10-Q/A
UNITED STATES
10-Q/A
| ☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2020 |
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _______to_______ |
For the transition period from _______to_______
Delaware | 26-0734029 |
(State or Other Jurisdiction of Incorporation or Organization) | (I.R.S. Employer Identification No.) |
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(205)
Title of each class | Trading | Name of each exchange on which registered |
Common stock, par value $.001 per share | SFBS | The NASDAQ Global Select Market |
Class | Outstanding as of |
| Common stock, $.001 par value |
EX-31.01 SECTION 302 CERTIFICATION OF THE CEO
EX-31.02 SECTION 302 CERTIFICATION OF THE CFO
EX-32.01 SECTION 906 CERTIFICATION OF THE CEO
EX-32.02 SECTION 906 CERTIFICATION OF THE CFO
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS
SERVISFIRST BANCSHARES, INC. | ||||||||
CONSOLIDATED BALANCE SHEETS | ||||||||
(In thousands, except share and per share amounts) | ||||||||
March 31, 2020 | December 31, 2019 | |||||||
(Unaudited) | (1) | |||||||
ASSETS | ||||||||
Cash and due from banks | $ | 80,461 | $ | 78,618 | ||||
Interest-bearing balances due from depository institutions | 297,943 | 451,509 | ||||||
Federal funds sold | 306,127 | 100,473 | ||||||
Cash and cash equivalents | 684,531 | 630,600 | ||||||
Available for sale debt securities, at fair value | 826,782 | 759,399 | ||||||
Held to maturity debt securities (fair value of $250 at March 31, 2020 and December 31, 2019) | 250 | 250 | ||||||
Mortgage loans held for sale | 6,747 | 6,312 | ||||||
Loans | 7,568,836 | 7,261,451 | ||||||
Less allowance for loan losses | (85,414 | ) | (76,584 | ) | ||||
Loans, net | 7,483,422 | 7,184,867 | ||||||
Premises and equipment, net | 55,992 | 56,496 | ||||||
Accrued interest and dividends receivable | 25,314 | 26,262 | ||||||
Deferred tax assets, net | 23,723 | 25,566 | ||||||
Other real estate owned and repossessed assets | 7,448 | 8,178 | ||||||
Bank owned life insurance contracts | 210,847 | 209,395 | ||||||
Goodwill and other identifiable intangible assets | 14,111 | 14,179 | ||||||
Other assets | 25,715 | 26,149 | ||||||
Total assets | $ | 9,364,882 | $ | 8,947,653 | ||||
LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||
Liabilities: | ||||||||
Deposits: | ||||||||
Noninterest-bearing | $ | 1,925,626 | $ | 1,749,879 | ||||
Interest-bearing | 5,907,029 | 5,780,554 | ||||||
Total deposits | 7,832,655 | 7,530,433 | ||||||
Federal funds purchased | 543,623 | 470,749 | ||||||
Other borrowings | 64,707 | 64,703 | ||||||
Accrued interest payable | 12,399 | 11,934 | ||||||
Other liabilities | 29,613 | 27,152 | ||||||
Total liabilities | 8,482,997 | 8,104,971 | ||||||
Stockholders' equity: | ||||||||
Preferred stock, par value $0.001 per share; 1,000,000 authorized and undesignated at March 31, 2020 and December 31, 2019 | - | - | ||||||
Common stock, par value $0.001 per share; 100,000,000 shares authorized; 53,844,009 shares issued and outstanding at March 31, 2020, and 53,623,740 shares issued and outstanding at December 31, 2019 | 54 | 54 | ||||||
Additional paid-in capital | 221,901 | 219,766 | ||||||
Retained earnings | 641,980 | 616,611 | ||||||
Accumulated other comprehensive income | 17,448 | 5,749 | ||||||
Total stockholders' equity attributable to ServisFirst Bancshares, Inc. | 881,383 | 842,180 | ||||||
Noncontrolling interest | 502 | 502 | ||||||
Total stockholders' equity | 881,885 | 842,682 | ||||||
Total liabilities and stockholders' equity | $ | 9,364,882 | $ | 8,947,653 | ||||
(1) derived from audited financial statements.
See Notes to Consolidated Financial Statements.
SERVISFIRST BANCSHARES, INC. | ||||||||
CONSOLIDATED STATEMENTS OF INCOME | ||||||||
(In thousands, except share and per share amounts) | ||||||||
(Unaudited) | ||||||||
THREE MONTHS ENDED MARCH 31, | ||||||||
2020 | 2019 | |||||||
Interest income: | ||||||||
Interest and fees on loans | $ | 89,385 | $ | 85,524 | ||||
Taxable securities | 5,154 | 3,746 | ||||||
Nontaxable securities | 233 | 446 | ||||||
Federal funds sold | 277 | 1,219 | ||||||
Other interest and dividends | 1,718 | 2,764 | ||||||
Total interest income | 96,767 | 93,699 | ||||||
Interest expense: | ||||||||
Deposits | 16,745 | 22,145 | ||||||
Borrowed funds | 2,382 | 2,776 | ||||||
Total interest expense | 19,127 | 24,921 | ||||||
Net interest income | 77,640 | 68,778 | ||||||
Provision for loan losses | 13,584 | 4,885 | ||||||
Net interest income after provision for loan losses | 64,056 | 63,893 | ||||||
Noninterest income: | ||||||||
Service charges on deposit accounts | 1,916 | 1,702 | ||||||
Mortgage banking | 1,071 | 575 | ||||||
Credit cards | 1,765 | 1,576 | ||||||
Increase in cash surrender value life insurance | 1,453 | 762 | ||||||
Other operating income | 469 | 329 | ||||||
Total noninterest income | 6,674 | 4,944 | ||||||
Noninterest expense: | ||||||||
Salaries and employee benefits | 15,658 | 14,265 | ||||||
Equipment and occupancy | 2,400 | 2,259 | ||||||
Third party processing and other services | 3,345 | 2,411 | ||||||
Professional services | 948 | 994 | ||||||
FDIC and other regulatory assessments | 1,332 | 1,019 | ||||||
Other real estate owned | 601 | 22 | ||||||
Other operating expense | 3,636 | 4,358 | ||||||
Total noninterest expense | 27,920 | 25,328 | ||||||
Income before income taxes | 42,810 | 43,509 | ||||||
Provision for income taxes | 8,032 | 8,499 | ||||||
Net income | 34,778 | 35,010 | ||||||
Dividends on preferred stock | - | - | ||||||
Net income available to common stockholders | $ | 34,778 | $ | 35,010 | ||||
Basic earnings per common share | $ | 0.65 | $ | 0.65 | ||||
Diluted earnings per common share | $ | 0.64 | $ | 0.65 | ||||
See Notes to Consolidated Financial Statements.
SERVISFIRST BANCSHARES, INC. | ||||||||
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME | ||||||||
(In thousands) | ||||||||
(Unaudited) | ||||||||
THREE MONTHS ENDED MARCH 31, | ||||||||
2020 | 2019 | |||||||
Net income | $ | 34,778 | $ | 35,010 | ||||
Other comprehensive income, net of tax: | ||||||||
Unrealized net holding gains arising during period from securities available for sale, net of tax of $3,110 and $1,002 for 2020 and 2019, respectively | 11,699 | 3,772 | ||||||
Comprehensive income | $ | 46,477 | $ | 38,782 | ||||
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SERVISFIRST BANCSHARES, INC. | ||||||||||||||||||||||||||||||||
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY | ||||||||||||||||||||||||||||||||
(In thousands, except share amounts) | ||||||||||||||||||||||||||||||||
(Unaudited) | ||||||||||||||||||||||||||||||||
Three Months Ended March 31, | ||||||||||||||||||||||||||||||||
Accumulated | ||||||||||||||||||||||||||||||||
Additional | Other | Total | ||||||||||||||||||||||||||||||
Common | Preferred | Common | Paid-in | Retained | Comprehensive | Noncontrolling | Stockholders' | |||||||||||||||||||||||||
Shares | Stock | Stock | Capital | Earnings | Income (loss) | Interest | Equity | |||||||||||||||||||||||||
Balance, January 1, 2019 | 53,375,195 | $ | - | $ | 53 | $ | 218,521 | $ | 500,868 | $ | (4,741 | ) | $ | 502 | $ | 715,203 | ||||||||||||||||
Common dividends declared, $0.15 per share | - | - | - | - | (8,025 | ) | - | - | (8,025 | ) | ||||||||||||||||||||||
Issue restricted shares pursuant to stock incentives | 2,700 | - | - | - | - | - | - | - | ||||||||||||||||||||||||
Issue shares of common stock upon exercise of stock options | 117,313 | - | - | 797 | - | - | - | 797 | ||||||||||||||||||||||||
45,187 shares of common stock withheld in net settlement upon exercise of stock options | - | - | - | (1,453 | ) | - | - | - | (1,453 | ) | ||||||||||||||||||||||
Stock-based compensation expense | - | - | - | 282 | - | - | - | 282 | ||||||||||||||||||||||||
Other comprehensive income, net of tax | - | - | - | - | - | 3,772 | - | 3,772 | ||||||||||||||||||||||||
Net income | - | - | - | - | 35,010 | - | - | 35,010 | ||||||||||||||||||||||||
Balance, March 31, 2019 | 53,495,208 | $ | - | $ | 53 | $ | 218,147 | $ | 527,853 | $ | (969 | ) | $ | 502 | $ | 745,586 | ||||||||||||||||
Balance, January 1, 2020 | 53,623,740 | $ | - | $ | 54 | $ | 219,766 | $ | 616,611 | $ | 5,749 | $ | 502 | $ | 842,682 | |||||||||||||||||
Common dividends declared, $0.175 per share | - | - | - | - | (9,409 | ) | - | - | (9,409 | ) | ||||||||||||||||||||||
Issue restricted shares pursuant to stock incentives | 15,300 | - | - | - | - | - | - | - | ||||||||||||||||||||||||
Issue shares of common stock upon exercise of stock options | 204,969 | - | - | 2,261 | - | - | - | 2,261 | ||||||||||||||||||||||||
11,031 shares of common stock withheld in net settlement upon exercise of stock options | - | - | - | (403 | ) | - | - | - | (403 | ) | ||||||||||||||||||||||
Stock-based compensation expense | - | - | - | 277 | - | - | - | 277 | ||||||||||||||||||||||||
Other comprehensive income, net of tax | - | - | - | - | - | 11,699 | - | 11,699 | ||||||||||||||||||||||||
Net income | - | - | - | - | 34,778 | - | - | 34,778 | ||||||||||||||||||||||||
Balance, March 31, 2020 | 53,844,009 | $ | - | $ | 54 | $ | 221,901 | $ | 641,980 | $ | 17,448 | $ | 502 | $ | 881,885 | |||||||||||||||||
See Notes to Consolidated Financial Statements.
SERVISFIRST BANCSHARES, INC. | ||||||||
CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||||||
(In thousands) (Unaudited) | ||||||||
Three Months Ended March 31, | ||||||||
2020 | 2019 | |||||||
OPERATING ACTIVITIES | ||||||||
Net income | $ | 34,778 | $ | 35,010 | ||||
Adjustments to reconcile net income to net cash provided by | ||||||||
Deferred tax (benefit) expense | (1,267 | ) | 1,068 | |||||
Provision for loan losses | 13,584 | 4,885 | ||||||
Depreciation | 921 | 917 | ||||||
Accretion on acquired loans | - | (91 | ) | |||||
Amortization of core deposit intangible | 68 | 68 | ||||||
Net amortization of debt securities available for sale | 966 | 626 | ||||||
Decrease (increase) in accrued interest and dividends receivable | 948 | (2,928 | ) | |||||
Stock-based compensation expense | 277 | 282 | ||||||
Increase in accrued interest payable | 465 | 1,095 | ||||||
Proceeds from sale of mortgage loans held for sale | 36,308 | 15,581 | ||||||
Originations of mortgage loans held for sale | (35,672 | ) | (16,109 | ) | ||||
Gain on sale of mortgage loans held for sale | (1,071 | ) | (575 | ) | ||||
Net (gain) loss on sale of other real estate owned and repossessed assets | (24 | ) | 2 | |||||
Write down of other real estate owned and repossessed assets | 587 | 20 | ||||||
Operating losses of tax credit partnerships | 3 | 35 | ||||||
Increase in cash surrender value of life insurance contracts | (1,453 | ) | (762 | ) | ||||
Net change in other assets, liabilities, and other operating activities | 2,814 | 2,550 | ||||||
Net cash provided by operating activities | 52,232 | 41,674 | ||||||
INVESTMENT ACTIVITIES | ||||||||
Purchase of debt securities available for sale | (80,149 | ) | (65,507 | ) | ||||
Proceeds from maturities, calls and paydowns of debt securities available for sale | 26,778 | 28,469 | ||||||
Purchase of debt securities held to maturity | - | (250 | ) | |||||
Investment in tax credit partnership and SBIC | (111 | ) | - | |||||
Increase in loans | (312,426 | ) | (129,977 | ) | ||||
Purchase of premises and equipment | (417 | ) | (759 | ) | ||||
Proceeds from sale of other real estate owned and repossessed assets | 454 | 48 | ||||||
Net cash used in investing activities | (365,871 | ) | (167,976 | ) | ||||
FINANCING ACTIVITIES | ||||||||
Net increase in non-interest-bearing deposits | 175,747 | 15,362 | ||||||
Net increase in interest-bearing deposits | 126,475 | 152,596 | ||||||
Net increase in federal funds purchased | 72,874 | 84,653 | ||||||
Proceeds from exercise of stock options | 2,261 | 797 | ||||||
Taxes paid in net settlement of tax obligation upon exercise of stock options | (403 | ) | (1,453 | ) | ||||
Dividends paid on common stock | (9,384 | ) | (8,019 | ) | ||||
Net cash provided by financing activities | 367,570 | 243,936 | ||||||
Net increase in cash and cash equivalents | 53,931 | 117,634 | ||||||
Cash and cash equivalents at beginning of period | 630,600 | 681,895 | ||||||
Cash and cash equivalents at end of period | $ | 684,531 | $ | 799,529 | ||||
SUPPLEMENTAL DISCLOSURE | ||||||||
Cash paid for: | ||||||||
Interest | $ | 18,662 | $ | 23,826 | ||||
Income taxes | 400 | 1,533 | ||||||
Income tax refund | - | (2 | ) | |||||
NONCASH TRANSACTIONS | ||||||||
Other real estate acquired in settlement of loans | $ | 287 | $ | 381 | ||||
Dividends declared | 9,409 | 8,025 | ||||||
SERVISFIRST BANCSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2020
(Unaudited)
NOTE 1 - GENERAL
The accompanying consolidated financial statements in this report have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission, including Regulation S-X and the instructions for Form 10-Q, and have not been audited. These consolidated financial statements do not include all of the information and footnotes required by U.S. generally accepted accounting principles (“U.S. GAAP”) for complete financial statements. In the opinion of management, all adjustments necessary to present fairly the consolidated financial position and the consolidated results of operations for the interim periods have been made. All such adjustments are of a normal nature. The consolidated results of operations are not necessarily indicative of the consolidated results of operations which ServisFirst Bancshares, Inc. (the “Company”) may achieve for future interim periods or the entire year. For further information, refer to the consolidated financial statements and footnotes included in the Company’s Form 10-K for the year ended December 31, 2019.
All reported amounts are in thousands except share and per share data.
Allowance for Loan Losses
The Company was prepared to fully adopt Accounting Standards Update (“ASU”) 2016-13, “Financial Instruments – Credit Losses (Topic 326)” as of January 1, 2020 prior to the COVID-19 outbreak and subsequent passage of the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act on March 27, 2020, which provided financial institutions with the option to delay adoption of ASU 2016-13. The Company has decided to delay its adoption until the earlier of the date on which the national emergency concerning COVID-19 terminates or December 31, 2020, with an effective retrospective implementation date of January 1, 2020.
The allowance for loan losses as of March 31, 2020 is determined under the Company’s incurred loss model. Qualitative adjustments were made to the amount of the allowance to take into effect management’s estimates of the COVID-19 pandemic’s impact on the local and regional markets which the Company operates. Further discussion of the allowance for loan losses is included in Note 5 – Loans.
NOTE 2 - CASH AND CASH EQUIVALENTS
Cash on hand, cash items in process of collection, amounts due from banks, and federal funds sold are included in cash and cash equivalents.
NOTE 3 - EARNINGS PER COMMON SHARE
Basic earnings per common share are computed by dividing net income by the weighted average number of common shares outstanding during the period. Diluted earnings per common share include the dilutive effect of additional potential common shares issuable under stock options.
Three Months Ended March 31, | ||||||||
2020 | 2019 | |||||||
(In Thousands, Except Shares and Per Share Data) | ||||||||
Earnings per common share | ||||||||
Weighted average common shares outstanding | 53,704,224 | 53,465,091 | ||||||
Net income available to common stockholders | $ | 34,778 | $ | 35,010 | ||||
Basic earnings per common share | $ | 0.65 | $ | 0.65 | ||||
Weighted average common shares outstanding | 53,704,224 | 53,465,091 | ||||||
Dilutive effects of assumed conversions and exercise of stock options and warrants | 463,190 | 611,447 | ||||||
Weighted average common and dilutive potential common shares outstanding | 54,167,414 | 54,076,538 | ||||||
Net income available to common stockholders | $ | 34,778 | $ | 35,010 | ||||
Diluted earnings per common share | $ | 0.64 | $ | 0.65 | ||||
NOTE 4 - SECURITIES
The amortized cost and fair value of available-for-sale and held-to-maturity securities at March 31, 2020 and December 31, 2019 are summarized as follows:
Amortized Cost | Gross Unrealized Gain | Gross Unrealized Loss | Fair Value | |||||||||||||
March 31, 2020 | (In Thousands) | |||||||||||||||
Available for sale debt securities | ||||||||||||||||
U.S. Treasury Securities | $ | 48,956 | $ | 826 | $ | - | $ | 49,782 | ||||||||
Government Agency Securities | 18,188 | 405 | - | 18,593 | ||||||||||||
Mortgage-backed securities | 529,126 | 17,305 | - | 546,431 | ||||||||||||
State and municipal securities | 50,989 | 353 | (14 | ) | 51,328 | |||||||||||
Corporate debt | 157,496 | 3,652 | (500 | ) | 160,648 | |||||||||||
Total | $ | 804,755 | $ | 22,541 | $ | (514 | ) | $ | 826,782 | |||||||
Held to maturity debt securities | ||||||||||||||||
State and municipal securities | $ | 250 | $ | - | $ | - | $ | 250 | ||||||||
Total | $ | 250 | $ | - | $ | - | $ | 250 | ||||||||
December 31, 2019 | ||||||||||||||||
Available for sale debt securities | ||||||||||||||||
U.S. Treasury Securities | $ | 48,923 | $ | 291 | $ | (4 | ) | $ | 49,210 | |||||||
Government Agency Securities | 18,245 | 143 | (2 | ) | 18,386 | |||||||||||
Mortgage-backed securities | 470,513 | 4,859 | (1,318 | ) | 474,054 | |||||||||||
State and municipal securities | 56,951 | 335 | (14 | ) | 57,272 | |||||||||||
Corporate debt | 157,549 | 3,098 | (170 | ) | 160,477 | |||||||||||
Total | $ | 752,181 | $ | 8,726 | $ | (1,508 | ) | $ | 759,399 | |||||||
Held to maturity debt securities | ||||||||||||||||
State and municipal securities | $ | 250 | $ | - | $ | - | $ | 250 | ||||||||
Total | $ | 250 | $ | - | $ | - | $ | 250 | ||||||||
The amortized cost and fair value of debt securities as of March 31, 2020 and December 31, 2019 by contractual maturity are shown below. Actual maturities may differ from contractual maturities of mortgage-backed securities since the mortgages underlying the securities may be called or prepaid with or without penalty. Therefore, these securities are not included in the maturity categories along with the other categories of debt securities.
March 31, 2020 | December 31, 2019 | |||||||||||||||
Amortized Cost | Fair Value | Amortized Cost | Fair Value | |||||||||||||
(In thousands) | ||||||||||||||||
Available for sale debt securities | ||||||||||||||||
Due within one year | $ | 59,924 | $ | 60,306 | $ | 58,722 | $ | 58,975 | ||||||||
Due from one to five years | 83,414 | 84,963 | 90,034 | 91,005 | ||||||||||||
Due from five to ten years | 130,876 | 133,641 | 129,501 | 131,914 | ||||||||||||
Due after ten years | 1,415 | 1,441 | 3,411 | 3,451 | ||||||||||||
Mortgage-backed securities | 529,126 | 546,431 | 470,513 | 474,054 | ||||||||||||
| $ | 804,755 | $ | 826,782 | $ | 752,181 | $ | 759,399 | |||||||||
Held to maturity debt securities | ||||||||||||||||
Due from one to five years | $ | 250 | $ | 250 | $ | 250 | $ | 250 | ||||||||
| $ | 250 | $ | 250 | $ | 250 | $ | 250 | |||||||||
All mortgage-backed securities are with government-sponsored enterprises (GSEs) such as Federal National Mortgage Association, Government National Mortgage Association, Federal Home Loan Bank, and Federal Home Loan Mortgage Corporation.
The following table identifies, as of March 31, 2020 and December 31, 2019, the Company’s investment securities that have been in a continuous unrealized loss position for less than 12 months and those that have been in a continuous unrealized loss position for 12 or more months. At March 31, 2020, 4 of the Company’s 678 debt securities had been in an unrealized loss position for 12 or more months. The Company does not intend to sell these securities, and it is more likely than not that the Company will not be required to sell the securities before recovery of their amortized cost, which may be maturity; accordingly, the Company does not consider these securities to be other-than-temporarily impaired at March 31, 2020. Further, the Company believes any deterioration in value of its current investment securities is attributable to changes in market interest rates and not credit quality of the issuer.
Less Than Twelve Months | Twelve Months or More | Total | ||||||||||||||||||||||
Gross | Gross | Gross | ||||||||||||||||||||||
Unrealized | Unrealized | Unrealized | ||||||||||||||||||||||
Losses | Fair Value | Losses | Fair Value | Losses | Fair Value | |||||||||||||||||||
(In Thousands) | ||||||||||||||||||||||||
March 31, 2020 | ||||||||||||||||||||||||
State and municipal securities | $ | (10 | ) | $ | 3,582 | $ | (4 | ) | $ | 721 | $ | (14 | ) | $ | 4,303 | |||||||||
Corporate debt | (500 | ) | 15,478 | - | - | (500 | ) | 15,478 | ||||||||||||||||
Total | $ | (510 | ) | $ | 19,060 | $ | (4 | ) | $ | 721 | $ | (514 | ) | $ | 19,781 | |||||||||
December 31, 2019 | ||||||||||||||||||||||||
U.S. Treasury Securities | $ | (4 | ) | $ | 3,012 | $ | - | $ | - | $ | (4 | ) | $ | 3,012 | ||||||||||
Government Agency Securities | (2 | ) | 266 | - | - | (2 | ) | 266 | ||||||||||||||||
Mortgage-backed securities | (1,206 | ) | 153,330 | (112 | ) | 24,911 | (1,318 | ) | 178,241 | |||||||||||||||
State and municipal securities | (4 | ) | 1,900 | (10 | ) | 2,647 | (14 | ) | 4,547 | |||||||||||||||
Corporate debt | (170 | ) | 19,981 | - | - | (170 | ) | 19,981 | ||||||||||||||||
Total | $ | (1,386 | ) | $ | 178,489 | $ | (122 | ) | $ | 27,558 | $ | (1,508 | ) | $ | 206,047 | |||||||||
The carrying value of investment securities pledged to secure public funds on deposit and for other purposes as required by law was $437.6 million and $389.9 million as of March 31, 2020 and December 31, 2019, respectively.
NOTE 5 – LOANS
The following table details the Company’s loans at March 31, 2020 and December 31, 2019:
March 31, | December 31, | |||||||
2020 | 2019 | |||||||
(Dollars In Thousands) | ||||||||
Commercial, financial and agricultural | $ | 2,771,307 | $ | 2,696,210 | ||||
Real estate - construction | 548,578 | 521,392 | ||||||
Real estate - mortgage: | ||||||||
Owner-occupied commercial | 1,678,532 | 1,587,478 | ||||||
1-4 family mortgage | 675,870 | 644,188 | ||||||
Other mortgage | 1,834,137 | 1,747,394 | ||||||
Subtotal: Real estate - mortgage | 4,188,539 | 3,979,060 | ||||||
Consumer | 60,412 | 64,789 | ||||||
Total Loans | 7,568,836 | 7,261,451 | ||||||
Less: Allowance for loan losses | (85,414 | ) | (76,584 | ) | ||||
Net Loans | $ | 7,483,422 | $ | 7,184,867 | ||||
Commercial, financial and agricultural | 36.61 | % | 37.13 | % | ||||
Real estate - construction | 7.25 | % | 7.18 | % | ||||
Real estate - mortgage: | ||||||||
Owner-occupied commercial | 22.18 | % | 21.86 | % | ||||
1-4 family mortgage | 8.93 | % | 8.87 | % | ||||
Other mortgage | 24.23 | % | 24.07 | % | ||||
Subtotal: Real estate - mortgage | 55.34 | % | 54.80 | % | ||||
Consumer | 0.80 | % | 0.89 | % | ||||
Total Loans | 100.00 | % | 100.00 | % | ||||
The credit quality of the loan portfolio is summarized no less frequently than quarterly using categories similar to the standard asset classification system used by the federal banking agencies. The following table presents credit quality indicators for the loan loss portfolio segments and classes. These categories are utilized to develop the associated allowance for loan losses using historical losses adjusted for current economic conditions defined as follows:
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Loans by credit quality indicator as of March 31, 2020 and December 31, 2019 were as follows:
Special | ||||||||||||||||||||
March 31, 2020 | Pass | Mention | Substandard | Doubtful | Total | |||||||||||||||
(In Thousands) | ||||||||||||||||||||
Commercial, financial and agricultural | $ | 2,708,845 | $ | 17,902 | $ | 44,560 | $ | - | $ | 2,771,307 | ||||||||||
Real estate - construction | 542,659 | 4,136 | 1,783 | - | 548,578 | |||||||||||||||
Real estate - mortgage: | ||||||||||||||||||||
Owner-occupied commercial | 1,658,909 | 11,014 | 8,609 | - | 1,678,532 | |||||||||||||||
1-4 family mortgage | 671,407 | 2,080 | 2,383 | - | 675,870 | |||||||||||||||
Other mortgage | 1,824,825 | 7,557 | 1,755 | - | 1,834,137 | |||||||||||||||
Total real estate - mortgage | 4,155,141 | 20,651 | 12,747 | - | 4,188,539 | |||||||||||||||
Consumer | 60,403 | - | 9 | - | 60,412 | |||||||||||||||
Total | $ | 7,467,048 | $ | 42,689 | $ | 59,099 | $ | - | $ | 7,568,836 | ||||||||||
Special | ||||||||||||||||||||
December 31, 2019 | Pass | Mention | Substandard | Doubtful | Total | |||||||||||||||
(In Thousands) | ||||||||||||||||||||
Commercial, financial and agricultural | $ | 2,629,487 | $ | 46,176 | $ | 20,547 | $ | - | $ | 2,696,210 | ||||||||||
Real estate - construction | 512,373 | 4,731 | 4,288 | - | 521,392 | |||||||||||||||
Real estate - mortgage: | ||||||||||||||||||||
Owner-occupied commercial | 1,555,283 | 18,240 | 13,955 | - | 1,587,478 | |||||||||||||||
1-4 family mortgage | 639,959 | 2,787 | 1,442 | - | 644,188 | |||||||||||||||
Other mortgage | 1,735,869 | 10,018 | 1,507 | - | 1,747,394 | |||||||||||||||
Total real estate - mortgage | 3,931,111 | 31,045 | 16,904 | - | 3,979,060 | |||||||||||||||
Consumer | 64,789 | - | - | - | 64,789 | |||||||||||||||
Total | $ | 7,137,760 | $ | 81,952 | $ | 41,739 | $ | - | $ | 7,261,451 | ||||||||||
Loans by performance status as of March 31, 2020 and December 31, 2019 were as follows:
March 31, 2020 | Performing | Nonperforming | Total | |||||||||
(In Thousands) | ||||||||||||
Commercial, financial and agricultural | $ | 2,756,132 | $ | 15,175 | $ | 2,771,307 | ||||||
Real estate - construction | 546,774 | 1,804 | 548,578 | |||||||||
Real estate - mortgage: | ||||||||||||
Owner-occupied commercial | 1,668,297 | 10,235 | 1,678,532 | |||||||||
1-4 family mortgage | 674,134 | 1,736 | 675,870 | |||||||||
Other mortgage | 1,829,244 | 4,893 | 1,834,137 | |||||||||
Total real estate - mortgage | 4,171,675 | 16,864 | 4,188,539 | |||||||||
Consumer | 60,387 | 25 | 60,412 | |||||||||
Total | $ | 7,534,968 | $ | 33,868 | $ | 7,568,836 | ||||||
December 31, 2019 | Performing | Nonperforming | Total | |||||||||
(In Thousands) | ||||||||||||
Commercial, financial | ||||||||||||
and agricultural | $ | 2,681,280 | $ | 14,930 | $ | 2,696,210 | ||||||
Real estate - construction | 519,803 | 1,589 | 521,392 | |||||||||
Real estate - mortgage: | ||||||||||||
Owner-occupied commercial | 1,576,652 | 10,826 | 1,587,478 | |||||||||
1-4 family mortgage | 641,875 | 2,313 | 644,188 | |||||||||
Other mortgage | 1,740,963 | 6,431 | 1,747,394 | |||||||||
Total real estate - mortgage | 3,959,490 | 19,570 | 3,979,060 | |||||||||
Consumer | 64,766 | 23 | 64,789 | |||||||||
Total | $ | 7,225,339 | $ | 36,112 | $ | 7,261,451 | ||||||
Loans by past due status as of March 31, 2020 and December 31, 2019 were as follows:
March 31, 2020 | Past Due Status (Accruing Loans) | |||||||||||||||||||||||||||
Total Past | ||||||||||||||||||||||||||||
30-59 Days | 60-89 Days | 90+ Days | Due | Non-Accrual | Current | Total Loans | ||||||||||||||||||||||
(In Thousands) | ||||||||||||||||||||||||||||
Commercial, financial and agricultural | $ | 1,859 | $ | 211 | $ | 45 | $ | 2,115 | $ | 15,130 | $ | 2,754,062 | $ | 2,771,307 | ||||||||||||||
Real estate - construction | - | - | - | - | 1,804 | 546,774 | 548,578 | |||||||||||||||||||||
Real estate - mortgage: | ||||||||||||||||||||||||||||
Owner-occupied commercial | 2,389 | 1,778 | - | 4,167 | 10,235 | 1,664,130 | 1,678,532 | |||||||||||||||||||||
1-4 family mortgage | 2,191 | - | - | 2,191 | 1,736 | 671,943 | 675,870 | |||||||||||||||||||||
Other mortgage | - | - | 4,893 | 4,893 | - | 1,829,244 | 1,834,137 | |||||||||||||||||||||
Total real estate - mortgage | 4,580 | 1,778 | 4,893 | 11,251 | 11,971 | 4,165,317 | 4,188,539 | |||||||||||||||||||||
Consumer | 83 | 31 | 16 | 130 | 9 | 60,273 | 60,412 | |||||||||||||||||||||
Total | $ | 6,522 | $ | 2,020 | $ | 4,954 | $ | 13,496 | $ | 28,914 | $ | 7,526,426 | $ | 7,568,836 | ||||||||||||||
December 31, 2019 | Past Due Status (Accruing Loans) | |||||||||||||||||||||||||||
Total Past | ||||||||||||||||||||||||||||
30-59 Days | 60-89 Days | 90+ Days | Due | Non-Accrual | Current | Total Loans | ||||||||||||||||||||||
(In Thousands) | ||||||||||||||||||||||||||||
Commercial, financial and agricultural | $ | 3,135 | $ | 344 | $ | 201 | $ | 3,680 | $ | 14,729 | $ | 2,677,801 | $ | 2,696,210 | ||||||||||||||
Real estate - construction | 830 | - | - | 830 | 1,589 | 518,973 | 521,392 | |||||||||||||||||||||
Real estate - mortgage: | ||||||||||||||||||||||||||||
Owner-occupied commercial | 917 | 7,242 | - | 8,159 | 10,826 | 1,568,493 | 1,587,478 | |||||||||||||||||||||
1-4 family mortgage | 1,638 | 567 | 873 | 3,078 | 1,440 | 639,670 | 644,188 | |||||||||||||||||||||
Other mortgage | - | - | 4,924 | 4,924 | 1,507 | 1,740,963 | 1,747,394 | |||||||||||||||||||||
Total real estate - mortgage | 2,555 | 7,809 | 5,797 | 16,161 | 13,773 | 3,949,126 | 3,979,060 | |||||||||||||||||||||
Consumer | 35 | 25 | 23 | 83 | - | 64,706 | 64,789 | |||||||||||||||||||||
Total | $ | 6,555 | $ | 8,178 | $ | 6,021 | $ | 20,754 | $ | 30,091 | $ | 7,210,606 | $ | 7,261,451 | ||||||||||||||
The allowance for loan losses is maintained at a level which, in management’s judgment, is adequate to absorb credit losses inherent in the loan portfolio. The amount of the allowance is based on management’s evaluation of the collectability of the loan portfolio, including the nature of the portfolio, credit concentrations, trends in historical loss experience, specific impaired loans, economic conditions, and other risks inherent in the portfolio. Allowances for impaired loans are generally determined based on collateral values or the present value of the estimated cash flows. The allowance is increased by a provision for loan losses, which is charged to expense, and reduced by charge-offs, net of recoveries. In addition, various regulatory agencies, as an integral part of their examination process, periodically review the allowance for losses on loans. Such agencies may require the Company to recognize adjustments to the allowance based on their judgments about information available to them at the time of their examination.
The methodology utilized for the calculation of the allowance for loan losses is divided into four distinct categories. Those categories include allowances for non-impaired loans (ASC 450), impaired loans (ASC 310), external qualitative factors, and internal qualitative factors. A description of each category of the allowance for loan loss methodology is listed below.
Non-Impaired Loans. Non-impaired loans are grouped into the following homogeneous loan pools by loan type: commercial and industrial, construction and development, commercial real estate, second lien home equity lines of credit, and all other loans. Each loan pool is stratified by internal risk rating and multiplied by a loss allocation percentage derived from the loan pool historical loss rate. The historical loss rate is based on an age weighted five year history of net charge-offs experienced by pool, with the most recent net charge-off experience given a greater weighting. This results in the expected loss rate per year, adjusted by a qualitative adjustment factor and a years-to-impairment factor, for each pool of loans to derive the total amount of allowance for non-impaired loans.
Impaired Loans. Loans are considered impaired, when based on current information and events, it is probable that the Bank will be unable to collect all amounts due according to the contractual terms of the loan agreement. The collection of all amounts due according to contractual terms means that both the contractual interest and principal payments of a loan will be collected as scheduled in the loan agreement. Impaired loans are measured based on the present value of expected future cash flows discounted at the rate implicit in the original loan agreement, at the loan’s observable market price or the fair value of the underlying collateral. The fair value of collateral, reduced by costs to sell on a discounted basis, is used if a loan is collateral-dependent. Fair value estimates for specifically impaired collateral-dependent loans are derived from appraised values based on the current market value or “as is” value of the property, normally from recently received and reviewed appraisals. Appraisals are obtained from certified and licensed appraisers and are based on certain assumptions, which may include construction or development status and the highest and best use of the property.These appraisals are reviewed by our credit administration department, and values are adjusted downward to reflect anticipated disposition costs. Once this estimated net realizable value has been determined, the value used in the impairment assessment is updated for each impaired loan. As subsequent events dictate and estimated net realizable values decline, required reserves may be established or further adjustments recorded.
External Qualitative Factors. The determination of the portion of the allowance for loan losses relating to external qualitative factors is based on consideration of the following factors: gross domestic product growth rate, changes in prime rate, delinquency trends, peer delinquency trends, year over year loan growth and state unemployment rate trends. Data for the three most recent periods is utilized in the calculation for each external qualitative component. The factors have a consistent weighted methodology to calculate the amount of allowance due to external qualitative factors. Overall macroeconomic conditions and uncertainty due to COVID-19 resulted in an increased provision for loans losses related to external qualitative factors of $6.7 million at March 31, 2020.
Internal Qualitative Factors. The determination of the portion of the allowance for loan losses relating to internal qualitative factors is based on the consideration of criteria which includes the following: number of extensions and deferrals, single pay and interest only loans, current financial information, credit concentrations and risk grade accuracy. A self-assessment for each of the criteria is made with a consistent weighted methodology used to calculate the amount of allowance required for internal qualitative factors.
The following table presents an analysis of the allowance for loan losses by portfolio segment and changes in the allowance for loan losses for the three months ended March 31, 2020 and March 31, 2019. The total allowance for loan losses is disaggregated into those amounts associated with loans individually evaluated and those associated with loans collectively evaluated.
Commercial, | ||||||||||||||||||||
financial and | Real estate - | Real estate - | ||||||||||||||||||
agricultural | construction | mortgage | Consumer | Total | ||||||||||||||||
(In Thousands) | ||||||||||||||||||||
Three Months Ended March 31, 2020 | ||||||||||||||||||||
Allowance for loan losses: | ||||||||||||||||||||
Balance at December 31, 2019 | $ | 43,666 | $ | 2,768 | $ | 29,653 | $ | 497 | $ | 76,584 | ||||||||||
Charge-offs | (2,640 | ) | (454 | ) | (1,678 | ) | (58 | ) | (4,830 | ) | ||||||||||
Recoveries | 62 | 1 | 1 | 12 | 76 | |||||||||||||||
Provision | 7,692 | 1,442 | 4,384 | 66 | 13,584 | |||||||||||||||
Balance at March 31, 2020 | $ | 48,780 | $ | 3,757 | $ | 32,360 | $ | 517 | $ | 85,414 | ||||||||||
Three Months Ended March 31, 2019 | ||||||||||||||||||||
Allowance for loan losses: | ||||||||||||||||||||
Balance at December 31, 2018 | $ | 39,016 | $ | 3,522 | $ | 25,508 | $ | 554 | $ | 68,600 | ||||||||||
Charge-offs | (3,037 | ) | - | (50 | ) | (218 | ) | (3,305 | ) | |||||||||||
Recoveries | 12 | 1 | 7 | 7 | 27 | |||||||||||||||
Provision | 3,468 | 72 | 1,246 | 99 | 4,885 | |||||||||||||||
Balance at March 31, 2019 | $ | 39,459 | $ | 3,595 | $ | 26,711 | $ | 442 | $ | 70,207 | ||||||||||
As of March 31, 2020 | ||||||||||||||||||||
Allowance for loan losses: | ||||||||||||||||||||
Individually Evaluated for Impairment | $ | 8,840 | $ | 351 | $ | 931 | $ | - | $ | 10,122 | ||||||||||
Collectively Evaluated for Impairment | 39,940 | 3,406 | 31,429 | 517 | 75,292 | |||||||||||||||
Loans: | ||||||||||||||||||||
Ending Balance | $ | 2,771,307 | $ | 548,578 | $ | 4,188,539 | $ | 60,412 | $ | 7,568,836 | ||||||||||
Individually Evaluated for Impairment | 44,868 | 1,834 | 13,815 | 9 | 60,526 | |||||||||||||||
Collectively Evaluated for Impairment | 2,726,439 | 546,744 | 4,174,724 | 60,403 | 7,508,310 | |||||||||||||||
As of December 31, 2019 | ||||||||||||||||||||
Allowance for loan losses: | ||||||||||||||||||||
Individually Evaluated for Impairment | $ | 6,085 | $ | 86 | $ | 3,633 | $ | - | $ | 9,804 | ||||||||||
Collectively Evaluated for Impairment | 37,581 | 2,682 | 26,020 | 497 | 66,780 | |||||||||||||||
Loans: | ||||||||||||||||||||
Ending Balance | $ | 2,696,210 | $ | 521,392 | $ | 3,979,060 | $ | 64,789 | $ | 7,261,451 | ||||||||||
Individually Evaluated for Impairment | 20,843 | 4,320 | 17,985 | - | 43,148 | |||||||||||||||
Collectively Evaluated for Impairment | 2,675,367 | 517,072 | 3,961,075 | 64,789 | 7,218,303 | |||||||||||||||
The following table presents details of the Company’s impaired loans as of March 31, 2020 and December 31, 2019, respectively. Loans which have been fully charged off do not appear in the table.
March 31, 2020 | ||||||||||||||||||||
For the three months | ||||||||||||||||||||
ended March 31, 2020 | ||||||||||||||||||||
Interest | ||||||||||||||||||||
Unpaid | Average | Income | ||||||||||||||||||
Recorded | Principal | Related | Recorded | Recognized | ||||||||||||||||
Investment | Balance | Allowance | Investment | in Period | ||||||||||||||||
(In Thousands) | ||||||||||||||||||||
With no allowance recorded: | ||||||||||||||||||||
Commercial, financial and agricultural | $ | 12,360 | $ | 12,360 | $ | - | $ | 12,352 | $ | 176 | ||||||||||
Real estate - construction | 30 | 34 | - | 35 | - | |||||||||||||||
Real estate - mortgage: | ||||||||||||||||||||
Owner-occupied commercial | 2,195 | 2,291 | - | 2,299 | 33 | |||||||||||||||
1-4 family mortgage | 717 | 717 | - | 735 | 1 | |||||||||||||||
Other mortgage | 1,701 | 1,701 | - | 1,731 | 18 | |||||||||||||||
Total real estate - mortgage | 4,613 | 4,709 | - | 4,765 | 52 | |||||||||||||||
Consumer | 9 | 9 | - | 9 | - | |||||||||||||||
Total with no allowance recorded | 17,012 | 17,112 | - | 17,161 | 228 | |||||||||||||||
With an allowance recorded: | ||||||||||||||||||||
Commercial, financial and agricultural | 32,508 | 32,775 | 8,840 | 33,186 | 239 | |||||||||||||||
Real estate - construction | 1,804 | 1,882 | 351 | 2,749 | - | |||||||||||||||
Real estate - mortgage: | ||||||||||||||||||||
Owner-occupied commercial | 7,487 | 12,127 | 827 | 12,159 | 5 | |||||||||||||||
1-4 family mortgage | 1,662 | 1,822 | 104 | 1,526 | 4 | |||||||||||||||
Other mortgage | 53 | 53 | - | 156 | 2 | |||||||||||||||
Total real estate - mortgage | 9,202 | 14,002 | 931 | 13,841 | 11 | |||||||||||||||
Consumer | - | - | - | - | - | |||||||||||||||
Total with allowance recorded | 43,514 | 48,659 | 10,122 | 49,776 | 250 | |||||||||||||||
Total Impaired Loans: | ||||||||||||||||||||
Commercial, financial and agricultural | 44,868 | 45,135 | 8,840 | 45,538 | 415 | |||||||||||||||
Real estate - construction | 1,834 | 1,916 | 351 | 2,784 | - | |||||||||||||||
Real estate - mortgage: | ||||||||||||||||||||
Owner-occupied commercial | 9,682 | 14,418 | 827 | 14,458 | 38 | |||||||||||||||
1-4 family mortgage | 2,379 | 2,539 | 104 | 2,261 | 5 | |||||||||||||||
Other mortgage | 1,754 | 1,754 | - | 1,887 | 20 | |||||||||||||||
Total real estate - mortgage | 13,815 | 18,711 | 931 | 18,606 | 63 | |||||||||||||||
Consumer | 9 | 9 | - | 9 | - | |||||||||||||||
Total impaired loans | $ | 60,526 | $ | 65,771 | $ | 10,122 | $ | 66,937 | $ | 478 | ||||||||||
December 31, 2019 | ||||||||||||||||||||
For the twelve months | ||||||||||||||||||||
ended December 31, 2019 | ||||||||||||||||||||
Interest | ||||||||||||||||||||
Unpaid | Average | Income | ||||||||||||||||||
Recorded | Principal | Related | Recorded | Recognized | ||||||||||||||||
Investment | Balance | Allowance | Investment | In Period | ||||||||||||||||
(In Thousands) | ||||||||||||||||||||
With no allowance recorded: | ||||||||||||||||||||
Commercial, financial and agricultural | $ | 9,015 | $ | 10,563 | $ | - | $ | 11,284 | $ | 562 | ||||||||||
Real estate - construction | 2,731 | 2,735 | - | 2,063 | 126 | |||||||||||||||
Real estate - mortgage: | ||||||||||||||||||||
Owner-occupied commercial | 7,150 | 7,246 | - | 7,548 | 618 | |||||||||||||||
1-4 family mortgage | 287 | 287 | - | 289 | 2 | |||||||||||||||
Total real estate - mortgage | 7,437 | 7,533 | - | 7,837 | 620 | |||||||||||||||
Consumer | - | - | - | - | - | |||||||||||||||
Total with no allowance recorded | 19,183 | 20,831 | - | 21,184 | 1,308 | |||||||||||||||
With an allowance recorded: | ||||||||||||||||||||
Commercial, financial and agricultural | 11,828 | 19,307 | 6,085 | 19,714 | 395 | |||||||||||||||
Real estate - construction | 1,589 | 1,589 | 86 | 1,614 | 27 | |||||||||||||||
Real estate - mortgage: | ||||||||||||||||||||
Owner-occupied commercial | 7,888 | 11,028 | 2,456 | 13,627 | 301 | |||||||||||||||
1-4 family mortgage | 1,153 | 1,153 | 176 | 1,157 | 1 | |||||||||||||||
Other mortgage | 1,507 | 1,507 | 1,001 | 1,468 | 21 | |||||||||||||||
Total real estate - mortgage | 10,548 | 13,688 | 3,633 | 16,252 | 323 | |||||||||||||||
Consumer | - | - | - | - | - | |||||||||||||||
Total with allowance recorded | 23,965 | 34,584 | 9,804 | 37,580 | 745 | |||||||||||||||
Total Impaired Loans: | ||||||||||||||||||||
Commercial, financial and agricultural | 20,843 | 29,870 | 6,085 | 30,998 | 957 | |||||||||||||||
Real estate - construction | 4,320 | 4,324 | 86 | 3,677 | 153 | |||||||||||||||
Real estate - mortgage: | ||||||||||||||||||||
Owner-occupied commercial | 15,038 | 18,274 | 2,456 | 21,175 | 919 | |||||||||||||||
1-4 family mortgage | 1,440 | 1,440 | 176 | 1,446 | 3 | |||||||||||||||
Other mortgage | 1,507 | 1,507 | 1,001 | 1,468 | 21 | |||||||||||||||
Total real estate - mortgage | 17,985 | 21,221 | 3,633 | 24,089 | 943 | |||||||||||||||
Total impaired loans | $ | 43,148 | $ | 55,415 | $ | 9,804 | $ | 58,764 | $ | 2,053 | ||||||||||
As of March 31, 2020, the Company had executed 730 loan modifications with payment deferrals on outstanding loan balances of $574.7 million in connection with the COVID-19 relief provided by the CARES Act. Of these 730 payment deferrals, 720 were principal only deferrals totaling $547.8 million, five were interest only deferrals totaling $18.3 million and five were principal and interest deferrals totaling $8.6 million. These deferrals were generally no more than three months in duration and were not considered troubled debt restructurings based on interagency guidance issued in March 2020.
Troubled Debt Restructurings (“TDR”) at March 31, 2020, December 31, 2019 and March 31, 2019 totaled $2.4 million, $3.3 million and $12.3 million, respectively. The portion of those TDRs accruing interest at March 31, 2020, December 31, 2019 and March 31, 2019 totaled $2.4 million, $3.3 million and $2.7 million, respectively. At March 31, 2020, the Company had a related allowance for loan losses of $223,000 allocated to TDRs, compared to $929,000 million at December 31, 2019 and $2.6 million at March 31, 2019. One commercial loan totaling $350,000 was newly classified as a TDR and there were no renewals of existing TDRs for the three months ended March 31, 2020. There were no modifications made to new TDRs or renewals of existing TDRs for the three months ended March 31, 2019.
2020 | ||||||||||||
Pre- | Post- | |||||||||||
Modification | Modification | |||||||||||
Outstanding | Outstanding | |||||||||||
Number of | Recorded | Recorded | ||||||||||
Contracts | Investment | Investment | ||||||||||
(In Thousands) | ||||||||||||
Troubled Debt Restructurings | ||||||||||||
Commercial, financial and agricultural | 1 | $ | 350 | $ | 350 | |||||||
Real estate - construction | - | - | - | |||||||||
Real estate - mortgage: | ||||||||||||
Owner-occupied commercial | - | - | - | |||||||||
1-4 family mortgage | - | - | - | |||||||||
Other mortgage | - | - | - | |||||||||
Total real estate mortgage | - | - | - | |||||||||
Consumer | - | - | - | |||||||||
| 1 | $ | 350 | $ | 350 | ||||||||
There were no loans which were modified in the previous twelve months (i.e., the twelve months prior to default) that defaulted during the three months ended March 31, 2020. There were two commercial loans totaling $325,000 which were modified in the previous twelve months which defaulted during the three months ended March 31, 2019. For purposes of this disclosure, default is defined as 90 days past due and still accruing or placement on nonaccrual status.
The Company leases space under non-cancelable operating leases for several of its banking offices and certain office equipment. The leases have remaining terms up to 9 years. At March 31, 2020, the Company had lease right-of-use assets and lease liabilities totaling $12.5 million and $12.6 million, respectively, compared to $12.3 and $13.4 million, respectively at December 31, 2019 which are reflected in other assets and other liabilities, respectively, in the Company’s Consolidated Balance Sheet.
Maturities of operating lease liabilities as of March 31, 2020 are as follows:
March 31, 2020 | ||||
(In Thousands) | ||||
2020 (remaining) | $ | 2,544 | ||
2021 | 2,688 | |||
2022 | 2,655 | |||
2023 | 2,181 | |||
2024 | 1,180 | |||
thereafter | 2,570 | |||
Total lease payments | 13,818 | |||
Less: imputed interest | (1,224 | ) | ||
Present value of operating lease liabilities | $ | 12,594 | ||
As of March 31, 2020, the weighted average remaining term of operating leases is 5.3 years and the weighted average discount rate used in the measurement of operating lease liabilities was 3.19%.
Operating cash flows related to leases were $852,000 and $781,000 for the three months ended March 31, 2020 and 2019, respectively.
Lease costs during the three months ended March 31, 2020 and 2019 were as follows (in thousands):
Three Months Ended March 31, | ||||||||
2020 | 2019 | |||||||
Operating lease cost | $ | 873 | $ | 840 | ||||
Short-term lease cost | 16 | 9 | ||||||
Variable lease cost | 44 | 38 | ||||||
Sublease income | (16 | ) | (6 | ) | ||||
Net lease cost | $ | 917 | $ | 881 | ||||
NOTE 7 - EMPLOYEE AND DIRECTOR BENEFITS
Stock Options
At March 31, 2020, the Company had stock incentive plans as described below. The compensation cost that has been charged to earnings for the plans was approximately $276,000 and $282,000 for the three months ended March 31, 2020 and 2019, respectively.
The Company’s 2009 Amended and Restated Stock Incentive Plan authorizes the grant of up to 5,550,000 shares and allows for the issuance of Stock Appreciation Rights, Restricted Stock, Stock Options, Non-stock Share Equivalents, Performance Shares or Performance Units. Both plans allow for the grant of incentive stock options and non-qualified stock options, and option awards are granted with an exercise price equal to the fair market value of the Company’s common stock at the date of grant. The maximum term of the options granted under the plans is ten years.
The Company estimates the fair value of each stock option award using a Black-Scholes-Merton valuation model which incorporates the assumptions noted in the following table. Expected volatilities are based on an index of southeastern United States publicly traded banks. The expected term for options granted is based on the short-cut method and represents the period of time that options granted are expected to be outstanding. The risk-free rate for periods within the contractual life of the option is based on the U. S. Treasury yield curve in effect at the time of grant.
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There were no grants of stock options during the three months ended March 31, 2020. The weighted average grant-date fair value of options granted during the three months ended March 31, 2019 was $12.20.
The following table summarizes stock option activity during the three months ended March 31, 2020 and 2019:
Weighted | ||||||||||||||||
Weighted | Average | |||||||||||||||
Average | Remaining | |||||||||||||||
Exercise | Contractual | Aggregate | ||||||||||||||
Shares | Price | Term (years) | Intrinsic Value | |||||||||||||
(In Thousands) | ||||||||||||||||
Three Months Ended March 31, 2020: | ||||||||||||||||
Outstanding January 1, 2020 | 965,248 | $ | 15.19 | 4.9 | $ | 21,911 | ||||||||||
Granted | - | - | - | - | ||||||||||||
Exercised | (216,000 | ) | 10.47 | 3.3 | 4,072 | |||||||||||
Forfeited | (18,000 | ) | 30.79 | 6.9 | 26 | |||||||||||
Outstanding March 31, 2020 | 731,248 | 17.68 | 5.4 | $ | 12,969 | |||||||||||
Exercisable March 31, 2020 | 210,500 | $ | 16.54 | 5.0 | $ | 7,146 | ||||||||||
Three Months Ended March 31, 2019: | ||||||||||||||||
Outstanding January 1, 2019 | 1,238,748 | $ | 13.02 | 5.2 | $ | 23,355 | ||||||||||
Granted | 6,000 | 34.09 | 9.8 | (2 | ) | |||||||||||
Exercised | (162,500 | ) | 4.59 | 1.7 | 4,384 | |||||||||||
Forfeited | - | - | - | - | ||||||||||||
Outstanding March 31, 2019 | 1,082,248 | 14.41 | 6.3 | $ | 21,318 | |||||||||||
Exercisable March 31, 2019 | 354,800 | $ | 8.40 | 4.0 | $ | 9,356 | ||||||||||
As of March 31, 2020, there was $1.1 million of total unrecognized compensation cost related to non-vested stock options. The cost is expected to be recognized on the straight-line method over the next 1.7 years.
Restricted Stock
The Company periodically grants restricted stock awards that vest upon service conditions. Dividend payments are made during the vesting period. The value of restricted stock is determined to be the current value of the Company’s stock, and this total value will be recognized as compensation expense over the vesting period. As of March 31, 2020, there was $1.8 million of total unrecognized compensation cost related to non-vested restricted stock. The cost is expected to be recognized evenly over the remaining 3.0 years of the restricted stock’s vesting period.
Shares | Weighted Average Grant Date Fair Value | |||||||
Three Months Ended March 31, 2020: | ||||||||
Non-vested at January 1, 2020 | 71,290 | $ | 31.53 | |||||
Granted | 15,300 | 39.45 | ||||||
Vested | (8,376 | ) | 18.64 | |||||
Forfeited | - | - | ||||||
Non-vested at March 31, 2020 | 78,214 | 34.46 | ||||||
Three Months Ended March 31, 2019: | ||||||||
Non-vested at January 1, 2019 | 44,076 | $ | 28.94 | |||||
Granted | 2,700 | 34.09 | ||||||
Vested | (5,200 | ) | 20.31 | |||||
Forfeited | - | - | ||||||
Non-vested at March 31, 2019 | 41,576 | 30.35 | ||||||
NOTE 8 - DERIVATIVES
The Company has entered into agreements with secondary market investors to deliver loans on a “best efforts delivery” basis. When a rate is committed to a borrower, it is based on the best price that day and locked with the investor for the customer for a 30-day period. In the event the loan is not delivered to the investor, the Company has no risk or exposure with the investor. The interest rate lock commitments related to loans that are originated for later sale are classified as derivatives. The fair values of the Company’s agreements with investors and rate lock commitments to customers as of March 31, 2020 and December 31, 2019 were not material.
NOTE 9 – RECENTLY ADOPTED ACCOUNTING PRONOUNCEMENTS
In July 2018, the Financial Accounting Standards Board (“FASB”) issued ASU 2018-13,Fair Value Measurement (Topic 820): Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement. This ASU eliminated, added and modified certain disclosure requirements for fair value measurements. Among the changes, entities are no longer required to disclose the amount of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy, however, entities are required to disclose the range and weighted average used to develop significant unobservable inputs for Level 3 fair value measurements. ASU No.2018-13 was effective for the Company beginning January 1, 2020. As ASU 2018-13 only revised disclosure requirements, it has no material impact on the Company’s Consolidated Financial Statements.
NOTE 10 – RECENT ACCOUNTING PRONOUNCEMENTS
In June 2016, the FASB issued ASU 2016-13,Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which is essentially the final rule on use of the so-called CECL model, or current expected credit losses. Among other things, the amendments in this ASU require the measurement of all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. Financial institutions and other organizations will now use forward-looking information to better inform their credit loss estimates. In addition, the ASU amends the accounting for credit losses on available-for-sale debt securities and purchased financial assets with credit deterioration.
The Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”), passed by Congress and signed into law by the President on March 27, 2020, gave financial institutions the option to delay adoption of ASU 2016-13. The Company decided to delay its adoption of the Update until the earlier of the date the national emergency concerning COVID-19 terminates or December 31, 2020, with an effective retrospective adoption date of January 1, 2020.
The Company’s CECL implementation team includes leadership from Accounting, Credit Administration and Risk Management. This group works closely with a third-party software solution vendor providing expertise in CECL modeling techniques to develop expected credit loss estimation models. Loans with similar risk characteristics have been evaluated in pools and, depending on the nature of each identified pool, the Company utilized a discounted cash flow (“DCF”), probability of default / loss given default (“PD/LGD”) or remaining life method. The historical loss experience estimate by pool is then adjusted by forecast factors that are quantitatively related to the Company’s historical credit loss experience, such as national unemployment rates and gross domestic product.
CECL parallel comparisons were performed at March 31, 2020 and the Company estimates an increase in its allowance for loan losses under CECL by approximately 10%. The Company forecasted an immediate reversion to longer term average historical loss experience for the reasonable and supportable forecast due to the current level of uncertainty and unprecedented effect of COVID-19 as well as the corresponding response from the federal government through the CARES Act. Qualitative factors were adjusted for a higher level of risk associated with economic conditions with a mitigating adjustment for the regulatory environment.
Credit losses for loans that no longer share similar risk characteristics were estimated on an individual basis. Individual evaluations were performed for nonaccrual loans, loans rated substandard, and modified loans classified as troubled debt restructurings. Specific allowances were estimated based on one of several methods, including the estimated fair value of the underlying collateral, observable market value of similar debt or the present value of expected cash flows.
The estimation methodology for credit losses on lending-related commitments were similar to the process for estimating credit losses for loans, with the addition of a probability of draw estimate that will be applied to each commitment amount.
Based upon the nature and characteristics of our securities portfolios at March 31, 2020, the macroeconomic conditions and forecasts at that date, and other management judgments, the Company does not currently expect to record any allowance for credit losses on available for sale securities.
In March 2020, the FASB issued ASU 2020-04,Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. The Update provide temporary optional guidance to ease the potential burden in accounting for reference rate reform. The guidance provides optional expedients and exceptions for applying generally accepted accounting principles to contract modifications and hedging relationships, subject to meeting certain criteria, that reference LIBOR or another reference rate expected to be discontinued. The guidance is intended to help stakeholders during the global market-wide reference rate transition period. Therefore, it will be effective for a limited time, starting March 12, 2020 through December 31, 2022. The Company has identified a replacement reference rate established by the American Financial Exchange. This rate is based on an active market of daily fund trading among participant banks. The Company will apply the guidance provided by this ASU in transitioning to the new reference rate.
NOTE 11 - FAIR VALUE MEASUREMENT
Measurement of fair value under U.S. GAAP establishes a hierarchy that prioritizes observable and unobservable inputs used to measure fair value, as of the measurement date, into three broad levels, which are described below:
Level 1: Quoted prices (unadjusted) in active markets that are accessible at the measurement date for assets or liabilities. The fair value hierarchy gives the highest priority to Level 1 inputs.
Level 2: Observable prices that are based on inputs not quoted on active markets, but corroborated by market data.
Level 3: Unobservable inputs are used when little or no market data is available. The fair value hierarchy gives the lowest priority to Level 3 inputs.
In determining fair value, the Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible and also considers counterparty credit risk in its assessment of fair value.
Debt Securities. Where quoted prices are available in an active market, securities are classified within Level 1 of the hierarchy. Level 1 securities include highly liquid government securities such as U.S. Treasuries and exchange-traded equity securities. For securities traded in secondary markets for which quoted market prices are not available, the Company generally relies on pricing services provided by independent vendors. Such independent pricing services are to advise the Company on the carrying value of the securities available for sale portfolio. As part of the Company’s procedures, the price provided from the service is evaluated for reasonableness given market changes. When a questionable price exists, the Company investigates further to determine if the price is valid. If needed, other market participants may be utilized to determine the correct fair value. The Company has also reviewed and confirmed its determinations in discussions with the pricing source regarding their methods of price discovery. Securities measured with these techniques are classified within Level 2 of the hierarchy and often involve using quoted market prices for similar securities, pricing models or discounted cash flow calculations using inputs observable in the market where available. Examples include U.S. government agency securities, mortgage-backed securities, obligations of states and political subdivisions, and certain corporate, asset-backed and other securities. The Company bought two corporate debt securities in a private placement transactions, for which Level 2 inputs are not available. The Company uses average observable prices of similar corporate securities owned by the Company to value the two securities and are classified in Level 3 of the hierarchy. The range of values and weighted average value as of March 31, 2020 was 94.5744 to 106.7775 and 102.3865, respectively, observed for the Company’s other similar corporate securities. The range of values and weighted average value as of December 31, 2019 was 98.7836 to 112.2305 and 102.2648, respectively, observed for the Company’s other similar corporate securities.
Impaired Loans. Impaired loans are measured and reported at fair value when full payment under the loan terms is not probable. Impaired loans are carried at the present value of expected future cash flows using the loan’s existing rate in a discounted cash flow calculation, or the fair value of the collateral if the loan is collateral-dependent. Expected cash flows are based on internal inputs reflecting expected default rates on contractual cash flows. This method of estimating fair value does not incorporate the exit-price concept of fair value described in Accounting Standards Codification (“ASC”) 820-10 and would generally result in a higher value than the exit-price approach. For loans measured using the estimated fair value of collateral less costs to sell, fair value is generally determined based on appraisals performed by certified and licensed appraisers using inputs such as absorption rates, capitalization rates, and market comparables, adjusted for estimated costs to sell. Management modifies the appraised values, if needed, to take into account recent developments in the market or other factors, such as changes in absorption rates or market conditions from the time of valuation, and anticipated sales values considering management’s plans for disposition. Such modifications to the appraised values could result in lower valuations of such collateral. Estimated costs to sell are based on current amounts of disposal costs for similar assets. These measurements are classified as Level 3 within the valuation hierarchy. Impaired loans are subject to nonrecurring fair value adjustment upon initial recognition or subsequent impairment. A portion of the allowance for loan losses is allocated to impaired loans if the value of such loans is deemed to be less than the unpaid balance. The range of fair value adjustments and weighted average adjustment as of March 31, 2020 was 0% to 50% and 16.6%, respectively. The range of fair value adjustments and weighted average adjustment as of December 31, 2019 was 0% to 30% and 5.6%, respectively. Impaired loans are reviewed and evaluated on at least a quarterly basis for additional impairment and adjusted accordingly based on the same factors identified above. The amount recognized as an impairment charge related to impaired loans that are measured at fair value on a nonrecurring basis was $5.0 million during the three months ended March 31, 2020, and $1.9 million during the three months ended March 31, 2019.
Other Real Estate Owned. Other real estate assets (“OREO”) acquired through, or in lieu of, foreclosure are held for sale and are initially recorded at the lower of cost or fair value, less selling costs. Any write-downs to fair value at the time of transfer to OREO are charged to the allowance for loan losses subsequent to foreclosure. Values are derived from appraisals of underlying collateral and discounted cash flow analysis. Appraisals are performed by certified and licensed appraisers. Subsequent to foreclosure, valuations are updated periodically and assets are marked to current fair value, not to exceed the new cost basis. In the determination of fair value subsequent to foreclosure, management also considers other factors or recent developments, such as changes in absorption rates and market conditions from the time of valuation, and anticipated sales values considering management’s plans for disposition, which could result in adjustment to lower the property value estimates indicated in the appraisals. The range of fair value adjustments and weighted average adjustment as of March 31, 2020 was 5% to 10% and 7.8%, respectively. The range of fair value adjustments and weighted average adjustment as of December 31, 2019 was 5% to 10% and 8.0%, respectively. These measurements are classified as Level 3 within the valuation hierarchy. A loss on the sale and write-downs of OREO of $563,000 and $22,000 was recognized during the three months ended March 31, 2020 and 2019, respectively. These charges were for write-downs in the value of OREO subsequent to foreclosure and losses on the disposal of OREO. OREO is classified within Level 3 of the hierarchy.
There was one residential real estate loan with a balance of $287,000 foreclosed and classified as OREO as of March 31, 2020, compared to one residential real estate loan foreclosure for $103,000 as of December 31, 2019.
One residential real estate loan for $600,000 was in the process of being foreclosed as of March 31, 2020 and the residential real estate loan for $287,000 mentioned above was in the process of being foreclosed as of December 31, 2019.
The following table presents the Company’s financial assets carried at fair value on a recurring basis as of March 31, 2020 and December 31, 2019. There were no liabilities measured at fair value on a recurring basis as of March 31, 2020 and December 31, 2019.
Fair Value Measurements at March 31, 2020 Using | ||||||||||||||||
Quoted Prices in | ||||||||||||||||
Active Markets | Significant Other | Significant | ||||||||||||||
for Identical | Observable Inputs | Unobservable | ||||||||||||||
Assets (Level 1) | (Level 2) | Inputs (Level 3) | Total | |||||||||||||
Assets Measured on a Recurring Basis: | (In Thousands) | |||||||||||||||
Available for sale debt securities: | ||||||||||||||||
U.S. Treasury securities | $ | - | $ | 49,782 | $ | - | $ | 49,782 | ||||||||
Government agency securities | - | 18,593 | - | 18,593 | ||||||||||||
Mortgage-backed securities | - | 546,431 | - | 546,431 | ||||||||||||
State and municipal securities | - | 51,328 | - | 51,328 | ||||||||||||
Corporate debt | - | 154,001 | 6,647 | 160,648 | ||||||||||||
Total assets at fair value | $ | - | $ | 820,135 | $ | 6,647 | $ | 826,782 | ||||||||
Fair Value Measurements at December 31, 2019 Using | ||||||||||||||||
Quoted Prices in | ||||||||||||||||
Active Markets | Significant Other | Significant | ||||||||||||||
for Identical | Observable Inputs | Unobservable | ||||||||||||||
Assets (Level 1) | (Level 2) | Inputs (Level 3) | Total | |||||||||||||
Assets Measured on a Recurring Basis: | (In Thousands) | |||||||||||||||
Available for sale debt securities: | ||||||||||||||||
U.S. Treasury securities | $ | - | $ | 49,210 | $ | - | $ | 49,210 | ||||||||
Government agency securities | - | 18,386 | - | 18,386 | ||||||||||||
Mortgage-backed securities | - | 474,054 | - | 474,054 | ||||||||||||
State and municipal securities | - | 57,272 | - | 57,272 | ||||||||||||
Corporate debt | - | 153,881 | 6,596 | 160,477 | ||||||||||||
Total assets at fair value | $ | - | $ | 752,803 | $ | 6,596 | $ | 759,399 | ||||||||
The following table presents the Company’s financial assets carried at fair value on a nonrecurring basis as of March 31, 2020 and December 31, 2019. There were no liabilities measured at fair value on a non-recurring basis as of March 31, 2020 and December 31, 2019.
Fair Value Measurements at March 31, 2020 Using | ||||||||||||||||
Quoted Prices in | ||||||||||||||||
Active Markets | Significant Other | Significant | ||||||||||||||
for Identical | Observable | Unobservable | ||||||||||||||
Assets (Level 1) | Inputs (Level 2) | Inputs (Level 3) | Total | |||||||||||||
Assets Measured on a Nonrecurring Basis: | (In Thousands) | |||||||||||||||
Impaired loans | $ | - | $ | - | $ | 50,404 | $ | 50,404 | ||||||||
Other real estate owned and repossessed assets | - | - | 7,448 | 7,448 | ||||||||||||
Total assets at fair value | $ | - | $ | - | $ | 57,852 | $ | 57,852 | ||||||||
Fair Value Measurements at December 31, 2019 Using | ||||||||||||||||
Quoted Prices in | ||||||||||||||||
Active Markets | Significant Other | Significant | ||||||||||||||
for Identical | Observable | Unobservable | ||||||||||||||
Assets (Level 1) | Inputs (Level 2) | Inputs (Level 3) | Total | |||||||||||||
Assets Measured on a Nonrecurring Basis: | (In Thousands) | |||||||||||||||
Impaired loans | $ | - | $ | - | $ | 33,344 | $ | 33,344 | ||||||||
Other real estate owned | - | - | 8,178 | 8,178 | ||||||||||||
Total assets at fair value | $ | - | $ | - | $ | 41,522 | $ | 41,522 | ||||||||
The fair value of a financial instrument is the current amount that would be exchanged in a sale between willing parties, other than in a forced liquidation. Fair value is best determined based upon quoted market prices. However, in many instances, there are no quoted market prices for the Company’s various financial instruments. In cases where quoted market prices are not available, fair values are based on estimates using present value or other valuation techniques. Those techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. Accordingly, the fair value estimates may not be realized in an immediate settlement of the instrument. Current U.S. GAAP excludes certain financial instruments and all nonfinancial instruments from its fair value disclosure requirements. Accordingly, the aggregate fair value amounts presented may not necessarily represent the underlying fair value of the Company.
The estimated fair values of the Company’s financial instruments not measured at fair value on a recurring or non-recurring basis as of March 31, 2020 and December 31, 2019 were as follows:
March 31, 2020 | December 31, 2019 | |||||||||||||||
Carrying | Carrying | |||||||||||||||
Amount | Fair Value | Amount | Fair Value | |||||||||||||
(In Thousands) | ||||||||||||||||
Financial Assets: | ||||||||||||||||
Level 1 inputs: | ||||||||||||||||
Cash and cash equivalents | $ | 378,404 | $ | 378,404 | $ | 530,127 | $ | 530,127 | ||||||||
Level 2 inputs: | ||||||||||||||||
Federal funds sold | 306,127 | 306,127 | 100,473 | 100,473 | ||||||||||||
Mortgage loans held for sale | 6,747 | 6,775 | 6,302 | 6,312 | ||||||||||||
Level 3 Inputs: | ||||||||||||||||
Held to maturity debt securities | 250 | 250 | 250 | 250 | ||||||||||||
Loans, net | 7,433,018 | 7,401,907 | 7,151,523 | 7,099,198 | ||||||||||||
Financial Liabilities: | ||||||||||||||||
Level 2 inputs: | ||||||||||||||||
Deposits | $ | 7,832,655 | $ | 7,817,647 | $ | 7,530,433 | $ | 7,534,984 | ||||||||
Federal funds purchased | 543,623 | 543,623 | 470,749 | 470,749 | ||||||||||||
Other borrowings | 64,707 | 64,950 | 64,703 | 65,048 | ||||||||||||
NOTE 12 – SUBSEQUENT EVENTS
In light of the US and global economic crisis brought about by the COVID-19 pandemic, the Company has prioritized assisting its clients through this troubled time. The CARES Act provides for Payroll Protection Plan (“PPP”) loans to be made by banks to employers with less than 500 employees if they continue to employ their existing workers. As of April 17, 2020, the Company has funded approximately 3,525 loans for a total amount of $920.3 million for clients under the PPP, and management expects to continue to participate in any extensions of the PPP by the Treasury Department.
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Business
of Second Quarter 2020 Results
Investmentnature.
Lower market interest rates resulting from the financial crisis related to the COVID-19 pandemic have caused the market values of most of our investment securities to increase. Our unrealized gains on investments have increased from $7.2 million as of December 31, 2019 to $22.0 million as of March 31, 2020.
Percentage of Total Loans in MSA | ||||
Birmingham, AL | % | |||
Huntsville, AL | % | |||
Dothan, AL | % | |||
Montgomery, AL | % | |||
Mobile, AL |
| |||
|
| |||
|
| |||
|
| |||
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| |||
|
| |||
| 6.2 | % | ||
| % | |||
| Pensacola, FL | 6.3 | % | ||
| West Florida (1) | 4.8 | % | ||
| Total Florida MSAs | 11.1 | % | ||
| Nashville, TN | 9.5 | % | ||
| Atlanta, GA | 6.5 | % | ||
| Charleston, SC | 4.4 | % | ||
Asset Quality
As of and for the Three Months Ended | ||||||||
March 31, | ||||||||
2020 | 2019 | |||||||
(Dollars in thousands) | ||||||||
Total loans outstanding, net of unearned income | $ | 7,568,836 | $ | 6,659,908 | ||||
Average loans outstanding, net of unearned income | $ | 7,361,149 | $ | 6,601,497 | ||||
Allowance for loan losses at beginning of period | 76,584 | 68,600 | ||||||
Charge-offs: | ||||||||
Commercial, financial and agricultural loans | 2,640 | 3,037 | ||||||
Real estate - construction | 454 | - | ||||||
Real estate - mortgage | 1,678 | 50 | ||||||
Consumer loans | 58 | 218 | ||||||
Total charge-offs | 4,830 | 3,305 | ||||||
Recoveries: | ||||||||
Commercial, financial and agricultural loans | 62 | 12 | ||||||
Real estate - construction | 1 | 1 | ||||||
Real estate - mortgage | 1 | 7 | ||||||
Consumer loans | 12 | 7 | ||||||
Total recoveries | 76 | 27 | ||||||
Net charge-offs | 4,754 | 3,278 | ||||||
Provision for loan losses | 13,584 | 4,885 | ||||||
Allowance for loan losses at period end | $ | 85,414 | $ | 70,207 | ||||
Allowance for loan losses to period end loans | 1.13 | % | 1.05 | % | ||||
Net charge-offs to average loans | 0.26 | % | 0.20 | % | ||||
| As of and for the Three Months Ended | As of and for the Six Months Ended | |||||||||||||||
| June 30, | June 30, | |||||||||||||||
| 2020 | 2019 | 2020 | 2019 | |||||||||||||
| (Dollars in thousands) | ||||||||||||||||
| Total loans outstanding, net of unearned income | $ | 8,315,375 | $ | 6,968,886 | $ | 8,315,375 | $ | 6,968,886 | ||||||||
| Average loans outstanding, net of unearned income | $ | 8,333,704 | $ | 6,789,051 | $ | 7,847,426 | $ | 6,695,792 | ||||||||
| Allowance for loan losses at beginning of period | 85,414 | 70,207 | 76,584 | 68,600 | ||||||||||||
| Charge-offs: | ||||||||||||||||
| Commercial, financial and agricultural loans | 1,358 | 3,610 | 3,998 | 6,647 | ||||||||||||
| Real estate - construction | 376 | - | 830 | - | ||||||||||||
| Real estate - mortgage | 2,520 | 169 | 4,198 | 219 | ||||||||||||
| Consumer loans | 62 | 63 | 120 | 281 | ||||||||||||
| Total charge-offs | 4,316 | 3,842 | �� | 9,146 | 7,147 | |||||||||||
| Recoveries: | ||||||||||||||||
| Commercial, financial and agricultural loans | 84 | 117 | 146 | 129 | ||||||||||||
| Real estate - construction | 1 | - | 2 | 1 | ||||||||||||
| Real estate - mortgage | 13 | 4 | 14 | 11 | ||||||||||||
| Consumer loans | 28 | 16 | 40 | 23 | ||||||||||||
| Total recoveries | 126 | 137 | 202 | 164 | ||||||||||||
| Net charge-offs | 4,190 | 3,705 | 8,944 | 6,983 | ||||||||||||
| Provision for loan losses | 10,283 | 4,884 | 23,867 | 9,769 | ||||||||||||
| Allowance for loan losses at period end | $ | 91,507 | $ | 71,386 | $ | 91,507 | $ | 71,386 | ||||||||
| Allowance for loan losses to period end loans | 1.10 | % | 1.02 | % | 1.10 | % | 1.02 | % | ||||||||
| Net charge-offs to average loans | 0.20 | % | 0.22 | % | 0.23 | % | 0.21 | % | ||||||||
Percentage | ||||||||
of loans in | ||||||||
each | ||||||||
category to | ||||||||
March 31, 2020 | Amount | total loans | ||||||
(In Thousands) | ||||||||
Commercial, financial and agricultural | $ | 48,780 | 36.61 | % | ||||
Real estate - construction | 3,757 | 7.25 | % | |||||
Real estate - mortgage | 32,360 | 55.34 | % | |||||
Consumer | 517 | 0.80 | % | |||||
Total | $ | 85,414 | 100.00 | % | ||||
Percentage | ||||||||
of loans in | ||||||||
each | ||||||||
category to | ||||||||
December 31, 2019 | Amount | total loans | ||||||
(In Thousands) | ||||||||
Commercial, financial and agricultural | $ | 43,666 | 37.13 | % | ||||
Real estate - construction | 2,768 | 7.18 | % | |||||
Real estate - mortgage | 29,653 | 54.80 | % | |||||
Consumer | 497 | 0.89 | % | |||||
Total | $ | 76,584 | 100.00 | % | ||||
| Percentage of loans | ||||||||
| in each category | ||||||||
| June 30, 2020 | Amount | to total loans | ||||||
| (In Thousands) | ||||||||
| Commercial, financial and agricultural | $ | 47,986 | 42.07 | % | ||||
| Real estate - construction | 4,531 | 6.55 | % | |||||
| Real estate - mortgage | 38,399 | 50.65 | % | |||||
| Consumer | 591 | 0.73 | % | |||||
| Total | $ | 91,507 | 100.00 | % | ||||
| Percentage of loans | ||||||||
| in each category | ||||||||
| December 31, 2019 | Amount | to total loans | ||||||
| (In Thousands) | ||||||||
| Commercial, financial and agricultural | $ | 43,666 | 37.13 | % | ||||
| Real estate - construction | 2,768 | 7.18 | % | |||||
| Real estate - mortgage | 29,653 | 54.80 | % | |||||
| Consumer | 497 | 0.89 | % | |||||
| Total | $ | 76,584 | 100.00 | % | ||||
Three months ended March 31, | ||||||||
2020 | 2019 | |||||||
(In thousands) | ||||||||
Balance at beginning of period | $ | 8,178 | $ | 5,169 | ||||
Transfers from loans and capitalized expenses | 287 | 381 | ||||||
Proceeds from sales | (454 | ) | (48 | ) | ||||
Write-downs / net gain (loss) on sales | (563 | ) | (22 | ) | ||||
Balance at end of period | $ | 7,448 | $ | 5,480 | ||||
| Six Months Ended June 30, | ||||||||
| 2020 | 2019 | |||||||
| (In thousands) | ||||||||
| Balance at beginning of period | $ | 8,178 | $ | 5,169 | ||||
| Transfers from loans and capitalized expenses | 1,023 | 752 | ||||||
| Proceeds from sales | (852 | ) | (48 | ) | ||||
| Internally financed sales | - | - | ||||||
| Write-downs / net gain (loss) on sales | (1,812 | ) | (224 | ) | ||||
| Balance at end of period | $ | 6,537 | $ | 5,649 | ||||
March 31, 2020 | December 31, 2019 | |||||||||||||||
Number of | Number of | |||||||||||||||
Balance | Loans | Balance | Loans | |||||||||||||
(Dollar Amounts In Thousands) | ||||||||||||||||
Nonaccrual loans: | ||||||||||||||||
Commercial, financial and agricultural | $ | 15,130 | 26 | $ | 14,729 | 29 | ||||||||||
Real estate - construction | 1,804 | 4 | 1,588 | 2 | ||||||||||||
Real estate - mortgage: | ||||||||||||||||
Owner-occupied commercial | 10,235 | 5 | 10,826 | 3 | ||||||||||||
1-4 family mortgage | 1,736 | 9 | 1,440 | 5 | ||||||||||||
Other mortgage | - | - | 1,507 | 1 | ||||||||||||
Total real estate - mortgage | 11,971 | 14 | 13,773 | 9 | ||||||||||||
Consumer | 9 | 1 | - | - | ||||||||||||
Total Nonaccrual loans: | $ | 28,914 | 45 | $ | 30,090 | 40 | ||||||||||
90+ days past due and accruing: | ||||||||||||||||
Commercial, financial and agricultural | $ | 45 | 3 | $ | 201 | 3 | ||||||||||
Real estate - construction | - | - | - | - | ||||||||||||
Real estate - mortgage: | ||||||||||||||||
Owner-occupied commercial | - | - | - | - | ||||||||||||
1-4 family mortgage | - | - | 873 | 5 | ||||||||||||
Other mortgage | 4,893 | 1 | 4,924 | 1 | ||||||||||||
Total real estate - mortgage | 4,893 | 1 | 5,797 | 6 | ||||||||||||
Consumer | 16 | 4 | 23 | 8 | ||||||||||||
Total 90+ days past due and accruing: | $ | 4,954 | 8 | $ | 6,021 | 17 | ||||||||||
Total Nonperforming Loans: | $ | 33,868 | 53 | $ | 36,111 | 57 | ||||||||||
Plus: Other real estate owned and repossessions | 7,448 | 10 | 8,178 | 12 | ||||||||||||
Total Nonperforming Assets | $ | 41,316 | 63 | $ | 44,289 | 69 | ||||||||||
Restructured accruing loans: | ||||||||||||||||
Commercial, financial and agricultural | $ | 975 | 3 | $ | 625 | 2 | ||||||||||
Real estate - construction | - | - | - | - | ||||||||||||
Real estate - mortgage: | ||||||||||||||||
Owner-occupied commercial | - | - | - | - | ||||||||||||
1-4 family mortgage | - | - | - | - | ||||||||||||
Other mortgage | - | - | - | - | ||||||||||||
Total real estate - mortgage | - | - | - | - | ||||||||||||
Consumer | - | - | - | - | ||||||||||||
Total restructured accruing loans: | $ | 975 | 3 | $ | 625 | 2 | ||||||||||
Total Nonperforming assets and restructured accruing loans | $ | 42,291 | 66 | $ | 44,914 | 71 | ||||||||||
Ratios: | ||||||||||||||||
Nonperforming loans to total loans | 0.45 | % | 0.50 | % | ||||||||||||
Nonperforming assets to total loans plus other real estate owned and repossessions | 0.55 | % | 0.61 | % | ||||||||||||
Nonperforming assets plus restructured accruing loans to total loans plus other real estate owned and repossessions | 0.56 | % | 0.62 | % | ||||||||||||
| June 30, 2020 | December 31, 2019 | |||||||||||||||
| Number of | Number of | |||||||||||||||
| Balance | Loans | Balance | Loans | |||||||||||||
| (Dollar Amounts In Thousands) | ||||||||||||||||
| Nonaccrual loans: | ||||||||||||||||
| Commercial, financial and agricultural | $ | 13,888 | 24 | $ | 14,729 | 29 | ||||||||||
| Real estate - construction | 587 | 3 | 1,588 | 2 | ||||||||||||
| Real estate - mortgage: | ||||||||||||||||
| Owner-occupied commercial | 1,714 | 5 | 10,826 | 3 | ||||||||||||
| 1-4 family mortgage | 683 | 7 | 1,440 | 5 | ||||||||||||
| Other mortgage | - | - | 1,507 | 1 | ||||||||||||
| Total real estate - mortgage | 2,397 | 12 | 13,773 | 9 | ||||||||||||
| Consumer | 9 | 1 | - | - | ||||||||||||
| Total Nonaccrual loans: | $ | 16,881 | 40 | $ | 30,090 | 40 | ||||||||||
| 90+ days past due and accruing: | ||||||||||||||||
| Commercial, financial and agricultural | $ | 248 | 2 | $ | 201 | 3 | ||||||||||
| Real estate - construction | - | - | - | - | ||||||||||||
| Real estate - mortgage: | ||||||||||||||||
| Owner-occupied commercial | - | - | - | - | ||||||||||||
| 1-4 family mortgage | - | - | 873 | 5 | ||||||||||||
| Other mortgage | 4,861 | 1 | 4,924 | 1 | ||||||||||||
| Total real estate - mortgage | 4,861 | 1 | 5,797 | 6 | ||||||||||||
| Consumer | 24 | 6 | 23 | 8 | ||||||||||||
| Total 90+ days past due and accruing: | $ | 5,133 | 9 | $ | 6,021 | 17 | ||||||||||
| Total Nonperforming Loans: | $ | 22,014 | 49 | $ | 36,111 | 57 | ||||||||||
| Plus: Other real estate owned and repossessions | 6,537 | 11 | 8,178 | 12 | ||||||||||||
| Total Nonperforming Assets | $ | 28,551 | 60 | $ | 44,289 | 69 | ||||||||||
| Restructured accruing loans: | ||||||||||||||||
| Commercial, financial and agricultural | $ | 975 | 3 | $ | 625 | 2 | ||||||||||
| Real estate - construction | - | - | - | - | ||||||||||||
| Real estate - mortgage: | ||||||||||||||||
| Owner-occupied commercial | - | - | - | - | ||||||||||||
| 1-4 family mortgage | - | - | - | - | ||||||||||||
| Other mortgage | - | - | - | - | ||||||||||||
| Total real estate - mortgage | - | - | - | - | ||||||||||||
| Consumer | - | - | - | - | ||||||||||||
| Total restructured accruing loans: | $ | 975 | 3 | $ | 625 | 2 | ||||||||||
| Total Nonperforming assets and restructured accruing loans | $ | 29,526 | 63 | $ | 44,914 | 71 | ||||||||||
| Ratios: | ||||||||||||||||
| Nonperforming loans to total loans | 0.26 | % | 0.50 | % | ||||||||||||
| Nonperforming assets to total loans plus other real estate owned and repossessions | 0.34 | % | 0.61 | % | ||||||||||||
| Nonperforming assets plus restructured accruing loans to total loans plus other real estate owned and repossessions | 0.35 | % | 0.62 | % | ||||||||||||
Income.”
March 31, 2020 | December 31, 2019 | |||||||||||||||
Non-interest-bearing demand | $ | 1,925,626 | 24.58 | % | $ | 1,749,879 | 23.24 | % | ||||||||
Interest-bearing | 5,064,699 | 64.66 | % | 4,986,155 | 66.21 | % | ||||||||||
Savings | 67,434 | 0.86 | % | 65,808 | 0.87 | % | ||||||||||
Time deposits, $250,000 and under | 281,085 | 3.59 | % | 267,259 | 3.55 | % | ||||||||||
Time deposits, over $250,000 | 493,811 | 6.30 | % | 461,332 | 6.13 | % | ||||||||||
| $ | 7,832,655 | 100.00 | % | $ | 7,530,433 | 100.00 | % | |||||||||
2019:
| June 30, 2020 | December 31, 2019 | |||||||||||||||
| Noninterest-bearing demand | $ | 2,678,893 | 28.67 | % | $ | 1,749,879 | 23.24 | % | ||||||||
| Interest-bearing demand | 5,786,886 | 61.94 | % | 4,986,155 | 66.21 | % | ||||||||||
| Savings | 77,387 | 0.83 | % | 65,808 | 0.87 | % | ||||||||||
| Time deposits , $250,000 and under | 277,278 | 2.97 | % | 267,259 | 3.55 | % | ||||||||||
| Time deposits, over $250,000 | 422,474 | 4.52 | % | 461,332 | 6.13 | % | ||||||||||
| Brokered CDs | 100,000 | 1.07 | % | - | - | % | ||||||||||
| $ | 9,342,918 | 100.00 | % | $ | 7,530,433 | 100.00 | % | |||||||||
● | $ |
● | $30.0 million of 4.5% Subordinated Notes due November 8, 2027, which were issued in a private placement in November 2017 and pay interest semi-annually. |
We anticipate the need for short-term funding of PPP loans and have applied with the Federal Reserve Bank of Atlanta to participate in their PPP Liquidity Facility (“PPPLF”). The PPPLF will allow us to use PPP loans as collateral to borrow funds from the FRB-Atlanta at a rate of 0.35% for a certain period of time. We currently anticipate that the vast majority of the loans we make through the PPP will be totally forgiven by the SBA by the end of the second quarter of 2020, or soon thereafter.
needs. Our management meets on a quarterly basis to review sources and uses of funding to determine the appropriate strategy to ensure an appropriate level of liquidity. At the current time, our long-term liquidity needs primarily relate to funds required to support loan originations and commitments and deposit withdrawals. Our regular sources of funding are from the growth of our deposit base, correspondent banking relationships and related federal funds purchased, repayment of principal and interest on loans, the sale of loans and the renewal of time deposits. In addition, we have issued debt as described above under “Borrowings.”
“Other Borrowings”.
Payments due by Period | ||||||||||||||||||||
Total | 1 year or less | 1 - 3 years | 3 - 5 years | Over 5 years | ||||||||||||||||
(In Thousands) | ||||||||||||||||||||
Contractual Obligations (1) | ||||||||||||||||||||
Deposits without a stated maturity | $ | 6,957,760 | $ | - | $ | - | $ | - | $ | - | ||||||||||
Certificates of deposit (2) | 874,895 | 459,095 | 340,605 | 75,195 | - | |||||||||||||||
Federal funds purchased | 543,623 | 543,623 | - | - | - | |||||||||||||||
Subordinated notes payable | 64,707 | - | - | - | 64,707 | |||||||||||||||
Operating lease commitments | 12,593 | 2,872 | 4,747 | 2,781 | 2,193 | |||||||||||||||
Total | $ | 8,453,578 | $ | 1,005,590 | $ | 345,352 | $ | 77,976 | $ | 66,900 | ||||||||||
| Payments due by Period | ||||||||||||||||||||
| Over 1 - 3 | Over 3 - 5 | |||||||||||||||||||
| Total | 1 year or less | years | years | Over 5 years | ||||||||||||||||
| (In Thousands) | ||||||||||||||||||||
| Contractual Obligations (1) | ||||||||||||||||||||
| Deposits without a stated maturity | $ | 8,464,353 | $ | - | $ | - | $ | - | $ | - | ||||||||||
| Certificates of deposit (2) | 778,565 | 443,718 | 273,236 | 61,611 | - | |||||||||||||||
| Brokered certificates of deposit | 100,000 | 50,000 | 50,000 | |||||||||||||||||
| Federal funds purchased | 635,606 | 635,606 | - | - | - | |||||||||||||||
| Subordinated debentures | 64,750 | - | - | - | 64,750 | |||||||||||||||
| Operating lease commitments | 11,833 | 1,515 | 4,813 | 3,080 | 2,425 | |||||||||||||||
| Total | $ | 10,055,107 | $ | 1,130,839 | $ | 328,049 | $ | 64,691 | $ | 67,175 | ||||||||||
(1) | Excludes interest. | ||||||||||||||||||||
(2) | Certificates of deposit give customers the right to early withdrawal. Early withdrawals may be subject to penalties. The penalty amount depends on the remaining time to maturity at the time of early withdrawal. |
common equity Tier 1, and the buffer applies to all three risk-based measurements (CET1, Tier 1 capital and total capital). The capital conservation buffer was phased in incrementally over time, beginning January 1, 2016 and became fully effective on January 1, 2019. As of January 1, 2019, an additional amount of Tier 1 common equity equal to 2.5% of risk-weighted assets is required for compliance with the capital conservation buffer. The ratios for the Company and the Bank are currently sufficient to satisfy the fully phased-in conservation buffer.
Actual | For Capital Adequacy Purposes | To Be Well Capitalized Under Prompt Corrective Action Provisions | ||||||||||||||||||||||
Amount | Ratio | Amount | Ratio | Amount | Ratio | |||||||||||||||||||
As of March 31, 2020: | ||||||||||||||||||||||||
CET 1 Capital to Risk Weighted Assets: | ||||||||||||||||||||||||
Consolidated | $ | 731,864 | 10.30 | % | $ | 319,875 | 4.50 | % | N/A | N/A | ||||||||||||||
ServisFirst Bank | 796,506 | 11.21 | % | 319,851 | 4.50 | % | $ | 462,007 | 6.50 | % | ||||||||||||||
Tier 1 Capital to Risk Weighted Assets: | ||||||||||||||||||||||||
Consolidated | 732,366 | 10.30 | % | 426,500 | 6.00 | % | N/A | N/A | ||||||||||||||||
ServisFirst Bank | 797,008 | 11.21 | % | 426,468 | 6.00 | % | 568,624 | 8.00 | % | |||||||||||||||
Total Capital to Risk Weighted Assets: | ||||||||||||||||||||||||
Consolidated | 867,748 | 12.21 | % | 568,667 | 8.00 | % | N/A | N/A | ||||||||||||||||
ServisFirst Bank | 838,216 | 12.21 | % | 568,624 | 8.00 | % | 710,780 | 10.00 | % | |||||||||||||||
Tier 1 Capital to Average Assets: | ||||||||||||||||||||||||
Consolidated | 732,366 | 9.03 | % | 324,553 | 4.00 | % | N/A | N/A | ||||||||||||||||
ServisFirst Bank | 797,008 | 9.82 | % | 324,537 | 4.00 | % | 405,671 | 5.00 | % | |||||||||||||||
As of December 31, 2019: | ||||||||||||||||||||||||
CET 1 Capital to Risk Weighted Assets: | ||||||||||||||||||||||||
Consolidated | $ | 822,396 | 10.50 | % | $ | 342,283 | 4.50 | % | N/A | N/A | ||||||||||||||
ServisFirst Bank | 885,172 | 11.30 | % | 342,269 | 4.50 | % | $ | 494,389 | 6.50 | % | ||||||||||||||
Tier 1 Capital to Risk Weighted Assets: | ||||||||||||||||||||||||
Consolidated | 822,896 | 10.50 | % | 456,377 | 6.00 | % | N/A | N/A | ||||||||||||||||
ServisFirst Bank | 885,674 | 11.31 | % | 456,359 | 6.00 | % | 608,479 | 8.00 | % | |||||||||||||||
Total Capital to Risk Weighted Assets: | ||||||||||||||||||||||||
Consolidated | 964,683 | 12.31 | % | 608,502 | 8.00 | % | N/A | N/A | ||||||||||||||||
ServisFirst Bank | 962,758 | 12.29 | % | 608,479 | 8.00 | % | 760,598 | 10.00 | % | |||||||||||||||
Tier 1 Capital to Average Assets: | ||||||||||||||||||||||||
Consolidated | 822,896 | 9.13 | % | 356,012 | 4.00 | % | N/A | N/A | ||||||||||||||||
ServisFirst Bank | 885,674 | 9.83 | % | 355,998 | 4.00 | % | 444,997 | 5.00 | % | |||||||||||||||
As of March 31, 2019: | ||||||||||||||||||||||||
CET 1 Capital to Risk Weighted Assets: | ||||||||||||||||||||||||
Consolidated | $ | 731,864 | 10.30 | % | $ | 319,875 | 4.50 | % | N/A | N/A | ||||||||||||||
ServisFirst Bank | 796,506 | 11.21 | % | 319,851 | 4.50 | % | $ | 462,007 | 6.50 | % | ||||||||||||||
Tier 1 Capital to Risk Weighted Assets: | ||||||||||||||||||||||||
Consolidated | 732,366 | 10.30 | % | 426,500 | 6.00 | % | N/A | N/A | ||||||||||||||||
ServisFirst Bank | 797,008 | 11.21 | % | 426,468 | 6.00 | % | 568,624 | 8.00 | % | |||||||||||||||
Total Capital to Risk Weighted Assets: | ||||||||||||||||||||||||
Consolidated | 867,748 | 12.21 | % | 568,667 | 8.00 | % | N/A | N/A | ||||||||||||||||
ServisFirst Bank | 838,216 | 12.21 | % | 568,624 | 8.00 | % | 710,780 | 10.00 | % | |||||||||||||||
Tier 1 Capital to Average Assets: | ||||||||||||||||||||||||
Consolidated | 732,366 | 9.03 | % | 324,553 | 4.00 | % | N/A | N/A | ||||||||||||||||
ServisFirst Bank | 797,008 | 9.82 | % | 324,537 | 4.00 | % | 405,671 | 5.00 | % | |||||||||||||||
| To Be Well Capitalized | ||||||||||||||||||||||||
| For Capital Adequacy | Under Prompt Corrective | |||||||||||||||||||||||
| Actual | Purposes | Action Provisions | ||||||||||||||||||||||
| Amount | Ratio | Amount | Ratio | Amount | Ratio | |||||||||||||||||||
| As of June 30, 2020: | (Dollars in Thousands) | |||||||||||||||||||||||
| CET 1 Capital to Risk-Weighted Assets: | ||||||||||||||||||||||||
| Consolidated | $ | 881,539 | 11.26 | % | $ | 352,327 | 4.50 | % | N/A | N/A | ||||||||||||||
| ServisFirst Bank | 943,578 | 12.06 | % | 352,219 | 4.50 | % | $ | 508,761 | 6.50 | % | ||||||||||||||
| Tier 1 Capital to Risk-Weighted Assets: | ||||||||||||||||||||||||
| Consolidated | 882,041 | 11.27 | % | 469,769 | 6.00 | % | N/A | N/A | ||||||||||||||||
| ServisFirst Bank | 944,080 | 12.06 | % | 469,625 | 6.00 | % | 626,167 | 8.00 | % | |||||||||||||||
| Total Capital to Risk-Weighted Assets: | ||||||||||||||||||||||||
| Consolidated | 1,038,763 | 13.27 | % | 626,359 | 8.00 | % | N/A | N/A | ||||||||||||||||
| ServisFirst Bank | 1,036,087 | 13.24 | % | 626,167 | 8.00 | % | 782,709 | 10.00 | ||||||||||||||||
| Tier 1 Capital to Average Assets: | ||||||||||||||||||||||||
| Consolidated | 882,041 | 8.46 | % | 417,188 | 4.00 | % | N/A | N/A | ||||||||||||||||
| ServisFirst Bank | 944,080 | 9.06 | % | 416,980 | 4.00 | % | 521,225 | 5.00 | % | |||||||||||||||
| As of December 31, 2019: | ||||||||||||||||||||||||
| CET 1 Capital to Risk-Weighted Assets: | ||||||||||||||||||||||||
| Consolidated | $ | 822,396 | 10.50 | % | $ | 342,283 | 4.50 | % | N/A | N/A | ||||||||||||||
| ServisFirst Bank | 885,172 | 11.30 | % | 342,269 | 4.50 | % | $ | 494,389 | 6.50 | % | ||||||||||||||
| Tier 1 Capital to Risk-Weighted Assets: | ||||||||||||||||||||||||
| Consolidated | 822,896 | 10.50 | % | 456,377 | 6.00 | % | N/A | N/A | ||||||||||||||||
| ServisFirst Bank | 885,674 | 11.31 | % | 456,359 | 6.00 | % | 608,479 | 8.00 | % | |||||||||||||||
| Total Capital to Risk-Weighted Assets: | ||||||||||||||||||||||||
| Consolidated | 964,683 | 12.31 | % | 608,502 | 8.00 | % | N/A | N/A | ||||||||||||||||
| ServisFirst Bank | 962,758 | 12.29 | % | 608,479 | 8.00 | % | 760,598 | 10.00 | % | |||||||||||||||
| Tier 1 Capital to Average Assets: | ||||||||||||||||||||||||
| Consolidated | 822,896 | 9.13 | % | 356,012 | 4.00 | % | N/A | N/A | ||||||||||||||||
| ServisFirst Bank | 885,674 | 9.83 | % | 355,998 | 4.00 | % | 444,997 | 5.00 | % | |||||||||||||||
| As of June 30, 2019: | ||||||||||||||||||||||||
| CET 1 Capital to Risk-Weighted Assets: | ||||||||||||||||||||||||
| Consolidated | $ | 759,998 | 10.18 | % | $ | 335,955 | 4.50 | % | N/A | N/A | ||||||||||||||
| ServisFirst Bank | 823,912 | 11.04 | % | 335,942 | 4.50 | % | $ | 485,249 | 6.50 | % | ||||||||||||||
| Tier 1 Capital to Risk-Weighted Assets: | ||||||||||||||||||||||||
| Consolidated | 760,500 | 10.19 | % | 447,940 | 6.00 | % | N/A | N/A | ||||||||||||||||
| ServisFirst Bank | 824,414 | 11.04 | % | 447,922 | 6.00 | % | 597,230 | 8.00 | % | |||||||||||||||
| Total Capital to Risk-Weighted Assets: | ||||||||||||||||||||||||
| Consolidated | 897,070 | 12.02 | % | 597,254 | 8.00 | % | N/A | N/A | ||||||||||||||||
| ServisFirst Bank | 896,300 | 12.01 | % | 597,230 | 8.00 | % | 746,537 | 10.00 | % | |||||||||||||||
| Tier 1 Capital to Average Assets: | ||||||||||||||||||||||||
| Consolidated | 760,500 | 9.00 | % | 338,030 | 4.00 | % | N/A | N/A | ||||||||||||||||
| ServisFirst Bank | 824,414 | 9.76 | % | 338,016 | 4.00 | % | 422,520 | 5.00 | % | |||||||||||||||
March 31, 2020 | ||||
(In Thousands) | ||||
Commitments to extend credit | $ | 2,265,133 | ||
Credit card arrangements | 247,976 | |||
Standby letters of credit | 73,135 | |||
| $ | 2,586,244 | |||
| June 30, 2020 | December 31, 2019 | |||||||
| (In Thousands) | (In Thousands) | |||||||
| Commitments to extend credit | $ | 2,505,241 | $ | 2,303,788 | ||||
| Credit card arrangements | 270,218 | 248,617 | ||||||
| Standby letters of credit | 65,585 | 48,394 | ||||||
| $ | 2,841,044 | $ | 2,600,799 | |||||
a $1.4 billion increase in average earning assets, and a $3.0 million increase in non-interest income. Increases in non-interest expense of $2.8 million and $5.4 million and increases in income tax expense of $1.4 million and $929,000, respectively, for the three and six months ended June 30, 2020 compared to 2019 partially offset increases in income.
and Net Interest Margin Analysis
| Average Balance Sheets and Net Interest Analysis | ||||||||||||||||||||||||
| On a Fully Taxable-Equivalent Basis | ||||||||||||||||||||||||
| For the Three Months Ended June 30, | ||||||||||||||||||||||||
| (In thousands, except Average Yields and Rates) | ||||||||||||||||||||||||
| 2020 | 2019 | |||||||||||||||||||||||
| Interest | Average | Interest | Average | |||||||||||||||||||||
| Average | Earned / | Yield / | Average | Earned / | Yield / | |||||||||||||||||||
| Balance | Paid | Rate | Balance | Paid | Rate | |||||||||||||||||||
| Assets: | ||||||||||||||||||||||||
| Interest-earning assets: | ||||||||||||||||||||||||
| Loans, net of unearned income (1)(2) | ||||||||||||||||||||||||
| Taxable | $ | 8,301,775 | $ | 89,042 | 4.31 | % | $ | 6,756,927 | $ | 88,280 | 5.24 | % | ||||||||||||
| Tax-exempt (3) | 31,929 | 327 | 4.12 | 32,124 | 307 | 3.83 | ||||||||||||||||||
| Total loans, net of unearned income | 8,333,704 | 89,369 | 4.31 | 6,789,051 | 88,587 | 5.23 | ||||||||||||||||||
| Mortgage loans held for sale | 13,278 | 69 | 2.09 | 5,208 | 50 | 3.85 | ||||||||||||||||||
| Investment securities: | ||||||||||||||||||||||||
| Taxable | 761,575 | 5,092 | 2.67 | 565,491 | 4,192 | 2.97 | ||||||||||||||||||
| Tax-exempt (3) | 38,201 | 250 | 2.62 | 77,364 | 406 | 2.10 | ||||||||||||||||||
| Total investment securities (4) | 799,776 | 5,342 | 2.67 | 642,855 | 4,598 | 2.86 | ||||||||||||||||||
| Federal funds sold | 83,274 | 33 | 0.16 | 323,714 | 1,998 | 2.48 | ||||||||||||||||||
| Interest-bearing balances with banks | 849,549 | 360 | 0.17 | 411,481 | 2,593 | 2.53 | ||||||||||||||||||
| Total interest-earning assets | $ | 10,079,581 | $ | 95,173 | 3.80 | $ | 8,172,309 | $ | 97,826 | 4.80 | ||||||||||||||
| Non-interest-earning assets: | ||||||||||||||||||||||||
| Cash and due from banks | 76,212 | 76,988 | ||||||||||||||||||||||
| Net fixed assets and equipment | 57,446 | 58,607 | ||||||||||||||||||||||
| Allowance for loan losses, accrued interest and other assets | 248,702 | 156,264 | ||||||||||||||||||||||
| Total assets | $ | 10,461,941 | $ | 8,464,168 | ||||||||||||||||||||
| Liabilities and stockholders' equity: | ||||||||||||||||||||||||
| Interest-bearing liabilities: | ||||||||||||||||||||||||
| Interest-bearing demand deposits | $ | 992,848 | $ | 875 | 0.35 | % | $ | 909,847 | $ | 2,004 | 0.88 | % | ||||||||||||
| Savings deposits | 72,139 | 75 | 0.42 | 54,391 | 77 | 0.57 | ||||||||||||||||||
| Money market accounts | 4,285,907 | 5,555 | 0.52 | 3,932,459 | 18,418 | 1.88 | ||||||||||||||||||
| Time deposits | 877,448 | 4,251 | 1.95 | 694,414 | 3,741 | 2.16 | ||||||||||||||||||
| Total interest-bearing deposits | 6,228,342 | 10,756 | 0.69 | 5,591,111 | 24,240 | 1.74 | ||||||||||||||||||
| Federal funds purchased | 572,990 | 310 | 0.22 | 418,486 | 2,681 | 2.57 | ||||||||||||||||||
| Other borrowings | 64,711 | 781 | 4.85 | 64,680 | 781 | 4.84 | ||||||||||||||||||
| Total interest-bearing liabilities | $ | 6,866,043 | $ | 11,847 | 0.69 | % | $ | 6,074,277 | $ | 27,702 | 1.83 | % | ||||||||||||
| Non-interest-bearing liabilities: | ||||||||||||||||||||||||
| Non-interest-bearing demand deposits | 2,646,030 | 1,591,722 | ||||||||||||||||||||||
| Other liabilities | 69,061 | 35,161 | ||||||||||||||||||||||
| Stockholders' equity | 862,500 | 763,742 | ||||||||||||||||||||||
| Accumulated other comprehensive loss | 18,307 | (734 | ) | |||||||||||||||||||||
| Total liabilities and stockholders' equity | $ | 10,461,941 | $ | 8,464,168 | ||||||||||||||||||||
| Net interest income | $ | 83,326 | $ | 70,124 | ||||||||||||||||||||
| Net interest spread | 3.11 | % | 2.97 | % | ||||||||||||||||||||
| Net interest margin | 3.32 | % | 3.44 | % | ||||||||||||||||||||
Average Consolidated Balance Sheets and Net Interest Analysis | ||||||||||||||||||||||||
On a Fully Taxable-Equivalent Basis | ||||||||||||||||||||||||
For the Three Months Ended March 31, | ||||||||||||||||||||||||
(Dollar Amounts In Thousands) | ||||||||||||||||||||||||
2020 | 2019 | |||||||||||||||||||||||
Interest | Average | Interest | Average | |||||||||||||||||||||
Average | Earned / | Yield / | Average | Earned / | Yield / | |||||||||||||||||||
Balance | Paid | Rate | Balance | Paid | Rate | |||||||||||||||||||
Assets: | ||||||||||||||||||||||||
Interest-earning assets: | ||||||||||||||||||||||||
Loans, net of unearned income (1) (2) | ||||||||||||||||||||||||
Taxable | $ | 7,328,594 | $ | 89,076 | 4.89 | % | $ | 6,570,920 | $ | 85,233 | 5.26 | % | ||||||||||||
Tax-exempt (3) | 32,555 | 327 | 4.04 | 30,577 | 287 | 3.81 | ||||||||||||||||||
Total loans, net of unearned income | 7,361,149 | 89,403 | 4.88 | 6,601,497 | 85,520 | 5.25 | ||||||||||||||||||
Mortgage loans held for sale | 4,282 | 23 | 2.16 | 1,614 | 26 | 6.53 | ||||||||||||||||||
Investment securities: | ||||||||||||||||||||||||
Taxable | 750,413 | 5,154 | 2.75 | 518,955 | 3,746 | 2.89 | ||||||||||||||||||
Tax-exempt (3) | 44,029 | 257 | 2.33 | 87,537 | 464 | 2.12 | ||||||||||||||||||
Total investment securities (4) | 794,442 | 5,411 | 2.72 | 606,492 | 4,210 | 2.78 | ||||||||||||||||||
Federal funds sold | 105,423 | 277 | 1.06 | 192,690 | 1,219 | 2.57 | ||||||||||||||||||
Interest-bearing balances with banks | 469,199 | 1,718 | 1.47 | 438,099 | 2,764 | 2.56 | ||||||||||||||||||
Total interest-earning assets | $ | 8,734,495 | $ | 96,832 | 4.46 | % | $ | 7,840,392 | $ | 93,739 | 4.85 | % | ||||||||||||
Non-interest-earning assets: | ||||||||||||||||||||||||
Cash and due from banks | 66,140 | 74,430 | ||||||||||||||||||||||
Net premises and equipment | 58,066 | 58,852 | ||||||||||||||||||||||
Allowance for loan losses, accrued interest and other assets | 241,479 | 149,941 | ||||||||||||||||||||||
Total assets | $ | 9,100,180 | $ | 8,123,615 | ||||||||||||||||||||
Liabilities and stockholders' equity: | ||||||||||||||||||||||||
Interest-bearing liabilities: | ||||||||||||||||||||||||
Interest-bearing demand deposits | $ | 956,803 | $ | 1,346 | 0.57 | % | $ | 942,686 | $ | 2,003 | 0.86 | % | ||||||||||||
Savings deposits | 67,380 | 84 | 0.50 | 54,086 | 73 | 0.55 | ||||||||||||||||||
Money market accounts | 4,061,286 | 11,127 | 1.10 | 3,758,162 | 16,513 | 1.78 | ||||||||||||||||||
Time deposits | 805,924 | 4,188 | 2.09 | 698,976 | 3,556 | 2.06 | ||||||||||||||||||
Total interest-bearing deposits | 5,891,393 | 16,745 | 1.14 | 5,453,910 | 22,145 | 1.65 | ||||||||||||||||||
Federal funds purchased | 492,638 | 1,601 | 1.31 | 312,989 | 1,995 | 2.59 | ||||||||||||||||||
Other borrowings | 64,707 | 781 | 4.85 | 64,671 | 781 | 4.90 | ||||||||||||||||||
Total interest-bearing liabilities | $ | 6,448,738 | $ | 19,127 | 1.19 | % | $ | 5,831,570 | $ | 24,921 | 1.73 | % | ||||||||||||
Non-interest-bearing liabilities: | ||||||||||||||||||||||||
Non-interest-bearing demand deposits | 1,749,671 | 1,524,502 | ||||||||||||||||||||||
Other liabilities | 39,801 | 36,362 | ||||||||||||||||||||||
Stockholders' equity | 853,800 | 735,611 | ||||||||||||||||||||||
Accumulated other comprehensive income (loss) | 8,170 | (4,430 | ) | |||||||||||||||||||||
Total liabilities and stockholders' equity | $ | 9,100,180 | $ | 8,123,615 | ||||||||||||||||||||
Net interest income | $ | 77,705 | $ | 68,818 | ||||||||||||||||||||
Net interest spread | 3.27 | % | 3.12 | % | ||||||||||||||||||||
Net interest margin | 3.58 | % | 3.56 | % | ||||||||||||||||||||
| (1) | |||||||||||||||||||||
| Non-accrual loans are included in average loan balances in all periods. Loan fees of | ||||||||||||||||||||
(2) | Net accretion on acquired loan discounts of | ||||||||||||||||||||
(3) | Interest income and yields are presented on a fully taxable equivalent basis using a tax rate of 21%. | ||||||||||||||||||||
(4) | Unrealized gains (losses) of | ||||||||||||||||||||
For the Three Months Ended March 31, | ||||||||||||
2020 Compared to 2019 Increase (Decrease) in Interest Income and Expense Due to Changes in: | ||||||||||||
Volume | Rate | Total | ||||||||||
(In Thousands) | ||||||||||||
Interest-earning assets: | ||||||||||||
Loans, net of unearned income | ||||||||||||
Taxable | $ | 9,917 | $ | (6,074 | ) | $ | 3,843 | |||||
Tax-exempt | 21 | 19 | 40 | |||||||||
Total loans, net of unearned income | 9,938 | (6,055 | ) | 3,883 | ||||||||
Mortgages held for sale | 23 | (26 | ) | (3 | ) | |||||||
Debt securities: | ||||||||||||
Taxable | 1,628 | (220 | ) | 1,408 | ||||||||
Tax-exempt | (247 | ) | 40 | (207 | ) | |||||||
Total debt securities | 1,381 | (180 | ) | 1,201 | ||||||||
Federal funds sold | (410 | ) | (532 | ) | (942 | ) | ||||||
Interest-bearing balances with banks | 189 | (1,235 | ) | (1,046 | ) | |||||||
Total interest-earning assets | 11,121 | (8,028 | ) | 3,093 | ||||||||
Interest-bearing liabilities: | ||||||||||||
Interest-bearing demand deposits | 30 | (687 | ) | (657 | ) | |||||||
Savings | 17 | (6 | ) | 11 | ||||||||
Money market accounts | 1,278 | (6,664 | ) | (5,386 | ) | |||||||
Time deposits | 582 | 50 | 632 | |||||||||
Total interest-bearing deposits | 1,907 | (7,307 | ) | (5,400 | ) | |||||||
Federal funds purchased | 857 | (1,251 | ) | (394 | ) | |||||||
Other borrowed funds | - | - | - | |||||||||
Total interest-bearing liabilities | 2,764 | (8,558 | ) | (5,794 | ) | |||||||
Increase in net interest income | $ | 8,357 | $ | 530 | $ | 8,887 | ||||||
Our
| For the Three Months Ended June 30, | ||||||||||||
| 2020 Compared to 2019 Increase (Decrease) in Interest Income and Expense Due to Changes in: | ||||||||||||
| Volume | Rate | Total | ||||||||||
| (In Thousands) | ||||||||||||
| Interest-earning assets: | ||||||||||||
| Loans, net of unearned income | ||||||||||||
| Taxable | $ | 17,985 | $ | (17,223 | ) | $ | 762 | |||||
| Tax-exempt | (2 | ) | 22 | 20 | ||||||||
| Total loans, net of unearned income | 17,983 | (17,201 | ) | 782 | ||||||||
| Mortgages held for sale | 50 | (31 | ) | 19 | ||||||||
| Debt securities: | ||||||||||||
| Taxable | 1,332 | (432 | ) | 900 | ||||||||
| Tax-exempt | (240 | ) | 84 | (156 | ) | |||||||
| Total debt securities | 1,092 | (348 | ) | 744 | ||||||||
| Federal funds sold | (870 | ) | (1,095 | ) | (1,965 | ) | ||||||
| Interest-bearing balances with banks | 1,381 | (3,614 | ) | (2,233 | ) | |||||||
| Total interest-earning assets | 19,636 | (22,289 | ) | (2,653 | ) | |||||||
| Interest-bearing liabilities: | ||||||||||||
| Interest-bearing demand deposits | 167 | (1,296 | ) | (1,129 | ) | |||||||
| Savings | 21 | (23 | ) | (2 | ) | |||||||
| Money market accounts | 1,513 | (14,376 | ) | (12,863 | ) | |||||||
| Time deposits | 906 | (396 | ) | 510 | ||||||||
| Total interest-bearing deposits | 2,607 | (16,091 | ) | (13,484 | ) | |||||||
| Federal funds purchased | 725 | (3,096 | ) | (2,371 | ) | |||||||
| Other borrowed funds | - | - | - | |||||||||
| Total interest-bearing liabilities | 3,332 | (19,187 | ) | (15,855 | ) | |||||||
| Increase in net interest income | $ | 16,304 | $ | (3,102 | ) | $ | 13,202 | |||||
| Average Balance Sheets and Net Interest Analysis | ||||||||||||||||||||||||
| On a Fully Taxable-Equivalent Basis | ||||||||||||||||||||||||
| For the Six Months Ended June 30, | ||||||||||||||||||||||||
| (In thousands, except Average Yields and Rates) | ||||||||||||||||||||||||
| 2020 | 2019 | |||||||||||||||||||||||
| Interest | Interest | |||||||||||||||||||||||
| Average | Earned / | Average | Average | Earned / | Average | |||||||||||||||||||
| Balance | Paid | Yield / Rate | Balance | Paid | Yield / Rate | |||||||||||||||||||
| Assets: | ||||||||||||||||||||||||
| Interest-earning assets: | ||||||||||||||||||||||||
| Loans, net of unearned income (1)(2) | ||||||||||||||||||||||||
| Taxable | $ | 7,815,184 | $ | 178,119 | 4.58 | % | $ | 6,664,437 | $ | 173,515 | 5.25 | % | ||||||||||||
| Tax-exempt (3) | 32,242 | 654 | 4.08 | 31,355 | 592 | 3.81 | ||||||||||||||||||
| Total loans, net of unearned income | 7,847,426 | 178,773 | 4.58 | 6,695,792 | 174,107 | 5.24 | ||||||||||||||||||
| Mortgage loans held for sale | 8,780 | 93 | 2.13 | 3,421 | 76 | 4.48 | ||||||||||||||||||
| Investment securities: | ||||||||||||||||||||||||
| Taxable | 755,994 | 10,246 | 2.73 | 542,351 | 7,939 | 2.95 | ||||||||||||||||||
| Tax-exempt (3) | 41,115 | 507 | 2.48 | 82,423 | 870 | 2.13 | ||||||||||||||||||
| Total investment securities (4) | 797,109 | 10,753 | 2.71 | 624,774 | 8,809 | 2.84 | ||||||||||||||||||
| Federal funds sold | 94,348 | 311 | 0.66 | 258,564 | 3,217 | 2.51 | ||||||||||||||||||
| Interest-bearing balances with banks | 659,374 | 2,078 | 0.63 | 424,841 | 5,357 | 2.54 | ||||||||||||||||||
| Total interest-earning assets | $ | 9,407,037 | $ | 192,008 | 4.10 | % | $ | 8,007,392 | $ | 191,566 | 4.82 | % | ||||||||||||
| Non-interest-earning assets: | ||||||||||||||||||||||||
| Cash and due from banks | 71,176 | 75,592 | ||||||||||||||||||||||
| Net fixed assets and equipment | 57,756 | 58,729 | ||||||||||||||||||||||
| Allowance for loan losses, accrued interest and other assets | 246,673 | 153,120 | ||||||||||||||||||||||
| Total assets | $ | 9,782,642 | $ | 8,294,833 | ||||||||||||||||||||
| Liabilities and stockholders' equity: | ||||||||||||||||||||||||
| Interest-bearing liabilities: | ||||||||||||||||||||||||
| Interest-bearing demand deposits | $ | 974,826 | $ | 2,220 | 0.46 | % | $ | 926,176 | $ | 4,007 | 0.87 | % | ||||||||||||
| Savings deposits | 69,759 | 159 | 0.46 | 54,239 | 149 | 0.55 | ||||||||||||||||||
| Money market accounts | 4,173,597 | 16,682 | 0.80 | 3,845,792 | 34,932 | 1.83 | ||||||||||||||||||
| Time deposits | 841,686 | 8,439 | 2.02 | 696,682 | 7,297 | 2.11 | ||||||||||||||||||
| Total interest-bearing deposits | 6,059,868 | 27,500 | 0.91 | 5,522,889 | 46,385 | 1.69 | ||||||||||||||||||
| Federal funds purchased | 532,814 | 1,910 | 0.72 | 366,029 | 4,676 | 2.58 | ||||||||||||||||||
| Other borrowings | 64,709 | 1,562 | 4.85 | 64,675 | 1,562 | 4.87 | ||||||||||||||||||
| Total interest-bearing liabilities | $ | 6,657,391 | $ | 30,972 | 0.94 | % | $ | 5,953,593 | $ | 52,623 | 1.78 | % | ||||||||||||
| Non-interest-bearing liabilities: | ||||||||||||||||||||||||
| Non-interest-bearing demand deposits | 2,197,850 | 1,558,783 | ||||||||||||||||||||||
| Other liabilities | 56,013 | 35,275 | ||||||||||||||||||||||
| Stockholders' equity | 858,150 | 749,754 | ||||||||||||||||||||||
| Accumulated other comprehensive (loss) | 13,238 | (2,572 | ) | |||||||||||||||||||||
| Total liabilities and stockholders' equity | $ | 9,782,642 | $ | 8,294,833 | ||||||||||||||||||||
| Net interest income | $ | 161,036 | $ | 138,943 | ||||||||||||||||||||
| Net interest spread | 3.16 | % | 3.04 | % | ||||||||||||||||||||
| Net interest margin | 3.44 | % | 3.50 | % | ||||||||||||||||||||
| (1) | Non-accrual loans are included in average loan balances in all periods. Loan fees of $4,930 and $1,887 are included in interest income in 2020 and 2019, respectively. Loan fees in 2020 include amortization of PPP loan fees. | ||||||||||||||||||||
| (2) | Accretion on acquired loan discounts of $91 are included in interest income in 2019. | ||||||||||||||||||||
| (3) | Interest income and yields are presented on a fully taxable equivalent basis using a tax rate of 21%. | ||||||||||||||||||||
| (4) | Unrealized gains (losses) of $231 and $(3,311) are excluded from the yield calculation in 2020 and 2019, respectively. | ||||||||||||||||||||
| For the Six Months Ended June 30, | ||||||||||||
| 2020 Compared to 2019 Increase (Decrease) in Interest Income and Expense Due to Changes in: | ||||||||||||
| Volume | Rate | Total | ||||||||||
| (In Thousands) | ||||||||||||
| Interest-earning assets: | ||||||||||||
| Loans, net of unearned income | ||||||||||||
| Taxable | $ | 28,123 | $ | (23,519 | ) | $ | 4,604 | |||||
| Tax-exempt | 18 | 44 | 62 | |||||||||
| Total loans, net of unearned income | 28,141 | (23,475 | ) | 4,666 | ||||||||
| Mortgages held for sale | 73 | (56 | ) | 17 | ||||||||
| Debt securities: | ||||||||||||
| Taxable | 2,954 | (647 | ) | 2,307 | ||||||||
| Tax-exempt | (490 | ) | 127 | (363 | ) | |||||||
| Total debt securities | 2,464 | (520 | ) | 1,944 | ||||||||
| Federal funds sold | (1,346 | ) | (1,560 | ) | (2,906 | ) | ||||||
| Interest-bearing balances with banks | 2,029 | (5,308 | ) | (3,279 | ) | |||||||
| Total interest-earning assets | 31,361 | (30,919 | ) | 442 | ||||||||
| Interest-bearing liabilities: | ||||||||||||
| Interest-bearing demand deposits | 202 | (1,989 | ) | (1,787 | ) | |||||||
| Savings | 39 | (29 | ) | 10 | ||||||||
| Money market accounts | 2,778 | (21,028 | ) | (18,250 | ) | |||||||
| Time deposits | 1,483 | (341 | ) | 1,142 | ||||||||
| Total interest-bearing deposits | 4,502 | (23,387 | ) | (18,885 | ) | |||||||
| Federal funds purchased | 1,546 | (4,312 | ) | (2,766 | ) | |||||||
| Other borrowed funds | 2 | (2 | ) | - | ||||||||
| Total interest-bearing liabilities | 6,050 | (27,701 | ) | (21,651 | ) | |||||||
| Increase in net interest income | $ | 25,311 | $ | (3,218 | ) | $ | 22,093 | |||||
● | Salary and |
● | Equipment and occupancy expense increased |
● | Third party processing and other services increased |
● | Professional services expense decreased |
● | FDIC |
| ● | OREO expense increased |
● |
|
| Other operating expenses decreased |
Changes in
Three Months Ended March 31, | ||||||||||||||||
2020 | 2019 | $ change | % change | |||||||||||||
(Dollars In Thousands) | ||||||||||||||||
Noninterest income: | ||||||||||||||||
Service charges on deposit accounts | $ | 1,916 | $ | 1,702 | $ | 214 | 12.6 | % | ||||||||
Mortgage banking | 1,071 | 575 | 496 | 86.3 | % | |||||||||||
Credit cards | 1,765 | 1,576 | 189 | 12.0 | % | |||||||||||
Increase in cash surrender value life insurance | 1,453 | 762 | 691 | 90.7 | % | |||||||||||
Other operating income | 469 | 329 | 140 | 42.6 | % | |||||||||||
Total noninterest income | $ | 6,674 | $ | 4,944 | $ | 1,730 | 35.0 | % | ||||||||
Noninterest expense: | ||||||||||||||||
Salaries and employee benefits | $ | 15,658 | $ | 14,265 | $ | 1,393 | 9.8 | % | ||||||||
Equipment and occupancy | 2,400 | 2,259 | 141 | 6.2 | % | |||||||||||
Third party processing and other services | 3,345 | 2,411 | 934 | 38.7 | % | |||||||||||
Professional services | 948 | 994 | (46 | ) | (4.6 | %) | ||||||||||
FDIC and other regulatory assessments | 1,332 | 1,019 | 313 | 30.7 | % | |||||||||||
Other real estate owned | 601 | 22 | 579 | 2,631.8 | % | |||||||||||
Other operating expense | 3,636 | 4,358 | (722 | ) | (16.6 | %) | ||||||||||
Total noninterest expense | $ | 27,920 | $ | 25,328 | $ | 2,592 | 10.2 | % | ||||||||
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||||||||||||
| 2020 | 2019 | $ change | % change | 2020 | 2019 | $ change | % change | |||||||||||||||||||||||||
| Non-interest income: | ||||||||||||||||||||||||||||||||
| Service charges on deposit accounts | $ | 1,823 | $ | 1,786 | $ | 37 | 2.1 | % | $ | 3,739 | $ | 3,488 | $ | 251 | 7.2 | % | ||||||||||||||||
| Mortgage banking | 2,107 | 1,087 | 1,020 | 93.8 | % | 3,178 | 1,662 | 1,516 | 91.2 | % | ||||||||||||||||||||||
| Credit card income | 1,398 | 1,741 | (343 | ) | (19.7 | %) | 3,163 | 3,317 | (154 | ) | (4.6 | %) | ||||||||||||||||||||
| Securities gains | - | (6 | ) | 6 | (100.0 | %) | - | (6 | ) | 6 | (100.0 | %) | ||||||||||||||||||||
| Increase in cash surrender value life insurance | 1,464 | 778 | 686 | 88.2 | % | 2,917 | 1,540 | 1,377 | 89.4 | % | ||||||||||||||||||||||
| Other operating income | 241 | 392 | (151 | ) | (38.5 | %) | 710 | 721 | (11 | ) | (1.5 | %) | ||||||||||||||||||||
| Total non-interest income | $ | 7,033 | $ | 5,778 | $ | 1,255 | 21.7 | % | $ | 13,707 | $ | 10,722 | $ | 2,985 | 27.8 | % | ||||||||||||||||
| Non-interest expense: | ||||||||||||||||||||||||||||||||
| Salaries and employee benefits | $ | 15,792 | $ | 14,339 | $ | 1,453 | 10.1 | % | $ | 31,450 | $ | 28,604 | $ | 2,846 | 9.9 | % | ||||||||||||||||
| Equipment and occupancy expense | 2,434 | 2,287 | 147 | 6.4 | % | 4,834 | 4,546 | 288 | 6.3 | % | ||||||||||||||||||||||
| Third party processing and other services | 3,513 | 2,724 | 789 | 29.0 | % | 6,858 | 5,135 | 1,723 | 33.6 | % | ||||||||||||||||||||||
| Professional services | 1,091 | 1,191 | (100 | ) | (8.4 | %) | 2,039 | 2,185 | (146 | ) | (6.7 | %) | ||||||||||||||||||||
| FDIC and other regulatory assessments | 595 | 1,081 | (486 | ) | (45.0 | %) | 1,927 | 2,100 | (173 | ) | (8.2 | %) | ||||||||||||||||||||
| OREO expense | 1,303 | 212 | 1,091 | 514.6 | % | 1,904 | 234 | 1,670 | 713.7 | % | ||||||||||||||||||||||
| Other operating expense | 4,088 | 4,188 | (100 | ) | (2.4 | %) | 7,724 | 8,546 | (822 | ) | (9.6 | %) | ||||||||||||||||||||
| Total non-interest expense | $ | 28,816 | $ | 26,022 | $ | 2,794 | 10.7 | % | $ | 56,736 | $ | 51,350 | $ | 5,386 | 10.5 | % | ||||||||||||||||
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Like all financial institutions, we are subject to market risk from changes in interest rates. Interest rate risk is inherent in the balance sheet due to the mismatch between the maturities of rate-sensitive assets and rate-sensitive liabilities. If rates are rising, and the level of rate-sensitive liabilities exceeds the level of rate-sensitive assets, the net interest margin will be negatively impacted. Conversely, if rates are falling, and the level of rate-sensitive liabilities is greater than the level of rate-sensitive assets, the impact on the net interest margin will be favorable. Managing interest rate risk is further complicated by the fact that all rates do not change at the same pace; in other words, short-term rates may be rising while longer-term rates remain stable. In addition, different types of rate-sensitive assets and rate-sensitive liabilities react differently to changes in rates.
To manage interest rate risk, we must take a position on the expected future trend of interest rates. Rates may rise, fall or remain the same. Our asset-liability committee (“ALCO”) develops its view of future rate trends and strives to manage rate risk within a targeted range by monitoring economic indicators, examining the views of economists and other experts, and understanding the current risks that our balance sheet is exposed to. Our annual budget reflects the anticipated rate environment for the next 12 months.
The ALCO employs modeling techniques such as net interest income simulations and economic value of equity simulations to determine what amount of the Bank’s net interest income is at risk given different movements in market interest rates. Simulations assume gradual and instantaneous (shocks) movements in market interest rates of up and down 100, 200, 300 and 400 basis points, when practicable. A set of Benchmark and optional scenarios are ran and results are compared to base model results to measure sensitivity to movements in market interest rates. The ALCO establishes limits for the amount of negative change in net interest margin in the first year, second year and two-year cumulative time horizon. Current policy limits for the 100 and 200 basis point scenarios in the first and second year is -10% and -15%, respectively, and for the two-year cumulative is -15%. The ALCO conducts a quarterly analysis of the rate sensitivity position, reviews established limits, and reports its results to our board of directors. As of March 31, 2020, there have been no significant changes to our sensitivity to changes in interest rates since December 31, 2019. However, market disruptions brought about by the COVID-19 pandemic may adversely affect our sensitivity to market interest rates. We could experience an increase in the cost of funding our balance sheet. We could also experience increased pricing competition for our existing loans or future borrower prospects, which could decrease rates earned on our earning assets.
ITEM 4. CONTROLS AND PROCEDURES
CEO and CFO Certification.
Appearing as exhibits to this report are Certifications of our Chief Executive Officer (“CEO”) and our Chief Financial Officer (“CFO”). The Certifications are required to be made by Rule 13a-14 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). This item contains the information about the evaluation that is referred to in the Certifications, and the information set forth below in this Item 4 should be read in conjunction with the Certifications for a more complete understanding of the Certifications.
We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our CEO and CFO, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives.
We conducted an evaluation (the “Evaluation”) of the effectiveness of the design and operation of our disclosure controls and procedures under the supervision and with the participation of our management, including our CEO and CFO, as of March 31, 2020. Based upon the Evaluation, our CEO and CFO have concluded that, as of March 31, 2020, our disclosure controls and procedures are effective to ensure that material information relating to ServisFirst Bancshares, Inc. and its subsidiaries is made known to management, including the CEO and CFO, particularly during the period when our periodic reports are being prepared.
There have not been any changes in our internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) during the fiscal quarter to which this report relates that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
From time to time we may be a party to various legal proceedings arising in the ordinary course of business. Management does not believe the Company or the Bank is currently a party to any material legal proceedings except as disclosed in Item 3, “Legal Proceedings”, in our Annual Report on Form 10-K for the fiscal year ended December 31, 2019, and there has been no material change in any matter described therein.
Our business is influenced by many factors that are difficult to predict, involve uncertainties that may materially affect actual results and are often beyond our control. We have identified a number of these risk factors in our Annual Report on Form 10-K for the fiscal year ended December 31, 2019, which should be taken into consideration when reviewing the information contained in this report. There have been no material changes in the Company’s risk factors from those disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019, with the exception of:
The ongoing COVID-19 pandemic and measures intended to prevent its spread may adversely affect our business, financial condition and operations, and such effects will depend on future developments, which are highly uncertain and are difficult to predict.
Global health and economic concerns relating to the COVID-19 outbreak and government actions taken to reduce the spread of the virus have had a material adverse impact on the macroeconomic environment, and the outbreak has significantly increased economic uncertainty. The pandemic has resulted in federal, state and local authorities, including those who govern the markets in which we operate, implementing numerous measures to try to contain the virus. Such measures have included travel bans and restrictions, curfews, quarantines, shelter in place or total lock-down orders and business limitations and shutdowns. Such measures have significantly contributed to rising unemployment and negatively impacted consumer and business spending. The United States government has taken steps to attempt to mitigate some of the more severe anticipated economic effects of the virus, including the passage of the CARES Act, but there can be no assurance that such steps will be effective or achieve their desired results in the near future.
The outbreak has adversely impacted and is likely to continue to adversely impact our workforce and operations and the operations of our customers and business partners. In particular, we may experience financial losses due to a number of operational factors impacting us or our customers or business partners, including but not limited to:
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These factors may exist for an extended period of time and may continue to adversely affect our business, financial condition and operations even after the COVID-19 outbreak has subsided.
The extent to which the pandemic impacts our business, financial condition and operations will depend on future developments, which are highly uncertain and are difficult to predict, including, but not limited to, its duration and severity, the actions to contain it or treat its impact, and how quickly and to what extent normal economic and operating conditions can resume. Even after the pandemic has subsided, we may continue to experience materially adverse impacts to our business as a result of its economic impact, including the availability of credit, adverse impacts on our liquidity and any recession that has occurred or may occur in the future. Additionally, future outbreaks of COVID-19, or other viruses, may occur.
There are no comparable recent events that provide guidance as to the effect the spread of COVID-19 as a global pandemic may have, and, as a result, the ultimate impact of the pandemic is highly uncertain and subject to change. We do not yet know the full extent of the impacts on our business, our operations or the global economy as a whole. Therefore, the risk factors discussed in our Annual Report on Form 10-K could be heightened, changed or be added to in the future. For other factors that may cause actual results to differ materially from those indicated in any forward-looking statement or projection contained in this report, see “Forward-Looking Statements” under Part 1, Item 2 above.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
None.
(a) Exhibit:
| Exhibit: | Description | ||
| Certification of principal executive officer pursuant to Rule 13a-14(a). | |||
| Certification of principal financial officer pursuant to Rule 13a-14(a). | |||
| 104 | Cover Page Interactive Data File | ||
*denotes compensatory plan or arrangement
SERVISFIRST BANCSHARES, INC. | ||||
| Date: | By | /s/ Thomas A. Broughton III | ||
| Thomas A. Broughton III | ||||
| President and Chief Executive Officer | ||||
| Date: | By | /s/ William M. Foshee | ||
| William M. Foshee | ||||
| Chief Financial Officer | ||||