Press Releases

ServisFirst Bancshares, Inc. Announces Results for First Quarter of 2020

BIRMINGHAM, Ala., April 20, 2020 (GLOBE NEWSWIRE) -- ServisFirst Bancshares, Inc. (NASDAQ: SFBS), today announced earnings and operating results for the quarter ended March 31, 2020.

First Quarter 2020 Highlights:

  • Net income of $34.8 million for the quarter
  • Net interest margin increased to 3.58% compared to 3.47% in the fourth quarter of 2019
  • Diluted earnings per share were $0.64 for the quarter
  • Deposits grew 16% annualized during the quarter
  • Loan loss reserves were enhanced during the quarter in light of current economic conditions
  • Non-interest income increased by $1.7 million, or 35%, year-over-year

Tom Broughton, Chairman, President and CEO, said, “Our current focus is on serving our client needs during the current pandemic and our team has done an outstanding job. I could not be more proud of our hard working bankers who have gone above and beyond.  They are what makes our company a standout in our industry for customer service.”

Bud Foshee, CFO, said, “We are pleased to have a strong balance sheet and solid profitability that positions us well during the current pandemic and beyond. Our return on average assets was 1.54% during the first quarter. Our pre-tax, pre-provision return on average assets was 2.49% during the first quarter, which is among the best in the banking industry.”

FINANCIAL SUMMARY (UNAUDITED)                                      
(in Thousands except share and per share amounts)                                
                                           
        Period Ending
March 31, 2020
  Period Ending
December 31,
2019
  % Change
From Period
Ending
December 31,
2019 to Period
Ending March
31, 2020
  Period Ending
March 31, 2019
  % Change
From Period
Ending March
31, 2019 to
Period Ending
March 31,
2020
 
QUARTERLY OPERATING RESULTS                                      
Net Income   $ 34,778     $ 41,037     (15 ) %   $ 35,010     (1 ) %  
Net Income Available to Common Stockholders   $ 34,778     $ 41,005     (15 ) %   $ 35,010     (1 ) %  
Diluted Earnings Per Share   $ 0.64     $ 0.76     (16 ) %   $ 0.65     (2 ) %  
Return on Average Assets     1.54 %     1.80 %           1.75 %        
Return on Average Common Stockholders' Equity     16.23 %     19.75 %           19.42 %        
Average Diluted Shares Outstanding     54,167,414       54,149,554             54,076,538          
                                           
BALANCE SHEET                                      
Total Assets   $ 9,364,882     $ 8,947,653     5   %   $ 8,310,836     13   %  
Loans     7,568,836       7,261,451     4   %     6,659,908     14   %  
Non-interest-bearing Demand Deposits     1,925,626       1,749,879     10   %     1,572,703     22   %  
Total Deposits     7,832,655       7,530,433     4   %     7,083,666     11   %  
Stockholders' Equity     881,885       842,682     5   %     745,586     18   %  
                                           

DETAILED FINANCIALS

ServisFirst Bancshares, Inc. reported net income and net income available to common stockholders of $34.8 million for the quarter ended March 31, 2020, compared to net income and net income available to common stockholders of $35.0 million for the same quarter in 2019.  Basic and diluted earnings per common share were $0.65 and $0.64, respectively, for the first quarter of 2020, compared to $0.65 and $0.65, respectively, for the first quarter of 2019.

Annualized return on average assets was 1.54% and annualized return on average common stockholders’ equity was 16.23% for the first quarter of 2020, compared to 1.75% and 19.42%, respectively, for the first quarter of 2019.

Net interest income was $77.6 million for the first quarter of 2020, compared to $75.8 million for the fourth quarter of 2019 and $68.8 million for the first quarter of 2019.  The net interest margin in the first quarter of 2020 was 3.58% compared to 3.47% in the fourth quarter of 2019 and 3.56% in the first quarter of 2019.  Linked quarter decreases in average rates paid on deposits in excess of decreases in loan yields drove a favorable rate change and increases in average balances in loans, non-interest-bearing demand deposits and equity drove favorable volume change.

Average loans for the first quarter of 2020 were $7.36 billion, an increase of $259.0 million, or 15% annualized, over average loans of $7.10 billion for the fourth quarter of 2019, and an increase of $759.7 million, or 12%, over average loans of $6.60 billion for the first quarter of 2019.

Average total deposits for the first quarter of 2020 were $7.64 billion, a decrease of $44,000,  from average total deposits of $7.68 billion for the fourth quarter of 2019, and an increase of $662.7 million, or 10%, over average total deposits of $6.98 billion for the first quarter of 2019.

Non-performing assets to total assets were 0.44% for the first quarter of 2020, a decrease of six basis points compared to 0.50% for the fourth quarter of 2019 and an increase of three basis points compared to 0.41% for the first quarter of 2019. Annualized net charge-offs to average loans were 0.26%, a 10 basis point decrease compared to 0.36% for the fourth quarter of 2019 and an increase of six basis points compared to 0.20% for the first quarter of 2019.  We recorded a $13.6 million provision for loan losses in the first quarter of 2020 compared to $5.9 million in the fourth quarter of 2019 and $4.9 million in the first quarter of 2019.  We have added a new pandemic qualitative factor to our allowance for loan loss calculation and have increased qualitative factors related to macroeconomic conditions; these changes resulted in the need for an additional loan loss provision during the quarter.  The allowance for loan loss as a percentage of total loans was 1.13% at March 31, 2020, an increase of eight basis points compared to 1.05% at December 31, 2019 and an increase of 11 basis points compared to 1.02% as of March 31, 2019.  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.

Non-interest income for the first quarter of 2020 increased $1.8 million, or 36%, to $6.7 million from $4.9 million in the first quarter of 2019.  Deposit service charges increased $214,000 in the first quarter of 2020, or 13%, compared to the first quarter of 2019.  Mortgage banking revenue almost doubled to $1.1 million from the first quarter of 2019 to the first quarter of 2020.  Mortgage loan sales increased approximately 96% during the first quarter of 2020 when compared to the same quarter in 2019.  Credit card revenue increased $189,000, or 12%, to $1.8 million during the first quarter of 2020, compared to $1.6 million during the first quarter of 2019. The number of credit card accounts increased approximately 43% and the aggregate amount of sales on all credit card accounts increased 29% during the first quarter of 2020.  Cash surrender value of life insurance increased $691,000, or 91%, to $1.5 million during the first quarter of 2020, compared to $762,000 during the first quarter of 2019.  We purchased $75.0 million of additional life insurance contracts during the third quarter of 2019.  Other income for the first quarter of 2020 increased $140,000, or 43%, to $469,000 from $329,000 in the first quarter of 2019. 

Non-interest expense for the first quarter of 2020 increased $2.6 million, or 10%, to $27.9 million from $25.3 million in the first quarter of 2019, and increased $2.3 million, or 9%, on a linked quarter basis.  Salary and benefit expense for the first quarter of 2020 increased $1.4 million, or 10%, to $15.7 million from $14.3 million in the first quarter of 2019, and increased $2.0 million, or 15%, on a linked quarter basis.  We adjusted accrued incentives downward by $1.0 million in December based on actual year-end production in 2019.  The number of FTE employees increased from 485 at March 31, 2019 to 492 at March 31, 2020, or 1%, and decreased by eight from the end of the fourth quarter of 2019.  Equipment and occupancy expense increased $141,000, or 6%, to $2.4 million in the first quarter of 2020, from $2.3 million in the first quarter of 2019, and decreased $61,000 on a linked-quarter basis.  Third party processing and other services expense increased $934,000, or 39%, to $3.3 million in the first quarter of 2020, from $2.4 million in the first quarter of 2019.  Professional services expense decreased $46,000, or 5%, to $948,000 in the first quarter of 2020, from $994,000 in the first quarter of 2019, and decreased $215,000 on a linked-quarter basis.  FDIC and other regulatory assessments increased $313,000 to $1.3 million in the first quarter of 2020, from $1.0 million in the first quarter of 2019.  Growth in our assessment base was partially offset by a decrease in our assessment rate.  Expenses associated with other real estate owned increased $579,000 to $601,000 in the first quarter of 2020, from $22,000 in the first quarter of 2019.  This increase was the result of write-downs in value of property based on updated appraisals related to one foreclosed loan relationship in our Nashville region.  Other operating expenses for the first quarter of 2020 decreased $722,000, or 17%, to $3.6 million from $4.4 million in the first quarter of 2019, and decreased $235,000 on a linked-quarter basis.  Write-downs in tax credit investments decreased significantly as our New Market Tax Credit partnerships terminated at the end of 2019.  Decreases in travel and entertainment expenses also contributed to the decrease in other operating expenses.  We accrued $250,000 for a pending legal matter during the first quarter of 2020.  The efficiency ratio was 33.11% during the first quarter of 2020 compared to 34.36% during the first quarter of 2019 and compared to 30.83% during the fourth quarter of 2019.

Income tax expense decreased $467,000, or 6%, to $8.0 million in the first quarter of 2020, compared to $8.5 million in the first quarter of 2019.  Our effective tax rate was 18.76% for the first quarter of 2020 compared to 19.53% for the first quarter of 2019.  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 first quarters of 2020 and 2019 of $1.1 million and $772,000, respectively.

GAAP Reconciliation and Management Explanation of Non-GAAP Financial Measures

During the third quarter of 2019, we recorded a $1.7 million credit to our FDIC and other regulatory assessments expense as a result of the FDIC’s Small Bank Assessment Credit.  Financial measures included in this press release that are presented adjusted for this credit are net income, net income available to common stockholders, diluted earnings per share, return on average assets and return on average common stockholders’ equity. Each of these five financial measures excludes the impact of this item, net of tax, attributable to the FDIC Small Bank Assessment Credit and are all considered non-GAAP financial measures. This press release also 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 and pre-tax, pre-provision return on average assets.  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 tables provide 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.

      Three Months
Ended September
30, 2019
                     
Net income - GAAP   $ 149,243                                      
  Adjustments:                                          
  FDIC Small Bank Assessment Credit     1,669                                      
  Tax on adjustment     421                                      
Adjusted net income - non-GAAP   $ 147,995                                      
                                             
Net income available to common stockholders - GAAP   $ 149,180                                      
  Adjustments:                                          
  FDIC Small Bank Assessment Credit     1,669                                      
  Tax on adjustment     421                                      
Adjusted net income available to common stockholders -                                          
  non-GAAP   $ 147,932                                      
                                             
Diluted earnings per share - GAAP   $ 2.76                                      
  Adjustments:                                          
  FDIC Small Bank Assessment Credit     (0.03 )                                    
  Tax on adjustment     0.01                                      
Adjusted diluted earnings per share - non-GAAP   $ 2.74                                      
                                             
Return on average assets - GAAP     1.73   %                                  
Net income - GAAP   $ 149,243                                      
  Adjustments:                                          
  FDIC Small Bank Assessment Credit     1,669                                      
  Tax on adjustment     421                                      
Adjusted net income - non-GAAP   $ 147,995                                      
Average assets - GAAP   $ 8,638,604                                      
Adjusted return on average assets - non-GAAP     1.71   %                                  
                                             
Return on average common stockholders' equity - GAAP     19.15   %                                  
Net income - GAAP   $ 149,243                                      
  Adjustments:                                          
  FDIC Small Bank Assessment Credit     1,669                                      
  Tax on adjustment     421                                      
Adjusted net income - non-GAAP   $ 147,995                                      
Average common stockholders' equity - GAAP   $ 779,071                                      
Adjusted return on average common stockholders' equity -                                          
  non-GAAP     18.99   %                                  
                                             
      At March 31,
2020
  At December
31, 2019
  At September
30, 2019
  At June 30,
2019
  At March 31,
2019
 
Book value per share - GAAP   $ 16.38       $ 15.71     $ 15.13     $ 14.55     $ 13.94    
Total common stockholders' equity - GAAP     881,886         842,682       810,537       778,957       745,586    
  Adjustments:                                          
  Adjusted for goodwill and core deposit intangible asset     14,111         14,179       14,246       14,314       14,381    
Tangible common stockholders' equity - non-GAAP   $ 867,775       $ 828,503     $ 796,291     $ 764,643     $ 731,205    
Tangible book value per share - non-GAAP   $ 16.12       $ 15.45     $ 14.86     $ 14.29     $ 13.67    
                                             
Stockholders' equity to total assets - GAAP     9.42   %     9.42 %     9.00 %     8.91 %     8.97 %  
Total assets - GAAP   $ 9,364,882       $ 8,947,653     $ 9,005,112     $ 8,740,237     $ 8,310,836    
  Adjustments:                                          
  Adjusted for goodwill and core deposit intangible asset     14,111         14,179       14,246       14,314       14,381    
Total tangible assets - non-GAAP   $ 9,350,771       $ 8,933,474     $ 8,990,866     $ 8,725,923     $ 8,296,455    
Tangible common equity to total tangible assets - non-GAAP     9.28   %     9.27 %     8.86 %     8.76 %     8.81 %  
                                             
Return on average assets - GAAP     1.54   %                                  
Net income   $ 34,778                                      
  Adjustments:                                          
  Provision for loan losses     13,584                                      
  Provision for income taxes     8,032                                      
Net income before provision for loan losses and provision                                          
  for income taxes   $ 56,394                                      
Pre-tax, Pre-Provision return on average assets - non-GAAP     2.49   %                                  

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,” “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: 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 crises and associated credit issues in industries most impacted by the COVID-19 outbreak, including 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 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)                                          
    1st Quarter 2020   4th Quarter 2019   3rd Quarter 2019   2nd Quarter 2019   1st Quarter 2019  
CONSOLIDATED STATEMENT OF INCOME                                          
Interest income   $ 96,767     $ 98,187     $ 101,130     $ 97,787     $ 93,699    
Interest expense     19,127       22,410       28,125       27,702       24,921    
Net interest income     77,640       75,777       73,005       70,085       68,778    
Provision for loan losses     13,584       5,884       6,985       4,884       4,885    
Net interest income after provision for loan losses     64,056       69,893       66,020       65,201       63,893    
Non-interest income     6,674       6,936       6,202       5,778       4,944    
Non-interest expense     27,920       25,503       25,153       26,022       25,328    
Income before income tax     42,810       51,326       47,069       44,957       43,509    
Provision for income tax     8,032       10,289       9,506       9,324       8,499    
Net income     34,778       41,037       37,563       35,633       35,010    
Preferred stock dividends     -       32       -       31       -    
Net income available to common stockholders   $ 34,778     $ 41,005     $ 37,563     $ 35,602     $ 35,010    
Earnings per share - basic   $ 0.65     $ 0.76     $ 0.70     $ 0.66     $ 0.65    
Earnings per share - diluted   $ 0.64     $ 0.76     $ 0.69     $ 0.66     $ 0.65    
Average diluted shares outstanding     54,167,414       54,149,554       54,096,368       54,089,107       54,076,538    
                                           
CONSOLIDATED BALANCE SHEET DATA                                          
Total assets   $ 9,364,882     $ 8,947,653     $ 9,005,112     $ 8,740,237     $ 8,310,836    
Loans     7,568,836       7,261,451       7,022,069       6,967,886       6,659,908    
Debt securities     827,032       759,649       688,271       658,221       631,946    
Non-interest-bearing demand deposits     1,925,626       1,749,879       1,678,672       1,576,959       1,572,703    
Total deposits     7,832,655       7,530,433       7,724,158       7,404,794       7,083,666    
Borrowings     64,707       64,703       64,693       64,684       64,675    
Stockholders' equity   $ 881,885     $ 842,682     $ 810,537     $ 778,957     $ 745,586    
                                           
Shares outstanding     53,844,009       53,623,740       53,579,013       53,526,882       53,495,208    
Book value per share   $ 16.38     $ 15.71     $ 15.13     $ 14.55     $ 13.94    
Tangible book value per share (1)   $ 16.12     $ 15.45     $ 14.86     $ 14.29     $ 13.67    
                                           
SELECTED FINANCIAL RATIOS (Annualized)                                          
Net interest margin     3.58 %     3.47 %     3.36 %     3.44 %     3.56 %  
Return on average assets     1.54 %     1.80 %     1.67 %     1.69 %     1.75 %  
Return on average common stockholders' equity     16.23 %     19.75 %     18.69 %     18.72 %     19.42 %  
Efficiency ratio     33.11 %     30.83 %     31.76 %     34.30 %     34.36 %  
Non-interest expense to average earning assets     1.29 %     1.17 %     1.16 %     1.28 %     1.31 %  
                                           
CAPITAL RATIOS (2)                                          
Common equity tier 1 capital to risk-weighted assets     10.68 %     10.50 %     10.39 %     10.18 %     10.30 %  
Tier 1 capital to risk-weighted assets     10.68 %     10.50 %     10.39 %     10.19 %     10.30 %  
Total capital to risk-weighted assets     12.54 %     12.31 %     12.27 %     12.02 %     12.21 %  
Tier 1 capital to average assets     9.56 %     9.13 %     8.88 %     9.00 %     9.03 %  
Tangible common equity to total tangible assets (1)     9.28 %     9.27 %     8.86 %     8.76 %     8.81 %  
                                           
(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)                    
        March 31,
2020
  March 31,
2019
  % Change  
ASSETS                    
Cash and due from banks   $ 80,461     $ 71,058     13   %  
Interest-bearing balances due from depository institutions     297,943       547,036     (46 ) %  
Federal funds sold     306,127       181,435     69   %  
  Cash and cash equivalents     684,531       799,529     (14 ) %  
Available for sale debt securities, at fair value     826,782       631,696     31   %  
Held to maturity debt securities (fair value of $250 at March 31, 2020 and 2019)     250       250     -      
Mortgage loans held for sale     6,747       1,223     452   %  
Loans     7,568,836       6,659,908     14   %  
Less allowance for loan losses     (85,414 )     (70,207 )   22   %  
  Loans, net     7,483,422       6,589,701     14   %  
Premises and equipment, net     55,992       57,664     (3 ) %  
Goodwill and other identifiable intangible assets     14,111       14,381     (2 ) %  
Other assets     293,047       216,392     35   %  
  Total assets   $ 9,364,882     $ 8,310,836     13   %  
LIABILITIES AND STOCKHOLDERS' EQUITY                    
Liabilities:                    
Deposits:                    
  Non-interest-bearing   $ 1,925,626     $ 1,572,703     22   %  
  Interest-bearing     5,907,029       5,510,963     7   %  
    Total deposits     7,832,655       7,083,666     11   %  
Federal funds purchased     543,623       373,378     46   %  
Other borrowings     64,707       64,675     -   %  
Other liabilities     42,012       43,531     (3 ) %  
  Total liabilities     8,482,997       7,565,250     12   %  
Stockholders' equity:                    
  Preferred stock, par value $0.001 per share; 1,000,000 authorized and undesignated at                    
    March 31, 2020 and March 31, 2019     -       -          
  Common stock, par value $0.001 per share; 100,000,000 shares authorized; 53,844,009 shares                    
    issued and outstanding at March 31, 2020, and 53,495,208 shares issued and outstanding                    
    at March 31, 2019     54       54     -   %  
  Additional paid-in capital     221,901       218,147     2   %  
  Retained earnings     641,980       527,853     22   %  
  Accumulated other comprehensive income (loss)     17,448       (969 )   NM      
    Total stockholders' equity attributable to ServisFirst Bancshares, Inc.     881,383       745,084     18   %  
  Noncontrolling interest     502       502     -   %  
    Total stockholders' equity     881,885       745,586     18   %  
  Total liabilities and stockholders' equity   $ 9,364,882     $ 8,310,836     13   %  
                             


CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)      
(In thousands except per share data)            
        Three Months Ended March 31,
        2020   2019
Interest income:            
  Interest and fees on loans   $ 89,385   $ 85,524
  Taxable securities     5,154     3,746
  Nontaxable securities     233     446
  Federal funds sold     277     1,219
  Other interest and dividends     1,718     2,764
  Total interest income     96,767     93,699
Interest expense:            
  Deposits     16,745     22,145
  Borrowed funds     2,382     2,776
  Total interest expense     19,127     24,921
  Net interest income     77,640     68,778
Provision for loan losses     13,584     4,885
  Net interest income after provision for loan losses     64,056     63,893
Non-interest income:            
  Service charges on deposit accounts     1,916     1,702
  Mortgage banking     1,071     575
  Credit card income     1,765     1,576
  Increase in cash surrender value life insurance     1,453     762
  Other operating income     469     329
  Total non-interest income     6,674     4,944
Non-interest expense:            
  Salaries and employee benefits     15,658     14,265
  Equipment and occupancy expense     2,400     2,259
  Third party processing and other services     3,345     2,411
  Professional services     948     994
  FDIC and other regulatory assessments     1,332     1,019
  Other real estate owned expense     601     22
  Other operating expense     3,636     4,358
  Total non-interest expense     27,920     25,328
  Income before income tax     42,810     43,509
Provision for income tax     8,032     8,499
  Net income     34,778     35,010
  Dividends on preferred stock     -     -
  Net income available to common stockholders   $ 34,778   $ 35,010
Basic earnings per common share   $ 0.65   $ 0.65
Diluted earnings per common share   $ 0.64   $ 0.65


LOANS BY TYPE (UNAUDITED)                              
(In thousands)                              
                                 
      1st Quarter 2020   4th Quarter 2019   3rd Quarter 2019   2nd Quarter 2019   1st Quarter 2019
Commercial, financial and agricultural   $ 2,771,307   $ 2,696,210   $ 2,653,934   $ 2,633,529   $ 2,522,136
Real estate - construction     548,578     521,392     550,871     603,779     556,219
Real estate - mortgage:                              
  Owner-occupied commercial     1,678,532     1,587,478     1,526,911     1,538,279     1,500,595
  1-4 family mortgage     675,870     644,188     632,346     630,963     629,285
  Other mortgage     1,834,137     1,747,394     1,592,072     1,496,512     1,394,611
Subtotal: Real estate - mortgage     4,188,539     3,979,060     3,751,329     3,665,754     3,524,491
Consumer     60,412     64,789     65,935     64,824     57,062
Total loans   $ 7,568,836   $ 7,261,451   $ 7,022,069   $ 6,967,886   $ 6,659,908
                               


SUMMARY OF LOAN LOSS EXPERIENCE (UNAUDITED)                                    
(Dollars in thousands)                                    
          1st Quarter 2020   4th Quarter 2019   3rd Quarter
2019
  2nd Quarter
2019
  1st Quarter 2019  
Allowance for loan losses:                                          
Beginning balance   $ 76,584     $ 77,192     $ 71,386     $ 70,207     $ 68,600    
Loans charged off:                                          
  Commercial financial and agricultural     2,640       4,742       3,626       3,610       3,037    
  Real estate - construction     454       -       -       -       -    
  Real estate - mortgage     1,678       1,689       4,974       169       50    
  Consumer     58       139       172       63       218    
    Total charge offs     4,830       6,570       8,772       3,842       3,305    
Recoveries:                                          
  Commercial financial and agricultural     62       51       126       117       12    
  Real estate - construction     1       1       1       -       1    
  Real estate - mortgage     1       2       -       4       7    
  Consumer     12       24       60       16       7    
    Total recoveries     76       78       187       137       27    
  Net charge-offs     4,754       6,492       8,585       3,705       3,278    
  Allocation from Loan Guarantee Program     -       -       7,406       -       -    
  Provision for loan losses     13,584       5,884       6,985       4,884       4,885    
  Ending balance   $ 85,414     $ 76,584     $ 77,192     $ 71,386     $ 70,207    
                                                 
  Allowance for loan losses to total loans     1.13 %     1.05 %     1.10 %     1.02 %     1.05 %  
  Allowance for loan losses to total average                                          
    loans     1.16 %     1.08 %     1.11 %     1.05 %     1.06 %  
  Net charge-offs to total average loans     0.26 %     0.36 %     0.49 %     0.22 %     0.20 %  
  Provision for loan losses to total average                                          
    loans     0.74 %     0.33 %     0.40 %     0.29 %     0.30 %  
  Nonperforming assets:                                          
    Nonaccrual loans   $ 28,914     $ 30,091     $ 35,732     $ 21,840     $ 22,154    
    Loans 90+ days past due and accruing     4,954       6,021       5,317       10,299       5,021    
    Other real estate owned and                                          
    repossessed assets     7,448       8,178       5,337       5,649       5,480    
  Total   $ 41,316     $ 44,290     $ 46,386     $ 37,788     $ 32,655    
                                                 
  Nonperforming loans to total loans     0.45 %     0.50 %     0.58 %     0.46 %     0.41 %  
  Nonperforming assets to total assets     0.44 %     0.50 %     0.52 %     0.43 %     0.39 %  
  Nonperforming assets to earning assets     0.45 %     0.50 %     0.53 %     0.44 %     0.40 %  
  Reserve for loan losses to nonaccrual loans     295.41 %     254.51 %     216.03 %     326.86 %     316.90 %  
                                                 
  Restructured accruing loans   $ 975     $ 625     $ 3,468     $ 2,742     $ 2,742    
                                                 
  Restructured accruing loans to total loans     0.01 %     0.01 %     0.05 %     0.04 %     0.04 %  
                                                 
  TROUBLED DEBT RESTRUCTURINGS (TDRs) (UNAUDITED)                            
  (In thousands)                                  
          1st Quarter 2020   4th Quarter 2019   3rd Quarter
2019
  2nd Quarter
2019
  1st Quarter 2019  
  Beginning balance:   $ 3,330     $ 11,248     $ 11,284     $ 12,289     $ 14,555    
    Additions     350       250       -       -       -    
    Net (paydowns) / advances     (232 )     (3,481 )     714       (12 )     (766 )  
    Charge-offs     (1,081 )     (1,333 )     (750 )     (993 )     (1,500 )  
    Transfer to OREO     -       (3,354 )     -       -       -    
          $ 2,367     $ 3,330     $ 11,248     $ 11,284     $ 12,289    
                                                 


CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)                    
(In thousands except per share data)                    
        1st Quarter
2020
  4th Quarter
2019
  3rd Quarter
2019
  2nd Quarter
2019
  1st Quarter
2019
 
Interest income:                                
  Interest and fees on loans   $ 89,385   $ 89,407     $ 90,767     $ 88,610     $ 85,524  
  Taxable securities     5,154     4,702       4,367       4,193       3,746  
  Nontaxable securities     233     274       316       393       446  
  Federal funds sold     277     1,053       1,768       1,998       1,219  
  Other interest and dividends     1,718     2,751       3,912       2,593       2,764  
  Total interest income     96,767     98,187       101,130       97,787       93,699  
Interest expense:                                
  Deposits     16,745     19,786       24,787       24,240       22,145  
  Borrowed funds     2,382     2,624       3,338       3,462       2,776  
  Total interest expense     19,127     22,410       28,125       27,702       24,921  
  Net interest income     77,640     75,777       73,005       70,085       68,778  
Provision for loan losses     13,584     5,884       6,985       4,884       4,885  
  Net interest income after provision for loan losses     64,056     69,893       66,020       65,201       63,893  
Non-interest income:                                
  Service charges on deposit accounts     1,916     1,806       1,735       1,786       1,702  
  Mortgage banking     1,071     1,366       1,333       1,087       575  
  Credit card income     1,765     1,891       1,868       1,741       1,576  
  Securities (losses) gains     -     (1 )     34       (6 )     -  
  Increase in cash surrender value life insurance     1,453     1,419       787       778       762  
  Other operating income     469     455       445       392       329  
  Total non-interest income     6,674     6,936       6,202       5,778       4,944  
Non-interest expense:                                
  Salaries and employee benefits     15,658     13,680       15,499       14,339       14,265  
  Equipment and occupancy expense     2,400     2,339       2,387       2,287       2,259  
  Third party processing and other services     3,345     3,176       2,923       2,724       2,411  
  Professional services     948     1,163       887       1,191       994  
  FDIC and other regulatory assessments (credits)     1,332     1,171       (296 )     1,081       1,019  
  Other real estate owned expense     601     103       78       212       22  
  Other operating expense     3,636     3,871       3,675       4,188       4,358  
  Total non-interest expense     27,920     25,503       25,153       26,022       25,328  
  Income before income tax     42,810     51,326       47,069       44,957       43,509  
Provision for income tax     8,032     10,289       9,506       9,324       8,499  
  Net income     34,778     41,037       37,563       35,633       35,010  
  Dividends on preferred stock     -     32       -       31       -  
  Net income available to common stockholders   $ 34,778   $ 41,005     $ 37,563     $ 35,602     $ 35,010  
Basic earnings per common share   $ 0.65   $ 0.77     $ 0.70     $ 0.67     $ 0.65  
Diluted earnings per common share   $ 0.64   $ 0.76     $ 0.69     $ 0.66     $ 0.65  


AVERAGE BALANCE SHEETS AND NET INTEREST ANALYSIS (UNAUDITED)  
ON A FULLY TAXABLE-EQUIVALENT BASIS  
(Dollars in thousands)  
                                                                       
            1st Quarter 2020   4th Quarter 2019   3rd Quarter 2019   2nd Quarter 2019   1st 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   $ 7,328,594   4.89 %   $ 7,066,576   5.00 %   $ 6,927,075   5.18 %   $ 6,756,927     5.24 %   $ 6,570,920     5.26 %  
    Tax-exempt (2)     32,555   4.04       35,563   4.00       34,195   3.98       32,124     3.83       30,577     3.81    
      Total loans, net of                                                              
        unearned income     7,361,149   4.88       7,102,139   4.99       6,961,270   5.17       6,789,051     5.23       6,601,497     5.25    
  Mortgage loans held for sale     4,282   2.16       6,505   2.44       6,482   2.45       5,208     3.85       1,614     6.53    
  Debt securities:                                                              
    Taxable     750,413   2.75       670,732   2.81       595,405   2.93       565,491     2.97       518,955     2.89    
    Tax-exempt (2)     44,029   2.33       50,825   2.17       59,992   2.21       77,364     2.10       87,537     2.12    
      Total securities (3)     794,442   2.72       721,557   2.76       655,397   2.87       642,855     2.86       606,492     2.78    
  Federal funds sold     105,423   1.06       238,927   1.75       312,968   2.24       323,714     2.48       192,690     2.57    
  Interest-bearing balances with banks     469,199   1.47       602,755   1.81       690,973   2.25       411,481     2.53       438,099     2.56    
  Total interest-earning assets   $ 8,734,495   4.46 %   $ 8,671,883   4.49 %   $ 8,627,090   4.65 %   $ 8,172,309     4.80 %   $ 7,840,392     4.85 %  
Non-interest-earning assets:                                                              
  Cash and due from banks     66,140           70,381           71,418           76,988             74,430          
  Net premises and equipment     58,066           57,986           58,243           58,607             58,852          
  Allowance for loan losses, accrued                                                              
    interest and other assets     241,479           233,885           162,654           156,264             149,941          
      Total assets   $ 9,100,180         $ 9,034,135         $ 8,919,405         $ 8,464,168           $ 8,123,615          
                                                                       
Interest-bearing liabilities:                                                              
  Interest-bearing deposits:                                                              
  Checking   $ 956,803   0.57 %   $ 961,258   0.69 %   $ 900,754   0.84 %   $ 909,847     0.88 %   $ 942,686     0.86 %  
  Savings     67,380   0.50       62,311   0.53       57,431   0.60       54,391     0.57       54,086     0.55    
  Money market     4,061,286   1.10       4,189,283   1.34       4,265,435   1.76       3,932,459     1.88       3,758,162     1.78    
  Time deposits     805,924   2.09       712,155   2.15       703,278   2.20       694,414     2.16       698,976     2.06    
    Total interest-bearing deposits     5,891,393   1.14       5,925,007   1.32       5,926,898   1.66       5,591,111     1.74       5,453,910     1.65    
  Federal funds purchased     492,638   1.31       420,066   1.74       441,526   2.30       418,486     2.57       312,989     2.59    
  Other borrowings     64,707   4.85       64,698   4.79       64,689   4.79       64,680     4.84       64,671     4.90    
  Total interest-bearing liabilities   $ 6,448,738   1.19 %   $ 6,409,771   1.39 %   $ 6,433,113   1.73 %   $ 6,074,277     1.83 %   $ 5,831,570     1.73 %  
Non-interest-bearing liabilities:                                                              
  Non-interest-bearing                                                              
    demand deposits     1,749,671           1,759,671           1,654,928           1,591,722             1,524,502          
  Other liabilities     39,801           41,112           34,070           35,161             36,362          
  Stockholders' equity     853,800           818,320           792,284           763,742             735,611          
  Accumulated other comprehensive                                                              
    income (loss)     8,170           5,261           5,010           (734 )           (4,430 )        
      Total liabilities and                                                              
        stockholders' equity   $ 9,100,180         $ 9,034,135         $ 8,919,405         $ 8,464,168           $ 8,123,615          
Net interest spread         3.27 %         3.10 %         2.92 %         2.97 %         3.12 %  
Net interest margin         3.58 %         3.47 %         3.36 %         3.44 %         3.56 %  
                                                                       
(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.