discontinue accruing interest on a loan (i.e., place the loan on nonaccrual status) after it has become 90 days delinquent as to payment of principal or interest, unless the loan is considered to be well-collateralized and is actively in the process of collection. In addition, a loan will be placed on nonaccrual status before it becomes 90 days delinquent unless management believes that the collection of interest is expected. Interest previously accrued but uncollected on such loans is reversed and charged against current income when the receivable is determined to be uncollectible. Interest income on nonaccrual loans is recognized only as received. If we believe that a loan will not be collected in full, we will increase the allowance for loan losses to reflect management’s estimate of any potential exposure or loss. Generally, payments received on nonaccrual loans are applied directly to principal.

Impaired Loans and Allowance for Loan Losses

As of ~~June 30, 2017,~~March 31, 2018, we had impaired loans of ~~$51.0~~$42.6 million inclusive of nonaccrual loans, an increase of ~~$5.4~~$2.1 million from ~~$45.6~~$40.5 million as of December 31, 2016. This increase is attributable to $14.7 million of loans newly classified as specifically impaired, partially offset by charge-offs totaling $4.7 million, net pay downs of $3.4 million, loan classification upgrades of $0.6 million and OREO transfers and repossessions of $0.6 million.2017. We allocated ~~$7.2~~$6.5 million of our allowance for loan losses at ~~June 30, 2017~~March 31, 2018 to these impaired loans, ~~a decrease~~an increase of ~~$1.0~~$0.9 million compared to ~~$8.2~~$5.6 million as of December 31, ~~2016.~~2017. A loan is considered impaired, based on current information and events, if it is probable that we will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the original loan agreement. Impairment does not always indicate credit loss, but provides an indication of collateral exposure based on prevailing market conditions and third-party valuations. Impaired loans are measured by either the present value of expected future cash flows discounted at ~~the~~each loan’s effective interest rate, the loan’s obtainable market price, or the fair value of the collateral if the loan is collateral-dependent. The amount of impairment, if any, and subsequent changes are included in the allowance for loan losses. Interest on accruing impaired loans is recognized as long as such loans do not meet the criteria for nonaccrual status. Our credit ~~administration group~~risk management team performs verification and testing to ensure appropriate identification of impaired loans and that proper reserves are held on these loans.

Of the ~~$51.0~~$42.6 million of impaired loans reported as of ~~June 30, 2017, $31.4~~March 31, 2018, $24.6 million were commercial, financial and agricultural loans, ~~$3.4~~$1.6 million were real estate – construction loans, ~~and $16.2~~$16.3 million were real estate - mortgage loans and $0.1 million were consumer loans.

Deposits

Total deposits decreased ~~$25.5~~by $114.3 million ~~or 0.5%,~~ to ~~$5.39~~$5.98 billion at ~~June 30, 2017~~March 31, 2018 compared to ~~$5.42~~$6.09 billion at December 31, 2016. This overall decrease is attributable to some large deposits moving out of the bank resulting from our refusal to increase rates paid on them. While we have experienced a decrease in our total deposits during the first half of 2017, we2017. We anticipate long-term sustainable growth in deposits through continued development of market share in our ~~regions.~~less mature markets and through organic growth in our mature markets.

For amounts and rates of our deposits by category, see the table “Average Consolidated Balance Sheets and Net Interest Analysis on a Fully Taxable-equivalent Basis” under the subheading “Net Interest ~~Income.”~~Income” below.

~~Other~~ Borrowings

Our borrowings consist of federal funds purchased and subordinated notes ~~payable and Federal Home Loan Bank advances.~~payable. We had ~~$300.2~~$326.4 million and ~~$355.9~~$301.8 million at ~~June 30, 2017~~March 31, 2018 and December 31, ~~2016,~~2017, respectively, in federal funds purchased from correspondent banks that are clients of our correspondent banking unit. The average rate paid on these borrowings was ~~1.11%~~1.60% for the quarter ended ~~June 30, 2017, which has increased during the past three quarters due to increases in the FRB’s targeted federal funds rate.~~March 31, 2018. Other borrowings consist of the following:

· ~~$20.0 million of 5.50% Subordinated Notes due November 9, 2022, which were issued in a private placement in November 2012,~~
· ~~$34.75 million of 5% Subordinated Notes due July 15, 2025, which were issued in a private placement in July 2015, and~~
· $400,000 of principal reducing advances from the Federal Home Loan Bank of Atlanta, which have an interest rate of 0.75% and require quarterly principal payments of $100,000 until maturity on May 22, 2018.
$34.75 million of 5% Subordinated Notes due July 15, 2025, which were issued in a private placement in July 2015 and pay interest semi-annually;
$30.0 million of 4.5% Subordinated Notes due November 8, 2027, which were issued in a private placement in November 2017 and pay interest semi-annually; and
$0.1 million of principal reducing advances from the Federal Home Loan Bank of Atlanta, which have an interest rate of 0.75% and require quarterly principal payments of $100,000 until maturity on May 22, 2018.

31 27

Liquidity

Liquidity is defined as our ability to generate sufficient cash to fund current loan demand, deposit withdrawals, and other cash demands and disbursement needs, and otherwise to operate on an ongoing basis.

The retention of existing deposits and attraction of new deposit sources through new and existing customers is critical to our liquidity position. If our liquidity ~~were~~was to decline due to a run-off in deposits, we have procedures that provide for certain actions under varying liquidity conditions. These actions include borrowing from existing correspondent banks, selling or participating loans, and curtailing loan commitments and funding. At ~~June 30, 2017,~~March 31, 2018, liquid assets, which are represented by cash and due from banks, federal funds sold and unpledged available-for-sale securities, totaled ~~$549.7~~$674.1 million. Additionally, the Bank had ~~additional~~ borrowing availability of approximately ~~$458.0~~$533.0 million in unused federal funds lines of credit with regional banks, subject to certain restrictions and collateral requirements. We believe these sources of funding are adequate to meet immediate anticipated funding ~~needs.~~needs, but we may need additional funding if we are able to maintain our current growth rate into the future. Our management meets on a quarterly basis to review sources and uses of funding to determine the appropriate strategy to ensure an appropriate level of liquidity. At the current time, our long-term liquidity needs primarily relate to funds required to support loan originations and commitments and deposit withdrawals. Our regular sources of funding are from the growth of our deposit base, ~~correspondent banking relationships and related federal funds purchased,~~ repayment of principal and interest on loans, the sale of loans and the renewal of time deposits. In addition, we have issued debt as described above under ~~“Other Borrowings”.~~“Borrowings.”

We are subject to general FDIC guidelines that require a minimum level of liquidity. Management believes our liquidity ratios meet or exceed these guidelines. Our management is not currently aware of any trends or demands that are reasonably likely to result in liquidity materially increasing or decreasing.

The following table reflects the contractual maturities of our term liabilities as of ~~June 30, 2017.~~March 31, 2018. The amounts shown do not reflect any early withdrawal or prepayment assumptions.

Payments due by Period
Total 1 year or less Over 1 - 3
years Over 3 - 5
years Over 5 years
(In Thousands)
Contractual Obligations (1)

Deposits without a stated maturity $ 4,869,053 $ - $ - $ - $ -
Certificates of deposit (2) 525,757 284,730 157,765 81,335 1,927
Federal funds purchased 300,226 300,226 - - -
Subordinated debentures 55,075 400 - - 54,675
Operating lease commitments 18,677 3,843 6,394 4,107 4,333
Total $ 5,768,788 $ 589,199 $ 164,159 $ 85,442 $ 60,935
Payments due by Period
Total 1 year or less 1 - 3 years 3 - 5 years Over 5 years
(In Thousands)
Contractual Obligations (1)

Deposits without a stated maturity $ 5,404,267 $ - $ - $ - $ -
Certificates of deposit (2) 573,120 348,958 142,438 81,674 50
Federal funds purchased 326,399 326,399 - - -
Subordinated notes payable 64,850 100 - - 64,750
Operating lease commitments 16,818 3,113 5,899 4,633 3,173
Total $ 6,385,454 $ 678,570 $ 148,337 $ 86,307 $ 67,973

~~(1)  Excludes interest.~~
~~(2)  Certificates of deposit give customers the right to early withdrawal.  Early withdrawals may be subject to penalties.~~
~~The penalty amount depends on the remaining time to maturity at the time of early withdrawal.~~
(1) Excludes interest.
(2) Certificates of deposit give customers the right to early withdrawal.  Early withdrawals may be subject to penalties.  The penalty amount depends on the remaining time to maturity at the time of early withdrawal.

Capital Adequacy

As of ~~June 30, 2017,~~March 31, 2018, our most recent notification from the FDIC categorized us as well-capitalized under the regulatory framework for prompt corrective action. To remain categorized as well-capitalized, we must maintain minimum ~~total~~common equity Tier 1, Tier 1 risk-based, ~~Tier 1~~total risk-based, and Tier 1 leverage ratios as disclosed in the table below. Our management believes that we are well-capitalized under the prompt corrective action provisions as of ~~June 30, 2017.~~March 31, 2018.

32 28

The following table sets forth (i) the capital ratios required by the FDIC and the Alabama Banking Department’s leverage ratio requirement and (ii) our actual ratios of capital to total regulatory or risk-weighted assets, as of ~~June 30, 2017,~~March 31, 2018, December 31, ~~2016~~2017 and ~~June 30, 2016:~~March 31, 2017:

To Be Well Capitalized Actual For Capital Adequacy Purposes To Be Well Capitalized Under Prompt Corrective Action Provisions
For Capital Adequacy Under Prompt Corrective Amount Ratio Amount Ratio Amount Ratio
Actual Purposes Action Provisions
Amount Ratio Amount Ratio Amount Ratio
As of June 30, 2017: (Dollars in thousands)
CET 1 Capital to Risk-Weighted Assets:
As of March 31, 2018:
CET 1 Capital to Risk Weighted Assets:
Consolidated $ 551,433 9.72 % $ 255,319 4.50 % N/A N/A $ 619,494 9.87 % $ 282,487 4.50 % N/A N/A
ServisFirst Bank 603,094 10.63 % 255,286 4.50 % $ 368,747 6.50 % 683,126 10.88 % 282,443 4.50 % $ 407,973 6.50 %
Tier 1 Capital to Risk-Weighted Assets:
Tier 1 Capital to Risk Weighted Assets:
Consolidated 551,935 9.73 % 340,425 6.00 % N/A N/A 619,996 9.88 % 376,650 6.00 % N/A N/A
ServisFirst Bank 603,596 10.64 % 340,382 6.00 % 453,842 8.00 % 683,628 10.89 % 376,591 6.00 % 502,121 8.00 %
Total Capital to Risk-Weighted Assets:
Total Capital to Risk Weighted Assets:
Consolidated 662,169 11.67 % 453,900 8.00 % N/A N/A 747,185 11.90 % 502,200 8.00 % N/A N/A
ServisFirst Bank 659,155 11.62 % 453,842 8.00 % 567,303 10.00 746,178 11.89 % 502,121 8.00 % 627,651 10.00 %
Tier 1 Capital to Average Assets:
Consolidated 551,935 8.88 % 248,732 4.00 % N/A N/A 619,996 8.95 % 277,205 4.00 % N/A N/A
ServisFirst Bank 603,596 9.71 % 249,293 4.00 % 311,616 5.00 % 683,628 9.87 % 277,192 4.00 % 346,490 5.00 %

As of December 31, 2016:
CET 1 Capital to Risk-Weighted Assets:
As of December 31, 2017:
CET 1 Capital to Risk Weighted Assets:
Consolidated $ 508,982 9.78 % $ 234,262 4.50 % N/A N/A $ 593,111 9.51 % $ 280,553 4.50 % N/A N/A
ServisFirst Bank 560,731 10.77 % 234,232 4.50 % $ 338,335 6.50 % 651,201 10.45 % 280,523 4.50 % $ 405,199 6.50 %
Tier 1 Capital to Risk-Weighted Assets:
Tier 1 Capital to Risk Weighted Assets:
Consolidated 509,359 9.78 % 312,350 6.00 % N/A N/A 593,613 9.52 % 374,070 6.00 % N/A N/A
ServisFirst Bank 561,108 10.78 % 312,309 6.00 % 416,413 8.00 % 651,703 10.45 % 374,030 6.00 % 498,707 8.00 %
Total Capital to Risk-Weighted Assets:
Total Capital to Risk Weighted Assets:
Consolidated 616,415 11.84 % 416,467 8.00 % N/A N/A 718,151 11.52 % 498,760 8.00 % N/A N/A
ServisFirst Bank 613,501 11.79 % 416,413 8.00 % 520,516 10.00 % 711,609 11.42 % 498,707 8.00 % 623,384 10.00 %
Tier 1 Capital to Average Assets:
Consolidated 509,359 8.22 % 247,777 4.00 % N/A N/A 593,613 8.51 % 278,970 4.00 % N/A N/A
ServisFirst Bank 561,108 9.06 % 247,760 4.00 % 309,700 5.00 % 651,703 9.35 % 278,954 4.00 % 348,693 5.00 %

As of June 30, 2016:
CET 1 Capital to Risk-Weighted Assets:
As of March 31, 2017:
CET 1 Capital to Risk Weighted Assets:
Consolidated $ 469,101 9.83 % $ 214,649 4.50 % N/A N/A $ 530,034 9.67 % $ 246,744 4.50 % N/A N/A
ServisFirst Bank 517,987 10.86 % 214,615 4.50 % $ 309,999 6.50 % 582,483 10.63 % 246,695 4.50 % $ 356,338 6.50 %
Tier 1 Capital to Risk-Weighted Assets:
Tier 1 Capital to Risk Weighted Assets:
Consolidated 469,478 9.84 % 286,199 6.00 % N/A N/A 530,536 9.68 % 328,992 6.00 % N/A N/A
ServisFirst Bank 518,364 10.87 % 286,153 6.00 % 381,538 8.00 % 582,985 10.63 % 328,927 6.00 % 438,570 8.00 %
Total Capital to Risk-Weighted Assets:
Total Capital to Risk Weighted Assets:
Consolidated 571,627 11.98 % 381,598 8.00 % N/A N/A 639,597 11.66 % 438,656 8.00 % N/A N/A
ServisFirst Bank 565,862 11.86 % 381,538 8.00 % 476,922 10.00 % 637,377 11.63 % 438,570 8.00 % 548,212 10.00 %
Tier 1 Capital to Average Assets:
Consolidated 469,478 8.52 % 220,506 4.00 % N/A N/A 530,536 8.46 % 250,867 4.00 % N/A N/A
ServisFirst Bank 518,364 9.40 % 220,492 4.00 % 275,615 5.00 % 582,985 9.30 % 250,848 4.00 % 313,560 5.00 %

Off-Balance Sheet Arrangements

In the normal course of business, we are a party to financial instruments with off-balance sheet risk to meet the financing needs of our customers. These financial instruments include commitments to extend credit beyond current fundings, credit card arrangements, standby letters of credit, and financial guarantees. Those instruments involve, to varying degrees, elements of credit risk in excess of the amount recognized in our balance sheet. The contract or notional amounts of those instruments reflect the extent of involvement we have in those particular financial instruments.

Our exposure to credit loss in the event of non-performance by the other party to such financial instruments is represented by the contractual or notional amount of those instruments. We use the same credit policies in making commitments and conditional obligations as we do for on-balance sheet instruments. As of ~~June 30, 2017,~~March 31, 2018, we ~~have reserved $500,000~~had reserves of $0.5 million for losses on such off-balance sheet arrangements consistent with guidance in the ~~FRB’s~~Federal Reserve Bank’s Interagency Policy Statement SR 06-17.
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As part of our mortgage operations, we originate and sell certain loans to investors in the secondary market. We continue to experience a manageable level of investor repurchase demands. For loans sold, we have an obligation to either repurchase the outstanding principal balance of a loan or make the purchaser whole for the economic benefits of a loan if it is determined that the loans sold were in violation of representations and warranties made by the Bank at the time of the sale. Representations and warranties typically include those made regarding loans that had missing or insufficient file documentation or loans obtained through fraud by borrowers or other third parties such as appraisers. We had a reserve of $368,000 as of ~~June 30, 2017~~March 31, 2018 and December 31, ~~2016~~2017 for the settlement of any repurchase demands by investors.

29
Financial instruments whose contract amounts represent credit risk at ~~June 30, 2017~~March 31, 2018 are as follows:
June 30, 2017
(In Thousands)
Commitments to extend credit $ 1,889,718
Credit card arrangements 88,337
Standby letters of credit 39,710
$ 2,017,765
March 31, 2018
(In Thousands)
Commitments to extend credit $ 1,960,905
Credit card arrangements 108,451
Standby letters of credit 47,339
$ 2,116,695

Commitments to extend credit beyond current funded amounts are agreements to lend to a customer as long as there is no violation of any condition established in the applicable loan agreement. Such commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. We evaluate each customer’s creditworthiness on a case-by-case basis. The amount of collateral obtained if deemed necessary by us upon extension of credit is based on our management’s credit evaluation. Collateral held varies but may include accounts receivable, inventory, property, plant and equipment, and income-producing commercial properties.

Standby letters of credit are conditional commitments issued by us to guarantee the performance of a customer to a third party. Those guarantees are primarily issued to support public and private borrowing arrangements, including commercial paper, bond financing, and similar transactions. All letters of credit are due within one year or less of the original commitment date. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers.

Federal funds lines of credit are uncommitted lines issued to downstream correspondent banks for the purpose of providing liquidity to them. The lines are unsecured, and we have no obligation to sell federal funds to the correspondent, nor does the correspondent have any obligation to request or accept purchases of federal funds from us.
Results of Operations

Summary of Net Income

Net income and net income available to common stockholders for the three months ended ~~June 30, 2017~~March 31, 2018 was $24.2 million and $24.1 million, respectively, compared to net income and net income available to common stockholders of $18.9 million for the three months ended June 30, 2016. Net income and net income available to common stockholders for the six months ended June 30, 2017 was $46.7$32.6 million compared to net income and net income available to common stockholders of ~~$38.8~~$22.5 million for the ~~six~~three months ended ~~June 30, 2016.~~March 31, 2017. The increase in net income ~~for the three months ended June 30, 2017 over the same period in 2016~~ was primarily attributable to a ~~$9.7~~$10.4 million increase in net interest income ~~resulting from growth in earning assets and~~as a ~~$1.0 million increase in non-interest income, led by increased credit card income. The increase in net income for the six months ended June 30, 2017 compared to 2016 was primarily the~~ result of ~~a $17.5 million increase in net interest income resulting from~~ growth in average earning assets, a $775,000 decrease in income tax expense resulting from lower corporate tax rates enacted by the Tax Cuts and Jobs Act in December 2017 and a ~~$2.1~~$323,000 increase in non-interest income, offset by a $2.2 million increase in non-interest income, led by increased credit card income. Increases in non-interest expense of $2.4 million and $4.3 million, respectively, for the three and six months ended June 30, 2017 compared to 2016 partially offset increases in income.expense.

Basic and diluted net income per common share were ~~$0.46~~$0.61 and ~~$0.45,~~$0.60, respectively, for the three months ended ~~June 30, 2017,~~March 31, 2018, compared to ~~$0.36~~$0.43 and ~~$0.36,~~$0.42, respectively, for the corresponding period in 2016. Basic and diluted net income per common share were $0.88 and $0.86, respectively, for the six months ended June 30, 2017, compared to $0.74 and $0.73, respectively, for the corresponding period in 2016.2017. Return on average assets for the three ~~and six~~ months ended ~~June 30, 2017~~March 31, 2018 was ~~1.55% and 1.50%, respectively,~~1.91% compared to ~~1.37% and~~ 1.45%~~, respectively,~~ for the corresponding ~~periods~~period in ~~2016. Return~~2017, and return on average ~~common~~ stockholders’ equity for the three ~~and six~~ months ended ~~June 30, 2017~~March 31, 2018 was ~~17.36% and 17.23%~~21.40% compared to ~~15.79% and 16.57%, respectively,~~17.09% for the corresponding ~~periods~~period in ~~2016.~~2017.
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Net Interest Income

Net interest income is the difference between the income earned on interest-earning assets and interest paid on interest-bearing liabilities used to support such assets. The major factors which affect net interest income are changes in volumes, the yield on interest-earning assets and the cost of interest-bearing liabilities. Our management’s ability to respond to changes in interest rates by effective asset-liability management techniques is critical to maintaining the stability of the net interest margin and the momentum of our primary source of earnings.

Taxable-equivalent net interest income increased ~~$9.7~~$10.1 million, or ~~20.9%~~19.2%, to ~~$56.1~~$62.6 million for the three months ended ~~June 30, 2017~~March 31, 2018 compared to ~~$46.4~~$52.5 million for the corresponding period in ~~2016, and increased $17.5 million, or 19.0%, to $108.6 million for the six months ended June 30, 2017 compared to $91.9 million for the corresponding period in 2016.~~2017. This increase was primarily attributable to ~~growth~~a $630.0 million increase in average earning assets, ~~which increased $655.1 million,~~ or ~~12.3%~~10.4%, ~~from the second quarter of 2016 to the second quarter of 2017, and $832.0 million, or 16.1%, from the six months ended June 30, 2016 to the same period in 2017.~~year over year. The taxable-equivalent yield on interest-earning assets increased from 4.03% to 4.30% for the three months ended June 30, 2017 from 3.97% for the corresponding period in 2016, and increased to 4.17% for the six months ended June 30, 2017 from 4.00% for the corresponding period in 2016.4.51% year over year. The yield on loans for the three months ended ~~June 30, 2017~~March 31, 2018 was ~~4.60%~~4.80% compared to ~~4.47%~~4.51% for the corresponding period in ~~2016, and 4.52% compared to 4.48% for the six months ended June 30, 2017 and June 30, 2016, respectively.~~2017. The cost of total interest-bearing liabilities increased to ~~0.74%~~0.95% for the three months ended ~~June 30, 2017 compared to 0.64%~~March 31, 2018 from 0.68% for the corresponding period in ~~2016, and increased to 0.71% for the six months ended June 30, 2017 from 0.63% for the corresponding period in 2016.~~2017. Net interest margin for the three months ended ~~June 30, 2017 was 3.77% compared~~March 31, 2018 increased 28 basis points to ~~3.51%~~3.81% from 3.53% for the corresponding period in ~~2016, and 3.65% for the six months ended June 30, 2017 compared to 3.54% for the corresponding period in 2016.~~2017.
30

The following ~~tables show,~~table shows, for the three ~~and six~~ months ended ~~June 30,~~March 31, 2018 and March 31, 2017, ~~and June 30, 2016,~~ the average balances of each principal category of our assets, liabilities and stockholders’ equity, and an analysis of net interest revenue. The accompanying tables reflect changes in our net interest margin as a result of changes in the volume and rate of our interest-earning assets and interest-bearing liabilities for the same periods. Changes as a result of mix or the number of days in the periods have been allocated to the volume and rate changes in proportion to the relationship of the absolute dollar amounts of the change in each. The tables are presented on a taxable-equivalent basis where applicable:

35

Average Consolidated Balance Sheets and Net Interest Analysis
On a Fully Taxable-Equivalent Basis
For the Three Months Ended ~~June 30,~~March 31,
(Dollar Amounts In ~~thousands, except Average Yields and Rates)~~Thousands)

2017 2016 2018 2017
Interest Average Interest Average Interest Average Interest Average
Average Earned / Yield / Average Earned / Yield / Average Earned / Yield / Average Earned / Yield /
Balance Paid Rate Balance Paid Rate Balance Paid Rate Balance Paid Rate
Assets:
Interest-earning assets:
Loans, net of unearned income (1)(2)
Loans, net of unearned income (1) (2)
Taxable $ 5,192,812 $ 59,508 4.60 % $ 4,406,107 $ 49,015 4.47 % $ 5,847,443 $ 69,321 4.81 % $ 4,976,933 $ 55,282 4.50 %
Tax-exempt (3) 41,143 505 4.92 16,315 184 4.54 36,357 364 4.06 27,322 318 4.72
Total loans, net of unearned income 5,233,955 60,013 4.60 4,422,422 49,199 4.47 5,883,800 69,685 4.80 5,004,255 55,600 4.51
Mortgage loans held for sale 5,958 58 3.90 7,323 66 3.62 3,698 41 4.50 5,637 57 4.10
Investment securities:
Taxable 389,505 2,274 2.34 208,113 1,238 2.38 435,747 2,745 2.52 368,349 2,087 2.27
Tax-exempt (3) 133,590 1,129 3.38 135,954 1,269 3.73 120,270 770 2.56 132,578 1,145 3.45
Total investment securities (4) 523,095 3,403 2.60 344,067 2,507 2.91 556,017 3,515 2.53 500,927 3,232 2.58
Federal funds sold 98,598 287 1.17 144,206 210 0.59 131,472 551 1.70 234,460 519 0.90
Restricted equity securities 1,030 27 10.51 5,659 51 3.62
Equity securities 1,030 4 1.57 1,030 4 1.57
Interest-bearing balances with banks 109,909 286 1.04 393,782 507 0.52 96,012 379 1.60 295,648 586 0.80
Total interest-earning assets $ 5,972,545 $ 64,074 4.30 % $ 5,317,459 $ 52,540 3.97 % $ 6,672,029 $ 74,175 4.51 % $ 6,041,957 $ 59,998 4.03 %
Non-interest-earning assets:
Cash and due from banks 68,894 65,318 68,309 59,697
Net fixed assets and equipment 49,813 23,241
Net premises and equipment 59,709 44,739
Allowance for loan losses, accrued interest and other assets 143,286 127,640 140,558 138,289
Total assets $ 6,234,538 5,533,658 $ 6,940,605 $ 6,284,682

Liabilities and stockholders' equity:
Interest-bearing liabilities:
Interest-bearing demand deposits $ 779,916 $ 767 0.39 % $ 691,776 $ 614 0.36 % $ 899,311 $ 1,143 0.52 % $ 789,273 $ 733 0.38 %
Savings deposits 48,150 36 0.30 41,546 31 0.30 53,269 41 0.31 50,461 41 0.33
Money market accounts 2,567,817 4,097 0.64 2,105,420 2,736 0.52 3,027,176 6,711 0.90 2,694,225 3,876 0.58
Time deposits (5) 537,220 1,421 1.06 498,151 1,252 1.01 576,857 1,726 1.21 530,000 1,332 1.02
Total interest-bearing deposits 3,933,103 6,321 0.64 3,336,893 4,633 0.56 4,556,613 9,621 0.86 4,063,959 5,982 0.60
Federal funds purchased 336,344 933 1.11 505,076 808 0.64 297,051 1,171 1.60 359,747 766 0.86
Other borrowings 55,130 717 5.22 55,521 718 5.20 64,805 781 4.89 55,239 717 5.26
Total interest-bearing liabilities $ 4,324,577 $ 7,971 0.74 % $ 3,897,490 $ 6,159 0.64 % $ 4,918,469 $ 11,573 0.95 % $ 4,478,945 $ 7,465 0.68 %
Non-interest-bearing liabilities:
Non-interest-bearing demand
deposits 1,338,514 1,142,541
Non-interest-bearing demand deposits 1,389,217 1,254,496
Other liabilities 13,739 13,301 15,007 16,809
Stockholders' equity 556,521 475,917 621,004 535,232
Unrealized gains on securities and derivatives 1,187 4,409
Unrealized losses on securities (3,092 ) (800 )
Total liabilities and stockholders' equity $ 6,234,538 $ 5,533,658 $ 6,940,605 $ 6,284,682
Net interest income $ 56,103 $ 46,381 $ 62,602 $ 52,533
Net interest spread 3.56 % 3.33 % 3.56 % 3.35 %
Net interest margin 3.77 % 3.51 % 3.81 % 3.53 %

(1) Non-accrual loans are included in average loan balances in all periods.  Loan fees of ~~$851,000~~$749,000 and ~~$530,000~~$775,000 are included in interest income in ~~2017~~the first quarter of 2018 and ~~2016,~~2017, respectively.
(2) Accretion on acquired loan discounts of ~~$124,000~~$72,000 and ~~$334,000~~$143,000 are included in interest income in ~~2017~~the first quarter of 2018 and ~~2016,~~2017, respectively.
(3) Interest income and yields are presented on a fully taxable equivalent basis using a tax rate of 21% for the first quarter of 2018 and 35%. for the first quarter of 2017.
(4) Unrealized ~~gains~~losses of ~~$1,824,000~~$3,963,000 and ~~$6,772,000~~$1,232,000 are excluded from the yield calculation in ~~2017~~the first quarter of 2018 and ~~2016,~~2017, respectively.
(5) Accretion on acquired CD premiums of $0 and ~~$48,000~~$32,000 are included in interest in ~~2017~~the first quarter of 2018 and ~~2016,~~2017, respectively.

36 31

For the Three Months Ended June 30, For the Three Months Ended March 31,
2017 Compared to 2016 Increase (Decrease) in Interest
Income and Expense Due to Changes in: 2018 Compared to 2017 Increase (Decrease) in Interest
Income and Expense Due to Changes in:
Volume Rate Total Volume Rate Total
(In Thousands) (In Thousands)
Interest-earning assets:
Loans, net of unearned income
Taxable $ 9,100 $ 1,393 $ 10,493 $ 10,139 $ 3,900 $ 14,039
Tax-exempt 304 17 321 94 (48 ) 46
Total loans, net of unearned income 9,404 1,269 10,814 10,233 3,852 14,085
Mortgages held for sale (13 ) 5 (8 ) (21 ) 5 (16 )
Debt securities:
Taxable 1,062 (26 ) 1,036 409 249 658
Tax-exempt (21 ) (119 ) (140 ) (99 ) (276 ) (375 )
Total debt securities 1,041 (145 ) 896 310 (27 ) 283
Federal funds sold (83 ) 160 77 (295 ) 327 32
Restricted equity securities (66 ) 42 (24 )
Equity securities - - -
Interest-bearing balances with banks (520 ) 299 (221 ) (555 ) 348 (207 )
Total interest-earning assets 9,763 1,771 11,534 9,672 4,505 14,177

Interest-bearing liabilities:
Interest-bearing demand deposits 83 70 153 112 298 410
Savings 5 - 5 2 (2 ) -
Money market accounts 673 688 1,361 527 2,308 2,835
Time deposits 104 65 169 125 269 394
Total interest-bearing deposits 865 823 1,688 766 2,873 3,639
Federal funds purchased (332 ) 457 125 (152 ) 557 405
Other borrowed funds (4 ) 3 (1 ) 118 (54 ) 64
Total interest-bearing liabilities 529 1,283 1,812 732 3,376 4,108
Increase in net interest income $ 9,234 $ 488 $ 9,722 $ 8,940 $ 1,129 $ 10,069

Our growth in loans ~~non-interest bearing deposits and average equity~~ continues to drive favorable volume component change and overall change. ~~Also, the recent increases in the Federal Reserve Bank’s target federal funds rate has contributed to a~~We have also experienced favorable variance relating to the interest rate component because yields on loans have increased slightly more than rates paid on deposits.
37
~~Average Consolidated Balance Sheets and Net Interest Analysis~~
On Accordingly, the prolonged low interest rate environment has resulted in a ~~Fully Taxable-Equivalent Basis~~
~~For~~compression of the ~~Six Months Ended June 30,~~
~~(In thousands, except Average Yields and Rates)~~
2017 2016
Interest Interest
Average Earned / Average Average Earned / Average
Balance Paid Yield / Rate Balance Paid Yield / Rate
Assets:
Interest-earning assets:
Loans, net of unearned income (1)(2)
Taxable $ 5,085,468 $ 114,791 4.55 % $ 4,318,082 $ 96,096 4.48 %
Tax-exempt (3) 34,271 822 4.80 13,298 327 4.95
Total loans, net of unearned income 5,119,739 115,613 4.52 4,331,380 96,423 4.48
Mortgage loans held for sale 5,798 115 4.00 6,704 136 4.08
Investment securities:
Taxable 378,985 4,361 2.30 214,918 2,505 2.33
Tax-exempt (3) 133,087 2,274 3.42 136,858 2,618 3.83
Total investment securities (4) 512,072 6,635 2.59 351,776 5,123 2.91
Federal funds sold 166,154 806 0.98 96,298 283 0.59
Restricted equity securities 1,030 31 6.07 5,310 98 3.71
Interest-bearing balances with banks 202,265 872 0.87 383,548 974 0.51
Total interest-earning assets $ 6,007,058 $ 124,072 4.17 % $ 5,175,016 $ 103,037 4.00 %
Non-interest-earning assets:
Cash and due from banks 64,321 63,460
Net fixed assets and equipment 47,290 22,132
Allowance for loan losses, accrued interest and other assets 140,796 127,066
Total assets $ 6,259,465 $ 5,387,674

Liabilities and stockholders' equity:
Interest-bearing liabilities:
Interest-bearing demand deposits $ 784,569 $ 1,499 0.39 % $ 678,407 $ 1,194 0.35 %
Savings deposits 49,299 76 0.31 41,301 61 0.30
Money market accounts 2,630,672 7,973 0.61 2,036,579 5,226 0.52
Time deposits (5) 533,630 2,755 1.04 502,878 2,513 1.00
Total interest-bearing deposits 3,998,170 12,303 0.62 3,259,165 8,994 0.55
Federal funds purchased 347,981 1,699 0.98 479,187 1,512 0.63
Other borrowings 55,184 1,434 5.24 55,576 1,435 5.19
Total interest-bearing liabilities $ 4,401,335 $ 15,436 0.71 % $ 3,793,928 $ 11,941 0.63 %
Non-interest-bearing liabilities:
Non-interest-bearing demand deposits 1,297,578 1,110,076
Other liabilities 14,417 12,747
Stockholders' equity 545,936 466,569
Unrealized gains on securities and derivatives 199 4,354
Total liabilities and stockholders' equity $ 6,259,465 $ 5,387,674
Net interest income $ 108,636 $ 91,096
Net interest spread 3.46 % 3.37 %
Net interest margin 3.65 % 3.54 %

~~(1)~~ ~~Non-accrual loans are included~~net interest margin percentage. Growth in ~~average loan balances in all periods.  Loan fees of $1,626,000 and $939,000 are included in interest income in 2017 and 2016, respectively.~~
~~(2)~~ ~~Accretion on acquired loan discounts of $267,000 and $624,000 are included in interest income in 2017 and 2016, respectively.~~
~~(3)~~ ~~Interest income and yields are presented on a fully taxable equivalent basis using a tax rate of 35%.~~
~~(4)~~ ~~Unrealized gains of $304,000 and $6,694,000 are excluded from the yield calculation in 2017 and 2016, respectively.~~
~~(5)~~ ~~Accretion on acquired CD premiums of $32,000 and $140,000 are included in interest in 2017 and 2016, respectively.~~
38
For the Six Months Ended June 30,
2017 Compared to 2016 Increase (Decrease) in Interest Income and Expense Due to Changes in:
Volume Rate Total
(In Thousands)
Interest-earning assets:
Loans, net of unearned income
Taxable $ 17,054 $ 1,641 $ 18,695
Tax-exempt 502 (7 ) 495
Total loans, net of unearned income 17,556 1,634 19,190
Mortgages held for sale (18 ) (3 ) (21 )
Debt securities:
Taxable 1,881 (25 ) 1,856
Tax-exempt (72 ) (272 ) (344 )
Total debt securities 1,809 (297 ) 1,512
Federal funds sold 275 248 523
Restricted equity securities (107 ) 40 (67 )
Interest-bearing balances with banks (590 ) 488 (102 )
Total interest-earning assets 18,925 2,110 21,035

Interest-bearing liabilities:
Interest-bearing demand deposits 195 110 305
Savings 12 3 15
Money market accounts 1,683 1,064 2,747
Time deposits 152 90 242
Total interest-bearing deposits 2,042 1,267 3,309
Federal funds purchased (490 ) 677 187
Other borrowed funds (12 ) 11 (1 )
Total interest-bearing liabilities 1,540 1,955 3,495
Increase in net interest income $ 17,385 $ 155 $ 17,540
~~Our growth in loans,~~ non-interest bearing deposits ~~and average equity continues to drive favorable volume component change and overall change. Also, the recent increases in the Federal Reserve Bank’s target federal funds rate~~ has also contributed to ~~a favorable variance relating to the~~our growth in net interest ~~rate component.~~income.

Provision for Loan Losses

The provision for loan losses represents the amount determined by management to be necessary to maintain the allowance for loan losses at a level capable of absorbing inherent losses in the loan portfolio. Our management reviews the adequacy of the allowance for loan losses on a quarterly basis. The allowance for loan losses calculation is segregated into various segments that include classified loans, loans with specific allocations and pass rated loans. A pass rated loan is generally characterized by a very low to average risk of default and in which management perceives there is a minimal risk of loss. Loans are rated using a nine-point risk grade scale with loan officers having the primary responsibility for assigning risk grades and for the timely reporting of changes in the risk grades. Based on these processes, and the assigned risk grades, the criticized and classified loans in the portfolio are segregated into the following regulatory classifications: Special Mention, Substandard, Doubtful or Loss, with some general allocation of reserve based on ~~these grades.~~various internal and external factors. At ~~June 30, 2017,~~March 31, 2018, total loans rated Special Mention, Substandard, and Doubtful were ~~$122.6~~$102.4 million, or ~~2.3%~~1.7% of total loans, compared to ~~$128.8~~$99.8 million, or ~~2.6%~~1.7% of total loans, at December 31, ~~2016.~~2017. Impaired loans are reviewed specifically and separately under FASB ASC 310-30-35, Subsequent Measurement of Impaired Loans, to determine the appropriate reserve allocation. Our management compares the investment in an impaired loan with the present value of expected future cash flow discounted at the loan’s effective interest rate, the loan’s observable market price or the fair value of the collateral, if the loan is collateral-dependent, to determine the specific reserve allowance. Reserve percentages assigned to non-impaired loans are based on historical charge-off experience adjusted for other risk factors. To evaluate the overall adequacy of the allowance to absorb losses inherent in our loan portfolio, our management considers historical loss experience based on volume and types of loans, trends in classifications, volume and trends in delinquencies and nonaccruals, economic conditions and other pertinent information. Based on future evaluations, additional provisions for loan losses may be necessary to maintain the allowance for loan losses at an appropriate level.

32
The provision for loan losses was ~~$4.4~~$4.1 million for the three months ended ~~June 30, 2017, an increase~~March 31, 2018, a decrease of ~~$0.6~~$0.9 million from ~~$3.8~~$5.0 million for the three months ended ~~June 30, 2016, and was $9.4 million~~March 31, 2017. Net credit charge-offs to quarter-to-date average loans were 0.10% for the ~~six months ended June 30, 2017,~~first quarter of 2018, a ~~$3.5 million increase~~46 basis point decrease compared to ~~$5.9 million~~0.56% for the ~~six months ended June 30, 2016.~~fourth quarter of 2017 and a 14 basis point decrease compared to 0.24% for the first quarter of 2017. Nonperforming loans decreased to ~~$11.0~~$9.9 million, or ~~0.21%~~0.17% of total loans, at ~~June 30, 2017~~March 31, 2018 from ~~$16.9~~$10.8 million, or ~~0.34%~~0.19% of total loans, at December 31, ~~2016, but~~2017, and were ~~higher~~lower than ~~$5.2~~$12.1 million, or ~~0.11%~~0.23% of total loans, at ~~June 30, 2016.~~March 31, 2017. Impaired loans increased to ~~$51.0~~$42.6 million, or ~~0.94%~~0.72% of total loans, at ~~June 30, 2017,~~March 31, 2018, compared to ~~$45.6~~$40.5 million, or ~~0.93%~~0.69% of total loans, at December 31, ~~2016.~~2017. The allowance for loan losses totaled ~~$55.1~~$62.1 million, or ~~1.03%~~1.05% of total loans, net of unearned income, at ~~June 30, 2017,~~March 31, 2018, compared to ~~$51.9~~$59.4 million, or ~~1.06%~~1.02% of loans, net of unearned income, at December 31, ~~2016.~~2017.
39

Noninterest Income

Noninterest income totaled ~~$4.8~~$4.9 million for the three months ended ~~June 30, 2017,~~March 31, 2018, an increase of ~~$1.0 million,~~$323,000, or ~~12.2%~~7.1%, compared to the corresponding period in ~~2016, and totaled $9.4 million for~~2017. Service charges on deposit accounts increased $231,000 during the ~~six~~three months ended ~~June 30, 2017, an increase of $2.1~~March 31, 2018, or 17.1%, from $1.4 million ~~or 28.4%, compared to~~during the corresponding period in ~~2016. Mortgage banking~~2017, primarily the result of increased non-sufficient funds charges. Credit card income increased ~~$0.2 million,~~$399,000, or ~~18.1%~~33.8%, to ~~$1.1~~$1.6 million ~~for~~during the three months ended ~~June 30, 2017~~March 31, 2018 compared to ~~$0.9~~$1.2 million during the corresponding period in 2017. Spending on credit cards increased 38% for the same period in 2016, and increased $0.4 million, or 25.1%, to $2.0 million for the six months ended June 30, 2017 compared to $1.6 million for the same period in 2016, resulting from increases in average profit margins per loan originated. Credit card income increased $0.6 million for the three months ended June 30, 2017 from $0.6 million for the same period in 2016, and increased to $2.4 million for the six months ended June 30, 2017 compared to $1.0 million for the same period in 2016. The number of credit card accounts increased 22% from June 30, 2016 to 2017 and the volume of purchases on cards increased 127% from the quarter ended June 30, 2016 to the quarter ended June 30, 2017.comparative period.

Noninterest Expense

Noninterest expense totaled ~~$21.9~~$23.5 million for the three months ended ~~June 30, 2017,~~March 31, 2018, an increase of ~~$2.4~~$2.2 million, or ~~12.2%~~10.6%, compared to ~~$19.5~~$21.3 million for the ~~same~~corresponding period in ~~2016, and totaled $43.1 million for the six months ended June 30, 2017, an increase of $4.3 million, or 11.2%, compared to $38.8 million for the same period in 2016.~~2017.

Details of expenses are as follows:

· Salary and benefit expense increased $1.3 million, or 12.1%, to $12.0 million for the three months ended June 30, 2017 from $10.7 million for the same period in 2016, and increased $1.9 million, or 8.9%, to $23.7 million for the six months ended June 30, 2017 from $21.8 million for the same period in 2016. Total employees increased from 417 as of June 30, 2016 to 433 as of June 30, 2017, or 3.8%.
Salary and benefit expense increased $1.6 million, or 13.7%, to $13.3 million for the three months ended March 31, 2018 from $11.7 million for the corresponding period in 2017. We had 437 total employees as of March 31, 2018 compared to 417 as of March 31, 2017, a 4.8% increase. There was also an increase in incentive compensation expense in the first quarter of 2018 compared to the 2017 same period.

· Occupancy expense increased $0.2 million, or 12.0%, to $2.3 million for the three months ended June 30, 2017 from $2.0 million for the corresponding period in 2016, and increased $0.5 million, or 12.4%, to $4.5 million from $4.0 million for the six months ended June 30, 2017 compared to the corresponding period in 2016. We leased a new main office building in our Tampa Bay, Florida region starting in early 2017 which was a replacement of our previous loan production office in Pasco County. We also leased a new main office in our Mobile, Alabama region starting in late 2016, a replacement of a previous smaller location with less visibility.
Occupancy expense decreased $0.3 million, or 13.0%, to $2.0 million for the three months ended March 31, 2018 from $2.3 million for the corresponding period in 2017. A decrease in rental payments more than offset increased depreciation expense resulting from our fourth quarter 2017 move from our previous headquarters building, which was leased, to our new headquarters building, which is owned.

· Federal deposit insurance and other regulatory assessments increased $0.3 million to $1.1 million for the three months ended June 30, 2017 compared to the same period in 2016, and increased $0.5 million to $2.1 million for the six months ended June 30, 2017 compared to the same period in 2016. This increase is driven by asset growth and a change in the assessment rate calculation enacted by the FDIC starting in the third quarter of 2016.
FDIC insurance assessments increased $0.1 million as a result of asset growth, which impacts our assessment base.

· Other operating expenses increased $0.7 million to $5.6 million for the three months ended June 30, 2017 compared to the same period in 2016, and increased $1.9 million to $11.1 million for the six months ended June 30, 2017 compared to the same period in 2016. State sales taxes paid for the construction of our new headquarters building in Birmingham, Alabama contributed $0.1 million and $0.3 million of this increase for the three and six month comparative periods. Credit card processing expenses increased by $0.2 million and $0.3 million for the three and six month comparative periods.
Expenses related to other real estate owned increased to $0.3 million for the three months ended March 31, 2018 from $0.1 million for the corresponding period in 2017. Write-downs in property values reflecting updated appraisals on three properties and construction of a water retention pond on another property contributed to this increase in OREO expenses.
Other operating expenses increased $0.5 million, or 9.1%, to $6.0 million for the three months ended March 31, 2018 from $5.5 million for the corresponding period in 2017. Disputed debit card transaction write-offs, increases in data processing costs and increases in bank service charges related to our correspondent banking activities contributed to the increase in other operating expenses, but were partially offset by lower state sales taxes paid. The decrease in state sales tax relates to payments to our contractors for the construction of our new headquarters building during 2017.

40 33

~~The following table presents our non-interest income and non-interest expense for the three and six month periods ending June 30, 2017 compared to the same periods in 2016.~~
Three Months Ended
June 30, Six Months Ended
June 30, Three Months Ended March 31,
2017 2016 $ change % change 2017 2016 $ change % change 2018 2017 $ change % change
Non-interest income:
(Dollars In Thousands)
Noninterest income:
Service charges on deposit accounts $ 1,382 $ 1,306 $ 76 5.8 % $ 2,736 $ 2,613 $ 123 4.7 % $ 1,585 $ 1,354 $ 231 17.1 %
Mortgage banking 1,064 901 163 18.1 % 1,963 1,569 394 25.1 % 518 899 (381 ) (42.4 )%
Credit card income 1,189 572 617 107.9 % 2,368 1,041 1,327 127.5 % 1,578 1,179 399 33.8 %
Securities gains - (3 ) 3 NM - (3 ) 3 NM 4 - 4 NM
Increase in cash surrender value life insurance 785 655 130 19.8 % 1,509 1,279 230 18.0 % 777 724 53 7.3 %
Other operating income 385 416 (31 ) (7.5 )% 775 783 (8 ) (1.0 )% 407 390 17 4.4 %
Total non-interest income $ 4,805 $ 3,847 $ 958 24.9 % $ 9,351 $ 7,282 $ 2,069 28.4 %
Total noninterest income $ 4,869 $ 4,546 $ 323 7.1 %

Non-interest expense:
Noninterest expenses:
Salaries and employee benefits 12,031 10,733 1,298 12.1 % 23,744 21,800 1,944 8.9 % $ 13,296 $ 11,713 $ 1,583 13.5 %
Equipment and occupancy expense 2,265 2,023 242 12.0 % 4,505 4,008 497 12.4 % 1,954 2,250 (296 ) (13.2 )%
Professional services 808 999 (191 ) (19.1 )% 1,579 1,737 (158 ) (9.1 )% 805 771 34 4.4 %
FDIC and other regulatory assessments 1,081 803 278 34.6 % 2,078 1,553 525 33.8 % 1,133 997 136 13.6 %
OREO expense 56 41 15 36.6 % 132 490 (358 ) (73.1 )%
Other operating expense 5,634 4,905 729 14.9 % 11,104 9,206 1,898 20.6 %
Total non-interest expense $ 21,875 $ 19,504 $ 2,371 12.2 % $ 43,142 $ 38,794 $ 4,348 11.2 %
Other real estate owned expense 316 76 240 315.8 %
Other operating expenses 6,008 5,460 548 10.0 %
Total non-interest expenses $ 23,512 $ 21,267 $ 2,245 10.6 %

Income Tax Expense

Income tax expense was ~~$10.0~~$7.1 million for the three months ended ~~June 30, 2017~~March 31, 2018 versus ~~$7.6~~$7.8 million for the same period in ~~2016,~~2017. Lower corporate income tax rates resulting from the passage of the Tax Cuts and ~~was $17.8 million for the six months ended June 30,~~Jobs Act in December 2017 ~~compared to $13.9 million for the same period~~has resulted in ~~2016.~~lower effective tax rates. Our effective tax rate for the three ~~and six~~ months ended ~~June 30, 2017~~March 31, 2018 was ~~29.2% and 27.6%~~17.8%, ~~respectively,~~ compared to ~~28.6% and 26.3%~~25.8% for the corresponding ~~periods~~period in ~~2016, respectively.~~2017. We recognized ~~a reduction in provision for income taxes resulting from~~ excess tax benefits as a credit to our income tax expense from the exercise ~~and vesting~~ of stock options and vesting of restricted stock ~~during~~of $1.5 million in the ~~three and six months ended June 30, 2017~~first quarter of ~~$1.4 million and $3.5 million, respectively,~~2018, compared to ~~$1.2~~$2.1 million ~~and $3.5 million during~~in the first quarter ~~and six months ended June 30, 2016, respectively.~~of 2017. Our primary permanent differences are related to ~~tax exempt~~tax-exempt income on securities, state income tax benefit on real estate investment trust dividends, various qualifying tax credits and change in cash surrender value of bank-owned life insurance.

We own real estate investment trusts for the purpose of holding and managing participations in residential mortgages and commercial real estate loans originated by the Bank. The trusts are wholly-owned subsidiaries of a trust holding company, which in turn is an indirect wholly-owned subsidiary of the Bank. The trusts earn interest income on the loans they hold and incur operating expenses related to their activities. They pay their net earnings, in the form of dividends, to the Bank, which receives a deduction for state income taxes.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Like all financial institutions, we are subject to market risk from changes in interest rates. Interest rate risk is inherent in the balance sheet due to the mismatch between the maturities of rate-sensitive assets and rate-sensitive liabilities. If rates are rising, and the level of rate-sensitive liabilities exceeds the level of rate-sensitive assets, the net interest margin will be negatively impacted. Conversely, if rates are falling, and the level of rate-sensitive liabilities is greater than the level of rate-sensitive assets, the impact on the net interest margin will be favorable. Managing interest rate risk is further complicated by the fact that all rates do not change at the same pace; in other words, short-term rates may be rising while longer-term rates remain stable. In addition, different types of rate-sensitive assets and rate-sensitive liabilities react differently to changes in rates.

To manage interest rate risk, we must take a position on the expected future trend of interest rates. Rates may rise, fall or remain the same. Our asset-liability committee develops its view of future rate trends and strives to manage rate risk within a targeted range by monitoring economic indicators, examining the views of economists and other experts, and understanding the current status of our balance sheet. Our annual budget reflects the anticipated rate environment for the next 12 months. The asset-liability committee conducts a quarterly analysis of the rate sensitivity position and reports its results to our board of directors.

The asset-liability committee thoroughly analyzes the maturities of rate-sensitive assets and liabilities. This analysis measures the “gap”, which is defined as the difference between the dollar amount of rate-sensitive assets repricing during a period and the volume of rate-sensitive liabilities repricing during the same period. The gap is also expressed as the ratio of rate-sensitive assets divided by rate-sensitive liabilities. If the ratio is greater than one, the dollar value of assets exceeds the dollar value of ~~liabilities;~~liabilities and the balance sheet is “asset-sensitive.” Conversely, if the value of liabilities exceeds the value of assets, the ratio is less than one and the balance sheet is “liability-sensitive.” Our internal policy requires management to maintain the gap such that net interest margins will not change more than 10% if interest rates change 100 basis points or more than 15% if interest rates change 200 basis points. There have been no changes to our policies or procedures for analyzing our interest rate risk since December 31, ~~2016,~~2017, and there are no significant changes to our sensitivity to changes in interest rates since December 31, ~~2016~~2017 as disclosed in our ~~Annual Report on~~ Form 10-K.

41 34

ITEM 4. CONTROLS AND PROCEDURES

CEO and CFO Certification.

Appearing as exhibits to this report are Certifications of our Chief Executive Officer (“CEO”) and our Chief Financial Officer (“CFO”). The Certifications are required to be made by Rule 13a-14 ~~or Rule 15d-14~~ under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). This item contains the information about the evaluation that is referred to in the Certifications, and the information set forth below in this Item 4 should be read in conjunction with the Certifications for a more complete understanding of the Certifications.

Evaluation of Disclosure Controls and ~~Procedures.~~Procedures.

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the ~~SEC's~~SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our CEO and CFO, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives.

We conducted an evaluation (the ~~"Evaluation"~~“Evaluation”) of the effectiveness of the design and operation of our disclosure controls and procedures under the supervision and with the participation of our management, including our CEO and CFO, as of ~~June 30, 2017.~~March 31, 2018. Based upon the Evaluation, our CEO and CFO have concluded that, as of ~~June 30, 2017,~~March 31, 2018, our disclosure controls and procedures are effective to ensure that material information relating to ServisFirst Bancshares, Inc. and its subsidiaries is made known to management, including the CEO and CFO, particularly during the period when our periodic reports are being prepared.

There have not been any changes in our internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) during the fiscal quarter to which this report relates that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

From time to time we may be a party to various legal proceedings arising in the ordinary course of business. Management does not believe the Company or the Bank is currently a party to any material legal ~~proceedings.~~proceedings except as disclosed in Item 3, “Legal Proceedings”, in our Annual Report on Form 10-K for the fiscal year ended December 31, 2017, and there has been no material change in any matter described therein.

ITEM 1A. RISK FACTORS

Our business is influenced by many factors that are difficult to predict, involve uncertainties that may materially affect actual results and are often beyond our control. We have identified a number of these risk factors in our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2016,~~2017, which should be taken into consideration when reviewing the information contained in this report. There have been no material changes with regard to the risk factors previously disclosed in the Form 10-K. For other factors that may cause actual results to differ materially from those indicated in any forward-looking statement or projection contained in this report, see “Forward-Looking Statements” under Part 1, Item 2 above.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None.
42

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.
35

ITEM 5. OTHER INFORMATION

None.

ITEM 6. EXHIBITS

(a) Exhibit:
~~Exhibit:~~ ~~Description~~
31.01 Certification of principal executive officer pursuant to Rule 13a-14(a).
31.02 Certification of principal financial officer pursuant to Rule 13a-14(a).
32.01 Certification of principal executive officer pursuant to 18 U.S.C. Section 1350.
32.02 Certification of principal financial officer pursuant to 18 U.S.C. Section 1350.
101.INS XBRL Instance Document
101.SCH XBRL Taxonomy Extension Schema Document
101.CAL XBRL Taxonomy Extension Calculation ~~Linkbase Document~~
~~101.DEF~~ ~~XBRL Taxonomy Extension Definition~~ Linkbase Document
101.LAB XBRL Taxonomy Extension Label Linkbase Document
101.PRE XBRL Taxonomy Extension Presentation Linkbase Document
~~101.INS~~ ~~XBRL Instance Document~~
~~101.SCH~~101.DEF XBRL Taxonomy Extension ~~Schema~~Definition Linkbase Document

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

SERVISFIRST BANCSHARES, INC.

Date: ~~August~~May 1, ~~2017~~2018 By /s/ Thomas A. Broughton III
Thomas A. Broughton III
President and Chief Executive Officer

Date: ~~August~~May 1, ~~2017~~2018 By /s/ William M. Foshee
William M. Foshee
Chief Financial Officer

43
36

PART I. FINANCIAL INFORMATION			3
	Item 1.	Consolidated Financial Statements	3
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2623
	Item 3.	Quantitative and Qualitative Disclosures about Market Risk	4134
	Item 4.	Controls and Procedures	4235

PART II. OTHER INFORMATION			4235
	Item 1	Legal Proceedings	4235
	Item 1A.	Risk Factors	4235
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	4235
	Item 3.	Defaults Upon Senior Securities	4335
	Item 4.	Mine Safety Disclosures	4335
	Item 5.	Other Information	4336
	Item 6.	Exhibits	4336

~~EX-31.01 SECTION 302 CERTIFICATION OF THE CEO~~
~~EX-31.02 SECTION 302 CERTIFICATION OF THE CFO~~
~~EX-32.01 SECTION 906 CERTIFICATION OF THE CEO~~
~~EX-32.02 SECTION 906 CERTIFICATION OF THE CFO~~

	Common Stock		Additional Paid-in Capital		Retained Earnings			Accumulated Other Comprehensive Income			Noncontrolling Interest		Total Stockholders' Equity
Balance, December 31, 2015	$	52	$	211,546	$	234,124		$	3,048		$	377	$	449,147
Common dividends paid, $0.04 per share		-		-		(2,095	)		-			-		(2,095	)
Common dividends declared, $.04 per share		-		-		(2,099	)		-			-		(2,099	)
Preferred dividends paid		-		-		(23	)		-			-		(23	)
Issue 549,500 shares of common stock upon exercise of stock options		-		2,339		-			-			-		2,339
Stock based compensation expense		-		640		-			-			-		640
Other comprehensive income, net of tax		-		-		-			2,356			-		2,356
Net income		-		-		38,832			-			-		38,832
Balance, June 30, 2016	$	52	$	214,525	$	268,739		$	5,404		$	377	$	489,097

Balance, December 31, 2016	$	53	$	215,932	$	307,151		$	(624	)	$	377	$	522,889
Common dividends paid, $0.05 per share		-		-		(2,641	)		-			-		(2,641	)
Common dividends declared, $0.05 per share		-		-		(2,645	)		-			-		(2,645	)
Preferred dividends paid		-		-		(31	)		-			-		(31	)
Issue 272,466 shares of common stock upon exercise of stock options		-		717		-			-			-		717
Issue 125 shares of REIT preferred stock		-		-		-			-			125		125
Stock based compensation expense		-		622		-			-			-		622
Other comprehensive income, net of tax		-		-		-			1,367			-		1,367
Net income		-		-		46,683			-			-		46,683
Balance, June 30, 2017	$	53	$	217,271	$	348,517		$	743		$	502	$	567,086

	Three Months Ended June 30,				Six Months Ended June 30,
	2017		2016		2017		2016
	(In Thousands, Except Shares and Per Share Data)
Earnings per common share
Weighted average common shares outstanding		52,864,761		52,425,726		52,805,378		52,340,390
Net income available to common stockholders	$	24,133	$	18,853	$	46,652	$	38,809
Basic earnings per common share	$	0.46	$	0.36	$	0.88	$	0.74

Weighted average common shares outstanding		52,864,761		52,425,726		52,805,378		52,340,390
Dilutive effects of assumed conversions and exercise of stock options and warrants		1,235,843		1,026,800		1,311,694		952,684
Weighted average common and dilutive potential common shares outstanding		54,100,604		53,452,526		54,117,072		53,293,074
Net income available to common stockholders	$	24,133	$	18,853	$	46,652	$	38,809
Diluted earnings per common share	$	0.45	$	0.36	$	0.86	$	0.73

	Commercial financial and agricultural			Real estate - construction			Real estate - mortgage			Consumer			Total

	(In Thousands)
	Three Months Ended June 30, 2017
Allowance for loan losses:
Balance at March 31, 2017	$	28,707		$	4,825		$	19,962		$	398		$	53,892
Charge-offs		(3,067	)		(40	)		(106	)		(33	)		(3,246	)
Recoveries		16			14			2			-			32
Provision		3,471			339			534			37			4,381
Balance at June 30, 2017	$	29,127		$	5,138		$	20,392		$	402		$	55,059

		Three Months Ended June 30, 2016
Allowance for loan losses:
Balance at March 31, 2016	$	22,839		$	5,005		$	16,901		$	400		$	45,145
Charge-offs		(1,412	)		(355	)		(191	)		(31	)		(1,989	)
Recoveries		1			39			2			-			42
Provision		2,227			590			888			95			3,800
Balance at June 30, 2016	$	23,655		$	5,279		$	17,600		$	464		$	46,998

		Six Months Ended June 30, 2017
Allowance for loan losses:
Balance at December 31, 2016	$	28,872		$	5,125		$	17,504		$	392		$	51,893
Charge-offs		(5,922	)		(40	)		(372	)		(108	)		(6,442	)
Recoveries		206			30			4			1			241
Provision		5,971			23			3,256			117			9,367
Balance at June 30, 2017	$	29,127		$	5,138		$	20,392		$	402		$	55,059

		Six Months Ended June 30, 2016
Allowance for loan losses:
Balance at December 31, 2015	$	21,495		$	5,432		$	16,061		$	431		$	43,419
Charge-offs		(1,462	)		(736	)		(191	)		(49	)		(2,438	)
Recoveries		4			55			99			-			158
Provision		3,618			528			1,631			82			5,859
Balance at June 30, 2016	$	23,655		$	5,279		$	17,600		$	464		$	46,998

		As of June 30, 2017
Allowance for loan losses:
Individually Evaluated for Impairment	$	4,457		$	921		$	1,779		$	-		$	7,157
Collectively Evaluated for Impairment		24,670			4,217			18,613			402			47,902

Loans:
Ending Balance	$	2,123,498		$	395,398		$	2,769,568		$	55,224		$	5,343,688
Individually Evaluated for Impairment		31,430			3,420			16,171			-			51,021
Collectively Evaluated for Impairment		2,092,068			391,978			2,753,397			55,224			5,292,667

		As of December 31, 2016
Allowance for loan losses:
Individually Evaluated for Impairment	$	6,607		$	923		$	622		$	-		$	8,152
Collectively Evaluated for Impairment		22,265			4,202			16,882			392			43,741

Loans:
Ending Balance	$	1,982,267		$	335,085		$	2,539,207		$	55,211		$	4,911,770
Individually Evaluated for Impairment		27,922			4,314			13,350			3			45,589
Collectively Evaluated for Impairment		1,954,345			330,771			2,525,857			55,208			4,866,181

	June 30, 2017						For the three months ended June 30, 2017				For the six months ended June 30, 2017
	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized in Period		Average Recorded Investment		Interest Income Recognized in Period

	(In Thousands)
With no allowance recorded:
Commercial, financial and agricultural	$	6,003	$	6,016	$	-	$	6,213	$	66	$	6,272	$	137
Real estate - construction		46		48		-		49		1		49		2
Real estate - mortgage:
Owner-occupied commercial		2,398		2,564		-		2,584		37		2,601		76
1-4 family mortgage		2,674		2,674		-		2,678		29		2,716		51
Other mortgage		732		732		-		733		10		734		21
Total real estate - mortgage		5,804		5,970		-		5,995		76		6,051		148
Consumer		-		-		-		-		-		-		-
Total with no allowance recorded		11,853		12,034		-		12,257		143		12,372		287

With an allowance recorded:
Commercial, financial and agricultural		25,427		27,127		4,457		27,760		257		27,525		541
Real estate - construction		3,374		3,374		921		3,374		14		3,374		28
Real estate - mortgage:
Owner-occupied commercial		7,774		7,774		1,205		7,774		55		7,547		134
1-4 family mortgage		1,613		1,613		260		1,617		20		1,644		42
Other mortgage		980		980		314		983		12		990		25
Total real estate - mortgage		10,367		10,367		1,779		10,374		87		10,181		201
Consumer		-		-		-		-		-		-		-
Total with allowance recorded		39,168		40,868		7,157		41,508		358		41,080		770

Total Impaired Loans:
Commercial, financial and agricultural		31,430		33,143		4,457		33,973		323		33,797		678
Real estate - construction		3,420		3,422		921		3,423		15		3,423		30
Real estate - mortgage:
Owner-occupied commercial		10,172		10,338		1,205		10,358		92		10,148		210
1-4 family mortgage		4,287		4,287		260		4,295		49		4,360		93
Other mortgage		1,712		1,712		314		1,716		22		1,724		46
Total real estate - mortgage		16,171		16,337		1,779		16,369		163		16,232		349
Consumer		-		-		-		-		-		-		-
Total impaired loans	$	51,021	$	52,902	$	7,157	$	53,765	$	501	$	53,452	$	1,057

	Three Months Ended June 30, 2017						Six Months Ended June 30, 2017
	Number of Contracts		Pre- Modification Outstanding Recorded Investment		Post- Modification Outstanding Recorded Investment		Number of Contracts		Pre- Modification Outstanding Recorded Investment		Post- Modification Outstanding Recorded Investment
	(In Thousands)
Troubled Debt Restructurings
Commercial, financial and agricultural		5	$	7,205	$	7,205		5	$	7,205	$	7,205
Real estate - construction		1		997		997		1		997		997
Real estate - mortgage:
Owner-occupied commercial		2		3,664		3,664		2		3,664		3,664
1-4 family mortgage		1		850		850		1		850		850
Other mortgage		-		-		-		-		-		-
Total real estate mortgage		3		4,514		4,514		3		4,514		4,514
Consumer		-		-		-		-		-		-
		9	$	12,716	$	12,716		9	$	12,716	$	12,716

June 30, 2017	Amount		Percentage of loans in each category to total loans
	(In Thousands)
Commercial, financial and agricultural	$	29,127		39.74	%
Real estate - construction		5,138		7.40	%
Real estate - mortgage		20,392		51.83	%
Consumer		402		1.03	%
Total	$	55,059		100.00	%

			Percentage
			of loans in
			each
			category to
December 31, 2017	Amount		total loans
	(In Thousands)
Commercial, financial and agricultural	$	32,880		38.96	%
Real estate - construction		4,989		9.93	%
Real estate - mortgage		21,022		50.05	%
Consumer		515		1.06	%
Total	$	59,406		100.00	%

	Payments due by Period
	Total		1 year or less		Over 1 - 3 years		Over 3 - 5 years		Over 5 years
	(In Thousands)
Contractual Obligations (1)

Deposits without a stated maturity	$	4,869,053	$	-	$	-	$	-	$	-
Certificates of deposit (2)		525,757		284,730		157,765		81,335		1,927
Federal funds purchased		300,226		300,226		-		-		-
Subordinated debentures		55,075		400		-		-		54,675
Operating lease commitments		18,677		3,843		6,394		4,107		4,333
Total	$	5,768,788	$	589,199	$	164,159	$	85,442	$	60,935

											To Be Well Capitalized					Actual					For Capital Adequacy Purposes					To Be Well Capitalized Under Prompt Corrective Action Provisions
						For Capital Adequacy					Under Prompt Corrective					Amount		Ratio			Amount		Ratio			Amount		Ratio
	Actual					Purposes					Action Provisions
	Amount		Ratio			Amount		Ratio			Amount		Ratio
As of June 30, 2017:	(Dollars in thousands)
CET 1 Capital to Risk-Weighted Assets:
As of March 31, 2018:
CET 1 Capital to Risk Weighted Assets:
Consolidated	$	551,433		9.72	%	$	255,319		4.50	%		N/A		N/A		$	619,494		9.87	%	$	282,487		4.50	%		N/A		N/A
ServisFirst Bank		603,094		10.63	%		255,286		4.50	%	$	368,747		6.50	%		683,126		10.88	%		282,443		4.50	%	$	407,973		6.50	%
Tier 1 Capital to Risk-Weighted Assets:
Tier 1 Capital to Risk Weighted Assets:
Consolidated		551,935		9.73	%		340,425		6.00	%		N/A		N/A			619,996		9.88	%		376,650		6.00	%		N/A		N/A
ServisFirst Bank		603,596		10.64	%		340,382		6.00	%		453,842		8.00	%		683,628		10.89	%		376,591		6.00	%		502,121		8.00	%
Total Capital to Risk-Weighted Assets:
Total Capital to Risk Weighted Assets:
Consolidated		662,169		11.67	%		453,900		8.00	%		N/A		N/A			747,185		11.90	%		502,200		8.00	%		N/A		N/A
ServisFirst Bank		659,155		11.62	%		453,842		8.00	%		567,303		10.00			746,178		11.89	%		502,121		8.00	%		627,651		10.00	%
Tier 1 Capital to Average Assets:
Consolidated		551,935		8.88	%		248,732		4.00	%		N/A		N/A			619,996		8.95	%		277,205		4.00	%		N/A		N/A
ServisFirst Bank		603,596		9.71	%		249,293		4.00	%		311,616		5.00	%		683,628		9.87	%		277,192		4.00	%		346,490		5.00	%

As of December 31, 2016:
CET 1 Capital to Risk-Weighted Assets:
As of December 31, 2017:
CET 1 Capital to Risk Weighted Assets:
Consolidated	$	508,982		9.78	%	$	234,262		4.50	%		N/A		N/A		$	593,111		9.51	%	$	280,553		4.50	%		N/A		N/A
ServisFirst Bank		560,731		10.77	%		234,232		4.50	%	$	338,335		6.50	%		651,201		10.45	%		280,523		4.50	%	$	405,199		6.50	%
Tier 1 Capital to Risk-Weighted Assets:
Tier 1 Capital to Risk Weighted Assets:
Consolidated		509,359		9.78	%		312,350		6.00	%		N/A		N/A			593,613		9.52	%		374,070		6.00	%		N/A		N/A
ServisFirst Bank		561,108		10.78	%		312,309		6.00	%		416,413		8.00	%		651,703		10.45	%		374,030		6.00	%		498,707		8.00	%
Total Capital to Risk-Weighted Assets:
Total Capital to Risk Weighted Assets:
Consolidated		616,415		11.84	%		416,467		8.00	%		N/A		N/A			718,151		11.52	%		498,760		8.00	%		N/A		N/A
ServisFirst Bank		613,501		11.79	%		416,413		8.00	%		520,516		10.00	%		711,609		11.42	%		498,707		8.00	%		623,384		10.00	%
Tier 1 Capital to Average Assets:
Consolidated		509,359		8.22	%		247,777		4.00	%		N/A		N/A			593,613		8.51	%		278,970		4.00	%		N/A		N/A
ServisFirst Bank		561,108		9.06	%		247,760		4.00	%		309,700		5.00	%		651,703		9.35	%		278,954		4.00	%		348,693		5.00	%

As of June 30, 2016:
CET 1 Capital to Risk-Weighted Assets:
As of March 31, 2017:
CET 1 Capital to Risk Weighted Assets:
Consolidated	$	469,101		9.83	%	$	214,649		4.50	%		N/A		N/A		$	530,034		9.67	%	$	246,744		4.50	%		N/A		N/A
ServisFirst Bank		517,987		10.86	%		214,615		4.50	%	$	309,999		6.50	%		582,483		10.63	%		246,695		4.50	%	$	356,338		6.50	%
Tier 1 Capital to Risk-Weighted Assets:
Tier 1 Capital to Risk Weighted Assets:
Consolidated		469,478		9.84	%		286,199		6.00	%		N/A		N/A			530,536		9.68	%		328,992		6.00	%		N/A		N/A
ServisFirst Bank		518,364		10.87	%		286,153		6.00	%		381,538		8.00	%		582,985		10.63	%		328,927		6.00	%		438,570		8.00	%
Total Capital to Risk-Weighted Assets:
Total Capital to Risk Weighted Assets:
Consolidated		571,627		11.98	%		381,598		8.00	%		N/A		N/A			639,597		11.66	%		438,656		8.00	%		N/A		N/A
ServisFirst Bank		565,862		11.86	%		381,538		8.00	%		476,922		10.00	%		637,377		11.63	%		438,570		8.00	%		548,212		10.00	%
Tier 1 Capital to Average Assets:
Consolidated		469,478		8.52	%		220,506		4.00	%		N/A		N/A			530,536		8.46	%		250,867		4.00	%		N/A		N/A
ServisFirst Bank		518,364		9.40	%		220,492		4.00	%		275,615		5.00	%		582,985		9.30	%		250,848		4.00	%		313,560		5.00	%

	June 30, 2017
	(In Thousands)
Commitments to extend credit	$	1,889,718
Credit card arrangements		88,337
Standby letters of credit		39,710
	$	2,017,765

	For the Three Months Ended June 30,									For the Three Months Ended March 31,
	2017 Compared to 2016 Increase (Decrease) in Interest Income and Expense Due to Changes in:									2018 Compared to 2017 Increase (Decrease) in Interest Income and Expense Due to Changes in:
	Volume			Rate			Total			Volume			Rate			Total
	(In Thousands)									(In Thousands)
Interest-earning assets:
Loans, net of unearned income
Taxable	$	9,100		$	1,393		$	10,493		$	10,139		$	3,900		$	14,039
Tax-exempt		304			17			321			94			(48	)		46
Total loans, net of unearned income		9,404			1,269			10,814			10,233			3,852			14,085
Mortgages held for sale		(13	)		5			(8	)		(21	)		5			(16	)
Debt securities:
Taxable		1,062			(26	)		1,036			409			249			658
Tax-exempt		(21	)		(119	)		(140	)		(99	)		(276	)		(375	)
Total debt securities		1,041			(145	)		896			310			(27	)		283
Federal funds sold		(83	)		160			77			(295	)		327			32
Restricted equity securities		(66	)		42			(24	)
Equity securities											-			-			-
Interest-bearing balances with banks		(520	)		299			(221	)		(555	)		348			(207	)
Total interest-earning assets		9,763			1,771			11,534			9,672			4,505			14,177

Interest-bearing liabilities:
Interest-bearing demand deposits		83			70			153			112			298			410
Savings		5			-			5			2			(2	)		-
Money market accounts		673			688			1,361			527			2,308			2,835
Time deposits		104			65			169			125			269			394
Total interest-bearing deposits		865			823			1,688			766			2,873			3,639
Federal funds purchased		(332	)		457			125			(152	)		557			405
Other borrowed funds		(4	)		3			(1	)		118			(54	)		64
Total interest-bearing liabilities		529			1,283			1,812			732			3,376			4,108
Increase in net interest income	$	9,234		$	488		$	9,722		$	8,940		$	1,129		$	10,069

~~(1)~~	~~Non-accrual loans are included~~net interest margin percentage. Growth in ~~average loan balances in all periods. Loan fees of $1,626,000 and $939,000 are included in interest income in 2017 and 2016, respectively.~~
~~(2)~~	~~Accretion on acquired loan discounts of $267,000 and $624,000 are included in interest income in 2017 and 2016, respectively.~~
~~(3)~~	~~Interest income and yields are presented on a fully taxable equivalent basis using a tax rate of 35%.~~
~~(4)~~	~~Unrealized gains of $304,000 and $6,694,000 are excluded from the yield calculation in 2017 and 2016, respectively.~~
~~(5)~~	~~Accretion on acquired CD premiums of $32,000 and $140,000 are included in interest in 2017 and 2016, respectively.~~

	For the Six Months Ended June 30,
	2017 Compared to 2016 Increase (Decrease) in Interest Income and Expense Due to Changes in:
	Volume			Rate			Total
	(In Thousands)
Interest-earning assets:
Loans, net of unearned income
Taxable	$	17,054		$	1,641		$	18,695
Tax-exempt		502			(7	)		495
Total loans, net of unearned income		17,556			1,634			19,190
Mortgages held for sale		(18	)		(3	)		(21	)
Debt securities:
Taxable		1,881			(25	)		1,856
Tax-exempt		(72	)		(272	)		(344	)
Total debt securities		1,809			(297	)		1,512
Federal funds sold		275			248			523
Restricted equity securities		(107	)		40			(67	)
Interest-bearing balances with banks		(590	)		488			(102	)
Total interest-earning assets		18,925			2,110			21,035

Interest-bearing liabilities:
Interest-bearing demand deposits		195			110			305
Savings		12			3			15
Money market accounts		1,683			1,064			2,747
Time deposits		152			90			242
Total interest-bearing deposits		2,042			1,267			3,309
Federal funds purchased		(490	)		677			187
Other borrowed funds		(12	)		11			(1	)
Total interest-bearing liabilities		1,540			1,955			3,495
Increase in net interest income	$	17,385		$	155		$	17,540

~~Exhibit:~~		~~Description~~
31.01		Certification of principal executive officer pursuant to Rule 13a-14(a).
31.02		Certification of principal financial officer pursuant to Rule 13a-14(a).
32.01		Certification of principal executive officer pursuant to 18 U.S.C. Section 1350.
32.02		Certification of principal financial officer pursuant to 18 U.S.C. Section 1350.
101.INS		XBRL Instance Document
101.SCH		XBRL Taxonomy Extension Schema Document
101.CAL		XBRL Taxonomy Extension Calculation ~~Linkbase Document~~
~~101.DEF~~		~~XBRL Taxonomy Extension Definition~~ Linkbase Document
101.LAB		XBRL Taxonomy Extension Label Linkbase Document
101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document
~~101.INS~~		~~XBRL Instance Document~~
~~101.SCH~~101.DEF		XBRL Taxonomy Extension ~~Schema~~Definition Linkbase Document

		SERVISFIRST BANCSHARES, INC.

Date: ~~August~~May 1, ~~2017~~2018	By	/s/ Thomas A. Broughton III
		Thomas A. Broughton III
		President and Chief Executive Officer

Date: ~~August~~May 1, ~~2017~~2018	By	/s/ William M. Foshee
		William M. Foshee
		Chief Financial Officer