ServisFirst Bancshares, Inc. - Quarter Report: 2022 March (Form 10-Q)

sfbs20220331_10q.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

_________________________

FORM 10-Q

(Mark one)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2022

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _______to_______

Commission file number 001-36452

SERVISFIRST BANCSHARES, INC.

(Exact Name of Registrant as Specified in Its Charter)

Delaware	26-0734029
(State or Other Jurisdiction of Incorporation or Organization)	(I.R.S. Employer Identification No.)

2500 Woodcrest Place, Birmingham, Alabama	35209
(Address of Principal Executive Offices)	(Zip Code)

(205) 949-0302

(Registrant's Telephone Number, Including Area Code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of exchange on which registered
Common stock, par value $.001 per share	SFBS	New York Stock Exchange

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or Section 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act (Check one):

Large accelerated filer ☒ Accelerated filer ☐ Non-accelerated filer ☐ Smaller reporting company ☐ Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Class	Outstanding as of April 25, 2022
Common stock, $.001 par value	54,290,392

TABLE OF CONTENTS

PART I. FINANCIAL INFORMATION		4
Item 1.	Consolidated Financial Statements	4
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	25
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	39
Item 4.	Controls and Procedures	39

PART II. OTHER INFORMATION		40
Item 1	Legal Proceedings	40
Item 1A.	Risk Factors	40
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	40
Item 3.	Defaults Upon Senior Securities	40
Item 4.	Mine Safety Disclosures	40
Item 5.	Other Information	40
Item 6.	Exhibits	40

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

PART 1. FINANCIAL INFORMATION

ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS

SERVISFIRST BANCSHARES, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share amounts)

	March 31, 2022			December 31, 2021
	(Unaudited)				(1)
ASSETS
Cash and due from banks	$	103,439		$	56,934
Interest-bearing balances due from depository institutions		3,315,312			4,106,790
Federal funds sold		24,638			58,372
Cash and cash equivalents		3,443,389			4,222,096
Available for sale debt securities, at fair value		784,673			842,570
Held to maturity debt securities (fair value of $799,347 at March 31, 2022 and $466,286 at December 31, 2021)		833,304			462,957
Restricted equity securities		7,734			7,311
Mortgage loans held for sale		403			1,114
Loans		9,898,957			9,532,934
Less allowance for credit losses		(119,463	)		(116,660	)
Loans, net		9,779,494			9,416,274
Premises and equipment, net		59,908			60,300
Accrued interest and dividends receivable		34,388			34,831
Deferred tax asset, net		44,021			37,772
Other real estate owned and repossessed assets		1,989			1,208
Bank owned life insurance contracts		284,682			283,074
Goodwill and other identifiable intangible assets		13,615			13,638
Other assets		51,819			65,661
Total assets	$	15,339,419		$	15,448,806
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposits:
Noninterest-bearing	$	4,889,495		$	4,799,767
Interest-bearing		7,519,260			7,653,069
Total deposits		12,408,755			12,452,836
Federal funds purchased		1,639,238			1,711,777
Other borrowings		64,711			64,706
Accrued interest payable		14,185			13,619
Other liabilities		39,555			53,853
Total liabilities		14,166,444			14,296,791
Stockholders' equity:
Preferred stock, par value $0.001 per share; 1,000,000 authorized and undesignated at March 31, 2022 and December 31, 2021		-			-
Common stock, par value $0.001 per share; 100,000,000 shares authorized; 54,282,132 shares issued and outstanding at March 31, 2022, and 54,227,060 shares issued and outstanding at December 31, 2021		54			54
Additional paid-in capital		227,127			226,397
Retained earnings		956,169			911,008
Accumulated other comprehensive (loss) income		(10,875	)		14,056
Total stockholders' equity attributable to ServisFirst Bancshares, Inc.		1,172,475			1,151,515
Noncontrolling interest		500			500
Total stockholders' equity		1,172,975			1,152,015
Total liabilities and stockholders' equity	$	15,339,419		$	15,448,806

(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,
	2022			2021
Interest income:
Interest and fees on loans	$	103,105		$	93,803
Taxable securities		8,223			5,807
Nontaxable securities		43			107
Federal funds sold		13			3
Other interest and dividends		1,804			676
Total interest income		113,188			100,396
Interest expense:
Deposits		5,843			6,881
Borrowed funds		1,623			1,150
Total interest expense		7,466			8,031
Net interest income		105,722			92,365
Provision for credit losses		5,362			7,451
Net interest income after provision for credit losses		100,360			84,914
Noninterest income:
Service charges on deposit accounts		2,142			1,908
Mortgage banking		526			2,747
Credit card income		2,372			1,192
Securities losses		(3,335	)		-
Increase in cash surrender value life insurance		1,608			1,658
Other operating income		4,635			958
Total noninterest income		7,948			8,463
Noninterest expense:
Salaries and employee benefits		18,301			15,543
Equipment and occupancy		2,933			2,654
Third party processing and other services		5,605			3,416
Professional services		992			923
FDIC and other regulatory assessments		1,132			1,582
Other real estate owned		3			157
Other operating expense		8,252			4,639
Total noninterest expense		37,218			28,914
Income before income taxes		71,090			64,463
Provision for income taxes		13,477			13,008
Net income		57,613			51,455
Dividends on preferred stock		-			-
Net income available to common stockholders	$	57,613		$	51,455
Basic earnings per common share	$	1.06		$	0.95
Diluted earnings per common share	$	1.06		$	0.95

See Notes to Consolidated Financial Statements.

SERVISFIRST BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands)
(Unaudited)
	Three Months Ended March 31,
	2022			2021
Net income	$	57,613		$	51,455
Other comprehensive loss, net of tax:
Unrealized net holding losses arising during period from securities available for sale, net of tax of $7,003 and $917 for 2022 and 2021, respectively		(26,997	)		(3,464	)
Amortization of net unrealized gains on securities transferred from available-for-sale to held-to-maturity, net of tax of $150 for 2022		(569	)		-
Reclassification adjustment for net losses on sales of securities, net of tax of $700 for 2022		2,635			-
Other comprehensive loss, net of tax		(24,931	)		(3,464	)
Comprehensive income	$	32,682		$	47,991

See Notes to Consolidated Financial Statements.

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, 2021		53,943,751	$	-	$	54	$	223,856		$	748,224		$	20,218		$	500	$	992,852
Common dividends declared, $0.20 per share		-		-		-		-			(10,829	)		-			-		(10,829	)
Dividends on nonvested restricted stock recognized as compensation expense		-		-		-		-			25			-			-		25
Issue restricted shares pursuant to stock incentives, net of forfeitures		42,642		-		-		-			-			-			-		-
Issue shares of common stock upon exercise of stock options		151,257		-		-		1,865			-			-			-		1,865
36,243 shares of common stock withheld in net settlement upon exercise of stock options		-		-		-		(1,710	)		-			-			-		(1,710	)
Stock-based compensation expense		-		-		-		291			-			-			-		291
Other comprehensive loss, net of tax		-		-		-		-			-			(3,464	)		-		(3,464	)
Net income		-		-		-		-			51,455			-			-		51,455
Balance, March 31, 2021		54,137,650	$	-	$	54	$	224,302		$	788,875		$	16,754		$	500	$	1,030,485

Balance, January 1, 2022		54,227,060		-		54		226,397			911,008			14,056			500		1,152,015
Common dividends declared, $0.23 per share		-		-		-		-			(12,485	)		-			-		(12,485	)
Dividends on nonvested restricted stock recognized as compensation expense		-		-		-		-			33			-			-		33
Issue restricted shares pursuant to stock incentives, net of forfeitures		26,974		-		-		-			-			-			-		-
Issue shares of common stock upon exercise of stock options		28,098		-		-		553			-			-			-		553
8,402 shares of common stock withheld in net settlement upon exercise of stock options		-		-		-		(613	)		-			-			-		(613	)
Stock-based compensation expense		-		-		-		790			-			-			-		790
Other comprehensive loss, net of tax		-		-		-		-			-			(24,931	)		-		(24,931	)
Net income		-		-		-		-			57,613			-			-		57,613
Balance, March 31, 2022		54,282,132	$	-	$	54	$	227,127		$	956,169		$	(10,875	)	$	500	$	1,172,975

See Notes to Consolidated Financial Statements.

SERVISFIRST BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands) (Unaudited)
	Three Months Ended March 31,
	2022			2021
OPERATING ACTIVITIES
Net income	$	57,613		$	51,455
Adjustments to reconcile net income to net cash provided by
Deferred tax		(5,257	)		(137	)
Provision for credit losses		5,362			7,451
Depreciation		1,058			1,015
Amortization of core deposit intangible		23			67
Net amortization of debt securities available for sale		4,303			1,701
Decrease in accrued interest and dividends receivable		443			493
Stock-based compensation expense		790			291
Increase in accrued interest payable		566			544
Proceeds from sale of mortgage loans held for sale		8,955			90,227
Originations of mortgage loans held for sale		(7,718	)		(88,889	)
Loss on sale of securities available for sale		3,335			-
Gain on sale of mortgage loans held for sale		(526	)		(2,747	)
Net (gain) loss on sale of other real estate owned and repossessed assets		(1	)		334
Write down of other real estate owned and repossessed assets		6			147
Operating losses of tax credit partnerships		-			4
Increase in cash surrender value of life insurance contracts		(1,608	)		(1,658	)
Net change in other assets, liabilities, and other operating activities		1,921			6,462
Net cash provided by operating activities		69,265			66,760
INVESTMENT ACTIVITIES
Purchases of debt securities available for sale		(52,500	)		(149,719	)
Proceeds from maturities, calls and paydowns of debt securities available for sale		29,627			72,194
Proceeds from sale of debt securities available for sale		45,394			-
Purchases of debt securities held to maturity		(392,622	)		-
Proceeds from maturities and paydowns of debt securities held to maturity		21,554			-
Purchases of restricted equity securities		(423	)		-
Investment in tax credit partnership and SBIC		(65	)		(56	)
Return of capital from TC Partnerships and SBIC		249			-
Increase in loans		(369,412	)		(40,193	)
Purchases of premises and equipment		(666	)		(2,518	)
Proceeds from sale of other real estate owned and repossessed assets		44			584
Net cash used in investing activities		(718,820	)		(119,708	)
FINANCING ACTIVITIES
Net increase in non-interest-bearing deposits		89,728			255,839
Net (decrease) increase in interest-bearing deposits		(133,809	)		346,047
Net (decrease) increase in federal funds purchased		(72,539	)		60,013
Proceeds from exercise of stock options		553			1,865
Taxes paid in net settlement of tax obligation upon exercise of stock options		(613	)		(1,710	)
Dividends paid on common stock		(12,472	)		(10,787	)
Net cash (used-in) provided by financing activities		(129,152	)		651,267
Net (decrease) increase in cash and cash equivalents		(778,707	)		598,319
Cash and cash equivalents at beginning of period		4,222,096			2,211,411
Cash and cash equivalents at end of period	$	3,443,389		$	2,809,730
SUPPLEMENTAL DISCLOSURE
Cash paid for:
Interest	$	6,900		$	7,487
Income taxes		891			4,294
NONCASH TRANSACTIONS
Other real estate acquired in settlement of loans	$	830		$	364
Internally financed sale of other real estate owned		-			3,779
Dividends on nonvested restricted stock reclassified as compensation expense		33			25
Dividends declared		12,485			10,829

See Notes to Consolidated Financial Statements.

SERVISFIRST BANCSHARES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2022

(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, 2021.

All reported amounts are in thousands except share and per share data.

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,
	2022		2021
	(In Thousands, Except Shares and Per Share Data)
Earnings per common share
Weighted average common shares outstanding		54,263,143		54,050,670
Net income available to common stockholders	$	57,613	$	51,455
Basic earnings per common share	$	1.06	$	0.95

Weighted average common shares outstanding		54,263,143		54,050,670
Dilutive effects of assumed exercise of stock options and vesting of performance shares		258,899		331,321
Weighted average common and dilutive potential common shares outstanding		54,522,042		54,381,991
Net income available to common stockholders	$	57,613	$	51,455
Diluted earnings per common share	$	1.06	$	0.95

NOTE 4 - SECURITIES

The amortized cost and fair value of available-for-sale and held-to-maturity securities at March 31, 2022 and December 31, 2021 are summarized as follows:

	Amortized Cost		Gross Unrealized Gain		Gross Unrealized Loss			Fair Value
March 31, 2022	(In Thousands)
Debt Securities Available for Sale
U.S. Treasury Securities	$	6,005	$	14	$	(9	)	$	6,010
Government Agency Securities		14		-		-			14
Mortgage-backed securities		356,119		200		(17,185	)		339,134
State and municipal securities		20,350		23		(707	)		19,666
Corporate debt		420,826		4,075		(5,052	)		419,849
Total	$	803,314	$	4,312	$	(22,953	)	$	784,673
Debt Securities Held to Maturity
U.S. Treasury Securities	$	346,414	$	16	$	(14,370	)	$	332,060
Mortgage-backed securities		478,865		383		(19,542	)		459,706
State and municipal securities		8,025		-		(444	)		7,581
Total	$	833,304	$	399	$	(34,356	)	$	799,347

December 31, 2021
Debt Securities Available for Sale
U.S. Treasury Securities	$	9,003	$	101	$	-		$	9,104
Government Agency Securities		6,022		19		-			6,041
Mortgage-backed securities		424,372		3,474		(2,685	)		425,161
State and municipal securities		21,531		173		(70	)		21,634
Corporate debt		369,618		11,659		(647	)		380,630
Total	$	830,546	$	15,425	$	(3,402	)	$	842,570
Debt Securities Held to Maturity
U.S. Treasury Securities	$	149,263	$	25	$	(668	)	$	148,620
Mortgage-backed securities		310,641		5,251		(1,271	)		314,621
State and municipal securities		3,053		2		(10	)		3,045
Total	$	462,957	$	5,278	$	(1,949	)	$	466,286

The amortized cost and fair value of debt securities as of March 31, 2022 and December 31, 2021 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, 2022				December 31, 2021
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
	(In thousands)
Debt securities available for sale
Due within one year	$	26,302	$	26,389	$	32,913	$	33,232
Due from one to five years		64,413		64,291		31,760		32,307
Due from five to ten years		346,386		344,765		338,407		348,594
Due after ten years		10,094		10,094		3,094		3,276
Mortgage-backed securities		356,119		339,134		424,372		425,161
	$	803,314	$	784,673	$	830,546	$	842,570

Debt securities held to maturity
Due within one year	$	250	$	250	$	250	$	250
Due from one to five years		225,279		217,987		49,663		49,419
Due from five to ten years		128,910		121,403		102,403		101,996
Mortgage-backed securities		478,865		459,706		310,641		314,621
Total	$	833,304	$	799,347	$	462,957	$	466,286

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 carrying value of investment securities pledged to secure public funds on deposit and for other purposes as required by law was $490.8 million and $481.3 million as of March 31, 2022 and December 31, 2021, respectively.

The following table identifies, as of March 31, 2022 and December 31, 2021, 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.

	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, 2022
Debt Securities available for sale
U.S. Treasury Securities	$	(9	)	$	2,997	$	-		$	-	$	(9	)	$	2,997
Mortgage-backed securities		(13,930	)		273,725		(3,254	)		45,759		(17,185	)		319,485
State and municipal securities		(664	)		11,203		(43	)		427		(707	)		11,630
Corporate debt		(5,052	)		191,204		-			-		(5,052	)		191,204
Total	$	(19,655	)	$	479,129	$	(3,297	)	$	46,186	$	(22,953	)	$	525,315

Debt Securities held to maturity
U.S. Treasury Securities	$	(14,370	)	$	284,429	$	-		$	-	$	(14,370	)	$	284,429
Mortgage-backed securities		(18,096	)		407,781		(1,446	)		14,767		(19,542	)		422,549
State and municipal securities		(444	)		7,331		-			-		(444	)		7,331
Total	$	(32,910	)	$	699,541	$	(1,446	)	$	14,767	$	(34,356	)	$	714,308

December 31, 2021
Debt Securities available for sale
Mortgage-backed securities		(2,685	)		303,297		-			-		(2,685	)		303,297
State and municipal securities		(61	)		5,198		(9	)		228		(70	)		5,426
Corporate debt		(647	)		61,677		-			-		(647	)		61,677
Total	$	(3,393	)	$	370,172	$	(9	)	$	228	$	(3,402	)	$	370,400

Debt Securities held to maturity
U.S. Treasury Securities	$	(668	)	$	123,698	$	-		$	-	$	(668	)	$	123,698
Mortgage-backed securities		(1,271	)		134,192		-			-		(1,271	)		134,192
State and municipal securities		(10	)		482		-			-		(10	)		482
Total	$	(1,949	)	$	258,372	$	-		$	-	$	(1,949	)	$	258,372

At March 31, 2022, no allowance for credit losses (“ACL”) has been recognized on available for sale debt securities in an unrealized loss position as the Company does not believe any of the debt securities are credit impaired. This is based on the Company’s analysis of the risk characteristics, including credit ratings, and other qualitative factors related to available for sale debt securities. The issuers of these debt securities continue to make timely principal and interest payments under the contractual terms of the securities. The Company does not intend to sell these debt securities and it is more likely than not that the Company will not be required to sell the debt securities before recovery of their amortized cost, which may be at maturity. The unrealized losses are due to increases in market interest rates over the yields available at the time the debt securities were purchased. Furthermore, the Company performed an analysis that determined that the following securities have a zero expected credit loss: U.S. Treasury Securities; State and Municipal Securities and, Agency-Backed Securities, including securities issued by GNMA, FNMA, FHLB, FFCB and SBA. All of the U.S. Treasury and Agency-Backed Securities have the full faith and credit backing of the United States Government or one of its agencies. All debt securities in an unrealized loss position as of March 31, 2022 continue to perform as scheduled and the Company does not believe there is a possible credit loss or that an allowance for credit loss on these debt securities is necessary.

	Three Months Ended March 31,
	2022			2021
	(In Thousands)
Sale proceeds	$	45,394		$	-
Gross realized losses		(3,335	)		-
Net realized losses	$	(3,335	)	$	-

Restricted equity securities are comprised entirely of a restricted investment in Federal Home Loan Bank of Atlanta stock for membership requirement.

NOTE 5 – LOANS

The loan portfolio is classified based on the underlying collateral utilized to secure each loan for financial reporting purposes. This classification is consistent with the Quarterly Report of Condition and Income filed by ServisFirst Bank with the Federal Deposit Insurance Corporation (FDIC).

Commercial, financial and agricultural - Includes loans to business enterprises issued for commercial, industrial, agricultural production and/or other professional purposes. These loans are generally secured by equipment, inventory, and accounts receivable of the borrower and repayment is primarily dependent on business cash flows.

Real estate – construction – Includes loans secured by real estate to finance land development or the construction of industrial, commercial or residential buildings. Repayment is dependent upon the completion and eventual sale, refinance or operation of the related real estate project.

Owner-occupied commercial real estate mortgage – Includes loans secured by nonfarm nonresidential properties for which the primary source of repayment is the cash flow from the ongoing operations conducted by the party that owns the property.

1-4 family real estate mortgage – Includes loans secured by residential properties, including home equity lines of credit. Repayment is primarily dependent on the personal cash flow of the borrower.

Other real estate mortgage – Includes loans secured by nonowner-occupied properties, including office buildings, industrial buildings, warehouses, retail buildings, multifamily residential properties and farmland. Repayment is primarily dependent on income generated from the underlying collateral.

Consumer – Includes loans to individuals not secured by real estate. Repayment is dependent upon the personal cash flow of the borrower.

In light of the U.S. and global economic crisis brought about by the COVID-19 pandemic, the Company prioritized assisting its clients. The Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) provided for Paycheck Protection Program (“PPP”) loans to be made by banks to employers with less than 500 employees if they continued to employ their existing workers. The American Rescue Plan Act of 2021, which was signed into law on March 21, 2021, provided additional relief for businesses, states, municipalities and individuals by, among other things, allocating additional funds for the PPP. Effective May 28, 2021, the PPP was closed to new applications. The Company funded approximately 7,400 loans for a total amount of $1.5 billion for clients under the PPP since April 2020. At March 31, 2022 and December 31, 2021, unaccreted deferred loan origination fees, net of costs, related to PPP loans totaled $3.1 million and $7.2 million, respectively. PPP loan origination fees recorded to interest income totaled $4.5 million and $9.1 million for the three months ended March 31, 2022 and 2021, respectively. PPP loans outstanding totaled $107.6 million and $230.2 million at March 31, 2022 and December 31, 2021, respectively. PPP loans are included within the Commercial, financial and agricultural loan category in the table below.

The following table details the Company’s loans at March 31, 2022 and December 31, 2021:

	March 31,			December 31,
	2022			2021
	(Dollars In Thousands)
Commercial, financial and agricultural	$	2,955,927		$	2,984,053
Real estate - construction		1,164,690			1,103,076
Real estate - mortgage:
Owner-occupied commercial		1,919,811			1,874,103
1-4 family mortgage		926,697			826,765
Other mortgage		2,869,158			2,678,084
Subtotal: Real estate - mortgage		5,715,666			5,378,952
Consumer		62,674			66,853
Total Loans		9,898,957			9,532,934
Less: Allowance for credit losses		(119,463	)		(116,660	)
Net Loans	$	9,779,494		$	9,416,274


Commercial, financial and agricultural		29.86	%		31.30	%
Real estate - construction		11.77	%		11.57	%
Real estate - mortgage:
Owner-occupied commercial		19.39	%		19.66	%
1-4 family mortgage		9.36	%		8.67	%
Other mortgage		28.99	%		28.10	%
Subtotal: Real estate - mortgage		57.74	%		56.43	%
Consumer		0.63	%		0.70	%
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 credit loss portfolio segments and classes. These categories are utilized to develop the associated allowance for credit losses using historical losses adjusted for current economic conditions defined as follows:

●

Pass – loans which are well protected by the current net worth and paying capacity of the obligor (or obligors, if any) or by the fair value, less cost to acquire and sell, of any underlying collateral.

●

Special Mention – loans with potential weakness that may, if not reversed or corrected, weaken the credit or inadequately protect the Company’s position at some future date. These loans are not adversely classified and do not expose an institution to sufficient risk to warrant an adverse classification.

●

Substandard – loans that exhibit well-defined weakness or weaknesses that presently jeopardize debt repayment. These loans are characterized by the distinct possibility that the institution will sustain some loss if the weaknesses are not corrected.

●

Doubtful – loans that have all the weaknesses inherent in loans classified substandard, plus the added characteristic that the weaknesses make collection or liquidation in full on the basis of currently existing facts, conditions, and values highly questionable and improbable.

The table below presents loan balances classified by credit quality indicator, loan type and based on year of origination as of March 31, 2022:

													Revolving
	2022		2021		2020		2019		2018		Prior		Loans		Total
	(In Thousands)
Commercial, financial and agricultural
Pass	$	140,149	$	657,397	$	269,415	$	180,675	$	120,063	$	212,701	$	1,283,888	$	2,864,288
Special Mention		-		935		1,325		695		20		1,750		23,487		28,212
Substandard		-		295		702		9,955		526		8,768		43,181		63,427
Total Commercial, financial and agricultural	$	140,149	$	658,627	$	271,442	$	191,325	$	120,609	$	223,219	$	1,350,556	$	2,955,927

Real estate - construction
Pass	$	95,286	$	645,872	$	231,563	$	69,614	$	13,804	$	30,519	$	73,375	$	1,160,033
Special Mention		-		-		-		-		2,500		917		-		3,417
Substandard		-		-		-		-		1,240		-		-		1,240
Total Real estate - construction	$	95,286	$	645,872	$	231,563	$	69,614	$	17,544	$	31,436	$	73,375	$	1,164,690

Owner-occupied commercial
Pass	$	94,900	$	454,961	$	350,982	$	225,994	$	174,338	$	543,117	$	61,812	$	1,906,104
Special Mention		-		200		-		2,396		632		6,202		-		9,430
Substandard		-		218		-		-		-		4,059		-		4,277
Total Owner-occupied commercial	$	94,900	$	455,379	$	350,982	$	228,390	$	174,970	$	553,378	$	61,812	$	1,919,811

1-4 family mortgage
Pass	$	126,001	$	303,142	$	113,577	$	62,000	$	40,808	$	70,229	$	202,134	$	917,891
Special Mention		-		326		850		380		-		905		2,794		5,255
Substandard		-		-		252		859		235		1,092		1,113		3,551
Total 1-4 family mortgage	$	126,001	$	303,468	$	114,679	$	63,239	$	41,043	$	72,226	$	206,041	$	926,697

Other mortgage
Pass	$	220,057	$	928,191	$	501,880	$	408,445	$	162,634	$	565,459	$	61,886	$	2,848,552
Special Mention		-		-		-		130		376		7,334		-		7,840
Substandard		-		-		-		-		4,473		8,293		-		12,766
Total Other mortgage	$	220,057	$	928,191	$	501,880	$	408,575	$	167,483	$	581,086	$	61,886	$	2,869,158

Consumer
Pass	$	3,056	$	9,069	$	4,396	$	2,253	$	662	$	4,131	$	39,087	$	62,654
Special Mention		-		-		-		-		-		20		-		20
Substandard		-		-		-		-		-		-		-		-
Total Consumer	$	3,056	$	9,069	$	4,396	$	2,253	$	662	$	4,151	$	39,087	$	62,674

Total Loans
Pass	$	679,449	$	2,998,632	$	1,471,813	$	948,981	$	512,309	$	1,426,156	$	1,722,182	$	9,759,522
Special Mention		-		1,461		2,175		3,601		3,528		17,128		26,281		54,174
Substandard		-		513		954		10,814		6,474		22,212		44,294		85,261
Total Loans	$	679,449	$	3,000,606	$	1,474,942	$	963,396	$	522,311	$	1,465,496	$	1,792,757	$	9,898,957

Loans by credit quality indicator, loan type and based on year of origination as of December 31, 2021 were as follows:

													Revolving
	2021		2020		2019		2018		2017		Prior		Loans		Total
	(In Thousands)
Commercial, financial and agricultural
Pass	$	800,822	$	294,841	$	209,086	$	130,579	$	114,870	$	127,572	$	1,216,153	$	2,893,923
Special Mention		1,245		1,323		942		846		915		784		19,801		25,856
Substandard		-		387		10,039		1,741		1,501		7,966		42,640		64,274
Total Commercial, financial and agricultural	$	802,067	$	296,551	$	220,067	$	133,166	$	117,286	$	136,322	$	1,278,594	$	2,984,053

Real estate - construction
Pass	$	597,497	$	260,723	$	110,671	$	16,452	$	13,704	$	17,356	$	76,662	$	1,093,065
Special Mention		-		-		6,594		2,500		-		917		-		10,011
Substandard		-		-		-		-		-		-		-		-
Total Real estate - construction	$	597,497	$	260,723	$	117,265	$	18,952	$	13,704	$	18,273	$	76,662	$	1,103,076

Owner-occupied commercial
Pass	$	406,473	$	352,642	$	231,197	$	182,812	$	162,648	$	430,638	$	96,860	$	1,863,270
Special Mention		101		-		2,417		779		476		2,688		-		6,461
Substandard		-		-		-		-		-		4,372		-		4,372
Total Owner-occupied commercial	$	406,574	$	352,642	$	233,614	$	183,591	$	163,124	$	437,698	$	96,860	$	1,874,103

1-4 family mortgage
Pass	$	299,686	$	117,579	$	68,044	$	46,954	$	37,374	$	37,970	$	210,338	$	817,945
Special Mention		-		1,000		517		116		260		912		3,033		5,838
Substandard		-		150		593		241		231		611		1,156		2,982
Total 1-4 family mortgage	$	299,686	$	118,729	$	69,154	$	47,311	$	37,865	$	39,493	$	214,527	$	826,765

Other mortgage
Pass	$	882,849	$	481,012	$	411,426	$	174,700	$	272,555	$	353,621	$	81,202	$	2,657,365
Special Mention		-		-		130		376		2,720		4,656		-		7,882
Substandard		-		-		-		4,497		8,340		-		-		12,837
Total Other mortgage	$	882,849	$	481,012	$	411,556	$	179,573	$	283,615	$	358,277	$	81,202	$	2,678,084

Consumer
Pass	$	16,303	$	4,845	$	2,896	$	983	$	903	$	3,649	$	37,250	$	66,829
Special Mention		-		-		-		-		-		24		-		24
Substandard		-		-		-		-		-		-		-		-
Total Consumer	$	16,303	$	4,845	$	2,896	$	983	$	903	$	3,673	$	37,250	$	66,853

Total Loans
Pass	$	3,003,630	$	1,511,642	$	1,033,320	$	552,480	$	602,054	$	970,806	$	1,718,465	$	9,392,397
Special Mention		1,346		2,323		10,600		4,617		4,371		9,981		22,834		56,072
Substandard		-		537		10,632		6,479		10,072		12,949		43,796		84,465
Total Loans	$	3,004,976	$	1,514,502	$	1,054,552	$	563,576	$	616,497	$	993,736	$	1,785,095	$	9,532,934

Loans by performance status as of March 31, 2022 and December 31, 2021 were as follows:

March 31, 2022	Performing		Nonperforming		Total
	(In Thousands)
Commercial, financial and agricultural	$	2,947,094	$	8,833	$	2,955,927
Real estate - construction		1,164,690		-		1,164,690
Real estate - mortgage:
Owner-occupied commercial		1,916,539		3,272		1,919,811
1-4 family mortgage		924,957		1,740		926,697
Other mortgage		2,863,594		5,564		2,869,158
Total real estate - mortgage		5,705,090		10,576		5,715,666
Consumer		62,659		15		62,674
Total	$	9,879,533	$	19,424	$	9,898,957

December 31, 2021	Performing		Nonperforming		Total
	(In Thousands)
Commercial, financial and agricultural	$	2,979,671	$	4,382	$	2,984,053
Real estate - construction		1,103,076		-		1,103,076
Real estate - mortgage:
Owner-occupied commercial		1,873,082		1,021		1,874,103
1-4 family mortgage		824,756		2,009		826,765
Other mortgage		2,673,428		4,656		2,678,084
Total real estate - mortgage		5,371,266		7,686		5,378,952
Consumer		66,824		29		66,853
Total	$	9,520,837	$	12,097	$	9,532,934

Loans by past due status as of March 31, 2022 and December 31, 2021 were as follows:

March 31, 2022	Past Due Status (Accruing Loans)
							Total Past		Total						Nonaccrual
	30-59 Days		60-89 Days		90+ Days		Due		Nonaccrual		Current		Total Loans		With No ACL
	(In Thousands)
Commercial, financial and agricultural	$	1,982	$	495	$	38	$	2,515	$	8,795	$	2,944,617	$	2,955,927	$	6,784
Real estate - construction		917		-		-		917		-		1,163,773		1,164,690		-
Real estate - mortgage:
Owner-occupied commercial		632		-		-		632		3,272		1,915,907		1,919,811		3,272
1-4 family mortgage		658		163		-		821		1,740		924,136		926,697		432
Other mortgage		-		-		4,633		4,633		931		2,863,594		2,869,158		-
Total real estate - mortgage		1,290		163		4,633		6,086		5,943		5,703,637		5,715,666		3,704
Consumer		61		44		15		120		-		62,554		62,674		-
Total	$	4,250	$	702	$	4,686	$	9,638	$	14,738	$	9,874,581	$	9,898,957	$	10,488

December 31, 2021	Past Due Status (Accruing Loans)
							Total Past		Total						Nonaccrual
	30-59 Days		60-89 Days		90+ Days		Due		Nonaccrual		Current		Total Loans		With No ACL
	(In Thousands)
Commercial, financial and agricultural	$	516	$	77	$	39	$	632	$	4,343	$	2,979,078	$	2,984,053	$	2,059
Real estate - construction		-		-		-		-		-		1,103,076		1,103,076		-
Real estate - mortgage:
Owner-occupied commercial		143		-		-		143		1,021		1,872,939		1,874,103		1,021
1-4 family mortgage		-		703		611		1,314		1,398		824,053		826,765		483
Other mortgage		-		-		4,656		4,656		-		2,673,428		2,678,084		-
Total real estate - mortgage		143		703		5,267		6,113		2,419		5,370,420		5,378,952		1,504
Consumer		93		23		29		145		-		66,708		66,853		-
Total	$	752	$	803	$	5,335	$	6,890	$	6,762	$	9,519,282	$	9,532,934	$	3,563

Under the current expected credit losses (“CECL”) methodology, the ACL is measured on a collective basis for pools of loans with similar risk characteristics. For loans that do not share similar risk characteristics with the collectively evaluated pools, evaluations are performed on an individual basis. For all loan segments collectively evaluated, losses are predicted over a period of time determined to be reasonable and supportable, and at the end of the reasonable and supportable forecast period losses are reverted to long-term historical averages. The estimated loan losses for all loan segments are adjusted for changes in qualitative factors not inherently considered in the quantitative analyses.

The Company uses the discounted cash flow (“DCF”) method to estimate ACL for all loan pools except for commercial revolving lines of credit and credit cards. For all loan pools utilizing the DCF method, the Company utilizes and forecasts national unemployment rate as a loss driver. The Company also utilizes and forecasts GDP growth as a second loss driver for its agricultural and consumer loan pools. Consistent forecasts of the loss drivers are used across the loan segments. At March 31, 2022 and December 31, 2021, the Company utilized a reasonable and supportable forecast period of twelve months followed by a six-month straight-line reversion to long term averages. The Company leveraged economic projections from reputable and independent sources to inform its loss driver forecasts. The Company expects national unemployment to be generally improved compared to the December 31, 2021 forecast with a stable national GDP growth rate.

The Company uses a loss-rate method to estimate expected credit losses for its commercial revolving lines of credit and credit card pools. The commercial revolving lines of credit pool incorporates a probability of default (“PD”) and loss given default (“LGD”) modeling approach. This approach involves estimating the pool average life and then using historical correlations of default and loss experience over time to calculate the lifetime PD and LGD. These two inputs are then applied to the outstanding pool balance. The credit card pool incorporates a remaining life modeling approach, which utilizes an attrition-based method to estimate the remaining life of the pool. A quarterly average loss rate is then calculated using the Company’s historical loss data. The model reduces the pool balance quarterly on a straight-line basis over the estimated life of the pool. The quarterly loss rate is multiplied by the outstanding balance at each period-end resulting in an estimated loss for each quarter. The sum of estimated loss for all quarters is the total calculated reserve for the pool. Management has applied the loss-rate method to C&I lines of credit and to credit cards due to their generally short-term nature. An expected loss ratio is applied based on internal and peer historical losses.

Each loan pool is adjusted for qualitative factors not inherently considered in the quantitative analyses. The qualitative adjustments either increase or decrease the quantitative model estimation. The Company considers factors that are relevant within the qualitative framework which include the following: lending policy, changes in nature and volume of loans, staff experience, changes in volume and trends of problem loans, concentration risk, trends in underlying collateral values, external factors, quality of loan review system and other economic conditions.

Inherent risks in the loan portfolio will differ based on type of loan. Specific risk characteristics by loan portfolio segment are listed below:

Commercial and industrial loans include risks associated with borrower’s cash flow, debt service coverage and management’s expertise. These loans are subject to the risk that the Company may have difficulty converting collateral to a liquid asset if necessary, as well as risks associated with degree of specialization, mobility and general collectability in a default situation. These commercial loans may be subject to many different types of risks, including fraud, bankruptcy, economic downturn, deteriorated or non-existent collateral, and changes in interest rates.

Real estate construction loans include risks associated with the borrower’s credit-worthiness, contractor’s qualifications, borrower and contractor performance, and the overall risk and complexity of the proposed project. Construction lending is also subject to risks associated with sub-market dynamics, including population, employment trends and household income. During times of economic stress, this type of loan has typically had a greater degree of risk than other loan types.

Real estate mortgage loans consist of loans secured by commercial and residential real estate. Commercial real estate lending is dependent upon successful management, marketing and expense supervision necessary to maintain the property. Repayment of these loans may be adversely affected by conditions in the real estate market or the general economy. Also, commercial real estate loans typically involve relatively large loan balances to a single borrower. Residential real estate lending risks are generally less significant than those of other loans. Real estate lending risks include fluctuations in the value of real estate, bankruptcies, economic downturn and customer financial problems.

Consumer loans carry a moderate degree of risk compared to other loans. They are generally more risky than traditional residential real estate loans but less risky than commercial loans. Risk of default is usually determined by the well-being of the local economies. During times of economic stress, there is usually some level of job loss both nationally and locally, which directly affects the ability of the consumer to repay debt.

The following table presents changes in the ACL, segregated by loan type, for the three months ended March 31, 2022 and March 31, 2021.

	Commercial,
	financial and			Real estate -		Real estate -
	agricultural			construction		mortgage			Consumer			Total
	(In Thousands)
	Three Months Ended March 31, 2022
Allowance for credit losses:
Balance at January 1, 2022	$	41,869		$	26,994	$	45,829		$	1,968		$	116,660
Charge-offs		(2,574	)		-		(27	)		(75	)		(2,676	)
Recoveries		105			-		12			-			117
Provision		2,017			827		2,734			(216	)		5,362
Balance at March 31, 2022	$	41,417		$	27,821	$	48,548		$	1,677		$	119,463

	Three Months Ended March 31, 2021
Allowance for credit losses:
Balance at January 1, 2021	$	36,370		$	16,057	$	33,722		$	1,793		$	87,942
Charge-offs		(477	)		-		(12	)		(87	)		(576	)
Recoveries		26			50		1			12			89
Provision		2,313			3,284		1,896			(42	)		7,451
Balance at March 31, 2021	$	38,232		$	19,391	$	35,607		$	1,676		$	94,906

We maintain an ACL on unfunded commercial lending commitments and letters of credit to provide for the risk of loss inherent in these arrangements. The ACL is computed using a methodology similar to that used to determine the ACL for loans, modified to take into account the probability of a drawdown on the commitment. The ACL on unfunded loan commitments is classified as a liability account on the Consolidated Balance Sheet within other liabilities, while the corresponding provision for these credit losses is recorded as a component of other expense. The ACL on unfunded commitments was $1.6 million at March 31, 2022 and $1.3 million at December 31, 2021. The provision expense for unfunded commitments for the three months ended March 31, 2022 and 2021 was $300,000 and $600,000, respectively.

Loans that no longer share similar risk characteristics with collectively evaluated pools are estimated on an individual basis. A loan is considered collateral-dependent when the borrower is experiencing financial difficulty and repayment is expected to be provided substantially through the operation or sale of the collateral. The following table summarizes collateral-dependent gross loans held for investment by collateral type as follows:

			Accounts								ACL
March 31, 2022	Real Estate		Receivable		Equipment		Other		Total		Allocation
	(In Thousands)
Commercial, financial and agricultural	$	12,332	$	5,132	$	17,864	$	28,097	$	63,425	$	9,503
Real estate - construction		-		-		-		1,240		1,240		-
Real estate - mortgage:
Owner-occupied commercial		4,279		-		-		-		4,279		1,484
1-4 family mortgage		3,551		-		-		-		3,551		285
Other mortgage		12,771		-		-		-		12,771		629
Total real estate - mortgage		20,601		-		-		-		20,601		2,398
Consumer		-		-		-		-		-		-
Total	$	32,933	$	5,132	$	17,864	$	29,337	$	85,266	$	11,901

			Accounts								ACL
December 31, 2021	Real Estate		Receivable		Equipment		Other		Total		Allocation
	(In Thousands)
Commercial, financial and agricultural	$	13,067	$	5,075	$	18,533	$	27,599	$	64,274	$	9,727
Real estate - construction		-		-		-		-		-		-
Real estate - mortgage:
Owner-occupied commercial		4,372		-		-		-		4,372		1,371
1-4 family mortgage		2,982		-		-		-		2,982		163
Other mortgage		12,837		-		-		-		12,837		31
Total real estate - mortgage		20,191		-		-		-		20,191		1,565
Consumer		-		-		-		-		-		-
Total	$	33,258	$	5,075	$	18,533	$	27,599	$	84,465	$	11,292

On March 22, 2020, an Interagency Statement was issued by banking regulators that encourages financial institutions to work prudently with borrowers who are or may be unable to meet their contractual payment obligations due to the effects of COVID-19. Additionally, Section 4013 of the CARES Act further provides that a qualified loan modification is exempt by law from classification as a Troubled Debt Restructuring (“TDR”) as defined by GAAP, from the period beginning March 1, 2020 until the earlier of December 31, 2020 or the date that is 60 days after the date on which the national emergency concerning the COVID-19 outbreak declared by the President of the United States under the National Emergencies Act terminates. The Interagency Statement was subsequently revised in April 2020 to clarify the interaction of the original guidance with Section 4013 of the CARES Act, as well as setting forth the banking regulators’ views on consumer protection considerations. On December 27, 2020, President Trump signed into law the Consolidated Appropriations Act 2021, which extended the period established by Section 4013 of the CARES Act to the earlier of January 1, 2022 or the date that is 60 days after the date on which the national COVID-19 emergency terminates. In accordance with such guidance, the Bank offered short-term modifications made in response to COVID-19 to borrowers who are current and otherwise not past due. These include short-term (180 days or less) modifications in the form of payment deferrals, fee waivers, extensions of repayment terms, or other delays in payment that are insignificant.

TDRs at March 31, 2022, December 31, 2021 and March 31, 2021 totaled $2.5 million, $2.6 million and $3.5 million, respectively. The portion of those TDRs accruing interest at March 31, 2022, December 31, 2021 and March 31, 2021 totaled $426,000, $431,000 and $794,000, respectively. There were no modifications made to new TDRs or renewals of existing TDRs for the three months ended March 31, 2022. The following table presents loans modified in a TDR during the period ended March 31, 2021 by portfolio segment and the financial impact of those modifications. The table includes modifications made to new TDRs, as well as renewals of existing TDRs.

	Three Months Ended March 31, 2021
			Pre-		Post-
			Modification		Modification
			Outstanding		Outstanding
	Number of		Recorded		Recorded
	Contracts		Investment		Investment
	(In Thousands)
Troubled Debt Restructurings
Commercial, financial and agricultural		2	$	1,155	$	1,155
Real estate - construction		-		-		-
Real estate - mortgage:
Owner-occupied commercial		1		991		991
1-4 family mortgage		-		-		-
Other mortgage		-		-		-
Total real estate mortgage		1		991		991
Consumer		-		-		-
		3	$	2,146	$	2,146

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, 2022 and March 31, 2021. For purposes of this disclosure, default is defined as 90 days past due and still accruing or placement on nonaccrual status.

NOTE 6 – LEASES

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 10 years. At March 31, 2022, the Company had lease right-of-use assets and lease liabilities totaling $17.0 million and $17.7 million, respectively, compared to $17.9 million and $18.5 million, respectively at December 31, 2021 which are reflected in other assets and other liabilities, respectively, in the Company’s Consolidated Balance Sheet.

Maturities of operating lease liabilities are as follows:

	March 31, 2022
	(In Thousands)
2022 (remaining)	$	3,046
2023		3,520
2024		2,566
2025		2,481
2026		1,929
thereafter		5,511
Total lease payments		19,053
Less: imputed interest		(1,330	)
Present value of operating lease liabilities	$	17,723

As of March 31, 2022, the weighted average remaining term of operating leases was 6.7 years and the weighted average discount rate used in the measurement of operating lease liabilities was 2.42%.

Operating cash flows related to leases were $1.0 million and $747,000 for the three months ended March 31, 2022 and 2021, respectively.

Lease costs during the three months ended March 31, 2022 and 2021 were as follows (in thousands):

	Three Months Ended March 31,
	2022			2021
Operating lease cost	$	1,043		$	899
Variable lease cost		148			81
Sublease income		(24	)		(19	)
Net lease cost	$	1,167		$	961

NOTE 7 - EMPLOYEE AND DIRECTOR BENEFITS

Stock Incentive Plan

At March 31, 2022, the Company had a stock incentive plan as described below. The compensation cost that has been charged to earnings for the plan was approximately $790,000 and $291,000 for the three months ended March 31, 2022 and 2021, 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. The plan allows 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 plan 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.

There were no grants of stock options during first quarters of 2022 and 2021.

The following table summarizes stock option activity during the three months ended March 31, 2022 and 2021:

						Weighted
				Weighted		Average
				Average		Remaining
				Exercise		Contractual		Aggregate
	Shares			Price		Term (years)		Intrinsic Value
								(In Thousands)
Three Months Ended March 31, 2022:
Outstanding January 1, 2022		353,250		$	19.28		3.8	$	23,525
Exercised		(36,500	)		18.65		3.1		2,677
Outstanding March 31, 2022		316,750			19.35		3.7	$	24,446

Exercisable March 31, 2022		255,000		$	14.79		2.8	$	20,056

Three Months Ended March 31, 2021:
Outstanding January 1, 2021		641,450		$	18.15		4.6	$	16,985
Exercised		(187,500	)		9.92		3.3		9,639
Forfeited		(6,000	)		5.82		0.8		79
Outstanding March 31, 2021		447,950			19.64		4.6	$	14,859

Exercisable March 31, 2021		329,700		$	13.57		3.7	$	15,962

As of March 31, 2022, there was $342,000 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 1.9 years.

Restricted Stock and Performance Shares

The Company periodically grants restricted stock awards that vest upon time-based 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, 2022, there was $4.6 million of total unrecognized compensation cost related to non-vested time-based restricted stock. The cost is expected to be recognized evenly over the remaining 2.2 years of the restricted stock’s vesting period.

The Company periodically grants performance shares that give plan participants the opportunity to earn between 0% and 150% of the number of performance shares granted based on achieving certain performance metrics. The number of performance shares earned is determined by reference to the Company’s total shareholder return relative to a peer group of other publicly traded banks and bank holding companies during the performance period. The performance period is generally three years starting on the grant date. The fair value of performance shares is determined using a Monte Carlo simulation model on the grant date. As of March 31, 2022, there was $866,000 of total unrecognized compensation cost related to non-vested performance shares. As of March 31, 2022, non-vested performance shares had a weighted average remaining time to vest of 2.2 years.

	Restricted Stock					Performance Shares
	Shares			Weighted Average Grant Date Fair Value		Shares		Weighted Average Grant Date Fair Value
Three Months Ended March 31, 2022:
Non-vested at January 1, 2022		127,602		$	42.27		12,437	$	37.05
Granted		27,851			84.67		6,557		74.52
Vested		(9,612	)		42.23		-		-
Forfeited		(877	)		40.72		-		-
Non-vested at March 31, 2022		144,964			50.43		18,994		49.99

Three Months Ended March 31, 2021:
Non-vested at January 1, 2021		84,307		$	34.92		-	$	-
Granted		48,217			42.07		12,437		37.05
Vested		(5,158	)		22.72		-		-
Forfeited		(5,575	)		38.96		-		-
Non-vested at March 31, 2021		121,791			38.08		12,437		-

NOTE 8 - DERIVATIVES

The Company periodically enters into derivative contracts to manage exposures to movements in interest rates. The Company purchased an interest rate cap in May of 2020 to limit exposures to increases in interest rates. The interest rate cap is not designated as a hedging instrument but rather as a stand-alone derivative. The interest rate cap has an original term of 3 years, a notional amount of $300 million and is tied to the one-month LIBOR rate with a strike rate of 0.50%. The fair value of the interest rate cap is carried on the Consolidated Balance Sheet in other assets and the change in fair value is recognized in noninterest income each quarter. At March 31, 2022 the interest rate cap had a fair value of $4.5 million and remaining term of 1.1 years. If LIBOR is deemed unrepresentative at any time, the reference rate for the cap would be governed by the fallback protocol where LIBOR will be adjusted to the Secured Overnight Financing Rate (“SOFR”) plus the five-year median spread.

The Company has entered into forward loan sale commitments with secondary market investors to deliver loans on a “best efforts delivery” basis, which do not meet the definition of a derivative instrument. 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, 2022 and December 31, 2021 were not material.

NOTE 9 – RECENTLY ADOPTED ACCOUNTING PRONOUNCEMENTS

In July 2021, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) 2021-05, Leases (Topic 842): Lessors-Certain Leases with Variable Lease Payments, which amends guidance so that lessors are no longer required to record a selling loss at lease commencement for a lease with any variable lease payments that do not depend on an index or rate. A lessor would classify such leases as an operating lease rather than a sales-type or direct financing lease. The update was effective for the Company as of January 1, 2022. The adoption of ASU 2021-05 did not have an impact on the Company’s consolidated financial statements.

NOTE 10 – RECENT ACCOUNTING PRONOUNCEMENTS

In March 2022, the FASB issued ASU 2022-02, Financial Instruments—Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures. The update eliminates the TDR recognition and measurement guidance and, instead, requires that an entity evaluates whether all modifications represents a new loan or a continuation of an existing loan. The amendments also enhance existing disclosure requirements and introduce new requirements related to certain modifications of receivables made to borrowers experiencing financial difficulty. For public business entities, these amendments require that an entity disclose current-period gross write-offs by year of origination for financing receivables and net investment in leases within the scope of Subtopic 326-20. Gross write-off information must be included in the vintage disclosures required for public business entities in accordance with paragraph 326-20-50-6, which requires that an entity disclose the amortized cost basis of financing receivables by credit quality indicator and class of financing receivable by year of origination. The update is effective for entities that have adopted ASU No. 2016-13 for fiscal years beginning after December 31, 2022, including interim periods within those fiscal years. These amendments should be applied prospectively, except as provided in the next sentence. For the transition method related to the recognition and measurement of TDRs, an entity has the option to apply a modified retrospective transition method, resulting in a cumulative-effect adjustment to retained earnings in the period of adoption. Early adoption is permitted if an entity has adopted ASU No. 2016-13, including adoption in an interim period. If an entity elects to early adopt ASU No. 2022-02 in an interim period, the guidance should be applied as of the beginning of the fiscal year that includes the interim period. An entity may elect to early adopt the amendments about TDRs and related disclosure enhancements separately from the amendments related to vintage disclosures. The Company is assessing the impact of adopting the update on its financial statements and disclosures and is currently planning to adopt effective January 1, 2023.

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 service 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. In cases where Level 1 or Level 2 inputs are not available, as in the case of certain corporate securities, these securities are classified in Level 3 of the hierarchy.

Derivative instruments. The fair values of derivatives are determined based on a valuation pricing model using readily available observable market parameters such as interest rate curves, adjusted for counterparty credit risk. These measurements are classified as level 2 within the valuation hierarchy.

Loans Individually Evaluated. Loans individually evaluated are measured and reported at fair value when full payment under the loan terms is not probable. Loans individually evaluated 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 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. Loans individually evaluated are subject to nonrecurring fair value adjustment upon initial recognition or subsequent individually evaluation. A portion of the ACL is allocated to loans individually evaluated 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, 2022 was 0% to 75% and 23.3%, respectively. The range of fair value adjustments and weighted average adjustment as of December 31, 2021 was 0% to 75% and 24.1% respectively. Loans individually evaluated 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 to write-down individually evaluated loans that are measured at fair value on a nonrecurring basis was $3.0 million during the three months ended March 31, 2022, and $2.0 million during the three months ended March 31, 2021.

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 ACL 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, 2022 was 10% to 66% and 42.7%, respectively. The range of fair value adjustments and weighted average adjustment as of December 31, 2021 was 0% to 100% and 40.6%, respectively. These measurements are classified as Level 3 within the valuation hierarchy. A loss on the sale and write-downs of OREO of $6,000 and $432,000 was recognized during the three months ended March 31, 2022 and 2021, 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 were two residential real estate loans with an aggregate balance of $182,000 foreclosed and classified as OREO as of March 31, 2022, compared to one residential real estate loan foreclosure for $50,000 as of December 31, 2021.

Eight residential real estate loans for $1.1 million were in the process of foreclosure as of March 31, 2022. There was one residential real estate loan for $299,000 in the process of foreclosure as of December 31, 2021.

The following table presents the Company’s financial assets carried at fair value on a recurring basis as of March 31, 2022 and December 31, 2021. There were no liabilities measured at fair value on a recurring basis as of March 31, 2022 and December 31, 2021.

	Fair Value Measurements at March 31, 2022 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	$	6,010	$	-	$	-	$	6,010
Government agency securities		-		14		-		14
Mortgage-backed securities		-		339,134		-		339,134
State and municipal securities		-		19,666		-		19,666
Corporate debt		-		408,349		11,500		419,849
Total available-for-sale debt securities		6,010		767,163		11,500		784,673
Interest rate cap derivative		-		4,518		-		4,518
Total assets at fair value	$	6,010	$	771,681	$	11,500	$	789,191

	Fair Value Measurements at December 31, 2021 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	$	9,104	$	-	$	-	$	9,104
Government agency securities		-		6,041		-		6,041
Mortgage-backed securities		-		425,161		-		425,161
State and municipal securities		-		21,634		-		21,634
Corporate debt		-		363,638		16,992		380,630
Total available-for-sale debt securities		9,104		816,474		16,992		842,570
Interest rate cap derivative		-		1,152		-		1,152
Total assets at fair value	$	9,104	$	817,626	$	16,992	$	843,722

The following table presents the Company’s financial assets carried at fair value on a nonrecurring basis as of March 31, 2022 and December 31, 2021. There were no liabilities measured at fair value on a recurring basis as of March 31, 2022 and December 31, 2021.

	Fair Value Measurements at March 31, 2022 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)
Loans individually evaluated	$	-	$	-	$	73,365	$	73,365
Other real estate owned and repossessed assets		-		-		1,989		1,989
Total assets at fair value	$	-	$	-	$	75,354	$	75,354

	Fair Value Measurements at December 31, 2021 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)
Loans individually evaluated	$	-	$	-	$	73,173	$	73,173
Other real estate owned		-		-		1,208		1,208
Total assets at fair value	$	-	$	-	$	74,381	$	74,381

There were no liabilities measured at fair value on a non-recurring basis as of March 31, 2022 and March 31, 2021.

In the case of the debt securities portfolio, the Company monitors the portfolio to ascertain when transfers between levels have been affected. For the three months ended March 31, 2022, there was one transfer out of level 3 into level 2.

The table below includes a rollforward of the balance sheet amounts for the period ended March 31, 2022 and March 31, 2021 (including the change in fair value) for financial instruments classified by the Company within Level 3 of the valuation hierarchy measured at fair value on a recurring basis including changes in fair value due in part to observable factors that are part of the valuation methodology:

	For the period ended March 31,
	2022			2021
	Available-for-sale Securities			Available-for-sale Securities
	(In Thousands)
Fair value, beginning of period	$	16,992		$	-
Transfers into Level 3		-			10,000
Total realized gains included in income		-			-
Changes in unrealized gains/losses included in other comprehensive income for assets and liabilities still held at period-end		(343	)		301
Purchases		-			-
Transfers out of Level 3		(5,149	)		-
Fair value, end of period	$	11,500		$	10,301

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, 2022 and December 31, 2021 were as follows:

	March 31, 2022				December 31, 2021
	Carrying				Carrying
	Amount		Fair Value		Amount		Fair Value
	(In Thousands)
Financial Assets:
Level 1 inputs:
Cash and cash equivalents	$	3,418,751	$	3,418,751	$	4,163,724	$	4,163,724

Level 2 inputs:
Federal funds sold		24,638		24,638		58,372		58,372
Held to maturity debt securities		833,304		799,347		462,707		466,036
Mortgage loans held for sale		403		120		1,114		1,111

Level 3 Inputs:
Held to maturity debt securities		250		250		250		250
Loans, net		9,779,494		9,798,389		9,416,274		9,403,012

Financial Liabilities:
Level 2 inputs:
Deposits	$	12,408,755	$	12,418,183	$	12,452,836	$	12,454,140
Federal funds purchased		1,639,238		1,639,238		1,711,777		1,711,777
Other borrowings		64,711		65,548		64,706		65,476

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis is designed to provide a better understanding of various factors relating to the results of operations and financial condition of ServisFirst Bancshares, Inc. (the “Company”) and its wholly owned subsidiary, ServisFirst Bank (the “Bank”). This discussion is intended to supplement and highlight information contained in the accompanying unaudited consolidated balance sheets as of March 31, 2022 and December 31, 2021 and consolidated statements of income for the three months ended March 31, 2022 and March 31, 2021.

Forward-Looking Statements

Statements in this document that are not historical facts, including, but not limited to, statements concerning future operations, results or performance, are hereby identified as “forward-looking statements” for the purpose of the safe harbor provided by Section 21E of the Securities Exchange Act of 1934 and Section 27A of the Securities Act of 1933. The words “believe,” “expect,” “anticipate,” “project,” “plan,” “intend,” “will,” “could,” “would,” “might” and similar expressions often signify forward-looking statements. Such statements involve inherent risks and uncertainties. The Company cautions that such forward-looking statements, wherever they occur in this quarterly report or in other statements attributable to the Company, are necessarily estimates reflecting the judgment of the Company’s senior management and involve a number of risks and uncertainties that could cause actual results to differ materially from those suggested by the forward-looking statements. Such forward-looking statements should, therefore, be considered in light of various factors that could affect the accuracy of such forward-looking statements, including, but not limited to: the global health and economic crisis precipitated by the COVID-19 outbreak; general economic conditions, especially in the credit markets and in the Southeast; the performance of the capital markets; changes in interest rates, yield curves and interest rate spread relationships, including in light of the continuing high rate of domestic inflation; changes in accounting and tax principles, policies or guidelines; changes in legislation or regulatory requirements; changes in our loan portfolio and deposit base; economic crisis and associated credit issues in industries most impacted by the COVID-19 outbreak; possible changes in laws and regulations and governmental monetary and fiscal policies; the cost and other effects of legal and administrative cases and similar contingencies; possible changes in the creditworthiness of customers and the possible impairment of the collectability of loans and the value of collateral; the effect of natural disasters, such as hurricanes and tornados, in our geographic markets; and increased competition from both banks and non-banks. The foregoing list of factors is not exhaustive. For discussion of these and other risks that may cause actual results to differ from expectations, please refer to “Cautionary Note Regarding Forward Looking Statements” and “Risk Factors” in our most recent Annual Report on Form 10-K and our other SEC filings. If one or more of the factors affecting our forward-looking information and statements proves incorrect, then our actual results, performance or achievements could differ materially from those expressed in, or implied by, forward-looking information and statements. Accordingly, you should not place undue reliance on any forward-looking statements, which speak only as of the date made. The Company assumes no obligation to update or revise any forward-looking statements that are made from time to time.

Business

We are a bank holding company under the Bank Holding Company Act of 1956 and are headquartered in Birmingham, Alabama. Our wholly-owned subsidiary, ServisFirst Bank, an Alabama banking corporation, provides commercial banking services through full-service banking offices located in Alabama, Florida, Georgia, North and South Carolina, and Tennessee. We also operate loan production offices in Florida. Through the bank, we originate commercial, consumer and other loans and accept deposits, provide electronic banking services, such as online and mobile banking, including remote deposit capture, deliver treasury and cash management services and provide correspondent banking services to other financial institutions.

Our principal business is to accept deposits from the public and to make loans and other investments. Our principal sources of funds for loans and investments are demand, time, savings, and other deposits. Our principal sources of income are interest and fees collected on loans, interest and dividends collected on other investments and service charges. Our principal expenses are interest paid on savings and other deposits, interest paid on our other borrowings, employee compensation, office expenses and other overhead expenses.

First quarter highlights

●

Diluted earnings per common share of $1.06 for the first quarter of 2022, an increase of 12%, from the first quarter 2021.

●

Average loans of $9.65 billion for the first quarter of 2022 increased $1.13 billion, or 13.3%, from a year ago.

●

Average deposits of $12.38 billion for the first quarter of 2022 increased $2.20 billion, or 21.6%, from a year ago.

●

Net interest income of $105.7 million for the first quarter of 2022, an increase $13.4 million, or 14.5%, from the first quarter of 2021. Net interest margin of 2.89% for the first quarter of 2022 decreased 31 bps from 3.20% in the first quarter of 2021. The decrease was primarily driven by the continued low interest rate environment as well as increased liquidity throughout 2021.

Overview

As of March 31, 2022, we had consolidated total assets of $15.34 billion, down $109.4 million, or 0.7%, from total assets of $15.45 billion at December 31, 2021. Total loans were $9.90 billion at March 31, 2022, up $366.0 million, or 3.8%, from $9.53 billion at December 31, 2021. Total deposits were $12.41 billion at March 31, 2022, down $44.1 million, or 0.4%, from $12.45 billion at December 31, 2021.

Net income available to common stockholders for the three months ended March 31, 2022 was $57.6 million, up $6.1 million, or 11.8%, from $51.5 million for the three months ended March 31, 2021. Basic and diluted earnings per common share were $1.06 for the three months ended March 31, 2022, compared to $0.95 for the corresponding period in 2021. An increase in net interest income of $105.7 million and a decrease in provision for credit losses of $2.1 million for the comparative periods contributed to the increase in net income. Partially offsetting the increase in net interest income were decreased non-interest income, increases in salary expenses, third party processing expenses, other operating expenses, and provision for income taxes. Changes in income and expenses are more fully explained in “Results of Operations” below.

Performance Ratios

The following table presents selected ratios of our results of operations for the three months ended March 31, 2022, and 2021.

	Three Months Ended March 31,
	2022			2021
Return on average assets		1.53	%		1.72	%
Return on average stockholders' equity		20.09	%		19.83	%
Dividend payout ratio		21.77	%		21.14	%
Net interest margin (1)		2.89	%		3.20	%
Efficiency ratio (2)		32.74	%		28.68	%
Average stockholders' equity to average total assets		7.61	%		8.37	%

(1)	Net interest margin in the net yield on interest earning assets and is the difference between the interest yield earned on interest-earning assets and interest rate paid on interest-bearing liabilities, divided by average earning assets.

(2)	Efficiency ratio is the result of noninterest expense divided by the sum of net interest income and noninterest income.

Financial Condition

Cash and Cash Equivalents

At March 31, 2022, we had $24.6 million in federal funds sold, compared to $58.4 million at December 31, 2021. We also maintain balances at the Federal Reserve Bank of Atlanta, which earn interest. At March 31, 2022, we had $3.28 billion in balances at the Federal Reserve, compared to $4.07 billion at December 31, 2021.

Investment Securities

Debt securities available for sale totaled $784.7 million at March 31, 2022 and $842.6 million at December 31, 2021. Investment securities held to maturity totaled $833.3 million at March 31, 2022 and $463.0 million at December 31, 2021. We had paydowns of $39.7 million on mortgage-backed securities, maturities of $10.2 million on U.S. government agencies, mortgage-backed securities, municipal bonds, corporate securities, and Treasury securities, and calls of $1.3 million on corporate securities during the three months ended March 31, 2022. We recognized a $3.3 million loss on the sale of available for sale debt securities during the first quarter of 2022. We sold eight debt securities for $45.4 million that were yielding less than 1.00%. We purchased $190.6 million in mortgage-backed securities, $52.5 million in corporate securities, and $197.1 million in US Treasury securities during the first three months of 2022. In order to deploy our excess liquidity into higher-earning assets, we currently anticipate purchasing $50.0 million per month of two-year US Treasury securities and $25.0 million per month of mortgage-backed securities. This investment strategy could change if the Federal Reserve Bank FOMC adjusts their current monetary policy of increasing rates or if our loan growth changes. For a tabular presentation of debt securities available for sale and held to maturity at March 31, 2022 and December 31, 2021, see “Note 4 – Securities” in our Notes to Consolidated Financial Statements.

The objective of our investment policy is to invest funds not otherwise needed to meet our loan demand to earn the maximum return, yet still maintain sufficient liquidity to meet fluctuations in our loan demand and deposit structure. In doing so, we seek to balance the market and credit risks against the potential investment return, make investments compatible with the pledge requirements of any deposits of public funds, maintain compliance with regulatory investment requirements, and assist certain public entities with their financial needs. The investment committee has full authority over the investment portfolio and makes decisions on purchases and sales of securities. The entire portfolio, along with all investment transactions occurring since the previous board of directors meeting, is reviewed by the board at each monthly meeting. The investment policy allows portfolio holdings to include short-term securities purchased to provide us with needed liquidity and longer-term securities purchased to generate level income for us over periods of interest rate fluctuations.

Each quarter, management assesses whether there have been events or economic circumstances indicating that a security on which there is an unrealized loss is other-than-temporarily impaired. Management considers several factors, including the amount and duration of the impairment; the intent and ability of the Company to hold the security for a period sufficient for a recovery in value; and known recent events specific to the issuer or its industry. In analyzing an issuer’s financial condition, management considers whether the securities are issued by agencies of the federal government, whether downgrades by bond rating agencies have occurred, and industry analysts’ reports, among other things. As we currently do not have the intent to sell these securities and it is not more likely than not that we will be required to sell these securities before recovery of their amortized cost basis, which may be at maturity, no declines are deemed to be other than temporary. We will continue to evaluate our investment securities for possible other-than-temporary impairment, which could result in non-cash charges to earnings in one or more future periods. All securities held are traded in liquid markets.

The Company does not invest in collateralized debt obligations (“CDOs”). As of March 31, 2022, we had $419.8 million of bank holding company subordinated notes. If rated, all such bonds were rated BBB or better by Kroll Bond Rating Agency at the time of our initial investment. All other corporate bonds had a Standard and Poor’s or Moody’s rating of A-1 or better when purchased. The total investment portfolio has a combined average credit rating of AA as of March 31, 2022.

The carrying value of investment securities pledged to secure public funds on deposit and for other purposes as required by law was $490.8 million and $481.3 million as of March 31, 2022 and December 31, 2021, respectively.

Loans

We had total loans of $9.90 billion at March 31, 2022, up $366.0 million, or 3.8%, compared to $9.53 billion at December 31, 2021. We originated approximately 7,400 PPP loans totaling $1.5 billion during the COVID-19 pandemic. Over 6,300 of these loans had a balance of less than $350,000. PPP loans outstanding totaled $107.6 million at March 31, 2022 and $230.2 million at December 31, 2021.

Asset Quality

The Company assesses the adequacy of its ACL at the end of each calendar quarter. The level of ACL is based on the Company’s evaluation of historical default and loss experience, current and projected economic conditions, asset quality trends, known and inherent risks in the portfolio, adverse situations that may affect the borrowers’ ability to repay a loan, the estimated value of any underlying collateral, composition of the loan portfolio and other relevant factors. The ACL is increased by a provision for credit losses, which is charged to expense, and reduced by charge-offs, net of recoveries. The ACL is believed adequate to absorb all expected future losses to be recognized over the contractual life of the loans in the portfolio.

Loans with similar risk characteristics are evaluated in pools and, depending on the nature of each identified pool, the Company utilizes 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. Losses are predicted over a period of time determined to be reasonable and supportable, and at the end of the reasonable and supportable period losses are reverted to long term historical averages. The reasonable and supportable period and reversion period are re-evaluated each quarter by the Company and are dependent on the current economic environment among other factors. See “Note 1 – General” in the Notes to Consolidated Financial Statements included in Item 1. Consolidated Financial Statements elsewhere in this report.

The expected credit losses for each loan pool are then adjusted for changes in qualitative factors not inherently considered in the quantitative analyses. The qualitative adjustments either increase or decrease the quantitative model estimation. The Company considers factors that are relevant within the qualitative framework which include the following: lending policy, changes in nature and volume of loans, staff experience, changes in volume and trends of problem loans, concentration risk, trends in underlying collateral values, external factors, quality of loan review system and other economic conditions.

Expected credit losses for loans that no longer share similar risk characteristics with the collectively evaluated pools are excluded from the collective evaluation and estimated on an individual basis. Individual evaluations are performed for nonaccrual loans, loans rated substandard, and modified loans classified as TDRs. Specific allocations of the ACL for credit losses are estimated 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.

	As of and for the Three Months Ended
	March 31,
	2022			2021
	(Dollars in thousands)
Total loans outstanding, net of unearned income	$	9,898,957		$	8,504,980
Average loans outstanding, net of unearned income	$	9,646,679		$	8,512,506
Allowance for credit losses at beginning of period		116,660			87,942
Charge-offs:
Commercial, financial and agricultural loans		2,574			477
Real estate - construction		-			-
Real estate - mortgage		27			12
Consumer loans		75			87
Total charge-offs		2,676			576
Recoveries:
Commercial, financial and agricultural loans		105			26
Real estate - construction		-			50
Real estate - mortgage		-			2
Consumer loans		12			11
Total recoveries		117			89
Net charge-offs		2,559			487
Provision for credit losses		5,362			7,451
Allowance for credit losses at period end	$	119,463		$	94,906
Allowance for credit losses to period end loans		1.21	%		1.12	%
Net charge-offs to average loans		0.11	%		0.02	%

			Percentage
			of loans in
			each
			category to
March 31, 2022	Amount		total loans
	(In Thousands)
Commercial, financial and agricultural	$	41,417		29.86	%
Real estate - construction		27,821		11.77	%
Real estate - mortgage		48,548		57.74	%
Consumer		1,677		0.63	%
Total	$	119,463		100.00	%

			Percentage
			of loans in
			each
			category to
December 31, 2021	Amount		total loans
	(In Thousands)
Commercial, financial and agricultural	$	41,869		31.30	%
Real estate - construction		26,994		11.57	%
Real estate - mortgage		45,829		56.43	%
Consumer		1,968		0.70	%
Total	$	116,660		100.00	%

Nonperforming Assets

Total nonperforming loans, which include nonaccrual loans and loans 90 or more days past due and still accruing, increased to $19.4 million at March 31, 2022 compared to $12.1 million at December 31, 2021. Of this total, nonaccrual loans of $14.7 million at March 31, 2022 represented a net increase of $7.9 million from nonaccrual loans at December 31, 2021. Excluding credit card accounts, there was one loan 90 or more days past due and still accruing totaling $4.6 million at March 31, 2022, compared to four loans totaling $5.3 million at December 31, 2021. TDRs at March 31, 2022 and December 31, 2021 were $2.5 million and $2.6 million, respectively. There were no loans newly classified as TDR or renewals of existing TDRs for the three months ended March 31, 2022. There were three loans newly classified as TDR totaling $2.1 million and no renewals of existing TDRs for the three months ended March 31, 2021.

OREO and repossessed assets increased to $2.0 million at March 31, 2022, from $1.2 million at December 31, 2021. The following table summarizes OREO and repossessed asset activity for the three months ended March 31, 2022 and 2021:

	Three months ended March 31,
	2022			2021
	(In thousands)
Balance at beginning of period	$	1,208		$	6,497
Transfers from loans and capitalized expenses		830			414
Proceeds from sales		(44	)		(584	)
Internally financed sales		-			(3,779	)
Write-downs / net gain (loss) on sales		(5	)		(482	)
Balance at end of period	$	1,989		$	2,066

The following table summarizes our nonperforming assets and TDRs at March 31, 2022 and December 31, 2021:

	March 31, 2022					December 31, 2021
				Number of					Number of
	Balance			Loans		Balance			Loans
	(Dollar Amounts In Thousands)
Nonaccrual loans:
Commercial, financial and agricultural	$	8,795			21	$	4,343			17
Real estate - construction		-			-		-			-
Real estate - mortgage:
Owner-occupied commercial		3,272			3		1,021			2
1-4 family mortgage		1,740			14		1,398			12
Other mortgage		931			1		-			-
Total real estate - mortgage		5,943			18		2,419			14
Consumer		-			-		-			-
Total Nonaccrual loans:	$	14,738			39	$	6,762			31

90+ days past due and accruing:
Commercial, financial and agricultural	$	38			7	$	39			4
Real estate - construction		-			-		-			-
Real estate - mortgage:
Owner-occupied commercial		-			-		-			-
1-4 family mortgage		-			-		611			3
Other mortgage		4,633			1		4,656			1
Total real estate - mortgage		4,633			1		5,267			4
Consumer		15			13		29			22
Total 90+ days past due and accruing:	$	4,686			21	$	5,335			30

Total Nonperforming Loans:	$	19,424			60	$	12,097			61

Plus: Other real estate owned and repossessions		1,989			7		1,208			5
Total Nonperforming Assets	$	21,413			67	$	13,305			66

Restructured accruing loans:
Commercial, financial and agricultural	$	426			2	$	431			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:	$	426			2	$	431			2
Total Nonperforming assets and restructured accruing loans	$	21,839			69	$	13,736			68

Ratios:
Nonperforming loans to total loans		0.20	%				0.13	%
Nonperforming assets to total loans plus other real estate owned and repossessions		0.22	%				0.14	%
Nonperforming assets plus restructured accruing loans to total loans plus other real estate owned and repossessions		0.22	%				0.14	%

The balance of nonperforming assets can fluctuate due to changes in economic conditions. We have established a policy to discontinue accruing interest on a loan (i.e., place the loan on nonaccrual status) after it has become 90 days delinquent as to payment of principal or interest, unless the loan is considered to be well-collateralized and is actively in the process of collection. In addition, a loan will be placed on nonaccrual status before it becomes 90 days delinquent if management believes that the collection of interest is not expected. Interest previously accrued but uncollected on such loans is reversed and charged against current income when the receivable is determined to be uncollectible. Interest income on nonaccrual loans is recognized only as received. If we believe that a loan will not be collected in full, we will increase the ACL to reflect management’s estimate of any potential exposure or loss. Generally, payments received on nonaccrual loans are applied directly to principal.

In keeping with this guidance from regulators, the bank offered short-term modifications made in response to COVID-19 to borrowers who were current and otherwise not past due. Should eventual credit losses on these deferred payments emerge, the related loans would be placed on nonaccrual status and interest income accrued would be reversed. In such a scenario, interest income in future periods could be negatively impacted. As of March 31, 2022, we carried $3.8 million of accrued interest income on deferrals made to COVID-19 affected borrowers compared to $4.0 million at December 31, 2021. At this time, we are unable to project the materiality of such an impact on future deferrals to COVID-19 affected borrowers, but we recognize the breadth of the economic impact may affect our borrowers’ ability to repay in future periods.

Deposits

We rely on increasing our deposit base to fund loan and other asset growth. Each of our markets is highly competitive. We compete for local deposits by offering attractive products with competitive rates. We expect to have a higher average cost of funds for local deposits than competitor banks due to our lack of an extensive branch network. Our management’s strategy is to offset the higher cost of funding with a lower level of operating expense and firm pricing discipline for loan products. We have promoted electronic banking services by providing them without charge and by offering in-bank customer training. Total deposits decreased by $44.1 million to $12.41 billion at March 31, 2022 compared to $12.45 billion at December 31, 2021. We anticipate long-term sustainable growth in deposits through continued development of market share in our less mature markets and through organic growth in our mature markets. A significant amount of federal and state stimulus money resulting from the COVID-19 pandemic remains on deposit at our bank. We are currently taking measures to deploy these excess funds out of cash into higher-earning assets.

For amounts and rates of our deposits by category, see the table “Average Consolidated Balance Sheets and Net Interest Analysis on a Fully Taxable-equivalent Basis” under the subheading “Net Interest Income” below.

The following table summarizes balances of our deposits and the percentage of each type to the total at March 31, 2022 and December 31, 2021.

	March 31, 2022				December 31, 2021
Non-interest-bearing demand	$	4,889,495	39.40	%	$	4,799,767	38.54	%
Interest-bearing demand		1,649,407	13.30	%		1,652,710	13.27	%
Money market		4,948,753	39.88	%		5,094,313	40.91	%
Savings		134,815	1.09	%		97,946	0.79	%
Time deposits, $250,000 and under		249,370	2.01	%		267,164	2.15	%
Time deposits, over $250,000		486,915	3.92	%		490,936	3.94	%
Brokered time deposits		50,000	0.40	%		50,000	0.40	%
	$	12,408,755	100.00	%	$	12,452,836	100.00	%

At March 31, 2022 and December 31, 2021, we estimate that we had approximately $10.15 billion and $10.65 billion, respectively, in uninsured deposits, which are the portion of deposit accounts that exceed the FDIC insurance limit.

The following table presents the maturities of our time deposits in excess of insurance limit as of March 31, 2022.

	Portion of time deposits in excess of insurance limit
	March 31, 2022
Time deposits otherwise uninsured with a maturity of:	(In Thousands)

3 months or less	$	90,588
Over 3 months through 6 months		68,521
Over 6 months through 12 months		86,291
Over 12 months		77,766
Total	$	323,166

The uninsured deposit data for 2022 and 2021 reflect the deposit insurance impact of “combined ownership segregation” of escrow and other accounts at an aggregate level but do not reflect an evaluation of all of the account styling distinctions that would determine the availability of deposit insurance to individual accounts based on FDIC regulations.

Borrowings

Our borrowings consist of federal funds purchased and subordinated notes payable. We had $1.64 billion and $1.71 billion at March 31, 2022 and December 31, 2021, respectively, in federal funds purchased from correspondent banks that are clients of our correspondent banking unit. The average rate paid on these borrowings was 0.23% for the quarter ended March 31, 2022. Other borrowings consist of the following:

●

$30.0 million on the Company’s 4.5% Subordinated Notes due November 8, 2027, which were issued in a private placement in November 2017 and pay interest semi-annually. The Notes may not be prepaid by the Company prior to November 8, 2022; and

●

$34.75 million of the Company’s 4% Subordinated Notes due October 21, 2030, which were issued in a private placement in October 2020 and pay interest semi-annually. The Notes may not be prepaid by the Company prior to October 21, 2025.

Liquidity

Liquidity is defined as our ability to generate sufficient cash to fund current loan demand, deposit withdrawals, and other cash demands and disbursement needs, and otherwise to operate on an ongoing basis.

The retention of existing deposits and attraction of new deposit sources through new and existing customers is critical to our liquidity position. If our liquidity was to decline due to a run-off in deposits, we have procedures that provide for certain actions under varying liquidity conditions. These actions include borrowing from existing correspondent banks, selling or participating loans, and curtailing loan commitments and funding. At March 31, 2022, liquid assets, which are represented by cash and due from banks, federal funds sold and unpledged available-for-sale securities, totaled $4.61 billion. Additionally, the Bank had borrowing availability of approximately $1.04 billion in unused federal funds lines of credit with regional banks, subject to certain restrictions and collateral requirements.

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, 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.” We believe these sources of funding are adequate to meet both our immediate (within the next 12 months) and our longer term anticipated funding needs. However, we may need additional funding if we are able to maintain our current growth rate into the future.

We are subject to general FDIC guidelines that require a minimum level of liquidity. Management believes our liquidity ratios meet or exceed these guidelines. However, uncertainties brought about by the COVID-19 pandemic may adversely affect our ability to obtain funding or may increase the cost of funding.

The following table illustrates, during the periods presented, the mix of our funding sources and the assets in which those funds are invested as a percentage of our average total assets for the period indicated. Average assets totaled $15.29 billion and $12.14 billion for the quarters ended March 31, 2022 and 2021, respectively.

	For the Three Months Ended March 31,
	2022			2021
Sources of Funds:
Deposits:
Non-interest-bearing		31.9	%		24.1	%
Interest-bearing		49.1			59.7
Federal funds purchased		10.6			7.0
Long term debt and other borrowings		0.4			0.5
Other liabilities		0.4			0.3
Equity capital		7.6			8.4
Total sources		100.0	%		100.0	%

Uses of Funds:
Loans		63.1	%		70.2	%
Securities		10.0			7.4
Interest-bearing balances with banks		23.8			18.6
Federal funds sold		0.1			0.1
Other assets		3.0			3.7
Total uses		100.0	%		100.0	%

Capital Adequacy

Total stockholders’ equity attributable to us at March 31, 2022 was $1.17 billion, or 7.64% of total assets. At December 31, 2021, total stockholders’ equity attributable to us was $1.15 billion, or 7.45% of total assets.

As of March 31, 2022, our most recent notification from the FDIC categorized us as well-capitalized under the regulatory framework for prompt corrective action. To remain categorized as well-capitalized, we must maintain minimum common equity Tier 1, Tier 1 risk-based, total risk-based, and Tier 1 leverage ratios as disclosed in the table below. Our management believes that we are well-capitalized under the prompt corrective action provisions as of March 31, 2022.

The following table sets forth (i) the capital ratios required by the FDIC and the Alabama Banking Department’s leverage ratio requirement and (ii) our actual ratios of capital to total regulatory or risk-weighted assets, as of March 31, 2022, December 31, 2021 and March 31, 2021:

	Actual					For Capital Adequacy Purposes					To Be Well Capitalized Under Prompt Corrective Action Provisions
	Amount		Ratio			Amount		Ratio			Amount		Ratio
As of March 31, 2022:
CET 1 Capital to Risk Weighted Assets:
Consolidated	$	1,169,735		9.86	%	$	533,769		4.50	%		N/A		N/A
ServisFirst Bank		1,232,198		10.39	%		533,698		4.50	%	$	770,897		6.50	%
Tier 1 Capital to Risk Weighted Assets:
Consolidated		1,170,235		9.87	%		711,691		6.00	%		N/A		N/A
ServisFirst Bank		1,232,698		10.39	%		711,598		6.00	%		948,797		8.00	%
Total Capital to Risk Weighted Assets:
Consolidated		1,356,009		11.43	%		948,922		8.00	%		N/A		N/A
ServisFirst Bank		1,353,761		11.41	%		948,797		8.00	%		1,185,996		10.00	%
Tier 1 Capital to Average Assets:
Consolidated		1,170,235		7.67	%		610,638		4.00	%		N/A		N/A
ServisFirst Bank		1,232,698		8.08	%		610,538		4.00	%		763,172		5.00	%

As of December 31, 2021:
CET 1 Capital to Risk Weighted Assets:
Consolidated	$	1,123,826		9.95	%	$	508,027		4.50	%		N/A		N/A
ServisFirst Bank		1,185,161		10.50	%		507,969		4.50	%	$	733,733		6.50	%
Tier 1 Capital to Risk Weighted Assets:
Consolidated		1,124,326		9.96	%		677,370		6.00	%		N/A		N/A
ServisFirst Bank		1,185,661		10.50	%		677,292		6.00	%		903,056		8.00	%
Total Capital to Risk Weighted Assets:
Consolidated		1,306,992		11.58	%		903,160		8.00	%		N/A		N/A
ServisFirst Bank		1,303,621		11.55	%		903,056		8.00	%		1,128,821		10.00	%
Tier 1 Capital to Average Assets:
Consolidated		1,124,326		7.39	%		608,883		4.00	%		N/A		N/A
ServisFirst Bank		1,185,661		7.79	%		608,826		4.00	%		761,033		5.00	%

As of March 31, 2021:
CET 1 Capital to Risk Weighted Assets:
Consolidated	$	999,447		10.73	%	$	419,190		4.50	%		N/A		N/A
ServisFirst Bank		1,061,620		11.40	%		419,127		4.50	%	$	605,405		6.50	%
Tier 1 Capital to Risk Weighted Assets:
Consolidated		999,947		10.73	%		558,920		6.00	%		N/A		N/A
ServisFirst Bank		1,062,120		11.40	%		558,836		6.00	%		745,114		8.00	%
Total Capital to Risk Weighted Assets:
Consolidated		1,162,344		12.48	%		745,227		8.00	%		N/A		N/A
ServisFirst Bank		1,159,826		12.45	%		745,114		8.00	%		931,393		10.00	%
Tier 1 Capital to Average Assets:
Consolidated		999,947		8.25	%		484,571		4.00	%		N/A		N/A
ServisFirst Bank		1,062,120		8.77	%		484,521		4.00	%		605,651		5.00	%

We are a legal entity separate and distinct from the Bank. Our principal source of cash flow, including cash flow to pay dividends to our stockholders, is dividends the Bank pays to us as the Bank’s sole shareholder. Statutory and regulatory limitations apply to the Bank’s payment of dividends to us as well as to our payment of dividends to our stockholders. The requirement that a bank holding company must serve as a source of strength to its subsidiary banks also results in the position of the Federal Reserve that a bank holding company should not maintain a level of cash dividends to its stockholders that places undue pressure on the capital of its bank subsidiaries or that can be funded only through additional borrowings or other arrangements that may undermine the bank holding company’s ability to serve as such a source of strength. Our ability to pay dividends is also subject to the provisions of Delaware corporate law.

The Alabama Banking Department also regulates the Bank’s dividend payments. Under Alabama law, a state-chartered bank may not pay a dividend in excess of 90% of its net earnings until the Bank’s surplus is equal to at least 20% of its capital (our Bank’s surplus currently exceeds 20% of its capital). Moreover, our Bank is also required by Alabama law to obtain the prior approval of the Superintendent of Banks (“Superintendent”) for its payment of dividends if the total of all dividends declared by the Bank in any calendar year will exceed the total of (i) the Bank’s net earnings (as defined by statute) for that year, plus (ii) its retained net earnings for the preceding two years, less any required transfers to surplus. In addition, no dividends, withdrawals or transfers may be made from the Bank’s surplus without the prior written approval of the Superintendent.

The Bank’s payment of dividends may also be affected or limited by other factors, such as the requirement to maintain adequate capital above regulatory guidelines. The federal banking agencies have indicated that paying dividends that deplete a depository institution’s capital base to an inadequate level would be an unsafe and unsound banking practice. Under the Federal Deposit Insurance Corporation Improvement Act of 1991, a depository institution may not pay any dividends if payment would cause it to become undercapitalized or if it already is undercapitalized. Moreover, the federal agencies have issued policy statements that provide that bank holding companies and insured banks should generally only pay dividends out of current operating earnings. If, in the opinion of the federal banking regulators, the Bank were engaged in or about to engage in an unsafe or unsound practice, the federal banking regulators could require, after notice and a hearing, that the Bank stop or refrain from engaging in the questioned practice.

Off-Balance Sheet Arrangements

In the normal course of business, we are a party to financial credit arrangements with off-balance sheet risk to meet the financing needs of our customers. These financial credit arrangements include commitments to extend credit beyond current fundings, credit card arrangements, standby letters of credit and financial guarantees. Those credit arrangements involve, to varying degrees, elements of credit risk in excess of the amount recognized in the balance sheet. The contract or notional amounts of those instruments reflect the extent of involvement we have in those particular financial credit arrangements. All such credit arrangements bear interest at variable rates and we have no such credit arrangements which bear interest at fixed rates.

Our exposure to credit loss in the event of non-performance by the other party to the financial instrument for commitments to extend credit, credit card arrangements and standby letters of credit is represented by the contractual or notional amount of those instruments. We use the same credit policies in making commitments and conditional obligations as we do for on-balance sheet instruments.

As part of our mortgage operations, we originate and sell certain loans to investors in the secondary market. We continue to experience a manageable level of investor repurchase demands. For loans sold, we have an obligation to either repurchase the outstanding principal balance of a loan or make the purchaser whole for the economic benefits of a loan if it is determined that the loans sold were in violation of representations and warranties made by the Bank at the time of the sale. Representations and warranties typically include those made regarding loans that had missing or insufficient file documentation or loans obtained through fraud by borrowers or other third parties such as appraisers.

Financial instruments whose contract amounts represent credit risk at March 31, 2022 are as follows:

	March 31, 2022
	(In Thousands)
Commitments to extend credit	$	3,656,812
Credit card arrangements		377,211
Standby letters of credit		61,856
	$	4,095,879

Commitments to extend credit beyond current funded amounts are agreements to lend to a customer as long as there is no violation of any condition established in the applicable loan agreement. Such commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. We evaluate each customer’s creditworthiness on a case-by-case basis. The amount of collateral obtained if deemed necessary by us upon extension of credit is based on our management’s credit evaluation. Collateral held varies but may include accounts receivable, inventory, property, plant and equipment, and income-producing commercial properties.

Standby letters of credit are conditional commitments issued by us to guarantee the performance of a customer to a third party. Those guarantees are primarily issued to support public and private borrowing arrangements, including commercial paper, bond financing, and similar transactions. All letters of credit are due within one year or less of the original commitment date. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers.

Federal funds lines of credit are uncommitted lines issued to downstream correspondent banks for the purpose of providing liquidity to them. The lines are unsecured, and we have no obligation to sell federal funds to the correspondent, nor does the correspondent have any obligation to request or accept purchases of federal funds from us.

Results of Operations

Summary of Net Income

Net income and net income available to common stockholders for the three months ended March 31, 2022 was $57.6 million compared to $51.5 million for the three months ended March 31, 2021. The increase in net income was primarily attributable to a $13.4 million increase in net interest income during the three months ended March 31, 2022 to $105.7 million, compared to $92.4 million during the same period in 2021. The increase in net interest income is primarily attributable to growth in average earning assets and non-interest-bearing deposit balances. Total non-interest income decreased by $515,000 to $7.9 million during the three months ended March 31, 2022 compared to $8.5 million during the same period in 2021. Total non-interest expenses increased by $8.3 million to $37.2 million during the three months ended March 31, 2022 compared to $28.9 million during the same period in 2021.

Basic and diluted net income per common share were $1.06 for the three months ended March 31, 2022, compared to $0.95 for the corresponding period in 2021. Return on average assets for the three months ended March 31, 2022 was 1.53% compared to 1.72% for the corresponding period in 2021, and return on average common stockholders’ equity for the three months ended March 31, 2022 was 20.09% compared to 19.83% for the corresponding period in 2021.

Net Interest Income

Net interest income is the difference between the income earned on interest-earning assets and interest paid on interest-bearing liabilities used to support such assets. The major factors which affect net interest income are changes in volumes, the yield on interest-earning assets and the cost of interest-bearing liabilities. Our management’s ability to respond to changes in interest rates by effective asset-liability management techniques is critical to maintaining the stability of the net interest margin and the momentum of our primary source of earnings.

Taxable-equivalent net interest income increased $13.4 million, or 14.5%, to $105.8 million for the three months ended March 31, 2022 compared to $92.4 million for the corresponding period in 2021. This increase was primarily attributable to a $3.14 billion increase in average earning assets, or 27%, year-over-year. The taxable-equivalent yield on interest-earning assets decreased from 3.48% to 3.10% year-over-year. The yield on loans for the three months ended March 31, 2022 was 4.34% compared to 4.47% for the corresponding period in 2021. The cost of total interest-bearing liabilities decreased to 0.33% for the three months ended March 31, 2022 from 0.40% for the corresponding period in 2021. Net interest margin for the three months ended March 31, 2022 decreased 31 basis points to 2.89% from 3.20% for the corresponding period in 2021.

On March 17, 2022 the Federal Reserve Bank increased their targeted federal funds rate from 0 – 0.25% to 0.25 - 0.50%. We believe our net interest income will benefit from this and future rate increases as we anticipate a lag in deposit pricing increases to loan pricing increases.

The following table shows, for the three months ended March 31, 2022 and March 31, 2021, the average balances of each principal category of our assets, liabilities and stockholders’ equity, and an analysis of net interest revenue. The accompanying table reflects changes in our net interest margin as a result of changes in the volume and rate of our interest-earning assets and interest-bearing liabilities for the same periods. Changes as a result of mix or the number of days in the periods have been allocated to the volume and rate changes in proportion to the relationship of the absolute dollar amounts of the change in each. Both tables are presented on a taxable-equivalent basis where applicable:

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)
	2022							2021
			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)
Taxable	$	9,621,484	$	102,891		4.34	%	$	8,484,914	$	93,503		4.47	%
Tax-exempt (2)		25,195		254		4.09			27,592		284		4.17
Total loans, net of unearned income		9,646,679		103,145		4.34			8,512,506		93,787		4.47
Mortgage loans held for sale		927		4		1.75			13,601		65		1.94
Investment securities:
Taxable		1,518,572		8,222		2.17			878,118		5,807		2.65
Tax-exempt (2)		8,812		51		2.32			21,084		128		2.43
Total investment securities (3)		1,527,384		8,273		2.17			899,202		5,935		2.64
Federal funds sold		16,639		13		0.32			11,935		3		0.10
Restricted equity securities		7,371		68		3.74			-		-		-
Interest-bearing balances with banks		3,637,882		1,804		0.20			2,262,233		676		0.12
Total interest-earning assets	$	14,836,882	$	113,307		3.10	%	$	11,699,477	$	100,466		3.48	%
Non-interest-earning assets:
Cash and due from banks		74,534							71,166
Net premises and equipment		61,209							57,198
Allowance for credit losses, accrued interest and other assets		313,560							320,407
Total assets	$	15,286,185						$	12,148,248


Liabilities and stockholders' equity:
Interest-bearing liabilities:
Interest-bearing demand deposits	$	1,594,645	$	778		0.20	%	$	1,294,614	$	621		0.19	%
Savings deposits		135,545		59		0.18			93,375		41		0.18
Money market accounts		4,985,224		3,204		0.26			5,057,828		3,358		0.27
Time deposits		792,930		1,803		0.92			808,561		2,861		1.44
Total interest-bearing deposits		7,508,344		5,844		0.32			7,254,378		6,881		0.38
Federal funds purchased		1,620,012		932		0.23			849,772		460		0.22
Other borrowings		64,708		690		4.32			64,689		690		4.33
Total interest-bearing liabilities	$	9,193,064	$	7,466		0.33	%	$	8,168,839	$	8,031		0.40	%
Non-interest-bearing liabilities:
Non-interest-bearing demand deposits		4,870,701							2,923,041
Other liabilities		59,619							39,442
Stockholders' equity		1,156,186							996,741
Accumulated other comprehensive income		6,615							20,185
Total liabilities and stockholders' equity	$	15,286,185						$	12,148,248
Net interest income			$	105,841						$	92,435
Net interest spread						2.77	%						3.08	%
Net interest margin						2.89	%						3.20	%

(1)		Non-accrual loans are included in average loan balances in all periods. Loan fees of $6,823 and $10,400 are included in interest income in the first quarter of 2022 and 2021, respectively. Loan fees include accretion of PPP loan fees.
(2)		Interest income and yields are presented on a fully taxable equivalent basis using a tax rate of 21%.
(3)		Unrealized gains of $8,245 and $22,027 are excluded from the yield calculation in the first quarter of 2022 and 2021, respectively.

	For the Three Months Ended March 31,
	2022 Compared to 2021 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	$	12,221		$	(2,833	)	$	9,388
Tax-exempt		(24	)		(6	)		(30	)
Total loans, net of unearned income		12,197			(2,839	)		9,358
Mortgages held for sale		(56	)		(5	)		(61	)
Debt securities:
Taxable		3,621			(1,206	)		2,415
Tax-exempt		(71	)		(6	)		(77	)
Total debt securities		3,550			(1,212	)		2,338
Federal funds sold		1			9			10
Restricted equity securities		68			-			68
Interest-bearing balances with banks		541			587			1,128
Total interest-earning assets		16,301			(3,460	)		12,841

Interest-bearing liabilities:
Interest-bearing demand deposits		146			11			157
Savings		18			-			18
Money market accounts		(48	)		(106	)		(154	)
Time deposits		(54	)		(1,004	)		(1,058	)
Total interest-bearing deposits		62			(1,099	)		(1,037	)
Federal funds purchased		441			31			472
Other borrowed funds		-			-			-
Total interest-bearing liabilities		503			(1,068	)		(565	)
Increase in net interest income	$	15,798		$	(2,392	)	$	13,406

Our growth in loans continues to drive favorable volume component change and overall change. The rate component was unfavorable as average rates paid on interest-bearing liabilities decreased seven basis points while loan yields decreased 13 basis points. Growth in non-interest-bearing deposits and equity also contributed to the increase in net interest revenue during the three months ended March 31, 2022 compared to the same period in 2021.

Provision for Credit Losses

The provision for credit losses was $5.4 million for the three months ended March 31, 2022, a decrease of $2.1 million from $7.5 million for the three months ended March 31, 2021. The decrease in provision expense is primarily the result of improvement in economic projections used to inform loss driver forecasts within the ACL model. The ACL for March 31, 2022, December 31, 2021 and March 31, 2021 totaled $119.5 million, $116.7 million, and $94.9 million, or 1.21%, 1.22% and 1.12% of loans, net of unearned income, respectively. Annualized net credit charge-offs to quarter-to-date average loans were 0.11% for the first quarter of 2022, a nine basis point increase compared to 0.02% for the first quarter of 2021. Nonperforming loans increased to $19.4 million, or 0.20% of total loans, at March 31, 2022 from $12.1 million, or 0.13% of total loans, at December 31, 2021, and were lower than $20.1 million, or 0.21% of total loans, at March 31, 2021.

Noninterest Income

Noninterest income totaled $7.9 million for the three months ended March 31, 2022, a decrease of $515,000 compared to the corresponding period in 2021. Service charges on deposit accounts increased $234,000, or 12.3%, to $2.1 million for the three months ended March 31, 2022, compared to the corresponding period in 2021. Mortgage banking revenue decreased $2.2 million to $526,000 for the three months ended March 31, 2022, compared to the corresponding period in 2021. We started retaining our mortgage loans in the second quarter of 2021 to increase earning assets and use excess liquidity. As of March 31, 2022, we had retained a total of 313 1-4 family mortgages with an aggregate balance of $117.9 million. Net credit card revenue increased $1.2 million, or 99%, to $2.4 million during the three months ended March 31, 2022, compared to $1.2 million during the three months ended March 31, 2021. The number of credit card accounts increased approximately 29% and the aggregate amount of spend on all credit card accounts increased 32% during the three months ended March 31, 2022 compared to the three months ended March 31, 2021. We recognized a $3.3 million loss on the sale of available for sale debt securities during the first quarter of 2022. We sold eight debt securities totaling $41.6 million that were yielding less than 1.00%. Other income for the three months ended March 31, 2022 increased $3.6 million when compared to the corresponding period in 2021. The interest rate cap we bought in May of 2020 increased in value during the first quarter of 2022, contributing $3.4 million to the increase in other income. Merchant service revenue increased from $191,000 during the first quarter of 2021 to $336,000 during the corresponding period in 2022.

Changes in our non-interest income, including percentage changes, are detailed in the following table:

	Three Months Ended March 31,
	2022			2021		$ change			% change
	(Dollars In Thousands)
Noninterest income:
Service charges on deposit accounts	$	2,142		$	1,908	$	234			12.3	%
Mortgage banking		526			2,747		(2,221	)		(80.9	)%
Credit cards		2,372			1,192		1,180			99.0	%
Securities gains		(3,335	)		-		(3,335	)		NM
Increase in cash surrender value life insurance		1,608			1,658		(50	)		(3.0	)%
Other operating income		4,635			958		3,677			383.8	%
Total noninterest income	$	7,948		$	8,463	$	(515	)		(6.1	)%

Noninterest Expense

Noninterest expense totaled $37.2 million for the three months ended March 31, 2022, an increase of $8.3 million, or 28.7%, compared to $28.9 million for the corresponding period in 2021. Salary and employee benefit expense increased $2.8 million, or 17.7%, to $18.3 million for the three months ended March 31, 2022 from $15.5 million for the corresponding period in 2021.Salaries alone increased $786,000, or 6.9%. We added production staff in our new office in Orlando, Florida and added mortgage loan officers in Pensacola and Tampa, Florida. We also hired an internal audit manager in the fourth quarter of 2021 to manage our outsourced audit expenses. The number of FTE employees increased to 511 at March 31, 2022 compared to 491 at March 31, 2021. Incentive accruals increased $729,000, or 19.5%, year-over-year due to anticipated higher loan production and new producers being added as participants in the incentive plan. Loan expense deferrals (a benefit) decreased $644,000, or 24.5%, year-over-year. A majority of our round-two PPP loan production occurred during the first quarter of 2021, resulting in the higher expense deferrals. Equity compensation expense increased $500,000, or 171.5%, year over year. We awarded restricted shares to key producers and performance-based shares to key employees. . Equipment and occupancy expense increased $279,000, or 10.5%, to $2.9 million for the three months ended March 31, 2022 from $2.7 million for the corresponding period in 2021. Third party processing and other services increased $2.2 million, or 64.1%, to $5.6 million for the three months ended March 31, 2022 compared to the corresponding period in 2021. Our core banking system provider increased our processing rates in the fourth quarter of 2021 after we notified them of our intent to terminate our contract and convert to a new system. Professional services increased $69,000, or 7.5%, to $992,000 for the three months ended March 31, 2022 from $923,000 for the corresponding period in 2021. FDIC insurance assessments decreased $450,000, or 28.4%, to $1.1 million for the three months ended March 31, 2022 from $1.6 million for the corresponding period in 2021. Our assessment rate decreased when we started reporting as a large financial institution in the third quarter of 2021. Expenses related to other real estate owned decreased $154,000, 98.1%, to $3,000 for the three months ended March 31, 2022 from $157,000 for the corresponding period in 2021. Other operating expenses increased $3.6 million, or 77.9%, to $8.3 million for the three months ended March 31, 2022 from $4.6 million for the corresponding period in 2021. We recognized $874,000 of expenses during the three months ended March 31, 2022, associated with the conversion to a new core operating system scheduled to take place within the year. We wrote down investments in new market tax credit entities by $2.5 million during the three months ended March 31, 2022. We increased our ACL on unfunded loan commitments by $300,000 in the first quarter of 2022.

Changes in our non-interest expenses, including percentage changes, are detailed in the following table:

	Three Months Ended March 31,
	2022		2021		$ change			% change
	(Dollars In Thousands)
Noninterest expense:
Salaries and employee benefits	$	18,301	$	15,543	$	2,758			17.7	%
Equipment and occupancy		2,933		2,654		279			10.5	%
Third party processing and other services		5,605		3,416		2,189			64.1	%
Professional services		992		923		69			7.5	%
FDIC and other regulatory assessments		1,132		1,582		(450	)		(28.4	)%
Other real estate owned		3		157		(154	)		(98.1	)%
Other operating expense		8,252		4,639		3,613			77.9	%
Total noninterest expense	$	37,218	$	28,914	$	8,304			28.7	%

Income Tax Expense

Income tax expense was $13.5 million for the three months ended March 31, 2022 versus $13.0 million for the same period in 2021. Our effective tax rate for the three months ended March 31, 2022 was 18.96%, compared to 20.18% for the corresponding period in 2021. We recognized tax credits during the three months ended March 31, 2022 of $3.3 million, compared to $272,000 for the corresponding period in 2021. We recognized excess tax benefits as a credit to our income tax expense from the exercise of stock options and vesting of restricted stock of $571,000 in the first quarter of 2022, compared to $1.6 million in the first quarter of 2021. Our primary permanent differences are related to tax-exempt income on securities, state income tax benefit on real estate investment trust dividends, various qualifying tax credits and change in cash surrender value of bank-owned life insurance.

We own real estate investment trusts for the purpose of holding and managing participations in residential mortgages and commercial real estate loans originated by the Bank. The trusts are wholly-owned subsidiaries of a trust holding company, which in turn is an indirect wholly-owned subsidiary of the Bank. The trusts earn interest income on the loans they hold and incur operating expenses related to their activities. They pay their net earnings, in the form of dividends, to the Bank, which receives a deduction for state income taxes.

Critical Accounting Estimates

The accounting and financial policies of the Company conform to U.S. GAAP and to general practices within the banking industry. To prepare consolidated financial statements in conformity with U.S. generally accepted accounting principles, management makes estimates and assumptions based on available information. These estimates and assumptions affect the amounts reported in the financial statements and the disclosures provided, and future results could differ. The ACL and deferred taxes are particularly subject to change. Information concerning our accounting policies with respect to these items is available in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021.

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, 2022, there have been no significant changes to our sensitivity to changes in interest rates since December 31, 2021. 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. In response to increased inflationary pressures, the Federal Reserve increased their targeted federal funds rate from 0 – 0.25% to 0.25 – 0.50% on March 17, 2022. We currently anticipate further increases in rates during each of their remaining meetings during 2022. Such rate increases could lead to us increasing rates on our deposits and short-term borrowings. 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.

Evaluation of Disclosure Controls and Procedures.

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, 2022. Based upon the Evaluation, our CEO and CFO have concluded that, as of March 31, 2022, 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.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

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, 2021, and there has been no material change in any matter described therein.

ITEM 1A. RISK FACTORS

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, 2021, 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, 2021.

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.

ITEM 5. OTHER INFORMATION

None.

ITEM 6. EXHIBITS

(a) Exhibit:

31.01

Certification of principal executive officer pursuant to Rule 13a-14(a).

31.02

Certification of principal financial officer pursuant to Rule 13a-14(a).

32.01

Certification of principal executive officer pursuant to 18 U.S.C. Section 1350.

32.02

Certification of principal financial officer pursuant to 18 U.S.C. Section 1350.

101.INS

Inline XBRL Instance Document

101.SCH

Inline XBRL Taxonomy Extension Schema Document

101.CAL

Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.LAB

Inline XBRL Taxonomy Extension Label Linkbase Document

101.PRE

Inline XBRL Taxonomy Extension Presentation Linkbase Document

101.DEF

Inline XBRL Taxonomy Extension Definition Linkbase Document

104	Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	SERVISFIRST BANCSHARES, INC.

Date: April 28, 2022	By	/s/ Thomas A. Broughton III
		Thomas A. Broughton III
		President and Chief Executive Officer

Date: April 28, 2022	By	/s/ William M. Foshee
		William M. Foshee
		Chief Financial Officer