ServisFirst Bancshares (SFBS) Reports Q4 Diluted EPS of $0.99

January 24, 2022 4:04 PM EST
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ServisFirst Bancshares, Inc. (NYSE: SFBS), today announced earnings and operating results for the quarter and year ended December 31, 2021.

Fourth Quarter 2021 Highlights:

  • Diluted earnings per share were $0.99 for the fourth quarter of 2021, a 5% increase over the fourth quarter of 2020. Excluding the impact of core system conversion expenses recognized during the fourth quarter of 2021, diluted earnings per share were $1.03, an increase of 10% over the fourth quarter of 2020
  • Diluted earnings per share were $3.82 for 2021, a 22% increase over 2020. Excluding the impact of core system conversion expenses, diluted earnings per share were $3.86 for 2021, a 23% increase over 2020
  • Total loans grew from $8.5 billion to $9.5 billion, or by 13%, during 2021, and grew $720.1 million, or 32%, annualized, on a linked-quarter basis. Total loans, excluding the impact of Paycheck Protection Program (“PPP”) loan forgiveness, grew $877.7 million, or 41% annualized, during the quarter
  • Deposits grew from $9.98 billion to $12.45 billion year-over-year, or 25%, and grew $374 million on a linked-quarter basis, or 12%, annualized
  • Book value per share increased to $21.24, a 15% increase year-over-year
  • Cash dividend increased from $0.20 to $0.23 per quarter, a 15% increase

Tom Broughton, Chairman, President and CEO, said, “Our strong business development initiatives continue to result in record loan growth and a strong loan pipeline.”

Bud Foshee, CFO, said, “Excellent credit quality and low levels of loan losses are evidence that we will be able to leverage our excess liquidity in a profitable manner. Operating efficiency will continue to be a focus in 2022.”

FINANCIAL SUMMARY (UNAUDITED)
(in Thousands except share and per share amounts)
Period Ending December 31, 2021 Period Ending September 30, 2021 % Change From Period Ending September 30, 2021 to Period Ending December 31, 2021 Period Ending December 31, 2020 % Change From Period Ending December 31, 2020 to Period Ending December 31, 2021
QUARTERLY OPERATING RESULTS
Net Income $53,753 $52,499 2% $50,981 5%
Net Income Available to Common Stockholders $53,722 $52,499 2% $50,949 5%
Diluted Earnings Per Share $0.99 $0.96 3% $0.94 5%
Return on Average Assets 1.40% 1.50% 1.74%
Return on Average Common Stockholders' Equity 18.75% 18.93% 20.78%
Average Diluted Shares Outstanding 54,493,959 54,477,740 54,273,944
Net income - adjusted for core system conversion
expenses, net of tax* $56,004 $52,499 7% $50,981 10%
Net Income Available to Common Stockholders -
adjusted for core system conversion expenses,
net of tax* $55,973 $52,499 7% $50,949 10%
Diluted Earnings Per Share - adjusted for core
system conversion expenses, net of tax* $1.03 $0.96 7% $0.94 10%
Return on Average Assets - adjusted for core
system conversion expenses, net of tax* 1.46% 1.50% 1.74%
Return on Average Common Stockholders' Equity -
adjusted for core system conversion expenses,
net of tax* 19.54% 18.93% 20.78%
YEAR-TO-DATE OPERATING RESULTS
Net Income $207,734 $169,569 23%
Net Income Available to Common Stockholders $207,672 $169,506 23%
Diluted Earnings Per Share $3.82 $3.13 22%
Return on Average Assets 1.53% 1.59%
Return on Average Common Stockholders' Equity 19.26% 18.55%
Average Diluted Shares Outstanding 54,434,573 54,219,037
Net income - adjusted for core system conversion
expenses, net of tax* $209,985 $169,569 24%
Net Income Available to Common Stockholders -
adjusted for core system conversion expenses,
net of tax* $209,923 $169,506 24%
Diluted Earnings Per Share - adjusted for core system
conversion expenses, net of tax* $3.86 $3.13 23%
Return on Average Assets - adjusted for core
system conversion expenses, net of tax* 1.55% 1.59%
Return on Average Common Stockholders' Equity -
adjusted for core system conversion expenses,
net of tax* 19.47% 18.55%
BALANCE SHEET
Total Assets $15,448,806 $14,602,228 6% $11,932,654 29%
Loans 9,532,934 8,812,811 8% 8,465,688 13%
Non-interest-bearing Demand Deposits 4,799,767 4,366,654 10% 2,788,772 72%
Total Deposits 12,452,836 12,078,670 3% 9,975,724 25%
Stockholders' Equity 1,152,015 1,114,293 3% 992,852 16%
* The adjustment for the core system conversion expenses included in the comparative periods presented in this press release are more fully described in "Detailed Financials" and in "GAAP Reconciliation and Management Explanation of Non-GAAP Financial Measures" below.

DETAILED FINANCIALS

ServisFirst Bancshares, Inc. reported net income of $53.8 million and net income available to common stockholders of $53.7 million for the quarter ended December 31, 2021, compared to net income and net income available to common stockholders of $51.0 million and $50.9 million, respectively, for the same quarter in 2020. Basic and diluted earnings per common share were $0.99 for the fourth quarter of 2021, compared to $0.94 for the fourth quarter of 2020.

Annualized return on average assets was 1.40% and annualized return on average common stockholders’ equity was 18.75% for the fourth quarter of 2021, compared to 1.74% and 20.78%, respectively, for the fourth quarter of 2020.

Net interest income was $101.2 million for the fourth quarter of 2021, compared to $96.3 million for the third quarter of 2021 and $92.1 million for the fourth quarter of 2020. The net interest margin in the fourth quarter of 2021 was 2.71% compared to 2.85% in the third quarter of 2021 and 3.27% in the fourth quarter of 2020. Accretion of net fees on PPP loans of $5.1 million during the fourth quarter of 2021 contributed 22 basis points of the loan yield, compared to $5.2 million of PPP loan fee accretion during the third quarter of 2021, or 24 basis points of the loan yield and $7.5 million during the fourth quarter of 2020, or 35 basis points of the loan yield.

Average loans for the fourth quarter of 2021 were $9.06 billion, an increase of $378.9 million, or 17.3% annualized, over average loans of $8.68 billion for the third quarter of 2021, and an increase of $594.4 million, or 7.0%, over average loans of $8.46 billion for the fourth quarter of 2020. Forgiveness of PPP loans during the fourth quarter of 2021 totaled $157.8 million. PPP loans outstanding as of December 31, 2021 were $230.2 million.

Average total deposits for the fourth quarter of 2021 were $12.39 billion, an increase of $897.5 million, or 31.0%, annualized, over average total deposits of $11.49 billion for the third quarter of 2021, and an increase of $2.55 billion, or 25.9%, over average total deposits of $9.84 billion for the fourth quarter of 2020.

Non-performing assets to total assets were 0.09% for the fourth quarter of 2021, a decrease of two basis points compared to 0.11% for the third quarter of 2021 and a decrease of 12 basis points compared to 0.21% for the fourth quarter of 2020. Annualized net charge-offs to average loans were 0.03% for the fourth quarter of 2021, compared to 0.08% and 0.41% for the third quarter of 2021 and fourth quarter of 2020, respectively. The allowance for credit losses for each quarter-end period presented was calculated under the CECL methodology. The allowance for credit losses as a percentage of total loans at December 31, 2021, September 30, 2021 and December 30, 2020 was 1.22%, 1.24% and 1.04%, respectively. Excluding PPP loans, the allowance for credit losses as a percentage of total loans at December 31, 2021, September 30, 2021 and December 31, 2020 was 1.25%, 1.29%, and 1.16%, respectively. We recorded an $8.5 million provision for credit losses in the fourth quarter of 2021 compared to $6.0 million in the third quarter of 2021 and $6.3 million in the fourth quarter of 2020.

Non-interest income decreased $872,000, or 10.6%, to $7.4 million for the fourth quarter of 2021 from $8.2 million in the fourth quarter of 2020. Service charges on deposit accounts decreased $674,000, or 34.2%, to $1.3 million from the fourth quarter of 2020 to the fourth quarter of 2021. Mortgage banking revenue decreased $2.6 million, or 84.6%, to $471,000 from the fourth quarter of 2020 to the fourth quarter of 2021. We started retaining our mortgage loans in the second quarter of 2021 to increase earning assets and use excess liquidity. As of December 31, 2021, we had retained a total of 202 1-4 family mortgages for an aggregate balance of $76.9 million. Net credit card revenue increased $1.3 million, or 141.0%, to $2.2 million during the fourth quarter of 2021, compared to $913,000 during the fourth quarter of 2020. The number of credit card accounts increased approximately 6.4% and the aggregate amount of spend on all credit card accounts increased 36% during the fourth quarter of 2021 compared to the fourth quarter of 2020. Other operating income for the fourth quarter of 2021 increased $1.1 million, or 174.8%, to $1.8 million from $643,000 in the fourth quarter of 2020. We wrote up the value of our interest rate cap by $839,000 during the fourth quarter of 2021 through other income compared to a write down of $61,000 during the fourth quarter of 2020. Increased probabilities of Fed rate increases contributed to the recovery in the fair value of our interest rate cap during the fourth quarter of 2021. Merchant service revenue increased from $168,000 during the fourth quarter of 2020 to $376,000, or 124.1%, during the fourth quarter of 2021.

Non-interest expense for the fourth quarter of 2021 increased $10.3 million, or 36.5%, to $38.5 million from $28.2 million in the fourth quarter of 2020, and increased $4.1 million, or 12.0%, on a linked quarter basis. Salary and benefit expense for the fourth quarter of 2021 increased $2.3 million, or 15.6%, to $17.3 million from $15.0 million in the fourth quarter of 2020, and decreased $692,000, or 3.8%, on a linked quarter basis. Salary expense alone increased 6.2% year over year. We increased our annual incentive accrual based on the increased loan production in 2021 and on final anticipated payouts for 2021 PPP loan originations. Total incentive accruals increased $2.4 million to $4.4 million for the fourth quarter of 2021 compared the same quarter in 2020. The number of FTE employees increased by 9 to 502 at December 31, 2021 compared to 493 at December 31, 2020, and decreased by 16 from the end of the third quarter of 2021. Equipment and occupancy expense increased $230,000, or 8.6%, to $2.9 million in the fourth quarter of 2021, from $2.7 million in the fourth quarter of 2020, and decreased $86,000, or 2.9% on a linked-quarter basis. We moved our office in Nashville, Tennessee in early 2021 to expand our space and improve visibility and we opened our new office in Orlando, Florida in the third quarter of 2021. The linked-quarter decrease is primarily attributable to adjustments of accrued property taxes. Third party processing and other services expense increased $1.4 million, or 42.1%, to $4.9 million in the fourth quarter of 2021, from $3.4 million in the fourth quarter of 2020 and increased $712,000, or 17.2%, on a linked-quarter basis. We increased the number of correspondent banks for which we are processing transactions through the Federal Reserve Bank. Professional services expense decreased $335,000, or 26.8%, to $913,000 in the fourth quarter of 2021, from $1.2 million in the fourth quarter of 2020, primarily due to adjustments in accrued professional services fees during the fourth quarter of 2021. FDIC and other regulatory assessments decreased $324,000 to $1.0 million in the fourth quarter of 2021, from $1.4 million in the fourth quarter of 2020, and decreased $588,000, or 36.1%, on a linked quarter basis. ServisFirst Bank was reclassified as a large financial institution by the FDIC as of September 30, 2021. Other operating expenses for the fourth quarter of 2021 increased $7 million, or 160.7%, to $11.4 million from $4.4 million in the fourth quarter of 2020, and increased $4.9 million on a linked-quarter basis. This increase in other operating expenses includes a $3.0 million charge for expenses associated with the conversion to a new core operating system scheduled to take place in the third quarter of 2022. See “GAAP Reconciliation and Management Explanation of Non-GAAP Financial Measures” below for more discussion of these expenses. We invested $24.5 million in a new market tax credit during the fourth quarter of 2021. We wrote down the investment by $3.1 million during the fourth quarter of 2021 as we recognize the tax credits. We decreased our reserve for credit losses on unfunded loan commitments by $1.7 million in the fourth quarter of 2021. The efficiency ratio was 35.47% during the fourth quarter of 2021 compared to 28.11% during the fourth quarter of 2020 and compared to 32.95% during the third quarter of 2021. The efficiency ratio was 32.70% when adjusted for the core system conversion costs discussed above.

Income tax expense decreased $7.0 million, or 47.3%, to $7.8 million in the fourth quarter of 2021, compared to $14.9 million in the fourth quarter of 2020. Our effective tax rate was 12.70% for the fourth quarter of 2021 compared to 22.56% for the fourth quarter of 2020. We recognized an aggregate of $7.4 million in credits during the fourth quarter of 2021 related to investments in new market tax credits. 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 fourth quarters of 2021 and 2020 of $363,000 and $170,000, respectively.

GAAP Reconciliation and Management Explanation of Non-GAAP Financial Measures

During the fourth quarter of 2021, we recorded $3.0 million of expenses associated with our core operating system conversion scheduled to be completed during the third quarter of 2022. The expenses relate to negotiated liquidated damages of our existing system contracts and the procurement of our data from those providers. Financial measures included in this press release that are presented adjusted for these expenses are net income, net income available to common stockholders, diluted earnings per share, return on average assets, return on average common stockholders’ equity and efficiency ratio. Each of these six financial measures excludes the impact of this item, net of tax, 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. We also include total loans adjusted for the impact of PPP loan activities. 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.

Three Months Ended December 31, 2021 Year Ended December 31, 2021
Net income - GAAP $53,753 $207,734
Adjustments:
Core system conversion expenses 3,007 3,007
Tax on adjustment (756) (756)
Adjusted net income - non-GAAP $56,004 $209,985
Net income available to common stockholders - GAAP $53,722 $207,672
Adjustments:
Core system conversion expenses 3,007 3,007
Tax on adjustment (756) (756)
Adjusted net income available to common stockholders -
non-GAAP $55,973 $209,923
Diluted earnings per share - GAAP $0.99 3.82
Adjustments:
Core system conversion expenses 0.05 0.05
Tax on adjustment (0.01) (0.01)
Adjusted diluted earnings per share - non-GAAP $1.03 $3.86
Return on average assets - GAAP 1.40 % 1.53 %
Net income - GAAP $53,753 $207,734
Adjustments:
Core system conversion expenses 3,007 3,007
Tax on adjustment (756) (756)
Adjusted net income - non-GAAP $56,004 $209,985
Average assets - GAAP $15,250,671 $13,555,221
Adjusted return on average assets - non-GAAP 1.46 % 1.55 %
Return on average common stockholders' equity - GAAP 18.75 % 19.26 %
Net income available to common stockholders - GAAP $53,722 $207,672
Adjustments:
Core system conversion expenses 3,007 3,007
Tax on adjustment (756) (756)
Adjusted net income available to common stockholders -
non-GAAP $55,973 $209,923
Average common stockholders' equity - GAAP $1,136,610 $1,078,075
Adjusted return on average common stockholders' equity - 19.54 % 19.47 %
non-GAAP
Efficiency ratio 35.47 %
Non-interest expense - GAAP $38,489
Adjustments:
Core system conversion expenses 3,007
Adjusted non-interest expense 35,482
Net interest income plus non-interest income - GAAP $108,515
Adjusted efficiency ratio - non-GAAP 32.70 %
At December 31, 2021 At September 30, 2021 At June 30, 2021 At March 31, 2021 At December 31, 2020
Book value per share - GAAP $21.24 $20.56 $19.80 $19.03 $18.41
Total common stockholders' equity - GAAP 1,152,015 1,114,293 1,073,284 1,030,485 992,852
Adjustments:
Adjusted for goodwill and core deposit intangible asset (13,638) (13,705) (13,773) (13,841) (13,908)
Tangible common stockholders' equity - non-GAAP $1,138,377 $1,100,588 $1,059,511 $1,016,644 $978,944
Tangible book value per share - non-GAAP $20.99 $20.30 $19.55 $18.78 $18.15
Stockholders' equity to total assets - GAAP 7.46 % 7.63 % 8.13 % 8.15 % 8.32 %
Total assets - GAAP $15,448,806 $14,602,228 $13,207,319 $12,647,374 $11,932,654
Adjustments:
Adjusted for goodwill and core deposit intangible asset (13,638) (13,705) (13,773) (13,841) (13,908)
Total tangible assets - non-GAAP $15,435,168 $14,588,523 $13,193,546 $12,633,533 $11,918,746
Tangible common equity to total tangible assets - non-GAAP 7.38 % 7.54 % 8.03 % 8.05 % 8.21 %
Total loans - GAAP $9,532,934 $8,812,811 $8,649,694 $8,504,980 $8,465,688
Adjustments:
Adjusted to exclude PPP loans (230,184) (387,725) (595,017) (967,641) (900,493)
Loans, excluding PPP loans - non-GAAP $9,302,750 $8,425,086 $8,054,677 $7,537,339 $7,565,195

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, Mobile, Montgomery and Dothan, Alabama, Northwest Florida, West Central Florida, Nashville, Tennessee, Atlanta, Georgia, and Charleston, South Carolina.

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 as a result of our reclassification as a large financial institution by the FDIC; 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 and the ability of the U.S. Congress to increase the U.S. statutory debt limit as needed; 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 2021, 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 BankDavis Mange (205) 949-3420[email protected]

SELECTED FINANCIAL HIGHLIGHTS (UNAUDITED)
(In thousands except share and per share data)
4th Quarter 2021 3rd Quarter 2021 2nd Quarter 2021 1st Quarter 2021 4th Quarter 2020
CONSOLIDATED STATEMENT OF INCOME
Interest income $108,954 $104,236 $102,719 $100,396 $101,065
Interest expense 7,804 7,916 8,051 8,031 8,984
Net interest income 101,150 96,320 94,668 92,365 92,081
Provision for credit losses 8,451 5,963 9,652 7,451 6,283
Net interest income after provision for credit losses 92,699 90,357 85,016 84,914 85,798
Non-interest income 7,365 8,026 9,598 8,463 8,237
Non-interest expense 38,489 34,377 31,309 28,914 28,202
Income before income tax 61,575 64,006 63,305 64,463 65,833
Provision for income tax 7,822 11,507 13,278 13,008 14,852
Net income 53,753 52,499 50,027 51,455 50,981
Preferred stock dividends 31 - 31 - 32
Net income available to common stockholders $53,722 $52,499 $49,996 $51,455 $50,949
Earnings per share - basic $0.99 $0.97 $0.92 $0.95 $0.94
Earnings per share - diluted $0.99 $0.96 $0.92 $0.95 $0.94
Average diluted shares outstanding 54,493,959 54,477,740 54,460,230 54,381,991 54,273,944
CONSOLIDATED BALANCE SHEET DATA
Total assets $15,448,806 $14,602,228 $13,207,319 $12,647,374 $11,932,654
Loans 9,532,934 8,812,811 8,649,694 8,504,980 8,465,688
Debt securities 1,305,527 984,600 1,013,783 962,129 886,938
Non-interest-bearing demand deposits 4,799,767 4,366,654 3,296,429 3,044,611 2,788,772
Total deposits 12,452,836 12,078,670 10,958,236 10,577,610 9,975,724
Borrowings 64,706 64,701 64,696 64,691 64,748
Stockholders' equity 1,152,015 1,114,293 1,073,284 1,030,485 992,852
Shares outstanding 54,227,060 54,207,147 54,201,204 54,137,650 53,943,751
Book value per share $21.24 $20.56 $19.80 $19.03 $18.41
Tangible book value per share (1) $20.99 $20.30 $19.55 $18.78 $18.15
SELECTED FINANCIAL RATIOS (Annualized)
Net interest margin 2.71% 2.85% 3.06% 3.20% 3.27%
Return on average assets 1.40% 1.50% 1.56% 1.72% 1.74%
Return on average common stockholders' equity 18.75% 18.93% 18.98% 19.83% 20.78%
Efficiency ratio 35.47% 32.95% 30.03% 28.68% 28.11%
Non-interest expense to average earning assets 1.03% 1.01% 1.01% 1.00% 1.00%
CAPITAL RATIOS (2)
Common equity tier 1 capital to risk-weighted assets 9.95% 10.46% 10.60% 10.73% 10.50%
Tier 1 capital to risk-weighted assets 9.96% 10.47% 10.60% 10.73% 10.50%
Total capital to risk-weighted assets 11.58% 12.18% 12.36% 12.48% 12.20%
Tier 1 capital to average assets 7.39% 7.80% 8.10% 8.25% 8.23%
Tangible common equity to total tangible assets (1) 7.38% 7.54% 8.03% 8.05% 8.22%
(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)
December 31, 2021 December 31, 2020 % Change
ASSETS
Cash and due from banks $56,934 $93,655 (39)%
Interest-bearing balances due from depository institutions 4,106,790 2,115,985 94 %
Federal funds sold 58,372 1,771 3,196 %
Cash and cash equivalents 4,222,096 2,211,411 91 %
Available for sale debt securities, at fair value 842,570 886,688 (5)%
Held to maturity debt securities (fair value of $466,286 at December 31, 2021 and $250 at December 31, 2020) 462,957 250 NM
Restricted equity securities 7,311 -
Mortgage loans held for sale 1,114 14,425 (92)%
Loans 9,532,934 8,465,688 13 %
Less allowance for credit losses (116,660) (87,942) 33 %
Loans, net 9,416,274 8,377,746 12 %
Premises and equipment, net 60,300 54,969 10 %
Goodwill and other identifiable intangible assets 13,638 13,908 (2)%
Other assets 429,859 373,256 15 %
Total assets $15,448,806 $11,932,654 29 %
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposits:
Non-interest-bearing $4,799,767 $2,788,772 72 %
Interest-bearing 7,653,069 7,186,952 6 %
Total deposits 12,452,836 9,975,724 25 %
Federal funds purchased 1,711,777 851,545 101 %
Other borrowings 64,706 64,748 - %
Other liabilities 67,472 47,785 41 %
Total liabilities 14,296,791 10,939,802 31 %
Stockholders' equity:
Preferred stock, par value $0.001 per share; 1,000,000 authorized and undesignated at
December 31, 2021 and December 31, 2020 - -
Common stock, par value $0.001 per share; 100,000,000 shares authorized; 54,227,060 shares
issued and outstanding at December 31, 2021, and 53,943,751 shares issued and outstanding
at December 31, 2020 54 54 - %
Additional paid-in capital 226,397 223,856 1 %
Retained earnings 911,008 748,224 22 %
Accumulated other comprehensive income 14,056 20,218 (30)%
Total stockholders' equity attributable to ServisFirst Bancshares, Inc. 1,151,515 992,352 16 %
Noncontrolling interest 500 500 - %
Total stockholders' equity 1,152,015 992,852 16 %
Total liabilities and stockholders' equity $15,448,806 $11,932,654 29 %

CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(In thousands except per share data)
Three Months Ended December 31, Year Ended December 31,
2021 2020 2021 2020
Interest income:
Interest and fees on loans $100,348 $94,332 $385,721 $362,664
Taxable securities 6,747 6,018 25,413 22,122
Nontaxable securities 47 129 302 739
Federal funds sold 18 5 29 332
Other interest and dividends 1,794 581 4,840 3,165
Total interest income 108,954 101,065 416,305 389,022
Interest expense:
Deposits 6,271 7,853 26,569 45,230
Borrowed funds 1,533 1,131 5,233 5,755
Total interest expense 7,804 8,984 31,802 50,985
Net interest income 101,150 92,081 384,503 338,037
Provision for credit losses 8,451 6,283 31,517 42,434
Net interest income after provision for credit losses 92,699 85,798 352,986 295,603
Non-interest income:
Service charges on deposit accounts 1,297 1,971 6,839 7,528
Mortgage banking 471 3,050 7,340 8,747
Credit card income 2,200 913 7,347 5,916
Securities gains - - 620 -
Increase in cash surrender value life insurance 1,630 1,660 6,642 6,310
Other operating income 1,767 643 4,664 1,615
Total non-interest income 7,365 8,237 33,452 30,116
Non-interest expense:
Salaries and employee benefits 17,303 14,970 67,728 61,414
Equipment and occupancy expense 2,910 2,680 11,404 10,070
Third party processing and other services 4,856 3,418 16,362 13,778
Professional services 913 1,248 3,891 4,242
FDIC and other regulatory assessments 1,042 1,366 5,679 4,354
Other real estate owned expense 48 140 868 2,163
Other operating expense 11,417 4,380 27,157 15,490
Total non-interest expense 38,489 28,202 133,089 111,511
Income before income tax 61,575 65,833 253,349 214,208
Provision for income tax 7,822 14,852 45,615 44,639
Net income 53,753 50,981 207,734 169,569
Dividends on preferred stock 31 32 62 63
Net income available to common stockholders $53,722 $50,949 $207,672 $169,506
Basic earnings per common share $0.99 $0.94 $3.83 $3.15
Diluted earnings per common share $0.99 $0.94 $3.82 $3.13

LOANS BY TYPE (UNAUDITED)
(In thousands)
4th Quarter 2021 3rd Quarter 2021 2nd Quarter 2021 1st Quarter 2021 4th Quarter 2020
Commercial, financial and agricultural $2,984,053 $2,927,845 $3,105,243 $3,323,093 $3,295,900
Real estate - construction 1,103,076 887,938 782,305 666,592 593,614
Real estate - mortgage:
Owner-occupied commercial 1,874,103 1,809,840 1,726,888 1,698,695 1,693,428
1-4 family mortgage 826,765 765,102 707,546 685,840 711,692
Other mortgage 2,678,084 2,357,812 2,262,231 2,068,560 2,106,184
Subtotal: Real estate - mortgage 5,378,952 4,932,754 4,696,665 4,453,095 4,511,304
Consumer 66,853 64,274 65,481 62,200 64,870
Total loans $9,532,934 $8,812,811 $8,649,694 $8,504,980 $8,465,688

SUMMARY OF CREDIT LOSS EXPERIENCE (UNAUDITED)
(Dollars in thousands)
4th Quarter 2021 3rd Quarter 2021 2nd Quarter 2021 1st Quarter 2021 4th Quarter 2020
Allowance for credit losses:
Beginning balance $108,950 $104,670 $94,906 $87,942 $92,440
Impact of Adoption of ASC 326 - - - - (2,000)
Loans charged off:
Commercial financial and agricultural 1,285 1,541 150 477 8,792
Real estate - construction 14 - - - 202
Real estate - mortgage - 208 59 12 -
Consumer 141 86 54 87 38
Total charge offs 1,440 1,835 263 576 9,032
Recoveries:
Commercial financial and agricultural 671 140 298 26 94
Real estate - construction - - 2 50 30
Real estate - mortgage 18 4 62 2 114
Consumer 10 8 13 11 13
Total recoveries 699 152 375 89 251
Net charge-offs 741 1,683 (112) 487 8,781
Provision for credit losses 8,451 5,963 9,652 7,451 6,283
Ending balance $116,660 $108,950 $104,670 $94,906 $87,942
Allowance for credit losses to total loans 1.22 % 1.24 % 1.21 % 1.12 % 1.04 %
Allowance for credit losses to total average
loans 1.29 % 1.26 % 1.21 % 1.11 % 1.04 %
Net charge-offs (recoveries) to total average loans0.03 % 0.08 % (0.01)% 0.02 % 0.41 %
Provision for credit losses to total average
loans 0.37 % 0.27 % 0.45 % 0.35 % 0.30 %
Nonperforming assets:
Nonaccrual loans $6,762 $9,145 $12,301 $13,088 $13,973
Loans 90+ days past due and accruing 5,335 5,326 4,888 4,804 4,981
Other real estate owned and
repossessed assets 1,208 2,068 2,039 2,067 6,497
Total $13,305 $16,539 $19,228 $19,959 $25,451
Nonperforming loans to total loans 0.13 % 0.16 % 0.20 % 0.21 % 0.22 %
Nonperforming assets to total assets 0.09 % 0.11 % 0.15 % 0.16 % 0.21 %
Nonperforming assets to earning assets 0.09 % 0.11 % 0.15 % 0.16 % 0.22 %
Allowance for credit losses to nonaccrual loans1,725.23 % 1,191.36 % 850.91 % 725.14 % 629.37 %
Restructured accruing loans $431 $437 $441 $794 $818
Restructured accruing loans to total loans - % - % 0.01 % 0.01 % 0.01 %
TROUBLED DEBT RESTRUCTURINGS (TDRs) (UNAUDITED)
(In thousands)
4th Quarter 2021 3rd Quarter 2021 2nd Quarter 2021 1st Quarter 2021 4th Quarter 2020
Beginning balance: $2,893 $2,918 $3,542 $1,433 $2,738
Additions - - - 2,146 -
Net (paydowns) / advances (303) (25) (624) (37) (619)
Charge-offs (14) - - - (535)
Transfer to OREO - - - - (151)
Ending balance $2,576 $2,893 $2,918 $3,542 $1,433

CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(In thousands except per share data)
4th Quarter 2021 3rd Quarter 2021 2nd Quarter 2021 1st Quarter 2021 4th Quarter 2020
Interest income:
Interest and fees on loans $100,348 $96,119 $95,451 $93,803 $94,332
Taxable securities 6,747 6,544 6,315 5,807 6,018
Nontaxable securities 47 62 86 107 129
Federal funds sold 18 4 4 3 5
Other interest and dividends 1,794 1,507 863 676 581
Total interest income 108,954 104,236 102,719 100,396 101,065
Interest expense:
Deposits 6,271 6,581 6,836 6,881 7,853
Borrowed funds 1,533 1,335 1,215 1,150 1,131
Total interest expense 7,804 7,916 8,051 8,031 8,984
Net interest income 101,150 96,320 94,668 92,365 92,081
Provision for credit losses 8,451 5,963 9,652 7,451 6,283
Net interest income after provision for credit losses 92,699 90,357 85,016 84,914 85,798
Non-interest income:
Service charges on deposit accounts 1,297 1,727 1,907 1,908 1,971
Mortgage banking 471 1,423 2,699 2,747 3,050
Credit card income 2,200 2,043 1,912 1,192 913
Securities gains - - 620 - -
Increase in cash surrender value life insurance 1,630 1,671 1,683 1,658 1,660
Other operating income 1,767 1,162 777 958 643
Total non-interest income 7,365 8,026 9,598 8,463 8,237
Non-interest expense:
Salaries and employee benefits 17,303 17,995 16,887 15,543 14,970
Equipment and occupancy expense 2,910 2,996 2,844 2,654 2,680
Third party processing and other services 4,856 4,144 3,946 3,416 3,418
Professional services 913 948 1,107 923 1,248
FDIC and other regulatory assessments 1,042 1,630 1,425 1,582 1,366
Other real estate owned expense 48 123 540 157 140
Other operating expense 11,417 6,541 4,560 4,639 4,380
Total non-interest expense 38,489 34,377 31,309 28,914 28,202
Income before income tax 61,575 64,006 63,305 64,463 65,833
Provision for income tax 7,822 11,507 13,278 13,008 14,852
Net income 53,753 52,499 50,027 51,455 50,981
Dividends on preferred stock 31 - 31 - 32
Net income available to common stockholders $53,722 $52,499 $49,996 $51,455 $50,949
Basic earnings per common share $0.99 $0.97 $0.92 $0.95 $0.94
Diluted earnings per common share $0.99 $0.96 $0.92 $0.95 $0.94

AVERAGE BALANCE SHEETS AND NET INTEREST ANALYSIS (UNAUDITED)
ON A FULLY TAXABLE-EQUIVALENT BASIS
(Dollars in thousands)
4th Quarter 2021 3rd Quarter 2021 2nd Quarter 2021 1st Quarter 2021 4th Quarter 2020
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 $9,032,914 4.40% $8,653,632 4.40% $8,618,139 4.43% $8,484,914 4.47% $8,435,237 4.43%
Tax-exempt (2) 26,148 4.07 26,542 4.05 26,854 4.05 27,592 4.17 29,393 4.16
Total loans, net of
unearned income 9,059,062 4.40 8,680,174 4.39 8,644,993 4.43 8,512,506 4.47 8,464,630 4.43
Mortgage loans held for sale 998 1.99 7,050 1.69 11,470 1.92 13,601 1.94 19,459 1.37
Debt securities:
Taxable 1,134,378 2.38 969,715 2.70 936,863 2.70 878,118 2.65 862,333 2.79
Tax-exempt (2) 9,823 2.36 12,382 2.39 16,872 2.47 21,084 2.43 25,542 2.52
Total securities (3) 1,144,201 2.38 982,097 2.70 953,735 2.69 899,202 2.64 887,875 2.78
Federal funds sold 39,445 0.18 8,551 0.19 8,224 0.20 11,935 0.10 16,306 0.12
Restricted equity securities 873 3.18 - - - - - - - -
Interest-bearing balances with banks 4,561,662 0.16 3,761,652 0.16 2,790,524 0.12 2,262,233 0.12 1,837,249 0.13
Total interest-earning assets $14,806,241 2.92 $13,439,524 3.08 $12,408,946 3.32 $11,699,477 3.48 $11,225,519 3.58
Non-interest-earning assets:
Cash and due from banks 79,293 90,034 85,478 71,166 91,258
Net premises and equipment 61,837 62,845 61,240 57,198 56,315
Allowance for credit losses, accrued
interest and other assets 303,300 315,178 320,729 320,407 308,746
Total assets $15,250,671 $13,907,581 $12,876,393 $12,148,248 $11,681,838
Interest-bearing liabilities:
Interest-bearing deposits:
Checking $1,499,918 0.19% $1,431,420 0.19% $1,350,098 0.19% $1,294,614 0.19% $1,197,908 0.23%
Savings 123,179 0.18 122,579 0.17 104,283 0.18 93,375 0.18 86,259 0.18
Money market 5,100,192 0.26 5,328,291 0.26 5,321,338 0.26 5,057,828 0.27 4,933,285 0.31
Time deposits 807,342 1.05 806,108 1.15 801,928 1.33 808,561 1.44 810,675 1.59
Total interest-bearing deposits 7,530,631 0.33 7,688,398 0.34 7,577,647 0.36 7,254,378 0.38 7,028,127 0.44
Federal funds purchased 1,608,349 0.21 1,205,327 0.21 970,708 0.22 849,772 0.22 752,765 0.22
Other borrowings 64,704 4.23 64,694 4.23 64,694 4.28 64,689 4.33 64,701 4.41
Total interest-bearing liabilities $9,203,684 0.34% $8,958,419 0.35% $8,613,049 0.37% $8,168,839 0.40% $7,845,593 0.46%
Non-interest-bearing liabilities:
Non-interest-bearing
demand deposits 4,856,243 3,800,972 3,154,605 2,923,041 2,812,254
Other liabilities 54,134 48,060 52,027 39,442 48,642
Stockholders' equity 1,121,578 1,078,987 1,038,012 996,741 956,847
Accumulated other comprehensive
income 15,032 21,143 18,700 20,185 18,502
Total liabilities and
stockholders' equity $15,250,671 $13,907,581 $12,876,393 $12,148,248 $11,681,838
Net interest spread 2.58% 2.73% 2.95% 3.08% 3.12%
Net interest margin 2.71% 2.85% 3.06% 3.20% 3.27%
(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.



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