ServisFirst Bancshares, Inc. Announces Results For Fourth Quarter of 2023

Rhea-AI Summary

ServisFirst Bancshares, Inc. (NYSE: SFBS) announced earnings and operating results for the quarter ended December 31, 2023. The company entered the Memphis, Tennessee market with the hiring of Joel Smith as President. Deposits grew 15% year-over-year, new deposit accounts opened increased 12% year-over-year. Diluted earnings per share were $0.77 for the quarter, with adjusted diluted earnings per share of $0.91. The company had $2.1 billion in cash on hand with no FHLB advances or brokered deposits. Book value per share increased by 10.7% from the fourth quarter of 2022. The cash dividend was increased by 7% to $0.30 per share. Credit quality remains strong with non-performing assets to total assets at 0.14%. Consolidated Common Equity Tier 1 capital to risk-weighted assets increased from 9.95% to 10.91% year-over-year.

Positive

• Entering the Memphis, Tennessee market with the hiring of Joel Smith as President
• 15% year-over-year growth in deposits
• 12% year-over-year increase in new deposit accounts opened
• Adjusted diluted earnings per share of $0.91 for the quarter
• Cash dividend increased by 7% to $0.30 per share
• Credit quality remains strong with non-performing assets to total assets at 0.14%
• Consolidated Common Equity Tier 1 capital to risk-weighted assets increased from 9.95% to 10.91% year-over-year

Negative

• Net Income decreased by 21.1% compared to the third quarter of 2023
• Diluted Earnings Per Share decreased by 21.3% compared to the third quarter of 2023
• Return on Average Assets decreased from 1.89% to 1.04% compared to the fourth quarter of 2022
• Net interest income decreased to $101.7 million for the fourth quarter of 2023 from $122.4 million for the fourth quarter of 2022
• Non-interest expense increased by 52.9% to $58.3 million from $38.1 million in the fourth quarter of 2022
• Efficiency ratio increased to 55.23% from 29.45% in the fourth quarter of 2022

Insights

Financial Analyst

The reported earnings by ServisFirst Bancshares, Inc. reflect a significant year-over-year decline in net income and diluted earnings per share (EPS), with a 37.9% drop in both metrics. This notable decrease can be attributed to a range of factors, including increased non-interest expenses and higher FDIC and other regulatory assessments. The increase in FDIC assessments alone, due to a rate hike, has had a substantial impact on the bank's expenses. Additionally, the bank faced unusual costs such as a special FDIC assessment to recapitalize the Deposit Insurance Fund and contract termination fees. These figures suggest a need for careful cost management and operational efficiency moving forward.

Despite these challenges, the company's strategic expansion into the Memphis market and the growth in deposits and loan portfolios indicate a strong focus on long-term growth. The bank's credit quality remains robust with low non-performing assets, which is a positive indicator for risk management. The increase in the cash dividend also signals confidence in the bank's liquidity and profitability prospects. Investors should monitor how these strategic initiatives and the bank's cost management strategies unfold in the coming quarters.

Market Research Analyst

The entrance into the Memphis market represents a strategic move for ServisFirst Bancshares, Inc. to expand its geographic footprint. The appointment of Joel Smith, with a commercial and industrial banking background, could potentially cater to a new client base and diversify revenue streams. The growth in new deposit accounts and overall deposits by 15% year-over-year is a strong indicator of customer trust and market competitiveness.

However, the banking sector is currently facing headwinds due to changing interest rates and regulatory pressures, as evidenced by the reduced net interest margin from 3.52% in the fourth quarter of 2022 to 2.57% in the same period in 2023. This compression may affect profitability if not offset by other revenue-generating activities. The bank's performance in this competitive landscape will be crucial to its stock valuation and investor confidence.

Economist

The report indicates an environment of increasing interest rates, as shown by the rise in average interest-bearing deposit rates and federal funds purchased rates. This scenario typically leads to higher net interest income but can also result in decreased loan demand and increased costs for banks. ServisFirst Bancshares, Inc. has managed to slightly grow its loan portfolio despite these conditions, suggesting resilience in their core business operations.

The banking industry is sensitive to macroeconomic factors and the performance of ServisFirst Bancshares, Inc. must be analyzed in the context of broader economic trends, including monetary policy shifts and their impact on consumer and business lending behaviors. The bank's ability to navigate these trends while maintaining strong liquidity, as indicated by the $2.1 billion in cash on hand, will be vital for sustaining growth and shareholder value.

BIRMINGHAM, Ala.--(BUSINESS WIRE)-- ServisFirst Bancshares, Inc. (NYSE: SFBS), today announced earnings and operating results for the quarter ended December 31, 2023.

Fourth Quarter 2023 Highlights:

• Entering the Memphis, Tennessee market with the hiring of Joel Smith as President.
• Deposits grew 15% year-over-year and new deposit accounts opened increased 12% year-over-year.
• Diluted earnings per share of $0.77 for the quarter.
• Adjusted* diluted earnings per share of $0.91 for the quarter.
• $2.1 billion in cash on hand with no FHLB advances or brokered deposits.
• Book value per share of $26.45, up 10.7% from the fourth quarter of 2022 and 10.8% annualized, from the third quarter of 2023.
• Cash dividend increased from $0.28 per share to $0.30 per share, a 7% increase.
• Credit quality continues to be strong with non-performing assets to total assets of 0.14%.
• Consolidated Common Equity Tier 1 capital to risk-weighted assets increased from 9.95% to 10.91% year-over-year.

Tom Broughton, Chairman, President, and CEO, said, “We are pleased to announce our entrance into the Memphis, Tennessee market with the addition of Joel Smith, who is an outstanding banker with a commercial and industrial banking background.”

Bud Foshee, CFO, said, “We are well-positioned for growth in 2024, with strong liquidity in what we believe to be the best footprint in the United States.”

^* This press release includes certain non-GAAP financial measures: adjusted net income, adjusted net income available to common stockholders, adjusted diluted earnings per share, adjusted return on average assets, adjusted return on average common stockholders’ equity, adjusted efficiency ratio, tangible common stockholders' equity, total tangible assets, tangible book value per share, and tangible common equity to total tangible assets. Please see “GAAP Reconciliation and Management Explanation of Non-GAAP Financial Measures.”

FINANCIAL SUMMARY (UNAUDITED)
(in Thousands except share and per share amounts)		Period Ending December 31, 2023				Period Ending September 30, 2023				% Change From Period Ending September 30, 2023 to Period Ending December 31, 2023			Period Ending December 31, 2022				% Change From Period Ending December 31, 2022 to Period Ending December 31, 2023
QUARTERLY OPERATING RESULTS
Net Income		$	42,074			$	53,340			(21.1	)%		$	67,724			(37.9	)%
Net Income Available to Common Stockholders		$	42,043			$	53,340			(21.2	)%		$	67,693			(37.9	)%
Diluted Earnings Per Share		$	0.77			$	0.98			(21.3	)%		$	1.24			(38.0	)%
Return on Average Assets			1.04	%			1.37	%						1.89	%
Return on Average Common Stockholders' Equity			11.78	%			15.34	%						21.27	%
Average Diluted Shares Outstanding			54,548,719				54,530,635							54,537,685
Adjusted Net Income, net of tax*		$	49,891			$	53,340			(6.5	)%		$	67,724			(26.3	)%
Adjusted Net Income Available to Common
Stockholders, net of tax*		$	49,860			$	53,340			(6.5	)%		$	67,693			(26.3	)%
Adjusted Diluted Earnings Per Share, net of tax*		$	0.91			$	0.98			(6.6	)%		$	1.24			(26.4	)%
Adjusted Return on Average Assets, net of tax*			1.23	%			1.37	%						1.89	%
Adjusted Return on Average Common
Stockholders' Equity, net of tax*			13.98	%			15.34	%						21.27	%
YEAR-TO-DATE OPERATING RESULTS
Net Income		$	206,853										$	251,504			(17.8	)%
Net Income Available to Common Stockholders		$	206,791										$	251,442			(17.8	)%
Diluted Earnings Per Share		$	3.79										$	4.61			(17.8	)%
Return on Average Assets			1.37	%										1.71	%
Return on Average Common Stockholders' Equity			15.13	%										20.73	%
Average Diluted Shares Outstanding			54,535,315											54,534,774
Adjusted Net Income, net of tax*		$	214,670										$	251,504			(14.6	)%
Adjusted Net Income Available to Common
Stockholders, net of tax*		$	214,608										$	251,442			(14.6	)%
Adjusted Diluted Earnings Per Share, net of tax*		$	3.94										$	4.61
Adjusted Return on Average Assets, net of tax*			1.42	%										1.71	%
Adjusted Return on Average Common
Stockholders' Equity, net of tax*			15.71	%										20.73	%
BALANCE SHEET
Total Assets		$	16,129,668			$	16,044,332			0.5	%		$	14,595,753			10.5	%
Loans			11,658,829				11,641,130			0.2	%			11,687,968			(0.2	)%
Non-interest-bearing Demand Deposits			2,643,101				2,621,072			0.8	%			3,321,347			(20.4	)%
Total Deposits			13,273,511				13,142,376			1.0	%			11,546,805			15.0	%
Stockholders' Equity			1,440,405				1,401,384			2.8	%			1,297,896			11.0	%

DETAILED FINANCIALS

ServisFirst Bancshares, Inc. reported net income of $42.1 million and net income available to common stockholders of $42.0 million for the quarter ended December 31, 2023, compared to net income and net income available to common stockholders of $53.3 million for the third quarter of 2023 and net income and net income available to common stockholders of $67.7 million for the fourth quarter of 2022. Basic and diluted earnings per common share were both $0.77 in the fourth quarter of 2023, compared to $0.98 for both in the third quarter of 2023 and $1.25 and $1.24, respectively, in the fourth quarter of 2022.

Annualized return on average assets was 1.04% and annualized return on average common stockholders’ equity was 11.78% for the fourth quarter of 2023, compared to 1.89% and 21.27%, respectively, for the fourth quarter of 2022.

Net interest income was $101.7 million for the fourth quarter of 2023, compared to $99.7 million for the third quarter of 2023 and $122.4 million for the fourth quarter of 2022. The net interest margin in the fourth quarter of 2023 was 2.57% compared to 2.64% in the third quarter of 2023 and 3.52% in the fourth quarter of 2022. The Company significantly increased deposits and liquidity in the form of interest-bearing balances with banks after the stress in the banking system in March. Average interest-bearing balances with banks increased by $1.5 billion, or 333%, from the fourth quarter of 2022 to the fourth quarter of 2023. While the increased liquidity had a benign impact on net interest income, it has had an impact on our net interest margin. Loan yields were 6.32% during the fourth quarter of 2023 compared to 6.13% during the third quarter of 2023 and 5.32% during the fourth quarter of 2022. Investment yields were 3.08% during the fourth quarter of 2023 compared to 3.07% during the third quarter of 2023 and 2.49% during the fourth quarter of 2022. Average interest-bearing deposit rates were 4.06% during the fourth quarter of 2023, compared to 3.84% during the third quarter of 2023 and 1.70% during the fourth quarter of 2022. Average federal funds purchased rates were 5.49% during the fourth quarter of 2023, compared to 5.43% during the third quarter of 2023 and 3.75% during the fourth quarter of 2022.

Average loans for the fourth quarter of 2023 were $11.60 billion, an increase of $35.5 million, or 1.2% annualized, from average loans of $11.56 billion for the third quarter of 2023, and an increase of $113.4 million, or 1.0%, from average loans of $11.49 billion for the fourth quarter of 2022.

Average total deposits for the fourth quarter of 2023 were $13.23 billion, an increase of $549.1 million, or 17.2% annualized, over average total deposits of $12.68 billion for the third quarter of 2023, and an increase of $1.84 billion, or 16.2%, from average total deposits of $11.39 billion for the fourth quarter of 2022.

Non-performing assets to total assets were 0.14% for the fourth quarter of 2023, compared to 0.15% for the third quarter of 2023 and 0.12% for the fourth quarter of 2022. Annualized net charge-offs to average loans were 0.09% for the fourth quarter of 2023, compared to 0.15% for the third quarter of 2023 and 0.06% fourth quarter of 2022. The allowance for credit losses as a percentage of total loans at December 31, 2023, September 30, 2023, and December 31, 2022, was 1.32%, 1.31%, and 1.25%, respectively. We recorded a $3.6 million provision for credit losses in the fourth quarter of 2023 compared to $4.3 million in the third quarter of 2023, and $7.1 million in the fourth quarter of 2022.

Non-interest income increased $413,000, or 5.9%, to $7.4 million for the fourth quarter of 2023 from $7.0 million in the fourth quarter of 2022, and decreased $756,000, or 9.3%, on a linked quarter basis. Service charges on deposit accounts increased $315,000, or 16.9%, to $2.2 million from the fourth quarter of 2022 to the fourth quarter of 2023, and increased $18,000, or 0.8%, on a linked quarter basis. Mortgage banking revenue increased $278,000, or 54.1%, to $792,000 from the fourth quarter of 2022 to the fourth quarter of 2023, and decreased $33,000, or 4.0%, on a linked quarter basis. Net credit card revenue decreased $257,000, or 11.4%, to $2.0 million during the fourth quarter of 2023, compared to $2.3 million during the fourth quarter of 2022, and decreased $528,000, or 20.9%, on a linked quarter basis. Bank-owned life insurance (“BOLI”) income increased $39,000, or 2.4%, to $1.6 million during the fourth quarter of 2023, compared to $1.6 million during the fourth quarter of 2022, and decreased $179,000, or 9.8%, on a linked quarter basis. Other operating income for the fourth quarter of 2023 increased $38,000, or 5.2%, to $763,000 from $725,000 in the fourth quarter of 2022, and decreased $34,000, or 4.3%, on a linked quarter basis. We recognized $162,000 of income on an interest rate cap during the fourth quarter of 2022. The interest rate cap matured during the second quarter of 2023. Merchant service revenue increased $95,000, or 19.5%, to $585,000 for the fourth quarter of 2023 from $490,000 in the fourth quarter of 2022.

Non-interest expense for the fourth quarter of 2023 increased $20.2 million, or 52.9%, to $58.3 million from $38.1 million in the fourth quarter of 2022, and increased $16.6 million, or 39.8%, on a linked quarter basis. Salary and benefit expense for the fourth quarter of 2023 increased $3.8 million, or 19.7%, to $23.0 million from $19.2 million in the fourth quarter of 2022, and increased $2.9 million, or 14.7%, on a linked quarter basis. The number of FTE employees increased by 20 to 591 at December 31, 2023 compared to 571 at December 31, 2022, and increased by 23 from the end of the third quarter of 2023. Equipment and occupancy expense increased $597,000, or 18.3%, to $3.9 million in the fourth quarter of 2023, from $3.3 million in the fourth quarter of 2022, and increased $281,000, or 7.9% on a linked-quarter basis. The year-over-year increase was primarily attributed to new leases that began after the fourth quarter of 2022. Third party processing and other services expense decreased $329,000, or 4.0%, to $7.8 million in the fourth quarter of 2023, from $8.2 million in the fourth quarter of 2022, and increased $1.3 million, or 19.7%, on a linked-quarter basis. Professional services expense increased $495,000, or 53.7%, to $1.4 million in the fourth quarter of 2023, from $922,000 in the fourth quarter of 2022, and increased $152,000, or 12.0%, on a linked quarter basis. FDIC and other regulatory assessments increased $8.2 million to $9.5 million in the fourth quarter of 2023, from $1.3 million in the fourth quarter of 2022, and increased $7.2 million, or 305.3%, on a linked quarter basis. The FDIC increased the assessment rate by two basis points beginning in the first quarter of 2023. Other operating expenses for the fourth quarter of 2023 increased $7.6 million, or 154.0%, to $12.6 million from $5.0 million in the fourth quarter of 2022, and increased $4.8 million, or 60.9%, on a linked-quarter basis. During the fourth quarter of 2023, an incremental expense related to tax credit investments of $3.3 million, associated with the tax benefit discussed below, contributed to the increase in other operating expenses. In addition, the following items, which management views as unusual, infrequent, and not reflective of future normal operating expenses, contributed to the increase in non-interest expense: the FDIC implemented a special assessment to recapitalize the Deposit Insurance Fund resulting in an expense of $7.2 million, an EDP contract termination and related capitalized cost write-offs of $1.1 million to other operating expenses, and an adjustment to a privilege tax accrual resulting in a $2.2 million expense to other operating expenses. The EDP contract termination costs were related to a planned systems conversion that was canceled. We determined the benefits to our clients were less than expected and the disruption outweighed the benefits. We can continue to provide best-in-class products with our current service provider. The adjustment to the privilege tax accrual was due to an under-accrual in previous years, and the correction resulted in duplicate expense for 2023. See “GAAP Reconciliation and Management Explanation of Non-GAAP Financial Measures” below for more discussion of these expenses. The efficiency ratio was 55.23% during the fourth quarter of 2023 compared to 29.45% during the fourth quarter of 2022 and 38.64% during the third quarter of 2023. The adjusted efficiency ratio was 42.22%.

Income tax expense decreased $11.2 million, or 68.6%, to $5.2 million in the fourth quarter of 2023, compared to $16.4 million in the fourth quarter of 2022. Our effective tax rate was 10.91% for the fourth quarter of 2023 compared to 19.49% for the fourth quarter of 2022. We recognized an aggregate of $6.7 million in credits during the fourth quarter of 2023 related to investments in tax credit partnerships, compared to $3.1 million during the fourth quarter of 2022. During the fourth quarter of 2023, $4.1 million of the recognized credits were related to the incremental expense for tax credit investments discussed above. We recognize 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 2023 and 2022 of $252,000 and $10,000, respectively.

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 Alabama, Florida, Georgia, North and South Carolina, Tennessee, and Virginia. We also operate loan production offices in Florida. Through the bank, we originate commercial, consumer and other loans and accept deposits, provide electronic banking services, such as online and mobile banking, including remote deposit capture, deliver treasury and cash management services and provide correspondent banking services to other financial institutions.

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: 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; credit issues associated with the efficacy of return to office policies; possible changes in laws and regulations and governmental monetary and fiscal policies, including, but not limited to, the Federal Reserve policies in connection with continued inflationary pressures and the ability of the U.S. Congress to increase the U.S. statutory debt limit as needed; computer hacking or cyber-attacks resulting in unauthorized access to confidential or proprietary information; substantial, unexpected or prolonged changes in the level or cost of liquidity; 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 2023, 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.

SELECTED FINANCIAL HIGHLIGHTS (UNAUDITED)
(In thousands except share and per share data)
		4th Quarter 2023				3rd Quarter 2023				2nd Quarter 2023				1st Quarter 2023				4th Quarter 2022
CONSOLIDATED STATEMENT OF INCOME
Interest income		$	229,062			$	213,206			$	189,656			$	181,322			$	170,273
Interest expense			127,375				113,508				88,405				73,021				47,889
Net interest income			101,687				99,698				101,251				108,301				122,384
Provision for credit losses			3,582				4,282				6,654				4,197				7,135
Net interest income after provision for credit losses			98,105				95,416				94,597				104,104				115,249
Non-interest income			7,379				8,135				8,582				6,321				6,966
Non-interest expense			58,258				41,663				38,466				39,664				38,092
Income before income tax			47,226				61,888				64,713				70,761				84,123
Provision for income tax			5,152				8,548				11,245				12,790				16,399
Net income			42,074				53,340				53,468				57,971				67,724
Preferred stock dividends			31				-				31				-				31
Net income available to common stockholders		$	42,043			$	53,340			$	53,437			$	57,971			$	67,693
Earnings per share - basic		$	0.77			$	0.98			$	0.98			$	1.07			$	1.25
Earnings per share - diluted		$	0.77			$	0.98			$	0.98			$	1.06			$	1.24
Average diluted shares outstanding			54,548,719				54,530,635				54,527,317				54,534,482				54,537,685
CONSOLIDATED BALANCE SHEET DATA
Total assets		$	16,129,668			$	16,044,332			$	15,072,808			$	14,566,559			$	14,595,753
Loans			11,658,829				11,641,130				11,604,894				11,629,802				11,687,968
Debt securities			1,882,847				1,878,701				2,048,227				1,646,937				1,678,936
Non-interest-bearing demand deposits			2,643,101				2,621,072				2,855,102				2,898,736				3,321,347
Total deposits			13,273,511				13,142,376				12,288,219				11,615,317				11,546,805
Borrowings			64,735				64,751				64,737				65,417				64,726
Stockholders' equity			1,440,405				1,401,384				1,363,471				1,339,817				1,297,896
Shares outstanding			54,461,580				54,425,447				54,425,033				54,398,025				54,326,527
Book value per share		$	26.45			$	25.75			$	25.05			$	24.63			$	23.89
Tangible book value per share (1)		$	26.20			$	25.50			$	24.80			$	24.38			$	23.64
SELECTED FINANCIAL RATIOS (Annualized)
Net interest margin			2.57	%			2.64	%			2.93	%			3.15	%			3.52	%
Return on average assets			1.04	%			1.37	%			1.50	%			1.63	%			1.89	%
Return on average common stockholders' equity			11.78	%			15.34	%			15.85	%			17.83	%			21.27	%
Efficiency ratio			55.23	%			38.64	%			35.02	%			34.60	%			29.45	%
Non-interest expense to average earning assets			1.47	%			1.10	%			1.11	%			1.15	%			1.10	%
CAPITAL RATIOS (2)
Common equity tier 1 capital to risk-weighted assets			10.91	%			10.69	%			10.37	%			10.01	%			9.55	%
Tier 1 capital to risk-weighted assets			10.92	%			10.69	%			10.38	%			10.02	%			9.55	%
Total capital to risk-weighted assets			12.45	%			12.25	%			11.94	%			11.54	%			11.03	%
Tier 1 capital to average assets			9.12	%			9.35	%			9.83	%			9.49	%			9.29	%
Tangible common equity to total tangible assets (1)			8.85	%			8.66	%			8.96	%			9.11	%			8.81	%
(1) This press release contains certain non-GAAP financial measures. Please see “GAAP Reconciliation and Management Explanation of Non-GAAP Financial Measures.”
(2) Regulatory capital ratios for the most recent period are preliminary.

GAAP Reconciliation and Management Explanation of Non-GAAP Financial Measures

This press release contains certain non-GAAP financial measures, including adjusted net income, adjusted net income available to common stockholders, adjusted diluted earnings per share, adjusted return on average assets, adjusted return on average common stockholders’ equity, and adjusted efficiency ratio. During the fourth quarter of 2023, we recorded a one-time expense of $7.2 million associated with the FDIC’s special assessment to recapitalize the Deposit Insurance Fund following bank failures in the spring of 2023. Additionally, we experienced expenses for the termination of an EDP contract and related capitalized cost write-offs resulting in $1.1 million in expenses, and an adjustment to a privilege tax accrual resulting in a $2.2 million expense. The EDP contract termination costs were related to a planned systems conversion that was canceled. We determined the benefits to our clients were less than expected and the disruption outweighed the benefits. We can continue to provide best-in-class products with our current service provider. The adjustment to the privilege tax accrual was due to an under-accrual in previous years, and the correction resulted in duplicate expenses for 2023. These expenses are unusual, or infrequent, in nature and not part of the noninterest expense run rate. Each of adjusted net income, adjusted net income available to common stockholders, adjusted diluted earnings per share, adjusted return on average assets, adjusted return on average common stockholders’ equity, and adjusted efficiency ratio excludes the impact of these items, net of tax, and are all considered non-GAAP financial measures.

This press release also contains the non-GAAP financial measures of 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 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.

				Three Months Ended December 31, 2023				Year Ended December 31, 2023
Net income - GAAP				$	42,074			$	206,853
	Adjustments:
	FDIC special assessment				7,152				7,152
	Privilege tax expense				2,150				2,150
	EDP contract termination expense				1,134				1,134
		Tax on adjustments			(2,619	)			(2,619	)
Adjusted net income - non-GAAP				$	49,891			$	214,670
Net income available to common stockholders - GAAP				$	42,043			$	206,791
	Adjustments:
	FDIC special assessment				7,152				7,152
	Privilege tax expense				2,150				2,150
	EDP contract termination expense				1,134				1,134
		Tax on adjustments			(2,619	)			(2,619	)
Adjusted net income available to common stockholders -non-GAAP				$	49,860			$	214,608
Diluted earnings per share - GAAP				$	0.77			$	3.79
	Adjustments:
	FDIC special assessment				0.13				0.13
	Privilege tax expense				0.04				0.04
	EDP contract termination expense				0.02				0.02
		Tax on adjustments			(0.05	)			(0.05	)
Adjusted diluted earnings per share - non-GAAP				$	0.91			$	3.94
Return on average assets - GAAP					1.04	%			1.37	%
Net income - GAAP				$	42,074			$	206,853
	Adjustments:
	FDIC special assessment				7,152				7,152
	Privilege tax expense				2,150				2,150
	EDP contract termination expense				1,134				1,134
		Tax on adjustments			(2,619	)			(2,619	)
Adjusted net income available to common stockholders -non-GAAP				$	49,891			$	214,670
Average assets - GAAP				$	16,122,146			$	15,066,716
Adjusted return on average assets - non-GAAP					1.23	%			1.42	%
Return on average common stockholders' equity - GAAP					11.78	%			15.13	%
Net income available to common stockholders - GAAP				$	42,074			$	206,853
	Adjustments:
	FDIC special assessment				7,152				7,152
	Privilege tax expense				2,150				2,150
	EDP contract termination expense				1,134				1,134
		Tax on adjustments			(2,619	)			(2,619	)
Adjusted diluted earnings per share - non-GAAP				$	49,891			$	214,670
Average common stockholders' equity - GAAP				$	1,415,866			$	1,366,708
Adjusted return on average common stockholders' equity non-GAAP					13.98	%			15.71	%
Efficiency ratio					55.23	%			40.67	%
Non-interest expense - GAAP				$	56,480			$	176,273
	Adjustments:
	FDIC special assessment				7,152				7,152
	Privilege tax expense				2,150				2,150
	EDP contract termination expense				1,134				1,134
Adjusted non-interest expense				$	46,044			$	165,837
Net interest income plus non-interest income - GAAP				$	109,066			$	441,354
Adjusted efficiency ratio - non-GAAP					42.22	%			37.57	%

				At December 31, 2023				At September 30, 2023				At June 30, 2023				At March 31, 2023				At December 31, 2022
Book value per share - GAAP				$	26.45			$	25.75			$	25.05			$	24.63			$	23.89
Total common stockholders' equity - GAAP					1,440,405				1,401,384				1,363,471				1,339,817				1,297,896
	Adjustment for Goodwill				(13,615	)			(13,615	)			(13,615	)			(13,615	)			(13,615	)
Tangible common stockholders' equity - non-GAAP				$	1,426,790			$	1,387,769			$	1,349,856			$	1,326,202			$	1,284,281
Tangible book value per share - non-GAAP				$	26.22			$	25.50			$	24.80			$	24.38			$	23.64
Stockholders' equity to total assets - GAAP					8.93	%			8.73	%			9.05	%			9.20	%			8.89	%
Total assets - GAAP				$	16,129,668			$	16,044,332			$	15,072,808			$	14,566,559			$	14,595,753
	Adjustment for Goodwill				(13,615	)			(13,615	)			(13,615	)			(13,615	)			(13,615	)
Total tangible assets - non-GAAP				$	16,116,053			$	16,030,717			$	15,059,193			$	14,552,944			$	14,582,138
Tangible common equity to total tangible assets - non-GAAP					8.85	%			8.66	%			8.96	%			9.11	%			8.81	%

CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(Dollars in thousands)
				December 31, 2023				December 31, 2022				% Change
ASSETS
Cash and due from banks				$	123,430			$	106,317			16	%
Interest-bearing balances due from depository institutions					1,907,083				708,221			169	%
Federal funds sold					100,575				1,515			6,539	%
	Cash and cash equivalents				2,131,088				816,053			161	%
Available for sale debt securities, at fair value					900,183				644,815			40	%
Held to maturity debt securities (fair value of $907,191 and $935,953, respectively)					982,664				1,034,121			(5	)%
Restricted equity securities					10,226				7,734			32	%
Mortgage loans held for sale					5,074				1,607			216	%
Loans					11,658,829				11,687,968			-	%
Less allowance for credit losses					(153,317	)			(146,297	)		5	%
	Loans, net				11,505,512				11,541,671			-	%
Premises and equipment, net					59,324				59,850			(1	)%
Goodwill					13,615				13,615			-	%
Other assets					521,982				476,287			10	%
	Total assets			$	16,129,668			$	14,595,753			11	%
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposits:
	Non-interest-bearing			$	2,643,101			$	3,321,347			(20	)%
	Interest-bearing				10,630,410				8,225,458			29	%
		Total deposits			13,273,511				11,546,805			15	%
Federal funds purchased					1,256,724				1,618,798			(22	)%
Other borrowings					64,735				64,726			-	%
Other liabilities					94,293				67,528			40	%
	Total liabilities				14,689,263				13,297,857			10	%
Stockholders' equity:
	Preferred stock, par value $0.001 per share; 1,000,000 authorized and undesignated at
		December 31, 2023 and December 31, 2022			-				-			-	%
	Common stock, par value $0.001 per share; 200,000,000 shares authorized; 54,461,580 shares
		issued and outstanding at December 31, 2023, and 54,326,527
		shares issued and outstanding at December 31, 2022			54				54			-	%
	Additional paid-in capital				232,605				229,693			1	%
	Retained earnings				1,254,841				1,109,902			13	%
	Accumulated other comprehensive loss				(47,595	)			(42,253	)		13	%
		Total stockholders' equity attributable to ServisFirst Bancshares, Inc.			1,439,905				1,297,396			11	%
	Noncontrolling interest				500				500			-	%
		Total stockholders' equity			1,440,405				1,297,896			11	%
	Total liabilities and stockholders' equity			$	16,129,668			$	14,595,753			11	%

CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(In thousands except per share data)
				Three Months Ended December 31,						Year Ended December 31,
				2023			2022			2023			2022
Interest income:
	Interest and fees on loans			$	184,897		$	153,924		$	699,101		$	499,691
	Taxable securities				15,512			10,895			53,499			40,722
	Nontaxable securities				12			27			65			137
	Federal funds sold				1,018			818			2,844			1,556
	Other interest and dividends				27,623			4,609			57,737			17,209
	Total interest income				229,062			170,273			813,246			559,315
Interest expense:
	Deposits				108,155			33,471			331,740			59,396
	Borrowed funds				19,220			14,418			70,569			29,027
	Total interest expense				127,375			47,889			402,309			88,423
	Net interest income				101,687			122,384			410,937			470,892
Provision for credit losses					3,582			7,135			18,715			37,607
	Net interest income after provision for credit losses				98,105			115,249			392,222			433,285
Non-interest income:
	Service charges on deposit accounts				2,181			1,866			8,420			8,033
	Mortgage banking				792			514			2,755			2,438
	Credit card income				2,004			2,261			8,631			9,917
	Securities losses				-			-			-			(6,168	)
	Bank-owned life insurance income				1,639			1,600			7,574			6,478
	Other operating income				763			725			3,037			12,661
	Total non-interest income				7,379			6,966			30,417			33,359
Non-interest expense:
	Salaries and employee benefits				23,024			19,230			80,965			77,952
	Equipment and occupancy expense				3,860			3,263			14,295			12,319
	Third party processing and other services				7,841			8,170			27,872			27,333
	Professional services				1,417			922			5,916			4,277
	FDIC and other regulatory assessments				9,509			1,311			15,614			4,565
	Other real estate owned expense				17			239			47			295
	Other operating expense				12,590			4,957			33,342			31,075
	Total non-interest expense				58,258			38,092			178,051			157,816
	Income before income tax				47,226			84,123			244,588			308,828
Provision for income tax					5,152			16,399			37,735			57,324
	Net income				42,074			67,724			206,853			251,504
	Dividends on preferred stock				31			-			62			62
	Net income available to common stockholders			$	42,043		$	67,693		$	206,791		$	251,442
Basic earnings per common share				$	0.77		$	1.25		$	3.80		$	4.63
Diluted earnings per common share				$	0.77		$	1.24		$	3.79		$	4.61

LOANS BY TYPE (UNAUDITED)
(In thousands)
			4th Quarter 2023			3rd Quarter 2023			2nd Quarter 2023			1st Quarter 2023			4th Quarter 2022
Commercial, financial, and agricultural			$	2,823,986		$	2,890,535		$	2,986,453		$	3,081,926		$	3,145,317
Real estate - construction				1,519,619			1,509,937			1,397,732			1,469,670			1,532,388
Real estate - mortgage:
	Owner-occupied commercial			2,257,163			2,237,684			2,294,002			2,243,436			2,199,280
	1-4 family mortgage			1,249,938			1,170,099			1,167,238			1,138,645			1,146,831
	Other mortgage			3,744,346			3,766,124			3,686,434			3,624,071			3,597,750
Subtotal: Real estate - mortgage				7,251,447			7,173,907			7,147,674			7,006,152			6,943,861
Consumer				63,777			66,751			73,035			72,054			66,402
Total loans			$	11,658,829		$	11,641,130		$	11,604,894		$	11,629,802		$	11,687,968

SUMMARY OF CREDIT LOSS EXPERIENCE (UNAUDITED)
(Dollars in thousands)
					4th Quarter 2023				3rd Quarter 2023				2nd Quarter 2023				1st Quarter 2023				4th Quarter 2022
Allowance for credit losses:
Beginning balance					$	152,247			$	152,272			$	148,965			$	146,297			$	140,967
Loans charged off:
	Commercial financial and agricultural					2,831				4,783				4,358				1,257				2,116
	Real estate - construction					89				19				-				-				-
	Real estate - mortgage					14				-				131				26				-
	Consumer					231				341				111				390				200
		Total charge offs				3,165				5,143				4,600				1,673				2,316
Recoveries:
	Commercial financial and agricultural					614				825				1,233				128				393
	Real estate - construction					-				-				-				3				-
	Real estate - mortgage					-				-				-				1				-
	Consumer					39				11				21				11				118
		Total recoveries				653				836				1,254				143				511
	Net charge-offs					2,512				4,307				3,346				1,530				1,805
	Provision for credit losses					3,582				4,282				6,654				4,197				7,135
	Ending balance				$	153,317			$	152,247			$	152,272			$	148,965			$	146,297
	Allowance for credit losses to total loans					1.32	%			1.31	%			1.31	%			1.28	%			1.25	%
	Allowance for credit losses to total average loans					1.32	%			1.31	%			1.31	%			1.28	%			1.27	%
	Net charge-offs to total average loans					0.09	%			0.15	%			0.11	%			0.05	%			0.06	%
	Provision for credit losses to total average loans					0.12	%			0.15	%			0.23	%			0.14	%			0.25	%
	Nonperforming assets:
		Nonaccrual loans			$	19,349			$	20,912			$	16,897			$	13,157			$	12,450
		Loans 90+ days past due and accruing				2,184				1,692				5,947				4,683				5,391
		Other real estate owned and repossessed assets				995				690				832				248				248
	Total				$	22,528			$	23,294			$	23,676			$	18,088			$	18,089
	Nonperforming loans to total loans					0.18	%			0.19	%			0.20	%			0.15	%			0.15	%
	Nonperforming assets to total assets					0.14	%			0.15	%			0.16	%			0.12	%			0.12	%
	Nonperforming assets to earning assets					0.14	%			0.16	%			0.16	%			0.13	%			0.13	%
	Allowance for credit losses to nonaccrual loans					795.17	%			731.74	%			901.18	%			1,132.24	%			1,175.08	%

CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(In thousands except per share data)
		4th Quarter 2023			3rd Quarter 2023			2nd Quarter 2023			1st Quarter 2023			4th Quarter 2022
Interest income:
	Interest and fees on loans	$	184,897		$	178,754		$	171,718		$	163,732		$	153,924
	Taxable securities		15,512			15,522			11,570			10,895			10,895
	Nontaxable securities		12			15			17			21			27
	Federal funds sold		1,018			985			227			614			818
	Other interest and dividends		27,623			17,930			6,124			6,060			4,609
	Total interest income		229,062			213,206			189,656			181,322			170,273
Interest expense:
	Deposits		108,155			95,901			71,971			55,713			33,471
	Borrowed funds		19,220			17,607			16,434			17,308			14,418
	Total interest expense		127,375			113,508			88,405			73,021			47,889
	Net interest income		101,687			99,698			101,251			108,301			122,384
Provision for credit losses			3,582			4,282			6,654			4,197			7,135
	Net interest income after provision for credit losses		98,105			95,416			94,597			104,104			115,249
Non-interest income:
	Service charges on deposit accounts		2,181			2,163			2,142			1,934			1,866
	Mortgage banking		792			825			696			442			514
	Credit card income		2,004			2,532			2,406			1,689			2,261
	Bank-owned life insurance income		1,639			1,818			2,496			1,621			1,600
	Other operating income		763			797			842			635			725
	Total non-interest income		7,379			8,135			8,582			6,321			6,966
Non-interest expense:
	Salaries and employee benefits		23,024			20,080			18,795			19,066			19,230
	Equipment and occupancy expense		3,860			3,579			3,421			3,435			3,263
	Third party processing and other services		7,841			6,549			6,198			7,284			8,170
	Professional services		1,417			1,265			1,580			1,654			922
	FDIC and other regulatory assessments		9,509			2,346			2,242			1,517			1,311
	Other real estate owned expense		17			18			6			6			239
	Other operating expense		12,590			7,826			6,224			6,702			4,957
	Total non-interest expense		58,258			41,663			38,466			39,664			38,092
	Income before income tax		47,226			61,888			64,713			70,761			84,123
Provision for income tax			5,152			8,548			11,245			12,790			16,399
	Net income		42,074			53,340			53,468			57,971			67,724
	Dividends on preferred stock		31			-			31			-			31
	Net income available to common stockholders	$	42,043		$	53,340		$	53,437		$	57,971		$	67,693
Basic earnings per common share		$	0.77		$	0.98		$	0.98		$	1.07		$	1.25
Diluted earnings per common share		$	0.77		$	0.98		$	0.98		$	1.06		$	1.24

AVERAGE BALANCE SHEETS AND NET INTEREST ANALYSIS (UNAUDITED)
ON A FULLY TAXABLE-EQUIVALENT BASIS
(Dollars in thousands)
						4th Quarter 2023							3rd Quarter 2023							2nd Quarter 2023							1st Quarter 2023							4th Quarter 2022
						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				$	11,580,716			6.33	%		$	11,545,003			6.13	%		$	11,581,008			5.94	%		$	11,632,439			5.70	%		$	11,465,538			5.32	%
		Tax-exempt (2)					17,787			4.71				18,023			4.71				18,312			4.82				18,978			3.36				19,526			6.60
			Total loans, net of
				unearned income			11,598,503			6.32				11,563,026			6.13				11,599,320			5.94				11,651,417			5.70				11,485,064			5.32
	Mortgage loans held for sale						5,105			6.22				5,476			6.67				5,014			5.12				1,522			6.40				1,515			3.67
	Debt securities:
		Taxable					2,007,636			3.08				2,029,995			3.07				1,757,397			2.64				1,724,523			2.54				1,755,764			2.49
		Tax-exempt (2)					1,739			2.30				2,408			2.49				2,960			2.43				3,781			2.43				4,863			2.39
			Total securities (3)				2,009,375			3.08				2,032,403			3.07				1,760,357			2.64				1,728,304			2.54				1,760,627			2.49
	Federal funds sold						72,178			5.60				74,424			5.25				15,908			5.72				50,526			4.93				82,656			3.93
	Restricted equity securities						10,216			8.74				8,471			5.90				8,834			6.08				9,919			7.69				7,724			7.35
	Interest-bearing balances with banks						1,981,411			5.49				1,293,243			5.45				460,893			5.21				510,021			4.67				458,115			3.83
	Total interest-earning assets					$	15,676,788			5.80			$	14,977,043			5.65			$	13,850,326			5.49			$	13,951,709			5.27			$	13,795,701			4.90
Non-interest-earning assets:
	Cash and due from banks						101,741							111,566							101,188							106,448							113,823
	Net premises and equipment						60,110							60,121							60,499							60,617							60,323
	Allowance for credit losses, accrued
		interest and other assets					283,435							283,357							279,860							279,775							273,964
			Total assets			$	16,122,074						$	15,432,087						$	14,291,873						$	14,398,549						$	14,243,811
Interest-bearing liabilities:
	Interest-bearing deposits:
	Checking					$	2,245,431			2.91	%		$	2,153,973			2.72	%		$	1,628,936			1.69	%		$	1,675,355			1.25	%		$	1,763,622			0.73	%
	Savings						107,035			1.72				112,814			1.61				122,050			1.38				134,671			0.94				141,163			0.64
	Money market						7,106,190			4.44				6,538,426			4.24				5,971,639			3.78				5,756,642			3.17				5,047,133			2.07
	Time deposits						1,111,350			4.18				1,093,388			3.89				983,582			3.44				850,639			2.51				860,336			1.69
		Total interest-bearing deposits					10,570,006			4.06				9,898,601			3.84				8,706,207			3.32				8,417,307			2.68				7,812,254			1.70
	Federal funds purchased						1,338,110			5.49				1,237,721			5.43				1,191,582			5.14				1,389,217			4.67				1,453,445			3.75
	Other borrowings						64,734			4.23				64,734			4.23				100,998			4.62				114,726			4.61				64,726			4.23
	Total interest-bearing liabilities					$	11,972,850			4.22	%		$	11,201,056			4.02	%		$	9,998,787			3.55	%		$	9,921,250			2.98	%		$	9,330,425			2.04	%
Non-interest-bearing liabilities:
	Non-interest-bearing
		demand deposits					2,656,504							2,778,858							2,876,225							3,086,774							3,572,956
	Other liabilities						76,651							72,924							64,917							72,121							77,544
	Stockholders' equity						1,475,366							1,437,766							1,399,578							1,358,587							1,307,553
	Accumulated other comprehensive
		loss					(59,297	)						(58,517	)						(47,634	)						(40,183	)						(44,667	)
			Total liabilities and
				stockholders' equity		$	16,122,074						$	15,432,087						$	14,291,873						$	14,398,549						$	14,243,811
Net interest spread										1.58	%						1.63	%						1.94	%						2.29	%						2.86	%
Net interest margin										2.57	%						2.64	%						2.93	%						3.15	%						3.52	%
(1)	Average loans include nonaccrual loans in all periods. Loan fees of $4,175, $2,996, $3,318 $3,263, and $3,630 are included in interest income in the fourth quarter of 2023, third quarter of 2023, second quarter of 2023, first quarter of 2023, and fourth quarter of 2022, respectively.
(2)	Interest income and yields are presented on a fully taxable equivalent basis using a tax rate of 21%.
(3)	Unrealized losses on debt securities of $(84,647), $(83,815), $(69,498), $(59,738), and $(62,568) for the fourth quarter of 2023, third quarter of 2023, second quarter of 2023, first quarter of 2023, and fourth quarter of 2022, respectively, are excluded from the yield calculation.

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20240129131808/en/

ServisFirst Bank

Davis Mange (205) 949-3420

dmange@servisfirstbank.com

Source: ServisFirst Bancshares, Inc.

FAQ

What is the ticker symbol for ServisFirst Bancshares, Inc.?

The ticker symbol for ServisFirst Bancshares, Inc. is SFBS.

What were the diluted earnings per share for the quarter ended December 31, 2023?

The diluted earnings per share for the quarter ended December 31, 2023 were $0.77, with adjusted diluted earnings per share of $0.91.

What was the percentage change in deposits year-over-year?

Deposits grew by 15% year-over-year.

What was the change in the cash dividend per share?

The cash dividend increased by 7% to $0.30 per share.

What was the return on average assets for the fourth quarter of 2023 compared to the fourth quarter of 2022?

The return on average assets decreased from 1.89% to 1.04% compared to the fourth quarter of 2022.