sfbs20230331

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

_________________________

FORM 10-Q

(Mark one)

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

FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2023

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

For the transition period from _______to_______

Commission file number 001-36452

SERVISFIRST BANCSHARES, INC.

(Exact Name of Registrant as Specified in Its Charter)

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

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

(205) 949-0302

(Registrant's Telephone Number, Including Area Code)

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

Title of each class	Trading Symbol(s)	Name of exchange on which registered
Common stock, par value $.001 per share	SFBS	New York Stock Exchange

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

Indicate by check mark whether the registrant has submitted electronically 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.

Class	Outstanding as of April 28, 2023
Common stock, $.001 par value	54,282,132

TABLE OF CONTENTS

PART I. FINANCIAL INFORMATION		3
Item 1.	Consolidated Financial Statements	3
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	24
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	37
Item 4.	Controls and Procedures	38

PART II. OTHER INFORMATION		38
Item 1	Legal Proceedings	38
Item 1A.	Risk Factors	39
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	39
Item 3.	Defaults Upon Senior Securities	39
Item 4.	Mine Safety Disclosures	39
Item 5.	Other Information	39
Item 6.	Exhibits	39

EX-31.01 SECTION 302 CERTIFICATION OF THE CEO

EX-31.02 SECTION 302 CERTIFICATION OF THE CFO

EX-32.01 SECTION 906 CERTIFICATION OF THE CEO

EX-32.02 SECTION 906 CERTIFICATION OF THE CFO

PART 1. FINANCIAL INFORMATION

ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS

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

	March 31, 2023			December 31, 2022
	(Unaudited)				(1)
ASSETS
Cash and due from banks	$	139,175		$	106,317
Interest-bearing balances due from depository institutions		725,318			708,221
Federal funds sold		6,478			1,515
Cash and cash equivalents		870,971			816,053
Available for sale debt securities, at fair value		624,948			644,815
Held to maturity debt securities (fair value of $937,961 at March 31, 2023 and $935,953 at December 31, 2022)		1,021,989			1,034,121
Restricted equity securities		7,307			7,734
Mortgage loans held for sale		1,651			1,607
Loans		11,629,802			11,687,968
Less allowance for credit losses		(148,965	)		(146,297	)
Loans, net		11,480,837			11,541,671
Premises and equipment, net		60,093			59,850
Accrued interest and dividends receivable		50,500			48,422
Deferred tax asset, net		60,666			60,448
Other real estate owned and repossessed assets		248			248
Bank owned life insurance contracts		289,374			287,752
Goodwill and other identifiable intangible assets		13,615			13,615
Other assets		84,360			79,417
Total assets	$	14,566,559		$	14,595,753
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposits:
Noninterest-bearing	$	2,898,736		$	3,321,347
Interest-bearing		8,716,581			8,225,458
Total deposits		11,615,317			11,546,805
Federal funds purchased		1,480,160			1,618,798
Other borrowings		65,417			64,726
Accrued interest payable		20,541			18,615
Other liabilities		45,307			48,913
Total liabilities		13,226,742			13,297,857
Stockholders' equity:
Preferred stock, par value $0.001 per share; 1,000,000 authorized and undesignated at March 31, 2023 and December 31, 2022		-			-
Common stock, par value $0.001 per share; 200,000,000 shares authorized: 54,398,025 shares issued and outstanding at March 31, 2023; and 54,326,527 shares issued and outstanding at December 31, 2022		54			54
Additional paid-in capital		229,631			229,693
Retained earnings		1,152,681			1,109,902
Accumulated other comprehensive loss		(43,049	)		(42,253	)
Total stockholders' equity attributable to ServisFirst Bancshares, Inc.		1,339,317			1,297,396
Noncontrolling interest		500			500
Total stockholders' equity		1,339,817			1,297,896
Total liabilities and stockholders' equity	$	14,566,559		$	14,595,753

(1) derived from audited financial statements.

See Notes to Consolidated Financial Statements.

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

See Notes to Consolidated Financial Statements.

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

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

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

See Notes to Consolidated Financial Statements.

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

See Notes to Consolidated Financial Statements.

SERVISFIRST BANCSHARES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2023

(Unaudited)

NOTE 1 - GENERAL

The accompanying consolidated financial statements in this report have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission, including Regulation S-X 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 nature. The consolidated results of operations are not necessarily indicative of the consolidated results of operations which ServisFirst Bancshares, Inc. (the “Company”) 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, 2022.

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

NOTE 2 - CASH AND CASH EQUIVALENTS

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

NOTE 3 - EARNINGS PER COMMON SHARE

Basic earnings per common share are computed by dividing net income 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. The difference in earnings per share under the two-class method was not significant for the three month period ended March 31, 2023 and 2022, respectively.

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

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

NOTE 4 - SECURITIES

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

			Gross		Gross
	Amortized		Unrealized		Unrealized			Market
	Cost		Gain		Loss			Value
March 31, 2023	(In Thousands)
Debt Securities Available for Sale
U.S. Treasury Securities	$	3,001	$	-	$	(11	)	$	2,990
Government Agency Securities		4		-		-			4
Mortgage-backed securities		272,070		7		(29,046	)		243,031
State and municipal securities		14,646		2		(1,337	)		13,311
Corporate debt		398,676		3		(33,067	)		365,612
Total	$	688,397	$	12	$	(63,461	)	$	624,948
Debt Securities Held to Maturity
U.S. Treasury Securities	$	507,601	$	-	$	(30,021	)	$	477,580
Mortgage-backed securities		506,342		10		(53,190	)		453,162
State and municipal securities		8,046		-		(827	)		7,219
Total	$	1,021,989	$	10	$	(84,038	)	$	937,961

December 31, 2022
Debt Securities Available for Sale
U.S. Treasury Securities	$	3,002	$	-	$	(33	)	$	2,969
Government Agency Securities		9		-		-			9
Mortgage-backed securities		282,480		5		(32,782	)		249,703
State and municipal securities		15,205		1		(1,597	)		13,609
Corporate debt		406,680		-		(28,155	)		378,525
Total	$	707,376	$	6	$	(62,567	)	$	644,815
Debt Securities Held to Maturity
U.S. Treasury Securities	$	507,151	$	-	$	(36,197	)	$	470,954
Mortgage-backed securities		518,929		7		(60,960	)		457,976
State and municipal securities		8,041		-		(1,018	)		7,023
Total	$	1,034,121	$	7	$	(98,175	)	$	935,953

The amortized cost and fair value of debt securities as of March 31, 2023 and December 31, 2022 by contractual maturity are shown below. Actual maturities may differ from contractual maturities of mortgage-backed securities since the mortgages underlying the securities may be called or prepaid with or without penalty. Therefore, these securities are not included in the maturity categories along with the other categories of debt securities.

	March 31, 2023				December 31, 2022
	Amortized Cost		Market Value		Amortized Cost		Market Value
	(In Thousands)
Debt securities available for sale
Due within one year	$	24,422	$	24,042	$	24,712	$	24,432
Due from one to five years		59,243		57,178		58,554		57,092
Due from five to ten years		329,662		298,353		338,630		311,100
Due after ten years		3,000		2,344		3,000		2,488
Mortgage-backed securities		272,070		243,031		282,480		249,703
	$	688,397	$	624,948	$	707,376	$	644,815

Debt securities held to maturity
Due within one year	$	250	$	250	$	250	$	250
Due from one to five years		386,897		370,166		386,465		366,095
Due from five to ten years		128,500		114,383		128,477		111,632
Due after ten years		-		-		-		-
Mortgage-backed securities		506,342		453,162		518,929		457,976
	$	1,021,989	$	937,961	$	1,034,121	$	935,953

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

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

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

The following table identifies, as of March 31, 2023 and December 31, 2022, the Company’s investment securities that have been in a continuous unrealized loss position for less than 12 months and those that have been in a continuous unrealized loss position for 12 or more months.

	Less Than Twelve Months					Twelve Months or More					Total
	Gross					Gross					Gross
	Unrealized					Unrealized					Unrealized
	Losses			Fair Value		Losses			Fair Value		Losses			Fair Value
	(In Thousands)
March 31, 2023
Debt Securities available for sale
U.S. Treasury Securities	$	-		$	-	$	(11	)	$	2,990	$	(11	)	$	2,990
Government Agency Securities		-			4		-			-		-			4
Mortgage-backed securities		(364	)		8,468		(28,682	)		233,956		(29,046	)		242,424
State and municipal securities		(27	)		3,328		(1,310	)		9,202		(1,337	)		12,530
Corporate debt		(8,809	)		163,363		(24,258	)		189,931		(33,067	)		353,294
Total	$	(9,200	)	$	175,163	$	(54,261	)	$	436,079	$	(63,461	)	$	611,242
Debt Securities held to maturity
U.S. Treasury Securities	$	(2,678	)	$	130,640	$	(27,343	)	$	346,939	$	(30,021	)	$	477,579
Mortgage-backed securities		(1,645	)		31,827		(51,545	)		416,994		(53,190	)		448,821
State and municipal securities		-			-		(827	)		6,969		(827	)		6,969
Total	$	(4,323	)	$	162,467	$	(79,715	)	$	770,902	$	(84,038	)	$	933,369
December 31, 2022
Debt Securities available for sale
U.S. Treasury Securities	$	(33	)	$	2,969	$	-		$	-	$	(33	)	$	2,969
Government Agency Securities		-			9		-			-		-			9
Mortgage-backed securities	$	(3,473	)	$	60,234	$	(29,309	)	$	189,109	$	(32,782	)	$	249,343
State and municipal securities		(186	)		5,283		(1,411	)		7,880		(1,597	)		13,163
Corporate debt		(18,566	)		304,254		(9,589	)		63,411		(28,155	)		367,666
Total