Annual report pursuant to Section 13 and 15(d)

EMPLOYEE AND DIRECTOR BENEFITS

v2.4.1.9
EMPLOYEE AND DIRECTOR BENEFITS
 12 Months Ended
Dec. 31, 2014
Disclosure Of Compensation Related Costs, Share-Based Payments [Abstract]  
EMPLOYEE AND DIRECTOR BENEFITS
NOTE 13.
EMPLOYEE AND DIRECTOR BENEFITS
 
At December 31, 2014, the Company has two stock incentive plans, which are described below. The compensation cost that has been charged against income for the plans was approximately $3,681,000, $1,205,000 and $1,049,000 for the years ended December 31, 2014, 2013 and 2012, respectively. Included in the expense for 2014 are non-routine expenses of approximately $703,000 in the first quarter of 2014 resulting from a correction of our accounting for vested stock options previously granted to members of our advisory boards in our Huntsville, Montgomery and Dothan, Alabama markets, and approximately $1,800,000 in the second quarter of 2014 resulting from the acceleration of vesting of stock options granted to members of our advisory boards in our Mobile, Alabama and Pensacola, Florida markets. We historically accounted for such options to advisory board members under the provisions of FASB ASC Topic 718-10, Compensation – Stock Compensation, and now have determined to recognize as an expense the fair value of these vested options in accordance with the provisions of the FASB ASC Topic 505-50, Equity-Based Payments to Non-Employees.
 
Stock Incentive Plans
 
The Company’s 2005 Stock Incentive Plan (the “2005 Plan”), originally permitted the grant of stock options to its officers, employees, directors and organizers of the Company for up to 1,575,000 shares of common stock. However, upon stockholder approval during 2006, the 2005 Plan was amended in order to allow the Company to grant stock options for up to 3,075,000 shares of common stock. Both incentive stock options and non-qualified stock options may be granted under the 2005 Plan. Option awards are generally granted with an exercise price equal to the estimated fair market value of the Company’s stock at the date of grant; those option awards vest in varying amounts through 2016 and are based on continuous service during that vesting period and have a ten-year contractual term. Dividends are not paid on unexercised options and dividends are not subject to vesting. The 2005 Plan provides for accelerated vesting if there is a change in control (as defined in the 2005 Plan).
 
On March 23, 2009, the Company’s board of directors adopted the 2009 Stock Incentive Plan (the “2009 Plan”), which was effective upon approval by the stockholders at the 2009 Annual Meeting of Stockholders. The 2009 Plan originally permitted the grant of up to 1,275,000 shares of common stock. However, upon stockholder approval during 2014, the 2009 Plan was amended in order to allow the Company to grant stock options for up to 2,775,000 shares of common stock. The 2009 Plan authorizes the grant of stock appreciation rights, restricted stock, incentive stock options, non-qualified stock options, non-stock share equivalents, performance shares or performance units and other equity-based awards. Option awards are generally granted with an exercise price equal to the estimated fair market value of the Company’s stock at the date of grant.
 
As of December 31, 2014, there are a total of 2,019,000 shares available to be granted under the 2009 Amended and Restated Stock Incentive Plan.
 
The fair value of each stock option award is estimated on the date of grant using a Black-Scholes-Merton valuation model that uses the assumptions noted in the following table. Expected volatilities are based on an index of approximately 79 publicly traded banks in the southeast United States. The expected term of options granted is based on the short-cut method and represents the period of time that options granted are expected to be outstanding. The risk-free rate for periods within the contractual life of the option is based on the U.S. Treasury yield curve in effect at the time of grant.
 
 
 
2014
 
 
2013
 
 
2012
 
Expected volatility
 
19.25
%
 
18.65
%
 
19.80
%
Expected dividends
 
1.31
%
 
-
%
 
-
%
Expected term (in years)
 
8
 
 
7
 
 
6
 
Risk-free rate
 
2.24
%
 
1.72
%
 
1.05
%
  
The weighted average grant-date fair value of options granted during the years ended December 31, 2014, December 31, 2013 and December 31, 2012 was $3.69, $3.04 and $2.20, respectively.
 
The following tables summarize stock option activity:
 
 
 
Shares
 
Weighted
Average
Exercise
Price
 
Weighted
Average
Remaining
Contractual
Term (years)
 
Aggregate
Intrinsic Value
 
 
 
 
 
 
 
 
 
 
 
 
(In Thousands)
 
Year Ended December 31, 2014:
 
 
 
 
 
 
 
 
 
 
 
 
 
Outstanding at beginning of year
 
 
2,328,900
 
$
7.69
 
 
5.5
 
$
14,300
 
Granted
 
 
139,000
 
 
16.83
 
 
9.3
 
 
2,339
 
Exercised
 
 
(838,983)
 
 
5.92
 
 
2.5
 
 
22,679
 
Forfeited
 
 
(6,000)
 
 
11.92
 
 
7.9
 
 
-
 
Outstanding at end of year
 
 
1,622,917
 
$
9.38
 
 
5.9
 
$
38,256
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Exercisable at December 31, 2014
 
 
591,418
 
$
7.75
 
 
4.1
 
$
14,901
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Year Ended December 31, 2013:
 
 
 
 
 
 
 
 
 
 
 
 
 
Outstanding at beginning of year
 
 
2,449,500
 
$
6.96
 
 
5.8
 
$
9,905
 
Granted
 
 
180,000
 
 
12.65
 
 
9.7
 
 
213
 
Exercised
 
 
(282,600)
 
 
4.48
 
 
2.8
 
 
2,532
 
Forfeited
 
 
(18,000)
 
 
7.50
 
 
5.6
 
 
-
 
Outstanding at end of year
 
 
2,328,900
 
$
7.69
 
 
5.5
 
$
14,300
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Exercisable at December 31, 2013
 
 
1,161,732
 
$
5.40
 
 
3.2
 
$
9,797
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Year Ended December 31, 2012:
 
 
 
 
 
 
 
 
 
 
 
 
 
Outstanding at beginning of year
 
 
3,221,400
 
$
6.11
 
 
6.0
 
$
12,508
 
Granted
 
 
136,500
 
 
10.00
 
 
9.3
 
 
130
 
Exercised
 
 
(864,390)
 
 
4.24
 
 
2.4
 
 
5,846
 
Forfeited
 
 
(44,010)
 
 
8.18
 
 
-
 
 
-
 
Outstanding at end of year
 
 
2,449,500
 
$
6.96
 
 
5.8
 
$
9,905
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Exercisable at December 31, 2012
 
 
1,238,475
 
$
4.68
 
 
3.6
 
$
7,831
 
 
Exercisable options at December 31, 2014 were as follows:
 
Range of
Exercise Price
 
Shares
 
Weighted
Average
Exercise Price
 
Weighted
Average
Remaining
Contractual
Term (years)
 
Aggregate
Intrinsic Value
 
 
 
 
 
 
 
 
 
 
 
 
 
(In Thousands)
 
$
3.33
 
 
13,500
 
$
3.33
 
 
0.5
 
$
400
 
 
3.67
 
 
150,000
 
 
3.67
 
 
1.3
 
 
4,392
 
 
5.00
 
 
10,500
 
 
5.00
 
 
2.2
 
 
293
 
 
6.67
 
 
45,000
 
 
6.67
 
 
2.5
 
 
1,183
 
 
8.33
 
 
267,418
 
 
8.33
 
 
4.3
 
 
6,583
 
 
11.00
 
 
15,000
 
 
11.00
 
 
8.2
 
 
329
 
 
13.83
 
 
90,000
 
 
13.83
 
 
9.0
 
 
1,721
 
 
 
 
 
591,418
 
 
7.75
 
 
4.1
 
 
14,901
 
 
As of December 31, 2014, there was $1,218,000 of total unrecognized compensation cost related to non-vested stock options. The cost is expected to be recognized on the straight-line method over the next 2.3 years. The total fair value of shares vested during the years ended December 31, 2014, 2013 and 2012 was $2,025,000 , $705,000 and $404,000, respectively. The fair value of shares vested during 2014 includes the accelerated vesting of nonemployee options awarded to the Company’s advisory directors in its Mobile, Alabama and Pensacola, Florida markets.
  
Restricted Stock
 
The Company has awarded 235,500 shares of restricted stock to certain officers, of which 60,000 shares are vested. The value of restricted stock is determined to be the current value of the Company’s stock at the grant date, and this total value will be recognized as compensation expense over the vesting period. As of December 31, 2014, there was $852,000 of total unrecognized compensation cost related to non-vested restricted stock. The cost is expected to be recognized evenly over the remaining 1.7 years of the restricted stock’s vesting period.
 
Stock Warrants
 
In recognition of the efforts and financial risks undertaken by the organizers of ServisFirst Bank (the “Bank”) in 2005, the Bank granted warrants to organizers for 180,000 shares of Bank common stock with an exercise price of $3.333 per share. The warrants became warrants to purchase a like number of shares of the Company’s common stock upon the formation of the Company as a holding company for the Bank. 60,000 of these warrants were exercised in 2011 and the remaining 120,000 were exercised in 2012. 
 
The Company granted warrants for 225,000 shares of common stock with an exercise price of $8.333 per share in the third quarter of 2008. These warrants were issued in connection with trust preferred securities and  13,500 of these warrants were exercised in 2012, with the remaining 211,500 warrants exercised in 2013.
 
The Company granted warrants for 45,000 shares of common stock with an exercise price of $8.333 per share in the second quarter of 2009. These warrants were issued in connection with the issuance of the Company’s 8.25% Subordinated Note. All of these warrants were exercised on May 14, 2014.
 
Retirement Plans
 
The Company has a retirement savings 401(k) and profit-sharing plan in which all employees age 21 and older may participate after completion of one year of service. For employees in service with the Company at June 15, 2005, the length of service and age requirements were waived. The Company matches employees’ contributions based on a percentage of salary contributed by participants and may make additional discretionary profit sharing contributions. The Company’s expense for the plan was $811,000, $878,000 and $1,167,000 for 2014, 2013 and 2012, respectively. The Company’s board of directors approved additional discretionary matches for 2013 and 2012 based on the profits of the Company during those years. The additional matches were 1% and 4%, respectively, and amounted to $200,000 and $576,000, respectively, and are included in the expenses above.