UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

_________________________

FORM 10-Q

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(Mark one)one)

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

FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2021

FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2020

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIESEXCHANGE 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)

 

Delaware26-0734029

(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 Code)

2500 Woodcrest Place, Birmingham, Alabama35209
(Address of Principal Executive Offices)(Zip Code)

 

(205) 949-0302

(Registrant's Telephone Number, Including Area Code)

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

Title of each class

Trading symbol(s)Symbol(s)

Name of each exchange on which registered

Common stock, par value $.001 per share

SFBS

The NASDAQ Global Select Market

 

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 every Interactive Data File required to be submitted 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 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,” “accelerated filer,” “smaller reporting 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 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.

 

ClassOutstanding as of October 23, 2020April 26, 2021
Common stock, $.001 par value53,915,24554,152,882

 

 

 

 

TABLE OF CONTENTS

 

PART I. FINANCIAL INFORMATION

4

Item 1.

Consolidated Financial Statements

4

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

26

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

4339

Item 4.

Controls and Procedures

4439

PART II. OTHER INFORMATION

40

PART II. OTHER INFORMATION

44

Item 1.1

Legal Proceedings

4440

Item 1A.

Risk Factors

4440

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

4540

Item 3.

Defaults Upon Senior Securities

4540

Item 4.

Mine Safety Disclosures

4540

Item 5.

Other Information

4540

Item 6.

Exhibits

4540

 

EX-10.3 Form of ServisFirst Bancshares, Inc. Restricted Stock Award Agreement

EX-10.4 Form of ServisFirst Bancshares, Inc. Performance Share Award Agreement

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

 

 

 

3


 

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.

 

CONSOLIDATED BALANCE SHEETS

 

(In thousands, except share and per share amounts)

 
         
  

March 31, 2021

  

December 31, 2020

 
  

(Unaudited)

   (1) 

ASSETS

        

Cash and due from banks

 $70,107  $93,655 

Interest-bearing balances due from depository institutions

  2,738,046   2,115,985 

Federal funds sold

  1,577   1,771 

Cash and cash equivalents

  2,809,730   2,211,411 

Available for sale debt securities, at fair value

  961,879   886,688 

Held to maturity debt securities (fair value of $250 at March 31, 2021 and December 31, 2020)

  250   250 

Mortgage loans held for sale

  15,834   14,425 

Loans

  8,504,980   8,465,688 

Less allowance for credit losses

  (94,906)  (87,942)

Loans, net

  8,410,074   8,377,746 

Premises and equipment, net

  56,472   54,969 

Accrued interest and dividends receivable

  36,348   36,841 

Deferred tax assets, net

  32,126   31,072 

Other real estate owned and repossessed assets

  2,067   6,497 

Bank owned life insurance contracts

  278,045   276,387 

Goodwill and other identifiable intangible assets

  13,841   13,908 

Other assets

  30,708   22,460 

Total assets

 $12,647,374  $11,932,654 

LIABILITIES AND STOCKHOLDERS' EQUITY

        

Liabilities:

        

Deposits:

        

Noninterest-bearing

 $3,044,611  $2,788,772 

Interest-bearing

  7,532,999   7,186,952 

Total deposits

  10,577,610   9,975,724 

Federal funds purchased

  911,558   851,545 

Other borrowings

  64,691   64,748 

Accrued interest payable

  12,865   12,321 

Other liabilities

  50,165   35,464 

Total liabilities

  11,616,889   10,939,802 

Stockholders' equity:

        

Preferred stock, par value $0.001 per share; 1,000,000 authorized and undesignated at March 31, 2021 and December 31 2020

  0   0 

Common stock, par value $0.001 per share; 100,000,000 shares authorized; 54,137,650 shares issued and outstanding at March 31, 2021, and 53,943,751 shares issued and outstanding at December 31 2020

  54   54 

Additional paid-in capital

  224,302   223,856 

Retained earnings

  788,875   748,224 

Accumulated other comprehensive income

  16,754   20,218 

Total stockholders' equity attributable to ServisFirst Bancshares, Inc.

  1,029,985   992,352 

Noncontrolling interest

  500   500 

Total stockholders' equity

  1,030,485   992,852 

Total liabilities and stockholders' equity

 $12,647,374  $11,932,654 

 

  

September 30, 2020

  

December 31, 2019

 
  

(Unaudited)

   (1)

ASSETS

        

Cash and due from banks

 $70,472  $78,618 

Interest-bearing balances due from depository institutions

  1,551,597   451,509 

Federal funds sold

  1,302   100,473 

Cash and cash equivalents

  1,623,371   630,600 

Available for sale debt securities, at fair value

  913,049   759,399 

Held to maturity debt securities (fair value of $250 at September 30, 2020 and December 31, 2019)

  250   250 

Mortgage loans held for sale

  21,472   6,312 

Loans

  8,508,554   7,261,451 

Less allowance for loan losses

  (92,440)  (76,584)

Loans, net

  8,416,114   7,184,867 

Premises and equipment, net

  55,273   56,496 

Accrued interest and dividends receivable

  36,607   26,262 

Deferred tax assets

  26,764   25,566 

Other real estate owned and repossessed assets

  6,976   8,178 

Bank owned life insurance contracts

  254,045   209,395 

Goodwill and other identifiable intangible assets

  13,976   14,179 

Other assets

  26,977   26,149 

Total assets

 $11,394,874  $8,947,653 

LIABILITIES AND STOCKHOLDERS' EQUITY

        

Liabilities:

        

Deposits:

        

Noninterest-bearing

 $2,762,814  $1,749,879 

Interest-bearing

  6,910,969   5,780,554 

Total deposits

  9,673,783   7,530,433 

Federal funds purchased

  669,350   470,749 

Other borrowings

  64,719   64,703 

Accrued interest payable

  11,915   11,934 

Other liabilities

  25,518   27,152 

Total liabilities

  10,445,285   8,104,971 

Stockholders' equity:

        

Preferred stock, par value $0.001 per share; 1,000,000 authorized and undesignated at September 30, 2020 and December 31, 2019

  0   0 

Common stock, par value $0.001 per share; 100,000,000 shares authorized; 53,915,245 shares issued and outstanding at September 30, 2020, and 53,623,740 shares issued and outstanding at December 31, 2019

  54   54 

Additional paid-in capital

  223,280   219,766 

Retained earnings

  706,924   616,611 

Accumulated other comprehensive income

  18,831   5,749 

Total stockholders' equity attributable to ServisFirst Bancshares, Inc.

  949,089   842,180 

Noncontrolling interest

  500   502 

Total stockholders' equity

  949,589   842,682 

Total liabilities and stockholders' equity

 $11,394,874  $8,947,653 
         

(1) Derived from audited financial statements.

        
         

See Notes to Consolidated Financial Statements.

        

(1) derived from audited financial statements.

 

See Notes to Consolidated Financial Statements.

 

4


 

 

SERVISFIRST BANCSHARES, INC.

CONSOLIDATED STATEMENTS OF INCOME

(In thousands, except per share amounts)

(Unaudited)

SERVISFIRST BANCSHARES, INC.

 

CONSOLIDATED STATEMENTS OF INCOME

 

(In thousands, except share and per share amounts)

 

(Unaudited)

 
  

Three Months Ended March 31,

 
  

2021

  

2020

 

Interest income:

        

Interest and fees on loans

 $93,803  $89,385 

Taxable securities

  5,807   5,154 

Nontaxable securities

  107   233 

Federal funds sold

  3   277 

Other interest and dividends

  676   1,718 

Total interest income

  100,396   96,767 

Interest expense:

        

Deposits

  6,881   16,745 

Borrowed funds

  1,150   2,382 

Total interest expense

  8,031   19,127 

Net interest income

  92,365   77,640 

Provision for credit losses

  7,451   13,584 

Net interest income after provision for credit losses

  84,914   64,056 

Noninterest income:

        

Service charges on deposit accounts

  1,908   1,916 

Mortgage banking

  2,747   1,071 

Credit card income

  1,192   1,765 

Increase in cash surrender value life insurance

  1,658   1,453 

Other operating income

  958   469 

Total noninterest income

  8,463   6,674 

Noninterest expense:

        

Salaries and employee benefits

  15,543   15,658 

Equipment and occupancy

  2,654   2,400 

Third party processing and other services

  3,416   3,457 

Professional services

  923   948 

FDIC and other regulatory assessments

  1,582   1,332 

Other real estate owned

  157   601 

Other operating expense

  4,639   3,524 

Total noninterest expense

  28,914   27,920 

Income before income taxes

  64,463   42,810 

Provision for income taxes

  13,008   8,032 

Net income

  51,455   34,778 

Dividends on preferred stock

  0   0 

Net income available to common stockholders

 $51,455  $34,778 

Basic earnings per common share

 $0.95  $0.65 

Diluted earnings per common share

 $0.95  $0.64 

 

  

Three Months Ended

  

Nine Months Ended

 
  

September 30,

  

September 30,

 
  

2020

  

2019

  

2020

  

2019

 

Interest income:

                

Interest and fees on loans

 $89,564  $90,767  $268,332  $264,901 

Taxable securities

  5,858   4,367   16,104   12,306 

Nontaxable securities

  166   316   610   1,155 

Federal funds sold

  16   1,768   327   4,985 

Other interest and dividends

  506   3,912   2,584   9,269 

Total interest income

  96,110   101,130   287,957   292,616 

Interest expense:

                

Deposits

  9,876   24,787   37,377   71,172 

Borrowed funds

  1,152   3,338   4,624   9,576 

Total interest expense

  11,028   28,125   42,001   80,748 

Net interest income

  85,082   73,005   245,956   211,868 

Provision for loan losses

  12,284   6,985   36,151   16,754 

Net interest income after provision for loan losses

  72,798   66,020   209,805   195,114 

Noninterest income:

                

Service charges on deposit accounts

  1,818   1,735   5,557   5,223 

Mortgage banking

  2,519   1,333   5,697   2,995 

Credit card income

  1,840   1,868   5,003   5,185 

Securities gains

  0   34   0   28 

Increase in cash surrender value life insurance

  1,733   787   4,650   2,327 

Other operating income

  262   453   972   1,172 

Total noninterest income

  8,172   6,210   21,879   16,930 

Noninterest expenses:

                

Salaries and employee benefits

  14,994   15,499   46,444   44,103 

Equipment and occupancy expense

  2,556   2,387   7,390   6,933 

Third party processing and other services

  3,281   2,923   10,360   8,058 

Professional services

  955   887   2,994   3,072 

FDIC and other regulatory assessments (credits)

  1,061   (296)  2,988   1,804 

OREO expense

  119   78   2,023   312 

Other operating expenses

  3,607   3,683   11,110   12,227 

Total noninterest expenses

  26,573   25,161   83,309   76,509 

Income before income taxes

  54,397   47,069   148,375   135,535 

Provision for income taxes

  11,035   9,506   29,787   27,329 

Net income

  43,362   37,563   118,588   108,206 

Preferred stock dividends

  0   0   31   31 

Net income available to common stockholders

 $43,362  $37,563  $118,557  $108,175 
                 

Basic earnings per common share

 $0.80  $0.70  $2.20  $2.02 

Diluted earnings per common share

 $0.80  $0.69  $2.19  $2.00 
                 

See Notes to Consolidated Financial Statements.

                

See Notes to Consolidated Financial Statements.

 

5


 

 

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,

 
  

2021

  

2020

 

Net income

 $51,455  $34,778 

Other comprehensive (loss) income, net of tax:

        

Unrealized net holding (losses) gains arising during period from securities available for sale, net of tax of $(917) and $3,110 for 2021 and 2020, respectively

  (3,464)  11,699 

Other comprehensive (loss) income, net of tax

  (3,464)  11,699 

Comprehensive income

 $47,991  $46,477 

 

     

Three Months Ended

  

Nine Months Ended

 
     

September 30,

  

September 30,

 
     

2020

  

2019

  

2020

  

2019

 

Net income

 $43,362  $37,563  $118,588  $108,206 

Other comprehensive income, net of tax:

                 

Unrealized net holding gains arising during period from securities available for sale, net of tax of $58 and $3,477 for the three and nine months ended September 30, 2020, respectively, and net of tax of $424 and $2,791 for the three and nine months ended September 30, 2019, respectively

  220   1,434   13,082   10,497 

Reclassification adjustment for net gains on sale of securities, net of tax of $7 and $5 for the three and nine months ended September 30, 2019, respectively

  0   27   0   23 

Other comprehensive income, net of tax

  220   1,461   13,082   10,520 

Comprehensive income

 $43,582  $39,024  $131,670  $118,726 
                    

See Notes to Consolidated Financial Statements.

                 

 

See Notes to Consolidated Financial Statements.

 

 

 

 

 

 

 

 

 

 

6


 

 

SERVISFIRST BANCSHARES, INC.

CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY

(In thousands, except share amounts)(Unaudited)

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, 2020

  53,623,740  $0  $54  $219,766  $616,611  $5,749  $502  $842,682 

Common dividends declared, $0.175 per share

  -   0   0   0   (9,423)  0   0   (9,423)

Dividends on nonvested restricted stock recognized as compensation expense

  -   0   0   0   14   0   0   14 

Issue restricted shares pursuant to stock incentives

  15,300   0   0   0   0   0   0   0 

Issue shares of common stock upon exercise of stock options

  204,969   0   0   2,261   0   0   0   2,261 

11,031 shares of common stock withheld in net settlement upon exercise of stock options

  -   0   0   (403)  0   0   0   (403)

Stock-based compensation expense

  -   0   0   277   0   0   0   277 

Other comprehensive income, net of tax

  -   0   0   0   0   11,699   0   11,699 

Net income

  -   0   0   0   34,778   0   0   34,778 

Balance, March 31, 2020

  53,844,009  $0  $54  $221,901  $641,980  $17,448  $502  $881,885 
                                 

Balance, January 1, 2021

  53,943,751   0   54   223,856   748,224   20,218   500   992,852 

Common dividends declared, $0.20 per share

  -   0   0   0   (10,829)  0   0   (10,829)

Dividends on nonvested restricted stock recognized as compensation expense

  -   0   0   0   25   0   0   25 

Issue restricted shares pursuant to stock incentives, net of forfeitures

  42,642   0   0   0   0   0   0   0 

Issue shares of common stock upon exercise of stock options

  151,257   0   0   1,865   0   0   0   1,865 

36,243 shares of common stock withheld in net settlement upon exercise of stock options

  -   0   0   (1,710)  0   0   0   (1,710)

Stock-based compensation expense

  -   0   0   291   0   0   0   291 

Other comprehensive loss, net of tax

  -   0   0   0   0   (3,464)  0   (3,464)

Net income

  -   0   0   0   51,455   0   0   51,455 

Balance, March 31, 2021

  54,137,650  $0  $54  $224,302  $788,875  $16,754  $500  $1,030,485 

 

  

Three Months Ended September 30,

 
  Common Shares  Preferred Stock  Common Stock  Additional Paid-in Capital  Retained Earnings  Accumulated Other Comprehensive Income (Loss)  Noncontrolling interest  Total Stockholders' Equity 

Balance, July 1, 2019

  53,526,882  $0  $54  $218,658  $555,425  $4,318  $502  $778,957 

Common dividends declared, $0.15 per share

  -   0   0   0   (8,020)  0   0   (8,020)

Issue restricted shares pursuant to stock incentives, net of forfeitures

  10,500   0   0   0   0   0   0   0 

Issue shares of common stock upon exercise of stock options

  41,731   0   0   571   0   0   0   571 

9,069 shares of common stock withheld in net settlement upon exercise of stock options

  -   0   0   (289)  0   0   0   (289)

Stock-based compensation expense

  -   0   0   294   0   0   0   294 

Other comprehensive income, net of tax

  -   0   0   0   0   1,461   0   1,461 

Net income

  -   0   0   0   37,563   0   0   37,563 

Balance, September 30, 2019

  53,579,113  $0  $54  $219,234  $584,968  $5,779  $502  $810,537 
                                 

Balance, July 1, 2020

  53,874,276  $0  $54  $222,437  $672,984  $18,611  $502  $914,588 

Common dividends declared, $0.175 per share

  -   0   0   0   (9,422)  0   0   (9,422)

Issue restricted shares pursuant to stock incentives, net of forfeitures

  3,500   0   0   0   0   0   0   0 

Issue shares of common stock upon exercise of stock options

  37,469   0   0   728   0   0   0   728 

5,831 shares of common stock withheld in net settlement upon exercise of stock options

  -   0   0   (225)  0   0   0   (225)

Stock-based compensation expense

  -   0   0   340   0   0   0   340 

Other comprehensive loss, net of tax

  -   0   0   0   0   220   0   220 

Net income

  -   0   0   0   43,362   0   (2)  43,360 

Balance, September 30, 2020

  53,915,245  $0  $54  $223,280  $706,924  $18,831  $500  $949,589 

See Notes to Consolidated Financial Statements.

 

7

  

Nine Months Ended September 30,

 
  Common Shares  Preferred Stock  Common Stock  Additional Paid-in Capital  Retained Earnings  Accumulated Other Comprehensive Income (Loss)  Noncontrolling interest  Total Stockholders' Equity 

Balance, January 1, 2019

  53,375,195  $0  $53  $218,521  $500,868  $(4,741) $502  $715,203 

Common dividends paid, $0.30 per share

  -   0   0   0   (16,038)  0   0   (16,038)

Common dividends declared, $0.15 per share

  -   0   0   0   (8,037)  0   0   (8,037)

Preferred dividends paid

  -   0   0   0   (31)  0   0   (31)

Issue restricted shares pursuant to stock incentives, net of forfeitures

  18,874   0   0   0   0   0   0   0 

Issue shares of common stock upon exercise of stock options

  185,044   0   1   1,674   0   0   0   1,675 

54,256 shares of common stock withheld in net settlement upon exercise of stock options

  -   0   0   (1,742)  0   0   0   (1,742)

Stock-based compensation expense

  -   0   0   781   0   0   0   781 

Other comprehensive income, net of tax

  -   0   0   0   0   10,520   0   10,520 

Net income

  -   0   0   0   108,206   0   0   108,206 

Balance, September 30, 2019

  53,579,113  $0  $54  $219,234  $584,968  $5,779  $502  $810,537 
                                 

Balance, January 1, 2020

  53,623,740  $0  $54  $219,766  $616,611  $5,749  $502  $842,682 

Common dividends paid, $0.35 per share

  -   0   0   0   (18,822)  0   0   (18,822)

Common dividends declared, $0.175 per share

  -   0   0   0   (9,422)  0   0   (9,422)

Preferred dividends paid

  -   0   0   0   (31)  0   0   (31)

Issue restricted shares pursuant to stock incentives, net of forfeitures

  29,067   0   0   0   0   0   0   0 

Issue shares of common stock upon exercise of stock options

  262,438   0   0   3,172   0   0   0   3,172 

16,862 shares of common stock withheld in net settlement upon exercise of stock options

  -   0   0   (627)  0   0   0   (627)

Stock-based compensation expense

  -   0   0   969   0   0   0   969 

Other comprehensive loss, net of tax

  -   0   0   0   0   13,082   0   13,082 

Net income

  -   0   0   0   118,588   0   (2)  118,586 

Balance, September 30, 2020

  53,915,245  $0  $54  $223,280  $706,924  $18,831  $500  $949,589 
                                 

See Notes to Consolidated Financial Statements.

                                

8


 

 

SERVISFIRST BANCSHARES, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands) (Unaudited)

SERVISFIRST BANCSHARES, INC.

 

CONSOLIDATED STATEMENTS OF CASH FLOWS

 

(In thousands) (Unaudited)

 
  

Three Months Ended March 31,

 
  

2021

  

2020

 

OPERATING ACTIVITIES

        

Net income

 $51,455  $34,778 

Adjustments to reconcile net income to net cash provided by

        

Deferred tax benefit

  (137)  (1,267)

Provision for credit losses

  7,451   13,584 

Depreciation

  1,015   921 

Amortization of core deposit intangible

  67   68 

Net amortization of debt securities available for sale

  1,701   966 

Increase in accrued interest and dividends receivable

  493   948 

Stock-based compensation expense

  291   277 

Increase in accrued interest payable

  544   465 

Proceeds from sale of mortgage loans held for sale

  90,227   36,308 

Originations of mortgage loans held for sale

  (88,889)  (35,672)

Gain on sale of mortgage loans held for sale

  (2,747)  (1,071)

Net loss (gain) on sale of other real estate owned and repossessed assets

  334   (24)

Write down of other real estate owned and repossessed assets

  147   587 

Operating losses of tax credit partnerships

  4   3 

Increase in cash surrender value of life insurance contracts

  (1,658)  (1,453)

Net change in other assets, liabilities, and other operating activities

  6,462   2,814 

Net cash provided by operating activities

  66,760   52,232 

INVESTMENT ACTIVITIES

        

Purchase of debt securities available for sale

  (149,719)  (80,149)

Proceeds from maturities, calls and paydowns of debt securities

        

available for sale

  72,194   26,778 

Investment in tax credit partnership and SBIC

  (56)  (111)

Increase in loans

  (40,193)  (312,426)

Purchase of premises and equipment

  (2,518)  (417)

Proceeds from sale of other real estate owned and repossessed assets

  584   454 

Net cash used in investing activities

  (119,708)  (365,871)

FINANCING ACTIVITIES

        

Net increase in non-interest-bearing deposits

  255,839   175,747 

Net increase in interest-bearing deposits

  346,047   126,475 

Net increase in federal funds purchased

  60,013   72,874 

Proceeds from exercise of stock options

  1,865   2,261 

Taxes paid in net settlement of tax obligation upon exercise of stock options

  (1,710)  (403)

Dividends paid on common stock

  (10,787)  (9,384)

Net cash provided by financing activities

  651,267   367,570 

Net increase in cash and cash equivalents

  598,319   53,931 

Cash and cash equivalents at beginning of period

  2,211,411   630,600 

Cash and cash equivalents at end of period

 $2,809,730  $684,531 

SUPPLEMENTAL DISCLOSURE

        

Cash paid for:

        

Interest

 $7,487  $18,662 

Income taxes

  4,294   400 

NONCASH TRANSACTIONS

        

Other real estate acquired in settlement of loans

 $364  $287 

Internally financed sale of other real estate owned

  3,779   0 

Dividends declared

  10,829   9,423 

 

  

Nine Months Ended September 30,

 
  

2020

  

2019

 

OPERATING ACTIVITIES

        

Net income

 $118,588  $108,206 

Adjustments to reconcile net income to net cash provided by

        

Deferred tax (benefit) expense

  (4,675)  2,851 

Provision for loan losses

  36,151   16,754 

Depreciation

  2,788   2,774 

Accretion on acquired loans

  (100)  (91)

Amortization of core deposit intangible

  203   203 

Net amortization of debt securities available for sale

  3,834   2,040 

Increase in accrued interest and dividends receivable

  (10,345)  (1,353)

Stock-based compensation expense

  969   781 

(Decrease) increase in accrued interest payable

  (19)  1,095 

Proceeds from sale of mortgage loans held for sale

  194,558   90,188 

Originations of mortgage loans held for sale

  (204,021)  (95,764)

Gain on sale of mortgage loans held for sale

  (5,697)  (2,995)

Net gain on sale of debt securities available for sale

  0   (28)

Net gain on sale of other real estate owned and repossessed assets

  (8)  (6)

Write down of other real estate owned and repossessed assets

  1,836   288 

Operating loss (income) of tax credit partnerships

  4   (16)

Increase in cash surrender value of life insurance contracts

  (4,650)  (2,327)

Net change in other assets, liabilities, and other operating activities

  (11,916)  (19,766)

Net cash provided by operating activities

  117,500   102,834 

INVESTMENT ACTIVITIES

        

Purchase of debt securities available for sale

  (288,453)  (186,240)

Proceeds from maturities, calls and paydowns of debt securities available for sale

  148,206   100,687 

Purchase of debt securities held to maturity

  0   (250)

Investment in tax credit partnership and SBIC

  (636)  0 

Increase in loans

  (1,269,704)  (505,224)

Purchase of premises and equipment

  (1,565)  (1,522)

Purchase of bank owned life insurance contracts

  (40,000)  (20,000)

Proceeds from sale of other real estate owned and repossessed assets

  1,780   727 

Net cash used in investing activities

  (1,450,372)  (611,822)

FINANCING ACTIVITIES

        

Net increase in non-interest-bearing deposits

  1,012,935   121,331 

Net increase in interest-bearing deposits

  1,130,415   687,119 

Net increase in federal funds purchased

  198,601   81,506 

Proceeds from exercise of stock options

  3,172   1,675 

Taxes paid in net settlement of tax obligation upon exercise of stock options

  (627)  (1,742)

Dividends paid on common stock

  (18,822)  (16,038)

Dividends paid on preferred stock

  (31)  (31)

Net cash provided by financing activities

  2,325,643   873,820 

Net increase in cash and cash equivalents

  992,771   364,832 

Cash and cash equivalents at beginning of period

  630,600   681,895 

Cash and cash equivalents at end of period

 $1,623,371  $1,046,727 

SUPPLEMENTAL DISCLOSURE

        

Cash paid for:

        

Interest

 $42,020  $76,653 

Income taxes

  38,593   34,464 

Income tax refund

  (47)  (86)

NONCASH TRANSACTIONS

        

Other real estate acquired in settlement of loans

 $2,406  $1,177 

Dividends declared

  9,422   8,037 
         

See Notes to Consolidated Financial Statements.

        

See Notes to Consolidated Financial Statements.

 

98


 

SERVISFIRST BANCSHARES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2020March 31, 2021

(Unaudited)

 

 

NOTE 1 - GENERAL

 

The accompanying consolidated financial statements in this report have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission, including Regulation S-X and the instructions for Form 10-Q, and have not been audited. These consolidated financial statements do not include all of the information and footnotes required by U.S. generally accepted accounting principles (“U.S. GAAP”) for complete financial statements. In the opinion of management, all adjustments necessary to present fairly the consolidated financial position and the consolidated results of operations for the interim periods have been made. All such adjustments are of a normal recurring nature. The consolidated results of operations are not necessarily indicative of the consolidated results of operations which ServisFirst Bancshares, Inc. (the “Company”) and its consolidated subsidiaries, including ServisFirst Bank (the “Bank”), may achieve for future interim periods or the entire year. For further information, refer to the consolidated financial statements and footnotes included in the Company’s Form 10-K for the year ended December 31, 2019.2020.

 

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

 

Allowance for LoanCredit Losses

 

The Company was prepared to fully adopt Accounting Standards Update (“ASU”) 2016-13,Financial Instruments – Credit Losses (Topic 326) as of January 1, 2020 prior to the COVID-19 outbreak and subsequent passage of the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) was passed on March 27, 2020 whichand provided financial institutions with the option to delay adoption of ASU 2016-13.13 The,Financial Instruments-Credit Losses (Topic326): Measurement of Credit Losses on Financial Instruments (“CECL”). As described below under Recently Adopted Accounting Pronouncements, the Company has decided to delay its adoption of ASU 2016-13, as provided by the CARES Act, until the earlier of the date on which the national emergency concerning COVID-19 terminates or December 31, 2020, with an effective retrospective implementation date of January 1, 2020.

The allowance for loan losses as ofPrior to September 30,January 1, 2020, is determined under the Company’s incurred loss model. Qualitative adjustmentsexcept quarterly periods in 2020 which were made to the amount of the allowance to take into effect management’s estimates of the COVID-19not pandemic’s impact on the local and regional markets in which the Company operates. Further discussion ofrestated, the allowance for loancredit losses is included in Note 5 – Loans.was calculated using an incurred losses methodology.

 

 

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.

 

  

Three Months Ended March 31,

 
  

2021

  

2020

 
  

(In Thousands, Except Shares and Per Share Data)

 

Earnings per common share

        

Weighted average common shares outstanding

  54,050,670   53,704,224 

Net income available to common stockholders

 $51,455  $34,778 

Basic earnings per common share

 $0.95  $0.65 
         

Weighted average common shares outstanding

  54,050,670   53,704,224 

Dilutive effects of assumed conversions and exercise of stock options and warrants

  331,321   463,190 

Weighted average common and dilutive potential common shares outstanding

  54,381,991   54,167,414 

Net income available to common stockholders

 $51,455  $34,778 

Diluted earnings per common share

 $0.95  $0.64 

109


 
  

Three Months Ended September 30,

  

Nine Months Ended September 30,

 
  

2020

  

2019

  

2020

  

2019

 
  

(In Thousands, Except Shares and Per Share Data)

 

Earnings per common share

                

Weighted average common shares outstanding

  53,893,753   53,544,747   53,817,928   53,508,710 

Net income available to common stockholders

 $43,362  $37,563  $118,557  $108,175 

Basic earnings per common share

 $0.80  $0.70  $2.20  $2.02 
                 

Weighted average common shares outstanding

  53,893,753   53,544,747   53,817,928   53,508,710 

Dilutive effects of assumed conversions and exercise of stock options and warrants

  339,212   551,621   380,494   578,700 

Weighted average common and dilutive potential common shares outstanding

  54,232,965   54,096,368   54,198,422   54,087,410 

Net income available to common stockholders

 $43,362  $37,563  $118,557  $108,175 

Diluted earnings per common share

 $0.80  $0.69  $2.19  $2.00 

 

NOTE 4 - SECURITIES

 

The amortized cost and fair value of available-for-sale and held-to-maturity securities at September 30, 2020March 31, 2021 and December 31, 20192020 are summarized as follows:

 

   

Gross

 

Gross

    

Amortized Cost

  

Gross Unrealized Gain

  

Gross Unrealized Loss

  

Allowance For Credit Losses

  

Fair Value

 
 

Amortized

 

Unrealized

 

Unrealized

 

Market

 
 

Cost

  

Gain

  

Loss

  

Value

 

September 30, 2020

 

(In Thousands)

 

Securities Available for Sale

         

U.S. Treasury securities

 $18,990  $436  $0  $19,426 

Government agencies

 15,222  299  0  15,521 

March 31, 2021

 

(In Thousands)

 

Available for sale debt securities

 

U.S. Treasury Securities

 $13,995  $301  $0  $-  $14,296 

Government Agency Securities

 12,020  170  0  -  12,190 

Mortgage-backed securities

 500,251  17,879  (68) 518,062  558,985  13,352  (2,795) -  569,542 

State and municipal securities

 36,922  486  0  37,408  33,408  303  (189) -  33,522 

Corporate debt

  317,887   5,638   (893)  322,632   322,320   10,288   (279)  -   332,329 

Total

 $889,272  $24,738  $(961) $913,049  $940,728  $24,414  $(3,263) $-  $961,879 

Securities Held to Maturity

         

Held to maturity debt securities

 

State and municipal securities

  250   0   0   250  $250  $0  $0  $-  $250 

Total

 $250  $0  $0  $250  $250  $0  $0  $-  $250 
  

December 31, 2019

         

Securities Available for Sale

         

U.S. Treasury securities

 $48,923  $291  $(4) $49,210 

Government agencies

 18,245  143  (2) 18,386 

December 31, 2020

 

Available for sale debt securities

 

U.S. Treasury Securities

 $13,993  $364  $0  $-  $14,357 

Government Agency Securities

 15,228  230  0  -  15,458 

Mortgage-backed securities

 470,513  4,859  (1,318) 474,054  477,407  17,720  (18) -  495,109 

State and municipal securities

 56,951  335  (14) 57,272  37,671  444  0  -  38,115 

Corporate debt

  157,549   3,098   (170)  160,477   316,857   7,296   (504)  -   323,649 

Total

 $752,181  $8,726  $(1,508) $759,399  $861,156  $26,054  $(522) $-  $886,688 

Securities Held to Maturity

         

Held to maturity debt securities

 

State and municipal securities

  250   0   0   250  $250  $0  $0  $-  $250 

Total

 $250  $0  $0  $250  $250  $0  $0  $-  $250 

 

The amortized cost and fair value of debt securities as of September 30, 2020March 31, 2021 and December 31, 20192020 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.  Corporate debt is primarily comprised of subordinated notes payable issued by financial institutions.  Most of these corporate securities have a contractual maturity of ten years but may be called at the end of their fifth year.

 

11

 
  

September 30, 2020

  

December 31, 2019

 
  

Amortized Cost

  

Fair Value

  

Amortized Cost

  

Fair Value

 
  

(In thousands)

 

Debt securities available for sale

                

Due within one year

 $22,531  $22,627  $58,722  $58,975 

Due from one to five years

  78,998   81,105   90,034   91,005 

Due from five to ten years

  191,528   194,527   129,501   131,914 

Due after ten years

  95,964   96,728   3,411   3,451 

Mortgage-backed securities

  500,251   518,062   470,513   474,054 
  $889,272  $913,049  $752,181  $759,399 
                 

Debt securities held to maturity

                

Due from one to five years

 $250  $250  $250  $250 
  $250  $250  $250  $250 
  

March 31, 2021

  

December 31, 2020

 
  

Amortized Cost

  

Fair Value

  

Amortized Cost

  

Fair Value

 
  

(In thousands)

 

Available for sale debt securities

                

Due within one year

 $32,331  $32,623  $30,797  $31,060 

Due from one to five years

  51,309   52,954   59,828   61,481 

Due from five to ten years

  293,965   302,644   288,002   293,886 

Due after ten years

  4,138   4,116   5,122   5,152 

Mortgage-backed securities

  558,985   569,542   477,407   495,109 
  $940,728  $961,879  $861,156  $886,688 
                 

Held to maturity debt securities

                

Due from one to five years

 $250  $250  $250  $250 
  $250  $250  $250  $250 

 

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

 

The carrying value of debtinvestment securities pledged to secure public funds on deposit and for other purposes as required by law was $468.7 million and $477.6 million as of September 30, 2020March 31, 2021 and December 31, 20192020, was $431.0 million and $389.9 million, respectively.

 

10

The following table identifies, as of September 30, 2020March 31, 2021 and December 31, 2019,2020, 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, 2021

                        

Mortgage-backed securities

 $(2,795) $191,402  $0  $0  $(2,795) $191,402 

State and municipal securities

  (189)  5,467   0   0   (189)  5,467 

Corporate debt

  (234)  29,836   (45)  1,990   (279)  31,826 

Total

 $(3,218) $226,705  $(45) $1,990  $(3,263) $228,694 
                         

December 31, 2020

                        

Mortgage-backed securities

 $(18) $3,667  $0  $0  $(18) $3,667 

Corporate debt

  (504)  59,576   0   0   (504)  59,576 

Total

 $(522) $63,243  $0  $0  $(522) $63,243 

At September 30, 2020,March 31, 2021, noneno of the Company’s 641allowance 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 sale debt securities. The issuers of these debt securities continue to make timely principal and interest payments under the contractual terms of the securities. Furthermore, the Company does 12not orintend to sell these debt securities and it is 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)

 

September 30, 2020

                        

U.S. Treasury securities

 $0  $0  $0  $0  $0  $0 

Government agency securities

  0   0   0   0   0   0 

Mortgage-backed securities

  (68)  34,639   0   0   (68)  34,639 

State and municipal securities (1)

  0   0   0   0   0   0 

Corporate debt

  (893)  87,212   0   0   (893)  87,212 

Total

 $(961) $121,851  $0  $0  $(961) $121,851 
                         

December 31, 2019

                        

U.S. Treasury securities

 $(4) $3,012  $0  $0  $(4) $3,012 

Government agency securities

  (2)  266   0   0   (2)  266 

Mortgage-backed securities

  (1,206)  153,330   (112)  24,911   (1,318)  178,241 

State and municipal securities

  (4)  1,900   (10)  2,647   (14)  4,547 

Corporate debt

  (170)  19,981   0   0   (170)  19,981 

Total

 $(1,386) $178,489  $(122) $27,558  $(1,508) $206,047 

likely than not that the Company will not be required to sell the debt securities before recovery of their amortized cost, which may be at maturity. The unrealized losses are due to increases in market interest rates over the yields available at the time the debt securities were purchased.

 

NOTE 5 LOANS

 

The following table detailsloan portfolio is classified based on the Company’s loans at September 30, 2020 underlying collateral utilized to secure each loan for financial reporting purposes. This classification is consistent with the Quarterly Report of Condition and December 31, 2019:Income filed by ServisFirst Bank with the Federal Deposit Insurance Corporation (FDIC).

 

  

September 30,

  

December 31,

 
  

2020

  

2019

 
  

(Dollars In Thousands)

 

Commercial, financial and agricultural

 $3,466,189  $2,696,210 

Real estate - construction

  530,919   521,392 

Real estate - mortgage:

        

Owner-occupied commercial

  1,725,222   1,587,478 

1-4 family mortgage

  671,841   644,188 

Other mortgage

  2,056,549   1,747,394 

Subtotal: Real estate - mortgage

  4,453,612   3,979,060 

Consumer

  57,834   64,789 

Total Loans

  8,508,554   7,261,451 

Less: Allowance for loan losses

  (92,440)  (76,584)

Net Loans

 $
 
8,416,114
 
  $7,184,867 

Commercial, financial and agricultural

  40.74

%

  37.13

%

Real estate - construction

  6.24

%

  7.18

%

Real estate - mortgage:

        

Owner-occupied commercial

  20.27

%

  21.86

%

1-4 family mortgage

  7.90

%

  8.87

%

Other mortgage

  24.17

%

  24.07

%

Subtotal: Real estate - mortgage

  52.34

%

  54.80

%

Consumer

  0.68

%

  0.89

%

Total Loans

  100.00

%

  100.00

%

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 – 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.

121


-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.

In light of the U.S. and global economic crisis brought about by the COVID-19 pandemic, the Company has prioritized assisting its clients through this troubled time.  The CARESCoronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) provides for Paycheck Protection PlanProgram (“PPP”) loans to be made by banks to employers with less than 500 employees if they continue to employ their existing workers.  As of September 30, 2020,March 31, 2021, the Company has funded approximately 4,9007,100 loans for a total amount of $1.05$1.47 billion for clients under the PPP since April 2020, and management expects to continue to participate in any extensions of the PPP by the Treasury Department. At September 30,March 31, 2021 and December 31, 2020, unaccreted deferred loan origination fees, net of costs, related to PPP loans totaled $25.3 million.$20.4 million and $17.8 million, respectively. PPP loan origination fees recorded as an adjustment to loan yieldinterest income for the three and ninemonths ended September 30,March 31, 2021 and 2020 were $9.1 million and $0, respectively. PPP loans outstanding totaled $967.7 million and $900.5 million at March 31, 2021 and December 31, 2020, were $4.0 million and $6.6 million, respectively. These PPP loans are included within the Commercial, financial and agricultural loan category in the table above.below. No allowance for credit losses has been recorded for PPP loans as they are fully guaranteed by the SBA (“Small Business Administration”).

The following table details the Company’s loans at March 31, 2021 and December 31, 2020:

11

 
  

March 31,

  

December 31,

 
  

2021

  

2020

 
  

(Dollars In Thousands)

 

Commercial, financial and agricultural

 $3,323,093  $3,295,900 

Real estate - construction

  666,592   593,614 

Real estate - mortgage:

        

Owner-occupied commercial

  1,698,695   1,693,428 

1-4 family mortgage

  685,840   711,692 

Other mortgage

  2,068,560   2,106,184 

Subtotal: Real estate - mortgage

  4,453,095   4,511,304 

Consumer

  62,200   64,870 

Total Loans

  8,504,980   8,465,688 

Less: Allowance for credit losses

  (94,906)  (87,942)

Net Loans

 $8,410,074  $8,377,746 
         
         

Commercial, financial and agricultural

  39.07

%

  38.93

%

Real estate - construction

  7.84

%

  7.01

%

Real estate - mortgage:

        

Owner-occupied commercial

  19.97

%

  20.00

%

1-4 family mortgage

  8.07

%

  8.41

%

Other mortgage

  24.32

%

  24.88

%

Subtotal: Real estate - mortgage

  52.36

%

  53.29

%

Consumer

  0.73

%

  0.77

%

Total Loans

  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 loancredit loss portfolio segments and classes. These categories are utilized to develop the associated allowance for loancredit 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 borrowerobligor (or guarantors,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 currentlypresently 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.

 

12

LoansThe table below presents loan balances classified by credit quality indicator, loan type and based on year of origination as of September 30, 2020 and DecemberMarch 31, 2019 2021:were as follows:

 

   

Special

                    

Revolving

   

September 30, 2020

 

Pass

  

Mention

  

Substandard

  

Doubtful

  

Total

 
 

March 31, 2021

 

2021

  

2020

  

2019

  

2018

  

2017

  

Prior

  

Loans

  

Total

 
 

(In Thousands)

  

(In Thousands)

 

Commercial, financial and agricultural

 $3,374,467  $17,955  $73,767  $0  $3,466,189  

Pass

 $451,136  $942,305  $305,491  $202,837  $153,959  $196,657  $993,613  $3,245,998 

Special Mention

 557  1,430  227  9  1,386  384  10,814  14,807 

Substandard

 0  559  10,570  567  3,741  2,570  44,281  62,288 

Doubtful

  0   0   0   0   0   0   0   0 

Total Commercial, financial and agricultural

 $451,693  $944,294  $316,288  $203,413  $159,086  $199,611  $1,048,708  $3,323,093 

Real estate - construction

 527,231  3,100  588  0  530,919  

Real estate - mortgage:

           

Pass

 $40,168  $250,260  $238,486  $54,129  $15,879  $19,009  $48,426  $666,357 

Special Mention

 0  0  0  0  0  0  0  0 

Substandard

 0  0  0  0  0  235  0  235 

Doubtful

  0   0   0   0   0   0   0   0 

Total Real estate - construction

 $40,168  $250,260  $238,486  $54,129  $15,879  $19,244  $48,426  $666,592 

Owner-occupied commercial

 1,708,113  14,280  2,829  0  1,725,222  

Pass

 $51,008  $364,982  $263,789  $207,599  $199,276  $551,086  $55,790  $1,693,530 

Special Mention

 0  0  0  0  289  1,941  200  2,430 

Substandard

 0  0  0  0  780  1,716  239  2,735 

Doubtful

  0   0   0   0   0   0   0   0 

Total Owner-occupied commercial

 $51,008  $364,982  $263,789  $207,599  $200,345  $554,743  $56,229  $1,698,695 

1-4 family mortgage

 666,463  2,065  3,313  0  671,841  

Pass

 $34,862  $170,574  $99,727  $65,064  $50,130  $61,073  $199,658  $681,088 

Special Mention

 0  680  433  129  104  481  1,111  2,938 

Substandard

 0  150  367  0  233  217  847  1,814 

Doubtful

  0   0   0   0   0   0   0   0 

Total 1-4 family mortgage

 $34,862  $171,404  $100,527  $65,193  $50,467  $61,771  $201,616  $685,840 

Other mortgage

  2,031,328   12,006   13,215   0   2,056,549  

Total real estate mortgage

 4,405,904  28,351  19,357  0  4,453,612 

Pass

 $90,376  $458,320  $442,499  $216,211  $333,266  $431,485  $71,610  $2,043,767 

Special Mention

 0  0  0  0  2,775  8,989  0  11,764 

Substandard

 0  0  0  4,567  8,462  0  0  13,029 

Doubtful

  0   0   0   0   0   0   0   0 

Total Other mortgage

 $90,376  $458,320  $442,499  $220,778  $344,503  $440,474  $71,610  $2,068,560 

Consumer

  57,785   49   0   0   57,834  

Total

 $8,365,387  $49,455  $93,712  $0  $8,508,554 

Pass

 $3,588  $16,111  $3,990  $1,332  $1,311  $4,373  $31,451  $62,156 

Special Mention

 0  0  0  13  0  31  0  44 

Substandard

 0  0  0  0  0  0  0  0 

Doubtful

  0   0   0   0   0   0   0   0 

Total Consumer

 $3,588  $16,111  $3,990  $1,345  $1,311  $4,404  $31,451  $62,200 

Total Loans

 

Pass

 $671,138  $2,202,552  $1,353,982  $747,172  $753,821  $1,263,683  $1,400,548  $8,392,896 

Special Mention

 557  2,110  660  151  4,554  11,826  12,125  31,983 

Substandard

 0  709  10,937  5,134  13,216  4,738  45,367  80,101 

Doubtful

  0   0   0   0   0   0   0   0 

Total Loans

 $671,695  $2,205,371  $1,365,579  $752,457  $771,591  $1,280,247  $1,458,040  $8,504,980 

 

13

 
      

Special

             

December 31, 2019

 

Pass

  

Mention

  

Substandard

  

Doubtful

  

Total

 
                     
  

(In Thousands)

 

Commercial, financial and agricultural

 $2,629,487  $46,176  $20,547  $0  $2,696,210 

Real estate - construction

  512,373   4,731   4,288   0   521,392 

Real estate - mortgage:

                    

Owner-occupied commercial

  1,555,283   18,240   13,955   0   1,587,478 

1-4 family mortgage

  639,959   2,787   1,442   0   644,188 

Other mortgage

  1,735,869   10,018   1,507   0   1,747,394 

Total real estate mortgage

  3,931,111   31,045   16,904   0   3,979,060 

Consumer

  64,789   0   0   0   64,789 

Total

 $7,137,760  $81,952  $41,739  $0  $7,261,451 

Loans by credit quality indicator, loan type and based on year of origination as of December 31, 2020 were as follows:

 

                          

Revolving

     

December 31, 2020

 

2020

  

2019

  

2018

  

2017

  

2016

  

Prior

  

Loans

  

Total

 
  

(In Thousands)

 

Commercial, financial and agricultural

                                

Pass

 $1,260,341  $332,690  $229,838  $169,616  $89,893  $137,021  $988,093  $3,207,492 

Special Mention

  2,551   1,404   10   253   163   281   14,948   19,610 

Substandard

  569   10,639   617   5,447   963   2,038   48,525   68,798 

Doubtful

  0   0   0   0   0   0   0   0 

Total Commercial, financial and agricultural

 $1,263,461  $344,733  $230,465  $175,316  $91,019  $139,340  $1,051,566  $3,295,900 

Real estate - construction

                                

Pass

 $230,931  $222,357  $53,981  $16,361  $7,677  $13,816  $48,256  $593,379 

Special Mention

  0   0   0   0   0   0   0   0 

Substandard

  0   0   0   0   0   235   0   235 

Doubtful

  0   0   0   0   0   0   0   0 

Total Real estate - construction

 $230,931  $222,357  $53,981  $16,361  $7,677  $14,051  $48,256  $593,614 

Owner-occupied commercial

                                

Pass

 $351,808  $271,645  $221,513  $198,935  $158,531  $417,743  $61,119  $1,681,294 

Special Mention

  0   0   0   6,524   543   1,873   200   9,140 

Substandard

  0   0   12   780   0   1,962   240   2,994 

Doubtful

  0   0   0   0   0   0   0   0 

Total Owner-occupied commercial

 $351,808  $271,645  $221,525  $206,239  $159,074  $421,578  $61,559  $1,693,428 

1-4 family mortgage

                                

Pass

 $179,314  $111,016  $70,381  $60,774  $27,985  $44,111  $212,616  $706,197 

Special Mention

  508   0   0   105   481   0   1,112   2,206 

Substandard

  350   126   0   235   218   0   2,360   3,289 

Doubtful

  0   0   0   0   0   0   0   0 

Total 1-4 family mortgage

 $180,172  $111,142  $70,381  $61,114  $28,684  $44,111  $216,088  $711,692 

Other mortgage

                                

Pass

 $470,086  $470,092  $250,945  $368,283  $180,244  $272,722  $68,721  $2,081,093 

Special Mention

  0   0   0   2,793   541   8,566   0   11,900 

Substandard

  0   50   4,589   8,552   0   0   0   13,191 

Doubtful

  0   0   0   0   0   0   0   0 

Total Other mortgage

 $470,086  $470,142  $255,534  $379,628  $180,785  $281,288  $68,721  $2,106,184 

Consumer

                                

Pass

 $20,410  $4,421  $1,551  $1,671  $1,031  $3,615  $32,125  $64,824 

Special Mention

  0   0   15   0   31   0   0   46 

Substandard

  0   0   0   0   0   0   0   0 

Doubtful

  0   0   0   0   0   0   0   0 

Total Consumer

 $20,410  $4,421  $1,566  $1,671  $1,062  $3,615  $32,125  $64,870 

Total Loans

                                

Pass

 $2,512,890  $1,412,221  $828,209  $815,640  $465,361  $889,028  $1,410,930  $8,334,279 

Special Mention

  3,059   1,404   25   9,675   1,759   10,720   16,260   42,902 

Substandard

  919   10,815   5,218   15,014   1,181   4,235   51,125   88,507 

Doubtful

  0   0   0   0   0   0   0   0 

Total Loans

 $2,516,868  $1,424,440  $833,452  $840,329  $468,301  $903,983  $1,478,315  $8,465,688 

14

Loans by performance status as of September 30, 2020March 31, 2021 and December 31, 20192020 were as follows:

 

September 30, 2020

 

Performing

  

Nonperforming

  

Total

 
 

March 31, 2021

 

Performing

  

Nonperforming

  

Total

 
 

(In Thousands)

  

(In Thousands)

 

Commercial, financial and agricultural

 $3,447,490  $18,699  $3,466,189  $3,313,167  $9,926  $3,323,093 

Real estate - construction

 530,332  587  530,919  666,358  234  666,592 

Real estate - mortgage:

        

Owner-occupied commercial

 1,723,384  1,838  1,725,222  1,696,686  2,009  1,698,695 

1-4 family mortgage

 671,227  614  671,841  684,917  923  685,840 

Other mortgage

  2,051,722   4,827   2,056,549   2,063,799   4,761   2,068,560 

Total real estate mortgage

 4,446,333  7,279  4,453,612 

Total real estate - mortgage

 4,445,402  7,693  4,453,095 

Consumer

  57,826   8   57,834   62,161   39   62,200 

Total

 $8,481,981  $26,573  $8,508,554  $8,487,088  $17,892  $8,504,980 

 

December 31, 2019

 

Performing

  

Nonperforming

  

Total

 
 

December 31, 2020

 

Performing

  

Nonperforming

  

Total

 
 

(In Thousands)

  

(In Thousands)

 

Commercial, financial and agricultural

 $2,681,280  $14,930  $2,696,210  $3,284,180  $11,720  $3,295,900 

Real estate - construction

 519,803  1,589  521,392  593,380  234  593,614 

Real estate - mortgage:

        

Owner-occupied commercial

 1,576,652  10,826  1,587,478  1,692,169  1,259  1,693,428 

1-4 family mortgage

 641,875  2,313  644,188  710,817  875  711,692 

Other mortgage

  1,740,963   6,431   1,747,394   2,101,379   4,805   2,106,184 

Total real estate mortgage

 3,959,490  19,570  3,979,060 

Total real estate - mortgage

 4,504,365  6,939  4,511,304 

Consumer

  64,766   23   64,789   64,809   61   64,870 

Total

 $7,225,339  $36,112  $7,261,451  $8,446,734  $18,954  $8,465,688 

 

1415

 

Loans by past due status as of September 30, 2020March 31, 2021 and December 31, 20192020 were as follows:

 

September 30, 2020

 

Past Due Status (Accruing Loans)

       
       

Total Past

       

March 31, 2021

 

Past Due Status (Accruing Loans)

          
 

30-59 Days

  

60-89 Days

  

90+ Days

  

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

 $721  $3,102  $63  $3,886  $18,636  $3,443,667  $3,466,189  $119  $0  $4  $123  $9,922  $3,313,048  $3,323,093  $6,946 

Real estate - construction

 0  0  0  0  587  530,332  530,919  0  0  0  0  234  666,358  666,592  0 

Real estate - mortgage:

                

Owner-occupied commercial

 0  0  0  0  1,838  1,723,384  1,725,222  0  0  0  0  2,009  1,696,686  1,698,695  1,229 

1-4 family mortgage

 211  320  0  531  614  670,696  671,841  782  178  0  960  923  683,957  685,840  327 

Other mortgage

  0   0   4,827   4,827   0   2,051,722   2,056,549   15   0   4,761   4,776   0   2,063,784   2,068,560   0 

Total real estate - mortgage

 211  320  4,827  5,358  2,452  4,445,802  4,453,612  797  178  4,761  5,736  2,932  4,444,427  4,453,095  1,556 

Consumer

  36   6   8   50   0   57,784   57,834   89   10   39   138   0   62,062   62,200   0 

Total

 $968  $3,428  $4,898  $9,294  $21,675  $8,477,585  $8,508,554  $1,005  $188  $4,804  $5,997  $13,088  $8,485,895  $8,504,980  $8,502 

 

December 31, 2019

 

Past Due Status (Accruing Loans)

       
       

Total Past

       

December 31, 2020

 

Past Due Status (Accruing Loans)

          
 

30-59 Days

  

60-89 Days

  

90+ Days

  

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

 $3,135  $344  $201  $3,680  $14,729  $2,677,801  $2,696,210  $92  $1,738  $11  $1,841  $11,709  $3,282,350  $3,295,900  $5,101 

Real estate - construction

 830  0  0  830  1,589  518,973  521,392  0  0  0  0  234  593,380  593,614  0 

Real estate - mortgage:

                

Owner-occupied commercial

 917  7,242  0  8,159  10,826  1,568,493  1,587,478  0  995  0  995  1,259  1,691,174  1,693,428  467 

1-4 family mortgage

 1,638  567  873  3,078  1,440  639,670  644,188  61  1,073  104  1,238  771  709,683  711,692  512 

Other mortgage

  0   0   4,924   4,924   1,507   1,740,963   1,747,394   18   0   4,805   4,823   0   2,101,361   2,106,184   0 

Total real estate - mortgage

 2,555  7,809  5,797  16,161  13,773  3,949,126  3,979,060  79  2,068  4,909  7,056  2,030  4,502,218  4,511,304  979 

Consumer

  35   25   23   83   0   64,706   64,789   64   13   61   138   0   64,732   64,870   0 

Total

 $6,555  $8,178  $6,021  $20,754  $30,091  $7,210,606  $7,261,451  $235  $3,819  $4,981  $9,035  $13,973  $8,442,680  $8,465,688  $6,080 

 

The allowanceAs described in Note 9 - Recently Adopted Accounting Pronouncements, the Company adopted ASU 2016-13 on January 1, 2020, which introduced the CECL methodology for loanestimating all expected losses (“ALLL”) is maintained atover the life of a level which, in management’s judgment, is adequate to absorb credit losses inherent infinancial asset. Under 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 reviewCECL methodology, the allowance for losses on loans. Such agencies may require the Company to recognize adjustments to the allowance based on their judgments about information available to them at the time of their examination.

The methodology utilized for the calculation of the allowance for loancredit losses is divided intomeasured on a collective basis for pools of loans with similar risk characteristics. For loans that do fournot 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 ofshare similar risk characteristics with the allowance for loan loss methodology is listed below.

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

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

15

External Qualitative Factors. The determination of the portion of the allowance for loan losses relating to external qualitative factors is based on consideration of the following factors: gross domestic product growth rate, changes in prime rate, delinquency trends, peer delinquency trends, year over year 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. An additional qualitative factor was incorporated beginning in the second quarter of 2020 due to COVID-19 and its effect on overall macroeconomic conditions.  This specific qualitative factor totaled $14.9 million at June 30, 2020.  This COVID-19 qualitative factor totaled $11.3 million at September 30, 2020, a decrease of $3.6 million from June 30, 2020, primarily due to improvement in the national unemployment rate at the end of the reasonable and supportable forecast period losses are reverted to long term historical averages. The estimated loan losses for all loan segments are adjusted for changes in qualitative factors thirdnot quarter of 2020.inherently considered in the quantitative analyses.

 

Internal Qualitative Factors. The determinationCompany uses the discounted cash flow (“DCF”) method to estimate ACL for all loan pools except for commercial revolving lines of credit and credit cards. For all 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 portionloss drivers are used across the loan segments. At March 31, 2021 and December 31, 2020, 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 remain above pre-pandemic levels over the allowanceforecast period with an improved national GDP growth rate as the economy comes back on-line over the next year.

The Company uses a loss-rate method to estimate expected credit losses for loan losses relating to internal qualitative factors is based onits 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 considerationpool average life and then using historical correlations of criteria which includes the following: number of extensionsdefault and deferrals, single pay and interest only loans, current financial information, credit concentrations and risk grade accuracy. A self-assessment for each of the criteria is made with a consistent weighted methodology usedloss experience over time to calculate the amountlifetime 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 allowance requiredthe 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 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 qualitative factors.and peer historical losses.

 

DuringEach loan pool is adjusted for qualitative factors not inherently considered in the third quarter of 2019,quantitative analyses. The qualitative adjustments either increase or decrease the quantitative model estimation. The Company recorded a $7.4 million payment resulting fromconsiders factors that are relevant within the termination of a Loan Guarantee Program (“LGP”) operated byqualitative framework which include the State of Alabama. The payment was recorded as an increase to the allowance for loan losses specifically related to loans formerly enrolled in this program, in accordance with the Company’s established ALLL review and evaluation criteria.

The following table presents an analysis of the allowance for loan losses by portfolio segment andfollowing: lending policy, changes in the allowance fornature 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 losses for the threereview system and nine months ended September 30, 2020 and September 30, 2019. The total allowance for loan losses is disaggregated into those amounts associated with loans individually evaluated and those associated with loans collectively evaluated.other economic conditions.

  

Commercial,

                 
  

financial and

  

Real estate -

  

Real estate -

         
  

agricultural

  

construction

  

mortgage

  

Consumer

  

Total

 
                     
  

(In Thousands)

 
  

Three Months Ended September 30, 2020

 

Allowance for loan losses:

                    

Balance at June 30, 2020

 $47,986  $4,531  $38,399  $591  $91,507 

Charge-offs

  (11,146)  0   (200)  (44)  (11,390)

Recoveries

  12   0   12   15   39 

Provision

  12,421   (441)  304   0   12,284 

Balance at September 30, 2020

 $49,273  $4,090  $38,515  $562  $92,440 
                     
  

Three Months Ended September 30, 2019

 

Allowance for loan losses:

                    

Balance at June, 2019

 $38,709  $3,419  $28,783  $475  $71,386 

Charge-offs

  (3,626)  0   (4,974)  (172)  (8,772)

Recoveries

  126   1   0   60   187 

Allocation from LGP

  4,905   115   2,386   0   7,406 

Provision

  5,108   (343)  2,069   151   6,985 

Balance at September 30, 2019

 $45,222  $3,192  $28,264  $514  $77,192 
                     
  

Nine Months Ended September 30, 2020

 

Balance at December 31, 2019

                    

Allowance for loan losses:

 $43,666  $2,768  $29,653  $497  $76,584 

Charge-offs

  (15,144)  (830)  (4,397)  (165)  (20,536)

Recoveries

  158   2   26   55   241 

Provision

  20,593   2,150   13,233   175   36,151 

Balance at September 30, 2020

 $49,273  $4,090  $38,515  $562  $92,440 
                     
  

Nine Months Ended September 30, 2019

 

Allowance for loan losses:

                    

Balance at December 31, 2018

 $39,016  $3,522  $25,508  $554  $68,600 

Charge-offs

  (10,273)  0   (5,193)  (453)  (15,919)

Recoveries

  255   2   11   83   351 

Allocation from LGP

  4,905   115   2,386   0   7,406 

Provision

  11,319   (447)  5,552   330   16,754 

Balance at September 30, 2019

 $45,222  $3,192  $28,264  $514  $77,192 
                     
  

As of September 30, 2020

 

Allowance for loan losses:

                    

Individually Evaluated for Impairment

 $9,204  $201  $195  $0  $9,600 

Collectively Evaluated for Impairment

  40,069   3,889   38,320   562   82,840 
                     

Loans:

                    

Ending Balance

 $3,466,189  $530,919  $4,453,612  $57,834  $8,508,554 

Individually Evaluated for Impairment

  73,800   587   19,376   0   93,763 

Collectively Evaluated for Impairment

  3,392,389   530,332   4,434,236   57,834   8,414,791 
                     
  

As of December 31, 2019

 

Allowance for loan losses:

                    

Individually Evaluated for Impairment

 $6,085  $86  $3,633  $0  $9,804 

Collectively Evaluated for Impairment

  37,581   2,682   26,020   497   66,780 
                     

Loans:

                    

Ending Balance

 $2,696,210  $521,392  $3,979,060  $64,789  $7,261,451 

Individually Evaluated for Impairment

  20,843   4,320   17,985   0   43,148 

Collectively Evaluated for Impairment

  2,675,367   517,072   3,961,075   64,789   7,218,303 

 

16

 

Inherent risks in the loan portfolio will differ based on type of loan. Specific risk characteristics by loan portfolio segment are listed below:

Commercial and industrialloans 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 specialization, mobility and general collectability in a default situation. These commercial loans may be subject to many different types of risks, including fraud, bankruptcy, economic downturn, deteriorated or non-existent collateral, and changes in interest rates.

Real estate constructionloans include risks associated with the borrower’s credit-worthiness, contractor’s qualifications, borrower and contractor performance, and the overall risk and complexity of the 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 local economies. During times of economic stress, there is usually some level of job loss both nationally and locally, which directly affects the ability of the consumer to repay debt.

The following table presents changes in the allowance for credit losses, and allowance for loan losses, segregated by loan type, for the three months ended March 31, 2021 and March 31, 2020.

  

Commercial,

                 
  

financial and

  

Real estate -

  

Real estate -

         
  

agricultural

  

construction

  

mortgage

  

Consumer

  

Total

 
  

(In Thousands)

 
  

Three Months Ended March 31, 2021

 

Allowance for credit losses:

                    

Balance at December 31, 2020

 $36,370  $16,057  $33,722  $1,793  $87,942 

Charge-offs

  (477)  0   (12)  (87)  (576)

Recoveries

  26   50   1   12   89 

Provision

  2,313   3,284   1,896   (42)  7,451 

Balance at March 31, 2021

 $38,232  $19,391  $35,607  $1,676  $94,906 

  

Three Months Ended March 31, 2020

 

Allowance for loan losses:

                    

Balance at December 31, 2019

 $43,666  $2,768  $29,653  $497  $76,584 

Charge-offs

  (2,640)  (454)  (1,678)  (58)  (4,830)

Recoveries

  62   1   1   12   76 

Provision

  7,692   1,442   4,384   66   13,584 

Balance at March 31, 2020

 $48,780  $3,757  $32,360  $517  $85,414 

The following table details of the Company’s impairedallowance for loan losses and recorded investment in loans by impairment evaluation method as of September 30,March 31, 2020, andas determined in accordance with ASC December 31, 2019, respectively. Loans which have been fully charged off do not310 appear inprior to the tables.adoption of ASU 2016-13:

 

              

For the three months

  

For the nine months

 
              

ended September 30,

  

ended September 30,

 
  

September 30, 2020

  

2020

  

2020

 
                  

Interest

      

Interest

 
      

Unpaid

      

Average

  

Income

  

Average

  

Income

 
  

Recorded

  

Principal

  

Related

  

Recorded

  

Recognized

  

Recorded

  

Recognized

 
  

Investment

  

Balance

  

Allowance

  

Investment

  

in Period

  

Investment

  

in Period

 
                             
  

(In Thousands)

 

With no allowance recorded:

                            

Commercial, financial and agricultural

 $50,898  $60,687  $-  $61,374  $442  $61,967  $1,605 

Real estate - construction

  0   0   -   0   0   0   0 

Real estate - mortgage:

                            

Owner-occupied commercial

  1,581   1,581   -   1,582   12   1,600   52 

1-4 family mortgage

  2,899   2,899   -   2,882   26   2,814   78 

Other mortgage

  12,200   12,200   -   12,068   122   12,211   396 

Total real estate - mortgage

  16,680   16,680   -   16,532   160   16,625   526 

Consumer

  0   0   -   0   0   0   0 

Total with no allowance recorded

  67,578   77,367   -   77,906   602   78,592   2,131 
                             

With an allowance recorded:

                            

Commercial, financial and agricultural

  22,902   23,169   9,204   21,648   102   22,237   535 

Real estate - construction

  587   637   201   954   0   1,012   0 

Real estate - mortgage:

                            

Owner-occupied commercial

  1,252   1,392   146   4,563   3   3,915   97 

1-4 family mortgage

  412   412   49   398   12   406   12 

Other mortgage

  1,032   1,032   0   1,022   11   1,077   35 

Total real estate - mortgage

  2,696   2,836   195   5,983   26   5,398   144 

Consumer

  0   0   0   0   0   0   0 

Total with allowance recorded

  26,185   26,642   9,600   28,585   128   28,647   679 
                             

Total Impaired Loans:

                            

Commercial, financial and agricultural

  73,800   83,856   9,204   83,022   544   84,204   2,140 

Real estate - construction

  587   637   201   954   0   1,012   0 

Real estate - mortgage:

                            

Owner-occupied commercial

  2,833   2,973   146   6,145   15   5,515   149 

1-4 family mortgage

  3,311   3,311   49   3,280   38   3,220   90 

Other mortgage

  13,232   13,232   0   13,090   133   13,288   431 

Total real estate - mortgage

  19,376   19,516   195   22,515   186   22,023   670 

Consumer

  0   0   0   0   0   0   0 

Total impaired loans

 $93,763  $104,009  $9,600  $106,491  $730  $107,239  $2,810 
  

Commercial,

                 
  

financial and

  

Real estate -

  

Real estate -

         
  

agricultural

  

construction

  

mortgage

  

Consumer

  

Total

 
  

(In Thousands)

 
                     

Allowance for loan losses:

                    

Individually Evaluated for Impairment

 $8,840  $351  $931  $0  $10,122 

Collectively Evaluated for Impairment

  39,940   3,406   31,429   517   75,292 
                     

Loans:

                    

Ending Balance

 $2,771,307  $548,578  $4,188,539  $60,412  $7,568,836 

Individually Evaluated for Impairment

  44,868   1,834   13,815   9   60,526 

Collectively Evaluated for Impairment

  2,726,439   546,744   4,174,724   60,403   7,508,310 

 

17

 

December 31, 2019

 
              

For the twelve months

 
              

ended December 31, 2019

 
      

Unpaid

      

Average

  

Interest Income

 
  

Recorded

  

Principal

  

Related

  

Recorded

  

Recognized in

 
  

Investment

  

Balance

  

Allowance

  

Investment

  

Period

 
                     
  

(In Thousands)

 

With no allowance recorded:

                    

Commercial, financial and agricultural

 $9,015  $10,563  $-  $11,284  $562 

Real estate - construction

  2,731   2,735   -   2,063   126 

Real estate - mortgage:

                    

Owner-occupied commercial

  7,150   7,246   -   7,548   618 

1-4 family mortgage

  287   287   -   289   2 

Other mortgage

  0   0   -   0   0 

Total real estate - mortgage

  7,437   7,533   -   7,837   620 

Consumer

  0   0   -   0   0 

Total with no allowance recorded

  19,183   20,831   -   21,184   1,308 
                     

With an allowance recorded:

                    

Commercial, financial and agricultural

  11,828   19,307   6,085   19,714   395 

Real estate - construction

  1,589   1,589   86   1,614   27 

Real estate - mortgage:

                    

Owner-occupied commercial

  7,888   11,028   2,456   13,627   301 

1-4 family mortgage

  1,153   1,153   176   1,157   1 

Other mortgage

  1,507   1,507   1,001   1,468   21 

Total real estate - mortgage

  10,548   13,688   3,633   16,252   323 

Consumer

  0   0   0   0   0 

Total with allowance recorded

  23,965   34,584   9,804   37,580   745 
                     

Total Impaired Loans:

                    

Commercial, financial and agricultural

  20,843   29,870   6,085   30,998   957 

Real estate - construction

  4,320   4,324   86   3,677   153 

Real estate - mortgage:

                    

Owner-occupied commercial

  15,038   18,274   2,456   21,175   919 

1-4 family mortgage

  1,440   1,440   176   1,446   3 

Other mortgage

  1,507   1,507   1,001   1,468   21 

Total real estate - mortgage

  17,985   21,221   3,633   24,089   943 

Consumer

  0   0   0   0   0 

Total impaired loans

 $43,148  $55,415  $9,804  $58,764  $2,053 

We maintain an allowance for credit losses on unfunded commercial lending commitments and letters of credit to provide for the risk of loss inherent in these arrangements. The allowance is computed using a methodology similar to that used to determine the allowance for credit losses for loans, modified to take into account the probability of a drawdown on the commitment. The allowance for credit losses on unfunded loan commitments is classified as a liability account on the balance sheet within other liabilities, while the corresponding provision for these credit losses is recorded as a component of other expense. The allowance for credit losses on unfunded commitments was $2.8 million at March 31, 2021 and $2.2 million at December 31, 2020. The provision expense for unfunded commitments for the three months ended March 31, 2021 and March 31, 2020 was $600,000 and $0, respectively. Prior to January 1, 2020, except quarterly periods in 2020 which were not restated, the allowance for losses on unfunded loan commitments was calculated using an incurred losses methodology.

 

Loans that 18no


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, 2021

 

Real Estate

  

Receivable

  

Equipment

  

Other

  

Total

  

Allocation

 
  

(In Thousands)

 

Commercial, financial and agricultural

 $13,987  $24,957  $17,742  $5,603  $62,289  $8,675 

Real estate - construction

  235   0   0   0   235   1 

Real estate - mortgage:

                        

Owner-occupied commercial

  2,007   729   0   0   2,736   497 

1-4 family mortgage

  1,738   0   0   25   1,763   0 

Other mortgage

  13,079   0   0   0   13,079   0 

Total real estate - mortgage

  16,824   729   0   25   17,578   497 

Consumer

  0   0   0   0   0   0 

Total

 $31,046  $25,686  $17,742  $5,628  $80,102  $9,173 

      

Accounts

              

ACL

 

December 31, 2020

 

Real Estate

  

Receivable

  

Equipment

  

Other

  

Total

  

Allocation

 
  

(In Thousands)

 

Commercial, financial and agricultural

 $19,373  $27,952  $16,877  $4,594  $68,796  $7,142 

Real estate - construction

  235   0   0   0   235   1 

Real estate - mortgage:

                        

Owner-occupied commercial

  2,012   971   0   12   2,995   499 

1-4 family mortgage

  3,264   0   0   24   3,288   48 

Other mortgage

  13,191   0   0   0   13,191   0 

Total real estate - mortgage

  18,467   971   0   36   19,474   547 

Consumer

  0   0   0   0   0   0 

Total

 $38,075  $28,923  $16,877  $4,630  $88,505  $7,690 

On March 22, 2020, the 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 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 is offering 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. As of September 30, 2020,March 31, 2021, there are 42were 29 loans outstanding totaling $28.2$6.2 million that have payment deferrals in connection with the COVID-19 relief provided by the CARES Act. OfAll of these 42 paymentremaining deferrals 9 were principal only deferrals totaling $5.1 million, 4 were interest only deferrals totaling $3.2 million and 29 were principal and interest deferrals totaling $19.9 million.deferrals. The CARES Act precluded all of the ServisFirst COVID-19 loan modifications from being classified as a TDR as of September 30, 2020.March 31, 2021.

 

18

Troubled Debt Restructurings (“TDR”) at September 30, 2020,March 31, 2021, December 31, 20192020 and September 30, 2019March 31, 2020 totaled $2.7$3.5 million, $3.3$1.5 million and $11.2$2.4 million, respectively. The portion of those TDRs accruing interest at September 30, 2020,March 31, 2021, December 31, 20192020 and September 30, 2019March 31, 2020 totaled $1.8 million, $625,000$794,000, $818,000 and $3.5 million,$975,000, respectively. AtThe following tables present loans modified in a TDR during the periods ended September 30,March 31, 2021 and March 31, 2020 the Company had a related allowance for loan losses of $534,000 allocated to these TDRs, compared to $929,000 at December 31, 2019 and $1.8 million at September 30, 2019. TDR activity by portfolio segment forand the three and nine months ended September 30, 2020 and September 30, 2019 is presented in the table below.financial impact of those modifications. The tables include modifications made to new TDRs, as well as renewals of existing TDRs.

 

 

Three Months Ended September 30, 2020

 

Nine Months Ended September 30, 2020

 

Three Months Ended March 31, 2021

 
   

Pre-

 

Post-

   

Pre-

 

Post-

   

Pre-

 

Post-

 
   

Modification

 

Modification

   

Modification

 

Modification

   

Modification

 

Modification

 
   

Outstanding

 

Outstanding

   

Outstanding

 

Outstanding

   

Outstanding

 

Outstanding

 
 

Number of

 

Recorded

 

Recorded

 

Number of

 

Recorded

 

Recorded

 

Number of

 

Recorded

 

Recorded

 
 

Contracts

 

Investment

 

Investment

 

Contracts

 

Investment

 

Investment

 

Contracts

  

Investment

  

Investment

 
 

(In Thousands)

 

(In Thousands)

 

Troubled Debt Restructurings

              

Commercial, financial and agricultural

 

1

 

$

214

 

$

214

 

2

 

$

564

 

$

564

 2  $1,155  $1,155 

Real estate - construction

 

1

 

357

  

357

 

1

 

357

 

357

 0  0  0 

Real estate - mortgage:

              

Owner-occupied commercial

 

1

 

611

  

611

 

1

 

611

 

611

 1  991  991 

1-4 family mortgage

 

-

 

-

  

-

 

-

 

-

 

-

 0  0  0 

Other mortgage

 

-

  

-

  

-

 

-

  

-

  

-

  0   0   0 

Total real estate mortgage

 

1

 

611

  

611

 

1

 

611

 

611

 1  991  991 

Consumer

 

-

  

-

  

-

 

-

  

-

  

-

  0   0   0 
 

3

 

$

1,182

 

$

1,182

 

4

 

$

1,532

 

$

1,532

  3  $2,146  $2,146 

 

 

Three Months Ended September 30, 2019

 

Nine Months Ended September 30, 2019

 

Three Months Ended March 31, 2020

 
   

Pre-

 

Post-

   

Pre-

 

Post-

   

Pre-

 

Post-

 
   

Modification

 

Modification

   

Modification

 

Modification

   

Modification

 

Modification

 
   

Outstanding

 

Outstanding

   

Outstanding

 

Outstanding

   

Outstanding

 

Outstanding

 
 

Number of

 

Recorded

 

Recorded

 

Number of

 

Recorded

 

Recorded

 

Number of

 

Recorded

 

Recorded

 
 

Contracts

 

Investment

 

Investment

 

Contracts

 

Investment

 

Investment

 

Contracts

  

Investment

  

Investment

 
 

(In Thousands)

 

(In Thousands)

 

Troubled Debt Restructurings

              

Commercial, financial and agricultural

 

-

 

$

-

 

$

-

 

1

 

$

2,742

 

$

2,742

 1  $350  $350 

Real estate - construction

 

-

 

-

  

-

 

-

 

-

 

-

 0  0  0 

Real estate - mortgage:

              

Owner-occupied commercial

 

-

 

-

  

-

 

-

 

-

 

-

 0  0  0 

1-4 family mortgage

 

-

 

-

  

-

 

-

 

-

 

-

 0  0  0 

Other mortgage

 

-

  

-

  

-

 

-

  

-

  

-

  0   0   0 

Total real estate mortgage

 

-

 

-

  

-

 

-

 

-

 

-

 0  0  0 

Consumer

 

-

  

-

  

-

 

-

  

-

  

-

  0   0   0 
 

-

 

$

-

 

$

-

 

1

 

$

2,742

 

$

2,742

  1  $350  $350 

 

19

There were 0 loans which were modified in the previous twelve months (i.e., the twelve months prior to default) that defaulted during the three and ninemonths ended September 30,March 31, 2021 and March 31, 2020.There were 0 loans which were modified in the previous twelve months that defaulted during the three months ended September 30, 2019. There were two commercial loans totaling $325,000 which were modified in the previous twelve months which defaulted during the nine months ended September 30, 2019. For purposes of this disclosure, default is defined as 90 days past due and still accruing or placement on nonaccrual status.

 

19

 

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 8.410 years. At September 30, 2020,March 31, 2021, the Company had lease right-of-use assets and lease liabilities totaling $10.3$18.5 million and $11.1$18.8 million, respectively, compared to $12.3$10.5 million and $12.4$10.6 million, respectively at December 31, 20192020 which are reflected in other assets and other liabilities, respectively, in the Company’s Consolidated Balance Sheet.

 

Maturities of operating lease liabilities as of September 30, 2020March 31, 2021 are as follows:

 

 

September 30, 2020

  

March 31, 2021

 
 

(In Thousands)

  

(In Thousands)

 

2020 (remaining)

 $839 

2021

 2,744 

2021 (remaining)

 $3,055 

2022

 2,679  3,423 

2023

 2,205  3,061 

2024

 1,232  2,189 

2025

 2,157 

thereafter

  2,624   6,974 

Total lease payments

 12,323  20,859 

Less: imputed interest

  (1,219)  (2,078)

Present value of operating lease liabilities

 $11,104  $18,782 

 

As of September 30, 2020,March 31, 2021, the weighted average remaining term of operating leases is 5.0was 7.06 years and the weighted average discount rate used in the measurement of operating lease liabilities was 3.20%3.21%.

 

Operating cash flows related to leases were $855,000$747,000 and $2.6 million,$852,000 for the three and ninemonths ended September 30, 2020,March 31, 2021 respectively, compared to $888,000 and $2.5 million for the threeand nine2020, months ended September 30, 2019, respectively.

 

Lease costs during the three and ninemonths ended September 30, 2020March 31, 2021 and September 30, 2019 2020were as follows (in thousands):

 

 

Three Months Ended September 30,

  

Three Months Ended March 31,

 
 

2020

  

2019

  

2021

  

2020

 

Operating lease cost

 $876  $809  $899  $873 

Short-term lease cost

 13  8  0  16 

Variable lease cost

 77  49  81  44 

Sublease income

  (25)  (23)  (19)  (16)

Net lease cost

 $941  $843  $961  $917 

 

  

Nine Months Ended September 30,

 
  

2020

  

2019

 

Operating lease cost

 $2,623  $2,500 

Short-term lease cost

  45   21 

Variable lease cost

  165   151 

Sublease income

  (70)  (35)

Net lease cost

 $2,763  $2,637 

20

 

NOTE 7 - EMPLOYEE AND DIRECTOR BENEFITS

 

Stock Options

 

TheAt March 31, 2021, the Company has a stock-based compensation planhad stock incentive plans as described below. The compensation cost that has been charged to earnings for the planplans was $340,000approximately $291,000 and $969,000$276,000 for the three and ninemonths ended September 30, 2020March 31, 2021 and $294,000 and $781,000 for the three2020, and nine months ended September 30, 2019.respectively.

 

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. The plan allowsBoth plans allow for the grant of incentive stock options and non-qualified stock options, and option awards are granted with an exercise price equal to the fair market value of the Company’s common stock at the date of grant. The maximum term of the options granted under the planplans is ten years.

 

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

 

20

  

20192021

 

Expected volatility

  40.00

%

Expected dividends

  1.741.78

%

Expected term (in years)

  6.77.5 

Risk-free rate

  2.562.43

%

 

There were 0 grants of stock options during the nine months ended September 30, 2020. The weighted average grant-date fair value of options granted during the ninethree months ended September 30, 2019March 31, 2021 was $12.60.$12.73. There were 0 grants of stock options during the three months ended March 31, 2020.

 

The following table summarizes stock option activity during the ninethree months ended September 30, 2020March 31, 2021 and September 30, 2019:2020:

 

          

Weighted

     
      

Weighted

  

Average

     
      

Average

  

Remaining

  

Aggregate

 
      

Exercise

  

Contractual

  

Intrinsic

 
  

Shares

  

Price

  

Term (years)

  

Value

 
              

(In Thousands)

 

Nine Months Ended September 30, 2020:

                

Outstanding at January 1, 2020

  965,248  $15.19   4.9  $21,911 

Granted

  0   0   -   0 

Exercised

  (279,300)  11.36   3.2   6,330 

Forfeited

  (18,000)  30.79   6.4   58 

Outstanding at September 30, 2020

  667,948   16.37   4.5  $11,720 
                 

Exercisable at September 30, 2020

  209,200  $12.41   3.2  $4,425 
                 

Nine Months Ended September 30, 2019:

                

Outstanding at January 1, 2019

  1,238,748  $13.02   5.2  $23,355 

Granted

  10,500   34.44   9.4   (14)

Exercised

  (239,300)  7.02   2.3   6,162 

Forfeited

  (20,200)  24.88   6.5   167 

Outstanding at September 30, 2019

  989,748   14.46   5.0  $18,603 
                 

Exercisable at September 30, 2019

  278,000  $7.36   3.1  $7,261 
          

Weighted

     
      

Weighted

  

Average

     
      

Average

  

Remaining

     
      

Exercise

  

Contractual

  

Aggregate

 
  

Shares

  

Price

  

Term (years)

  

Intrinsic Value

 
              

(In Thousands)

 

Three Months Ended March 31, 2021:

                

Outstanding January 1, 2021

  640,950  $18.14   4.6  $16,981 

Granted

  500   32.60   8.2   14 

Exercised

  (187,500)  9.92   3.3   9,639 

Forfeited

  (6,000)  5.82   0.8   79 

Outstanding March 31, 2021

  447,950   19.64   4.6  $14,859 
                 

Exercisable March 31, 2021

  329,700  $13.57   3.7  $15,962 
                 

Three Months Ended March 31, 2020:

                

Outstanding January 1, 2020

  965,248  $15.19   4.9  $21,911 

Granted

  0   0   -   0 

Exercised

  (216,000)  10.47   3.3   4,072 

Forfeited

  (18,000)  30.79   6.9   26 

Outstanding March 31, 2020

  731,248   17.68   5.4  $12,969 
                 

Exercisable March 31, 2020

  210,500  $16.54   5.0  $7,146 

 

As of September 30, 2020,March 31, 2021, there was $815,000$604,000 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 0.92.0 years.

 

21

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, 2020,March 31, 2021, there was $1.8$3.2 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 2.92.7 years of the restricted stock’s vesting period.

 

The following table summarizes restricted stock activityCompany 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 nine months ended September 30, 2020 and 2019, respectively:performance period. The performance period is generally three years starting on the grant date. The fair value of the performance shares is determined using a Monte Carlo simulation model on the grant date.

 

  

Shares

  

Weighted

Average Grant

Date Fair Value

 

Nine Months Ended September 30, 2020:

        

Non-vested at January 1, 2020

  71,290  $31.53 

Granted

  29,067   33.20 

Vested

  (19,928)  23.64 

Forfeited

  0   0 

Non-vested at September 30, 2020

  80,429   34.09 
         

Nine Months Ended September 30, 2019:

        

Non-vested at January 1, 2019

  56,576  $29.94 

Granted

  21,274   34.08 

Vested

  (5,200)  20.31 

Forfeited

  (2,500)  38.17 

Non-vested at September 30, 2019

  70,150   31.62 
21

 
  

Restricted Stock

  

Performance Shares

 
  

Shares

  

Weighted Average Grant Date Fair Value

  

Shares

  

Weighted Average Grant Date Fair Value

 

Three Months Ended March 31, 2021:

                

Non-vested at January 1, 2021

  84,307  $34.92   0  $0 

Granted

  48,217   42.07   12,437   37.05 

Vested

  (5,158)  22.72   0   0 

Forfeited

  (5,575)  38.96   0   0 

Non-vested at March 31, 2021

  121,791   38.08   12,437   37.05 
                 

Three Months Ended March 31, 2020:

                

Non-vested at January 1, 2020

  71,290  $31.53   0  $0 

Granted

  15,300   39.45   0   0 

Vested

  (8,376)  18.64   0   0 

Forfeited

  0   0   0   0 

Non-vested at March 31, 2020

  78,214   34.46   0   0 

 

 

NOTE 8 - DERIVATIVES

 

The Company periodically enters into derivative contracts to manage exposures to movements in interest rates. The Company purchased an interest rate cap in May of 2020 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 one-month LIBOR rate with a strike rate of 0.50%. The fair value of the interest rate cap is carried on the balance sheet in other assets and the change in fair value is recognized in noninterest income each quarter. At September 30, 2020March 31, 2021 the interest rate cap had a fair value of $200,000$414,000 and remaining term of 2.62.1 years. If LIBOR is deemed unrepresentative at any time, the reference rate for the cap would be governed by the fallback protocol where LIBOR will be adjusted to the Secured Overnight Financing Rate (“SOFR”) plus the five-year median spread.

 

The Company has entered into agreements with secondary market investors to deliver loans on a “best efforts delivery” basis. When a rate is committed to a borrower, it is based on the best price that day and locked with the investor for the customer for a 30-day period. In the event the loan is not delivered to the investor, the Company has no risk or exposure with the investor. The interest rate lock commitments related to loans that are originated for later sale are classified as derivatives. The fair values of the Company’s agreements with investors and rate lock commitments to customers as of September 30, 2020March 31, 2021 and December 31, 20192020 were not material.

 

 

NOTE 9 RECENTLY ADOPTED ACCOUNTING PRONOUNCEMENTS

 

In July 2018, the Financial Accounting Standards Board (“FASB”) issued ASU 2018-13,Fair Value Measurement (Topic 820): Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement. This ASU eliminated, added and modified certain disclosure requirements for fair value measurements. Among the changes, entities are no longer required to disclose the amount of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy however, entities are required to disclose the range and weighted average used to develop significant unobservable inputs for Level 3 fair value measurements. ASU No.2018-13 was effective for the Company beginning January 1, 2020. As ASU 2018-13 only revised disclosure requirements, it had no material impact on the Company’s Consolidated Financial Statements.

NOTE 10 - RECENT ACCOUNTING PRONOUNCEMENTS

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 requireASC 326 requires 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.forecasts that affect the collectability of the reported amount. Financial institutions and other organizations will now use forward-looking information to better inform their credit loss estimates. In addition, the ASU amends the accounting for credit losses on available-for-sale debt securities and purchased financial assets with credit deterioration.

22

The CARESCoronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), enacted on March 27, 2020, gave financial institutions the option to delay adoption of ASU 2016-13.CECL. The Company decidedelected to delay its adoption of the update until the earlier of the date the national emergency concerning COVID-19 terminates or December 31, 2020, with an effective retrospective adoption date of January 1, 2020.

The Company’s CECL implementation team includes leadership from Accounting, Credit Administration and Risk Management. This group works closely with aAmounts reported for periods beginning on or after thirdJanuary 1, 2020 -party software solution vendor providing expertiseare presented under ASC 326, except quarterly periods in CECL modeling techniques to develop expected credit loss estimation models. Loans with similar risk characteristics have been evaluated in pools and, depending on the nature of each identified pool, the Company utilized a discounted cash flow (“DCF”), probability of default / loss given default (“PD/LGD”) or remaining life method. The historical loss experience 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.

CECL parallel comparisons2020, which were performed at September 30, 2020 notand the Company estimates the allowance for loan losses restated under CECL will be within 5 percent of the allowance for loan losses under the incurred loss methodology.  The Company forecasted an immediate reversion to longer term average historical loss experience for the reasonable and supportable forecast due to the current level of uncertainty and unprecedented effect of COVID-19 as well as the corresponding response from the federal government through the CARES Act.  Qualitative factors were adjusted for a higher level of risk associatedall prior period information is presented in accordance with previously applicable GAAP. Based on prevailing economic conditions with a mitigating adjustment for the regulatory environment.

Credit losses for loans thatand forecasts as of nolonger share similar risk characteristics were estimated on an individual basis. Individual evaluations were performed for nonaccrual loans, loans rated substandard, and modified loans classified as troubled debt restructurings. Specific allowances were estimated based on oneof 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.

The estimation methodology for credit losses on lending-related commitments were similar to the process for estimating credit losses for loans, with the addition of a probability of draw estimate that will be applied to each commitment amount.

Based upon the nature and characteristics of our securities portfolios at September 30,January 1, 2020, the macroeconomic conditions and forecasts at that date, and other management judgments,Company recognized a cumulative net increase to retained earnings of $1.1 million, net of tax, attributable to a decrease in the Company does not currently expect to record any allowance for credit losses on availableof $2.0 million, an increase in the allowance for sale securities.off balance sheet credit exposures of $0.5 million, and a decrease in deferred tax assets of $0.4 million. This was the result of implementing a more quantitative methodology. The commercial, financial, and agricultural loan category decreased $8.2 million due to the portfolio primarily consisting of loans with generally short contractual maturities. This was partially offset by an increase of $6.2 million in the real estate – construction loan category due to the application of peer loss rates within the discounted cash flow pool reserve methodology. Peer historical loss rates were utilized to better align with loss expectations given the Company’s low historical loss experience in this category.

 

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. The update provides temporary optional guidance to ease the potential burden in accounting for reference rate reform. The guidance provides optional expedients and exceptions for applying generally accepted accounting principles to contract modifications and hedging relationships, subject to meeting certain criteria, that reference LIBOR or another reference rate expected to be discontinued. The guidance is intended to help stakeholders during the global market-wide reference rate transition period. Therefore, it will be effective for a limited time, starting March 12, 2020 through December 31, 2022. The Company has identified a replacement reference rate established by the American Financial Exchange. This rate is based on an active market of daily fund trading among participant banks. The Company will apply the guidance provided by this ASU in transitioning to the new reference rate.

 

22

NOTE 10 RECENT ACCOUNTING PRONOUNCEMENTS

In August 2020,FASB issued ASU 2020-06, Debt-Debt with Conversion and Other Options (Topic470) and Derivatives and Hedging Contracts in Entity’sEntitys Own Equity (Topic815): Accounting for Convertible Instruments and Contracts in an Entity’sEntitys Own Equity. The update is intended to simplify accounting for convertible instruments by removing major separation models required under current U.S. GAAP. Consequently, more convertible debt instruments will be reported as a single liability instrument and more convertible preferred stock as a single equity instrument with no separate accounting for embedded conversion features. The update removes certain settlement conditions that are required for equity contracts to qualify for the derivative scope exception, which will permit more equity contracts to qualify for it. The update also simplifies the diluted earnings per share calculation in certain areas. The update is effective for the Company for its fiscal year beginning after December 15, 2021,including interim periods within those years. Early adoption will be permitted. The Company does not currently have any convertible debt instruments outstanding so does not believe that the update will have an impact on its financial statements.

 

23

 

NOTE 11 - 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:

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: inputs.

Level 2:

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

Level 3:

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

 

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

Debt Securities.Securities. Where quoted prices are available in an active market, securities are classified within Level 1 of the hierarchy. Level 1 securities include highly liquid government securities such as U.S. Treasuries and exchange-traded equity securities. For securities traded in secondary markets for which quoted market prices are not available, the Company generally relies on pricing services provided by independent vendors. Such independent pricing services are to advise the Company on the carrying value of the securities available for sale portfolio. As part of the Company’s procedures, the price provided from the service is evaluated for reasonableness given market changes. When a questionable price exists, the Company investigates further to determine if the price is valid. If needed, other market participants may be utilized to determine the correct fair value. The Company has also reviewed and confirmed its determinations in discussions with the pricing source regarding their methods of price discovery. Securities measured with these techniques are classified within Level 2 of the hierarchy and often involve using quoted market prices for similar securities, pricing models or discounted cash flow calculations using inputs observable in the market where available. Examples include U.S. government agency securities, mortgage-backed securities, obligations of states and political subdivisions, and certain corporate, asset-backed and other securities. The Company bought twoperiodically buys corporate debt securities in a private placement transaction, for whichtransactions.  Level 2 inputs are not available.available for these securities.  The Company uses average observable prices of similar corporate securities owned by the Company to value the twosuch securities and are classified in Level 3 of the hierarchy.  The range of values and weighted average value as of September 30, 2020March 31, 2021 was 87.6222 to 116.1915 and 104.0924, respectively, observed for the Company’s other similar corporate securities. The range of values and weighted average value as of December 31, 2019 3%was 98.7836 to 112.2305 and 102.2648, respectively, observed for the Company’s other similar corporate securities.

 

Derivative instrumentsinstruments.. 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.

 

Impaired Loans Individually Evaluated. . Impaired loansLoans individually evaluated are measured and reported at fair value when full payment under the loan terms is not probable. Impaired loansLoans 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 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, which typically ranges between 8%-10%, 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 loansLoans individually evaluated are subject to nonrecurring fair value adjustment upon initial recognition or subsequent impairment.individually evaluation. A portion of the allowance for loancredit losses is allocated to impaired loans individually evaluated if the value of such loans is deemed to be less than the unpaid balance. The range of fair value adjustments and weighted average adjustmentsadjustment as of September 30, 2020March 31, 2021 was 0% to 50%64% and 17.1%25.6%, respectively. The range of fair value adjustments and weighted average adjustment as of December 31, 20192020 was 0% to 30%56% and 5.6%,22.3% respectively. Impaired loansLoans 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 impairedwrite-down individually evaluated loans that are measured at fair value on a nonrecurring basis was $11.2 million and $20.0$2.0 million during the three and ninemonths ended September 30, 2020,March 31, 2021, respectively, and $7.7 million and $16.1$5.0 million during the three and ninemonths ended September 30, 2019, March 31, 2020.respectively.

 

2423

 

Other Real Estate Owned and repossessed assets. Other real estate assets (“OREO”) acquired through, or in lieu of, foreclosure and repossessed assets 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 or repossession are charged to the allowance for loancredit losses subsequent to foreclosure or repossession.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 September 30, 2020March 31, 2021 was 5% to 46%25% and 10.7%15.9%, respectively. The range of fair value adjustments and weighted average adjustment as of December 31, 20192020 was 5% to 10%27% and 8.0%12.5%, respectively. These measurements are classified as Level 3 within the valuation hierarchy. A loss on the sale and write-downs of OREO of $432,000 and repossessed assets of $86,000 and $2.5 million$563,000 was recognized forduring the three and ninemonths ended September 30, 2020,March 31, 2021 respectively, and $58,000 and $282,000 for the threeand nine2020, months ended September 30, 2019, respectively. These charges were for write-downs in the value of OREO subsequent to foreclosure and losses on the disposal of OREO. OREO and repossessed assets areis classified within Level 3 of the hierarchy.

 

There were nowas one residential real estate loansloan with a balance of $150,000 foreclosed and classified as OREO as of September 30, 2020,March 31, 2021, compared to one residential real estate loan foreclosure for $103,000$209,000 as of December 31, 2019.2020.

One residential real estate loan for $928,000 was in the process of being foreclosed as of March 31, 2021. There were 0 residential real estate loans in process of foreclosure as of December 31, 2020.

 

The following table presents the Company’s financial assets and financial liabilities carried at fair value on a recurring basis as of September 30, 2020March 31, 2021 and December 31, 2019:2020. There were 0 liabilities measured at fair value on a recurring basis as of March 31, 2021 and December 31, 2020.

 

 

Fair Value Measurements at September 30, 2020 Using

     

Fair Value Measurements at March 31, 2021 Using

    
 

Quoted Prices in

        

Quoted Prices in

       
 

Active Markets

 

Significant Other

 

Significant

    

Active Markets

 

Significant Other

 

Significant

   
 

for Identical

 

Observable Inputs

 

Unobservable

    

for Identical

 

Observable Inputs

 

Unobservable

   
 

Assets (Level 1)

  

(Level 2)

  

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 debt securities:

         

Available for sale debt securities:

 

U.S. Treasury securities

 $0  $19,426  $0  $19,426  $0  $14,296  $0  $14,296 

Government agency securities

 0  15,521  0  15,521  0  12,190  0  12,190 

Mortgage-backed securities

 0  518,062  0  518,062  0  569,542  0  569,542 

State and municipal securities

 0  37,408  0  37,408  0  33,522  0  33,522 

Corporate debt

  0   316,051   6,581   322,632   0   322,028   10,301   332,329 

Total available-for-sale debt securities

 0  906,468  6,581  913,049  0  951,578  10,301  961,879 

Interest rate cap derivative

  0   200   0   200   0   414   0   414 

Total assets at fair value

 $0  $906,668  $6,581  $913,249  $0  $951,992  $10,301  $962,293 

 

 

Fair Value Measurements at December 31, 2019 Using

     

Fair Value Measurements at December 31, 2020 Using

    
 

Quoted Prices in

        

Quoted Prices in

       
 

Active Markets

 

Significant Other

 

Significant

    

Active Markets

 

Significant Other

 

Significant

   
 

for Identical

 

Observable Inputs

 

Unobservable

    

for Identical

 

Observable Inputs

 

Unobservable

   
 

Assets (Level 1)

  

(Level 2)

  

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 debt securities:

         

Available for sale debt securities:

 

U.S. Treasury securities

 $0  $49,210  $0  $49,210  $0  $14,357  $0  $14,357 

Government agency securities

 0  18,386  0  18,386  0  15,458  0  15,458 

Mortgage-backed securities

 0  474,054  0  474,054  0  495,109  0  495,109 

State and municipal securities

 0  57,272  0  57,272  0  38,115  0  38,115 

Corporate debt

  0   153,881   6,596   160,477   0   323,649   0   323,649 

Total available-for-sale debt securities

 0  886,688  0  886,688 

Interest rate cap derivative

  0   139   0   139 

Total assets at fair value

 $0  $752,803  $6,596  $759,399  $0  $886,827  $0  $886,827 

During the three months ended March 31, 2021, two securities with a fair value of $6.2 million were transferred to level 3 in the hierarchy and one security with a fair value of $4.1 million was purchased.

24

 

The following table presents the Company’s financial assets and financial liabilities carried at fair value on a nonrecurring basis as of September 30, 2020March 31, 2021 and December 31, 2019:2020. There were no liabilities measured at fair value on a non-recurring basis as of March 31, 2021 and December 31, 2020.

 

 

Fair Value Measurements at March 31, 2021 Using

    
 

Quoted Prices in

       
 

Active Markets

 

Significant Other

 

Significant

   
 

Fair Value Measurements at September 30, 2020

     

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

 $0  $0  $84,163  $84,163 

Loans individually evaluated

 $0  $0  $70,929  $70,929 

Other real estate owned and repossessed assets

  0   0   6,976   6,976   0   0   2,067   2,067 

Total assets at fair value

 $0  $0  $91,139  $91,139  $0  $0  $72,996  $72,996 

 

  

Fair Value Measurements at December 31, 2020 Using

     
  

Quoted Prices in

             
  

Active Markets

  

Significant Other

  

Significant

     
  

for Identical

  

Observable

  

Unobservable

     
  

Assets (Level 1)

  

Inputs (Level 2)

  

Inputs (Level 3)

  

Total

 

Assets Measured on a Nonrecurring Basis:

 

(In Thousands)

 

Loans individually evaluated

 $0  $0  $80,817  $80,817 

Other real estate owned

  0   0   6,497   6,497 

Total assets at fair value

 $0  $0  $87,314  $87,314 

 

  

Fair Value Measurements at December 31, 2019

     
  

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 Nonrecurring Basis:

 

(In Thousands)

 

Impaired loans

 $0  $0  $33,344  $33,344 

Other real estate owned and repossessed assets

  0   0   8,178   8,178 

Total assets at fair value

 $0  $0  $41,522  $41,522 

25

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 estimated fair values of the Company’s financial instruments not measured at fair value on a recurring or non-recurring basis as of September 30, 2020March 31, 2021 and December 31, 20192020 were as follows:

 

  

September 30, 2020

  

December 31, 2019

 
  

Carrying

      

Carrying

     
  

Amount

  

Fair Value

  

Amount

  

Fair Value

 
  

(In Thousands)

 

Financial Assets:

                

Level 1 inputs:

                

Cash and due from banks

 $1,622,069  $1,622,069  $530,127  $530,127 
                 

Level 2 inputs:

                

Federal funds sold

  1,302   1,302   100,473   100,473 

Mortgage loans held for sale

  21,472   22,244   6,302   6,312 
                 

Level 3 inputs:

                

Held to maturity debt securities

  250   250   250   250 

Loans, net

  8,331,951   8,232,972   7,151,523   7,099,198 
                 

Financial liabilities:

                

Level 2 inputs:

                

Deposits

 $9,673,783  $9,687,830  $7,530,433  $7,534,984 

Federal funds purchased

  669,350   669,350   470,749   470,749 

Other borrowings

  64,719   63,840   64,703   
 
65,048
 
 

  

March 31, 2021

  

December 31, 2020

 
  

Carrying

      

Carrying

     
  

Amount

  

Fair Value

  

Amount

  

Fair Value

 
  

(In Thousands)

 

Financial Assets:

                

Level 1 inputs:

                

Cash and cash equivalents

 $2,808,153  $2,808,153  $2,209,640  $2,209,640 
                 

Level 2 inputs:

                

Federal funds sold

  1,577   1,577   1,771   1,771 

Mortgage loans held for sale

  15,834   15,551   14,425   14,497 
                 

Level 3 Inputs:

                

Held to maturity debt securities

  250   250   250   250 

Loans, net

  8,410,074   8,428,969   8,377,746   8,387,718 
                 

Financial Liabilities:

                

Level 2 inputs:

                

Deposits

 $10,577,610  $10,587,038  $9,975,724  $9,987,665 

Federal funds purchased

  911,558   911,558   851,545   851,545 

Other borrowings

  64,691   65,548   64,748   65,560 

 

25

NOTE 12 – SUBSEQUENT EVENTS

On October 21, 2020, the Company entered into a Note Purchase Agreement whereby it issued in a private placement $34.8 million in aggregate principal amount of 4.00% Subordinated Notes due October 21, 2030.  The Notes were sold to accredited investors pursuant to an exemption from registration under the Securities Act of 1933, as amended.  The Notes will pay interest semi-annually on June 30th and December 31st each year, beginning December 31, 2020, until the Notes mature.  The Notes may not be prepaid by the Company prior to October 21, 2025.  The Company used all of the net proceeds to redeem in full its 5.00% Subordinated Notes issued July 15, 2015.


ITEM 2. MANAGEMENT’SMANAGEMENTS 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-ownedwholly owned subsidiary, ServisFirst Bank.Bank (the “Bank”). This discussion is intended to supplement and highlight information contained in the accompanying unaudited consolidated financial statementsbalance sheets as of March 31, 2021 and December 31, 2020 and consolidated statements of income for the three and nine months ended September 30, 2020March 31, 2021 and September 30, 2019.March 31, 2020.

 

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 (the “Exchange Act”) 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, 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; 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, including but not limited to, the restaurant, hospitality and retail sectors;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 our Quarterly Reports on Form 10-Q for fiscal year 2020 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. The Company assumes no obligation to update or revise any forward-looking statements that are made from time to time.

 

26

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 2123 full-service banking offices located in Alabama, Tampa Bay, Florida, the panhandle of Florida, the greater Atlanta, Georgia metropolitan area, Charleston, South Carolina, and Nashville, Tennessee. We also operate a loan production office in Columbus, Georgia. Through the Bank,bank, we originate commercial, consumer and other loans and accept deposits, provide electronic banking services, such as online and mobile banking, including remote deposit capture, deliver treasury and cash management services and provide correspondent banking services to other financial institutions.

 

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

 

Overview of Quarter and Year-to-Date Results

 

As of September 30, 2020,March 31, 2021, we had consolidated total assets of $11.39$12.65 billion, up $2.45 billion,$714.7 million, or 27%6.0%, when compared to consolidatedfrom total assets of $8.95$11.93 billion at December 31, 2019.2020. Total loans were $8.51$8.50 billion at September 30, 2020,March 31, 2021, up $1.25 billion,$39.3 million, or 17%0.5%, from $7.26$8.47 billion at December 31, 2019.2020. Total deposits were $9.67$10.58 billion at September 30, 2020,March 31, 2021, up $2.14 billion,$601.9 million, or 29%6.0%, from $7.53$9.98 billion at December 31, 2019.2020.

26

 

Net income available to common stockholders for the three months ended September 30, 2020March 31, 2021 was $43.4$51.5 million, an increase of $5.8up $16.7 million, or 15.4%48.0%, from $37.6$34.8 million for the corresponding period in 2019.three months ended March 31, 2020. Basic and diluted earnings per common share were $0.80$0.95 for the three months ended September 30, 2020,March 31, 2021, compared to basic$0.65 and diluted earnings per common share of $0.70 and $0.69,$0.64, respectively, for the corresponding period in 2019.

Net2020. An increase in net interest income available to common stockholders for the nine months ended September 30, 2020 was $118.6 million, an increase of $10.4 million, or 9.6%, from $108.2$14.7 million for the corresponding periodcomparative periods contributed to the increase in 2019. Basicnet income. Partially offsetting the increase in net interest income were increases in salary expenses, other operating expenses, and diluted earnings per common share were $2.20provision for income taxes. Changes in income and $2.19, respectively, for the nine months ended September 30, 2020, compared to $2.02 and $2.00, respectively, for the corresponding periodexpenses are more fully explained in 2019.“Results of Operations” below.

 

Critical Accounting Policies

 

The accounting and financial policies of the Company conform to U.S. generally accepted accounting principlesGAAP and to general practices within the banking industry. To prepare consolidated financial statements in conformity with U.S. GAAP,generally accepted accounting principles, management makes estimates and assumptions based on available information. These estimates and assumptions affect the amounts reported in the financial statements and the disclosures provided, and future results could differ. The allowance for loancredit losses, valuation of foreclosed real estate, deferred taxes, and fair value of financial instruments are particularly subject to change. Information concerning our accounting policies with respect to these items is available in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2019.2020.

27

 

Financial Condition

 

Cash and Cash Equivalents

 

At September 30, 2020,March 31, 2021, we had $1.3$1.6 million in federal funds sold, compared to $100.5$1.8 million at December 31, 2019.2020. We also maintain balances at the Federal Reserve Bank of Atlanta, which earn interest. At September 30, 2020,March 31, 2021, we had $1.40 billion$67.4 million in balances at the Federal Reserve, compared to $61.9 million at December 31, 2019. The2020. Our increase in balances kept atfederal funds sold were the Federal Reserveresult of an increase in 2020 result from federal stimulus funds sold on deposit with us by our customers stemming from the COVID-19 pandemic.American Financial Exchange during the first quarter of 2021.

 

DebtInvestment Securities

 

Debt securities available for sale totaled $913.0$961.9 million at September 30, 2020March 31, 2021 and $759.4$886.7 million at December 31, 2019.2020. Investment securities held to maturity totaled $250,000 at September 30, 2020March 31, 2021 and at December 31, 2019.2020, respectively. We had paydownspay downs of $87.2$53.7 million on mortgage-backed securities and government agencies,calls and maturities of $48.1$1.8 million and $2.5 million on municipal bonds, corporate securities and treasury securities, and callscertificates of $8.1 million on U.S. government agencies and municipal securitiesdeposit, respectively during the ninefirst three months ended September 30, 2020.of 2021. We purchased $120.0had two bonds with an aggregate book balance of $7.5 million into be called during the first three months of 2021. We bought $136.7 million of mortgage-backed securities and $168.5$13.0 million inof corporate securitiesbonds during the first ninethree months of 2020.  For a tabular presentation of debt securities available for sale and held to maturity at September 30, 2020 and December 31, 2019, see “Note 4 – Securities” in our Notes to Consolidated Financial Statements.2021.

 

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 termlonger-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, 2020 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.

27

 

The Company does not invest in collateralized debt obligations (“CDOs”). At September 30, 2020, we had $316.1We have $320.9 million of bank holding company subordinated notes. If rated, all of these notessuch bonds were rated BBB or better by Kroll Bond Rating Agency at the time of our investment in them. All other corporate bonds had a Standard and Poor’s or Moody’s rating of A-1 or better when purchased. The total investment portfolio at September 30, 2020as of March 31, 2021 has a combined average credit rating of AA.

 

The carrying value of investment securities pledged to secure public funds on deposit and for other purposes as required by law was $432.7$468.7 million and $389.9$477.6 million as of September 30, 2020March 31, 2021 and December 31, 2019,2020, respectively.

28

 

Loans

 

AsSection 1102 of September 30,the CARES Act created the Paycheck Protection Program (“PPP”), a program administered by the SBA to provide loans to small businesses for payroll and other basic expenses during the COVID-19 pandemic. The Company has participated in the PPP as a lender. These loans are eligible to be forgiven if certain conditions are satisfied and are fully guaranteed by the SBA. Additionally, loan payments will also be deferred for the first six months of the loan term. The PPP commenced on April 3, 2020 thereand was available to qualified borrowers through August 8, 2020. No collateral or personal guarantees are 42required. Neither the government nor lenders are permitted to charge the recipients any fees.

On December 27, 2020, President Trump signed into law the Consolidated Appropriations Act (“CAA”). The CAA, among other things, extends the life of the PPP, effectively creating a second round of PPP loans outstanding totaling $28.2 million that have payment deferralsfor eligible businesses. The Company is participating in connection with the COVID-19CAA’s second round of PPP lending. Additionally, section 541 of the CAA extends the relief provided by the CARES Act.  Of these 42 payment deferrals, 9 were principal only deferrals totaling $5.1 million, 4 were interest only deferrals totaling $3.2 million and 29 were principal and interest deferrals totaling $19.9 million.  The amount of accrued interest relatedAct for financial institutions to payment deferrals totaled $6.0 million at September 30, 2020.  These deferrals were not consideredsuspend the GAAP accounting treatment for troubled debt restructurings basedrestructuring to January 1, 2022. As of March 31, 2021, the Company had originated over 7,100 loans with balances in excess of $1.47 billion to new and existing customers through the PPP. To the extent the PPP loans are forgiven, this represents outside funds to our borrowers; and, especially with respect to vulnerable industries, we believe these capital injections are going to be instrumental in assisting our borrowers in navigating through the pandemic. This capital injection, along with the level of capital each borrower had just prior to COVID-19 impacting them, are critical factors in determining the staying power of our borrowers. Upon receipt of interim financial results from our borrowers, we will use that information to update our understanding of the underlying strengths or weaknesses in each individual relationship and take actions, as appropriate. As of March 31, 2021, we have received payment from the SBA on guidance within the CARES Act issued in March 2020.just over 2,350 of our loans totaling $505.1 million.

 

We had total loans of $8.51$8.50 billion at September 30, 2020, an increase of $1.25 billion,March 31, 2021, up $39.3 million, or 17%0.5%, compared to $7.26$8.47 billion at December 31, 2019. We originated approximately 4,900 PPP loans totaling $1.05 billion as of September 30, 2020. Over 4,100 of these loans have a balance of less than $350,000. TheAt March 31, 2021, the percentage of our total loans in each of our regions weremarkets was as follows:

 

  

Percentage of Total Loans in MarketMSA

 

Birmingham, AL

  39.836.2

%

Huntsville, AL

  8.48.7

%

Dothan, AL

  8.69.3

%

Montgomery, AL

  5.55.7

%

Mobile, AL

  6.16.5

%

Total Alabama MSAs

  68.466.4

%

Pensacola, FL

  6.36.5

%

West Florida (1)

  4.96.2

%

Total Florida MSAs

  11.212.7

%

Nashville, TN

  9.49.6

%

Atlanta, GA

  6.56.9

%

Charleston, SC

  4.4

%

 

(1) comprised of Tampa Bay and Sarasota, Florida

Asset Quality

 

The Company determined to delayassesses the adequacy of its adoption of ASU 2016-13, “Financial Instruments – Credit Losses (Topic 326)” until the earlier of the date on which the national emergency concerning COVID-19 terminates or December 31, 2020, as outlined in the CARES Act, with an effective retrospective implementation date of January 1, 2020.  Accordingly, the Company will continue to use the incurred loss methodology to calculate the allowance for loan losses until the earlier of either event.

The allowance for loan losses, sometimes referred to as the “ALLL,” is established and maintained at levels management deems adequate to absorb anticipated credit losses from identifiedat the end of each calendar quarter. The level of allowance is based on the Company’s evaluation of historical default and otherwiseloss experience, current and 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 asthe estimated value of the balance sheet date. In assessing the adequacy of the ALLL, management considers its evaluationany underlying collateral, composition of the loan portfolio past due loan experience, collateral values, current economic conditions and other factors considered necessaryrelevant factors. The allowance is increased by a provision for credit losses, which is charged to maintain the ALLL at anexpense, and reduced by charge-offs, net of recoveries. The allowance for credit losses is believed adequate level. If the ALLL is considered inadequate to absorb all expected future loan losses on existing loans for any reason, including but not limited to increases inbe recognized over the sizecontractual life of the loan portfolio, increases in charge-offs or changes in the risk characteristics of the loan portfolio, then the provision for loan losses is increased. Our management believes that the allowance was adequate at September 30, 2020.

Our management reviews the adequacy of the ALLL on a quarterly basis. The ALLL 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 portfolioportfolio.

Loans with similar risk characteristics are segregated intoevaluated in pools and, depending on the following regulatory classifications: Special Mention, Substandard, Doubtfulnature of each identified pool, the Company utilizes a discounted cash flow (“DCF”), probability of default / loss given default (“PD/LGD”) or Loss, with some general allocationremaining life method.  For all 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 reserve based on these grades.the loss drivers are used across the loan segments.  At September 30, 2020, total loans rated Special Mention, Substandard,March 31, 2021 and Doubtful were $143.2 million, or 1.7% of total loans, compared to $123.7 million, or 1.7% of total loans, at December 31, 2019. Reserve percentages assigned2020, the Company utilized a reasonable and supportable forecast period of twelve months followed by a six-month straight-line reversion to non-impaired loans are based on historical charge-off experience adjusted for other risk factors. To evaluatelong term averages.  The Company leveraged economic projections from reputable and independent sources to inform its loss driver forecasts.  The Company expects national unemployment to remain above pre-pandemic levels over the overall adequacy offorecast period with an improved national GDP growth rate as the ALLL to absorb losses inherent in our loan portfolio, our management considerseconomy comes back on-line over the next year.

The historical loss experience based on volumeestimate 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 typesgross domestic product. Losses are predicted over a period of loans, trends in classifications, volumetime determined to be reasonable and trends in delinquenciessupportable, and nonaccruals, economic conditions, includingat the economic distress causedend 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 COVID-19 pandemicCompany and are dependent on the current economic environment among 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.

factors. See Note 5 – Loans are considered impaired when, based on current information and events, it is probable that the Bank will be unable to collect all amounts due according to the original terms of the loan agreement. The collection of all amounts due according to contractual terms means that both the contractual interest and principal payments of a loan will be collected as scheduled in the loan agreement. Impaired loans are reviewed specifically and separately under FASB ASC 310-30-35, Subsequent Measurement of Impaired Loans,notes to determine the appropriate reserve allocation. Impaired loans are measured based on the present value of expected future cash flows discounted at the interest rate implicitconsolidated financial statements included in the original loan agreement, or, as a practical expedient, at the loan’s observable market price, or the fair value of the underlying collateral. The fair value of collateral, reduced by costs to sell on a discounted basis, is used if a loan is collateral-dependent.Item 1. Consolidated Financial Statements elsewhere in this report.

 

2928


 

The following table presents a summaryexpected credit losses for each loan 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 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, and modified loans classified as troubled debt restructurings. Specific allocations of the allowance for credit 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.

Prior to the adoption of ASU 2016-13, Financial Instruments-Credit Losses (Topic326): Measurement of Credit Losses on Financial Instruments,  the allowance for loan losses represented management’s best estimate of inherent losses that had been incurred within the existing portfolio of loans. The allowance for the threelosses on loans included allowance allocations calculated in accordance with FASB Accounting Standards Codification (“ASC”) Topic 310, “Receivables” and nine months ended September 30, 2020 and 2019:allowance allocations calculated in accordance with ASC Topic 450, “Contingencies.”

 

  

As of and for the Three Months Ended

  

As of and for the Nine Months Ended

 
  

September 30,

  

September 30,

 
  

2020

  

2019

  

2020

  

2019

 
  

(Dollars in thousands)

 

Total loans outstanding, net of unearned income

 $8,508,554  $7,022,069  $8,508,554  $7,022,069 

Average loans outstanding, net of unearned income

 $8,365,155  $6,961,270  $8,021,262  $6,785,257 

Allowance for loan losses at beginning of period

  91,507   71,386   76,584   68,600 

Charge-offs:

                

Commercial, financial and agricultural loans

  11,146   3,626   15,144   10,273 

Real estate - construction

  -   -   830   - 

Real estate - mortgage

  200   4,974   4,397   5,193 

Consumer loans

  44   172   165   453 

Total charge-offs

  11,390   8,772   20,536   15,919 

Recoveries:

                

Commercial, financial and agricultural loans

  12   126   158   255 

Real estate - construction

  -   1   2   2 

Real estate - mortgage

  12   -   26   11 

Consumer loans

  15   60   55   83 

Total recoveries

  39   187   241   351 

Net charge-offs

  11,351   8,585   20,295   15,568 

Allocation from LGP

  -   7,406   -   7,406 

Provision for loan losses

  12,284   6,985   36,151   16,754 

Allowance for loan losses at period end

 $92,440  $77,192  $92,440  $77,192 

Allowance for loan losses to period end loans

  1.09

%

  1.10

%

  1.09

%

  1.10

%

Net charge-offs to average loans

  0.54

%

  0.49

%

  0.34

%

  0.31

%

The following table presents the allocation of the allowance for loan losses for each respective loan category with the corresponding percentage of loans in each category to total loans at September 30, 2020 and December 31, 2019:

      

Percentage of loans

 
      

in each category

 

September 30, 2020

 

Amount

  

to total loans

 
  

(In Thousands)

 

Commercial, financial and agricultural

 $49,273   40.74

%

Real estate - construction

  4,090   6.24

%

Real estate - mortgage

  38,515   52.34

%

Consumer

  562   0.68

%

Total

 $92,440   100.00

%

      

Percentage of loans

 
      

in each category

 

December 31, 2019

 

Amount

  

to total loans

 
  

(In Thousands)

 

Commercial, financial and agricultural

 $43,666   37.13

%

Real estate - construction

  2,768   7.18

%

Real estate - mortgage

  29,653   54.80

%

Consumer

  497   0.89

%

Total

 $76,584   100.00

%

  

As of and for the Three Months Ended

 
  

March 31,

 
  

2021

  

2020

 
  

(Dollars in thousands)

 

Total loans outstanding, net of unearned income

 $8,504,980  $7,568,836 

Average loans outstanding, net of unearned income

 $8,512,506  $7,361,149 

Allowance for credit losses at beginning of period

  87,942   - 

Allowance for loan losses at beginning of period

  -   76,584 

Charge-offs:

        

Commercial, financial and agricultural loans

  477   2,640 

Real estate - construction

  -   454 

Real estate - mortgage

  12   1,678 

Consumer loans

  87   58 

Total charge-offs

  576   4,830 

Recoveries:

        

Commercial, financial and agricultural loans

  26   62 

Real estate - construction

  50   1 

Real estate - mortgage

  2   1 

Consumer loans

  11   12 

Total recoveries

  89   76 

Net charge-offs

  487   4,754 

Provision for credit losses

  7,451   13,584 

Allowance for credit losses at period end

 $94,906  $- 

Allowance for loan losses at period end

 $-  $85,414 

Allowance for credit losses to period end loans

  1.12

%

  - 

Allowance for loan losses to period end loans

  -   1.13

%

Net charge-offs to average loans

  0.02

%

  0.26

%

 

3029


      

Percentage

 
      

of loans in

 
      

each

 
      

category to

 

March 31, 2021

 

Amount

  

total loans

 
  

(In Thousands)

 

Commercial, financial and agricultural

 $38,232   39.07

%

Real estate - construction

  19,391   7.84

%

Real estate - mortgage

  35,607   52.36

%

Consumer

  1,676   0.73

%

Total

 $94,906   100.00

%

      

Percentage

 
      

of loans in

 
      

each

 
      

category to

 

December 31, 2020

 

Amount

  

total loans

 
  

(In Thousands)

 

Commercial, financial and agricultural

 $36,370   38.93

%

Real estate - construction

  16,057   7.01

%

Real estate - mortgage

  33,722   53.29

%

Consumer

  1,793   0.77

%

Total

 $87,942   100.00

%

 

Nonperforming Assets

 

Total nonperforming loans, which include nonaccrual loans and loans 90 or more days past due and still accruing, decreased to $26.6$17.9 million at September 30, 2020,March 31, 2021 compared to $36.1$19.0 million at December 31, 2019.2020. Of this total, nonaccrual loans of $21.7$13.1 million at September 30, 2020March 31, 2021 represented a net decrease of $8.4$0.9 million from nonaccrual loans at December 31, 2019.2020. Excluding credit card accounts, there was one loan 90 or more days past due and still accruing totaling $4.8 million at September 30, 2020,March 31, 2021, compared to three loansone loan totaling $5.0$4.9 million at December 31, 2019.2020. Troubled Debt Restructurings (“TDR”) at September 30, 2020March 31, 2021 and December 31, 20192020 were $2.7$3.5 million and $3.3$2.4 million, respectively. There were three loans newly classified as TDR totaling $2.1 million and no renewals of existing TDRs for the three months ended March 31, 2021. There was one loan newly classified as a TDR totaling $350,000 and no renewals of existing TDRs for the three months ended March 31, 2020.

 

OREO and repossessed assets decreased to $7.0$2.1 million at September 30, 2020,March 31, 2021, from $8.2$6.5 million at December 31, 2019.2020. The following table summarizes OREO and repossessed asset activity for the ninethree months ended September 30, 2020March 31, 2021 and 2019:2020:

 

 

Nine Months Ended September 30,

  

Three months ended March 31,

 
 

2020

  

2019

  

2021

  

2020

 
 

(In thousands)

  

(In thousands)

 

Balance at beginning of period

 $8,178  $5,169  $6,497  $8,178 

Transfers from loans and capitalized expenses

 2,406  1,177  414  287 

Proceeds from sales

 (1,780) (727) (584) (454)

Internally financed sales

 -  -  (3,779) - 

Write-downs / net gain (loss) on sales

  (1,828)  (282)  (482)  (563)

Balance at end of period

 $6,976  $5,337  $2,066  $7,448 

30

 

The following table summarizes our nonperforming assets and TDRs at September 30, 2020March 31, 2021 and December 31, 2019:2020:

 

  

September 30, 2020

  

December 31, 2019

 
      

Number of

      

Number of

 
  

Balance

  

Loans

  

Balance

  

Loans

 
  

(Dollar Amounts In Thousands)

 

Nonaccrual loans:

                

Commercial, financial and agricultural

 $18,636   24  $14,729   29 

Real estate - construction

  587   3   1,589   2 

Real estate - mortgage:

                

Owner-occupied commercial

  1,838   6   10,826   3 

1-4 family mortgage

  614   6   1,440   5 

Other mortgage

  -   -   1,507   1 

Total real estate - mortgage

  2,452   12   13,773   9 

Consumer

  -   -   -   - 

Total Nonaccrual loans:

 $21,675   39  $30,091   40 
                 

90+ days past due and accruing:

                

Commercial, financial and agricultural

 $63   3  $201   3 

Real estate - construction

  -   -   -   - 

Real estate - mortgage:

                

Owner-occupied commercial

  -   -   -   - 

1-4 family mortgage

  -   -   873   5 

Other mortgage

  4,827   1   4,924   1 

Total real estate - mortgage

  4,827   1   5,797   6 

Consumer

  8   4   23   8 

Total 90+ days past due and accruing:

 $4,898   8  $6,021   17 
                 

Total Nonperforming Loans:

 $26,573   47  $36,112   57 
                 

Plus: Other real estate owned and repossessions

  6,976   10   8,178   12 

Total Nonperforming Assets

 $33,549   57  $44,290   69 
                 

Restructured accruing loans:

                

Commercial, financial and agricultural

 $1,800   5  $625   2 

Real estate - construction

  -   -   -   - 

Real estate - mortgage:

                

Owner-occupied commercial

  -   -   -   - 

1-4 family mortgage

  -   -   -   - 

Other mortgage

  -   -   -   - 

Total real estate - mortgage

  -   -   -   - 

Consumer

  -   -   -   - 

Total restructured accruing loans:

 $1,800   5  $625   2 
                 

Total Nonperforming assets and restructured accruing loans

 $35,349   62  $44,915   71 
                 

Ratios:

                

Nonperforming loans to total loans

  0.31

%

      0.50

%

    

Nonperforming assets to total loans plus other real estate owned and repossessions

  0.39

%

      0.61

%

    

Nonperforming assets plus restructured accruing loans to total loans plus other real estate owned and repossessions

  0.42

%

      0.62

%

    

31

  

March 31, 2021

  

December 31, 2020

 
      

Number of

      

Number of

 
  

Balance

  

Loans

  

Balance

  

Loans

 
  

(Dollar Amounts In Thousands)

 

Nonaccrual loans:

                

Commercial, financial and agricultural

 $9,922   22  $11,709   22 

Real estate - construction

  234   1   234   1 

Real estate - mortgage:

                

Owner-occupied commercial

  2,009   3   1,259   4 

1-4 family mortgage

  923   9   771   7 

Other mortgage

  -   -   -   - 

Total real estate - mortgage

  2,932   12   2,030   11 

Consumer

  -   1   -   - 

Total Nonaccrual loans:

 $13,088   36  $13,973   34 
                 

90+ days past due and accruing:

                

Commercial, financial and agricultural

 $4   1  $11   2 

Real estate - construction

  -   -   -   - 

Real estate - mortgage:

                

Owner-occupied commercial

  -   -   -   - 

1-4 family mortgage

  -   -   104   1 

Other mortgage

  4,761   1   4,805   1 

Total real estate - mortgage

  4,761   1   4,909   2 

Consumer

  39   17   61   25 

Total 90+ days past due and accruing:

 $4,804   19  $4,981   29 
                 

Total Nonperforming Loans:

 $17,892   55  $18,954   63 
                 

Plus: Other real estate owned and repossessions

  2,067   5   6,497   11 

Total Nonperforming Assets

 $19,959   60  $25,451   74 
                 

Restructured accruing loans:

                

Commercial, financial and agricultural

 $794   3  $818   3 

Real estate - construction

  -   -   -   - 

Real estate - mortgage:

                

Owner-occupied commercial

  -   -   -   - 

1-4 family mortgage

  -   -   -   - 

Other mortgage

  -   -   -   - 

Total real estate - mortgage

  -   -   -   - 

Consumer

  -   -   -   - 

Total restructured accruing loans:

 $794   3  $818   3 

Total Nonperforming assets and restructured accruing loans

 $20,753   63  $26,269   77 
                 

Ratios:

                

Nonperforming loans to total loans

  0.21

%

      0.22

%

    

Nonperforming assets to total loans plus other real estate owned and repossessions

  0.23

%

      0.30

%

    

Nonperforming assets plus restructured accruing loans to total loans plus other real estate owned and repossessions

  0.24

%

      0.31

%

    

 

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

 

Impaired LoansIn keeping with guidance from regulators, the Company continues to work with COVID-19 affected borrowers to defer their payments and Allowance for Loan Losses

interest. While interest continues to accrue to income, through normal GAAP accounting, 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, 2020, we had impaired loansMarch 31, 2021, the Company carries $5.1 million of $93.8accrued interest income on deferrals made to COVID-19 affected borrowers compared to $5.8 million inclusive of nonaccrual loans, an increase of $50.7 million from $43.1 million as ofat December 31, 2019. This increase2020. At this time, the Company is primarily attributable to four commercial relationships newly classified as impaired during 2020. Substandard loans are detailed in Note 5, “Loans”, within the credit quality indicator table. While total impaired loans have increased, our overall collateral exposure on these impairments has remained consistent. We allocated $9.6 million of our allowance for loan losses at September 30, 2020 to these impaired loans, a decrease of $0.2 million compared to December 31, 2019. A loan is considered impaired, based on current information and events, if it is probable that we will be unable to collectproject the scheduled paymentsmateriality of principal or interest when due accordingsuch an impact on future deferrals to COVID-19 affected borrowers but recognizes the contractual termsbreadth 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 expectedeconomic impact may affect its borrowers’ ability to repay in future cash flows discounted at the interest rate implicit in the original loan agreement, 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 loans is recognized as long as such loans do not meet the criteria for nonaccrual status. Our credit administration team performs verification and testing to ensure appropriate identification of impaired loans and that proper reserves are held on these loans.

Of the $93.8 million of impaired loans reported as of September 30, 2020, $73.8 million were commercial, financial and agricultural loans, $587,000 were real estate construction loans and $19.4 million were real estate mortgage loans.periods.

 

Deposits

 

Total deposits were $9.67increased by $600 million to $10.58 billion at September 30, 2020, an increase of $2.14 billion, or 29%, over $7.53March 31, 2021 compared to $9.98 billion at December 31, 2019.  Increased growth rates during 2020 have been the result of Paycheck Protection Program (“PPP”) lending in which our borrowers have retained portions of their proceeds in the Bank.2020. We anticipate long-term sustainable growth in deposits through continued development of market share in our 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-EquivalentTaxable-equivalent Basis” under the subheading “Net Interest Income.”Income” below.

31

 

The following table summarizes balances of our deposits and the percentage of each type to the total at September 30, 2020March 31, 2021 and December 31, 2019:2020.                  

 

  

September 30, 2020

  

December 31, 2019

 

Noninterest-bearing demand

 $2,762,814   28.56

%

 $1,749,879   23.24

%

Interest-bearing demand

  6,030,311   62.34

%

  4,986,193   66.21

%

Savings

  85,916   0.89

%

  65,808   0.87

%

Time deposits, $250,000 and under

  276,127   2.85

%

  267,221   3.55

%

Time deposits, over $250,000

  468,615   4.84

%

  461,332   6.13

%

Brokered time deposits

  50,000   0.52

%

  -   -

%

  $9,673,783   100.00

%

 $7,530,433   100.00

%

32

  

March 31, 2021

  

December 31, 2020

 

Non-interest-bearing demand

 $3,044,611   28.78

%

 $2,788,772   27.96

%

Interest-bearing

  6,626,953   62.65

%

  6,276,910   62.92

%

Savings

  97,946   0.93

%

  89,418   0.90

%

Time deposits, $250,000 and under

  267,164   2.53

%

  273,301   2.74

%

Time deposits, over $250,000

  490,936   4.64

%

  497,323   4.99

%

Brokered time deposits

  50,000   0.47   50,000   0.50 
  $10,577,610   100.00

%

 $9,975,724   100.00

%

 

Other Borrowings

 

Our borrowings consist of federal funds purchased and subordinated notes payable. We had $669.3$911.6 million and $470.7$851.5 million at September 30, 2020March 31, 2021 and December 31, 2019,2020, respectively, in federal funds purchased from correspondent banks that are clients of our correspondent banking unit. The average rate paid on these borrowings was 0.22% for the quarter ended September 30, 2020.March 31, 2021. Other borrowings consist of the following:

 

 

$34.75 million of 5% Subordinated Notes due July 15, 2025, which were issued in a private placement in July 2015 and pay interest semi-annually; and

$30.0 million ofon the Company’s 4.5% Subordinated Notes due November 8, 2027, which were issued in a private placement in November 2017 and pay interest semi-annually. The Notes may not be prepaid by the Company prior to November 8, 2022.

 

During the fourth quarter of 2020, we expect to redeem the $34.75 million of 5% Subordinated Notes due July 15, 2025 in full, and issue $34.75 million of 4% Subordinated Notes.

$34.75 million of the Company’s 4% Subordinated Notes due October 21, 2030, which were issued in a private placement in October 2020 and pay interest semi-annually. The Notes may not be prepaid by the 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 werewas 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, 2020,March 31, 2021, liquid assets, which are represented by cash and due from banks, federal funds sold and unpledged available-for-sale securities, totaled $2.13$3.3 billion. At September 30, 2020,Additionally, the Bank had borrowing availability of approximately $923.0$923 million in unused federal funds lines of credit with regional banks, subject to certain restrictions and collateral requirements. Additionally, the Bank had $2.84 billion in available lines from the Federal Reserve Bank-Atlanta. $1.79 billion of these lines from the Federal Reserve Bank-Atlanta are collateralized by loans of the Bank. The remaining $1.05 billion are collateralized by PPP loans originated by the Bank. We believe these sources of funding are adequate to meet ourimmediate anticipated funding needs. needs, but we may need additional funding if we are able to maintain our current growth rate into the future.

Our management meets on a quarterly basis to review sources and uses of funding to determine the appropriate strategy to ensure an appropriate level of liquidity. At the current time, our long-term liquidity needs primarily relate to funds required to support loan originations and commitments and deposit withdrawals. Our regular sources of funding are from the growth of our deposit base, correspondent banking relationships and related federal funds purchased, repayment of principal and interest on loans, the sale of loans and the renewal of time deposits. In addition, we have issued debt as described above under “Other Borrowings”.“Borrowings.”

 

We are subject to general FDIC guidelines that require a minimum level of liquidity. Management believes our liquidity ratios meet or exceed these guidelines. Our management is not currently aware of any trends or demands that are reasonably likely to result in liquidity materially increasing or decreasing. However, uncertainties brought about by the COVID-19 pandemic may adversely affect our ability to obtain funding or may increase the cost of funding.

 

The following table reflects the contractual maturities of our term liabilities as of September 30, 2020.March 31, 2021. The amounts shown do not reflect any early withdrawal or prepayment assumptions.

 

 

Payments due by Period

  

Payments due by Period

 
     

Over 1 - 3

 

Over 3 - 5

    
 

Total

  

1 year or less

  

years

  

years

  

Over 5 years

  

Total

  

1 year or less

  

1 - 3 years

  

3 - 5 years

  

Over 5 years

 
 

(In Thousands)

  

(In Thousands)

 

Contractual Obligations (1)

Contractual Obligations (1)

            
  

Deposits without a stated maturity

Deposits without a stated maturity

 $8,879,041  $-  $-  $-  $-  $9,769,510  $-  $-  $-  $- 

Certificates of deposit (2)

Certificates of deposit (2)

 744,742  458,475  248,499  37,768  -  808,100  318,734  344,991  144,300  75 

Brokered certificates of deposit

 50,000  -  50,000  -  - 

Federal funds purchased

Federal funds purchased

 669,350  669,350  -  -  -  911,558  911,558  -  -  - 

Subordinated debentures

 64,750  -  -  -  64,750 

Subordinated notes payable

 64,707  -  -  -  64,707 

Operating lease commitments

Operating lease commitments

  11,105   2,533   4,567   2,317   1,688   20,859   3,055   6,484   4,346   6,974 

Total

Total

 $10,418,988  $1,130,358  $303,066  $39,785  $66,438  $11,574,734  $1,233,347  $351,475  $148,646  $71,756 

 

(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.

 

3332


 

Capital Adequacy

 

Total stockholders’ equity attributable to us at September 30, 2020 was $949.1 million, or 8.33% of total assets.  At December 31, 2019, total stockholders’ equity attributable to us was $842.2 million, or 9.41% of total assets.

As of September 30, 2020,March 31, 2021, 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 totalcommon equity Tier 1, Tier 1 risk-based, Tier 1total risk-based, and Tier 1 leverage ratios.ratios as disclosed in the table below. Our management believes that we are well-capitalized under the prompt corrective action provisions as of March 31, 2021.

 

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 was phased in incrementally over time, beginning January 1, 2016 and 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 not including the capital conservation buffer, of capital to total regulatory or risk-weighted assets, as of September 30, 2020,March 31, 2021, December 31, 20192020 and September 30, 2019:March 31, 2020:

 

         

To Be Well Capitalized

  

Actual

  

For Capital Adequacy Purposes

  

To Be Well Capitalized Under Prompt

Corrective Action Provisions

 
     

For Capital Adequacy

 

Under Prompt Corrective

  

Amount

  

Ratio

  

Amount

  

Ratio

  

Amount

  

Ratio

 
 

Actual

  

Purposes

  

Action Provisions

 
 

Amount

  

Ratio

  

Amount

  

Ratio

  

Amount

  

Ratio

 

As of September 30, 2020

 

(Dollars in Thousands)

 

CET 1 Capital to Risk-Weighted Assets:

             

As of March 31, 2021:

 

CET 1 Capital to Risk Weighted Assets:

 

Consolidated

Consolidated

 $916,373  11.24

%

 $366,802  4.50

%

 N/A  N/A  $999,447  10.73

%

 $419,190  4.50

%

 N/A  N/A 

ServisFirst Bank

ServisFirst Bank

 978,584  12.01

%

 366,724  4.50

%

 $529,712  6.50

%

 1,061,620  11.40

%

 419,127  4.50

%

 $605,405  6.50

%

Tier 1 Capital to Risk-Weighted Assets:

             

Tier 1 Capital to Risk Weighted Assets:

 

Consolidated

Consolidated

 916,873  11.25

%

 489,070  6.00

%

 N/A  N/A  999,947  10.73

%

 558,920  6.00

%

 N/A  N/A 

ServisFirst Bank

ServisFirst Bank

 979,084  12.01

%

 488,965  6.00

%

 651,953  8.00

%

 1,062,120  11.40

%

 558,836  6.00

%

 745,114  8.00

%

Total Capital to Risk-Weighted Assets:

             

Total Capital to Risk Weighted Assets:

 

Consolidated

Consolidated

 1,067,583  13.10

%

 652,093  8.00

%

 N/A  N/A  1,162,344  12.48

%

 745,227  8.00

%

 N/A  N/A 

ServisFirst Bank

ServisFirst Bank

 1,072,024  13.15

%

 651,953  8.00

%

 814,941  10.00  1,159,826  12.45

%

 745,114  8.00

%

 931,393  10.00

%

Tier 1 Capital to Average Assets:

Tier 1 Capital to Average Assets:

              

Consolidated

Consolidated

 916,873  8.22

%

 446,428  4.00

%

 N/A  N/A  999,947  8.25

%

 484,571  4.00

%

 N/A  N/A 

ServisFirst Bank

ServisFirst Bank

 979,084  8.78

%

 446,243  4.00

%

 557,804  5.00

%

 1,062,120  8.77

%

 484,521  4.00

%

 605,651  5.00

%

  

As of December 31, 2019

             

CET 1 Capital to Risk-Weighted Assets:

             

As of December 31, 2020:

 

CET 1 Capital to Risk Weighted Assets:

 

Consolidated

Consolidated

 $822,396  10.50

%

 $342,283  4.50

%

 N/A  N/A  $958,300  10.50

%

 $410,816  4.50

%

 N/A  N/A 

ServisFirst Bank

ServisFirst Bank

 885,172  11.30

%

 342,269  4.50

%

 $494,389  6.50

%

 1,018,031  11.15

%

 410,766  4.50

%

 $593,328  6.50

%

Tier 1 Capital to Risk-Weighted Assets:

             

Tier 1 Capital to Risk Weighted Assets:

 

Consolidated

Consolidated

 822,896  10.50

%

 456,377  6.00

%

 N/A  N/A  958,800  10.50

%

 547,755  6.00

%

 N/A  N/A 

ServisFirst Bank

ServisFirst Bank

 885,674  11.31

%

 456,359  6.00

%

 608,479  8.00

%

 1,018,531  11.16

%

 547,688  6.00

%

 730,250  8.00

%

Total Capital to Risk-Weighted Assets:

             

Total Capital to Risk Weighted Assets:

 

Consolidated

Consolidated

 964,683  12.31

%

 608,502  8.00

%

 N/A  N/A  1,113,690  12.20

%

 730,340  8.00

%

 N/A  N/A 

ServisFirst Bank

ServisFirst Bank

 962,758  12.29

%

 608,479  8.00

%

 760,598  10.00

%

 1,108,673  12.15

%

 730,250  8.00

%

 912,813  10.00

%

Tier 1 Capital to Average Assets:

Tier 1 Capital to Average Assets:

              

Consolidated

Consolidated

 822,896  9.13

%

 356,012  4.00

%

 N/A  N/A  958,800  8.23

%

 465,980  4.00

%

 N/A  N/A 

ServisFirst Bank

ServisFirst Bank

 885,674  9.83

%

 355,998  4.00

%

 444,997  5.00

%

 1,018,531  8.75

%

 465,448  4.00

%

 581,810  5.00

%

  

As of September 30, 2019

             

CET 1 Capital to Risk-Weighted Assets:

             

As of March 31, 2020:

 

CET 1 Capital to Risk Weighted Assets:

 

Consolidated

Consolidated

 $790,168  10.39

%

 $342,283  4.50

%

 N/A  N/A  $849,949  10.46

%

 $365,531  4.50

%

 N/A  N/A 

ServisFirst Bank

ServisFirst Bank

 852,807  11.21

%

 342,269  4.50

%

 $494,389  6.50

%

 912,858  11.24

%

 365,460  4.50

%

 $527,886  6.50

%

Tier 1 Capital to Risk-Weighted Assets:

             

Tier 1 Capital to Risk Weighted Assets:

 

Consolidated

Consolidated

 790,670  10.39

%

 456,377  6.00

%

 N/A  N/A  850,451  10.47

%

 487,375  6.00

%

 N/A  N/A 

ServisFirst Bank

ServisFirst Bank

 853,309  11.22

%

 456,359  6.00

%

 608,479  8.00

%

 913,360  11.25

%

 487,280  6.00

%

 649,706  8.00

%

Total Capital to Risk-Weighted Assets:

             

Total Capital to Risk Weighted Assets:

 

Consolidated

Consolidated

 933,055  12.27

%

 608,502  8.00

%

 N/A  N/A  1,001,072  12.32

%

 649,833  8.00

%

 N/A  N/A 

ServisFirst Bank

ServisFirst Bank

 931,001  12.24

%

 608,479  8.00

%

 760,598  10.00

%

 999,274  12.30

%

 649,706  8.00

%

 812,133  10.00

%

Tier 1 Capital to Average Assets:

Tier 1 Capital to Average Assets:

              

Consolidated

Consolidated

 790,670  8.88

%

 356,012  4.00

%

 N/A  N/A  850,451  9.37

%

 363,121  4.00

%

 N/A  N/A 

ServisFirst Bank

ServisFirst Bank

 853,309  9.59

%

 355,998  4.00

%

 444,997  5.00

%

 913,360  10.06

%

 363,065  4.00

%

 453,831  5.00

%

 

3433


 

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 instrumentscredit arrangements with off-balance sheet risk to meet the financing needs of our customers.  These financial instrumentscredit arrangements include commitments to extend credit beyond current fundings, credit card arrangements, standby letters of credit and financial guarantees.  Those instrumentscredit arrangements involve, to varying degrees, elements of credit risk in excess of the amount recognized in ourthe 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 suchthe financial instrumentsinstrument 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, 2020, 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.

35

 

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 $558,000 as of September 30, 2020 and $370,000 as of December 31, 2019 for the settlement of any repurchase demands by investors.

34

 

Financial instruments whose contract amounts represent credit risk at September 30, 2020 and DecemberMarch 31, 20192021 are as follows:

 

 

September 30, 2020

  

December 31, 2019

  

March 31, 2021

 
 

(In Thousands)

 

(In Thousands)

  

(In Thousands)

 

Commitments to extend credit

 $2,557,139  $2,303,788  $2,932,352 

Credit card arrangements

 247,976  248,617  312,443 

Standby letters of credit

  72,138   48,394   60,435 
 $2,877,253  $2,600,799  $3,305,230 

 

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, 2020March 31, 2021 was $43.4$51.5 million compared to net income and net income available to common stockholders of $37.6$34.8 million for the three months ended September 30, 2019.  Net income and net income available to common stockholders for the nine months ended September 30, 2020 was $118.6 million compared to net income and net income available to common stockholders of $108.2 million for the nine months ended September 30, 2019.March 31, 2020. The increase in net income for the three months ended September 30, 2020 over the same period in 2019 was primarily attributable to a $12.1$14.7 million increase in net interest income resulting from a $2.15 billionduring the three months ended March 31, 2021 to $92.4 million, compared to $77.6 million during the same period in 2020. The increase in net interest income is primarily attributable to growth in average earning assets and a $2.0 million increase innon-interest-bearing deposit balances. Total non-interest income ledincreased by increased mortgage banking revenue. The same key drivers contributed$1.8 million to $8.5 million during the increase in net income for the ninethree months ended September 30, 2020March 31, 2021 compared to 2019 resulting$6.7 million during the same period in a $34.12020. Total non-interest expenses increased by $1.0 million increase in net interest income on a $1.65 billion increase in average earning assets, and a $4.9to $28.9 million increase in non-interest income.  Increases in provision for loan losses of $5.3 million and $19.4 million, increases in non-interest expense of $1.4 million and $6.8 million and increases in income tax expense of $1.5 million and $2.5 million, respectively, forduring the three and nine months ended September 30, 2020March 31, 2021 compared to 2019 partially offset increases$27.9 million during the same period in income.2020.

 

Basic and diluted net income per common share were $0.80$0.95 for the three months ended September 30, 2020,March 31, 2021, compared to $0.70$0.65 and $0.69, respectively,$0.64, for the corresponding period in 2019. Basic and diluted net income per common share were $2.20 and $2.19, respectively, for the nine months ended September 30, 2020, compared to $2.02 and $2.00, respectively, for the corresponding period in 2019.2020. Return on average assets for the three and nine months ended September 30, 2020March 31, 2021 was 1.54%1.72% compared to 1.67% and 1.70%, respectively,1.54% for the corresponding periodsperiod in 2019. Return2020, and return on average common stockholders’ equity for the three and nine months ended September 30, 2020March 31, 2021 was 18.43% and 17.73%, respectively,19.83% compared to 18.69% and 18.93%, respectively,16.23% for the corresponding periodsperiod in 2019.2020.

 

36

Net Interest Income and Net Interest Margin Analysis

 

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.

 

35

Taxable-equivalent net interest income increased $12.1$14.7 million, or 16.6%18.9%, to $85.2$92.4 million for the three months ended September 30, 2020March 31, 2021 compared to $73.1$77.7 million for the corresponding period in 2019, and increased $34.2 million, or 16.1%, to $246.2 million for the nine months ended September 30, 2020 compared to $212.0 million for the corresponding period in 2019.2020. This increase was primarily attributable to growtha $2.96 billion increase in average earning assets, which increased $2.15 billion, or 25.0%34%, from the third quarter of 2019 to the third quarter of 2020, and $1.65 billion, or 20.1%, from the nine months ended September 30, 2019 to the same period in 2020.year over year. The taxable-equivalent yield on interest-earning assets decreased from 4.46% to 3.55% for the three months ended September 30, 2020 from 4.65% for the corresponding period in 2019, and decreased to 3.90% for the nine months ended September 30, 2020 from 4.76% for the corresponding period in 2019.3.48% year over year. The yield on loans for the three months ended September 30, 2020March 31, 2021 was 4.26%4.47% compared to 5.17%4.88% for the corresponding period in 2019, and 4.47% compared to 5.22% for the nine months ended September 30, 2020 and September 30, 2019, respectively.2020. The cost of total interest-bearing liabilities decreased to 0.59%0.40% for the three months ended September 30, 2020 compared to 1.73%March 31, 2021 from 1.19% for the corresponding period in 2019, and decreased to 0.81% for the nine months ended September 30, 2020 from 1.77% for the corresponding period in 2019.2020. Net interest margin for the three months ended September 30, 2020 was 3.14% comparedMarch 31, 2021 decreased 38 basis points to 3.36%3.20% from 3.58% for the corresponding period in 2019, and 3.33% for the nine months ended September 30, 2020 compared to 3.45% for the corresponding period in 2019.2020.

 

The following tables show,table shows, for the three and nine months ended September 30,March 31, 2021 and March 31, 2020, and September 30, 2019, the average balances of each principal category of our assets, liabilities and stockholders’ equity, and an analysis of net interest revenue. The accompanying tables reflecttable 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. TheBoth 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 March 31,

(Dollar Amounts In Thousands)

 

37

Average 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)

 
 
 

2020

  

2019

  

2021

  

2020

 
   

Interest

 

Average

   

Interest

 

Average

    

Interest

 

Average

   

Interest

 

Average

 
 

Average

 

Earned /

 

Yield /

 

Average

 

Earned /

 

Yield /

  

Average

 

Earned /

 

Yield /

 

Average

 

Earned /

 

Yield /

 
 

Balance

 

Paid

 

Rate

 

Balance

 

Paid

 

Rate

  

Balance

 

Paid

 

Rate

 

Balance

 

Paid

 

Rate

 

Assets:

              

Interest-earning assets:

              

Loans, net of unearned income (1)(2)

             

Loans, net of unearned income (1) (2)

 

Taxable

 $8,335,087  $89,236  4.26

%

 $6,927,075  $90,426  5.18

%

 $8,484,914  $93,503  4.47

%

 $7,328,594  $89,076  4.89

%

Tax-exempt (3)

  30,068   313   4.14   34,195   343   3.98   27,592   284   4.17   32,555   327   4.04 

Total loans, net of unearned income

 8,365,155  89,549  4.26  6,961,270  90,769  5.17  8,512,506  93,787  4.47  7,361,149  89,403  4.88 

Mortgage loans held for sale

 20,053  71  1.41  6,482  40  2.45  13,601  65  1.94  4,282  23  2.16 

Investment securities:

              

Taxable

 820,526  5,858  2.86  595,405  4,367  2.93  878,118  5,807  2.65  750,413  5,154  2.75 

Tax-exempt (3)

  31,880   200   2.51   59,992   332   2.21   21,084   128   2.43   44,029   257   2.33 

Total investment securities (4)

 852,406  6,058  2.84  655,397  4,699  2.87  899,202  5,935  2.64  794,442  5,411  2.72 

Federal funds sold

 41,884  16  0.15  312,968  1,768  2.24  11,935  3  0.10  105,423  277  1.06 

Interest-bearing balances with banks

  1,500,563   506   0.13   690,973   3,912   2.25   2,262,233   676   0.12   469,199   1,718   1.47 

Total interest-earning assets

 $10,780,061  $96,200  3.55  $8,627,090  $101,188  4.65  $11,699,477  $100,466  3.48

%

 $8,734,495  $96,832  4.46

%

Non-interest-earning assets:

              

Cash and due from banks

 75,065       71,418       71,166       66,140      

Net fixed assets and equipment

 56,799       58,243      

Allowance for loan losses, accrued interest and other assets

  281,196        162,654      

Net premises and equipment

 57,198       58,066      

Allowance for credit losses, accrued interest and other assets

  320,407        241,479      

Total assets

 $11,193,121       $8,919,405       $12,148,248       $9,100,180      
 
  

Liabilities and stockholders' equity:

Liabilities and stockholders' equity:

            

Interest-bearing liabilities:

              

Interest-bearing demand deposits

 $1,077,595  $840  0.31

%

 $900,754  $1,904  0.84

%

 $1,294,614  $621  0.19

%

 $956,803  $1,346  0.57

%

Savings deposits

 82,671  75  0.36  57,431  87  0.60  93,375  41  0.18  67,380  84  0.50 

Money market accounts

 4,739,566  5,188  0.44  4,265,435  18,900  1.76  5,057,828  3,358  0.27  4,061,286  11,127  1.10 

Time deposits

  841,378   3,773   1.78   703,278   3,897   2.20   808,561   2,861   1.44   805,924   4,188   2.09 

Total interest-bearing deposits

 6,741,210  9,876  0.58  5,926,898  24,788  1.66  7,254,378  6,881  0.38  5,891,393  16,745  1.14 

Federal funds purchased

 682,971  375  0.22  441,526  2,557  2.30  849,772  460  0.22  492,638  1,601  1.31 

Other borrowings

  64,717   777   4.77   64,689   781   4.79   64,689   690   4.33   64,707   781   4.85 

Total interest-bearing liabilities

 $7,488,898  $11,028  0.59

%

 $6,433,113  $28,126  1.73

%

 $8,168,839  $8,031  0.40

%

 $6,448,738  $19,127  1.19

%

Non-interest-bearing liabilities:

              

Non-interest-bearing demand deposits

 2,728,513       1,654,928       2,923,041       1,749,671      

Other liabilities

 39,537       34,070       39,442       39,801      

Stockholders' equity

 917,626       792,284       996,741       853,800      

Accumulated other comprehensive gain

  18,547        5,010      

Accumulated other comprehensive income

  20,185        8,170      

Total liabilities and stockholders' equity

 $11,193,121       $8,919,405       $12,148,248       $9,100,180      

Net interest income

    $85,172       $73,062        $92,435       $77,705    

Net interest spread

      2.96

%

      2.92

%

      3.08

%

      3.27

%

Net interest margin

      3.14

%

      3.36

%

      3.20

%

      3.58

%

 

(1)

Non-accrual loans are included in average loan balances in all periods. Loan fees of $5,193$10,400 and $1,573$1,281 are included in interest income in the thirdfirst quarter of 20202021 and 2019,2020, respectively. Loan fees in 20202021 include accretion of PPP loan fees.

(2)

Net accretion on acquired loan discounts of $100 is included in interest income in the third quarter of 2020.

(3)

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

(4)(3)

Unrealized gains of $23,418$22,027 and $6,287$10,282 are excluded from the yield calculation in the thirdfirst quarter of 20202021 and 2019, respectively.

38

  

For the Three Months Ended September 30,

 
  

2020 Compared to 2019 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

 $16,461  $(17,651) $(1,190)

Tax-exempt

  (43)  13   (30)

Total loans, net of unearned income

  16,418   (17,638)  (1,220)

Mortgages held for sale

  54   (23)  31 

Debt securities:

            

Taxable

  1,598   (107)  1,491 

Tax-exempt

  (172)  40   (132)

Total debt securities

  1,426   (67)  1,359 

Federal funds sold

  (844)  (908)  (1,752)

Interest-bearing balances with banks

  2,180   (5,586)  (3,406)

Total interest-earning assets

  19,234   (24,222)  (4,988)
             

Interest-bearing liabilities:

            

Interest-bearing demand deposits

  316   (1,380)  (1,064)

Savings

  30   (42)  (12)

Money market accounts

  1,885   (15,597)  (13,712)

Time deposits

  684   (808)  (124)

Total interest-bearing deposits

  2,915   (17,827)  (14,912)

Federal funds purchased

  917   (3,099)  (2,182)

Other borrowed funds

  -   (4)  (4)

Total interest-bearing liabilities

  3,832   (20,930)  (17,098)

Increase in net interest income

 $15,402  $(3,292) $12,110 

Decreases in average yields on loans drive unfavorable rate component. PPP loans carry an interest rate of 1.00%, well below the average yield on other loans. However, this lower yield is offset by the accretion of net origination fees paid by the Small Business Administration on PPP loans. Decreases in average rates paid on interest-bearing deposits drive favorable rate component change. Growth in average loans, noninterest bearing deposits and equity drive favorable volume component change and overall change.

39

Average 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)

 
                         
  

2020

  

2019

 
      

Interest

          

Interest

     
  

Average

  

Earned /

  

Average

  

Average

  

Earned /

  

Average

 
  

Balance

  

Paid

  

Yield / Rate

  

Balance

  

Paid

  

Yield / Rate

 

Assets:

                        

Interest-earning assets:

                        

Loans, net of unearned income (1)(2)

                        

Taxable

 $7,989,750  $267,354   4.47

%

 $6,752,945  $263,942   5.23

%

Tax-exempt (3)

  31,512   968   4.10   32,312   934   3.86 

Total loans, net of unearned income

  8,021,262   268,322   4.47   6,785,257   264,876   5.22 

Mortgage loans held for sale

  12,565   164   1.74   4,452   116   3.48 

Investment securities:

                        

Taxable

  777,662   16,104   2.77   560,230   12,306   2.94 

Tax-exempt (3)

  38,014   709   2.49   74,864   1,201   2.14 

Total investment securities (4)

  815,676   16,813   2.75   635,094   13,507   2.84 

Federal funds sold

  76,733   327   0.57   276,898   4,985   2.41 

Interest-bearing balances with banks

  941,817   2,584   0.37   514,527   9,269   2.41 

Total interest-earning assets

 $9,868,053  $288,210   3.90

%

 $8,216,228  $292,753   4.76

%

Non-interest-earning assets:

                        

Cash and due from banks

  72,482           74,185         

Net fixed assets and equipment

  57,435           58,565         

Allowance for loan losses, accrued interest and other assets

  258,263           156,332         

Total assets

 $10,256,233          $8,505,310         
                         

Liabilities and stockholders' equity:

                        

Interest-bearing liabilities:

                        

Interest-bearing demand deposits

 $1,009,332  $3,061   0.41

%

 $917,609  $5,911   0.86

%

Savings deposits

  74,095   233   0.42   55,315   236   0.57 

Money market accounts

  4,363,630   21,871   0.67   3,987,210   53,831   1.81 

Time deposits

  841,583   12,212   1.94   698,905   11,194   2.14 

Total interest-bearing deposits

  6,288,640   37,377   0.79   5,659,039   71,172   1.68 

Federal funds purchased

  583,232   2,286   0.52   391,471   7,233   2.47 

Other borrowings

  64,712   2,338   4.83   64,680   2,343   4.84 

Total interest-bearing liabilities

 $6,936,584  $42,001   0.81

%

 $6,115,190  $80,748   1.77

%

Non-interest-bearing liabilities:

                        

Non-interest-bearing demand deposits

  2,376,029           1,591,184         

Other liabilities

  50,328           34,866         

Stockholders' equity

  878,271           764,087         

Accumulated other comprehensive gain (loss)

  15,021           (17)        

Total liabilities and stockholders' equity

 $10,256,233          $8,505,310         

Net interest income

     $246,209          $212,005     

Net interest spread

          3.09

%

          2.99

%

Net interest margin

          3.33

%

          3.45

%

(1)

Non-accrual loans are included in average loan balances in all periods. Loan fees of $10,123 and $3,461 are included in interest income in 2020, and 2019, respectively. Loan fees in 2020 include accretion of PPP loan fees.

(2)

Accretion on acquired loan discounts of $100 and $91 are included in interest income in 2020 and 2019, respectively.

(3)

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

(4)

Unrealized gains of $18,955 and $77 are excluded from the yield calculation in 2020 and 2019, respectively.

 

4036


 

 

For the Nine Months Ended September 30,

  

For the Three Months Ended March 31,

 
 

2020 Compared to 2019 Increase (Decrease) in Interest Income and Expense Due to Changes in:

  

2021 Compared to 2020 Increase (Decrease) in Interest Income and Expense Due to Changes in:

 
 

Volume

  

Rate

  

Total

  

Volume

 

Rate

 

Total

 
 

(In Thousands)

  

(In Thousands)

 

Interest-earning assets:

        

Loans, net of unearned income

        

Taxable

 $44,611  $(41,199) $3,412  $12,686  $(8,259) $4,427 

Tax-exempt

  (23)  57   34   (53)  10   (43)

Total loans, net of unearned income

 44,588  (41,142) 3,446  12,633  (8,249) 4,384 

Mortgages held for sale

 129  (81) 48  44  (2) 42 

Debt securities:

        

Taxable

 4,549  (751) 3,798  812  (159) 653 

Tax-exempt

  (663)  171   (492)  (140)  11   (129)

Total debt securities

 3,886  (580) 3,306  672  (148) 524 

Federal funds sold

 (2,265) (2,393) (4,658) (136) (138) (274)

Interest-bearing balances with banks

  4,477   (11,162)  (6,685)  1,682   (2,724)  (1,042)

Total interest-earning assets

  50,815   (55,358)  (4,543)  14,895   (11,261)  3,634 
 

Interest-bearing liabilities:

        

Interest-bearing demand deposits

 542  (3,392) (2,850) 359  (1,084) (725)

Savings

 68  (71) (3) 24  (67) (43)

Money market accounts

 4,676  (36,636) (31,960) 2,184  (9,953) (7,769)

Time deposits

  2,146   (1,128)  1,018   14   (1,341)  (1,327)

Total interest-bearing deposits

 7,432  (41,227) (33,795) 2,581  (12,445) (9,864)

Federal funds purchased

 2,477  (7,424) (4,947) 699  (1,840) (1,141)

Other borrowed funds

  1   (6)  (5)  -   (91)  (91)

Total interest-bearing liabilities

  9,910   (48,657)  (38,747)  3,280   (14,376)  (11,096)

Increase in net interest income

 $40,905  $(6,701) $34,204  $11,615  $3,115  $14,730 

 

Decreases in the average rates paid on interest-bearing deposits drive favorable rate component change. Decreases in average yields on loans drive unfavorable rate component whileOur growth in loans non-interest-bearing deposits and average equity continues to drive favorable volume component change and overall change. The rate component was favorable as average rates paid on interest-bearing liabilities decreased 79 basis points while loan yields decreased 41 basis points. Growth in non-interest-bearing deposits and equity also contributed to the increase in net interest revenue during the three months ended March 31, 2021 compared to the same period in 2020.

 

Provision for Loan LossesCredit losses

 

The provision for loancredit losses was $12.3$7.5 million for the three months ended September 30, 2020, an increaseMarch 31, 2021, a decrease of $5.3$6.1 million from $7.0$13.6 million for the three months ended September 30, 2019,March 31, 2020. The ACL for March 31, 2021 and December 31, 2020 was calculated under the current expected credit losses (“CECL”) methodology and totaled $94.9 million and 87.9 million, or 1.12% and 1.04% of loans, net of unearned income, respectively. The allowance totaled $85.4 million, or 1.13% of loans, net of unearned income, at March 31, 2020 and was $36.2 million forcalculated under the nine months ended September 30, 2020, a $19.4 million increase compared to $16.8 million for the nine months ended September 30, 2019.incurred loss methodology. Annualized net credit charge-offs to quarter-to-date average loans increased five basis points to 0.54%were 0.02% for the thirdfirst quarter of 20202021, a 24 basis point decrease compared to 0.49%0.26% for the corresponding period in 2019 and increased three basis points to 0.34% for the nine months ended September 30, 2020 compared to 0.31% for the corresponding period in 2019.first quarter of 2020. Nonperforming loans decreased to $26.6$17.9 million, or 0.31%0.21% of total loans, at September 30, 2020March 31, 2021 from $36.1$19.0 million, or 0.50%0.22% of total loans, at December 31, 2019,2020, and were $41.0lower than $33.9 million, or 0.58%0.45% of total loans, at September 30, 2019. Impaired loans increasedMarch 31, 2020. See the section captioned “Asset Quality” located elsewhere in this item for additional discussion related to $93.8 million, or 1.10% of total loans, at September 30, 2020, compared to $43.1 million, or 0.59% of total loans, at December 31, 2019.  An additional qualitative factor was incorporated beginning in the second quarter of 2020 due to COVID-19 and its effect on overall macroeconomic conditions.  This COVID-19 qualitative factor totaled $14.9 million at June 30, 2020 and totaled $11.3 million at September 30, 2020.  This decrease of $3.6 million was primarily due to improvement in the national unemployment rate at the end of the third quarter of 2020.  The allowanceprovision for loan losses totaled $92.4 million, or 1.09% of total loans, net of unearned income, at September 30, 2020, compared to $76.6 million, or 1.05% of loans, net of unearned income, at December 31, 2019.credit losses.

 

Noninterest Income

 

Noninterest income totaled $8.2$8.5 million for the three months ended September 30, 2020,March 31, 2021, an increase of $2.0$1.8 million or 31.6%, compared to the corresponding period in 2019, and totaled $21.9 million for the nine months ended September 30, 2020, an increase of $4.92020. Mortgage banking revenue increased $1.7 million, or 29.2%157%, comparedto $2.7 million from the first quarter of 2020 to the corresponding period in 2019.first quarter of 2021.  Mortgage banking income increased $1.2 million, or 89.0%, to $2.5 million for the three months ended September 30, 2020 compared to $1.3 million for the same period in 2019, and increased $2.7 million, or 90.2%, to $5.7 million for the nine months ended September 30, 2020 compared to $3.0 million for the same period in 2019. The number of loans originated for sale to investors during first nine months of 2020loan sales increased approximately 67%106% during the first quarter of 2021 when compared to the same period in 2019. Credit2020. Net credit card incomerevenue decreased $28,000$573,000, or 33%, to $1.2 million during the three months ended March 31, 2021, compared to $1.8 million during the three months ended March 31, 2020. This decrease was primarily attributable to additional accruals for awards obligations taken in the first quarter of 2021. The number of credit card accounts increased approximately 28% and the aggregate amount of spend on all credit card accounts increased 16% during the three months ended March 31, 2021 compared to the three months ended March 31, 2020. Cash surrender value of life insurance increased $205,000, or 14%, to $1.7 million during the three months ended March 31, 2021, compared to $1.5 million during the three months ended March 31, 2020. We purchased $60 million of additional life insurance contracts during the second half of 2020.

Noninterest Expense

Noninterest expense totaled $28.9 million for the three months ended September 30, 2020March 31, 2021, an increase of $1.0 million compared to $27.9 million for the corresponding period in 2020. Salary and employee benefit expense decreased $115,000 to $15.5 million for the three months ended March 31, 2021 from $15.6 million for the corresponding period in 2020. The number of FTE employees decreased to 491 at March 31, 2021 compared to 492 at March 31, 2020. Equipment and occupancy expense increased $254,000 to $2.7 million for the three months ended March 31, 2021 from $2.4 million for the corresponding period in 2020. Third party processing and other services decreased $41,000 to $3.4 million for the three months ended March 31, 2021 compared to the samecorresponding period in 2019, and2020. Professional services decreased $182,000$25,000 to $5.0$923,000 for the three months ended March 31, 2021 from $948,000 for the corresponding period in 2020. FDIC insurance assessments increased $250,000 to $1.6 million for the ninethree months ended September 30, 2020 compared toMarch 31, 2021 from $1.3 million for the samecorresponding period in 2019. The amount2020. Our assessment base increased by 31% year-over-year. Expenses related to other real estate owned decreased $444,000 to $157,000 for the three months ended March 31, 2021 from $601,000 for the corresponding period in 2020. First quarter 2020 included write-downs in value of spendproperty based on purchase cardsupdated appraisals related to one foreclosed loan relationship. Other operating expenses increased $23.0$1.1 million whileto $4.6 million for the amount of spendthree months ended March 31, 2021 from $3.5 million for the corresponding period in 2020. We increased our allowance for credit losses on business credit cards decreased $8.0 million duringunfunded loan commitments by $600,000 in the thirdfirst quarter of 2020 when compared2021 with a charge to the third quarter of 2019. Purchase card spend carries lower profit margins than credit cards due to their higher rebates.other operating expenses.

 

4137


 

Noninterest Expense

Noninterest expense totaled $26.6 million for the three months ended September 30, 2020, an increase of $1.4 million, or 5.6%, compared to $25.2 million for the same periodChanges in 2019, and totaled $83.3 million for the nine months ended September 30, 2020, an increase of $6.8 million, or 8.9%, compared to $76.5 million for the same period in 2019.

Details of expenses are as follows:

Salary and benefit expense decreased $505,000, or 3.3%, to $15.0 million for the three months ended September 30, 2020 from $15.5 million for the same period in 2019, and increased $2.3 million, or 5.3%, to $46.4 million for the nine months ended September 30, 2020 from $44.1 million for the same period in 2019. Total employees decreased from 511 as of September 30, 2019 to 496 as of September 30, 2020, or 2.9%.

Equipment and occupancy expense increased $169,000, or 7.1%, to $2.6 million for the three months ended September 30, 2020 from $2.4 million for the corresponding period in 2019, and increased $457,000, or 6.6%, to $7.4 million from $6.9 million for the nine months ended September 30, 2020 compared to the corresponding period in 2019.

Third party processing and other services increased $358,000, or 12.2%, to $3.3 million for the three months ended September 30, 2020 from $2.9 million for the corresponding period in 2019, and increased $2.3 million, or 28.6%, to $10.4 million from $8.1 million for the nine months ended September 30, 2020 compared to the corresponding period in 2019. Limited-term licenses were added to our loan origination systems to enable more employees to assist customers with their PPP loans in 2020 which added $514,000 to third party processing expenses.

Professional services expense increased $68,000, or 7.7%, to $1.0 million for the three months ended September 30, 2020 compared to the same period in 2019, and decreased $78,000, or 2.5%, to $3.0 million for the nine months ended September 30, 2020 compared to the same period in 2019.

FDIC and other regulatory assessments increased $1.4 million to $1.1 million for the three months ended September 30, 2020 compared to the same period in 2019, and increased $1.2 million to $3.0 million for the nine months ended September 30, 2020 compared to the same period in 2019. We recognized a credit of $296,000 during the third quarter of 2019 as a result of the FDIC’s Small Bank Assessment Credit.

OREO expense increased $41,000, or 52.6%, to $119,000 for the three months ended September 30, 2020 compared to the same period in 2019, and increased $1.2 million, or 548%, to $2.0 million for the nine months ended September 30, 2020 compared to the same period in 2019. Updated appraisals resulted in write-downs in values on two properties in our Birmingham, Alabama market during the second quarter of 2020.

Other operating expenses decreased $76,000, or 2.1%, to $3.6 million for the three months ended September 30, 2020 compared to the same period in 2019, and decreased $1.1 million, or 9.1%, to $11.1 million for the nine months ended September 30, 2020 compared to the same period in 2019. Decreased lending expenses in 2020 are the result of lower loan demand due to the COVID-19 pandemic. Decreases in business development expenses in 2020 are also the resulted of the pandemic. Lower write downs in tax credit partnership investments resulted from extinguishment of partnerships at the end of 2019.

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The following table presents our non-interest income and non-interest expense forexpenses, including percentage changes, are detailed in the three and nine month periods ending September 30, 2020 compared to the same periods in 2019.following table:

 

 

Three Months Ended September 30,

      

Nine Months Ended September 30,

       

Three Months Ended March 31,

      
 

2020

  

2019

  

$ change

  

% change

  

2020

  

2019

  

$ change

  

% change

  

2021

  

2020

  

$ change

  

% change

 

Non-interest income:

                 
 

(Dollars In Thousands)

   

Noninterest income:

         

Service charges on deposit accounts

 $1,818  $1,735  $83  4.8

%

 $5,557  $5,223  $334  6.4

%

 $1,908  $1,916  $(8) (0.4

%)

Mortgage banking

 2,519  1,333  1,186  89.0

%

 5,697  2,995  2,702  90.2

%

 2,747  1,071  1,676  156.5

%

Credit card income

 1,840  1,868  (28) (1.5

%)

 5,003  5,185  (182) (3.5

%)

Securities gains

 -  34  (34) (100.0

%)

 -  28  (28) (100.0

%)

Credit cards

 1,192  1,765  (573) (32.5

%)

Increase in cash surrender value life insurance

 1,733  787  946  120.2

%

 4,650  2,327  2,323  99.8

%

 1,658  1,453  205  14.1

%

Other operating income

  262   453   (191)  (42.2

%)

  972   1,172   (200)  (17.1

%)

  958   469   489  104.3

%

Total non-interest income

 $8,172  $6,210  $1,962   31.6

%

 $21,879  $16,930  $4,949   29.2

%

Total noninterest income

 $8,463  $6,674  $1,789  26.8

%

          

Non-interest expense:

                 

Noninterest expense:

         

Salaries and employee benefits

 $14,994  $15,499  $(505) (3.3

%)

 $46,444  $44,103  $2,341  5.3

%

 $15,543  $15,658  $(115) (0.7

%)

Equipment and occupancy expense

 2,556  2,387  169  7.1

%

 7,390  6,933  457  6.6

%

Equipment and occupancy

 2,654  2,400  254  10.6

%

Third party processing and other services

 3,281  2,923  358  12.2

%

 10,360  8,058  2,302  28.6

%

 3,416  3,457  (41) (1.2

%)

Professional services

 955  887  68  7.7

%

 2,994  3,072  (78) (2.5

%)

 923  948  (25) (2.6

%)

FDIC and other regulatory assessments

 1,061  (296) 1,357  (458.4

%)

 2,988  1,804  1,184  65.6

%

 1,582  1,332  250  18.8

%

OREO expense

 119  78  41  52.6

%

 2,023  312  1,711  548.4

%

Other real estate owned

 157  601  (444) (73.9

%)

Other operating expense

  3,607   3,683   (76)  (2.1

%)

  11,110   12,227   (1,117)  (9.1

%)

  4,639   3,524   1,115  31.6

%

Total non-interest expense

 $26,573  $25,161  $1,412   5.6

%

 $83,309  $76,509  $6,800   8.9

%

Total noninterest expense

 $28,914  $27,920  $994  3.6

%

 

Income Tax Expense

 

Income tax expense was $11.0$13.0 million for the three months ended September 30, 2020 compared to $9.5March 31, 2021 versus $8.0 million for the same period in 2019, and was $29.8 million for the nine months ended September 30, 2020 compared to $27.3 million for the same period in 2019.2020. Our effective tax rate for the three and nine months ended September 30, 2020March 31, 2021 was 20.3% and 20.1%20.18%, respectively, compared to 20.2% and 20.2%18.76% for the corresponding periodsperiod in 2019, respectively.2020. We recognized excess tax benefits as a credit to our income tax expense from the exercise and vesting of stock options and vesting of restricted stock duringof $1.6 million in the three and nine months ended September 30, 2020first quarter of $180,000 and $1.4 million, respectively,2021, compared to $231,000 and $1.2$1.1 million duringin the three and nine months ended September 30, 2019, respectively.first quarter of 2020. Our primary permanent differences are related to tax exempttax-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.

38

 

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 ofrisks that our balance sheet.sheet is exposed to. Our annual budget reflects the anticipated rate environment for the next 12 months.

The asset-liability committeeALCO 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 scenarios in the first and second year is -10% and -15%, respectively, and for the two-year cumulative is -15%. 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. There have been no changes to our policies or procedures for analyzing our interest rate risk since DecemberMarch 31, 2019, and2021, there have been no materialsignificant changes to our sensitivity to changes in interest rates since December 31, 2019, as disclosed2020. However, market disruptions brought about by the COVID-19 pandemic may adversely affect our sensitivity to market interest rates. We could experience an increase in the cost of funding our Annual Reportbalance sheet. We could also experience increased pricing competition for our existing loans or future borrower prospects, which could decrease rates earned on Form 10-K.our earning assets.

43

 

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 1934.1934, 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'sSEC’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, 2020.March 31, 2021. Based upon the Evaluation, our CEO and CFO have concluded that, as of September 30, 2020,March 31, 2021, our disclosure controls and procedures are effective to ensure that material information relating to the Company.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.

 

39

Changes in Internal Control Over Financial Reporting


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.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, 2020, 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, 2019,2020, which should be taken into consideration when reviewing the information contained in this report. There have been no material changes in the Company’s risk factors from those disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019, with the exception of:

The ongoing COVID-19 pandemic and measures intended to prevent its spread may adversely affect our business, financial condition and operations, and such effects will depend on future developments, which are highly uncertain and are difficult to predict.

Global health and economic concerns relating to the COVID-19 outbreak and government actions taken to reduce the spread of the virus have had a material adverse impact on the macroeconomic environment, and the outbreak has significantly increased economic uncertainty. The pandemic has resulted in federal, state and local authorities, including those who govern the markets in which we operate, implementing numerous measures to try to contain the virus. Such measures have included travel bans and restrictions, curfews, quarantines, shelter in place or total lock-down orders and business limitations and shutdowns. Such measures have significantly contributed to rising unemployment and negatively impacted consumer and business spending. The United States government has taken steps to attempt to mitigate some of the more severe anticipated economic effects of the virus, including the passage of the CARES Act, but there can be no assurance that such steps will be effective or achieve their desired results in the near future.

44

The outbreak has adversely impacted and is likely to continue to adversely impact our workforce and operations and the operations of our customers and business partners. In particular, we may experience financial losses due to a number of operational factors impacting us or our customers or business partners, including but not limited to:

Credit losses resulting from financial stress experienced by our borrowers, especially those operating in industries most hard hit by government measures to contain the spread of the virus;

Possible business disruptions experienced by our vendors and business partners in carrying out work that supports our operations;

Heightened levels of cyber and payment fraud, as cyber criminals try to take advantage of the disruption and increased online activity brought about by the pandemic; and,

Operational failures due to changes in our normal business practices necessitated by our internal measures to protect our employees and government-mandated measures intended to slow the spread of the virus.

These factors may exist for an extended period of time and may continue to adversely affect our business, financial condition and operations even after the COVID-19 outbreak has subsided.

The extent to which the pandemic impacts our business, financial condition and operations will depend on future developments, which are highly uncertain and are difficult to predict, including, but not limited to, its duration and severity, the actions to contain it or treat its impact, and how quickly and to what extent normal economic and operating conditions can resume. Even after the pandemic has subsided, we may continue to experience materially adverse impacts to our business as a result of its economic impact, including the availability of credit, adverse impacts on our liquidity and any recession that has occurred or may occur in the future. Additionally, future outbreaks of COVID-19, or other viruses, may occur.

There are no comparable recent events that provide guidance as to the effect the spread of COVID-19 as a global pandemic may have, and, as a result, the ultimate impact of the pandemic is highly uncertain and subject to change. We do not yet know the full extent of the impacts on our business, our operations or the global economy as a whole. Therefore, the risk factors discussed in our Annual Report on Form 10-K could be heightened, changed or be added to in the future. 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.2020.

 

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:                    Description

 

10.1*Form of Executive Officer Change in Control Agreement (filed as Exhibit 10 to the Company’s Current Report on Form 8-K dated February 25, 2021)
10.2*ServisFirst Bancshares, Inc. Annual Incentive Plan, effective January 1, 2021 (filed as Exhibit 10 to the Company’s Current Report on Form 8-K dated January 25, 2021)
10.3*Form of ServisFirst Bancshares, Inc. Restricted Stock Award Agreement
10.4*Form of ServisFirst Bancshares, Inc. Performance Share Award Agreement
31.01Certification of principal executive officer pursuant to Rule 13a-14(a).
31.02Certification of principal financial officer pursuant to Rule 13a-14(a).
32.01Certification of principal executive officer pursuant to 18 U.S.C. Section 1350.
32.02Certification of principal financial officer pursuant to 18 U.S.C. Section 1350.

101.INS

Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document

101.SCHInline XBRL Taxonomy Extension Schema Document
101.CALInline XBRL Taxonomy Extension Calculation Linkbase Document
101.LABInline XBRL Taxonomy Extension Label Linkbase Document
101.PREInline XBRL Taxonomy Extension Presentation Linkbase Document
101.DEFInline XBRL Taxonomy Extension Definition Linkbase Document
104Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

 

*denotes compensatory plan or arrangement

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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: April 29, 2021

By

Date: October 28, 2020 

By

/s/ Thomas A. Broughton III

Thomas A. Broughton III

President and Chief Executive Officer

Date: April 29, 2021

By

Date: October 28, 2020

By

/s/ William M. Foshee

William M. Foshee

Chief Financial Officer

 

 

 

 

 

 

 

 

 

 

 

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