SFBS - ServisFirst Bancshares Inc. Announces Results for Second Quarter of 2022

ServisFirst Bancshares, Inc. (NYSE: SFBS), today announced earnings and operating results for the quarter ended June 30, 2022.

Second Quarter 2022 Highlights:

• Diluted earnings per share were $1.14 for the second quarter of 2022, a 24% increase over the second quarter of 2021 and an 8% increase on a linked-quarter basis
• Total loans grew $718.4 million during the second quarter of 2022, or 29% annualized
• Entered the Tallahassee, Florida market
• Book value per share increased 13% year-over-year and 3% on a linked-quarter basis
• Return on equity was 21% for the quarter
• Deposits grew $814.1 million, or 7%, year-over-year

Tom Broughton, Chairman, President and CEO, said, “We are pleased with the strong profitability due to growth in our core relationships. Our bankers are winning in the marketplace.”

Bud Foshee, CFO, said, “Our efficiency ratio is among the lowest in the industry despite adding the most new bankers in the first half of the year.”

DETAILED FINANCIALS

ServisFirst Bancshares, Inc. reported net income and net income available to common stockholders of $62.1 million for the quarter ended June 30, 2022, compared to net income and net income available to common stockholders of $57.6 million for the first quarter of 2022 and $50.0 million for the second quarter of 2021. Basic and diluted earnings per common share were both $1.14 for the second quarter of 2022, compared to $1.06 for both in the first quarter of 2022 and $0.92 for both in the second quarter of 2021.

Annualized return on average assets was 1.67% and annualized return on average common stockholders’ equity was 20.93% for the second quarter of 2022, compared to 1.56% and 18.98%, respectively, for the second quarter of 2021.

Net interest income was $116.4 million for the second quarter of 2022, compared to $105.7 million for the first quarter of 2022 and $94.7 million for the second quarter of 2021. The net interest margin in the second quarter of 2022 was 3.26% compared to 2.89% in the first quarter of 2022 and 3.06% in the second quarter of 2021. Loan yields were 4.38% during the second quarter of 2022 compared to 4.29% during the first quarter of 2022 and 4.43% during the second quarter of 2021. Accretion of net fees on Paycheck Protection Program ("PPP") loans of $3.3 million during the second quarter of 2022 contributed 11 basis points of the loan yield, compared to $4.5 million of PPP loan fee accretion during the first quarter of 2022, or 19 basis points of the loan yield, and $8.0 million during the second quarter of 2021, or 37 basis points of the loan yield. Investment yields were 2.37% during the second quarter of 2022 compared to 2.17% during the first quarter of 2022 and 2.69% during the second quarter of 2021. Amortization of mortgage-backed securities decreased by $465,000 from the first quarter to the second quarter of 2022.

Average loans for the second quarter of 2022 were $10.19 billion, an increase of $542.4 million, or 22.6% annualized, over average loans of $9.65 billion for the first quarter of 2022, and an increase of $1.54 billion, or 17.9%, over average loans of $8.64 billion for the second quarter of 2021. Forgiveness of PPP loans during the second quarter of 2022 totaled $84.6 million. PPP loans outstanding as of June 30, 2022 were $23.0 million.

Average total deposits for the second quarter of 2022 were $12.04 billion, a decrease of $337.2 million, or 10.9%, annualized, over average total deposits of $12.38 billion for the first quarter of 2022, and an increase of $1.31 billion, or 12.2%, over average total deposits of $10.73 billion for the second quarter of 2021.

Non-performing assets to total assets were 0.12% for the second quarter of 2022, a decrease of 2 basis points compared to 0.14% for the first quarter of 2022 and a decrease of 3 basis points compared to 0.15% for the second quarter of 2021. Annualized net charge-offs to average loans were 0.02% for the second quarter of 2022, compared to 0.11% and -0.01% for the first quarter of 2022 and second quarter of 2021, respectively. The allowance for credit losses as a percentage of total loans at June 30, 2022, March 31, 2022 and June 30, 2021 was 1.21% at each date. Excluding PPP loans, the allowance for credit losses as a percentage of total loans at June 30, 2022, March 31, 2022 and June 30, 2021 was 1.21%, 1.22%, and 1.30%, respectively. We recorded a $9.5 million provision for credit losses in the second quarter of 2022 compared to $5.4 million in the first quarter of 2022 and $9.7 million in the second quarter of 2021. The second quarter 2022 and 2021 provision for credit losses were higher due to increased loan growth, adjusted for forgiveness of PPP loans.

Non-interest income decreased $92,000, or 1.0%, to $9.5 million for the second quarter of 2022 from $9.6 million in the second quarter of 2021. Service charges on deposit accounts increased $226,000, or 11.9%, to $2.1 million from the second quarter of 2021 to the second quarter of 2022. Mortgage banking revenue decreased $2.1 million, or 77.3%, to $614,000 from the second quarter of 2021 to the second quarter of 2022. We started retaining our mortgage loans in the second quarter of 2021 to increase earning assets and use excess liquidity. As of June 30, 2022, we had retained a total of 405 1-4 family mortgages for an aggregate balance of $151.1 million. Net credit card revenue increased $760,000, or 39.7%, to $2.7 million during the second quarter of 2022, compared to $1.9 million during the second quarter of 2021. The number of credit card accounts increased approximately 20.2% and the aggregate amount of spend on all credit card accounts increased 33.4% during the second quarter of 2022 compared to the second quarter of 2021. Cash surrender value life insurance decreased $50,000, or 3.0%, to $1.6 million during the second quarter of 2022, compared to $1.7 million during the second quarter of 2021. Other operating income for the second quarter of 2022 increased $4.5 million, or 580.4%, to $5.3 million from $777,000 in the second quarter of 2021. We wrote up the value of our interest rate cap by $1.9 million during the second quarter of 2022 compared to a write down of $2,000 during the second quarter of 2021. Merchant service revenue increased from $289,000 during the second quarter of 2021 to $471,000, or 63%, during the second quarter of 2022. We recognized a $2.1 million death benefit related to a former employee in our bank-owned life insurance (“BOLI”) program during the second quarter of 2022. We recognized a $2.8 million loss on the sale of seven available for sale debt securities that were yielding less than 1.00% during the second quarter of 2022.

Non-interest expense for the second quarter of 2022 increased $8.5 million, or 27.2%, to $39.8 million from $31.3 million in the second quarter of 2021, and increased $2.6 million, or 7.0%, on a linked quarter basis. Salary and benefit expense for the second quarter of 2022 increased $3.8 million, or 22.8%, to $20.7 million from $16.9 million in the second quarter of 2021, and increased $2.4 million, or 13.3%, on a linked quarter basis. The number of FTE employees increased by 13 to 540 at June 30, 2022 compared to 527 at June 30, 2021, and increased by 29 from the end of the first quarter of 2022. We accrued an additional $1.8 million in our annual incentive program during the second quarter of 2022 based on loan growth and entry into new markets. Equipment and occupancy expense increased $139,000, or 4.9%, to $3.0 million in the second quarter of 2022, from $2.8 million in the second quarter of 2021, and increased $50,000, or 1.7% on a linked-quarter basis. Third party processing and other services expense increased $2.4 million, or 60.8%, to $6.3 million in the second quarter of 2022, from $3.9 million in the second quarter of 2021, and increased $740,000, or 13.2%, on a linked-quarter basis. We incurred additional processing expenses of $243,000 during the second quarter of 2022 and $503,000 year-to-date related to our conversion to a new core processor in the first quarter of 2023. This increase in third party processing also includes Federal Reserve Bank charges related to correspondent bank settlement activities. These charges increased by $1.7 million year-over-year to $2.3 million during the second quarter of 2022. Professional services expense increased $220,000, or 19.9%, to $1.3 million in the second quarter of 2022, from $1.1 million in the second quarter of 2021. FDIC and other regulatory assessments decreased $278,000 to $1.1 million in the second quarter of 2022, from $1.4 million in the second quarter of 2021, and increased $15,000, or 1.3%, on a linked quarter basis. Other operating expenses for the second quarter of 2022 increased $2.7 million, or 59.1%, to $7.3 million from $4.6 million in the second quarter of 2021, and decreased $999,000 on a linked-quarter basis. We accrued $250,000 for potential uninsured check fraud losses during the second quarter of 2022 and $750,000 year-to-date. We recognized core system deconversion expenses of $3.0 million during the fourth quarter of 2021 and $873,000 during the first quarter of 2022 through other operating expenses. The efficiency ratio was 31.64% during the second quarter of 2022 compared to 30.03% during the second quarter of 2021 and compared to 32.74% during the first quarter of 2022.

Income tax expense increased $1.1 million, or 8.5%, to $14.4 million in the second quarter of 2022, compared to $13.3 million in the second quarter of 2021. Our effective tax rate was 18.83% for the second quarter of 2022 compared to 20.97% for the second quarter of 2021. We recognized an aggregate of $3.1 million in credits during the second quarter of 2022 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 second quarters of 2022 and 2021 of $352,000 and $724,000, respectively.

GAAP Reconciliation and Management Explanation of Non-GAAP Financial Measures

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

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, Charleston, South Carolina, and Charlotte, North 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 2022, 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.