SFBS - ServisFirst Bancshares Inc. Announces Results For Second Quarter of 2020

July, 20 2020 04:01 PM ServisFirst Bancshares Inc.

BIRMINGHAM, Ala., July 20, 2020 (GLOBE NEWSWIRE) -- ServisFirst Bancshares, Inc. (NASDAQ: SFBS), today announced earnings and operating results for the three and six months ended June 30, 2020.

Second Quarter 2020 Highlights:

Diluted EPS for the second quarter increased 14% to $0.75 year over year
Record deposit growth of $1.5 billion during the second quarter
Funded approximately 4,800 Payroll Protection Program (“PPP”) loans totaling over $1.0 billion, with 68% less than $150,000 in size
Asset quality improved, with nonperforming loans to total loans improving to 26 basis points during the second quarter
Total assets exceed $11.0 billion


FINANCIAL SUMMARY (UNAUDITED)
(in Thousands except share and per share amounts)





















Period Ending June 30, 2020

Period Ending March 31, 2020

% Change From Period Ending March 31, 2020 to Period Ending June 30, 2020

Period Ending June 30, 2019

% Change From Period Ending June 30, 2019 to Period Ending June 30, 2020
QUARTERLY OPERATING RESULTS


















Net Income

$
40,448


$
34,778


16
%

$
35,633


14
%
Net Income Available to Common Stockholders

$
40,417


$
34,778


16
%

$
35,602


14
%
Diluted Earnings Per Share

$
0.75


$
0.64


17
%

$
0.66


14
%
Return on Average Assets


1.55
%


1.54
%





1.69
%



Return on Average Common Stockholders' Equity


18.40
%


16.23
%





18.72
%



Average Diluted Shares Outstanding


54,194,506



54,167,414






54,089,107























YEAR-TO-DATE OPERATING RESULTS


















Net Income

$
75,226









$
70,643


6
%
Net Income Available to Common Stockholders

$
75,195









$
70,612


6
%
Diluted Earnings Per Share

$
1.39









$
1.31


6
%
Return on Average Assets


1.54
%









1.72
%



Return on Average Common Stockholders' Equity


17.31
%









19.06
%



Average Diluted Shares Outstanding


54,180,960










54,082,857























BALANCE SHEET


















Total Assets

$
11,012,195


$
9,364,882


18
%

$
8,740,237


26
%
Loans


8,315,375



7,568,836


10
%


6,967,886


19
%
Non-interest-bearing Demand Deposits


2,678,893



1,925,626


39
%


1,576,959


70
%
Total Deposits


9,342,918



7,832,655


19
%


7,404,794


26
%
Stockholders' Equity


914,588



881,885


4
%


778,957


17
%

DETAILED FINANCIALS

ServisFirst Bancshares, Inc. reported net income and net income available to common stockholders of $40.4 million for the quarter ended June 30, 2020, compared to net income and net income available to common stockholders of $35.6 million for the same quarter in 2019. Basic and diluted earnings per common share were $0.75 and $0.75, respectively, for the second quarter of 2020, compared to $0.67 and $0.66, respectively, for the second quarter of 2019.

Annualized return on average assets was 1.55% and annualized return on average common stockholders’ equity was 18.40% for the second quarter of 2020, compared to 1.69% and 18.72%, respectively, for the second quarter of 2019.

Net interest income was $83.2 million for the second quarter of 2020, compared to $77.6 million for the first quarter of 2020 and $70.1 million for the second quarter of 2019. The net interest margin in the second quarter of 2020 was 3.32% compared to 3.58% in the first quarter of 2020 and 3.44% in the second quarter of 2019. Origination of PPP loans and increased excess liquidity drove unfavorable rate and mix changes while lower deposit rates and increases in noninterest bearing demand balances drove favorable rate and mix changes, respectively. Accretion of net fees on PPP loans of $2.6 million during the second quarter of 2020 offset the decrease in loan yield by approximately 12 basis points.

Average loans for the second quarter of 2020 were $8.33 billion, an increase of $972.6 million, or 52% annualized, over average loans of $7.36 billion for the first quarter of 2020, and an increase of $1.54 billion, or 23%, over average loans of $6.79 billion for the second quarter of 2019. We originated over 4,800 PPP loans during the second quarter of 2020 for a total of $1.05 billion. Average total balances of PPP loans for the second quarter of 2020 were $885.5 million. Excluding PPP loans, average loans for the second quarter of 2020 were $7.45 billion, an increase of $87.0 million over average loans for the first quarter of 2020, and an increase of $659.1 million, or 10%, over average loans for the second quarter of 2019.

Average total deposits for the second quarter of 2020 were $8.87 billion, an increase of $1.23 billion, or 64% annualized, over average total deposits of $7.64 billion for the first quarter of 2020, and an increase of $1.69 billion, or 24%, over average total deposits of $7.18 billion for the second quarter of 2019.

Nonperforming assets to total assets were 0.26% for the second quarter of 2020, a decrease of 18 basis points compared to 0.44% for the first quarter of 2020 and a decrease of 17 basis points compared to 0.43% for the second quarter of 2019. Annualized net charge-offs to average loans were 0.20%, a six basis-point decrease compared to 0.26% for the first quarter of 2020 and a decrease of two basis points compared to 0.22% for the second quarter of 2019. We recorded a $10.3 million provision for loan losses in the second quarter of 2020 compared to $13.6 million in the first quarter of 2020 and $4.9 million in the second quarter of 2019. The allowance for loan loss as a percentage of total loans was 1.10% at June 30, 2020, a decrease of 3 basis points compared to 1.13% at March 31, 2020 and an increase of 8 basis points compared to 1.02% at June 30, 2019. Excluding PPP loans, the allowance for loan loss as a percentage of total loans was 1.26% at June 30, 2020. 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.

Noninterest income for the second quarter of 2020 increased $1.2 million, or 22%, to $7.0 million from $5.8 million in the second quarter of 2019. Mortgage banking revenue increased $1.0 million, or 94%, from the second quarter of 2019 to the second quarter of 2020. Mortgage loan origination volumes increased approximately 65% during the second quarter of 2020 when compared to the same quarter in 2019. Additionally, more of the originations in 2020 were sellable loans, driving higher gains on sale. Credit card revenue decreased $343,000, or 20%, to $1.4 million during the second quarter of 2020, compared to $1.7 million during the second quarter of 2019. The amount of spend on purchase cards increased $20.5 million while the amount of spend on business credit cards decreased $14.3 million during the second quarter of 2020 when compared to the second quarter of 2019. Purchase card spend carries lower profit margins than credit cards due to their higher rebates. Income on life insurance policies increased $686,000, or 88%, to $1.5 million during the second quarter of 2020, compared to $778,000 during the second quarter of 2019. We purchased an additional $75.0 million in BOLI contracts during the third quarter of 2019. Other income for the second quarter of 2020 decreased $151,000, or 39%, to $241,000 from $392,000 in the second quarter of 2019. On May 4, 2020 we bought an interest rate cap with a term of three years and a notional amount of $300 million. The cap is tied to one-month LIBOR with a strike rate of 0.50%. We wrote down the value of the cap by $252,000 during the second quarter of 2020 through other income and are amortizing the fee paid to our counterparty over the life of the cap.

Noninterest expense for the second quarter of 2020 increased $2.8 million, or 11%, to $28.8 million from $26.0 million in the second quarter of 2019, and increased $896,000, or 3%, on a linked quarter basis. Salary and benefit expense for the second quarter of 2020 increased $1.5 million, or 10%, to $15.8 million from $14.3 million in the second quarter of 2019, and increased $134,000, or 1%, on a linked quarter basis. Costs to originate PPP loans totaling $2.4 million were incurred during the second quarter of 2020. These costs were credited against salary and benefits as a deferred expense and will be amortized over the life of the loans by netting them against accretion of deferred origination fees. Bonuses of approximately $2.5 million were paid during the second quarter of 2020 related to work performed on the PPP. Additional bonuses of $71,000 were paid to front-line employees who continued to assist customers during the peak of the pandemic. Equipment and occupancy expense increased $147,000, or 6%, to $2.4 million in the second quarter of 2020, from $2.3 million in the second quarter of 2019. Third party processing expenses increased $789,000, or 29%, to $3.5 million in the second quarter of 2020, from $2.7 million in the second quarter of 2019. Limited-term licenses were added to our loan origination systems to enable more employees to assist customers with their PPP loans. These licenses added $514,000 to third party processing expenses during the second quarter of 2020. Professional services expense decreased $100,000, or 8%, to $1.1 million in the second quarter of 2020, from $1.2 million in the second quarter of 2019, and increased $143,000, or 15%, from $948,000 on a linked-quarter basis. FDIC and other regulatory assessments decreased $486,000, or 45%, to $595,000 in the second quarter of 2020, from $1.1 million in the second quarter of 2019. Lower growth in assets during the second quarter of 2020, excluding PPP loans, resulted in us adjusting our accrual for assessments to be paid at the end of the third quarter of 2020. Expenses associated with other real estate owned increased $1.1 million to $1.3 million in the second quarter of 2020, from $212,000 in the second quarter of 2019. Updated appraisals resulted in write-downs in values on two properties in our Birmingham, Alabama market. Other operating expenses for the second quarter of 2020 decreased $100,000, or 2%, to $4.1 million from $4.2 million in the second quarter of 2019, and increased $452,000, or 12%, on a linked-quarter basis. The efficiency ratio was 31.92% during the second quarter of 2020 compared to 34.30% during the second quarter of 2019 and compared to 33.11% during the first quarter of 2020.

Income tax expense increased $1.4 million, or 15%, to $10.7 million in the second quarter of 2020, compared to $9.3 million in the second quarter of 2019. Our effective tax rate was 20.95% for the second quarter of 2020 compared to 20.74% for the second quarter of 2019. State of Alabama tax credit investments matured at the end of 2019, causing our state credit amounts to decrease from $497,000 during the second quarter of 2019 to $132,000 during the second quarter of 2020. 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 2020 and 2019 of $136,000 and $186,000, 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.



At June 30, 2020

At March 31, 2020

At December 31, 2019

At September 30, 2019

At June 30, 2019
Book value per share - GAAP

$
16.98


$
16.38


$
15.71


$
15.13


$
14.55

Total common stockholders' equity - GAAP


914,588



881,886



842,682



810,537



778,957

Adjustments:




















Adjusted for goodwill and core deposit intangible asset


14,043



14,111



14,179



14,246



14,314

Tangible common stockholders' equity - non-GAAP

$
900,545


$
867,775


$
828,503


$
796,291


$
764,643

Tangible book value per share - non-GAAP

$
16.72


$
16.12


$
15.45


$
14.86


$
14.29






















Stockholders' equity to total assets - GAAP


8.31
%


9.42
%


9.42
%


9.00
%


8.91
%
Total assets - GAAP

$
11,012,195


$
9,364,882


$
8,947,653


$
9,005,112


$
8,740,237

Adjustments:




















Adjusted for goodwill and core deposit intangible asset


14,043



14,111



14,179



14,246



14,314

Total tangible assets - non-GAAP

$
10,998,152


$
9,350,771


$
8,933,474


$
8,990,866


$
8,725,923

Tangible common equity to total tangible assets - non-GAAP


8.19
%


9.28
%


9.27
%


8.86
%


8.76
%

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,” “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 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; 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 2020, 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)



2nd Quarter 2020

1st Quarter 2020

4th Quarter 2019

3rd Quarter 2019

2nd Quarter 2019
CONSOLIDATED STATEMENT OF INCOME




















Interest income

$
95,080


$
96,767


$
98,187


$
101,130


$
97,787

Interest expense


11,846



19,127



22,410



28,125



27,702

Net interest income


83,234



77,640



75,777



73,005



70,085

Provision for loan losses


10,283



13,584



5,884



6,985



4,884

Net interest income after provision for loan losses


72,951



64,056



69,893



66,020



65,201

Non-interest income


7,033



6,674



6,936



6,202



5,778

Non-interest expense


28,816



27,920



25,503



25,153



26,022

Income before income tax


51,168



42,810



51,326



47,069



44,957

Provision for income tax


10,720



8,032



10,289



9,506



9,324

Net income


40,448



34,778



41,037



37,563



35,633

Preferred stock dividends


31



-



32



-



31

Net income available to common stockholders

$
40,417


$
34,778


$
41,005


$
37,563


$
35,602

Earnings per share - basic

$
0.75


$
0.65


$
0.77


$
0.70


$
0.67

Earnings per share - diluted

$
0.75


$
0.64


$
0.76


$
0.69


$
0.66

Average diluted shares outstanding


54,194,506



54,167,414



54,149,554



54,096,368



54,089,107






















CONSOLIDATED BALANCE SHEET DATA




















Total assets

$
11,012,195


$
9,364,882


$
8,947,653


$
9,005,112


$
8,740,237

Loans


8,315,375



7,568,836



7,261,451



7,022,069



6,967,886

Debt securities


856,378



827,032



759,649



688,271



658,221

Non-interest-bearing demand deposits


2,678,893



1,925,626



1,749,879



1,678,672



1,576,959

Total deposits


9,342,918



7,832,655



7,530,433



7,724,158



7,404,794

Borrowings


64,715



64,707



64,703



64,693



64,684

Stockholders' equity

$
914,588


$
881,885


$
842,682


$
810,537


$
778,957






















Shares outstanding


53,874,276



53,844,009



53,623,740



53,579,013



53,526,882

Book value per share

$
16.98


$
16.38


$
15.71


$
15.13


$
14.55

Tangible book value per share (1)

$
16.72


$
16.12


$
15.45


$
14.86


$
14.29






















SELECTED FINANCIAL RATIOS (Annualized)




















Net interest margin


3.32
%


3.58
%


3.47
%


3.36
%


3.44
%
Return on average assets


1.55
%


1.54
%


1.80
%


1.67
%


1.69
%
Return on average common stockholders' equity


18.40
%


16.23
%


19.75
%


18.69
%


18.72
%
Efficiency ratio


31.92
%


33.11
%


30.83
%


31.76
%


34.30
%
Non-interest expense to average earning assets


1.15
%


1.29
%


1.17
%


1.16
%


1.28
%





















CAPITAL RATIOS (2)




















Common equity tier 1 capital to risk-weighted assets


11.26
%


10.68
%


10.50
%


10.39
%


10.18
%
Tier 1 capital to risk-weighted assets


11.27
%


10.68
%


10.50
%


10.39
%


10.19
%
Total capital to risk-weighted assets


13.27
%


12.54
%


12.31
%


12.27
%


12.02
%
Tier 1 capital to average assets


9.24
%


9.56
%


9.13
%


8.88
%


9.00
%
Tangible common equity to total tangible assets (1)


8.19
%


9.28
%


9.27
%


8.86
%


8.76
%





















(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)



June 30, 2020

June 30, 2019

% Change
ASSETS









Cash and due from banks

$
102,282


$
68,841


49
%
Interest-bearing balances due from depository institutions


1,444,293



409,052


253
%
Federal funds sold


2,352



408,289


(99
)%
Cash and cash equivalents


1,548,927



886,182


75
%
Available for sale debt securities, at fair value


856,128



657,971


30
%
Held to maturity debt securities (fair value of $250 at June 30, 2020 and 2019)


250



250


-
%
Mortgage loans held for sale


14,491



9,446


53
%
Loans


8,315,375



6,967,886


19
%
Less allowance for loan losses


(91,507
)


(71,386
)

28
%
Loans, net


8,223,868



6,896,500


19
%
Premises and equipment, net


55,588



57,195


(3
)%
Goodwill and other identifiable intangible assets


14,043



14,314


(2
)%
Other assets


298,900



218,379


37
%
Total assets

$
11,012,195


$
8,740,237


26
%
LIABILITIES AND STOCKHOLDERS' EQUITY









Liabilities:









Deposits:









Non-interest-bearing

$
2,678,893


$
1,576,959


70
%
Interest-bearing


6,664,025



5,827,835


14
%
Total deposits


9,342,918



7,404,794


26
%
Federal funds purchased


635,606



459,449


38
%
Other borrowings


64,715



64,684


-
%
Other liabilities


54,368



32,353


68
%
Total liabilities


10,097,607



7,961,280


27
%
Stockholders' equity:









Preferred stock, par value $0.001 per share; 1,000,000 authorized and undesignated at









June 30, 2020 and June 30, 2019


-



-




Common stock, par value $0.001 per share; 100,000,000 shares authorized; 53,874,276 shares









issued and outstanding at June 30, 2020, and 53,526,882 shares issued and outstanding









at June 30, 2019


54



54


-
%
Additional paid-in capital


222,437



218,658


2
%
Retained earnings


672,984



555,425


21
%
Accumulated other comprehensive income


18,611



4,318


331
%
Total stockholders' equity attributable to ServisFirst Bancshares, Inc.


914,086



778,455


17
%
Noncontrolling interest


502



502


-
%
Total stockholders' equity


914,588



778,957


17
%
Total liabilities and stockholders' equity

$
11,012,195


$
8,740,237


26
%

CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(In thousands except per share data)


Three Months Ended June 30,

Six Months Ended June 30,


2020

2019

2020

2019
Interest income:












Interest and fees on loans

$
89,383

$
88,610


$
178,768

$
174,134

Taxable securities


5,092


4,193



10,246


7,939

Nontaxable securities


211


393



444


839

Federal funds sold


34


1,998



311


3,217

Other interest and dividends


360


2,593



2,078


5,357

Total interest income


95,080


97,787



191,847


191,486

Interest expense:












Deposits


10,756


24,240



27,501


46,385

Borrowed funds


1,090


3,462



3,472


6,238

Total interest expense


11,846


27,702



30,973


52,623

Net interest income


83,234


70,085



160,874


138,863

Provision for loan losses


10,283


4,884



23,867


9,769

Net interest income after provision for loan losses


72,951


65,201



137,007


129,094

Non-interest income:












Service charges on deposit accounts


1,823


1,786



3,739


3,488

Mortgage banking


2,107


1,087



3,178


1,662

Credit card income


1,398


1,741



3,163


3,317

Securities losses


-


(6
)


-


(6
)
Increase in cash surrender value life insurance


1,464


778



2,917


1,540

Other operating income


241


392



710


721

Total non-interest income


7,033


5,778



13,707


10,722

Non-interest expense:












Salaries and employee benefits


15,792


14,339



31,450


28,604

Equipment and occupancy expense


2,434


2,287



4,834


4,546

Third party processing and other services


3,513


2,724



6,858


5,135

Professional services


1,091


1,191



2,039


2,185

FDIC and other regulatory assessments


595


1,081



1,927


2,100

Other real estate owned expense


1,303


212



1,904


234

Other operating expense


4,088


4,188



7,724


8,546

Total non-interest expense


28,816


26,022



56,736


51,350

Income before income tax


51,168


44,957



93,978


88,466

Provision for income tax


10,720


9,324



18,752


17,823

Net income


40,448


35,633



75,226


70,643

Dividends on preferred stock


31


31



31


31

Net income available to common stockholders

$
40,417

$
35,602


$
75,195

$
70,612

Basic earnings per common share

$
0.75

$
0.67


$
1.40

$
1.32

Diluted earnings per common share

$
0.75

$
0.66


$
1.39

$
1.31

LOANS BY TYPE (UNAUDITED)








(In thousands)































2nd Quarter 2020

1st Quarter 2020

4th Quarter 2019

3rd Quarter 2019

2nd Quarter 2019
Commercial, financial and agricultural

$
3,498,627


$
2,771,307


$
2,696,210


$
2,653,934


$
2,633,529

Real estate - construction


544,586



548,578



521,392



550,871



603,779

Real estate - mortgage:




















Owner-occupied commercial


1,634,495



1,678,532



1,587,478



1,526,911



1,538,279

1-4 family mortgage


665,883



675,870



644,188



632,346



630,963

Other mortgage


1,911,384



1,834,137



1,747,394



1,592,072



1,496,512

Subtotal: Real estate - mortgage


4,211,762



4,188,539



3,979,060



3,751,329



3,665,754

Consumer


60,400



60,412



64,789



65,935



64,824

Total loans

$
8,315,375


$
7,568,836


$
7,261,451


$
7,022,069


$
6,967,886

SUMMARY OF LOAN LOSS EXPERIENCE (UNAUDITED)

















(Dollars in thousands)



















2nd Quarter 2020

1st Quarter 2020

4th Quarter 2019

3rd Quarter 2019

2nd Quarter 2019
Allowance for loan losses:




















Beginning balance

$
85,414


$
76,584


$
77,192


$
71,386


$
70,207

Loans charged off:




















Commercial, financial and agricultural


1,358



2,640



4,742



3,626



3,610

Real estate - construction


376



454



-



-



-

Real estate - mortgage


2,520



1,678



1,689



4,974



169

Consumer


62



58



139



172



63

Total charge offs


4,316



4,830



6,570



8,772



3,842

Recoveries:




















Commercial, financial and agricultural


84



62



51



126



117

Real estate - construction


1



1



1



1



-

Real estate - mortgage


13



1



2



-



4

Consumer


28



12



24



60



16

Total recoveries


126



76



78



187



137

Net charge-offs


4,190



4,754



6,492



8,585



3,705

Allocation from Loan Guarantee Program


-



-



-



7,406



-

Provision for loan losses


10,283



13,584



5,884



6,985



4,884

Ending balance

$
91,507


$
85,414


$
76,584


$
77,192


$
71,386






















Allowance for loan losses to total loans


1.10
%


1.13
%


1.05
%


1.10
%


1.02
%
Allowance for loan losses to total average loans


1.10
%


1.16
%


1.08
%


1.11
%


1.05
%
Net charge-offs to total average loans


0.20
%


0.26
%


0.36
%


0.49
%


0.22
%
Provision for loan losses to total average loans


0.50
%


0.74
%


0.33
%


0.40
%


0.29
%
Nonperforming assets:




















Nonaccrual loans

$
16,881


$
28,914


$
30,091


$
35,732


$
21,840

Loans 90+ days past due and accruing


5,133



4,954



6,021



5,317



10,299

Other real estate owned and repossessed assets


6,537



7,448



8,178



5,337



5,649

Total

$
28,551


$
41,316


$
44,290


$
46,386


$
37,788






















Nonperforming loans to total loans


0.26
%


0.45
%


0.50
%


0.58
%


0.46
%
Nonperforming assets to total assets


0.26
%


0.44
%


0.50
%


0.52
%


0.43
%
Nonperforming assets to earning assets


0.26
%


0.45
%


0.50
%


0.53
%


0.44
%
Reserve for loan losses to nonaccrual loans


542.07
%


295.41
%


254.51
%


216.03
%


326.86
%





















Restructured accruing loans

$
975


$
975


$
625


$
3,468


$
2,742






















Restructured accruing loans to total loans


0.01
%


0.01
%


0.01
%


0.05
%


0.04
%





















TROUBLED DEBT RESTRUCTURINGS (TDRs) (UNAUDITED)













(In thousands)


















2nd Quarter 2020

1st Quarter 2020

4th Quarter 2019

3rd Quarter 2019

2nd Quarter 2019
Beginning balance:

$
2,367


$
3,330


$
11,248


$
11,284


$
12,289

Additions


-



350



250



-



-

Net (paydowns) / advances


(12
)


(232
)


(3,481
)


714



(12
)
Charge-offs


(412
)


(1,081
)


(1,333
)


(750
)


(993
)
Transfer to OREO


(375
)


-



(3,354
)


-



-

Ending balance

$
1,568


$
2,367


$
3,330


$
11,248


$
11,284

CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)









(In thousands except per share data)











2nd Quarter 2020

1st Quarter 2020

4th Quarter 2019

3rd Quarter 2019

2nd Quarter 2019
Interest income:

















Interest and fees on loans

$
89,383


$
89,385


$
89,407


$
90,767


$
88,610

Taxable securities


5,092



5,154



4,702



4,367



4,193

Nontaxable securities


211



233



274



316



393

Federal funds sold


34



277



1,053



1,768



1,998

Other interest and dividends


360



1,718



2,751



3,912



2,593

Total interest income


95,080



96,767



98,187



101,130



97,787

Interest expense:

















Deposits


10,756



16,745



19,786



24,787



24,240

Borrowed funds


1,090



2,382



2,624



3,338



3,462

Total interest expense


11,846



19,127



22,410



28,125



27,702

Net interest income


83,234



77,640



75,777



73,005



70,085

Provision for loan losses


10,283



13,584



5,884



6,985



4,884

Net interest income after provision for loan losses


72,951



64,056



69,893



66,020



65,201

Non-interest income:

















Service charges on deposit accounts


1,823



1,916



1,806



1,735



1,786

Mortgage banking


2,107



1,071



1,366



1,333



1,087

Credit card income


1,398



1,765



1,891



1,868



1,741

Securities (losses) gains


-



-



(1
)


34



(6
)
Increase in cash surrender value life insurance


1,464



1,453



1,419



787



778

Other operating income


241



469



455



445



392

Total non-interest income


7,033



6,674



6,936



6,202



5,778

Non-interest expense:

















Salaries and employee benefits


15,792



15,658



13,680



15,499



14,339

Equipment and occupancy expense


2,434



2,400



2,339



2,387



2,287

Third party processing and other services


3,513



3,345



3,176



2,923



2,724

Professional services


1,091



948



1,163



887



1,191

FDIC and other regulatory assessments


595



1,332



1,171



(296
)


1,081

Other real estate owned expense


1,303



601



103



78



212

Other operating expense


4,088



3,636



3,871



3,675



4,188

Total non-interest expense


28,816



27,920



25,503



25,153



26,022

Income before income tax


51,168



42,810



51,326



47,069



44,957

Provision for income tax


10,720



8,032



10,289



9,506



9,324

Net income


40,448



34,778



41,037



37,563



35,633

Dividends on preferred stock


31



-



32



-



31

Net income available to common stockholders

$
40,417


$
34,778


$
41,005


$
37,563


$
35,602

Basic earnings per common share

$
0.75


$
0.65


$
0.77


$
0.70


$
0.67

Diluted earnings per common share

$
0.75


$
0.64


$
0.76


$
0.69


$
0.66

































AVERAGE BALANCE SHEETS AND NET INTEREST ANALYSIS (UNAUDITED)
ON A FULLY TAXABLE-EQUIVALENT BASIS
(Dollars in thousands)

































2nd Quarter 2020

1st Quarter 2020

4th Quarter 2019

3rd Quarter 2019

2nd 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

$
8,301,775

4.31
%

$
7,328,594

4.89
%

$
7,066,576

5.00
%

$
6,927,075

5.18
%

$
6,756,927


5.24
%
Tax-exempt (2)


31,929

4.12



32,555

4.04



35,563

4.00



34,195

3.98



32,124


3.83

Total loans, net of unearned income


8,333,704

4.31



7,361,149

4.88



7,102,139

4.99



6,961,270

5.17



6,789,051


5.23

Mortgage loans held for sale


13,278

2.09



4,282

2.16



6,505

2.44



6,482

2.45



5,208


3.85

Debt securities:






























Taxable


761,575

2.67



750,413

2.75



670,732

2.81



595,405

2.93



565,491


2.97

Tax-exempt (2)


38,201

2.62



44,029

2.33



50,825

2.17



59,992

2.21



77,364


2.10

Total securities (3)


799,776

2.67



794,442

2.72



721,557

2.76



655,397

2.87



642,855


2.86

Federal funds sold


83,274

0.16



105,423

1.06



238,927

1.75



312,968

2.24



323,714


2.48

Interest-bearing balances with banks


849,549

0.17



469,199

1.47



602,755

1.81



690,973

2.25



411,481


2.53

Total interest-earning assets

$
10,079,581

3.80
%

$
8,734,495

4.46
%

$
8,671,883

4.49
%

$
8,627,090

4.65
%

$
8,172,309


4.80
%
Non-interest-earning assets:






























Cash and due from banks


76,212





66,140





70,381





71,418





76,988




Net premises and equipment


57,446





58,066





57,986





58,243





58,607




Allowance for loan losses, accrued interest and other assets


248,702





241,479





233,885





162,654





156,264




Total assets

$
10,461,941




$
9,100,180




$
9,034,135




$
8,919,405




$
8,464,168



































Interest-bearing liabilities:






























Interest-bearing deposits:






























Checking

$
992,848

0.35
%

$
956,803

0.57
%

$
961,258

0.69
%

$
900,754

0.84
%

$
909,847


0.88
%
Savings


72,139

0.42



67,380

0.50



62,311

0.53



57,431

0.60



54,391


0.57

Money market


4,285,907

0.52



4,061,286

1.10



4,189,283

1.34



4,265,435

1.76



3,932,459


1.88

Time deposits


877,448

1.95



805,924

2.09



712,155

2.15



703,278

2.20



694,414


2.16

Total interest-bearing deposits


6,228,342

0.69



5,891,393

1.14



5,925,007

1.32



5,926,898

1.66



5,591,111


1.74

Federal funds purchased


572,990

0.22



492,638

1.31



420,066

1.74



441,526

2.30



418,486


2.57

Other borrowings


64,711

4.85



64,707

4.85



64,698

4.79



64,689

4.79



64,680


4.84

Total interest-bearing liabilities

$
6,866,043

0.69
%

$
6,448,738

1.19
%

$
6,409,771

1.39
%

$
6,433,113

1.73
%

$
6,074,277


1.83
%
Non-interest-bearing liabilities:






























Non-interest-bearing checking


2,646,030





1,749,671





1,759,671





1,654,928





1,591,722




Other liabilities


69,061





39,801





41,112





34,070





35,161




Stockholders' equity


862,500





853,800





818,320





792,284





763,742




Accumulated other comprehensive income (loss)


18,307





8,170





5,261





5,010





(734
)



Total liabilities and stockholders' equity

$
10,461,941




$
9,100,180




$
9,034,135




$
8,919,405




$
8,464,168




Net interest spread




3.11
%




3.27
%




3.10
%




2.92
%




2.97
%
Net interest margin




3.32
%




3.58
%




3.47
%




3.36
%




3.44
%































(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.

Company Name:	ServisFirst Bancshares Inc.
Stock Symbol:	SFBS
Market:	NASDAQ
Website:	servisfirstbank.com

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