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

(~~Mark one~~)

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

FOR THE QUARTERLY PERIOD ENDED ~~SEPTEMBER 30, 2017~~MARCH 31, 2023

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

☐ 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)	(I.R.S. Employer Identification No.)


2500 Woodcrest Place, Birmingham, Alabama	*35209*
(Address of Principal Executive Offices)	~~(Zip~~(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	Trading Symbol(s)	Name of exchange on which registered
Common stock, par value $.001 per share	SFBS	New York Stock Exchange

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 for 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 ☒ 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 ☒ 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 of “large accelerated ~~filer”,~~filer,” “accelerated ~~filer”,~~filer,” “smaller reporting ~~company”~~company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act (Check one):

Large accelerated filer ☒ 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 ☒

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 ~~October 27, 2017~~April 28, 2023
Common stock, $.001 par value	~~52,979,310~~54,282,132

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)~~

SERVISFIRST BANCSHARES, INC.							SERVISFIRST BANCSHARES, INC.
CONSOLIDATED BALANCE SHEETS							CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share amounts)							(In thousands, except share and per share amounts)

	September 30, 2017			December 31, 2016				March 31, 2023			December 31, 2022
	(Unaudited)			(1)				(Unaudited)				(1)
ASSETS
Cash and due from banks	$	79,431		$	56,855			$	139,175		$	106,317
Interest-bearing balances due from depository institutions		86,719			566,707				725,318			708,221
Federal funds sold		182,841			160,435				6,478			1,515
Cash and cash equivalents		348,991			783,997				870,971			816,053
Available for sale debt securities, at fair value		435,325			422,375				624,948			644,815
Held to maturity debt securities (fair value of $89,329 and $63,302 at September 30, 2017 and December 31, 2016, respectively)		87,399			62,564
Held to maturity debt securities (fair value of $937,961 at March 31, 2023 and $935,953 at December 31, 2022)									1,021,989			1,034,121
Restricted equity securities		1,038			1,024				7,307			7,734
Mortgage loans held for sale		4,971			4,675				1,651			1,607
Loans		5,628,765			4,911,770				11,629,802			11,687,968
Less allowance for loan losses		(58,459	)		(51,893	)
Less allowance for credit losses									(148,965	)		(146,297	)
Loans, net		5,570,306			4,859,877				11,480,837			11,541,671
Premises and equipment, net		55,104			40,314				60,093			59,850
Accrued interest and dividends receivable		20,334			15,801				50,500			48,422
Deferred tax assets		26,326			27,132
Deferred tax asset, net									60,666			60,448
Other real estate owned and repossessed assets		3,888			4,988				248			248
Bank owned life insurance contracts		126,722			114,388				289,374			287,752
Goodwill and other identifiable intangible assets		14,787			14,996				13,615			13,615
Other assets		16,912			18,317				84,360			79,417
Total assets	$	6,712,103		$	6,370,448			$	14,566,559		$	14,595,753
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposits:
Noninterest-bearing	$	1,405,965		$	1,281,605			$	2,898,736		$	3,321,347
Interest-bearing		4,390,936			4,138,706				8,716,581			8,225,458
Total deposits		5,796,901			5,420,311				11,615,317			11,546,805
Federal funds purchased		254,880			355,944				1,480,160			1,618,798
Other borrowings		54,975			55,262				65,417			64,726
Accrued interest payable		4,353			4,401				20,541			18,615
Other liabilities		10,781			11,641				45,307			48,913
Total liabilities		6,121,890			5,847,559				13,226,742			13,297,857
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 September 30, 2017 and December 31, 2016		-			-
Preferred stock, par value $0.001 per share; 1,000,000 authorized and undesignated at September 30, 2017 and December 31, 2016		-			-
Common stock, par value $0.001 per share; 100,000,000 shares authorized; 52,970,310 shares issued and outstanding at September 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, 2023 and December 31, 2022									-			-
Common stock, par value $0.001 per share; 200,000,000 shares authorized: 54,398,025 shares issued and outstanding at March 31, 2023; and 54,326,527 shares issued and outstanding at December 31, 2022									54			54
Additional paid-in capital		217,483			215,932				229,631			229,693
Retained earnings		371,127			307,151				1,152,681			1,109,902
Accumulated other comprehensive income		1,048			(624	)
Accumulated other comprehensive loss									(43,049	)		(42,253	)
Total stockholders' equity attributable to ServisFirst Bancshares, Inc.		589,711			522,512				1,339,317			1,297,396
Noncontrolling interest		502			377				500			500
Total stockholders' equity		590,213			522,889				1,339,817			1,297,896
Total liabilities and stockholders' equity	$	6,712,103		$	6,370,448			$	14,566,559		$	14,595,753

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

~~See Notes to Consolidated Financial Statements.~~

(1) derived from audited financial statements.
	3
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 March 31,
	2023		2022
Interest income:
Interest and fees on loans	$	163,732	$	103,105
Taxable securities		10,895		8,223
Nontaxable securities		21		43
Federal funds sold		614		13
Other interest and dividends		6,060		1,804
Total interest income		181,322		113,188
Interest expense:
Deposits		55,713		5,843
Borrowed funds		17,308		1,623
Total interest expense		73,021		7,466
Net interest income		108,301		105,722
Provision for credit losses		4,197		5,362
Net interest income after provision for credit losses		104,104		100,360
Noninterest income:
Service charges on deposit accounts		1,934		2,142
Mortgage banking		442		526
Credit card income		1,689		2,372
Securities losses		-		(3,335	)
Increase in cash surrender value life insurance		1,621		1,608
Other operating income		635		4,635
Total noninterest income		6,321		7,948
Noninterest expense:
Salaries and employee benefits		19,066		18,301
Equipment and occupancy		3,435		2,933
Third party processing and other services		7,284		5,605
Professional services		1,654		992
FDIC and other regulatory assessments		1,517		1,132
Other real estate owned		6		3
Other operating expense		6,702		8,252
Total noninterest expense		39,664		37,218
Income before income taxes		70,761		71,090
Provision for income taxes		12,790		13,477
Net income		57,971		57,613
Dividends on preferred stock		-		-
Net income available to common stockholders	$	57,971	$	57,613
Basic earnings per common share	$	1.07	$	1.06
Diluted earnings per common share	$	1.06	$	1.06

~~SERVISFIRST BANCSHARES, INC.~~

~~CONSOLIDATED STATEMENTS OF INCOME~~

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

~~(Unaudited)~~
See Notes to Consolidated Financial Statements.

Three Months Ended
September 30, Nine Months Ended
September 30,
2017 2016 2017 2016
Interest income:
Interest and fees on loans $ 63,857 $ 51,473 $ 179,325 $ 147,930
Taxable securities 2,288 1,232 6,649 3,739
Nontaxable securities 729 823 2,246 2,515
Federal funds sold 379 347 1,185 630
Other interest and dividends 388 816 1,291 1,888
Total interest income 67,641 54,691 190,696 156,702
Interest expense:
Deposits 7,574 5,358 19,877 14,352
Borrowed funds 1,671 1,415 4,804 4,362
Total interest expense 9,245 6,773 24,681 18,714
Net interest income 58,396 47,918 166,015 137,988
Provision for loan losses 4,803 3,464 14,170 9,323
Net interest income after provision for loan losses 53,593 44,454 151,845 128,665
Noninterest income:
Service charges on deposit accounts 1,467 1,367 4,203 3,980
Mortgage banking 978 1,112 2,941 2,681
Credit card income 1,149 1,114 3,517 2,159
Securities losses - - - (3 )
Increase in cash surrender value life insurance 825 770 2,334 2,049
Other operating income 371 428 1,146 1,207
Total noninterest income 4,790 4,791 14,141 12,073
Noninterest expenses:
Salaries and employee benefits 12,428 10,958 36,172 32,758
Equipment and occupancy expense 1,947 2,100 6,452 6,108
Professional services 805 1,182 2,384 2,919
FDIC and other regulatory assessments 810 775 2,888 2,328
OREO expense 31 178 163 668
Other operating expenses 5,476 4,969 16,580 14,175
Total noninterest expenses 21,497 20,162 64,639 58,956
Income before income taxes 36,886 29,083 101,347 81,782
Provision for income taxes 11,627 8,174 29,405 22,041
Net income 25,259 20,909 71,942 59,741
Preferred stock dividends - - 31 23
Net income available to common stockholders $ 25,259 $ 20,909 $ 71,911 $ 59,718

Basic earnings per common share $ 0.48 $ 0.40 $ 1.36 $ 1.14

Diluted earnings per common share $ 0.47 $ 0.39 $ 1.33 $ 1.12

~~See Notes to Consolidated Financial Statements.~~

~~SERVISFIRST BANCSHARES, INC. AND SUBSIDIARIES~~

~~CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME~~

~~(In thousands)~~

~~(Unaudited)~~

SERVISFIRST BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands)
(Unaudited)
	Three Months Ended March 31,
	2023			2022
Net income	$	57,971		$	57,613
Other comprehensive loss, net of tax:
Unrealized net holding losses arising during period from securities available for sale, net of tax of $(221) and $(7,004) for 2023 and 2022, respectively		(666	)		(26,997	)
Amortization of net unrealized gains on securities transferred from available-for-sale to held-to-maturity, net of tax of $(45) and $(150) for 2023 and 2022, respectively		(129	)		(569	)
Reclassification adjustment for net losses on sales of securities, net of tax of $700 for 2022		-			2,635
Other comprehensive loss, net of tax		(796	)		(24,931	)
Comprehensive income	$	57,175		$	32,682

Three Months Ended
September 30, Nine Months Ended
September 30,
2017 2016 2017 2016
Net income $ 25,259 $ 20,909 $ 71,942 $ 59,741
Other comprehensive income (loss), net of tax:
Unrealized holding gains (losses) arising during period from securities available for sale, net of tax of $165 and $896 for the three and nine months ended September 30, 2017, respectively, and $(415) and $844 for the three and nine months ended September 30, 2016, respectively 305 (771 ) 1,672 1,583
Reclassification adjustment for net losses on sale of securities, net of tax of $1 for the nine months ended September 30, 2016 - - - 2
Other comprehensive income, net of tax 305 (771 ) 1,672 1,585
Comprehensive income $ 25,564 $ 20,138 $ 73,614 $ 61,326

~~See Notes to Consolidated Financial Statements.~~

SERVISFIRST BANCSHARES, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(In thousands, except share amounts)
(Unaudited)
	Three Months Ended March 31,
													Accumulated
							Additional						Other					Total
	Common		Preferred		Common		Paid-in			Retained			Comprehensive			Noncontrolling		Stockholders'
	Shares		Stock		Stock		Capital			Earnings			Income (Loss)			Interest		Equity
Balance, January 1, 2022		54,227,060	$	-	$	54	$	226,397		$	911,008		$	14,056		$	500	$	1,152,015
Common dividends declared, $0.23 per share		-		-		-		-			(12,485	)		-			-		(12,485	)
Dividends on nonvested restricted stock recognized as compensation expense		-		-		-		-			33			-			-		33
Issue restricted shares pursuant to stock incentives, net of forfeitures		26,974		-		-		-			-			-			-		-
Issue shares of common stock upon exercise of stock options		28,098		-		-		553			-			-			-		553
8,402 shares of common stock withheld in net settlement upon exercise of stock options		-		-		-		(613	)		-			-			-		(613	)
Stock-based compensation expense		-		-		-		790			-			-			-		790
Other comprehensive loss, net of tax		-		-		-		-			-			(24,931	)		-		(24,931	)
Net income		-		-		-		-			57,613			-			-		57,613
Balance, March 31, 2022		54,282,132	$	-	$	54	$	227,127		$	956,169		$	(10,875	)	$	500	$	1,172,975

Balance, January 1, 2023		54,326,527		-		54		229,693			1,109,902			(42,253	)		500		1,297,896
Common dividends declared, $0.28 per share		-		-		-		-			(15,233	)		-			-		(15,233	)
Dividends on nonvested restricted stock recognized as compensation expense		-		-		-		-			41			-			-		41
Issue restricted shares pursuant tostock incentives, net of forfeitures		20,713		-		-		-			-			-			-		-
Issue shares of common stock upon exercise of stock options		50,785		-		-		846			-			-			-		846
24,215 shares of common stock withheld in net settlement upon exercise of stock options		-		-		-		(1,716	)		-			-			-		(1,716	)
Stock-based compensation expense		-		-		-		808			-			-			-		808
Other comprehensive loss, net of tax		-		-		-		-			-			(796	)		-		(796	)
Net income		-		-		-		-			57,971			-			-		57,971
Balance, March 31, 2023		54,398,025	$	-	$	54	$	229,631		$	1,152,681		$	(43,049	)	$	500	$	1,339,817

~~SERVISFIRST BANCSHARES, INC.~~

~~CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY~~

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

~~(Unaudited)~~
See Notes to Consolidated Financial Statements.

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, $0.08 per share - - (4,194 ) - - (4,194 )
Common dividends declared, $.04 per share - - (2,106 ) - - (2,106 )
Preferred dividends paid - - (23 ) - - (23 )
Issue 656,500 shares of common stock upon exercise of stock options - 2,785 - - - 2,785
Stock based compensation expense - 931 - - - 931
Other comprehensive income, net of tax - - - 1,585 - 1,585
Net income - - 59,741 - - 59,741
Balance, September 30, 2016 $ 52 $ 215,262 $ 287,542 $ 4,633 $ 377 $ 507,866

Balance, December 31, 2016 $ 53 $ 215,932 $ 307,151 $ (624 ) $ 377 $ 522,889
Common dividends paid, $0.10 per share - - (5,286 ) - - (5,286 )
Common dividends declared, $0.05 per share - - (2,649 ) - - (2,649 )
Preferred dividends paid - - (31 ) - - (31 )
Issue 328,214 shares of common stock upon exercise of stock options - 635 - - - 635
Issue 125 shares of REIT preferred stock - - - - 125 125
Stock based compensation expense - 916 - - - 916
Other comprehensive income, net of tax - - - 1,672 - 1,672
Net income - - 71,942 - - 71,942
Balance, September 30, 2017 $ 53 $ 217,483 $ 371,127 $ 1,048 $ 502 $ 590,213

~~See Notes to Consolidated Financial Statements.~~

SERVISFIRST BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands) (Unaudited)
	Three Months Ended March 31,
	2023			2022
OPERATING ACTIVITIES
Net income	$	57,971		$	57,613
Adjustments to reconcile net income to net cash provided by
Deferred tax		49			(5,257	)
Provision for credit losses		4,197			5,362
Depreciation		1,071			1,058
Accretion on acquired loans		49			32
Amortization of core deposit intangible		-			23
Amortization of investments in tax credit partnerships		3,345			2,927
Net amortization of debt securities available for sale		128			1,376
(Increase) decrease in accrued interest and dividends receivable		(2,078	)		443
Stock-based compensation expense		808			790
Increase in accrued interest and dividends payable		1,926			566
Proceeds from sale of mortgage loans held for sale		16,320			8,955
Originations of mortgage loans held for sale		(15,922	)		(7,718	)
Loss on sale of securities available for sale		-			3,335
Gain on sale of mortgage loans held for sale		(442	)		(526	)
Net gain on sale of other real estate owned and repossessed assets		-			(1	)
Write down of other real estate owned and repossessed assets		-			6
Increase in cash surrender value of life insurance contracts		(1,621	)		(1,608	)
Net change in other assets, liabilities, and other operating activities		(10,652	)		1,889
Net cash provided by operating activities		55,149			69,265
INVESTMENT ACTIVITIES
Purchases of debt securities available for sale		-			(52,500	)
Proceeds from maturities, calls and paydowns of debt securities available for sale		18,853			29,627
Proceeds from sale of debt securities available for sale		-			45,394
Purchases of debt securities held to maturity		-			(392,622	)
Proceeds from maturities, calls and paydowns of debt securities held to maturity		11,960			21,554
Purchases of restricted equity securities		(12,750	)		(423	)
Proceeds from sale of restricted equity securities		13,177			-
Investment in tax credit partnerships and SBIC		(538	)		(65	)
Return of capital from tax credit partnerships and SBIC		-			249
Decrease (increase) in loans		56,588			(369,412	)
Purchases of premises and equipment		(1,314	)		(666	)
Proceeds from sale of other real estate owned and repossessed assets		-			44
Net cash provided by (used in) investing activities		85,976			(718,820	)
FINANCING ACTIVITIES
Net (decrease) increase in non-interest-bearing deposits		(422,611	)		89,728
Net increase (decrease) in interest-bearing deposits		491,123			(133,809	)
Net decrease in federal funds purchased		(138,638	)		(72,539	)
FHLB advances		300,000			-
Repayment of FHLB advances		(300,000	)		-
Proceeds from exercise of stock options		846			553
Taxes paid in net settlement of tax obligation upon exercise of stock options		(1,716	)		(613	)
Dividends paid on common stock		(15,211	)		(12,472	)
Net cash used in financing activities		(86,207	)		(129,152	)
Net increase (decrease) in cash and cash equivalents		54,918			(778,707	)
Cash and cash equivalents at beginning of period		816,053			4,222,096
Cash and cash equivalents at end of period	$	870,971		$	3,443,389
SUPPLEMENTAL DISCLOSURE
Cash paid for:
Interest	$	71,095		$	6,900
Income taxes		1,920			591
Income tax refund		-			(142	)
NONCASH TRANSACTIONS
Other real estate acquired in settlement of loans	$	-		$	830
Dividends on nonvested restricted stock reclassified as compensation expense		41			33
Dividends declared		15,233			12,485

~~SERVISFIRST BANCSHARES, INC.~~

~~CONSOLIDATED STATEMENTS OF CASH FLOWS~~

~~(In thousands) (Unaudited)~~
See Notes to Consolidated Financial Statements.

Nine Months Ended September 30,
2017 2016
OPERATING ACTIVITIES
Net income $ 71,942 $ 59,741
Adjustments to reconcile net income to net cash provided by
Deferred tax (3,099 ) 350
Provision for loan losses 14,170 9,323
Depreciation 2,281 2,211
Accretion on acquired loans (374 ) (819 )
Amortization of core deposit intangible 209 257
Net amortization of debt securities available for sale 2,874 2,034
Increase in accrued interest and dividends receivable (4,533 ) (950 )
Stock-based compensation expense 916 931
(Decrease) increase in accrued interest payable (48 ) 1,257
Proceeds from sale of mortgage loans held for sale 105,940 97,868
Originations of mortgage loans held for sale (103,295 ) (92,964 )
Loss on sale of debt securities available for sale - 3
Gain on sale of mortgage loans held for sale (2,941 ) (2,681 )
Net (gain) loss on sale of other real estate owned and repossessed assets (33 ) 27
Write down of other real estate owned and repossessed assets 5 557
Losses of tax credit partnerships 42 178
Increase in cash surrender value of life insurance contracts (2,334 ) (2,049 )
Net change in other assets, liabilities, and other operating activities (551 ) (4,633 )
Net cash provided by operating activities 81,171 70,641
INVESTMENT ACTIVITIES
Purchase of debt securities available for sale (77,567 ) (84,106 )
Proceeds from sale of debt securities available for sale - 6,085
Proceeds from maturities, calls and paydowns of debt securities available for sale 65,734 71,425
Purchase of debt securities held to maturity (29,782 ) (627 )
Proceeds from maturities, calls and paydowns of debt securities held to maturity 4,947 2,200
Purchase of equity securities (10 ) (708 )
Increase in loans (724,626 ) (443,771 )
Purchase of premises and equipment (17,071 ) (7,809 )
Purchase of bank-owned life insurance contracts (10,000 ) (20,000 )
Expenditures to complete construction of other real estate owned - (3 )
Proceeds from sale of other real estate owned and repossessed assets 1,529 1,648
Investment in tax credit partnerships - (2,491 )
Net cash used in investing activities (786,846 ) (478,157 )
FINANCING ACTIVITIES
Net increase in non-interest-bearing deposits 124,360 216,259
Net increase in interest-bearing deposits 252,230 640,981
Net decrease in federal funds purchased (101,064 ) (7,970 )
Repayment of Federal Home Loan Bank advances (300 ) (300 )
Proceeds from sale of preferred stock, net 125 -
Proceeds from exercise of stock options and warrants 635 2,785
Dividends paid on common stock (5,286 ) (4,194 )
Dividends paid on preferred stock (31 ) (23 )
Net cash provided by financing activities 270,669 847,538
Net (decrease) increase in cash and cash equivalents (435,006 ) 440,022
Cash and cash equivalents at beginning of period 783,997 352,235
Cash and cash equivalents at end of period $ 348,991 $ 792,257
SUPPLEMENTAL DISCLOSURE
Cash paid for:
Interest $ 24,729 $ 17,457
Income taxes 30,651 22,666
Income tax refund (492 ) (929 )
NONCASH TRANSACTIONS
Other real estate acquired in settlement of loans $ 586 $ 2,033
Internally financed sales of other real estate owned 185 2,161
Dividends declared 2,649 2,106

~~See Notes to Consolidated Financial Statements.~~

SERVISFIRST BANCSHARES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

~~September 30, 2017~~March 31, 2023

(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~~S-X and the instructions for Form ~~10-Q,~~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 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~~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.2022.

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

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~~ options. The difference in earnings per share under the two-class method was not significant for the three month period ended March 31, 2023 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.~~2022, respectively.

	Three Months Ended March 31,
	2023		2022
	(In Thousands, Except Shares and Per Share Data)
Earnings per common share
Weighted average common shares outstanding		54,360,253		54,263,143
Net income available to common stockholders	$	57,971	$	57,613
Basic earnings per common share	$	1.07	$	1.06

Weighted average common shares outstanding		54,360,253		54,263,143
Dilutive effects of assumed conversions and exercise of stock options and warrants		174,229		258,899
Weighted average common and dilutive potential common shares outstanding		54,534,482		54,522,042
Net income available to common stockholders	$	57,971	$	57,613
Diluted earnings per common share	$	1.06	$	1.06

Three Months Ended September 30, Nine Months Ended September 30,
2017 2016 2017 2016
(In Thousands, Except Shares and Per Share Data)
Earnings per common share
Weighted average common shares outstanding 52,950,644 52,554,918 52,854,332 52,557,910
Net income available to common stockholders $ 25,259 $ 20,909 $ 71,911 $ 59,718
Basic earnings per common share $ 0.48 $ 0.40 $ 1.36 $ 1.14

Weighted average common shares outstanding 52,950,644 52,554,918 52,854,332 52,557,910
Dilutive effects of assumed conversions and exercise of stock options and warrants 1,149,028 1,324,410 1,256,580 932,008
Weighted average common and dilutive potential common shares outstanding 54,099,672 53,879,328 54,110,912 53,489,918
Net income available to common stockholders $ 25,259 $ 20,909 $ 71,911 $ 59,718
Diluted earnings per common share $ 0.47 $ 0.39 $ 1.33 $ 1.12

NOTE 4 - SECURITIES

The amortized cost and fair value of available-for-sale and held-to-maturity securities at ~~September 30, 2017~~ March 31, 2023 and December 31, ~~2016~~ 2022 are summarized as follows:

	Amortized Cost		Gross Unrealized Gain		Gross Unrealized Loss			Market Value				Gross		Gross
September 30, 2017	(In Thousands)
Securities Available for Sale
U.S. Treasury and government sponsored agencies	$	56,518	$	335	$	(75	)	$	56,778
Mortgage-backed securities		243,465		1,457		(1,179	)		243,743
State and municipal securities		133,729		1,201		(126	)		134,804
Total		433,712		2,993		(1,380	)		435,325
Securities Held to Maturity
										Amortized		Unrealized		Unrealized			Market
										Cost		Gain		Loss			Value
March 31, 2023										(In Thousands)
Debt Securities Available for Sale
U.S. Treasury Securities										$	3,001	$	-	$	(11	)	$	2,990
Government Agency Securities											4		-		-			4
Mortgage-backed securities		31,165		393		(179	)		31,379		272,070		7		(29,046	)		243,031
State and municipal securities		5,726		300		-			6,026		14,646		2		(1,337	)		13,311
Corporate debt		50,508		1,416		-			51,924		398,676		3		(33,067	)		365,612
Total	$	87,399	$	2,109	$	(179	)	$	89,329	$	688,397	$	12	$	(63,461	)	$	624,948
Debt Securities Held to Maturity
U.S. Treasury Securities										$	507,601	$	-	$	(30,021	)	$	477,580
Mortgage-backed securities											506,342		10		(53,190	)		453,162
State and municipal securities											8,046		-		(827	)		7,219
Total										$	1,021,989	$	10	$	(84,038	)	$	937,961

December 31, 2016
Securities Available for Sale
U.S. Treasury and government sponsored agencies	$	45,998	$	382	$	(126	)	$	46,254
December 31, 2022
Debt Securities Available for Sale
U.S. Treasury Securities										$	3,002	$	-	$	(33	)	$	2,969
Government Agency Securities											9		-		-			9
Mortgage-backed securities		228,843		1,515		(3,168	)		227,190		282,480		5		(32,782	)		249,703
State and municipal securities		139,504		1,120		(694	)		139,930		15,205		1		(1,597	)		13,609
Corporate debt		8,985		16		-			9,001		406,680		-		(28,155	)		378,525
Total		423,330		3,033		(3,988	)		422,375	$	707,376	$	6	$	(62,567	)	$	644,815
Securities Held to Maturity
Debt Securities Held to Maturity
U.S. Treasury Securities										$	507,151	$	-	$	(36,197	)	$	470,954
Mortgage-backed securities		19,164		321		(245	)		19,240		518,929		7		(60,960	)		457,976
State and municipal securities		5,888		315		(12	)		6,191		8,041		-		(1,018	)		7,023
Corporate debt		37,512		374		(15	)		37,871
Total	$	62,564	$	1,010	$	(272	)	$	63,302	$	1,034,121	$	7	$	(98,175	)	$	935,953

The amortized cost and fair value of debt securities as of ~~September 30, 2017~~ March 31, 2023 and December 31, 2022 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.

	September 30, 2017				December 31, 2016				March 31, 2023				December 31, 2022
	Amortized Cost		Fair Value		Amortized Cost		Fair Value		Amortized Cost		Market Value		Amortized Cost		Market Value
	(In thousands)								(In Thousands)
Debt securities available for sale
Due within one year	$	25,961	$	26,035	$	28,270	$	28,400	$	24,422	$	24,042	$	24,712	$	24,432
Due from one to five years		151,842		153,099		152,347		153,003		59,243		57,178		58,554		57,092
Due from five to ten years		12,054		12,058		13,870		13,782		329,662		298,353		338,630		311,100
Due after ten years		390		390		-		-		3,000		2,344		3,000		2,488
Mortgage-backed securities		243,465		243,743		228,843		227,190		272,070		243,031		282,480		249,703
	$	433,712	$	435,325	$	423,330	$	422,375	$	688,397	$	624,948	$	707,376	$	644,815

Debt securities held to maturity
Due within one year									$	250	$	250	$	250	$	250
Due from one to five years	$	3,250	$	3,280	$	250	$	250		386,897		370,166		386,465		366,095
Due from five to ten years		48,997		50,450		34,251		34,617		128,500		114,383		128,477		111,632
Due after ten years		3,987		4,220		8,899		9,195		-		-		-		-
Mortgage-backed securities		31,165		31,379		19,164		19,240		506,342		453,162		518,929		457,976
	$	87,399	$	89,329	$	62,564	$	63,302	$	1,021,989	$	937,961	$	1,034,121	$	935,953

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.

Restricted equity securities are comprised entirely of restricted investment in Federal Home Loan Bank stock for membership requirements.

The carrying value of investment securities pledged to secure public funds on deposit and for other purposes as required by law was $834.9 million and $789.3 million as of March 31, 2023 and December 31, 2022, respectively.

The following table identifies, as of ~~September 30, 2017~~ March 31, 2023 and December 31, ~~2016,~~ 2022, 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.

	Less Than Twelve Months					Twelve Months or More					Total
	Gross					Gross					Gross
	Unrealized					Unrealized					Unrealized
	Losses			Fair Value		Losses			Fair Value		Losses			Fair Value
	(In Thousands)
March 31, 2023
Debt Securities available for sale
U.S. Treasury Securities	$	-		$	-	$	(11	)	$	2,990	$	(11	)	$	2,990
Government Agency Securities		-			4		-			-		-			4
Mortgage-backed securities		(364	)		8,468		(28,682	)		233,956		(29,046	)		242,424
State and municipal securities		(27	)		3,328		(1,310	)		9,202		(1,337	)		12,530
Corporate debt		(8,809	)		163,363		(24,258	)		189,931		(33,067	)		353,294
Total	$	(9,200	)	$	175,163	$	(54,261	)	$	436,079	$	(63,461	)	$	611,242
Debt Securities held to maturity
U.S. Treasury Securities	$	(2,678	)	$	130,640	$	(27,343	)	$	346,939	$	(30,021	)	$	477,579
Mortgage-backed securities		(1,645	)		31,827		(51,545	)		416,994		(53,190	)		448,821
State and municipal securities		-			-		(827	)		6,969		(827	)		6,969
Total	$	(4,323	)	$	162,467	$	(79,715	)	$	770,902	$	(84,038	)	$	933,369
December 31, 2022
Debt Securities available for sale
U.S. Treasury Securities	$	(33	)	$	2,969	$	-		$	-	$	(33	)	$	2,969
Government Agency Securities		-			9		-			-		-			9
Mortgage-backed securities	$	(3,473	)	$	60,234	$	(29,309	)	$	189,109	$	(32,782	)	$	249,343
State and municipal securities		(186	)		5,283		(1,411	)		7,880		(1,597	)		13,163
Corporate debt		(18,566	)		304,254		(9,589	)		63,411		(28,155	)		367,666
Total	$	(22,258	)	$	372,749	$	(40,309	)	$	260,400	$	(62,567	)	$	633,149
U.S. Treasury Securities	$	(12,662	)	$	295,383	$	(23,537	)	$	175,570	$	(36,197	)	$	470,953
Mortgage-backed securities		(31,367	)		278,746		(29,592	)		174,842		(60,960	)		453,588
State and municipal securities		(544	)		4,443		(474	)		2,330		(1,018	)		6,773
Total	$	(44,573	)	$	578,572	$	(53,603	)	$	352,742	$	(98,175	)	$	931,314

At ~~September 30, 2017, 52 of the Company’s 807~~March 31, 2023 and 2022, no allowance for credit losses has been recognized on available for sale debt securities ~~had been~~ in an unrealized loss position as the Company does not believe any of the debt securities are credit impaired. This is based on the Company’s analysis of the risk characteristics, including credit ratings, and other qualitative factors related to available for ~~12 or more months.~~sale debt securities. The issuers of these debt securities continue to make timely principal and interest payments under the contractual terms of the securities. The Company does not intend to sell these debt securities and it is more likely than not that the Company will not be required to sell the debt securities before recovery of their amortized cost, which may be ~~maturity; accordingly, the Company does not consider these securities~~at maturity. The unrealized losses are due to ~~be other-than-temporarily impaired at September 30, 2017. Further, the Company believes any deterioration in value of its current investment securities is attributable to changes~~increases in market interest rates over the yields available at the time the debt securities were purchased. Management measures expected credit losses on held-to-maturity securities on a collective basis by major security type with each type sharing similar risk characteristics and ~~not~~considers historical credit ~~quality~~loss information that is adjusted for current conditions and reasonable and supportable forecasts. With regard to U.S. Treasury and residential mortgage-backed securities issued by the U.S. government, or agencies thereof, it is expected that the securities will not be settled at prices less than the amortized cost bases of the ~~issuer.~~securities as such securities are backed by the full faith and credit of and/or guaranteed by the U.S. government. Accordingly, no allowance for credit losses has been recorded for these securities. With regard to securities issued by States and political subdivisions and other held-to-maturity securities, management considers (i) issuer bond ratings, (ii) historical loss rates for given bond ratings, (iii) whether issuers continue to make timely principal and interest payments under the contractual terms of the securities, and (iv) internal forecasts. Historical loss rates associated with securities having similar grades as those in our portfolio have generally not been significant. Furthermore, as of March 31, 2023 and 2022, there were no past due principal or interest payments associated with these securities. Based upon (i) the issuer’s strong bond ratings and (ii) a zero historical loss rate, no allowance for credit losses has been recorded for held-to-maturity State and Municipal Securities as such amount is not material at March 31, 2023 and 2022. All debt securities in an unrealized loss position as of March 31, 2023 continue to perform as scheduled and the Company does not believe there is a possible credit loss or that an allowance for credit loss on these debt securities is necessary.

Less Than Twelve Months Twelve Months or More Total
Gross
Unrealized
Losses Fair Value Gross
Unrealized
Losses Fair Value Gross
Unrealized
Losses Fair Value
(In Thousands)
September 30, 2017
U.S. Treasury and government sponsored agencies $ (75 ) $ 9,670 $ - $ - $ (75 ) $ 9,670
Mortgage-backed securities (596 ) 77,553 (762 ) 43,721 (1,358 ) 121,274
State and municipal securities (76 ) 22,069 (50 ) 7,041 (126 ) 29,110
Total $ (747 ) $ 109,292 $ (812 ) $ 50,762 $ (1,559 ) $ 160,054

December 31, 2016
U.S. Treasury and government sponsored agencies $ (126 ) $ 10,865 $ - $ - $ (126 ) $ 10,865
Mortgage-backed securities (3,413 ) 174,225 - - (3,413 ) 174,225
State and municipal securities (698 ) 64,502 (8 ) 1,021 (706 ) 65,523
Corporate debt (15 ) 3,034 - - (15 ) 3,034
Total $ (4,252 ) $ 252,626 $ (8 ) $ 1,021 $ (4,260 ) $ 253,647

The following table summarizes information about sales of debt securities.

	Three Months Ended March 31,
	2023		2022
	(In Thousands)
Sale proceeds	$	-	$	45,394
Gross realized gains	$	-	$	-
Gross realized losses		-		(3,335	)
Net realized losses	$	-	$	(3,335	)

NOTE 5– LOANS

~~NOTE 5~~ The loan portfolio is classified based on the underlying collateral utilized to secure each loan for financial reporting purposes. This classification is consistent with the Quarterly Report of Condition and Income filed by ServisFirst Bank with the Federal Deposit Insurance Corporation (FDIC).

Commercial, financial and agricultural - Includes loans to business enterprises issued for commercial, industrial, agricultural production and/or other professional purposes. These loans are generally secured by equipment, inventory, and accounts receivable of the borrower and repayment is primarily dependent on business cash flows.

Real estate – construction – ~~LOANS~~Includes loans secured by real estate to finance land development or the construction of industrial, commercial or residential buildings. Repayment is dependent upon the completion and eventual sale, refinance or operation of the related real estate project.

Owner-occupied commercial real estate mortgage – Includes loans secured by nonfarm nonresidential properties for which the primary source of repayment is the cash flow from the ongoing operations conducted by the party that owns the property.

1-4 family real estate mortgage – Includes loans secured by residential properties, including home equity lines of credit. Repayment is primarily dependent on the personal cash flow of the borrower.

Other real estate mortgage – Includes loans secured by nonowner-occupied properties, including office buildings, industrial buildings, warehouses, retail buildings, multifamily residential properties and farmland. Repayment is primarily dependent on income generated from the underlying collateral.

Consumer – Includes loans to individuals not secured by real estate. Repayment is dependent upon the personal cash flow of the borrower.

The following table details the Company’s loans at ~~September 30, 2017~~ March 31, 2023 and December 31, ~~2016:~~2022:

							March 31,			December 31,
	September 30, 2017			December 31, 2016			2023			2022
	(Dollars In Thousands)						(Dollars In Thousands)
Commercial, financial and agricultural	$	2,223,910		$	1,982,267		$	3,081,926		$	3,145,317
Real estate - construction		467,838			335,085			1,469,670			1,532,388
Real estate - mortgage:
Owner-occupied commercial		1,323,383			1,171,719			2,243,436			2,199,280
1-4 family mortgage		593,180			536,805			1,138,645			1,146,831
Other mortgage		962,690			830,683			3,624,071			3,597,750
Subtotal: Real estate - mortgage		2,879,253			2,539,207			7,006,152			6,943,861
Consumer		57,764			55,211			72,054			66,402
Total Loans		5,628,765			4,911,770			11,629,802			11,687,968
Less: Allowance for loan losses		(58,459	)		(51,893	)
Less: Allowance for credit losses								(148,965	)		(146,297	)
Net Loans	$	5,570,306		$	4,859,877		$	11,480,837		$	11,541,671


Commercial, financial and agricultural		39.51	%		40.36	%		26.50	%		26.91	%
Real estate - construction		8.31	%		6.82	%		12.64	%		13.11	%
Real estate - mortgage:
Owner-occupied commercial		23.51	%		23.86	%		19.29	%		18.82	%
1-4 family mortgage		10.54	%		10.93	%		9.79	%		9.81	%
Other mortgage		17.10	%		16.91	%		31.16	%		30.78	%
Subtotal: Real estate - mortgage		51.15	%		51.70	%		60.24	%		59.41	%
Consumer		1.03	%		1.12	%		0.62	%		0.57	%
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~~credit loss portfolio segments and classes. These categories are utilized to develop the associated allowance for ~~loan~~credit 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~~presently jeopardize debt repayment. These loans are characterized by the distinct possibility that the institution will sustain some loss if the weaknesses 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.

The table below presents loan balances classified by credit quality indicator, loan type and based on year of origination as of March 31, 2023:

	2023		2022		2021		2020		2019		Prior		Revolving Loans		Revolving lines of credit converted to term loans		Total
	(In Thousands)
Commercial, financial and agricultural
(1-55) Pass	$	160,551	$	540,101	$	471,521	$	208,825	$	136,657	$	192,509	$	1,252,905	$	699	$	2,963,768
(6) Special Mention		-		8,870		5,850		1,953		1,877		4,151		40,868		18		63,588
(7) Substandard - accruing		-		291		1,244		376		9,501		28,933		7,007		-		47,352
(7) Substandard -Non-accrual		-		697		146		-		-		3,345		3,030		-		7,219
Total Commercial, financial and agricultural	$	160,551	$	549,959	$	478,760	$	211,154	$	148,035	$	228,938	$	1,303,811	$	717	$	3,081,926
Current-period gross charge-offs		-		616		-		-		-		428		212		-		1,257

Real estate - construction						��
(1-55) Pass	$	37,212	$	661,294	$	556,953	$	105,265	$	4,761	$	21,591	$	77,837	$	-	$	1,464,913
(6) Special Mention		-		2,500		-		-		-		-		-		201		2,701
(7) Substandard - accruing		-		-		-		-		-		2,057		-		-		2,057
Total Real estate - construction	$	37,212	$	663,794	$	556,953	$	105,265	$	4,761	$	23,647	$	77,837	$	201	$	1,469,670

Owner-occupied commercial
(1-55) Pass	$	28,219	$	441,407	$	536,773	$	353,489	$	187,145	$	600,679	$	63,267	$	874	$	2,211,853
(6) Special Mention		1,496		2,349		856		-		7,909		6,391		1,601		-		20,601
(7) Substandard - accruing		-		-		-		-		2,358		5,237		-		-		7,595
(7) Substandard -Non-accrual		-		-		-		-		48		3,340		-		-		3,388
Total Owner-occupied commercial	$	29,715	$	443,756	$	537,629	$	353,489	$	197,461	$	615,647	$	64,867	$	874	$	2,243,436
Current-period gross charge-offs		-		-		-		-		26		-		-		-		26

1-4 family mortgage
(1-55) Pass	$	40,954	$	383,389	$	253,519	$	91,609	$	51,728	$	80,635	$	222,966	$	-	$	1,124,800
(6) Special Mention		-		414		365		808		261		1,576		7,469		-		10,893
(7) Substandard - accruing		-		-		-		-		139		516		253		-		908
(7) Substandard -Non-accrual		-		-		423		405		540		622		54		-		2,044
Total 1-4 family mortgage	$	40,954	$	383,803	$	254,307	$	92,822	$	52,668	$	83,349	$	230,742	$	-	$	1,138,645

Other mortgage
(1-55) Pass	$	31,821	$	1,075,262	$	1,011,383	$	515,230	$	316,995	$	581,406	$	75,148	$	246	$	3,607,491
(6) Special Mention		-		-		-		-		-		4,456		-		-		4,456
(7) Substandard - accruing		-		233		-		-		-		11,385		-		-		11,618
(7) Substandard -Non-accrual		-		-		-		-		130		376		-		-		506
Total Other mortgage	$	31,821	$	1,075,495	$	1,011,383	$	515,230	$	317,125	$	597,623	$	75,148	$	246	$	3,624,071

Consumer
(1-55) Pass	$	23,355	$	6,607	$	5,542	$	2,697	$	1,644	$	3,190	$	29,007	$	-	$	72,042
(6) Special Mention		-		-		-		-		-		12		-		-		12
(7) Substandard - accruing		-		-		-		-		-		-		-		-		-
Total Consumer	$	23,355	$	6,607	$	5,542	$	2,697	$	1,644	$	3,202	$	29,007	$	-	$	72,054
Current-period gross charge-offs		-		-		-		-		-		-		391		-		391

Total Loans
(1-55) Pass	$	322,112	$	3,108,059	$	2,835,691	$	1,277,114	$	698,931	$	1,480,009	$	1,721,129	$	1,819	$	11,444,866
(6) Special Mention		1,496		14,133		7,070		2,761		10,047		16,586		49,938		219		102,250
(7) Substandard - accruing		-		524		1,244		376		11,998		48,128		7,260		-		69,530
(7) Substandard -Non-accrual		-		697		570		405		718		7,683		3,084		-		13,157
Total Loans	$	323,608	$	3,123,414	$	2,844,575	$	1,280,656	$	721,694	$	1,552,406	$	1,781,412	$	2,038	$	11,629,802
Current-period gross charge-offs	$	-	$	616	$	-	$	-	$	26	$	428	$	603	$	-	$	1,673

Loans by credit quality indicator, loan type and based on year of origination as of ~~September 30, 2017 and~~ December 31, ~~2016~~ 2022 were as follows:

September 30, 2017	Pass		Special Mention		Substandard		Doubtful		Total
																								Revolving
												2022		2021		2020		2019		2018		Prior		Loans		Total
	(In Thousands)											(In Thousands)
Commercial, financial and agricultural	$	2,144,426	$	49,079	$	30,405	$	-	$	2,223,910	Commercial, financial and agricultural
Pass												$	691,817	$	502,648	$	223,096	$	144,587	$	78,477	$	134,893	$	1,267,333	$	3,042,851
Special Mention													6,906		3,737		1,101		1,748		570		898		29,516		44,476
Substandard													200		-		379		9,501		16,329		16,595		14,986		57,990
Total Commercial, financial and agricultural												$	698,923	$	506,385	$	224,576	$	155,836	$	95,376	$	152,386	$	1,311,835	$	3,145,317

Real estate - construction		457,188		7,367		3,283		-		467,838
Real estate - mortgage:
Pass												$	618,578	$	638,126	$	156,834	$	15,197	$	12,063	$	14,847	$	72,172	$	1,527,817
Special Mention													2,500		-		-		-		-		873		-		3,373
Substandard													-		-		-		-		1,198		-		-		1,198
Total Real estate - construction												$	621,078	$	638,126	$	156,834	$	15,197	$	13,261	$	15,720	$	72,172	$	1,532,388

Owner-occupied commercial		1,305,408		11,814		6,161		-		1,323,383
Pass												$	424,321	$	496,298	$	352,375	$	199,987	$	157,204	$	477,926	$	64,152	$	2,172,263
Special Mention													2,362		-		-		2,723		4,682		6,917		1,687		18,371
Substandard													-		-		-		73		-		8,573		-		8,646
Total Owner-occupied commercial												$	426,683	$	496,298	$	352,375	$	202,783	$	161,886	$	493,416	$	65,839	$	2,199,280

1-4 family mortgage		587,451		1,492		4,237		-		593,180
Pass												$	388,778	$	273,515	$	93,272	$	52,209	$	28,999	$	57,512	$	243,302	$	1,137,587
Special Mention													315		445		816		375		294		881		2,854		5,980
Substandard													-		279		404		648		346		1,224		363		3,264
Total 1-4 family mortgage												$	389,093	$	274,239	$	94,492	$	53,232	$	29,639	$	59,617	$	246,519	$	1,146,831

Other mortgage		945,548		14,118		3,024		-		962,690
Total real estate mortgage		2,838,407		27,424		13,422		-		2,879,253
Pass												$	1,027,747	$	976,208	$	517,392	$	380,104	$	130,228	$	470,699	$	75,669	$	3,578,047
Special Mention													231		-		-		-		-		7,161		-		7,392
Substandard													-		-		-		130		4,569		7,612		-		12,311
Total Other mortgage												$	1,027,978	$	976,208	$	517,392	$	380,234	$	134,797	$	485,472	$	75,669	$	3,597,750

Consumer		57,672		4		88		-		57,764
Total	$	5,497,693	$	83,874	$	47,198	$	-	$	5,628,765
Pass												$	21,132	$	5,845	$	4,203	$	1,759	$	440	$	2,988	$	30,021	$	66,388
Special Mention													-		-		-		-		-		14		-		14
Substandard													-		-		-		-		-		-		-		-
Total Consumer												$	21,132	$	5,845	$	4,203	$	1,759	$	440	$	3,002	$	30,021	$	66,402

Total Loans
Pass												$	3,172,373	$	2,892,640	$	1,347,172	$	793,843	$	407,411	$	1,158,865	$	1,752,649	$	11,524,953
Special Mention													12,314		4,182		1,917		4,846		5,546		16,744		34,057		79,606
Substandard													200		279		783		10,352		22,442		34,004		15,349		83,409
Total Loans												$	3,184,887	$	2,897,101	$	1,349,872	$	809,041	$	435,399	$	1,209,613	$	1,802,055	$	11,687,968

December 31, 2016 Pass Special
Mention Substandard Doubtful Total
(In Thousands)
Commercial, financial and agricultural $ 1,893,664 $ 61,035 $ 27,568 $ - $ 1,982,267
Real estate - construction 324,958 5,861 4,266 - 335,085
Real estate - mortgage:
Owner-occupied commercial 1,158,615 6,037 7,067 - 1,171,719
1-4 family mortgage 531,868 2,065 2,872 - 536,805
Other mortgage 818,724 11,224 735 - 830,683
Total real estate mortgage 2,509,207 19,326 10,674 - 2,539,207
Consumer 55,135 76 - - 55,211
Total $ 4,782,964 $ 86,298 $ 42,508 $ - $ 4,911,770

Loans by performance status as of ~~September 30, 2017~~ March 31, 2023 and December 31, ~~2016~~ 2022 were as follows:

September 30, 2017	Performing		Nonperforming		Total

March 31, 2023							Performing		Nonperforming		Total
	(In Thousands)						(In Thousands)
Commercial, financial and agricultural	$	2,216,004	$	7,906	$	2,223,910	$	3,074,568	$	7,358	$	3,081,926
Real estate - construction		465,553		2,285		467,838		1,469,670		-		1,469,670
Real estate - mortgage:
Owner-occupied commercial		1,320,886		2,497		1,323,383		2,240,048		3,388		2,243,436
1-4 family mortgage		591,544		1,636		593,180		1,136,601		2,044		1,138,645
Other mortgage		962,260		430		962,690		3,619,109		4,962		3,624,071
Total real estate mortgage		2,874,690		4,563		2,879,253
Total real estate - mortgage								6,995,758		10,394		7,006,152
Consumer		57,656		108		57,764		71,973		81		72,054
Total	$	5,613,903	$	14,862	$	5,628,765	$	11,611,969	$	17,833	$	11,629,802

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, 2022	Performing		Nonperforming		Total
	(In Thousands)
Commercial, financial and agricultural	$	3,138,014	$	7,303	$	3,145,317
Real estate - construction		1,532,388		-		1,532,388
Real estate - mortgage:
Owner-occupied commercial		2,195,968		3,312		2,199,280
1-4 family mortgage		1,144,713		2,118		1,146,831
Other mortgage		3,592,732		5,018		3,597,750
Total real estate - mortgage		6,933,413		10,448		6,943,861
Consumer		66,312		90		66,402
Total	$	11,670,127	$	17,841	$	11,687,968

Loans by past due status as of ~~September 30, 2017~~ March 31, 2023 and December 31, ~~2016~~ 2022 were as follows:

September 30, 2017	Past Due Status (Accruing Loans)
March 31, 2023															Past Due Status (Accruing Loans)
	30-59 Days		60-89 Days		90+ Days		Total Past Due		Non-Accrual		Current		Total Loans								Total Past		Total						Nonaccrual
															30-59 Days		60-89 Days		90+ Days		Due		Nonaccrual		Current		Total Loans		With No ACL
	(In Thousands)														(In Thousands)
Commercial, financial and agricultural	$	5,317	$	12,081	$	2,108	$	19,506	$	5,798	$	2,198,606	$	2,223,910	$	1,023	$	1,153	$	139	$	2,315	$	7,219	$	3,072,392	$	3,081,926	$	1,014
Real estate - construction		997		618		-		1,615		2,285		463,938		467,838		-		-		-		-		-		1,469,670		1,469,670		-
Real estate - mortgage:
Owner-occupied commercial		310		3,354		-		3,664		2,497		1,317,222		1,323,383		3,030		370		-		3,400		3,388		2,236,648		2,243,436		3,222
1-4 family mortgage		1,132		295		328		1,755		1,308		590,117		593,180		5,998		558		-		6,556		2,044		1,130,045		1,138,645		177
Other mortgage		-		-		-		-		430		962,260		962,690		-		-		4,456		4,456		506		3,619,109		3,624,071		506
Total real estate - mortgage		1,442		3,649		328		5,419		4,235		2,869,599		2,879,253		9,028		928		4,456		14,412		5,938		6,985,802		7,006,152		3,905
Consumer		102		13		70		185		38		57,541		57,764		94		64		81		239		-		71,815		72,054		-
Total	$	7,858	$	16,361	$	2,506	$	26,725	$	12,356	$	5,589,684	$	5,628,765	$	10,145	$	2,145	$	4,676	$	16,966	$	13,157	$	11,599,679	$	11,629,802	$	4,919

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, 2022	Past Due Status (Accruing Loans)
							Total Past		Total						Nonaccrual
	30-59 Days		60-89 Days		90+ Days		Due		Nonaccrual		Current		Total Loans		With No ACL
	(In Thousands)
Commercial, financial and agricultural	$	1,075	$	409	$	195	$	1,679	$	7,108	$	3,136,530		3,145,317	$	3,238
Real estate - construction		-		711		-		711		-		1,531,677		1,532,388		-
Real estate - mortgage:
Owner-occupied commercial		83		452		-		535		3,312		2,195,433		2,199,280		57
1-4 family mortgage		405		580		594		1,579		1,524		1,143,728		1,146,831		491
Other mortgage		231		-		4,512		4,743		506		3,592,501		3,597,750		-
Total real estate - mortgage		719		1,032		5,106		6,857		5,342		6,931,662		6,943,861		548
Consumer		174		128		90		392		-		66,010		66,402		621
Total	$	1,968	$	2,280	$	5,391	$	9,639	$	12,450	$	11,665,879		11,687,968	$	4,407

Under the current expected credit losses (“CECL”) methodology, the ACL is measured on a collective basis for pools of loans with similar risk characteristics. For loans that do not share similar risk characteristics with the collectively evaluated pools, evaluations are performed on an individual basis. For all loan segments collectively evaluated, losses are predicted over a period of time determined to be reasonable and supportable, and at the end of the reasonable and supportable forecast period losses are reverted to long-term historical averages. The ~~allowance for~~estimated loan losses ~~is maintained at a level which,~~for all loan segments are adjusted for changes in ~~management’s judgment, is adequate to absorb credit losses inherent~~qualitative factors not inherently considered 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.quantitative analyses.

The ~~methodology utilized~~Company uses the discounted cash flow (“DCF”) method to estimate ACL 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 homogeneous~~all loan pools ~~by loan type and are the following:~~except for commercial ~~and industrial, construction and development, commercial real estate, second lien home equity~~revolving lines of credit and credit cards. For all ~~other loans.~~ loan pools utilizing the DCF method, the Company utilizes and forecasts national unemployment rate as a loss driver. The Company also utilizes and forecasts GDP growth as a second loss driver for its agricultural and consumer loan pools. Consistent forecasts of the loss drivers are used across the loan segments. At March 31, 2023 and December 31, 2022, the Company utilized a reasonable and supportable forecast period of twelve months followed by a six-month straight-line reversion to long term averages. The Company leveraged economic projections from reputable and independent sources to inform its loss driver forecasts. The Company expects national unemployment to be generally unchanged and national GDP growth rate to improve compared to the December 31, 2022 forecast.

The Company uses a loss-rate method to estimate expected credit losses for its commercial revolving lines of credit and credit card pools. The commercial revolving lines of credit pool incorporates a probability of default (“PD”) and loss given default (“LGD”) modeling approach. This approach involves estimating the pool average life and then using historical correlations of default and loss experience over time to calculate the lifetime PD and LGD. These two inputs are then applied to the outstanding pool balance. The credit card pool incorporates a remaining life modeling approach, which utilizes an attrition-based method to estimate the remaining life of the pool. A quarterly average loss rate is then calculated using the Company’s historical loss data. The model reduces the pool balance quarterly on a straight-line basis over the estimated life of the pool. The quarterly loss rate is multiplied by the outstanding balance at each period-end resulting in an estimated loss for each quarter. The sum of estimated loss for all quarters is the total calculated reserve for the pool. Management has also applied the loss-rate method to C&I lines of credit and to credit cards due to their generally short-term nature. An expected loss ratio is applied based on internal and peer historical losses.

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 five year history of net charge-offs experienced by pool, with the most recent net charge-off experience given a greater weighting. This resultsadjusted for qualitative factors not inherently considered in the ~~expected loss rate per year, adjusted by a~~quantitative analyses. The qualitative ~~adjustment factor~~adjustments either increase or decrease the quantitative model estimation. The Company considers factors that are relevant within the qualitative framework which include the following: lending policy, changes in nature and ~~a years-to-impairment factor, for each pool~~volume of loans, ~~to derive the total amount~~staff experience, changes in volume and trends of ~~allowance for non-impaired loans.~~problem loans, concentration risk, trends in underlying collateral values, external factors, quality of loan review system and other economic conditions.

~~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 scheduledInherent risks in the loan ~~agreement. Impaired loans are measured~~portfolio will differ based on ~~the present value~~type 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, reducedloan. Specific risk characteristics 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~~portfolio segment 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.listed below:

~~External Qualitative Factors~~Commercial and industrial~~. The determination~~loans include risks associated with borrower’s cash flow, debt service coverage and management’s expertise. These loans are subject to the risk that the Company may have difficulty converting collateral to a liquid asset if necessary, as well as risks associated with degree of ~~the portion~~specialization, mobility and general collectability in a default situation. These commercial loans may be subject to many different types of ~~the allowance for loan losses relating to external qualitative factors is based on consideration of the following factors: gross domestic product growth rate,~~risks, including fraud, bankruptcy, economic downturn, deteriorated or non-existent collateral, and changes in prime rate, delinquency trends, peer delinquency trends, 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.interest rates.

~~Internal Qualitative Factors~~Real estate construction~~. The determination~~loans include risks associated with the borrower’s credit-worthiness, contractor’s qualifications, borrower and contractor performance, and the overall risk and complexity of the ~~portion~~proposed project. Construction lending is also subject to risks associated with sub-market dynamics, including population, employment trends and household income. During times of economic stress, this type of loan has typically had a greater degree of risk than other loan types.

Real estate mortgageloans consist of loans secured by commercial and residential real estate. Commercial real estate lending is dependent upon successful management, marketing and expense supervision necessary to maintain the property. Repayment of these loans may be adversely affected by conditions in the real estate market or the general economy. Also, commercial real estate loans typically involve relatively large loan balances to a single borrower. Residential real estate lending risks are generally less significant than those of other loans. Real estate lending risks include fluctuations in the value of real estate, bankruptcies, economic downturn and customer financial problems.

Consumer loans carry a moderate degree of risk compared to other loans. They are generally more risky than traditional residential real estate loans but less risky than commercial loans. Risk of default is usually determined by the well-being of the ~~allowance for loan losses relating to internal qualitative factors~~local economies. During times of economic stress, there is ~~based on~~usually some level of job loss both nationally and locally, which directly affects 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 eachability of the ~~criteria is made with a consistent weighted methodology used~~consumer to ~~calculate the amount of allowance required for internal qualitative factors.~~repay debt.

The following table presents ~~an analysis of the allowance for loan losses by portfolio segment and~~ changes in the ~~allowance~~ACL, segregated by loan type, for the three months ended March 31, 2023 and March 31, 2022.

	Commercial,
	financial and			Real estate -			Real estate -
	agricultural			construction			mortgage			Consumer			Total
	(In Thousands)
	Three Months Ended March 31, 2023
Allowance for credit losses:
Balance at January 1, 2023	$	42,830		$	42,889		$	58,652		$	1,926		$	146,297
Charge-offs		(1,257	)		-			(26	)		(390	)		(1,673	)
Recoveries		128			3			1			11			143
Provision		1,193			(2,409	)		4,530			883			4,197
Balance at March 31, 2023	$	42,895		$	40,483		$	63,157		$	2,430		$	148,965

	Three Months Ended March 31, 2022
Allowance for credit losses:
Balance at January 1, 2022	$	41,869		$	26,994	$	45,829		$	1,968		$	116,660
Charge-offs		(2,574	)		-		(27	)		(75	)		(2,676	)
Recoveries		105			-		12			-			117
Provision		2,017			827		2,734			(216	)		5,362
Balance at March 31, 2022	$	41,417		$	27,821	$	48,548		$	1,677		$	119,463

We maintain an ACL on unfunded commercial lending commitments and letters of credit to provide for the risk of loss inherent in these arrangements. The ACL is computed using a methodology similar to that used to determine the ACL for loans, modified to take into account the probability of a drawdown on the commitment. The ACL on unfunded loan commitments is classified as a liability account on the Consolidated Balance Sheets within other liabilities, while the corresponding provision for these credit losses is recorded as a component of other expense. The ACL on unfunded commitments was $575,000 at March 31, 2023 and $575,000 at December 31, 2022. The provision expense for unfunded commitments for the three months ended March 31, 2023 and 2022 was zero and $300,000, respectively.

Loans that no longer share similar risk characteristics with collectively evaluated pools are estimated on an individual basis. A loan is considered collateral-dependent when the borrower is experiencing financial difficulty and repayment is expected to be provided substantially through the operation or sale of the collateral. The following table summarizes collateral-dependent gross loans held for investment by collateral type as follows:

			Accounts								ACL
March 31, 2023	Real Estate		Receivable		Equipment		Other		Total		Allocation
	(In Thousands)
Commercial, financial and agricultural	$	21,757	$	7,468	$	831	$	24,524	$	54,580	$	10,558
Real estate - construction		872		-		-		1,184		2,056		5
Real estate - mortgage:
Owner-occupied commercial		10,935		-		-		48		10,983		207
1-4 family mortgage		3,746		-		-		-		3,746		291
Other mortgage		11,258		-		-		-		11,258		76
Total real estate - mortgage		25,939		-		-		48		25,987		574
Consumer		-		-		-		-		-		-
Total	$	48,568	$	7,468	$	831	$	25,756	$	82,623	$	11,137

			Accounts								ACL
December 31, 2022	Real Estate		Receivable		Equipment		Other		Total		Allocation
	(In Thousands)
Commercial, financial and agricultural	$	20,061	$	12,092	$	837	$	24,998	$	57,988	$	9,910
Real estate - construction		-		-		-		1,198		1,198		7
Real estate - mortgage:
Owner-occupied commercial		8,573		-		-		74		8,647		154
1-4 family mortgage		3,260		-		-		-		3,260		316
Other mortgage		12,311		-		-		-		12,311		-
Total real estate - mortgage		24,144		-		-		74		24,218		470
Consumer		-		-		-		-		-		-
Total	$	44,205	$	12,092	$	837	$	26,270	$	83,404	$	10,387

On March 22, 2020, an Interagency Statement was issued by banking regulators that encourages financial institutions to work prudently with borrowers who are or may be unable to meet their contractual payment obligations due to the effects of COVID-19. Additionally, Section 4013 of the CARES Act further provides that a qualified loan modification is exempt by law from classification as a Troubled Debt Restructuring (“TDR”) as defined by GAAP, from the period beginning March 1, 2020 until the earlier of December 31, 2020 or the date that is 60 days after the date on which the national emergency concerning the COVID-19 outbreak declared by the President of the United States under the National Emergencies Act terminates. The Interagency Statement was subsequently revised in April 2020 to clarify the interaction of the original guidance with Section 4013 of the CARES Act, as well as setting forth the banking regulators’ views on consumer protection considerations. On December 27, 2020, President Trump signed into law the Consolidated Appropriations Act 2021, which extended the period established by Section 4013 of the CARES Act to the earlier of January 1, 2022 or the date that is 60 days after the date on which the national COVID-19 emergency terminates. In accordance with such guidance, the Bank offered short-term modifications made in response to COVID-19 to borrowers who are current and otherwise not past due. These include short-term (180 days or less) modifications in the form of payment deferrals, fee waivers, extensions of repayment terms, or other delays in payment that are insignificant.

The Bank adopted Accounting Standards Update (“ASU”) 2022-02, Financial Instruments - Credit Losses (Topic 326) Troubled Debt Restructurings and Vintage Disclosures (“ASU 2022-02”) effective January 1, 2023. The amendments in ASU 2022-02 eliminated the recognition and measure of TDRs and enhanced disclosures for loan ~~losses~~modifications to borrowers experiencing financial difficulty.

The table below details the amortized cost basis at the end of the reporting period for loans made to borrowers experiencing financial difficulty that were modified during the three ~~and nine~~ months ended September 30, 2017 and September 30, 2016. The total allowance for loan losses is disaggregated into those amounts associated with loans individually evaluated and those associated with loans collectively evaluated.March 31,2023:

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

(In Thousands)
Three Months Ended September 30, 2017
Allowance for loan losses:
Balance at June 30, 2017 $ 29,127 $ 5,138 $ 20,392 $ 402 $ 55,059
Charge-offs (924 ) (16 ) (550 ) (65 ) (1,555 )
Recoveries 67 12 59 14 152
Provision 3,431 197 1,065 110 4,803
Balance at September 30, 2017 $ 31,701 $ 5,331 $ 20,966 $ 461 $ 58,459

Three Months Ended September 30, 2016
Allowance for loan losses:
Balance at June 30, 2016 $ 23,655 $ 5,279 $ 17,600 $ 464 $ 46,998
Charge-offs (1,270 ) (79 ) (144 ) (81 ) (1,574 )
Recoveries 35 9 1 - 45
Provision 3,560 (394 ) 282 16 3,464
Balance at September 30, 2016 $ 25,980 $ 4,815 $ 17,739 $ 399 $ 48,933

Nine Months Ended September 30, 2017
Allowance for loan losses:
Balance at December 31, 2016 $ 28,872 $ 5,125 $ 17,504 $ 392 $ 51,893
Charge-offs (6,846 ) (56 ) (922 ) (173 ) (7,997 )
Recoveries 273 42 62 16 393
Provision 9,402 220 4,322 226 14,170
Balance at September 30, 2017 $ 31,701 $ 5,331 $ 20,966 $ 461 $ 58,459

Nine Months Ended September 30, 2016
Allowance for loan losses:
Balance at December 31, 2015 $ 21,495 $ 5,432 $ 16,061 $ 431 $ 43,419
Charge-offs (2,732 ) (815 ) (335 ) (130 ) (4,012 )
Recoveries 39 64 100 - 203
Provision 7,178 134 1,913 98 9,323
Balance at September 30, 2016 $ 25,980 $ 4,815 $ 17,739 $ 399 $ 48,933

As of September 30, 2017
Allowance for loan losses:
Individually Evaluated for Impairment $ 5,725 $ 829 $ 1,892 $ 50 $ 8,496
Collectively Evaluated for Impairment 25,976 4,502 19,074 411 49,963

Loans:
Ending Balance $ 2,223,910 $ 467,838 $ 2,879,253 $ 57,764 $ 5,628,765
Individually Evaluated for Impairment 30,405 3,328 15,789 88 49,610
Collectively Evaluated for Impairment 2,193,505 464,510 2,863,464 57,676 5,579,155

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

			Payment Deferral
	Term		and Term				Percentage of
	Extensions		Extensions		Total		Total Loans
	(In Thousands)

Commercial, financial and agricultural	$	39,978	$	-	$	39,978		0.34	%
Real estate - construction		200		-		200		-	%
Owner-occupied commercial		9,215		701		9,916		0.09	%
1-4 family mortgage		214		-		214		-	%
Other mortgage		11,254		359		11,613		0.10	%
Total	$	60,861	$	1,060	$	61,921		0.53	%

The following table ~~presents details~~summarizes the financial impacts of loan modifications made to borrowers experiencing financial difficulty during the ~~Company’s impaired~~three months ended March 31, 2023:

	Term			Total Payment
	Extensions			Deferral
	(In months)			(In Thousands)
Commercial, financial and agricultural	3	to	12	$	-
Real estate - construction		6			-
Owner-occupied commercial	3	to	18		49
1-4 family mortgage		3			-
Other mortgage	3	to	36		59

No loans modified on or after January 1, 2023, the date the Company adopted ASU 2022-02, were past due greater than 30 days or on non-accrual as of ~~September 30, 2017 and December~~March 31, ~~2016, respectively. Loans which have been fully charged off do not appear~~2023. As of March 31, 2023, we had commitments to lend $17.7 million in additional funds to borrowers experiencing financial difficulty that were modified during the ~~tables.~~first quarter of 2023.

September 30, 2017 For the three months
ended September 30,
2017 For the nine months
ended September 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 $ 4,671 $ 4,671 $ - $ 4,770 $ 52 $ 4,998 $ 164
Real estate - construction 45 48 - 48 1 49 2
Real estate - mortgage:
Owner-occupied commercial 2,366 2,532 - 2,551 37 2,584 113
1-4 family mortgage 1,752 1,752 - 1,756 22 1,781 67
Other mortgage 732 732 - 732 10 733 32
Total real estate - mortgage 4,850 5,016 - 5,039 69 5,098 212
Consumer 38 40 - 41 1 42 2
Total with no allowance recorded 9,604 9,775 - 9,898 123 10,187 380

With an allowance recorded:
Commercial, financial and agricultural 25,734 27,719 5,725 26,129 256 27,021 800
Real estate - construction 3,283 3,283 829 3,357 14 3,369 42
Real estate - mortgage:
Owner-occupied commercial 8,024 8,024 1,512 8,024 75 7,873 217
1-4 family mortgage 2,485 2,485 328 2,485 10 2,506 56
Other mortgage 430 980 52 974 (4 ) 984 21
Total real estate - mortgage 10,939 11,489 1,892 11,483 81 11,363 294
Consumer 50 50 50 50 1 39 2
Total with allowance recorded 40,006 42,541 8,496 41,019 352 41,792 1,138

Total Impaired Loans:
Commercial, financial and agricultural 30,405 32,390 5,725 30,899 308 32,019 964
Real estate - construction 3,328 3,331 829 3,405 15 3,418 44
Real estate - mortgage:
Owner-occupied commercial 10,390 10,556 1,512 10,575 112 10,457 330
1-4 family mortgage 4,237 4,237 328 4,241 32 4,287 123
Other mortgage 1,162 1,712 52 1,706 6 1,717 53
Total real estate - mortgage 15,789 16,505 1,892 16,522 150 16,461 506
Consumer 88 90 50 91 2 81 4
Total impaired loans $ 49,610 $ 52,316 $ 8,496 $ 50,917 $ 475 $ 51,979 $ 1,518

December 31, 2016 For the twelve months
ended December 31, 2016
Recorded
Investment Unpaid
Principal
Balance Related
Allowance Average
Recorded
Investment Interest Income
Recognized in
Period

(In Thousands)
With no allowance recorded:
Commercial, financial and agricultural $ 1,003 $ 1,003 $ - $ 992 $ 64
Real estate - construction 938 1,802 - 1,159 3
Real estate - mortgage:
Owner-occupied commercial 2,615 2,778 - 2,884 166
1-4 family mortgage 1,899 1,899 - 1,901 102
Other mortgage 940 940 - 965 60
Total real estate - mortgage 5,454 5,617 - 5,750 328
Consumer 3 5 - 6 -
Total with no allowance recorded 7,398 8,427 - 7,907 395

With an allowance recorded:
Commercial, financial and agricultural 26,919 31,728 6,607 26,955 1,162
Real estate - construction 3,376 3,376 923 3,577 68
Real estate - mortgage:
Owner-occupied commercial 6,924 6,924 348 6,934 362
1-4 family mortgage 972 972 274 313 19
Other mortgage - - - - -
Total real estate - mortgage 7,896 7,896 622 7,247 381
Consumer - - - - -
Total with allowance recorded 38,191 43,000 8,152 37,779 1,611

Total Impaired Loans:
Commercial, financial and agricultural 27,922 32,731 6,607 27,947 1,226
Real estate - construction 4,314 5,178 923 4,736 71
Real estate - mortgage:
Owner-occupied commercial 9,539 9,702 348 9,818 528
1-4 family mortgage 2,871 2,871 274 2,214 121
Other mortgage 940 940 - 965 60
Total real estate - mortgage 13,350 13,513 622 12,997 709
Consumer 3 5 - 6 -
Total impaired loans $ 45,589 $ 51,427 $ 8,152 $ 45,686 $ 2,006

~~Troubled Debt Restructurings (“TDR”) at September 30, 2017, December~~As of March 31, ~~2016 and September 30, 2016 totaled $16.4 million, $7.3 million and $6.7 million, respectively. At September 30, 2017,~~ 2023, the Company ~~had a related allowance for loan losses of $4.0 million allocated~~did not have any loans made to these TDRs, compared to $2.3 million at December 31, 2016 and $1.7 million at September 30, 2016. TDR activity by portfolio segment for the three and nine months ended September 30, 2017 is presented in the table below.

Three Months Ended September 30, 2017 Nine Months Ended September 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
Real estate - construction - - - 1 997 997
Real estate - mortgage:
Owner-occupied commercial - - - 2 3,664 3,664
1-4 family mortgage - - - 1 850 850
Other mortgage - - - - - -
Total real estate mortgage - - - 3 4,514 4,514
Consumer - - - - - -
- $ - $ - 9 $ 12,716 $ 12,716

Three Months Ended September 30, 2016 Nine Months Ended September 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
Real estate - construction - - - - - -
Real estate - mortgage:
Owner-occupied commercial - - - - - -
1-4 family mortgage - - - - - -
Other mortgage - - - 1 234 234
Total real estate mortgage - - - 1 234 234
Consumer - - - - - -
- $ - $ - 2 $ 600 $ 600

~~There~~borrowers experiencing financial difficulty that were ~~no TDRs which defaulted~~modified during the ~~three and nine months ended September 30, 2017 and 2016, and which were modified in the previous twelve months (i.e., the twelve months prior to default).~~first quarter of 2023 that subsequently defaulted. For purposes of this disclosure, default is defined as 90 days past due and still accruing or placement on nonaccrual status. ~~As of September 30, 2017, the Company’s TDRs have all resulted from term extensions, rather than from interest rate reductions or debt forgiveness.~~

TDRs at December 31, 2022 and March 31, 2022 totaled $2.5 million and $2.5 million, respectively. The portion of those TDRs accruing interest at December 31, 2022 and March 31, 2022 totaled $431,000 and $426,000, respectively. There were no modifications made to new TDRs or renewals of existing TDRs for the three months ended March 31, 2022

NOTE 6– LEASES

The Company leases space under non-cancelable operating leases for several of its banking offices and certain office equipment. The leases have remaining terms up to 9 years. At March 31, 2023, the Company had lease right-of-use assets and lease liabilities totaling $19.8 million and $20.7 million, respectively, compared to $18.8 million and $19.6 million, respectively at December 31, 2022 which are reflected in other assets and other liabilities, respectively, in the Company’s Consolidated Balance Sheets.

Maturities of operating lease liabilities are as follows:

	March 31, 2023
	(In Thousands)
2023 (remaining)	$	3,864
2024		3,768
2025		3,672
2026		3,066
2027		2,588
thereafter		6,079
Total lease payments		23,037
Less: imputed interest		(2,339	)
Present value of operating lease liabilities	$	20,698

As of March 31, 2023, the weighted average remaining term of operating leases was 6.3 years and the weighted average discount rate used in the measurement of operating lease liabilities was 2.95%.

Operating cash flows related to leases were $1.2 million and $1.0 million for the three months ended March 31, 2023 and 2022, respectively.

Lease costs during the three months ended March 31, 2023 and 2022 were as follows (in thousands):

	Three Months Ended March 31,
	2023			2022
Operating lease cost	$	1,230		$	1,043
Variable lease cost		191			148
Sublease income		(8	)		(24	)
Net lease cost	$	1,413		$	1,167

NOTE 7 - EMPLOYEE AND DIRECTOR BENEFITS

Stock ~~Options~~Incentive Plan

At ~~September 30, 2017,~~ March 31, 2023, the Company had ~~stock-based compensation plans,~~a stock incentive plan as described below. The compensation cost that has been charged to earnings for the ~~plans~~plan was approximately ~~$294,000~~$808,000 and ~~$916,000~~$790,000 for the three ~~and nine~~ months ended ~~September 30, 2017, respectively,~~ March 31, 2023 and ~~$291,000 and $931,000 for the three and nine months ended September 30, 2016,~~2022, respectively.

The Company’s ~~2005 Amended and Restated Stock Option 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~~The plan allows 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~~plan 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. ~~These assumptions are highly subjective and changes to them can materially affect the fair value estimate.~~ Expected ~~market price volatility and expected term of options~~volatilities are based on ~~historical data~~the Company’s trading price history. The expected term for options granted is based on the short-cut method and ~~other factors.~~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.~~U.S. Treasury yield curve in effect at the time of grant.

2017 2016
Expected volatility 29.00 % 29.00 %
Expected dividends 0.44 % 0.64 %
Expected term (in years) 6.25 6.25
Risk-free rate 2.08 % 1.86 %

~~The weighted average grant-date fair value~~There were no grants of stock options ~~granted~~ during ~~the nine months ended September 30, 2017~~first quarters of 2023 and ~~September 30, 2016 was $11.83 and $5.95, respectively.~~2022.

The following table summarizes stock option activity during the ~~nine~~three months ended ~~September 30, 2017~~ March 31, 2023 and ~~September 30, 2016:~~2022:

Shares Weighted
Average
Exercise
Price Weighted
Average
Remaining
Contractual
Term (years) Aggregate
Intrinsic
Value
(In Thousands)
Nine Months Ended September 30, 2017:
Outstanding at January 1, 2017 2,026,334 $ 9.00 6.2 $ 57,636
Granted 52,500 37.93 9.4 (35 )
Exercised (359,000 ) 4.97 4.2 11,590
Forfeited (32,000 ) 21.96 8.4 489
Outstanding at September 30, 2017 1,687,834 10.51 5.7 $ 45,136

Exercisable at September 30, 2017 810,736 $ 5.22 4.2 $ 25,971

Nine Months Ended September 30, 2016:
Outstanding at January 1, 2016 2,498,834 $ 6.66 6.3 $ 42,743
Granted 234,000 19.98 9.5 1,398
Exercised (656,500 ) 4.25 4.2 14,254
Forfeited (13,000 ) 19.41 9.0 85
Outstanding at September 30, 2016 2,063,334 8.86 6.5 $ 35,277

Exercisable at September 30, 2016 594,536 $ 6.45 6.0 $ 13,901

						Weighted
				Weighted		Average
				Average		Remaining
				Exercise		Contractual		Aggregate
	Shares			Price		Term (years)		Intrinsic Value
								(In Thousands)
Three Months Ended March 31, 2023:
Outstanding January 1, 2023		280,000		$	19.43		3.0	$	14,088
Exercised		(75,000	)		10.80		0.9		3,288
Outstanding March 31, 2023		205,000		$	22.59		3.4	$	7,428

Exercisable March 31, 2023		152,000		$	17.28		2.2	$	5,859

Three Months Ended March 31, 2022:
Outstanding January 1, 2022		353,250		$	19.28		3.8	$	23,525
Exercised		(36,500	)		18.65		3.1		2,677
Outstanding March 31, 2022		316,750		$	19.35		3.7	$	24,446

Exercisable March 31, 2022		255,000		$	14.79		2.8	$	20,056

As of ~~September 30, 2017,~~ March 31, 2023, there was ~~approximately $2.1 million~~$159,000 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 years.~~1.0 year.

Restricted Stock and Performance Shares

The Company periodically grants restricted stock awards that vest upon time-based service conditions. Dividend payments are made during the vesting period. The value of restricted stock 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 ~~September 30, 2017,~~ March 31, 2023, there was ~~$543,000~~$5.3 million of total unrecognized compensation cost related to non-vested time-based restricted stock. The cost is expected to be recognized evenly over the remaining ~~1.2~~2.2 years of the restricted stock’s vesting period.

The Company periodically grants performance shares that give plan participants the opportunity to earn between 0% and 150% of the number of performance shares granted based on achieving certain performance metrics. The number of performance shares earned is determined by reference to the Company’s total shareholder return relative to a peer group of other publicly traded banks and bank holding companies during the performance period. The performance period is generally three years beginning on January 1^st of the year of the grant. The fair value of performance shares is determined using a Monte Carlo simulation model on the grant date. As of March 31, 2023, there was $1.2 million of total unrecognized compensation cost related to non-vested performance shares. As of March 31, 2023, non-vested performance shares had a weighted average remaining time to vest of 1.8 years.

	Restricted Stock					Performance Shares
	Shares			Weighted Average Grant Date Fair Value		Shares		Weighted Average Grant Date Fair Value
Three Months Ended March 31, 2023:
Non-vested at January 1, 2023		141,580		$	56.39		23,852	$	54.16
Granted		27,258			69.83		8,091		70.29
Vested		(17,521	)		48.32		-		-
Forfeited		(6,545	)		69.90		-		-
Non-vested at March 31, 2023		144,772		$	59.29		31,943	$	58.25

Three Months Ended March 31, 2022:
Non-vested at January 1, 2022		127,602		$	42.27		12,437	$	37.05
Granted		27,851			84.67		6,557		74.52
Vested		(9,612	)		42.23		-		-
Forfeited		(877	)		40.72		-		-
Non-vested at March 31, 2022		144,964		$	50.43		18,994	$	49.99

NOTE 8 - DERIVATIVES

The ~~following table summarizes restricted stock activity during~~Company periodically enters into derivative contracts to manage exposures to movements in interest rates. The Company purchased an interest rate cap in Mayof2020 to limit exposures to increases in interest rates. The interest rate cap is not designated as a hedging instrument but rather as a stand-alone derivative. The interest rate cap has an original term of 3 years, a notional amount of $300 million and is tied to the ~~nine months ended September 30, 2017~~one-month LIBOR rate with a strike rate of 0.50%. The fair value of the interest rate cap is carried on the consolidated balance sheet in other assets and ~~September 30, 2016:~~

Shares Weighted
Average Grant
Date Fair Value

Nine Months Ended September 30, 2017:
Non-vested at January 1, 2017 118,676 $ 8.88
Granted 7,000 38.02
Vested (4,200 ) 15.74
Forfeited (800 ) 15.74
Non-vested at September 30, 2017 120,676 10.29

Nine Months Ended September 30, 2016:
Non-vested at January 1, 2016 294,176 $ 6.44
Granted 9,000 19.58
Vested (178,500 ) 5.59
Forfeited - -
Non-vested at September 30, 2016 124,676 8.66

~~NOTE 7 - DERIVATIVES~~the change in fair value is recognized in noninterest income each quarter. At March 31, 2023 the interest rate cap had a fair value of $1.2 million and remaining term of one month.

The Company has entered into ~~agreements~~forward loan sale commitments with secondary market investors to deliver loans on a “best efforts delivery” ~~basis.~~basis, which do not meet the definition of a derivative instrument. 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~~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 ~~September 30, 2017~~ March 31, 2023 and December 31, ~~2016~~ 2022 were not material.

NOTE 8 9– RECENTLY ADOPTED ACCOUNTING PRONOUNCEMENTS

In March 2022, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2022-02,Financial Instruments—Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures. The amendments eliminate the accounting guidance for TDR recognition in Subtopic 310-40,Receivables – Trouble Debt Restructurings by Creditors by entities that have adopted ASU 2016-13,Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. For public business entities, the amendments require disclosure of current-period gross write-offs by year of origination for financing receivables and net investment in leases within the scope of Subtopic 326-20. Gross write-off information must be included in the vintage disclosures required for public business entities in accordance with paragraph 326-20-50-6, which requires that an entity disclose the amortized cost basis of financing receivables by credit quality indicator and class of financing receivable by year of origination. The Company adopted ASU 2022-02 effective January 1, 2023 on a prospective basis. Adoption of ASU 2022-02 did not have a material impact on the Company’s consolidated financial statements.

NOTE 10– RECENT ACCOUNTING PRONOUNCEMENTS

In March 2023, the FASB issued ASU ~~2016-09,~~2023-02, ~~Compensation – Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting~~ (“ASU 2016-09”), which is intended to simplify several aspects 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 nine months ended September 30, 2017 of $1.4 million and $3.5 million, respectively, compared to $1.2 million and $3.5 million during the quarter and nine months ended September 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~~Investments-Equity Method and Joint Ventures (Topic ~~323), Simplifying~~323): Accounting for Investments in Tax Credit Structures Using the ~~Transition~~Proportional Amortization Method. These amendments allow entities to elect to account for qualifying tax equity investments using the proportional amortization method, regardless of the program giving rise to the ~~Equity Method~~related income tax credits. The ASU responds to stakeholder feedback that the proportional amortization method provides investors and other allocators of ~~Accounting. The amendments eliminate the requirement that when an investment qualifies for use~~capital with a better understanding of the equity method as 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 periodsreturns from investments that the investment had been held. The amendments require that the equity method investor add the cost of acquiring the additional interest in the investee 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 qualifiedare made primarily for the ~~equity method~~purpose of ~~accounting recognize through earnings the unrealized holding gain or loss in accumulated~~receiving income tax credits and other ~~comprehensive~~ income at the date the investment becomes qualified for use of the equity method. The amendments became effective for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2016. The amendments should be applied prospectively upon their effective date to increase the level of ownership interest or degree of influence that results in the adoption of the equity method. Adoption of this standard has not affected the consolidated financial statements.

~~In January 2017, the FASB issued~~tax benefits. ASU ~~2017-03,~~ ~~Accounting Changes and Error Corrections~~ ~~(Topic 250) and~~ ~~Investments – Equity Method and Joint Ventures~~ ~~(Topic 323)~~ ~~– Amendments to SEC Paragraphs Pursuant to Staff Announcements at the September 22, 2016 and November 17, 2016 EITF Meetings.~~ ASU 2017-03 provides amendments that add paragraph 250-10-S99-6 which includes the text of "SEC Staff Announcement: Disclosure of the Impact That Recently Issued Accounting Standards Will Have on the Financial Statements of a Registrant When Such Standards Are Adopted in a Future Period” (in accordance with Staff Accounting Bulletin (SAB) Topic 11.M). Registrants are required 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 estimate the impact of the adoption, then additional qualitative disclosures should be considered to assist the reader in assessing the significance of the standard's 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 disclosures.

~~NOTE 9~~ 2023- ~~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~~02 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 is continuing to assess its revenue streams and reviewing its contracts with customers that are potentially affected by the new guidance including fees on deposits, gains and losses on the sale of other real estate owned, credit and debit card interchange fees, and credit card revenue, to determine the potential impact the new guidance is expected to have on the Company’s consolidated financial statements. However, the Company’s revenue recognition pattern for these revenue streams is not expected to change materially from current practice. In addition, the Company continues to follow implementation issues specific to financial institutions which are still under discussion by the FASB’s Transition Resource Group. The Company is currently planning to adopt the ASU on January 1, 2018 utilizing the modified retrospective approach.

~~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,~~ 2023, including interim periods within those fiscal years. Early adoption is permitted for all entities in any interim period. The Company is ~~evaluating~~assessing its tax credit investments for whether they qualify for proportional amortization treatment and plans to adopt the ~~provisions of this ASU to determine~~amendments soon after. The Company does not currently believe the ~~potential impact the new standard~~amendments will have a material impact on ~~the Company’s~~its 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. 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. Additionally, the inclusion of these right-of-use lease assets in our balance sheet will impact our total risk-weighted assets.

~~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 the impact of the 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 of adopting this 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 1011 - 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~~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, as in the case of certain corporate securities, these securities are classified in Level 3 of the hierarchy.

~~Impaired~~ Derivative instruments. The fair values of derivatives are determined based on a valuation pricing model using readily available observable market parameters such as interest rate curves, adjusted for counterparty credit risk. These measurements are classified as level 2 within the valuation hierarchy.

Loans Individually Evaluated. ~~. Impaired loans~~Loans individually evaluated are measured and reported at fair value when full payment under the loan terms is not probable. ~~Impaired loans~~Loans individually evaluated 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 ~~820-10~~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~~Loans individually evaluated are subject to nonrecurring fair value adjustment upon initial recognition or subsequent ~~impairment.~~individually evaluation. A portion of the ~~allowance for loan losses~~ACL is allocated to ~~impaired~~ loans individually evaluated if the value of such loans is deemed to be less than the unpaid balance. ~~Impaired loans~~The range of fair value adjustments and weighted average adjustment as of March 31, 2023 was 0% to 90% and 14.9%, respectively. The range of fair value adjustments and weighted average adjustment as of December 31, 2022 was 0% to 82% and 19.5% respectively. Loans individually evaluated 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~~write-down individually evaluated loans that are measured at fair value on a nonrecurring basis was ~~$2,660,000 and $7,967,000~~$-.- million during the three ~~and nine~~ months ended ~~September 30, 2017, respectively,~~ March 31, 2023, and ~~$3,544,000 and $6,090,000~~$3.0 million during the three ~~and nine~~ months ended ~~September 30, 2016, respectively.~~March 31, 2022.

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~~ACL 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. The range of fair value adjustments and weighted average adjustment as of March 31, 2023 was 0% to 100% and 53.3%, respectively. The range of fair value adjustments and weighted average adjustment as of December 31, 2022 was 0% to 100% and 53.3%, respectively. These measurements are classified as Level 3 within the valuation hierarchy. ~~A gain on the sale of OREO of $20,000 and $56,000 was recognized for the three and nine months ended September 30, 2017, respectively, and a loss~~There were no losses on the sale and write-downs of ~~$148,000 and $584,000 for~~OREO during the three ~~and nine~~ months ended ~~September 30, 2016, respectively.~~ March 31, 2023, compared to $6,000 during the three months ended March 31, 2022. These charges were for write-downs in the value of OREO subsequent to foreclosure and ~~gains or~~ losses on the disposal of OREO. OREO is classified within Level 3 of the hierarchy.

There were two residential real estate loans with an aggregate balance of $248,000 foreclosed and classified as OREO as of March 31, 2023 and December 31, 2022.

Two residential real estate loans for $190,000 were in the process of foreclosure as of March 31, 2023. There were no residential real estate loan ~~foreclosures classified as OREO as of September 30, 2017, compared to $189,000 as of December 31, 2016.~~

~~One residential real estate loan with a balance of $921,000~~that was in the process of being foreclosed as of ~~September 30, 2017.~~December 31, 2022.

The following table presents the Company’s financial assets ~~and financial liabilities~~ carried at fair value on a recurring basis as of ~~September 30, 2017~~ March 31, 2023 and December 31, ~~2016:~~2022. There were no liabilities measured at fair value on a recurring basis as of March 31, 2023 and December 31, 2022.

									Fair Value Measurements at March 31, 2023 Using
									Quoted Prices in
									Active Markets		Significant Other		Significant
	Fair Value Measurements at September 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:
U.S. Treasury and government sponsored agencies	$	-	$	56,778	$	-	$	56,778
Available for sale debt securities:
U.S. Treasury securities									$	2,990	$	-	$	-	$	2,990
Government agency securities										-		4		-		4
Mortgage-backed securities		-		243,743		-		243,743		-		243,031		-		243,031
State and municipal securities		-		134,804		-		134,804		-		13,311		-		13,311
Corporate debt										-		358,752		6,860		365,612
Total available-for-sale debt securities										2,990		615,098		6,860		624,948
Interest rate cap derivative										-		1,181		-		1,181
Total assets at fair value	$	-	$	435,325	$	-	$	435,325	$	2,990	$	616,279	$	6,860	$	626,129

	Fair Value Measurements at December 31, 2022 Using
	Quoted Prices in
	Active Markets		Significant Other		Significant
	for Identical		Observable Inputs		Unobservable
	Assets (Level 1)		(Level 2)		Inputs (Level 3)		Total
Assets Measured on a Recurring Basis:	(In Thousands)
Available for sale debt securities:
U.S. Treasury securities	$	2,969	$	-	$	-	$	2,969
Government agency securities		-		9		-		9
Mortgage-backed securities		-		249,703		-		249,703
State and municipal securities		-		13,609		-		13,609
Corporate debt		-		367,665		10,860		378,525
Total available-for-sale debt securities		2,969		630,986		10,860		644,815
Interest rate cap derivative		-		4,201		-		4,201
Total assets at fair value	$	2,969	$	635,187	$	10,860	$	649,016

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

The following table presents the Company’s financial assets ~~and financial liabilities~~ carried at fair value on a nonrecurring basis as of ~~September 30, 2017~~ March 31, 2023 and December 31, ~~2016:~~2022. There were no liabilities measured at fair value on a nonrecurring basis as of March 31, 2023 and December 31, 2022.

									Fair Value Measurements at March 31, 2023 Using
									Quoted Prices in
									Active Markets		Significant Other		Significant
	Fair Value Measurements at September 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	$	-	$	-	$	41,114	$	41,114
Loans individually evaluated									$	-	$	-	$	71,486	$	71,486
Other real estate owned and repossessed assets		-		-		3,888		3,888		-		-		248		248
Total assets at fair value	$	-	$	-	$	45,002	$	45,002	$	-	$	-	$	71,734	$	71,734

									Fair Value Measurements at December 31, 2022 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
Other real estate owned and repossessed assets		-		-		4,988		4,988
Loans individually evaluated									$	-	$	-	$	73,017	$	73,017
Other real estate owned										-		-		248		248
Total assets at fair value	$	-	$	-	$	42,425	$	42,425	$	-	$	-	$	73,265	$	73,265

There were no liabilities measured at fair value on a non-recurring basis as of March 31, 2023 and December 31, 2022.

In the case of the debt securities portfolio, the Company monitors the portfolio to ascertain when transfers between levels have been affected. For the three months ended March 31, 2023, there was one transfer out of level 3 into level 2.

The table below includes a rollforward of the balance sheet amounts for the period ended March 31, 2023 and March 31, 2022 (including the change in fair value) for financial instruments classified by the Company within Level 3 of the valuation hierarchy measured at fair value on a recurring basis including changes in fair value due in part to observable factors that are part of the valuation methodology:

	For the period ended March 31,
	2023			2022
	Available-for-sale Securities			Available-for-sale Securities
	(In Thousands)
Fair value, beginning of period	$	10,860		$	16,992
Transfers into Level 3		-			-
Total realized gains included in income		-			-
Changes in unrealized gains/losses included in other comprehensive income for assets and liabilities still held at period-end		160			(343	)
Purchases		-			-
Transfers out of Level 3		(4,160	)		(5,149	)
Fair value, end of period	$	6,860		$	11,500

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 in the statements of financial condition approximate those assets’ fair values.~~

~~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 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 September 30, 2017 and December 31, 2016 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 or non-recurring basis ~~or nonrecurring basis.~~as of March 31, 2023 and December 31, 2022 were as follows:

September 30, 2017 December 31, 2016
Carrying
Amount Fair Value Carrying
Amount Fair Value
(In Thousands)
Financial Assets:
Level 1 inputs:
Cash and due from banks $ 166,150 $ 166,150 $ 623,562 $ 623,562

Level 2 inputs:
Available for sale debt securities 435,325 435,325 422,375 422,375
Held to maturity debt securities 36,891 37,406 25,052 25,431
Restricted equity securities 1,038 1,038 1,024 1,024
Federal funds sold 182,841 182,841 160,435 160,435
Mortgage loans held for sale 4,971 5,033 4,675 4,736
Bank owned life insurance contracts 126,722 126,722 114,388 114,388

Level 3 inputs:
Debt securities held to maturity 50,508 51,923 37,512 37,871
Loans, net 5,570,306 5,564,250 4,859,877 4,872,689

Financial liabilities:
Level 2 inputs:
Deposits $ 5,796,901 $ 5,793,324 $ 5,420,311 $ 5,417,320
Federal funds purchased 254,880 254,880 355,944 355,944
Other borrowings 54,975 56,996 55,262 54,203

	March 31, 2023				December 31, 2022
	Carrying				Carrying
	Amount		Fair Value		Amount		Fair Value
	(In Thousands)
Financial Assets:
Level 1 Inputs:
Cash and cash equivalents	$	864,493	$	864,493	$	814,538	$	814,538
Held to maturity U.S. Treasury securities		507,601		477,580		507,601		470,954

Level 2 Inputs:
Federal funds sold		6,478		6,478		1,515		1,515
Held to maturity debt securites		506,342		453,162		526,720		464,749
Mortgage loans held for sale		1,651		1,642		1,607		1,604
Restricted equity securities		7,307		7,307		7,734		7,734

Level 3 Inputs:
Held to maturity debt securites		250		250		250		250
Loans, net		11,480,837		11,145,529		11,541,671		11,265,517

Financial Liabilities:
Level 2 Inputs:
Deposits	$	11,615,317	$	11,602,610	$	11,546,805	$	11,529,647
Federal funds purchased		1,480,160		1,480,160		1,618,798		1,618,798
Other borrowings		65,417		57,340		64,726		57,101

~~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 September 30, 2017, and events which occurred subsequent to September 30, 2017 but were not recognized in the financial statements.

ITEM 2. ~~MANAGEMENT’S~~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, 2023 and December 31, 2022 and consolidated statements of income for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2023 and ~~September 30, 2016.~~March 31, 2022.

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,” “could,” “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: the global health and economic crisis precipitated by the COVID-19 outbreak; 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;~~relationships, including in light of the continuing high rate of domestic inflation; changes in accounting and tax principles, policies or guidelines; changes in legislation or regulatory requirements; changes in our loan portfolio and deposit base; economic crisis and associated credit issues in industries most impacted by the COVID-19 outbreak; 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~~ full-service banking offices located in Alabama, ~~Tampa Bay,~~ Florida, ~~the panhandle of Florida, the greater Atlanta,~~ Georgia, ~~metropolitan area, Charleston,~~North and South Carolina, and ~~Nashville,~~ Tennessee. We also operate loan production offices in Florida. 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.

First quarter highlights

●

Diluted earnings per common share of $1.06 for the first quarter of 2023.

●

Return on assets increased from 1.53% to 1.63% year-over-year.

●

Book value per share grew from $21.61 to $24.63, or 14%, year-over-year.

●

Deposit balances grew $69 million during the first quarter of 2023 while the deposit pipeline increased by $244 million, or 51%.

●

Bank level Tier 1 capital to average assets increased from 8.08% to 9.91% year-over-year.

Overview

As of ~~September 30, 2017,~~March 31, 2023, we had consolidated total assets of ~~$6.71~~$14.57 billion, ~~an increase of $341.7~~down $29.2 million, or ~~5.4%~~0.2%, from ~~$6.37~~total assets of $14.60 billion at December 31, ~~2016. This increase in total assets resulted from a $717.0 million increase in loans, offset by a $435.0 million decrease in cash and cash equivalents.~~2022. Total loans were ~~$5.63~~$11.63 billion at ~~September 30, 2017, up $717.0~~March 31, 2023, down $58.2 million, or ~~14.6%~~0.5%, from ~~$4.91~~$11.69 billion at December 31, ~~2016.~~2022. Total deposits were ~~$5.80~~$11.62 billion at ~~September 30, 2017, an increase of $376.6~~March 31, 2023, up $68.5 million, or ~~6.9%~~0.6%, from ~~$5.42~~$11.55 billion at December 31, ~~2016.~~2022.

Net income available to common stockholders for the three months ended ~~September 30, 2017~~March 31, 2023 was ~~$25.3~~$58.0 million, ~~an increase of $4.4 million,~~up $358,000, or ~~21.1%~~0.6%, from ~~$20.9~~$57.6 million for the ~~corresponding period in 2016.~~three months ended March 31, 2022. Basic and diluted earnings per common share were ~~$0.48~~$1.07 and ~~$0.47,~~$1.06, respectively, for the three months ended ~~September 30, 2017,~~March 31, 2023, compared to ~~basic and diluted earnings per common share of $0.40 and $0.39, respectively,~~$1.06 for both in the corresponding period in ~~2016.~~2022. Changes in income and expenses are more fully explained in “Results of Operations” below.

Net income available to common stockholders for the nine months ended September 30, 2017 was $71.9 million, an increase of $12.2 million, or 20.4%, from $59.7 million for the corresponding period in 2016. Basic and diluted earnings per common share were $1.36 and $1.33, respectively, for the nine months ended September 30, 2017, compared to $1.14 and $1.12, respectively, for the corresponding period in 2016.

~~Critical Accounting Policies~~Performance Ratios

The ~~accounting and financial policies~~following table presents selected ratios of the Company conform to U.S. generally accepted accounting principles (“U.S. GAAP”) and to general practices within the banking industry. To prepare consolidated financial statements in conformity with U.S. GAAP, 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 futureour 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-Koperations for the ~~fiscal year~~three months ended ~~December~~March 31, ~~2016.~~2023, and 2022.

	Three Months Ended March 31,
	2023			2022
Return on average assets		1.63	%		1.53	%
Return on average stockholders' equity		17.83	%		20.09	%
Dividend payout ratio		26.34	%		21.77	%
Net interest margin (1)		3.15	%		2.89	%
Efficiency ratio (2)		34.60	%		32.74	%
Average stockholders' equity to average total assets		9.16	%		7.61	%

(1) Net interest margin in the net yield on interest earning assets and is the difference between the interest yield earned on interest-earning assets and interest rate paid on interest-bearing liabilities, divided by average earning assets.

(2) Efficiency ratio is the result of noninterest expense divided by the sum of net interest income and noninterest income.

Financial Condition

Cash and Cash Equivalents

At ~~September 30, 2017,~~March 31, 2023, we had ~~$182.8~~$6.5 million in federal funds sold, compared to ~~$160.4~~$1.5 million at December 31, ~~2016.~~2022. We also maintain balances at the Federal Reserve Bank of Atlanta, which earn interest. At ~~September 30, 2017,~~March 31, 2023, we had ~~$85.2~~$713.6 million in balances at the Federal Reserve, compared to ~~$565.1~~$693.8 million at December 31, ~~2016. This decrease was a result of our lower levels of excess liquidity due to loan growth and a decrease in federal funds purchased from our correspondent banks during the first nine months of 2017.~~2022.

~~Debt~~Investment Securities

Debt securities available for sale totaled ~~$435.3~~$624.9 million at ~~September 30, 2017~~March 31, 2023 and ~~$422.4~~$644.8 million at December 31, ~~2016. Debt~~2022. Investment securities held to maturity totaled ~~$87.4 million~~$1.02 billion at ~~September 30, 2017~~March 31, 2023 and ~~$62.6 million~~$1.03 billion at December 31, ~~2016.~~2022. We had ~~pay downs~~paydowns of ~~$37.6~~$22.3 million on mortgage-backed securities, maturities of ~~$21.1~~$3.6 million on U.S. government agencies, mortgage-backed securities, municipal ~~agency~~bonds, corporate securities, and ~~corporate~~Treasury securities, and calls of ~~$11.9~~$5.0 million on ~~municipal~~corporate securities ~~and subordinated notes~~ during the ~~nine~~three months ended ~~September 30, 2017.~~March 31, 2023. We recognized a $3.3 million loss on the sale of $45.4 million in available for sale debt securities during the first quarter of 2022. We purchased ~~$72.0~~$190.6 million in mortgage-backed securities, ~~$13.8~~$52.5 million in ~~municipal~~corporate securities, ~~$2.9~~and $197.1 million in ~~U.S.~~US Treasury securities ~~and $16.0 million in subordinated notes~~ during the first ~~nine~~three months of ~~2017. Nine mortgage-backed~~2022. For a tabular presentation of debt securities available for sale and ~~five subordinated notes purchased were classified as~~ held to ~~maturity. All other securities purchased are classified as available for sale.~~maturity at March 31, 2023 and December 31, 2022, see “Note 4 – Securities” in our Notes to Consolidated Financial Statements.

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~~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 September 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 September 30, 2017, we owned restricted securities of First National Bankers Bank with an aggregate book value and market value of $0.4 million, securities of a fund that invests 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 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 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 $50.5~~As of March 31, 2023, we had $398.7 million of bank holding company subordinated notes. ~~All of these notes~~If rated, all such bonds were rated BBB or better by Kroll Bond Rating Agency at the time of our ~~investment in them.~~initial investment. 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 September 30, 2017~~ has a combined average credit rating of ~~AA.~~AA as of March 31, 2023.

The carrying value of investment securities pledged to secure public funds on deposit and for other purposes as required by law was ~~$240.5~~$834.9 million and ~~$223.7~~$789.3 million as of ~~September 30, 2017~~March 31, 2023 and December 31, ~~2016,~~2022, respectively.

Loans

We had total loans of ~~$5.63~~$11.63 billion at ~~September 30, 2017, an increase of $717.0~~March 31, 2023, down $58.2 million, or ~~14.6%~~0.5%, compared to ~~$4.91~~$11.69 billion at December 31, ~~2016. At September 30, 2017, the percentage of our loans in each of our regions were as follows:~~2022.

	~~Percentage of Total~~ ~~Loans in MSA~~
~~Birmingham-Hoover, AL MSA~~		~~42.9~~	%
~~Dothan, AL MSA~~		~~9.9~~	%
~~Huntsville, AL MSA~~		~~9.7~~	%
~~Montgomery, AL MSA~~		~~6.9~~	%
~~Mobile, AL MSA~~		~~6.1~~	%
~~Total Alabama MSAs~~		~~75.5~~	%
~~Pensacola-Ferry Pass-Brent, FL MSA~~		~~6.3~~	%
~~Tampa-St. Petersburg-Clearwater, FL MSA~~		~~1.9~~	%
~~Total Florida MSAs~~		~~8.2~~	%
~~Atlanta-Sandy Springs-Roswell, GA MSA~~		~~4.4~~	%
~~Nashville-Davidson-Murfreesboro-Franklin, TN MSA~~		~~8.7~~	%
~~Charleston-North Charleston, SC MSA~~		~~3.2~~	%

~~Premises and Equipment, Net~~

Premises and equipment increased $14.8 million to $55.1 million at September 30, 2017 compared to $40.3 million at December 31, 2016. This increase is primarily the result of our construction of a new headquarters building in Birmingham, Alabama. Construction began in the first quarter of 2016 and it was placed in service in September 2017. Total cost of the building and contents is approximately $31.0 million.

Asset Quality

The ~~allowance for loan losses~~Company assesses the adequacy of its ACL at the end of each calendar quarter. The level of ACL is ~~established~~based on the Company’s evaluation of historical default and ~~maintained at levels management deems adequate to absorb anticipated credit losses from identified~~loss experience, current and ~~otherwise~~projected economic conditions, asset quality trends, known and inherent risks in the portfolio, adverse situations that may affect the borrowers’ ability to repay a loan, ~~portfolio as~~the estimated value of ~~the balance sheet date. In assessing the adequacy of the allowance for loan losses, management considers its evaluation~~any underlying collateral, composition of the loan portfolio ~~past due loan~~and other relevant factors. The ACL is increased by a provision for credit losses, which is charged to expense, and reduced by charge-offs, net of recoveries. We believe the ACL is adequate to absorb all expected future losses to be recognized over the contractual life of the loans in the portfolio.

Loans with similar risk characteristics are evaluated in pools and, depending on the nature of each identified pool, the Company utilizes a discounted cash flow (“DCF”), probability of default / loss given default (“PD/LGD”) or remaining life method. The historical loss experience ~~collateral values,~~estimate by pool is then adjusted by forecast factors that are quantitatively related to the Company’s historical credit loss experience, such as national unemployment rates and gross domestic product. Losses are predicted over a period of time determined to be reasonable and supportable, and at the end of the reasonable and supportable period losses are reverted to long term historical averages. The reasonable and supportable period and reversion period are re-evaluated each quarter by the Company and are dependent on the current economic ~~conditions and~~environment among other ~~factors considered necessary~~factors. See “Note 1 – General” in the Notes to ~~maintain the allowance at an adequate level. Our management believes that the allowance was adequate at September 30, 2017.~~Consolidated Financial Statements included in Item 1. Consolidated Financial Statements elsewhere in this report.

The ~~following table presents the allocation of the allowance for loan~~expected credit losses for each ~~respective~~ loan ~~category~~pool are then adjusted for changes in qualitative factors not inherently considered in the quantitative analyses. The qualitative adjustments either increase or decrease the quantitative model estimation. The Company considers factors that are relevant within the qualitative framework which include the following: lending policy, changes in nature and volume of loans, staff experience, changes in volume and trends of problem loans, concentration risk, trends in underlying collateral values, external factors, quality of loan review system and other economic conditions.

Expected credit losses for loans that no longer share similar risk characteristics with the ~~corresponding percentage~~collectively evaluated pools are excluded from the collective evaluation and estimated on an individual basis. Individual evaluations are performed for nonaccrual loans, loans rated substandard, modified loans, and for periods prior to the adoption of ASU 2022-02 modified loans ~~in each category to total loans. Management believes that~~classified as TDRs. Specific allocations of the ~~comprehensive allowance analysis developed by our~~ACL for credit ~~administration group is in compliance with all current regulatory guidelines.~~losses are estimated on one of several methods, including the estimated fair value of the underlying collateral, observable market value of similar debt or the present value of expected cash flows.

September 30, 2017 Amount Percentage of loans
in each category
to total loans
(In Thousands)
Commercial, financial and agricultural $ 31,701 39.51 %
Real estate - construction 5,331 8.31 %
Real estate - mortgage 20,966 51.15 %
Consumer 461 1.03 %
Total $ 58,459 100.00 %

	As of and for the Three Months Ended
	March 31,
	2023			2022
	(Dollars in thousands)
Total loans outstanding, net of unearned income	$	11,629,802		$	9,898,957
Average loans outstanding, net of unearned income	$	11,651,417		$	9,646,679
Allowance for credit losses at beginning of period		146,297			116,660
Charge-offs:
Commercial, financial and agricultural loans		1,257			2,574
Real estate - construction		-			-
Real estate - mortgage		26			27
Consumer loans		390			75
Total charge-offs		1,673			2,676
Recoveries:
Commercial, financial and agricultural loans		128			105
Real estate - construction		3			-
Real estate - mortgage		1			-
Consumer loans		11			12
Total recoveries		143			117
Net charge-offs		1,530			2,559
Provision for credit losses		4,197			5,362
Allowance for credit losses at period end	$	148,965		$	119,463
Allowance for credit losses to period end loans		1.28	%		1.21	%
Net charge-offs to average loans		0.05	%		0.11	%

December 31, 2016	Amount		Percentage of loans in each category to total loans
								Percentage
								of loans in
								each
								category to
March 31, 2023						Amount		total loans
	(In Thousands)					(In Thousands)
Commercial, financial and agricultural	$	28,872		40.36	%	$	42,895		26.50	%
Real estate - construction		5,125		6.82	%		40,483		12.64	%
Real estate - mortgage		17,504		51.70	%		63,157		60.24	%
Consumer		392		1.12	%		2,430		0.62	%
Total	$	51,893		100.00	%	$	148,965		100.00	%

			Percentage
			of loans in
			each
			category to
December 31, 2022	Amount		total loans
	(In Thousands)
Commercial, financial and agricultural	$	42,830		26.91	%
Real estate - construction		42,889		13.11	%
Real estate - mortgage		58,652		59.42	%
Consumer		1,926		0.57	%
Total	$	146,297		100.01	%

Nonperforming Assets

Total nonperforming loans, which include nonaccrual loans and loans 90 or more days past due and still accruing, ~~decreased $2.0 million to $14.9~~remained flat at $17.8 million at ~~September 30, 2017, compared to $16.9 million at~~March 31, 2023 and December 31, ~~2016.~~2022, respectively. Of this total, nonaccrual loans ~~were $12.4~~of $13.2 million at ~~September 30, 2017, compared to $10.6 million~~March 31, 2023 represented a net increase of $707,000 from nonaccrual loans at December 31, ~~2016, an increase of $1.8 million.~~2022. Excluding credit card accounts, there were ~~three~~six loans 90 or more days past due and still accruing totaling ~~$2.4~~$5.1 million at March 31, 2023, compared to ~~two~~one loans totaling ~~$6.2~~$4.6 million at December 31, ~~2016. Troubled Debt Restructurings (“TDR”) at September 30, 2017 and December 31, 2016~~2022. Loans made to borrowers experiencing financial difficulty that were ~~$16.4 million and $7.3 million, respectively. There were no loans newly classified as TDR for~~modified during the three months ended ~~September 30, 2017~~March 31, 2023 were $61.9 million. TDRs at December 31, 2022, and ~~one relationship totaling $12.7~~March 31, 2022 were $2.5 million ~~which includes nine loans of various types, was newly classified as TDR for the nine months ended September 30, 2017. There were no loans newly classified as TDR for the three~~ and nine months ended September 30, 2016. There were no renewals of existing TDRs for the three months ended September 30, 2016 and two renewals of existing TDRs totaling $600,000 for the nine months ended September 30, 2016. These TDRs are the result of term extensions rather than interest rate reductions or forgiveness of debt.$2.1 million, respectively.

OREO and repossessed assets decreased to ~~$3.9 million~~$248,000 at ~~September 30, 2017,~~March 31, 2023, from ~~$5.0~~$2.0 million at December 31, ~~2016. The total number of OREO and repossessed asset accounts decreased to nine at September 30, 2017, compared to 12 at December 31, 2016.~~2022. The following table summarizes OREO and repossessed asset activity for the ~~nine~~three months ~~September 30, 2017~~ended March 31, 2023 and ~~2016:~~2022:

Nine months ended September 30,
2017 2016
(In thousands)
Balance at beginning of period $ 4,988 $ 5,392
Transfers from loans and capitalized expenses 586 2,036
Proceeds from sales (1,529 ) (1,648 )
Internally financed sales (185 ) (2,161 )
Write-downs / net gain (loss) on sales 28 (584 )
Balance at end of period $ 3,888 $ 3,035

	Three months ended March 31,
	2023		2022
	(In thousands)
Balance at beginning of period	$	248	$	1,208
Transfers from loans and capitalized expenses		-		830
Proceeds from sales		-		(44	)
Write-downs / net gain (loss) on sales		-		(5	)
Balance at end of period	$	248	$	1,989

The following table summarizes our nonperforming assets ~~and TDRs~~ at ~~September 30, 2017~~March 31, 2023 and December 31, ~~2016:~~2022:

											March 31, 2023					December 31, 2022
	September 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	$	5,798			16	$	7,282			13	$	7,219			22	$	7,108			18
Real estate - construction		2,285			3		3,268			5		-			-		-			-
Real estate - mortgage:
Owner-occupied commercial		2,497			3		-			-		3,388			3		3,312			3
1-4 family mortgage		1,308			3		74			1		2,044			20		1,524			16
Other mortgage		430			3		-			-		506			2		506			2
Total real estate - mortgage		4,235			9		74			1		5,938			25		5,342			21
Consumer		38			1		-			-		-			-		-			-
Total Nonaccrual loans:	$	12,356			29	$	10,624			19	$	13,157			47	$	12,450			39

90+ days past due and accruing:
Commercial, financial and agricultural	$	2,108			3	$	10			1	$	146			22	$	195			26
Real estate - construction		-			-		-			-		-			-		-			-
Real estate - mortgage:
Owner-occupied commercial		-			-		6,208			1		-			-		-			-
1-4 family mortgage		-			-		-			-		-			5		594			5
Other mortgage		328			1		-			-		4,456			1		4,512			1
Total real estate - mortgage		328			1		6,208			1		4,456			6		5,106			6
Consumer		70			27		45			10		81			31		90			44
Total 90+ days past due and accruing:	$	2,506			31	$	6,263			12	$	4,683			59	$	5,391			76

Total Nonperforming Loans:	$	14,862			60	$	16,887			31	$	17,840			106	$	17,841			115

Plus: Other real estate owned and repossessions		3,888			9		4,988			12		248			2		248			2
Total Nonperforming Assets	$	18,750			69	$	21,875			43	$	18,089			108	$	18,089			117

Restructured accruing loans:
Commercial, financial and agricultural	$	7,189			5	$	354			1	$	-			-	$	2,480			5
Real estate - construction		997			1		-			-		-			-		-			-
Real estate - mortgage:
Owner-occupied commercial		3,664			2		-			-		-			-		-			-
1-4 family mortgage		850			1		-			-		-			-		-			-
Other mortgage		-			-		204			1		-			-		-			-
Total real estate - mortgage		4,514			3		204			1		-			-		-			-
Consumer		-			-		-			-		-			-		-			-
Total restructured accruing loans:	$	12,700			9	$	558			2	$	-			-	$	2,480			5

Total Nonperforming assets and restructured accruing loans	$	31,450			78	$	22,433			45	$	18,089			108	$	20,569			122

Ratios:
Nonperforming loans to total loans		0.26	%				0.34	%				0.15	%				0.15	%
Nonperforming assets to total loans plus other real estate owned and repossessions		0.33	%				0.44	%				0.16	%				0.15	%
Nonperforming assets plus restructured accruing loans to total loans plus other real estate owned and repossessions		0.56	%				0.46	%				0.16	%				0.18	%

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~~ACL to reflect management’s estimate of any potential exposure or loss. Generally, payments received on nonaccrual loans are applied directly to principal.

~~Impaired Loans~~In keeping with this guidance from regulators, the bank offered short-term modifications made in response to COVID-19 to borrowers who were current and ~~Allowance for Loan Losses~~

otherwise not past due. Should eventual credit losses on these deferred payments emerge, the related loans would be placed on nonaccrual status and interest income accrued would be reversed. In such a scenario, interest income in future periods could be negatively impacted. As of ~~September 30, 2017,~~March 31, 2023, we ~~had impaired loans~~carried $2.4 million of ~~$49.6~~accrued interest income on deferrals made to COVID-19 affected borrowers compared to $2.4 million ~~inclusive of nonaccrual loans, an increase of $4.0 million from $45.6 million as of~~at December 31, 2016. This increase is attributable to $15.0 million of loans newly classified as specifically impaired, partially offset by charge-offs totaling $5.6 million, net pay downs of $4.1 million, loan classification upgrades of $0.7 million and OREO transfers and repossessions of $0.6 million. We allocated $8.5 million of our allowance for loan losses at September 30, 2017 to these impaired loans, an increase of $0.3 million compared to $8.2 million as of December 31, 2016. 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 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 performs verification and testing to ensure appropriate identification of impaired loans and that proper reserves are held on these loans.

Of the $49.6 million of impaired loans reported as of September 30, 2017, $30.4 million were commercial, financial and agricultural loans, $3.3 million were real estate construction loans, $15.8 million were real estate mortgage loans and $0.1 million were consumer loans.2022.

Deposits

~~Total~~We rely on increasing our deposit base to fund loan and other asset growth. Each of our markets is highly competitive. We compete for local deposits by offering attractive products with competitive rates. We expect to have a higher average cost of funds for local deposits than competitor banks due to our lack of an extensive branch network. Our management’s strategy is to offset the higher cost of funding with a lower level of operating expense and firm pricing discipline for loan products. We have promoted electronic banking services by providing them without charge and by offering in-bank customer training. Despite a decrease in non-interest bearing deposits, our total deposits increased ~~$376.6~~by $68.5 million ~~or 6.9%,~~ to ~~$5.80~~$11.62 billion at ~~September 30, 2017~~March 31, 2023 compared to ~~$5.42~~$11.55 billion at December 31, ~~2016. While we have experienced somewhat slower growth in our deposits so far in 2017, we~~2022. 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~~ The following table summarizes balances of our deposits and the percentage of each type to the total at March 31, 2023 and December 31, 2022.

	March 31, 2023				December 31, 2022
Non-interest-bearing demand	$	2,898,736	24.96	%	$	3,321,347	28.76	%
Interest-bearing demand		1,762,583	15.17	%		1,861,496	16.12	%
Money market		5,998,057	51.64	%		5,362,705	46.44	%
Savings		131,016	1.13	%		138,450	1.20	%
Time deposits, $250,000 and under		261,118	2.25	%		239,772	2.08	%
Time deposits, over $250,000		563,807	4.85	%		573,035	4.96	%
Brokered time deposits		-	-	%		50,000	0.43	%
	$	11,615,317	100.00	%	$	11,546,805	100.00	%

At March 31, 2023 and December 31, 2022, we estimate that we had approximately $6.9 billion and $7.0 billion, respectively, in uninsured deposits, which are the portion of deposit accounts that exceed the FDIC insurance limit.

The following table presents the maturities of our time deposits in excess of insurance limit as of March 31, 2023.

	Portion of time deposits in excess of insurance limit
	March 31, 2023
Time deposits otherwise uninsured with a maturity of:	(In Thousands)

3 months or less	$	75,443
Over 3 months through 6 months		57,907
Over 6 months through 12 months		83,621
Over 12 months		110,666
Total	$	327,637

The uninsured deposit data for 2023 and 2022 reflect the deposit insurance impact of “combined ownership segregation” of escrow and other accounts at an aggregate level but do not reflect an evaluation of all of the account styling distinctions that would determine the availability of deposit insurance to individual accounts based on FDIC regulations.

Borrowings

Our borrowings consist of federal funds purchased and subordinated notes ~~payable and Federal Home Loan Bank advances.~~payable. We had ~~$254.9 million~~$1.48 billion and ~~$355.9 million~~$1.64 billion at ~~September 30, 2017~~March 31, 2023 and December 31, ~~2016,~~2022, respectively, in federal funds purchased from correspondent banks that are clients of our correspondent banking unit. ~~Like us, our correspondent bank clients have experienced slower growth in deposits in 2017.~~ The average rate paid on these borrowings was ~~1.34%~~4.67% for the quarter ended ~~September 30, 2017, which has increased during the past three quarters due to increases in the FRB’s targeted federal funds rate.~~March 31, 2023. Other borrowings consist of the following:

●

$~~20.0~~30.0 million ~~of 5.50%~~on the Company’s 4.5% Subordinated Notes due November ~~9, 2022,~~8, 2027, which were issued in a private placement in November ~~2012,~~2017 and pay interest semi-annually. The Notes may be prepaid by the Company; and

●

$34.75 million of 5%the Company’s 4% Subordinated Notes due ~~July 15, 2025,~~October 21, 2030, which were issued in a private placement in ~~July 2015,~~October 2020 and

~~$300,000 of principal reducing advances from~~ pay interest semi-annually. The Notes may not be prepaid by 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.~~Company prior to October 21, 2025.

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 ~~September 30, 2017,~~March 31, 2023, liquid assets, which are represented by cash and due from banks, federal funds sold and unpledged available-for-sale securities, totaled ~~$628.1 million.~~$2.0 billion. The Bank had loans pledged the FHLB which provided approximately $1.4 billion in available funding. The Bank has additional unpledged CRE loans that would provide an approximate additional $1.7 billion in available funding through the FHLB for a total of $3.1 billion in available funding from the FHLB. The Bank’s policy limits on brokered deposits would allow for up to $3.6 billion in available funding for brokered deposits. Additionally, the Bank had borrowing availability of approximately ~~$485.0~~$698.0 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.~~

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” and has various other sources of liquidity as discussed herein. We believe these sources of funding are adequate to meet both our immediate (within the next 12 months) and our longer term anticipated funding needs. However, we may need additional funding if we are able to maintain our current growth rate into the future.

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~~illustrates, during the ~~contractual maturities~~periods presented, the mix of our ~~term liabilities~~funding sources and the assets in which those funds are invested as a percentage of ~~September 30, 2017. The amounts shown do not reflect any early withdrawal or prepayment assumptions.~~our average total assets for the period indicated. Average assets totaled $14.4 billion and $15.3 billion for the quarters ended March 31, 2023 and 2022, respectively.

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 $ 5,235,403 $ - $ - $ - $ -
Certificates of deposit (2) 561,498 324,179 152,527 83,161 1,631
Federal funds purchased 254,880 254,880 - - -
Subordinated debentures 54,975 300 - - 54,675
Operating lease commitments 16,180 3,101 5,365 3,870 3,844
Total $ 6,122,936 $ 582,460 $ 157,892 $ 87,031 $ 60,150

~~(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.

	For the Three Months Ended March 31,
	2023			2022
Sources of Funds:
Deposits:
Non-interest-bearing		21.4	%		31.9	%
Interest-bearing		58.3			49.1
Federal funds purchased		9.6			10.6
Long term debt and other borrowings		0.8			0.4
Other liabilities		0.5			0.4
Equity capital		9.4			7.6
Total sources		100.0	%		100.0	%

Uses of Funds:
Loans		81.0	%		63.1	%
Securities		12.0			10.0
Interest-bearing balances with banks		3.5			23.8
Federal funds sold		0.4			0.1
Other assets		3.1			3.0
Total uses		100.0	%		100.0	%

Capital Adequacy

Total stockholders’ equity attributable to us at March 31, 2023 was $1.34 billion, or 9.19% of total assets. At December 31, 2022, total stockholders’ equity attributable to us was $1.30 billion, or 8.89% of total assets.

As of ~~September 30, 2017,~~March 31, 2023, 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 ~~September 30, 2017.~~March 31, 2023.

The final rules implementing the Basel Committee on Banking Supervision's capital guidelines for U.S. banks (Basel III rules) became effective January 1, 2015, subject to a phase-in period for certain aspects of the new rules. In order to avoid restrictions on capital distributions and discretionary bonus payments to executives, under the new rules a covered banking organization is also required to maintain a “capital conservation buffer” in addition to its minimum risk-based capital requirements. This buffer is required to consist solely of common equity Tier 1, and the buffer applies to all three risk-based measurements (CET1, Tier 1 capital and total capital). The capital conservation buffer became fully effective on January 1, 2019. As of January 1, 2019, an additional amount of Tier 1 common equity equal to 2.5% of risk-weighted assets is required for compliance with the capital conservation buffer. The ratios for the Company and the Bank are currently sufficient to satisfy the fully phased-in conservation buffer.

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 ~~September 30, 2017,~~March 31, 2023, December 31, ~~2016~~2022 and ~~September 30, 2016:~~March 31, 2022:

	Actual					For Capital Adequacy Purposes					To Be Well Capitalized Under Prompt Corrective Action Provisions					Actual					For Capital Adequacy Purposes					To Be Well Capitalized Under Prompt Corrective Action Provisions
	Amount		Ratio			Amount		Ratio			Amount		Ratio			Amount		Ratio			Amount		Ratio			Amount		Ratio
As of September 30, 2017:	(Dollars in thousands)
CET 1 Capital to Risk-Weighted Assets:
As of March 31, 2023:
CET 1 Capital to Risk Weighted Assets:
Consolidated	$	574,296		9.60	%	$	269,204		4.50	%		N/A		N/A		$	1,368,751		10.01	%	$	615,176		4.50	%		N/A		N/A
ServisFirst Bank		629,146		10.52	%		269,172		4.50	%	$	388,803		6.50	%		1,428,371		10.45	%		615,120		4.50	%	$	888,506		6.50	%
Tier 1 Capital to Risk-Weighted Assets:
Tier 1 Capital to Risk Weighted Assets:
Consolidated		574,798		9.61	%		358,938		6.00	%		N/A		N/A			1,369,251		10.02	%		820,235		6.00	%		N/A		N/A
ServisFirst Bank		629,648		10.53	%		358,896		6.00	%		478,527		8.00	%		1,428,871		10.45	%		820,160		6.00	%		1,093,546		8.00	%
Total Capital to Risk-Weighted Assets:
Total Capital to Risk Weighted Assets:
Consolidated		688,432		11.51	%		478,584		8.00	%		N/A		N/A			1,578,208		11.54	%		1,093,647		8.00	%		N/A		N/A
ServisFirst Bank		688,607		11.51	%		478,527		8.00	%		598,159		10.00			1,578,411		11.55	%		1,093,546		8.00	%		1,366,933		10.00	%
Tier 1 Capital to Average Assets:
Consolidated		574,798		8.91	%		257,939		4.00	%		N/A		N/A			1,369,251		9.49	%		576,964		4.00	%		N/A		N/A
ServisFirst Bank		629,648		9.76	%		258,498		4.00	%		323,123		5.00	%		1,428,871		9.91	%		576,969		4.00	%		721,211		5.00	%

As of December 31, 2016:
CET 1 Capital to Risk-Weighted Assets:
As of December 31, 2022:
CET 1 Capital to Risk Weighted Assets:
Consolidated	$	508,982		9.78	%	$	234,262		4.50	%		N/A		N/A		$	1,326,035		9.55	%	$	624,986		4.50	%		N/A		N/A
ServisFirst Bank		560,731		10.77	%		234,232		4.50	%	$	338,335		6.50	%		1,385,697		9.98	%		624,942		4.50	%	$	902,694		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			1,326,535		9.55	%		833,315		6.00	%		N/A		N/A
ServisFirst Bank		561,108		10.78	%		312,309		6.00	%		416,413		8.00	%		1,386,197		9.98	%		833,256		6.00	%		1,111,008		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			1,532,134		11.03	%		1,111,086		8.00	%		N/A		N/A
ServisFirst Bank		613,501		11.79	%		416,413		8.00	%		520,516		10.00	%		1,533,069		11.04	%		1,111,008		8.00	%		1,388,760		10.00	%
Tier 1 Capital to Average Assets:
Consolidated		509,359		8.22	%		247,777		4.00	%		N/A		N/A			1,326,535		9.29	%		570,960		4.00	%		N/A		N/A
ServisFirst Bank		561,108		9.06	%		247,760		4.00	%		309,700		5.00	%		1,386,197		9.71	%		570,924		4.00	%		713,656		5.00	%

As of September 30, 2016:
CET 1 Capital to Risk-Weighted Assets:
As of March 31, 2022:
CET 1 Capital to Risk Weighted Assets:
Consolidated	$	488,673		9.91	%	$	221,937		4.50	%		N/A		N/A		$	1,169,735		9.86	%	$	533,769		4.50	%		N/A		N/A
ServisFirst Bank		540,233		10.96	%		221,902		4.50	%	$	320,525		6.50	%		1,232,198		10.39	%		533,698		4.50	%	$	770,897		6.50	%
Tier 1 Capital to Risk-Weighted Assets:
Tier 1 Capital to Risk Weighted Assets:
Consolidated		489,050		9.92	%		295,916		6.00	%		N/A		N/A			1,170,235		9.87	%		711,691		6.00	%		N/A		N/A
ServisFirst Bank		540,610		10.96	%		295,869		6.00	%		394,493		8.00	%		1,232,698		10.39	%		711,598		6.00	%		948,797		8.00	%
Total Capital to Risk-Weighted Assets:
Total Capital to Risk Weighted Assets:
Consolidated		593,140		12.03	%		394,554		8.00	%		N/A		N/A			1,356,009		11.43	%		948,922		8.00	%		N/A		N/A
ServisFirst Bank		590,043		11.97	%		394,493		8.00	%		493,116		10.00	%		1,353,761		11.41	%		948,797		8.00	%		1,185,996		10.00	%
Tier 1 Capital to Average Assets:
Consolidated		489,050		8.20	%		238,594		4.00	%		N/A		N/A			1,170,235		7.67	%		610,638		4.00	%		N/A		N/A
ServisFirst Bank		540,610		9.06	%		238,583		4.00	%		298,228		5.00	%		1,232,698		8.08	%		610,538		4.00	%		763,172		5.00	%

We are a legal entity separate and distinct from the Bank. Our principal source of cash flow, including cash flow to pay dividends to our stockholders, is dividends the Bank pays to us as the Bank’s sole shareholder. Statutory and regulatory limitations apply to the Bank’s payment of dividends to us as well as to our payment of dividends to our stockholders. The requirement that a bank holding company must serve as a source of strength to its subsidiary banks also results in the position of the Federal Reserve that a Bank holding company should not maintain a level of cash dividends to its stockholders that places undue pressure on the capital of its bank subsidiaries or that can be funded only through additional borrowings or other arrangements that may undermine the bank holding company’s ability to serve as such a source of strength. Our ability to pay dividends is also subject to the provisions of Delaware corporate law.

The Alabama Banking Department also regulates the Bank’s dividend payments. Under Alabama law, a state-chartered bank may not pay a dividend in excess of 90% of its net earnings until the Bank’s surplus is equal to at least 20% of its capital (our Bank’s surplus currently exceeds 20% of its capital). Moreover, our Bank is also required by Alabama law to obtain the prior approval of the Superintendent of Banks (“Superintendent”) for its payment of dividends if the total of all dividends declared by the Bank in any calendar year will exceed the total of (i) the Bank’s net earnings (as defined by statute) for that year, plus (ii) its retained net earnings for the preceding two years, less any required transfers to surplus. In addition, no dividends, withdrawals or transfers may be made from the Bank’s surplus without the prior written approval of the Superintendent.

The Bank’s payment of dividends may also be affected or limited by other factors, such as the requirement to maintain adequate capital above regulatory guidelines. The federal banking agencies have indicated that paying dividends that deplete a depository institution’s capital base to an inadequate level would be an unsafe and unsound banking practice. Under the Federal Deposit Insurance Corporation Improvement Act of 1991, a depository institution may not pay any dividends if payment would cause it to become undercapitalized or if it already is undercapitalized. Moreover, the federal agencies have issued policy statements that provide that bank holding companies and insured banks should generally only pay dividends out of current operating earnings. If, in the opinion of the federal banking regulators, the Bank were engaged in or about to engage in an unsafe or unsound practice, the federal banking regulators could require, after notice and a hearing, that the Bank stop or refrain from engaging in the questioned practice.

Off-Balance Sheet Arrangements

In the normal course of business, we are a party to financial ~~instruments~~credit arrangements with off-balance sheet risk to meet the financing needs of our customers. These financial ~~instruments~~credit arrangements include commitments to extend credit beyond current fundings, credit card arrangements, standby letters of credit and financial guarantees. Those ~~instruments~~credit arrangements involve, to varying degrees, elements of credit risk in excess of the amount recognized in ~~our~~the balance sheet. The contract or notional amounts of those instruments reflect the extent of involvement we have in those particular financial ~~instruments.~~credit arrangements. All such credit arrangements bear interest at variable rates and we have no such credit arrangements which bear interest at fixed rates.

Our exposure to credit loss in the event of non-performance by the other party to ~~such~~the financial ~~instruments~~instrument for commitments to extend credit, credit card arrangements and standby letters of credit 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 September 30, 2017, we have reserved $500,000 for losses on such off-balance sheet arrangements consistent with guidance in the FRB’s Interagency Policy Statement SR 06-17.~~

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 September 30, 2017 and December 31, 2016 for the settlement of any repurchase demands by investors.~~

Financial instruments whose contract amounts represent credit risk at ~~September 30, 2017~~March 31, 2023 are as follows:

	September 30, 2017		March 31, 2023
	(In Thousands)		(In Thousands)
Commitments to extend credit	$	1,873,412	$	3,958,312
Credit card arrangements		82,684		362,347
Standby letters of credit		49,894		60,666
	$	2,005,990	$	4,381,325

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 ~~September 30, 2017~~March 31, 2023 was ~~$25.3~~$58.0 million compared to ~~net income and net income available to common stockholders of $20.9~~$57.6 million for the three months ended September 30, 2016. Net income and net income available to common stockholders for the nine months ended September 30, 2017 was $71.9 million compared to net income and net income available to common stockholders of $59.7 million for the nine months ended September 30, 2016.March 31, 2022. The increase in net income ~~for the three months ended September 30, 2017 over the same period in 2016~~ was primarily attributable to a ~~$10.5~~$2.6 million increase in net interest income ~~resulting from growth in earning assets, partially offset by a $3.4 million increase in tax provision. The increase in net income for~~during the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2023 to $108.3 million, compared to ~~2016 was primarily~~$105.7 million during the ~~result of a $28.0 million~~same period in 2022. The increase in net interest income ~~resulting from~~is primarily attributable to growth in average ~~earning assets and a $2.0 million increase in~~loans, which increased by $2.00 billion. Total non-interest income ~~led~~decreased by ~~increased credit card income. Non-interest~~$1.6 million to $6.3 million during the three months ended March 31, 2023 compared to $7.9 million during the same period in 2022. Total non-interest expenses increased by ~~$1.3~~$2.4 million ~~and $5.6~~to $39.7 million ~~respectively, for~~during the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2023 compared to ~~2016.~~$37.2 million during the same period in 2022.

Basic and diluted net income per common share were ~~$0.48~~$1.07 and ~~$0.47,~~$1.06, respectively, for the three months ended ~~September 30, 2017,~~March 31, 2023, compared to ~~$0.40 and $0.39, respectively,~~$1.06 for both for the corresponding period in 2016. Basic and diluted net income per common share were $1.36 and $1.33, respectively, for the nine months ended September 30, 2017, compared to $1.14 and $1.12, respectively, for the corresponding period in 2016.2022. Return on average assets for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2023 was ~~1.55% and 1.52%, respectively,~~1.63% compared to ~~1.39% and 1.43%, respectively,~~1.53% for the corresponding ~~periods~~period in ~~2016. Return~~2022, and return on average common stockholders’ equity for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2023 was ~~17.28% and 17.24%~~17.83% compared to ~~16.66% and 16.60%, respectively,~~20.09% for the corresponding ~~periods~~period in ~~2016.~~2022.

Dividend payout ratio for the three and nine months ended September 30, 2017 was 10.71% and 11.29% compared to 10.26% and 10.62%, respectively, for the corresponding periods in 2016. Stockholders’ equity to total assets as of September 30, 2017 and 2016 was 8.79% and 8.46%, respectively.

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 ~~$8.5~~$2.5 million, or ~~17.6%~~2.4%, to ~~$56.9~~$108.4 million for the three months ended ~~September 30, 2017~~March 31, 2023 compared to ~~$48.4~~$105.8 million for the corresponding period in ~~2016, and increased $28.0 million, or 20.1%, to $167.5 million for the nine months ended September 30, 2017 compared to $139.5 million for the corresponding period in 2016.~~2022. This increase was primarily attributable to ~~growth~~a $2.00 billion increase in average ~~earning assets, which increased $435.8 million,~~loans, or ~~7.6%~~20.8%, ~~from the third quarter of 2016 to the third quarter of 2017, and $699.2 million, or 13.0%, from the nine months ended September 30, 2016 to the same period in 2017.~~year-over-year. Average interest-bearing balances with banks decreased by $3.13 billion. The taxable-equivalent yield on interest-earning assets increased from 3.10% to ~~4.37% for~~5.27% year-over-year, primarily a result of the three months ended September 30, 2017 from 3.81% for the corresponding period in 2016, and increased to 4.23% for the nine months ended September 30, 2017 from 3.93% for the corresponding period in 2016.Federal Reserve increasing market interest rates during 2022. The yield on loans for the three months ended ~~September 30, 2017~~March 31, 2023 was ~~4.66%~~5.70% compared to ~~4.47%~~4.34% for the corresponding period in ~~2016, and 4.58% compared to 4.47% for the nine months ended September 30, 2017 and September 30, 2016, respectively.~~2022. The cost of total interest-bearing liabilities increased to ~~0.81%~~2.98% for the three months ended ~~September 30, 2017 compared to 0.64%~~March 31, 2023 from 0.33% for the corresponding period in ~~2016, and increased to 0.74% for the nine months ended September 30, 2017 from 0.63% for the corresponding period in 2016.~~2022. Net interest margin for the three months ended ~~September 30, 2017 was 3.77% compared~~March 31, 2023 increased 26 basis points to ~~3.35%~~3.15% from 2.89% for the corresponding period in ~~2016, and 3.69% for the nine months ended September 30, 2017 compared to 3.47% for the corresponding period in 2016.~~2022.

Beginning in March of 2022, the Federal Reserve Bank increased their targeted federal funds rate from 0 – 0.25% to its current range of 4.75 – 5.00%. Our cost of funding has increased as a result of deposit pricing pressures resulting from these rate increases. We believe our net interest income will benefit over a short period of time following the Federal Reserve Bank’s ceasing these rate increases.

The following ~~tables show,~~table shows, for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2023 and ~~September 30, 2016,~~March 31, 2022, 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~~table reflects 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~~Both tables are presented on a taxable-equivalent basis where applicable:

Average Consolidated Balance Sheets and Net Interest Analysis

~~On a Fully Taxable-Equivalent Basis~~

~~For the Three Months Ended September 30,~~

~~(In thousands, except Average Yields and Rates)~~

On a Fully Taxable-Equivalent Basis

For the Three Months Ended March 31,

(Dollar Amounts In Thousands)

															2023								2022
																		Interest		Average					Interest		Average
	2017							2016							Average			Earned /		Yield /			Average		Earned /		Yield /
	Average Balance		Interest Earned / Paid		Average Yield / Rate			Average Balance		Interest Earned / Paid		Average Yield / 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	$	5,407,109	$	63,519		4.66	%	$	4,554,900	$	51,233		4.47	%	$	11,632,439		$	163,576		5.70	%	$	9,621,484	$	102,891		4.34	%
Tax-exempt (3)		33,357		435		5.17			21,939		241		4.37			18,978			157		3.36			25,195		254		4.09
Total loans, net of unearned income		5,440,466		63,954		4.66			4,576,839		51,474		4.47			11,651,417			163,733		5.70			9,646,679		103,145		4.34
Mortgage loans held for sale		4,862		43		3.51			6,724		64		3.79			1,522			24		6.40			927		4		1.75
Investment securities:
Taxable		385,431		2,287		2.37			224,825		1,232		2.19			1,724,523			10,939		2.54			1,518,572		8,222		2.17
Tax-exempt (3)		131,478		1,097		3.34			135,272		1,262		3.73			3,781			23		2.43			8,812		51		2.32
Total investment securities (4)		516,909		3,384		2.62			360,097		2,494		2.77
Total debt securities (4)																1,728,304			10,962		2.54			1,527,384		8,273		2.17
Federal funds sold		111,175		378		1.35			217,158		347		0.64			50,526			614		4.93			16,639		13		0.32
Restricted equity securities		1,030		9		3.47			5,658		57		4.01			9,919			188		7.69			7,371		68		4
Interest-bearing balances with banks		118,510		379		1.27			590,675		759		0.51			510,021			5,873		4.67			3,637,882		1,804		0.20
Total interest-earning assets	$	6,192,952	$	68,147		4.37	%	$	5,757,151	$	55,195		3.81	%	$	13,951,709		$	181,394		5.27	%	$	14,836,882	$	113,307		3.10	%
Non-interest-earning assets:
Cash and due from banks		65,457							58,809							106,448								74,534
Net fixed assets and equipment		54,727							25,000
Allowance for loan losses, accrued interest and other assets		151,786							145,804
Net premises and equipment																60,617								61,209
Allowance for credit losses, accrued interest and other assets																279,775								313,560
Total assets	$	6,464,922							5,986,764						$	14,398,549							$	15,286,185

Liabilities and stockholders' equity:
Interest-bearing liabilities:
Interest-bearing demand deposits	$	800,437	$	849		0.42	%	$	696,100	$	644		0.37	%	$	1,675,355		$	5,151		1.25	%	$	1,594,645	$	778		0.20	%
Savings deposits		48,313		37		0.30			43,569		33		0.30			134,671			312		0.94			135,545		59		0.18
Money market accounts		2,774,061		5,170		0.74			2,471,829		3,387		0.55			5,756,642			44,978		3.17			4,985,224		3,204		0.26
Time deposits (5)		546,020		1,518		1.10			519,653		1,294		0.99
Time deposits																850,639			5,272		2.51			792,930		1,803		0.92
Total interest-bearing deposits		4,168,831		7,574		0.72			3,731,151		5,358		0.57			8,417,307			55,713		2.68			7,508,344		5,844		0.32
Federal funds purchased		282,806		954		1.34			436,415		698		0.64			1,389,217			16,003		4.67			1,620,012		932		0.23
Other borrowings		55,034		717		5.17			55,410		717		5.15			114,726			1,305		4.61			64,708		690		4.32
Total interest-bearing liabilities	$	4,506,671	$	9,245		0.81	%	$	4,222,976	$	6,773		0.64	%	$	9,921,250		$	73,021		2.98	%	$	9,193,064	$	7,466		0.33	%
Non-interest-bearing liabilities:
Non-interest-bearing demand deposits		1,363,207							1,250,139							3,086,774								4,870,701
Other liabilities		15,070							14,376							72,121								59,619
Stockholders' equity		578,626							494,248							1,358,587								1,156,186
Unrealized gains on securities and derivatives		1,348							5,025
Accumulated other comprehensive (loss) income																(40,183	)							6,615
Total liabilities and stockholders' equity	$	6,464,922						$	5,986,764						$	14,398,549							$	15,286,185
Net interest income			$	58,902						$	48,422							$	108,373						$	105,841
Net interest spread						3.56	%						3.17	%							2.29	%						2.77	%
Net interest margin						3.77	%						3.35	%							3.15	%						2.89	%

(1)

Non-accrual loans are included in average loan balances in all periods. Loan fees of ~~$749,000~~$3,630 and ~~$653,000~~$7,686 are included in interest income in ~~2017~~the first quarter of 2023 and ~~2016,~~2022, respectively. Loan fees include accretion of PPP loan fees.

(2)

~~Accretion on~~

Amortization of acquired loan ~~discounts~~premiums of ~~$107,000~~$49 and ~~$194,000 are~~$21 is included in interest income in ~~2017~~2023 and ~~2016,~~2022, respectively.

(3)

Interest income and yields are presented on a fully taxable equivalent basis using a tax rate of ~~35%~~21%.

~~(4)~~

~~Unrealized gains of $2,072,000 and $7,730,000 are excluded from the yield calculation in 2017 and 2016, respectively.~~

~~(5)~~

~~Accretion on acquired CD premiums of $0 and $48,000 are included in interest in 2017 and 2016, respectively.~~

	For the Three Months Ended March 31,
	2023 Compared to 2022 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	$	24,207		$	36,478		$	60,685
Tax-exempt		(56	)		(41	)		(97	)
Total loans, net of unearned income		24,151			36,437			60,588
Mortgages held for sale		4			16			20
Debt securities:
Taxable		1,199			1,518			2,717
Tax-exempt		(31	)		3			(28	)
Total debt securities		1,168			1,521			2,689
Federal funds sold		73			528			601
Restricted equity securities		48			140			120
Interest-bearing balances with banks		(2,835	)		6,904			4,069
Total interest-earning assets		22,609			45,546			68,087

Interest-bearing liabilities:
Interest-bearing demand deposits		41			4,332			4,373
Savings		-			252			252
Money market accounts		572			41,202			41,774
Time deposits		140			3,329			3,469
Total interest-bearing deposits		753			49,115			49,868
Federal funds purchased		(152	)		15,223			15,071
Other borrowed funds		566			49			615
Total interest-bearing liabilities		1,167			64,387			65,554
Increase in net interest income	$	21,442		$	(18,841	)	$	2,533

For the Three Months Ended September 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 $ 10,054 $ 2,232 $ 12,286
Tax-exempt 144 50 194
Total loans, net of unearned income 10,198 2,282 12,480
Mortgages held for sale (16 ) (5 ) (21 )
Debt securities:
Taxable 949 106 1,055
Tax-exempt (34 ) (131 ) (165 )
Total debt securities 915 (25 ) 890
Federal funds sold (227 ) 258 31
Restricted equity securities (41 ) (7 ) (48 )
Interest-bearing balances with banks (923 ) 543 (380 )
Total interest-earning assets 9,906 3,046 12,952

Interest-bearing liabilities:
Interest-bearing demand deposits 105 100 205
Savings 4 - 4
Money market accounts 455 1,328 1,783
Time deposits 69 155 224
Total interest-bearing deposits 633 1,583 2,216
Federal funds purchased (311 ) 567 256
Other borrowed funds (4 ) 4 -
Total interest-bearing liabilities 318 2,154 2,472
Increase in net interest income $ 9,588 $ 892 $ 10,480

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~~The rate component was unfavorable as average rates paid on interest-bearing liabilities increased 265 basis points while loan yields increased only 136 basis points. An increase in ~~the Federal Reserve Bank’s target federal funds rate has~~average equity contributed to a favorable variance relating to the interest rate component because yields on loans have increased more than rates paid on deposits. More recently, increases in rates paid on deposits has contributed an unfavorable rate variance when compared to prior quarters in 2017. Management continues to closely monitor pricing of deposit accounts in an effort to control interest expense.

~~Average Consolidated Balance Sheets and Net Interest Analysis~~

~~On a Fully Taxable-Equivalent Basis~~

~~For the Nine Months Ended September 30,~~

~~(In thousands, except Average Yields and Rates)~~

2017 2016
Average
Balance Interest
Earned /
Paid Average
Yield / Rate Average
Balance Interest
Earned /
Paid Average
Yield / Rate
Assets:
Interest-earning assets:
Loans, net of unearned income (1)(2)
Taxable $ 5,193,860 $ 178,311 4.59 % $ 4,398,894 $ 147,328 4.47 %
Tax-exempt (3) 33,963 1,257 4.93 16,200 573 4.72
Total loans, net of unearned income 5,227,823 179,568 4.58 4,415,094 147,901 4.47
Mortgage loans held for sale 5,483 158 3.85 6,710 200 3.98
Investment securities:
Taxable 381,157 6,646 2.32 216,947 3,739 2.30
Tax-exempt (3) 132,545 3,373 3.39 136,326 3,845 3.76
Total investment securities (4) 513,702 10,019 2.60 353,273 7,584 2.86
Federal funds sold 147,626 1,185 1.07 136,879 630 0.61
Restricted equity securities 1,030 39 5.06 5,427 154 3.79
Interest-bearing balances with banks 174,040 1,252 0.96 453,087 1,734 0.51
Total interest-earning assets $ 6,069,704 $ 192,221 4.23 % $ 5,370,470 $ 158,203 3.93 %
Non-interest-earning assets:
Cash and due from banks 64,704 61,906
Net fixed assets and equipment 49,796 23,095
Allowance for loan losses, accrued interest and other assets 144,499 133,357
Total assets $ 6,328,703 $ 5,588,828

Liabilities and stockholders' equity:
Interest-bearing liabilities:
Interest-bearing demand deposits $ 789,916 $ 2,348 0.40 % $ 684,348 $ 1,838 0.36 %
Savings deposits 48,967 113 0.31 42,062 95 0.30
Money market accounts 2,678,993 13,143 0.66 2,186,703 8,612 0.53
Time deposits (5) 537,806 4,273 1.06 508,510 3,807 1.00
Total interest-bearing deposits 4,055,682 19,877 0.66 3,421,623 14,352 0.56
Federal funds purchased 326,017 2,653 1.09 460,844 2,210 0.64
Other borrowings 55,134 2,150 5.21 55,520 2,152 5.18
Total interest-bearing liabilities $ 4,436,833 $ 24,680 0.74 % $ 3,937,987 $ 18,714 0.63 %
Non-interest-bearing liabilities:
Non-interest-bearing demand deposits 1,319,695 1,157,106
Other liabilities 14,637 13,250
Stockholders' equity 556,952 475,905
Unrealized gains on securities and derivatives 586 4,580
Total liabilities and stockholders' equity $ 6,328,703 $ 5,588,828
Net interest income $ 167,541 $ 139,489
Net interest spread 3.49 % 3.30 %
Net interest margin 3.69 % 3.47 %

~~(1)~~	~~Non-accrual loans are included in average loan balances in all periods. Loan fees of $2,376,000 and $1,574,000 are included in interest income in 2017 and 2016, respectively.~~
~~(2)~~	~~Accretion on acquired loan discounts of $374,000 and $819,000 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 $189,000 are included in interest in 2017 and 2016, respectively.~~

For the Nine Months Ended September 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 $ 26,839 $ 4,144 $ 30,983
Tax-exempt 655 29 684
Total loans, net of unearned income 27,494 4,173 31,667
Mortgages held for sale (36 ) (6 ) (42 )
Debt securities:
Taxable 2,852 55 2,907
Tax-exempt (106 ) (366 ) (472 )
Total debt securities 2,746 (311 ) 2,435
Federal funds sold 52 503 555
Restricted equity securities (154 ) 39 (115 )
Interest-bearing balances with banks (1,454 ) 972 (482 )
Total interest-earning assets 28,648 5,370 34,018

Interest-bearing liabilities:
Interest-bearing demand deposits 298 212 510
Savings 16 2 18
Money market accounts 2,150 2,381 4,531
Time deposits 220 246 466
Total interest-bearing deposits 2,684 2,841 5,525
Federal funds purchased (780 ) 1,223 443
Other borrowed funds (18 ) 16 (2 )
Total interest-bearing liabilities 1,886 4,080 5,966
Increase in net interest income $ 26,762 $ 1,290 $ 28,052

~~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~~but was partially offset by a decrease in ~~the Federal Reserve Bank’s target federal funds rate has contributed to a favorable variance relating to the interest rate component because yields on loans have increased more than rates paid on~~average non-interest-bearing deposits.

Provision for ~~Loan~~Credit 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. At September 30, 2017, total loans rated Special Mention, Substandard, and Doubtful were $131.1 million, or 2.3% of total loans, compared to $128.8 million, or 2.6% of total loans, at December 31, 2016. Impaired loans are reviewed specifically and separately 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.

~~The provision for loan~~credit losses was ~~$4.8~~$4.2 million for the three months ended ~~September 30, 2017, an increase~~March 31, 2023, a decrease of ~~$1.3~~$1.2 million from ~~$3.5~~$5.4 million for the three months ended ~~September 30, 2016,~~March 31, 2022. The decrease in provision expense is primarily the result of improvement in the economic projections used to inform loss driver forecasts within the ACL model. The ACL for March 31, 2023, December 31, 2022 and ~~was $14.2~~March 31, 2022 totaled $149.0 million, ~~for the nine months ended September 30, 2017, a $4.9~~$146.0 million, ~~increase compared to $9.3 million for the nine months ended September 30, 2016. Nonperforming loans decreased to $14.9~~and $119.0 million, or 0.26% of total loans, at September 30, 2017 from $16.9 million, or 0.34% of total loans, at December 31, 2016, but were higher than $6.7 million, or 0.14% of total loans, at September 30, 2016. Impaired loans increased to $49.6 million, or 0.88% of total loans, at September 30, 2017, compared to $45.6 million, or 0.93% of total loans, at December 31, 2016. The allowance for loan losses totaled $58.5 million, or 1.04% of total loans, net of unearned income, at September 30, 2017, compared to $51.9 million, or 1.06%1.28%, 1.25%, and 1.21% of loans, net of unearned income, respectively. Annualized net credit charge-offs to quarter-to-date average loans were 0.05% for the first quarter of 2023, a six basis point decrease compared to 0.11% for the first quarter of 2022. Nonperforming loans were flat at $17.8 million, or 0.15% of total loans, at March 31, 2023 from the same amounts at December 31, ~~2016.~~2022, and decreased compared to $19.4 million, or 0.20% of total loans, at March 31, 2022.

Noninterest Income

Noninterest income ~~was flat at $4.8~~totaled $6.3 million for the three months ended ~~September 30, 2017~~March 31, 2023, a decrease of $1.6 million compared to the corresponding period in ~~2016, and totaled $14.1 million for the nine months ended September 30, 2017, an increase of $2.0 million,~~2022. Service charges on deposit accounts decreased $208,000, or ~~16.5%, compared to the corresponding period in 2016. Mortgage banking income decreased $0.1 million, or 9.1%~~9.71%, to ~~$1.0~~$1.9 million for the three months ended ~~September 30, 2017~~March 31, 2023, compared to ~~$1.1~~$2.1 million ~~for~~in the ~~same~~corresponding period in ~~2016, and increased $0.2 million,~~2022. Mortgage banking revenue decreased $84,000, or ~~7.4%~~15.97%, to ~~$2.9 million for the nine months ended September 30, 2017 compared to $2.7 million for the same period in 2016. Credit card income was flat at $1.1 million~~$442,000 for the three months ended ~~September 30, 2017~~March 31, 2023, compared to $526,000 in the ~~same~~corresponding period in ~~2016, and increased $1.3 million,~~2022. Interest rate increases have negatively impacted the housing market, which contributed to the decrease in mortgage banking revenue. Net credit card revenue decreased $683,000, or ~~59.1%~~28.79%, to ~~$3.5~~$1.7 million ~~for~~during the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2023, compared to ~~$2.2~~$2.4 million ~~for the same period in 2016. Flat credit card income for the comparative quarters was the result of higher accruals for rebates and awards on credit card accounts~~ during the ~~third quarter of 2017.~~three months ended March 31, 2022. The number of credit card accounts increased ~~35.7% from September 30, 2016 to September 30, 2017~~approximately 8.2% and the ~~volume~~aggregate amount of ~~purchases~~spend on ~~cards~~all credit card accounts increased ~~58.5% from~~14.7% during the ~~quarter~~three months ended ~~September 30, 2016~~March 31, 2023 compared to the three months ended March 31, 2022. Other income for the three months ended March 31, 2023, decreased $4.0 million, or 86.3%, to $635,000 when compared to the corresponding period in 2022. We did not recognize any income on the interest rate cap during the first quarter ~~ended September 30, 2017.~~of 2023, compared to $3.4 million during the first quarter of 2022. Merchant service revenue increased by $118,000, or 35.2%, to $455,000, during the first quarter of 2023 compared to $336,000 during the corresponding period in 2022.

Changes in our non-interest income, including percentage changes, are detailed in the following table:

	Three Months Ended March 31,
	2023		2022			$ change			% change
	(Dollars In Thousands)
Noninterest income:
Service charges on deposit accounts	$	1,934	$	2,142		$	(208	)		(9.7	)%
Mortgage banking		442		526			(84	)		(16.0	)%
Credit cards		1,689		2,372			(683	)		(28.8	)%
Securities gains		-		(3,335	)		NM			NM
Increase in cash surrender value life insurance		1,621		1,608			13			0.8	%
Other operating income		635		4,635			(4,000	)		(86.3	)%
Total noninterest income	$	6,321	$	7,948		$	(1,627	)		(20.5	)%

Noninterest Expense

Noninterest expense totaled ~~$21.5~~$39.7 million for the three months ended ~~September 30, 2017,~~March 31, 2023, an increase of ~~$1.3~~$2.4 million, or ~~6.4%~~6.6%, compared to ~~$20.2~~$37.2 million for the same period in ~~2016,~~2022. Salary and ~~totaled $64.6~~benefit expense increased $765,000, or 4.2%, to $19.1 million for the ~~nine~~three months ended ~~September 30, 2017, an increase of $5.6 million, or 9.5%, compared to $59.0~~March 31, 2023, from $18.3 million for the same period in ~~2016.~~

~~Details~~2022. Total FTE employees increased from 511 as of ~~expenses are~~March 31, 2022, to 573 as ~~follows:~~

~~Salary and benefit expense increased $1.5 million, or 13.4%~~of March 31, 2023. Equipment and occupancy expense increased $502,000, or 17.1%, to ~~$12.4 million for the three months ended September 30, 2017 from $11.0 million for the same period in 2016, and increased~~ $3.4 million or 10.4%, to $36.2 million for the nine months ended September 30, 2017 from $32.8 million for the same period in 2016. Total employees increased from 416 as of September 30, 2016 to 438 as of September 30, 2017, or 5.3%. Merit increases, cost of living adjustments, and medical benefit cost increases also contributed to the 2017 overall increased salary and benefits expense.

Occupancy expense decreased $0.2 million, or 7.3%, to $1.9 million for the three months ended September 30, 2017 from $2.1 million for the corresponding period in 2016, and increased $0.3 million, or 5.6%, to $6.4 million during the nine months ended September 30, 2017 from $6.1 million during 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, a replacement of a previous smaller location with less visibility.

Professional services expense decreased $0.4 million, or 31.9%, to $0.8 million for the three months ended September 30, 2017 from $1.2 million for the corresponding period in 2016, and decreased $0.5 million, or 18.3%, to $2.4 million from $2.9 million for the nine months ended September 30, 2017. Legal fees related to pending litigation during 2016 drove higher expenses in the previous year’s comparative periods.

Federal deposit insurance and other regulatory assessments were flat at $0.8 million for the three months ended September 30, 2017 compared to the same period in 2016, and increased $0.6 million to $2.9 million for the nine months ended September 30, 2017 compared to the same period in 2016. The increase in the nine-month comparative periods is driven by asset growth and a change in the assessment rate calculation enacted by the FDIC starting in the third quarter of 2016.

OREO expenses decreased to $31,000 for the three months ended September 30, 2017 from $0.2 million for the corresponding period in 2016, and decreased $0.5 million, or 75.6%, to $0.2 million from $0.7 million for the nine months ended September 30, 2017. Fewer properties in OREO and less activity lead to the drop in expenses. We continue to actively manage and maintain our OREO properties to minimize potential losses until they are sold.

Other operating expenses increased $0.5 million to $5.5 million for the three months ended September 30, 2017 compared to the same period in 2016, and increased $2.4 million to $16.6 million for the nine months ended September 30, 2017 compared to the same period in 2016. State sales taxes paid for the construction of our new headquarters building in Birmingham, Alabama and higher credit card processing expenses each contributed $0.4 million of the increase for the nine month comparative periods. Increased transaction volume drove increased loan expenses ($0.6 million), increased bank service charges ($0.1 million) and increased travel expenses ($0.1 million). We incurred a $0.2 million increase in non-credit losses during the nine months ended September 30, 2017 compared to the same period in 2016.

~~The following table presents our non-interest income and non-interest expense~~ for the three months ended March 31, 2023 from $2.9 million for the corresponding period in 2022.We opened new offices in Charlotte and ~~nine month periods ending September 30, 2017 compared~~Asheville, North Carolina during the second and third quarters of 2022, which contributed to the increase in equipment and occupancy expense. Third party processing and other services increased $1.7 million, or 30.0%, to $7.3 million for the three months ended March 31, 2023, from $5.6 million for the corresponding period in 2022. The increase year-over-year in third party processing also includes Federal Reserve Bank charges related to correspondent bank settlement activities. Professional services increased $662,000, or 66.7%, to $1.7 million for the three months ended March 31, 2023, from $992,000 for the same ~~periods~~period in ~~2016.~~2022. FDIC and other regulatory assessments increased $385,000, or 34.0%, to $1.5 million for the three months ended March 31, 2023 from $1.1 million for the corresponding period in 2022. OREO expense increased $3,000, or 100.0%, to $6,000 for the three months ended March 31, 2023 from $3,000 for the corresponding period in 2022. Other operating expenses decreased $1.6 million, or 18.8%, to $6.7 million for the three months ended March 31, 2023, from $8.3 million for the corresponding period in 2022. We recognized $874,000 of expenses during the three months ended March 31, 2022, associated with the conversion to a new core operating system scheduled to take place within the year. We wrote down investments in new market tax credit entities by $2.5 million during the three months ended March 31, 2022. We increased our ACL on unfunded loan commitments by $300,000 in the first quarter of 2022.

Three Months Ended
September 30, Nine Months Ended
September 30,
2017 2016 $ change % change 2017 2016 $ change % change
Non-interest income:
Service charges on deposit accounts $ 1,467 $ 1,367 $ 100 7.3 % $ 4,203 $ 3,980 $ 223 5.6 %
Mortgage banking 978 1,112 (134 ) (12.1 )% 2,941 2,681 260 9.7 %
Credit card income 1,149 1,116 33 3.0 % 3,517 2,159 1,358 62.9 %
Securities gains - - - NM - (3 ) 3 NM
Increase in cash surrender value life insurance 825 770 55 7.1 % 2,334 2,049 285 13.9 %
Other operating income 371 426 (55 ) (12.9 )% 1,146 1,207 (61 ) (5.1 )%
Total non-interest income $ 4,790 $ 4,791 $ (1 ) - % $ 14,141 $ 12,073 $ 2,068 17.1 %

Non-interest expense:
Salaries and employee benefits 12,428 10,958 1,470 13.4 % 36,172 32,758 3,414 10.4 %
Equipment and occupancy expense 1,947 2,100 (153 ) (7.3 )% 6,452 6,108 344 5.6 %
Professional services 805 1,182 (377 ) (31.9 )% 2,384 2,919 (535 ) (18.3 )%
FDIC and other regulatory assessments 810 775 35 4.5 % 2,888 2,328 560 24.1 %
OREO expense 31 178 (147 ) (82.6 )% 163 668 (505 ) (75.6 )%
Other operating expense 5,476 4,969 507 10.2 % 16,580 14,175 2,405 17.0 %
Total non-interest expense $ 21,497 $ 20,162 $ 1,335 6.6 % $ 64,639 $ 58,956 $ 5,683 9.6 %

Changes in our non-interest expenses, including percentage changes, are detailed in the following table:

	Three Months Ended March 31,
	2023		2022		$ change			% change
	(Dollars In Thousands)
Noninterest expense:
Salaries and employee benefits	$	19,066	$	18,301	$	765			4.2	%
Equipment and occupancy		3,435		2,933		502			17.1	%
Third party processing and other services		7,284		5,605		1,679			30.0	%
Professional services		1,654		992		662			66.7	%
FDIC and other regulatory assessments		1,517		1,132		385			34.0	%
Other real estate owned		6		3		3			100.0	%
Other operating expense		6,702		8,252		(1,550	)		(18.8	)%
Total noninterest expense	$	39,664	$	37,218	$	2,446			6.6	%

Income Tax Expense

Income tax expense was ~~$11.6~~$12.8 million for the three months ended ~~September 30, 2017 compared to $8.2~~March 31, 2023 versus $13.5 million for the same period in ~~2016, and was $29.4 million for the nine months ended September 30, 2017 compared to $22.0 million for the same period in 2016.~~2022. Our effective tax rate for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2023 was ~~31.5% and 29.0%~~18.07%, ~~respectively,~~ compared to ~~28.1% and 27.0%~~18.96% for the corresponding ~~periods~~period in ~~2016, respectively.~~2022. We recognized ~~a reduction~~tax credits during the three months ended March 31, 2023 of $3.9 million, compared to $3.3 million for the corresponding period in ~~provision for income taxes resulting from~~2022. We recognized excess tax benefits ~~from the exercise and vesting of stock options and restricted stock during the three and nine months ended September 30, 2017 of $0.8 million and $4.3 million, respectively, compared~~as a credit to ~~$1.2 million and $4.7 million during the three and nine months ended September 30, 2016, respectively. Lower excess~~our income tax ~~benefits~~expense from the exercise of stock options and ~~lower Alabama state sales taxes, which we can deduct from our Alabama corporate income taxes, during~~vesting of restricted stock of $1.1 million in the ~~third~~first quarter of ~~2017 contributed to the higher effective tax rate when~~2023, compared to $571,000 in the ~~same~~first quarter ~~in 2016.~~of 2022. 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.

Critical Accounting Estimates

The accounting and financial policies of the Company conform to U.S. GAAP and to general practices within the banking industry. To prepare consolidated financial statements in conformity with U.S. 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 ACL, valuation of impaired loans and 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, 2022.

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 (“ALCO”) 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~~risks that our balance ~~sheet.~~sheet is exposed to. Our annual budget reflects the anticipated rate environment for the next 12 months.

The ~~asset-liability committee~~ALCO employs modeling techniques such as net interest income simulations and economic value of equity simulations to determine what amount of the Bank’s net interest income is at risk given different movements in market interest rates. Simulations assume gradual and instantaneous (shocks) movements in market interest rates of up and down 100, 200, 300 and 400 basis points, when practicable. A set of Benchmark and optional scenarios are ran and results are compared to base model results to measure sensitivity to movements in market interest rates. The ALCO establishes limits for the amount of negative change in net interest margin in the first year, second year and two-year cumulative time horizon. Current policy limits for the 100 and 200 basis point shock and ramp scenarios in the first and second year range from -4% to -17%. The ALCO conducts a quarterly analysis of the rate sensitivity position, reviews established limits, and reports its results to our board of directors.

~~The asset-liability committee thoroughly analyzes the maturities~~ As 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; 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. ThereMarch 31, 2023, there have been ~~no changes to our policies or procedures for analyzing our interest rate risk since December 31, 2016, and there are~~ no significant changes to our sensitivity to changes in interest rates since December 31, ~~2016 as disclosed~~2022. We could experience an increase in the cost of funding our ~~Annual Report~~balance sheet. In response to increased inflationary pressures the Federal Reserve increased their targeted federal funds rate from 0 – 0.25% to 4.75 – 5.00% since March of 2022. Such rate increases could lead to us further increasing rates on ~~Form 10-K.~~our deposits and short-term borrowings. We could also experience increased pricing competition for our existing loans or future borrower prospects, which could decrease rates earned on our earning assets.

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 ~~September 30, 2017.~~March 31, 2023. Based upon the Evaluation, our CEO and CFO have concluded that, as of ~~September 30, 2017,~~March 31, 2023, 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, 2022, 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,~~2022, which should be taken into consideration when reviewing the information contained in this report. There have been no material changes ~~with regard to~~in the Company’s risk factors ~~previously~~from those disclosed in the Company’s Annual Report on 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.10-K for the year ended December 31, 2022.

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

None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

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.CAL~~101.INS	Inline XBRL Instance Document
101.SCH	Inline XBRL Taxonomy Extension Schema Document
101.CAL	Inline XBRL Taxonomy Extension Calculation Linkbase Document
~~101.DEF~~101.LAB		~~XBRL Taxonomy Extension Definition Linkbase Document~~
~~101.LAB~~		Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE		Inline XBRL Taxonomy Extension Presentation Linkbase Document
~~101.INS~~101.DEF		Inline XBRL ~~Instance~~Taxonomy Extension Definition Linkbase Document
~~101.SCH~~104		Cover Page Interactive Data File (formatted as Inline XBRL ~~Taxonomy Extension Schema Document~~and contained in Exhibit 101)

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: May 2, 2023

~~Date: October 31, 2017~~	By	/s/ Thomas A. Broughton III
		Thomas A. Broughton III
		President and Chief Executive Officer

Date: ~~October 31, 2017~~May 2, 2023	By	/s/ William M. Foshee
		William M. Foshee
		Chief Financial Officer

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	2724
	Item 3.	Quantitative and Qualitative Disclosures about Market Risk	4137
	Item 4.	Controls and Procedures	4238

PART II. OTHER INFORMATION		4238
	Item 1	Legal Proceedings	4238
	Item 1A.	Risk Factors	4339
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	4339
	Item 3.	Defaults Upon Senior Securities	4339
	Item 4.	Mine Safety Disclosures	4339
	Item 5.	Other Information	4339
	Item 6.	Exhibits	4339

	Three Months Ended September 30,				Nine Months Ended September 30,
	2017		2016		2017		2016
Interest income:
Interest and fees on loans	$	63,857	$	51,473	$	179,325	$	147,930
Taxable securities		2,288		1,232		6,649		3,739
Nontaxable securities		729		823		2,246		2,515
Federal funds sold		379		347		1,185		630
Other interest and dividends		388		816		1,291		1,888
Total interest income		67,641		54,691		190,696		156,702
Interest expense:
Deposits		7,574		5,358		19,877		14,352
Borrowed funds		1,671		1,415		4,804		4,362
Total interest expense		9,245		6,773		24,681		18,714
Net interest income		58,396		47,918		166,015		137,988
Provision for loan losses		4,803		3,464		14,170		9,323
Net interest income after provision for loan losses		53,593		44,454		151,845		128,665
Noninterest income:
Service charges on deposit accounts		1,467		1,367		4,203		3,980
Mortgage banking		978		1,112		2,941		2,681
Credit card income		1,149		1,114		3,517		2,159
Securities losses		-		-		-		(3	)
Increase in cash surrender value life insurance		825		770		2,334		2,049
Other operating income		371		428		1,146		1,207
Total noninterest income		4,790		4,791		14,141		12,073
Noninterest expenses:
Salaries and employee benefits		12,428		10,958		36,172		32,758
Equipment and occupancy expense		1,947		2,100		6,452		6,108
Professional services		805		1,182		2,384		2,919
FDIC and other regulatory assessments		810		775		2,888		2,328
OREO expense		31		178		163		668
Other operating expenses		5,476		4,969		16,580		14,175
Total noninterest expenses		21,497		20,162		64,639		58,956
Income before income taxes		36,886		29,083		101,347		81,782
Provision for income taxes		11,627		8,174		29,405		22,041
Net income		25,259		20,909		71,942		59,741
Preferred stock dividends		-		-		31		23
Net income available to common stockholders	$	25,259	$	20,909	$	71,911	$	59,718

Basic earnings per common share	$	0.48	$	0.40	$	1.36	$	1.14

Diluted earnings per common share	$	0.47	$	0.39	$	1.33	$	1.12

	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, $0.08 per share		-		-		(4,194	)		-			-		(4,194	)
Common dividends declared, $.04 per share		-		-		(2,106	)		-			-		(2,106	)
Preferred dividends paid		-		-		(23	)		-			-		(23	)
Issue 656,500 shares of common stock upon exercise of stock options		-		2,785		-			-			-		2,785
Stock based compensation expense		-		931		-			-			-		931
Other comprehensive income, net of tax		-		-		-			1,585			-		1,585
Net income		-		-		59,741			-			-		59,741
Balance, September 30, 2016	$	52	$	215,262	$	287,542		$	4,633		$	377	$	507,866

Balance, December 31, 2016	$	53	$	215,932	$	307,151		$	(624	)	$	377	$	522,889
Common dividends paid, $0.10 per share		-		-		(5,286	)		-			-		(5,286	)
Common dividends declared, $0.05 per share		-		-		(2,649	)		-			-		(2,649	)
Preferred dividends paid		-		-		(31	)		-			-		(31	)
Issue 328,214 shares of common stock upon exercise of stock options		-		635		-			-			-		635
Issue 125 shares of REIT preferred stock		-		-		-			-			125		125
Stock based compensation expense		-		916		-			-			-		916
Other comprehensive income, net of tax		-		-		-			1,672			-		1,672
Net income		-		-		71,942			-			-		71,942
Balance, September 30, 2017	$	53	$	217,483	$	371,127		$	1,048		$	502	$	590,213

	Nine Months Ended September 30,
	2017			2016
OPERATING ACTIVITIES
Net income	$	71,942		$	59,741
Adjustments to reconcile net income to net cash provided by
Deferred tax		(3,099	)		350
Provision for loan losses		14,170			9,323
Depreciation		2,281			2,211
Accretion on acquired loans		(374	)		(819	)
Amortization of core deposit intangible		209			257
Net amortization of debt securities available for sale		2,874			2,034
Increase in accrued interest and dividends receivable		(4,533	)		(950	)
Stock-based compensation expense		916			931
(Decrease) increase in accrued interest payable		(48	)		1,257
Proceeds from sale of mortgage loans held for sale		105,940			97,868
Originations of mortgage loans held for sale		(103,295	)		(92,964	)
Loss on sale of debt securities available for sale		-			3
Gain on sale of mortgage loans held for sale		(2,941	)		(2,681	)
Net (gain) loss on sale of other real estate owned and repossessed assets		(33	)		27
Write down of other real estate owned and repossessed assets		5			557
Losses of tax credit partnerships		42			178
Increase in cash surrender value of life insurance contracts		(2,334	)		(2,049	)
Net change in other assets, liabilities, and other operating activities		(551	)		(4,633	)
Net cash provided by operating activities		81,171			70,641
INVESTMENT ACTIVITIES
Purchase of debt securities available for sale		(77,567	)		(84,106	)
Proceeds from sale of debt securities available for sale		-			6,085
Proceeds from maturities, calls and paydowns of debt securities available for sale		65,734			71,425
Purchase of debt securities held to maturity		(29,782	)		(627	)
Proceeds from maturities, calls and paydowns of debt securities held to maturity		4,947			2,200
Purchase of equity securities		(10	)		(708	)
Increase in loans		(724,626	)		(443,771	)
Purchase of premises and equipment		(17,071	)		(7,809	)
Purchase of bank-owned life insurance contracts		(10,000	)		(20,000	)
Expenditures to complete construction of other real estate owned		-			(3	)
Proceeds from sale of other real estate owned and repossessed assets		1,529			1,648
Investment in tax credit partnerships		-			(2,491	)
Net cash used in investing activities		(786,846	)		(478,157	)
FINANCING ACTIVITIES
Net increase in non-interest-bearing deposits		124,360			216,259
Net increase in interest-bearing deposits		252,230			640,981
Net decrease in federal funds purchased		(101,064	)		(7,970	)
Repayment of Federal Home Loan Bank advances		(300	)		(300	)
Proceeds from sale of preferred stock, net		125			-
Proceeds from exercise of stock options and warrants		635			2,785
Dividends paid on common stock		(5,286	)		(4,194	)
Dividends paid on preferred stock		(31	)		(23	)
Net cash provided by financing activities		270,669			847,538
Net (decrease) increase in cash and cash equivalents		(435,006	)		440,022
Cash and cash equivalents at beginning of period		783,997			352,235
Cash and cash equivalents at end of period	$	348,991		$	792,257
SUPPLEMENTAL DISCLOSURE
Cash paid for:
Interest	$	24,729		$	17,457
Income taxes		30,651			22,666
Income tax refund		(492	)		(929	)
NONCASH TRANSACTIONS
Other real estate acquired in settlement of loans	$	586		$	2,033
Internally financed sales of other real estate owned		185			2,161
Dividends declared		2,649			2,106

	Three Months Ended September 30,				Nine Months Ended September 30,
	2017		2016		2017		2016
	(In Thousands, Except Shares and Per Share Data)
Earnings per common share
Weighted average common shares outstanding		52,950,644		52,554,918		52,854,332		52,557,910
Net income available to common stockholders	$	25,259	$	20,909	$	71,911	$	59,718
Basic earnings per common share	$	0.48	$	0.40	$	1.36	$	1.14

Weighted average common shares outstanding		52,950,644		52,554,918		52,854,332		52,557,910
Dilutive effects of assumed conversions and exercise of stock options and warrants		1,149,028		1,324,410		1,256,580		932,008
Weighted average common and dilutive potential common shares outstanding		54,099,672		53,879,328		54,110,912		53,489,918
Net income available to common stockholders	$	25,259	$	20,909	$	71,911	$	59,718
Diluted earnings per common share	$	0.47	$	0.39	$	1.33	$	1.12

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

	(In Thousands)
	Three Months Ended September 30, 2017
Allowance for loan losses:
Balance at June 30, 2017	$	29,127		$	5,138		$	20,392		$	402		$	55,059
Charge-offs		(924	)		(16	)		(550	)		(65	)		(1,555	)
Recoveries		67			12			59			14			152
Provision		3,431			197			1,065			110			4,803
Balance at September 30, 2017	$	31,701		$	5,331		$	20,966		$	461		$	58,459

	Three Months Ended September 30, 2016
Allowance for loan losses:
Balance at June 30, 2016	$	23,655		$	5,279		$	17,600		$	464		$	46,998
Charge-offs		(1,270	)		(79	)		(144	)		(81	)		(1,574	)
Recoveries		35			9			1			-			45
Provision		3,560			(394	)		282			16			3,464
Balance at September 30, 2016	$	25,980		$	4,815		$	17,739		$	399		$	48,933

	Nine Months Ended September 30, 2017
Allowance for loan losses:
Balance at December 31, 2016	$	28,872		$	5,125		$	17,504		$	392		$	51,893
Charge-offs		(6,846	)		(56	)		(922	)		(173	)		(7,997	)
Recoveries		273			42			62			16			393
Provision		9,402			220			4,322			226			14,170
Balance at September 30, 2017	$	31,701		$	5,331		$	20,966		$	461		$	58,459

	Nine Months Ended September 30, 2016
Allowance for loan losses:
Balance at December 31, 2015	$	21,495		$	5,432		$	16,061		$	431		$	43,419
Charge-offs		(2,732	)		(815	)		(335	)		(130	)		(4,012	)
Recoveries		39			64			100			-			203
Provision		7,178			134			1,913			98			9,323
Balance at September 30, 2016	$	25,980		$	4,815		$	17,739		$	399		$	48,933

	As of September 30, 2017
Allowance for loan losses:
Individually Evaluated for Impairment	$	5,725		$	829		$	1,892		$	50		$	8,496
Collectively Evaluated for Impairment		25,976			4,502			19,074			411			49,963

Loans:
Ending Balance	$	2,223,910		$	467,838		$	2,879,253		$	57,764		$	5,628,765
Individually Evaluated for Impairment		30,405			3,328			15,789			88			49,610
Collectively Evaluated for Impairment		2,193,505			464,510			2,863,464			57,676			5,579,155

	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

	September 30, 2017						For the three months ended September 30, 2017					For the nine months ended September 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	$	4,671	$	4,671	$	-	$	4,770	$	52		$	4,998	$	164
Real estate - construction		45		48		-		48		1			49		2
Real estate - mortgage:
Owner-occupied commercial		2,366		2,532		-		2,551		37			2,584		113
1-4 family mortgage		1,752		1,752		-		1,756		22			1,781		67
Other mortgage		732		732		-		732		10			733		32
Total real estate - mortgage		4,850		5,016		-		5,039		69			5,098		212
Consumer		38		40		-		41		1			42		2
Total with no allowance recorded		9,604		9,775		-		9,898		123			10,187		380

With an allowance recorded:
Commercial, financial and agricultural		25,734		27,719		5,725		26,129		256			27,021		800
Real estate - construction		3,283		3,283		829		3,357		14			3,369		42
Real estate - mortgage:
Owner-occupied commercial		8,024		8,024		1,512		8,024		75			7,873		217
1-4 family mortgage		2,485		2,485		328		2,485		10			2,506		56
Other mortgage		430		980		52		974		(4	)		984		21
Total real estate - mortgage		10,939		11,489		1,892		11,483		81			11,363		294
Consumer		50		50		50		50		1			39		2
Total with allowance recorded		40,006		42,541		8,496		41,019		352			41,792		1,138

Total Impaired Loans:
Commercial, financial and agricultural		30,405		32,390		5,725		30,899		308			32,019		964
Real estate - construction		3,328		3,331		829		3,405		15			3,418		44
Real estate - mortgage:
Owner-occupied commercial		10,390		10,556		1,512		10,575		112			10,457		330
1-4 family mortgage		4,237		4,237		328		4,241		32			4,287		123
Other mortgage		1,162		1,712		52		1,706		6			1,717		53
Total real estate - mortgage		15,789		16,505		1,892		16,522		150			16,461		506
Consumer		88		90		50		91		2			81		4
Total impaired loans	$	49,610	$	52,316	$	8,496	$	50,917	$	475		$	51,979	$	1,518

	December 31, 2016						For the twelve months ended December 31, 2016
	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized in Period

	(In Thousands)
With no allowance recorded:
Commercial, financial and agricultural	$	1,003	$	1,003	$	-	$	992	$	64
Real estate - construction		938		1,802		-		1,159		3
Real estate - mortgage:
Owner-occupied commercial		2,615		2,778		-		2,884		166
1-4 family mortgage		1,899		1,899		-		1,901		102
Other mortgage		940		940		-		965		60
Total real estate - mortgage		5,454		5,617		-		5,750		328
Consumer		3		5		-		6		-
Total with no allowance recorded		7,398		8,427		-		7,907		395

With an allowance recorded:
Commercial, financial and agricultural		26,919		31,728		6,607		26,955		1,162
Real estate - construction		3,376		3,376		923		3,577		68
Real estate - mortgage:
Owner-occupied commercial		6,924		6,924		348		6,934		362
1-4 family mortgage		972		972		274		313		19
Other mortgage		-		-		-		-		-
Total real estate - mortgage		7,896		7,896		622		7,247		381
Consumer		-		-		-		-		-
Total with allowance recorded		38,191		43,000		8,152		37,779		1,611

Total Impaired Loans:
Commercial, financial and agricultural		27,922		32,731		6,607		27,947		1,226
Real estate - construction		4,314		5,178		923		4,736		71
Real estate - mortgage:
Owner-occupied commercial		9,539		9,702		348		9,818		528
1-4 family mortgage		2,871		2,871		274		2,214		121
Other mortgage		940		940		-		965		60
Total real estate - mortgage		13,350		13,513		622		12,997		709
Consumer		3		5		-		6		-
Total impaired loans	$	45,589	$	51,427	$	8,152	$	45,686	$	2,006

	Three Months Ended September 30, 2017						Nine Months Ended September 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
Real estate - construction		-		-		-		1		997		997
Real estate - mortgage:
Owner-occupied commercial		-		-		-		2		3,664		3,664
1-4 family mortgage		-		-		-		1		850		850
Other mortgage		-		-		-		-		-		-
Total real estate mortgage		-		-		-		3		4,514		4,514
Consumer		-		-		-		-		-		-
		-	$	-	$	-		9	$	12,716	$	12,716

	2017			2016
Expected volatility		29.00	%		29.00	%
Expected dividends		0.44	%		0.64	%
Expected term (in years)		6.25			6.25
Risk-free rate		2.08	%		1.86	%

	Shares			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (years)		Aggregate Intrinsic Value
								(In Thousands)
Nine Months Ended September 30, 2017:
Outstanding at January 1, 2017		2,026,334		$	9.00		6.2	$	57,636
Granted		52,500			37.93		9.4		(35	)
Exercised		(359,000	)		4.97		4.2		11,590
Forfeited		(32,000	)		21.96		8.4		489
Outstanding at September 30, 2017		1,687,834			10.51		5.7	$	45,136

Exercisable at September 30, 2017		810,736		$	5.22		4.2	$	25,971

Nine Months Ended September 30, 2016:
Outstanding at January 1, 2016		2,498,834		$	6.66		6.3	$	42,743
Granted		234,000			19.98		9.5		1,398
Exercised		(656,500	)		4.25		4.2		14,254
Forfeited		(13,000	)		19.41		9.0		85
Outstanding at September 30, 2016		2,063,334			8.86		6.5	$	35,277

Exercisable at September 30, 2016		594,536		$	6.45		6.0	$	13,901

	Shares			Weighted Average Grant Date Fair Value

Nine Months Ended September 30, 2017:
Non-vested at January 1, 2017		118,676		$	8.88
Granted		7,000			38.02
Vested		(4,200	)		15.74
Forfeited		(800	)		15.74
Non-vested at September 30, 2017		120,676			10.29

Nine Months Ended September 30, 2016:
Non-vested at January 1, 2016		294,176		$	6.44
Granted		9,000			19.58
Vested		(178,500	)		5.59
Forfeited		-			-
Non-vested at September 30, 2016		124,676			8.66

	September 30, 2017				December 31, 2016
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
	(In Thousands)
Financial Assets:
Level 1 inputs:
Cash and due from banks	$	166,150	$	166,150	$	623,562	$	623,562

Level 2 inputs:
Available for sale debt securities		435,325		435,325		422,375		422,375
Held to maturity debt securities		36,891		37,406		25,052		25,431
Restricted equity securities		1,038		1,038		1,024		1,024
Federal funds sold		182,841		182,841		160,435		160,435
Mortgage loans held for sale		4,971		5,033		4,675		4,736
Bank owned life insurance contracts		126,722		126,722		114,388		114,388

Level 3 inputs:
Debt securities held to maturity		50,508		51,923		37,512		37,871
Loans, net		5,570,306		5,564,250		4,859,877		4,872,689

Financial liabilities:
Level 2 inputs:
Deposits	$	5,796,901	$	5,793,324	$	5,420,311	$	5,417,320
Federal funds purchased		254,880		254,880		355,944		355,944
Other borrowings		54,975		56,996		55,262		54,203

	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	$	5,235,403	$	-	$	-	$	-	$	-
Certificates of deposit (2)		561,498		324,179		152,527		83,161		1,631
Federal funds purchased		254,880		254,880		-		-		-
Subordinated debentures		54,975		300		-		-		54,675
Operating lease commitments		16,180		3,101		5,365		3,870		3,844
Total	$	6,122,936	$	582,460	$	157,892	$	87,031	$	60,150

	For the Three Months Ended September 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	$	10,054		$	2,232		$	12,286
Tax-exempt		144			50			194
Total loans, net of unearned income		10,198			2,282			12,480
Mortgages held for sale		(16	)		(5	)		(21	)
Debt securities:
Taxable		949			106			1,055
Tax-exempt		(34	)		(131	)		(165	)
Total debt securities		915			(25	)		890
Federal funds sold		(227	)		258			31
Restricted equity securities		(41	)		(7	)		(48	)
Interest-bearing balances with banks		(923	)		543			(380	)
Total interest-earning assets		9,906			3,046			12,952

Interest-bearing liabilities:
Interest-bearing demand deposits		105			100			205
Savings		4			-			4
Money market accounts		455			1,328			1,783
Time deposits		69			155			224
Total interest-bearing deposits		633			1,583			2,216
Federal funds purchased		(311	)		567			256
Other borrowed funds		(4	)		4			-
Total interest-bearing liabilities		318			2,154			2,472
Increase in net interest income	$	9,588		$	892		$	10,480

	For the Nine Months Ended September 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	$	26,839		$	4,144		$	30,983
Tax-exempt		655			29			684
Total loans, net of unearned income		27,494			4,173			31,667
Mortgages held for sale		(36	)		(6	)		(42	)
Debt securities:
Taxable		2,852			55			2,907
Tax-exempt		(106	)		(366	)		(472	)
Total debt securities		2,746			(311	)		2,435
Federal funds sold		52			503			555
Restricted equity securities		(154	)		39			(115	)
Interest-bearing balances with banks		(1,454	)		972			(482	)
Total interest-earning assets		28,648			5,370			34,018

Interest-bearing liabilities:
Interest-bearing demand deposits		298			212			510
Savings		16			2			18
Money market accounts		2,150			2,381			4,531
Time deposits		220			246			466
Total interest-bearing deposits		2,684			2,841			5,525
Federal funds purchased		(780	)		1,223			443
Other borrowed funds		(18	)		16			(2	)
Total interest-bearing liabilities		1,886			4,080			5,966
Increase in net interest income	$	26,762		$	1,290		$	28,052