ServisFirst Bancshares, Inc. Announces Results For Second Quarter of 2020

Rhea-AI Summary

ServisFirst Bancshares (NASDAQ: SFBS) reported strong financial results for Q2 2020, with a 14% increase in diluted earnings per share (EPS) to $0.75. The bank achieved record deposit growth of $1.5 billion and funded over 4,800 Payroll Protection Program loans totaling $1.05 billion. Asset quality improved, with nonperforming loans at 0.26% of total loans. Total assets surpassed $11 billion, reflecting an 18% year-over-year increase. However, net interest margin decreased to 3.32% from 3.58% sequentially, impacting profitability.

Positive

• Diluted EPS increased 14% to $0.75 year-over-year.
• Record deposit growth of $1.5 billion during Q2 2020.
• Funded approximately 4,800 PPP loans totaling over $1 billion.
• Asset quality improved with nonperforming loans at 0.26%.

Negative

• Net interest margin fell to 3.32% from 3.58% in Q1 2020.

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

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

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		At June 30, 2020		At March 31, 2020		At December 31, 2019		At September 30, 2019		At June 30, 2019
35%; width:35%; min-width:35%;">Book value per share - GAAP	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">$	10%; width:10%; min-width:10%;">16.98	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">$	10%; width:10%; min-width:10%;">16.38	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">$	10%; width:10%; min-width:10%;">15.71	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">$	10%; width:10%; min-width:10%;">15.13	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">$	10%; width:10%; min-width:10%;">14.55	1%; width:1%; min-width:1%;">
Total common stockholders' equity - GAAP			914,588				881,886				842,682				810,537				778,957
34%; min-width:34%;">Adjustments:	2%; min-width:2%;">	1%; min-width:1%;">	7%; min-width:7%;">	1%; min-width:1%;">	2%; min-width:2%;">	1%; min-width:1%;">	7%; min-width:7%;">	1%; min-width:1%;">	2%; min-width:2%;">	1%; min-width:1%;">	9%; min-width:9%;">	1%; min-width:1%;">	2%; min-width:2%;">	1%; min-width:1%;">	10%; min-width:10%;">	1%; min-width:1%;">	2%; min-width:2%;">	1%; min-width:1%;">	9%; min-width:9%;">	2%; min-width:2%;">
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

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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.

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CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(Dollars in thousands)
		June 30, 2020		June 30, 2019		% Change
ASSETS
59%; width:59%; min-width:59%;">Cash and due from banks	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">$	13%; width:13%; min-width:13%;">102,282	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">$	13%; width:13%; min-width:13%;">68,841	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">	7%; width:7%; min-width:7%;">49	1%; width:1%; min-width:1%;">%
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	%

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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:
46%; width:46%; min-width:46%;">Interest and fees on loans	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">$	11%; width:11%; min-width:11%;">89,383	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">$	11%; width:11%; min-width:11%;">88,610	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">$	11%; width:11%; min-width:11%;">178,768	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">$	11%; width:11%; min-width:11%;">174,134	1%; width:1%; min-width:1%;">
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

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35%; min-width:35%;">LOANS BY TYPE (UNAUDITED)	1%; min-width:1%;">	1%; min-width:1%;">	11%; min-width:11%;">	11%; min-width:11%;">	1%; min-width:1%;">	1%; min-width:1%;">	11%; min-width:11%;">	11%; min-width:11%;">
(In thousands)
35%; width:35%; min-width:35%;">	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">	10%; width:10%; min-width:10%;">	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">	10%; width:10%; min-width:10%;">	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">	10%; width:10%; min-width:10%;">	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">	10%; width:10%; min-width:10%;">	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">	10%; width:10%; min-width:10%;">	1%; width:1%; min-width:1%;">
		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

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SUMMARY OF LOAN LOSS EXPERIENCE (UNAUDITED)
(Dollars in thousands)
		2nd Quarter 2020		1st Quarter 2020		4th Quarter 2019		3rd Quarter 2019		2nd Quarter 2019
35%; width:35%; min-width:35%;">Allowance for loan losses:	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">	10%; width:10%; min-width:10%;">	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">	10%; width:10%; min-width:10%;">	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">	10%; width:10%; min-width:10%;">	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">	10%; width:10%; min-width:10%;">	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">	10%; width:10%; min-width:10%;">	1%; width:1%; min-width:1%;">
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
24%; min-width:24%;">Total charge offs	2%; min-width:2%;">	1%; min-width:1%;">	5%; min-width:5%;">4,316	1%; min-width:1%;">	2%; min-width:2%;">	1%; min-width:1%;">	5%; min-width:5%;">4,830	1%; min-width:1%;">	2%; min-width:2%;">	1%; min-width:1%;">	5%; min-width:5%;">6,570	1%; min-width:1%;">	2%; min-width:2%;">	1%; min-width:1%;">	5%; min-width:5%;">8,772	1%; min-width:1%;">	2%; min-width:2%;">	1%; min-width:1%;">	6%; min-width:6%;">3,842	1%; min-width:1%;">
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

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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:
35%; width:35%; min-width:35%;">Interest and fees on loans	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">$	10%; width:10%; min-width:10%;">89,383	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">$	10%; width:10%; min-width:10%;">89,385	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">$	10%; width:10%; min-width:10%;">89,407	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">$	10%; width:10%; min-width:10%;">90,767	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">$	10%; width:10%; min-width:10%;">88,610	1%; width:1%; min-width:1%;">
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

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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.

FAQ

What were the second quarter earnings results for SFBS?

ServisFirst Bancshares reported diluted EPS of $0.75 for Q2 2020, a 14% increase year-over-year.

How much did SFBS grow in deposits during Q2 2020?

SFBS experienced record deposit growth of $1.5 billion in Q2 2020.

How many PPP loans did SFBS fund?

The bank funded over 4,800 PPP loans totaling approximately $1.05 billion.

What was SFBS's total assets at the end of Q2 2020?

Total assets for ServisFirst Bancshares exceeded $11 billion as of June 30, 2020.

What is the current nonperforming loans ratio for SFBS?

The nonperforming loans ratio improved to 0.26% of total loans in Q2 2020.