Investor Relations

Press Release

ServisFirst Bancshares, Inc. Announces Results For Second Quarter of 2020

Company Release - 7/20/2020 4:01 PM ET

BIRMINGHAM, Ala., July 20, 2020 (GLOBE NEWSWIRE) -- ServisFirst Bancshares, Inc. (NASDAQ: SFBS), today announced earnings and operating results for the three and six months ended June 30, 2020.

Second Quarter 2020 Highlights:

  • Diluted EPS for the second quarter increased 14% to $0.75 year over year
  • Record deposit growth of $1.5 billion during the second quarter
  • Funded approximately 4,800 Payroll Protection Program (“PPP”) loans totaling over $1.0 billion, with 68% less than $150,000 in size
  • Asset quality improved, with nonperforming loans to total loans improving to 26 basis points during the second quarter
  • Total assets exceed $11.0 billion
 
FINANCIAL SUMMARY (UNAUDITED) 
(in Thousands except share and per share amounts) 
                   
  Period Ending June 30, 2020 Period Ending March 31, 2020 % Change From Period Ending March 31, 2020 to Period Ending June 30, 2020 Period Ending June 30, 2019 % Change From Period Ending June 30, 2019 to Period Ending June 30, 2020
QUARTERLY OPERATING RESULTS                  
Net Income $40,448  $34,778  16% $35,633  14%
Net Income Available to Common Stockholders $40,417  $34,778  16% $35,602  14%
Diluted Earnings Per Share $0.75  $0.64  17% $0.66  14%
Return on Average Assets  1.55%  1.54%     1.69%   
Return on Average Common Stockholders' Equity  18.40%  16.23%     18.72%   
Average Diluted Shares Outstanding  54,194,506   54,167,414      54,089,107    
                   
YEAR-TO-DATE OPERATING RESULTS                  
Net Income $75,226         $70,643  6%
Net Income Available to Common Stockholders $75,195         $70,612  6%
Diluted Earnings Per Share $1.39         $1.31  6%
Return on Average Assets  1.54%         1.72%   
Return on Average Common Stockholders' Equity  17.31%         19.06%   
Average Diluted Shares Outstanding  54,180,960          54,082,857    
                   
BALANCE SHEET                  
Total Assets $11,012,195  $9,364,882  18% $8,740,237  26%
Loans  8,315,375   7,568,836  10%  6,967,886  19%
Non-interest-bearing Demand Deposits  2,678,893   1,925,626  39%  1,576,959  70%
Total Deposits  9,342,918   7,832,655  19%  7,404,794  26%
Stockholders' Equity  914,588   881,885  4%  778,957  17%
                   

DETAILED FINANCIALS

ServisFirst Bancshares, Inc. reported net income and net income available to common stockholders of $40.4 million for the quarter ended June 30, 2020, compared to net income and net income available to common stockholders of $35.6 million for the same quarter in 2019.  Basic and diluted earnings per common share were $0.75 and $0.75, respectively, for the second quarter of 2020, compared to $0.67 and $0.66, respectively, for the second quarter of 2019.

Annualized return on average assets was 1.55% and annualized return on average common stockholders’ equity was 18.40% for the second quarter of 2020, compared to 1.69% and 18.72%, respectively, for the second quarter of 2019.

Net interest income was $83.2 million for the second quarter of 2020, compared to $77.6 million for the first quarter of 2020 and $70.1 million for the second quarter of 2019.  The net interest margin in the second quarter of 2020 was 3.32% compared to 3.58% in the first quarter of 2020 and 3.44% in the second quarter of 2019.  Origination of PPP loans and increased excess liquidity drove unfavorable rate and mix changes while lower deposit rates and increases in noninterest bearing demand balances drove favorable rate and mix changes, respectively.  Accretion of net fees on PPP loans of $2.6 million during the second quarter of 2020 offset the decrease in loan yield by approximately 12 basis points.

Average loans for the second quarter of 2020 were $8.33 billion, an increase of $972.6 million, or 52% annualized, over average loans of $7.36 billion for the first quarter of 2020, and an increase of $1.54 billion, or 23%, over average loans of $6.79 billion for the second quarter of 2019.  We originated over 4,800 PPP loans during the second quarter of 2020 for a total of $1.05 billion.  Average total balances of PPP loans for the second quarter of 2020 were $885.5 million.  Excluding PPP loans, average loans for the second quarter of 2020 were $7.45 billion, an increase of $87.0 million over average loans for the first quarter of 2020, and an increase of $659.1 million, or 10%, over average loans for the second quarter of 2019.

Average total deposits for the second quarter of 2020 were $8.87 billion, an increase of $1.23 billion, or 64% annualized, over average total deposits of $7.64 billion for the first quarter of 2020, and an increase of $1.69 billion, or 24%, over average total deposits of $7.18 billion for the second quarter of 2019.

Nonperforming assets to total assets were 0.26% for the second quarter of 2020, a decrease of 18 basis points compared to 0.44% for the first quarter of 2020 and a decrease of 17 basis points compared to 0.43% for the second quarter of 2019.  Annualized net charge-offs to average loans were 0.20%, a six basis-point decrease compared to 0.26% for the first quarter of 2020 and a decrease of two basis points compared to 0.22% for the second quarter of 2019.  We recorded a $10.3 million provision for loan losses in the second quarter of 2020 compared to $13.6 million in the first quarter of 2020 and $4.9 million in the second quarter of 2019.  The allowance for loan loss as a percentage of total loans was 1.10% at June 30, 2020, a decrease of 3 basis points compared to 1.13% at March 31, 2020 and an increase of 8 basis points compared to 1.02% at June 30, 2019.  Excluding PPP loans, the allowance for loan loss as a percentage of total loans was 1.26% at June 30, 2020.  The CARES Act, passed into law on March 27, 2020 as a result of the COVID-19 outbreak, allows companies to delay their adoption of Accounting Standards Update (ASU) 2016-13, Measurement of Credit Losses on Financial Instruments (CECL), including the current expected credit losses methodology for estimating allowances for credit losses. We have elected to delay adoption of ASU 2016-13 until the date on which the national emergency concerning the COVID-19 outbreak terminates or December 31, 2020, with an effective retrospective implementation date of January 1, 2020.  In management’s opinion, the allowance is adequate and was determined by consistent application of ServisFirst Bank’s methodology for calculating its allowance for loan losses.

Noninterest income for the second quarter of 2020 increased $1.2 million, or 22%, to $7.0 million from $5.8 million in the second quarter of 2019.  Mortgage banking revenue increased $1.0 million, or 94%, from the second quarter of 2019 to the second quarter of 2020.  Mortgage loan origination volumes increased approximately 65% during the second quarter of 2020 when compared to the same quarter in 2019.  Additionally, more of the originations in 2020 were sellable loans, driving higher gains on sale.  Credit card revenue decreased $343,000, or 20%, to $1.4 million during the second quarter of 2020, compared to $1.7 million during the second quarter of 2019.  The amount of spend on purchase cards increased $20.5 million while the amount of spend on business credit cards decreased $14.3 million during the second quarter of 2020 when compared to the second quarter of 2019.  Purchase card spend carries lower profit margins than credit cards due to their higher rebates.  Income on life insurance policies increased $686,000, or 88%, to $1.5 million during the second quarter of 2020, compared to $778,000 during the second quarter of 2019.  We purchased an additional $75.0 million in BOLI contracts during the third quarter of 2019.  Other income for the second quarter of 2020 decreased $151,000, or 39%, to $241,000 from $392,000 in the second quarter of 2019.  On May 4, 2020 we bought an interest rate cap with a term of three years and a notional amount of $300 million.  The cap is tied to one-month LIBOR with a strike rate of 0.50%.  We wrote down the value of the cap by $252,000 during the second quarter of 2020 through other income and are amortizing the fee paid to our counterparty over the life of the cap.

Noninterest expense for the second quarter of 2020 increased $2.8 million, or 11%, to $28.8 million from $26.0 million in the second quarter of 2019, and increased $896,000, or 3%, on a linked quarter basis.  Salary and benefit expense for the second quarter of 2020 increased $1.5 million, or 10%, to $15.8 million from $14.3 million in the second quarter of 2019, and increased $134,000, or 1%, on a linked quarter basis.  Costs to originate PPP loans totaling $2.4 million were incurred during the second quarter of 2020.  These costs were credited against salary and benefits as a deferred expense and will be amortized over the life of the loans by netting them against accretion of deferred origination fees.  Bonuses of approximately $2.5 million were paid during the second quarter of 2020 related to work performed on the PPP.  Additional bonuses of $71,000 were paid to front-line employees who continued to assist customers during the peak of the pandemic.  Equipment and occupancy expense increased $147,000, or 6%, to $2.4 million in the second quarter of 2020, from $2.3 million in the second quarter of 2019.  Third party processing expenses increased $789,000, or 29%, to $3.5 million in the second quarter of 2020, from $2.7 million in the second quarter of 2019.  Limited-term licenses were added to our loan origination systems to enable more employees to assist customers with their PPP loans.  These licenses added $514,000 to third party processing expenses during the second quarter of 2020.  Professional services expense decreased $100,000, or 8%, to $1.1 million in the second quarter of 2020, from $1.2 million in the second quarter of 2019, and increased $143,000, or 15%, from $948,000 on a linked-quarter basis.  FDIC and other regulatory assessments decreased $486,000, or 45%, to $595,000 in the second quarter of 2020, from $1.1 million in the second quarter of 2019.  Lower growth in assets during the second quarter of 2020, excluding PPP loans, resulted in us adjusting our accrual for assessments to be paid at the end of the third quarter of 2020.  Expenses associated with other real estate owned increased $1.1 million to $1.3 million in the second quarter of 2020, from $212,000 in the second quarter of 2019.  Updated appraisals resulted in write-downs in values on two properties in our Birmingham, Alabama market.  Other operating expenses for the second quarter of 2020 decreased $100,000, or 2%, to $4.1 million from $4.2 million in the second quarter of 2019, and increased $452,000, or 12%, on a linked-quarter basis.  The efficiency ratio was 31.92% during the second quarter of 2020 compared to 34.30% during the second quarter of 2019 and compared to 33.11% during the first quarter of 2020.

Income tax expense increased $1.4 million, or 15%, to $10.7 million in the second quarter of 2020, compared to $9.3 million in the second quarter of 2019.  Our effective tax rate was 20.95% for the second quarter of 2020 compared to 20.74% for the second quarter of 2019.  State of Alabama tax credit investments matured at the end of 2019, causing our state credit amounts to decrease from $497,000 during the second quarter of 2019 to $132,000 during the second quarter of 2020.  We recognized a reduction in provision for income taxes resulting from excess tax benefits from the exercise and vesting of stock options and restricted stock during the second quarters of 2020 and 2019 of $136,000 and $186,000, respectively.

GAAP Reconciliation and Management Explanation of Non-GAAP Financial Measures

This press release contains certain non-GAAP financial measures, including tangible common stockholders’ equity, total tangible assets, tangible book value per share and tangible common equity to total tangible assets, each of which excludes goodwill and core deposit intangibles associated with our acquisition of Metro Bancshares, Inc. in January 2015.  We believe these non-GAAP financial measures provide useful information to management and investors that is supplementary to our financial condition, results of operations and cash flows computed in accordance with GAAP; however, we acknowledge that these non-GAAP financial measures have a number of limitations.  As such, you should not view these disclosures as a substitute for results determined in accordance with GAAP, and they are not necessarily comparable to non-GAAP financial measures that other companies, including those in our industry, use.  The following reconciliation table provides a more detailed analysis of the non-GAAP financial measures as of and for the comparative periods presented in this press release.  Dollars are in thousands, except share and per share data.

  At June 30,
2020
 At March 31,
2020
 At December 31,
2019
 At September 30,
2019
 At June 30,
2019
Book value per share - GAAP $16.98  $16.38  $15.71  $15.13  $14.55 
Total common stockholders' equity - GAAP  914,588   881,886   842,682   810,537   778,957 
Adjustments:                    
Adjusted for goodwill and core deposit intangible asset  14,043   14,111   14,179   14,246   14,314 
Tangible common stockholders' equity - non-GAAP $900,545  $867,775  $828,503  $796,291  $764,643 
Tangible book value per share - non-GAAP $16.72  $16.12  $15.45  $14.86  $14.29 
                     
Stockholders' equity to total assets - GAAP  8.31%  9.42%  9.42%  9.00%  8.91%
Total assets - GAAP $11,012,195  $9,364,882  $8,947,653  $9,005,112  $8,740,237 
Adjustments:                    
Adjusted for goodwill and core deposit intangible asset  14,043   14,111   14,179   14,246   14,314 
Total tangible assets - non-GAAP $10,998,152  $9,350,771  $8,933,474  $8,990,866  $8,725,923 
Tangible common equity to total tangible assets - non-GAAP  8.19%  9.28%  9.27%  8.86%  8.76%

About ServisFirst Bancshares, Inc.

ServisFirst Bancshares, Inc. is a bank holding company based in Birmingham, Alabama. Through its subsidiary ServisFirst Bank, ServisFirst Bancshares, Inc. provides business and personal financial services from locations in Birmingham, Huntsville, Montgomery, Mobile and Dothan, Alabama, Pensacola, Sarasota and Tampa Bay, Florida, Atlanta, Georgia, Charleston, South Carolina and Nashville, Tennessee.

ServisFirst Bancshares, Inc. files periodic reports with the U.S. Securities and Exchange Commission (SEC).  Copies of its filings may be obtained through the SEC’s website at www.sec.gov or at www.servisfirstbancshares.com.

Statements in this press release that are not historical facts, including, but not limited to, statements concerning future operations, results or performance, are hereby identified as "forward-looking statements" for the purpose of the safe harbor provided by Section 21E of the Securities Exchange Act of 1934 and Section 27A of the Securities Act of 1933.  The words "believe," "expect," "anticipate," "project," “plan,” “intend,” “will,” “could,” “would,” “might” and similar expressions often signify forward-looking statements. Such statements involve inherent risks and uncertainties. ServisFirst Bancshares, Inc. cautions that such forward-looking statements, wherever they occur in this press release or in other statements attributable to ServisFirst Bancshares, Inc., are necessarily estimates reflecting the judgment of ServisFirst Bancshares, Inc.’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 the 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, including, but not limited to, economic stimulus initiatives; 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-bank financial institutions.  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, in 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. Accordingly, you should not place undue reliance on any forward-looking statements, which speak only as of the date made.  ServisFirst Bancshares, Inc. assumes no obligation to update or revise any forward-looking statements that are made from time to time.

More information about ServisFirst Bancshares, Inc. may be obtained over the Internet at www.servisfirstbancshares.com  or by calling (205) 949-0302.

Contact:ServisFirst Bank
Davis Mange (205) 949-3420
dmange@servisfirstbank.com

                     
SELECTED FINANCIAL HIGHLIGHTS (Unaudited)
 
(In thousands except share and per share data)
 
  2nd Quarter 2020 1st Quarter 2020 4th Quarter 2019 3rd Quarter 2019 2nd Quarter 2019
CONSOLIDATED STATEMENT OF INCOME                    
Interest income $95,080  $96,767  $98,187  $101,130  $97,787 
Interest expense  11,846   19,127   22,410   28,125   27,702 
Net interest income  83,234   77,640   75,777   73,005   70,085 
Provision for loan losses  10,283   13,584   5,884   6,985   4,884 
Net interest income after provision for loan losses  72,951   64,056   69,893   66,020   65,201 
Non-interest income  7,033   6,674   6,936   6,202   5,778 
Non-interest expense  28,816   27,920   25,503   25,153   26,022 
Income before income tax  51,168   42,810   51,326   47,069   44,957 
Provision for income tax  10,720   8,032   10,289   9,506   9,324 
Net income  40,448   34,778   41,037   37,563   35,633 
Preferred stock dividends  31   -   32   -   31 
Net income available to common stockholders $40,417  $34,778  $41,005  $37,563  $35,602 
Earnings per share - basic $0.75  $0.65  $0.77  $0.70  $0.67 
Earnings per share - diluted $0.75  $0.64  $0.76  $0.69  $0.66 
Average diluted shares outstanding  54,194,506   54,167,414   54,149,554   54,096,368   54,089,107 
                     
CONSOLIDATED BALANCE SHEET DATA                    
Total assets $11,012,195  $9,364,882  $8,947,653  $9,005,112  $8,740,237 
Loans  8,315,375   7,568,836   7,261,451   7,022,069   6,967,886 
Debt securities  856,378   827,032   759,649   688,271   658,221 
Non-interest-bearing demand deposits  2,678,893   1,925,626   1,749,879   1,678,672   1,576,959 
Total deposits  9,342,918   7,832,655   7,530,433   7,724,158   7,404,794 
Borrowings  64,715   64,707   64,703   64,693   64,684 
Stockholders' equity $914,588  $881,885  $842,682  $810,537  $778,957 
                     
Shares outstanding  53,874,276   53,844,009   53,623,740   53,579,013   53,526,882 
Book value per share $16.98  $16.38  $15.71  $15.13  $14.55 
Tangible book value per share (1) $16.72  $16.12  $15.45  $14.86  $14.29 
                     
SELECTED FINANCIAL RATIOS (Annualized)                    
Net interest margin  3.32%  3.58%  3.47%  3.36%  3.44%
Return on average assets  1.55%  1.54%  1.80%  1.67%  1.69%
Return on average common stockholders' equity  18.40%  16.23%  19.75%  18.69%  18.72%
Efficiency ratio  31.92%  33.11%  30.83%  31.76%  34.30%
Non-interest expense to average earning assets  1.15%  1.29%  1.17%  1.16%  1.28%
                     
CAPITAL RATIOS (2)                    
Common equity tier 1 capital to risk-weighted assets  11.26%  10.68%  10.50%  10.39%  10.18%
Tier 1 capital to risk-weighted assets  11.27%  10.68%  10.50%  10.39%  10.19%
Total capital to risk-weighted assets  13.27%  12.54%  12.31%  12.27%  12.02%
Tier 1 capital to average assets  9.24%  9.56%  9.13%  8.88%  9.00%
Tangible common equity to total tangible assets (1)  8.19%  9.28%  9.27%  8.86%  8.76%
                     
(1) See "GAAP Reconciliation and Management Explanation of Non-GAAP Financial Measures" for a discussion of these Non-GAAP financial measures.
(2) Regulatory capital ratios for most recent period are preliminary.


          
CONSOLIDATED BALANCE SHEETS (UNAUDITED)  
(Dollars in thousands)  
  June 30, 2020 June 30, 2019 % Change
ASSETS         
Cash and due from banks $102,282  $68,841  49%
Interest-bearing balances due from depository institutions  1,444,293   409,052  253%
Federal funds sold  2,352   408,289  (99)%
Cash and cash equivalents  1,548,927   886,182  75%
Available for sale debt securities, at fair value  856,128   657,971  30%
Held to maturity debt securities (fair value of $250 at June 30, 2020 and 2019)  250   250  -%
Mortgage loans held for sale  14,491   9,446  53%
Loans  8,315,375   6,967,886  19%
Less allowance for loan losses  (91,507)  (71,386) 28%
Loans, net  8,223,868   6,896,500  19%
Premises and equipment, net  55,588   57,195  (3)%
Goodwill and other identifiable intangible assets  14,043   14,314  (2)%
Other assets  298,900   218,379  37%
Total assets $11,012,195  $8,740,237  26%
LIABILITIES AND STOCKHOLDERS' EQUITY         
Liabilities:         
Deposits:         
Non-interest-bearing $2,678,893  $1,576,959  70%
Interest-bearing  6,664,025   5,827,835  14%
Total deposits  9,342,918   7,404,794  26%
Federal funds purchased  635,606   459,449  38%
Other borrowings  64,715   64,684  -%
Other liabilities  54,368   32,353  68%
Total liabilities  10,097,607   7,961,280  27%
Stockholders' equity:         
Preferred stock, par value $0.001 per share; 1,000,000 authorized and undesignated at         
June 30, 2020 and June 30, 2019  -   -    
Common stock, par value $0.001 per share; 100,000,000 shares authorized; 53,874,276 shares         
issued and outstanding at June 30, 2020, and 53,526,882 shares issued and outstanding         
at June 30, 2019  54   54  -%
Additional paid-in capital  222,437   218,658  2%
Retained earnings  672,984   555,425  21%
Accumulated other comprehensive income  18,611   4,318  331%
Total stockholders' equity attributable to ServisFirst Bancshares, Inc.  914,086   778,455  17%
Noncontrolling interest  502   502  -%
Total stockholders' equity  914,588   778,957  17%
Total liabilities and stockholders' equity $11,012,195  $8,740,237  26%


CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(In thousands except per share data)
  Three Months Ended June 30, Six Months Ended June 30,
  2020 2019 2020 2019
Interest income:            
Interest and fees on loans $89,383 $88,610  $178,768 $174,134 
Taxable securities  5,092  4,193   10,246  7,939 
Nontaxable securities  211  393   444  839 
Federal funds sold  34  1,998   311  3,217 
Other interest and dividends  360  2,593   2,078  5,357 
Total interest income  95,080  97,787   191,847  191,486 
Interest expense:            
Deposits  10,756  24,240   27,501  46,385 
Borrowed funds  1,090  3,462   3,472  6,238 
Total interest expense  11,846  27,702   30,973  52,623 
Net interest income  83,234  70,085   160,874  138,863 
Provision for loan losses  10,283  4,884   23,867  9,769 
Net interest income after provision for loan losses  72,951  65,201   137,007  129,094 
Non-interest income:            
Service charges on deposit accounts  1,823  1,786   3,739  3,488 
Mortgage banking  2,107  1,087   3,178  1,662 
Credit card income  1,398  1,741   3,163  3,317 
Securities losses  -  (6)  -  (6)
Increase in cash surrender value life insurance  1,464  778   2,917  1,540 
Other operating income  241  392   710  721 
Total non-interest income  7,033  5,778   13,707  10,722 
Non-interest expense:            
Salaries and employee benefits  15,792  14,339   31,450  28,604 
Equipment and occupancy expense  2,434  2,287   4,834  4,546 
Third party processing and other services  3,513  2,724   6,858  5,135 
Professional services  1,091  1,191   2,039  2,185 
FDIC and other regulatory assessments  595  1,081   1,927  2,100 
Other real estate owned expense  1,303  212   1,904  234 
Other operating expense  4,088  4,188   7,724  8,546 
Total non-interest expense  28,816  26,022   56,736  51,350 
Income before income tax  51,168  44,957   93,978  88,466 
Provision for income tax  10,720  9,324   18,752  17,823 
Net income  40,448  35,633   75,226  70,643 
Dividends on preferred stock  31  31   31  31 
Net income available to common stockholders $40,417 $35,602  $75,195 $70,612 
Basic earnings per common share $0.75 $0.67  $1.40 $1.32 
Diluted earnings per common share $0.75 $0.66  $1.39 $1.31 


LOANS BY TYPE (UNAUDITED)
        
(In thousands)
        
                     
  2nd Quarter 2020 1st Quarter 2020 4th Quarter 2019 3rd Quarter 2019 2nd Quarter 2019
Commercial, financial and agricultural $3,498,627  $2,771,307  $2,696,210  $2,653,934  $2,633,529 
Real estate - construction  544,586   548,578   521,392   550,871   603,779 
Real estate - mortgage:                    
Owner-occupied commercial  1,634,495   1,678,532   1,587,478   1,526,911   1,538,279 
1-4 family mortgage  665,883   675,870   644,188   632,346   630,963 
Other mortgage  1,911,384   1,834,137   1,747,394   1,592,072   1,496,512 
Subtotal: Real estate - mortgage  4,211,762   4,188,539   3,979,060   3,751,329   3,665,754 
Consumer  60,400   60,412   64,789   65,935   64,824 
Total loans $8,315,375  $7,568,836  $7,261,451  $7,022,069  $6,967,886 


SUMMARY OF LOAN LOSS EXPERIENCE (UNAUDITED)                 
(Dollars in thousands)                 
  2nd Quarter 2020 1st Quarter 2020 4th Quarter 2019 3rd Quarter 2019 2nd Quarter 2019
Allowance for loan losses:                    
Beginning balance $85,414  $76,584  $77,192  $71,386  $70,207 
Loans charged off:                    
Commercial, financial and agricultural  1,358   2,640   4,742   3,626   3,610 
Real estate - construction  376   454   -   -   - 
Real estate - mortgage  2,520   1,678   1,689   4,974   169 
Consumer  62   58   139   172   63 
Total charge offs  4,316   4,830   6,570   8,772   3,842 
Recoveries:                    
Commercial, financial and agricultural  84   62   51   126   117 
Real estate - construction  1   1   1   1   - 
Real estate - mortgage  13   1   2   -   4 
Consumer  28   12   24   60   16 
Total recoveries  126   76   78   187   137 
Net charge-offs  4,190   4,754   6,492   8,585   3,705 
Allocation from Loan Guarantee Program  -   -   -   7,406   - 
Provision for loan losses  10,283   13,584   5,884   6,985   4,884 
Ending balance $91,507  $85,414  $76,584  $77,192  $71,386 
                     
Allowance for loan losses to total loans  1.10%  1.13%  1.05%  1.10%  1.02%
Allowance for loan losses to total average loans  1.10%  1.16%  1.08%  1.11%  1.05%
Net charge-offs to total average loans  0.20%  0.26%  0.36%  0.49%  0.22%
Provision for loan losses to total average loans  0.50%  0.74%  0.33%  0.40%  0.29%
Nonperforming assets:                    
Nonaccrual loans $16,881  $28,914  $30,091  $35,732  $21,840 
Loans 90+ days past due and accruing  5,133   4,954   6,021   5,317   10,299 
Other real estate owned and repossessed assets  6,537   7,448   8,178   5,337   5,649 
Total $28,551  $41,316  $44,290  $46,386  $37,788 
                     
Nonperforming loans to total loans  0.26%  0.45%  0.50%  0.58%  0.46%
Nonperforming assets to total assets  0.26%  0.44%  0.50%  0.52%  0.43%
Nonperforming assets to earning assets  0.26%  0.45%  0.50%  0.53%  0.44%
Reserve for loan losses to nonaccrual loans  542.07%  295.41%  254.51%  216.03%  326.86%
                     
Restructured accruing loans $975  $975  $625  $3,468  $2,742 
                     
Restructured accruing loans to total loans  0.01%  0.01%  0.01%  0.05%  0.04%
                     
TROUBLED DEBT RESTRUCTURINGS (TDRs) (UNAUDITED)             
(In thousands)                
  2nd Quarter 2020 1st Quarter 2020 4th Quarter 2019 3rd Quarter 2019 2nd Quarter 2019
Beginning balance: $2,367  $3,330  $11,248  $11,284  $12,289 
Additions  -   350   250   -   - 
Net (paydowns) / advances  (12)  (232)  (3,481)  714   (12)
Charge-offs  (412)  (1,081)  (1,333)  (750)  (993)
Transfer to OREO  (375)  -   (3,354)  -   - 
Ending balance $1,568  $2,367  $3,330  $11,248  $11,284 


CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)         
(In thousands except per share data)         
  2nd Quarter
2020
 1st Quarter
2020
 4th Quarter
2019
 3rd Quarter
2019
 2nd Quarter
2019
Interest income:                 
Interest and fees on loans $89,383  $89,385  $89,407  $90,767  $88,610 
Taxable securities  5,092   5,154   4,702   4,367   4,193 
Nontaxable securities  211   233   274   316   393 
Federal funds sold  34   277   1,053   1,768   1,998 
Other interest and dividends  360   1,718   2,751   3,912   2,593 
Total interest income  95,080   96,767   98,187   101,130   97,787 
Interest expense:                 
Deposits  10,756   16,745   19,786   24,787   24,240 
Borrowed funds  1,090   2,382   2,624   3,338   3,462 
Total interest expense  11,846   19,127   22,410   28,125   27,702 
Net interest income  83,234   77,640   75,777   73,005   70,085 
Provision for loan losses  10,283   13,584   5,884   6,985   4,884 
Net interest income after provision for loan losses  72,951   64,056   69,893   66,020   65,201 
Non-interest income:                 
Service charges on deposit accounts  1,823   1,916   1,806   1,735   1,786 
Mortgage banking  2,107   1,071   1,366   1,333   1,087 
Credit card income  1,398   1,765   1,891   1,868   1,741 
Securities (losses) gains  -   -   (1)  34   (6)
Increase in cash surrender value life insurance  1,464   1,453   1,419   787   778 
Other operating income  241   469   455   445   392 
Total non-interest income  7,033   6,674   6,936   6,202   5,778 
Non-interest expense:                 
Salaries and employee benefits  15,792   15,658   13,680   15,499   14,339 
Equipment and occupancy expense  2,434   2,400   2,339   2,387   2,287 
Third party processing and other services  3,513   3,345   3,176   2,923   2,724 
Professional services  1,091   948   1,163   887   1,191 
FDIC and other regulatory assessments  595   1,332   1,171   (296)  1,081 
Other real estate owned expense  1,303   601   103   78   212 
Other operating expense  4,088   3,636   3,871   3,675   4,188 
Total non-interest expense  28,816   27,920   25,503   25,153   26,022 
Income before income tax  51,168   42,810   51,326   47,069   44,957 
Provision for income tax  10,720   8,032   10,289   9,506   9,324 
Net income  40,448   34,778   41,037   37,563   35,633 
Dividends on preferred stock  31   -   32   -   31 
Net income available to common stockholders $40,417  $34,778  $41,005  $37,563  $35,602 
Basic earnings per common share $0.75  $0.65  $0.77  $0.70  $0.67 
Diluted earnings per common share $0.75  $0.64  $0.76  $0.69  $0.66 


                                
AVERAGE BALANCE SHEETS AND NET INTEREST ANALYSIS (UNAUDITED)
ON A FULLY TAXABLE-EQUIVALENT BASIS
(Dollars in thousands)
                               
  2nd Quarter 2020 1st Quarter 2020 4th Quarter 2019 3rd Quarter 2019 2nd Quarter 2019
  Average Balance Yield /
Rate
 Average Balance Yield /
Rate
 Average Balance Yield /
Rate
 Average Balance Yield /
Rate
 Average Balance Yield /
Rate
Assets:                              
Interest-earning assets:                              
Loans, net of unearned income (1)                              
Taxable $8,301,775 4.31% $7,328,594 4.89% $7,066,576 5.00% $6,927,075 5.18% $6,756,927  5.24%
Tax-exempt (2)  31,929 4.12   32,555 4.04   35,563 4.00   34,195 3.98   32,124  3.83 
Total loans, net of unearned income  8,333,704 4.31   7,361,149 4.88   7,102,139 4.99   6,961,270 5.17   6,789,051  5.23 
Mortgage loans held for sale  13,278 2.09   4,282 2.16   6,505 2.44   6,482 2.45   5,208  3.85 
Debt securities:                              
Taxable  761,575 2.67   750,413 2.75   670,732 2.81   595,405 2.93   565,491  2.97 
Tax-exempt (2)  38,201 2.62   44,029 2.33   50,825 2.17   59,992 2.21   77,364  2.10 
Total securities (3)  799,776 2.67   794,442 2.72   721,557 2.76   655,397 2.87   642,855  2.86 
Federal funds sold  83,274 0.16   105,423 1.06   238,927 1.75   312,968 2.24   323,714  2.48 
Interest-bearing balances with banks  849,549 0.17   469,199 1.47   602,755 1.81   690,973 2.25   411,481  2.53 
Total interest-earning assets $10,079,581 3.80% $8,734,495 4.46% $8,671,883 4.49% $8,627,090 4.65% $8,172,309  4.80%
Non-interest-earning assets:                              
Cash and due from banks  76,212     66,140     70,381     71,418     76,988    
Net premises and equipment  57,446     58,066     57,986     58,243     58,607    
Allowance for loan losses, accrued interest and other assets  248,702     241,479     233,885     162,654     156,264    
Total assets $10,461,941    $9,100,180    $9,034,135    $8,919,405    $8,464,168    
                               
Interest-bearing liabilities:                              
Interest-bearing deposits:                              
Checking $992,848 0.35% $956,803 0.57% $961,258 0.69% $900,754 0.84% $909,847  0.88%
Savings  72,139 0.42   67,380 0.50   62,311 0.53   57,431 0.60   54,391  0.57 
Money market  4,285,907 0.52   4,061,286 1.10   4,189,283 1.34   4,265,435 1.76   3,932,459  1.88 
Time deposits  877,448 1.95   805,924 2.09   712,155 2.15   703,278 2.20   694,414  2.16 
Total interest-bearing deposits  6,228,342 0.69   5,891,393 1.14   5,925,007 1.32   5,926,898 1.66   5,591,111  1.74 
Federal funds purchased  572,990 0.22   492,638 1.31   420,066 1.74   441,526 2.30   418,486  2.57 
Other borrowings  64,711 4.85   64,707 4.85   64,698 4.79   64,689 4.79   64,680  4.84 
Total interest-bearing liabilities $6,866,043 0.69% $6,448,738 1.19% $6,409,771 1.39% $6,433,113 1.73% $6,074,277  1.83%
Non-interest-bearing liabilities:                              
Non-interest-bearing checking  2,646,030     1,749,671     1,759,671     1,654,928     1,591,722    
Other liabilities  69,061     39,801     41,112     34,070     35,161    
Stockholders' equity  862,500     853,800     818,320     792,284     763,742    
Accumulated other comprehensive income (loss)  18,307     8,170     5,261     5,010     (734)   
Total liabilities and stockholders' equity $10,461,941    $9,100,180    $9,034,135    $8,919,405    $8,464,168    
Net interest spread    3.11%    3.27%    3.10%    2.92%    2.97%
Net interest margin    3.32%    3.58%    3.47%    3.36%    3.44%
                               
(1)  Average loans include loans on which the accrual of interest has been discontinued.
(2)  Interest income and yields are presented on a fully taxable equivalent basis using a tax rate of 21%.
(3)  Unrealized losses on available-for-sale debt securities are excluded from the yield calculation.



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Source: ServisFirst Bancshares, Inc.