10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark one)

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

FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2011

¨ 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 000-53149

SERVISFIRST BANCSHARES, INC.

(Exact Name of Registrant as Specified in Its Charter)

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

(205) 949-0302

(Registrant’s Telephone Number, Including Area Code)

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 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 x No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files).

Yes ¨ No ¨

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

   Large accelerated filer ¨ Accelerated filer x Non-accelerated filer ¨ Smaller reporting company ¨

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

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

Class	Outstanding as of July 29, 2011
Common stock, $.001 par value	5,872,482

TABLE OF CONTENTS

PART I. FINANCIAL INFORMATION
	Item 1.	Consolidated Financial Statements	3
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	29
	Item 3.	Quantitative and Qualitative Disclosure about Market Risk	49
	Item 4.	Controls and Procedures	50
PART II. OTHER INFORMATION
	Item 1	Legal Proceedings	51
	Item 1A.	Risk Factors	51
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	51
	Item 3.	Defaults Upon Senior Securities	51
	Item 5.	Other Information	51
	Item 6.	Exhibits	51

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

2

PART 1. FINANCIAL INFORMATION

ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS

SERVISFIRST BANCSHARES, INC.

CONSOLIDATED BALANCE SHEETS JUNE 30, 2011 AND DECEMBER 31, 2010

(In thousands, except share and per share amounts)

	June 30, 2011			December 31, 2010
	(Unaudited)			(Audited)
ASSETS
Cash and due from banks	$	27,963		$	27,454
Interest-bearing balances due from depository institutions		74,951			204,178
Federal funds sold		94,541			346
Cash and cash equivalents		197,455			231,978
Debt securities:
Available for sale		230,671			276,959
Held to maturity		13,895			5,234
Restricted equity securities		3,899			3,510
Mortgage loans held for sale		4,092			7,875
Loans		1,560,974			1,394,818
Less allowance for loan losses		(19,516	)		(18,077	)
Loans, net		1,541,458			1,376,741
Premises and equipment, net		4,673			4,450
Accrued interest and dividends receivable		6,847			6,990
Deferred tax assets		7,338			6,366
Other real estate owned		6,931			6,966
Other assets		7,338			8,097
Total assets	$	2,024,597		$	1,935,166
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposits:
Noninterest-bearing	$	283,968		$	250,490
Interest-bearing		1,519,906			1,508,226
Total deposits		1,803,874			1,758,716
Other borrowings		4,945			24,937
Trust preferred securities		30,490			30,420
Accrued interest payable		983			898
Other liabilities		3,104			3,095
Total liabilities		1,843,396			1,818,066
Stockholders' equity:
Preferred stock, Series A Senior Non-Cumulative Perpetual Participating, par value $.001 (liquidation preference $1,000), net of discount; 40,000 shares authorized, 40,000 shares issued and outstanding at June 30, 2011 and no shares authorized, issued and outstanding at December 31, 2010		39,958			-
Preferred stock, undesignated, par value $.001 per share; 1,000,000 shares authorized; no shares outstanding		-			-
Common stock, par value $.001 per share; 15,000,000 shares authorized; 5,872,482 shares issued and outstanding at June 30, 2011 and 5,527,482 shares issued and outstanding at December 31, 2010		6			6
Additional paid-in capital		86,591			75,914
Retained earnings		49,059			38,343
Accumulated other comprehensive income		5,587			2,837
Total stockholders' equity		181,201			117,100
Total liabilities and shareholders' equity	$	2,024,597		$	1,935,166

See Notes to Consolidated Financial  Statements.

3

SERVISFIRST BANCSHARES, INC.

CONSOLIDATED STATEMENTS OF INCOME

(In thousands, except share and per share amounts)

(Unaudited)

	Three Months Ended June 30,				Six Months Ended June 30,
	2011		2010		2011		2010
Interest income:
Interest and fees on loans	$	19,845	$	16,750	$	38,466	$	32,954
Taxable securities		1,444		1,670		2,986		3,422
Nontaxable securities		719		544		1,433		1,068
Federal funds sold		35		16		71		18
Other interest and dividends		37		16		85		36
Total interest income		22,080		18,996		43,041		37,498
Interest expense:
Deposits		3,264		2,829		6,398		5,682
Borrowed funds		768		859		1,619		1,602
Total interest expense		4,032		3,688		8,017		7,284
Net interest income		18,048		15,308		35,024		30,214
Provision for loan losses		1,494		2,537		3,725		5,075
Net interest income after provision for loan losses		16,554		12,771		31,299		25,139
Noninterest income:
Service charges on deposit accounts		547		588		1,114		1,154
Securities gains		523		15		666		53
Other operating income		712		401		1,273		929
Total noninterest income		1,782		1,004		3,053		2,136
Noninterest expenses:
Salaries and employee benefits		5,026		3,147		9,240		6,629
Equipment and occupancy expense		934		774		1,820		1,554
Professional services		351		205		591		405
Other operating expenses		3,058		3,435		6,315		6,405
Total noninterest expenses		9,369		7,561		17,966		14,993
Income before income taxes		8,967		6,214		16,386		12,282
Provision for income taxes		3,122		2,193		5,670		4,248
Net income	$	5,845	$	4,021	$	10,716	$	8,034
Basic earnings per share	$	1.02	$	0.73	$	1.88	$	1.46
Diluted earnings per share	$	0.89	$	0.65	$	1.65	$	1.33

See Notes to Consolidated Financial  Statements.

4

SERVISFIRST BANCSHARES, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In thousands)

(Unaudited)

	Three Months Ended June 30,						Six Months Ended June 30,
	2011			2010			2011			2010
Net income	$	5,845		$	4,021		$	10,716		$	8,034
Other comprehensive income, net of tax:
Unrealized holding gains arising during period from securities available for sale, net of tax of $1,550 and $1,713 for the three and six months ended June 30, 2011, respectively, and $1,557 and $1,693 for the three and six months ended June 30, 2010, respectively		2,877			2,821			3,182			3,110
Reclassification adjustment for net gains on sale of securities in net income, net of tax of $184 and $234 for the three and six months ended June 30, 2011, respectively, and $6 and $19 for the three and six months ended June 30, 2010, respectively		(339	)		(9	)		(432	)		(34	)
Other comprehensive income, net of tax		2,538			2,812			2,750			3,076
Comprehensive income	$	8,383		$	6,833		$	13,466		$	11,110

See Notes to Consolidated Financial Statements

5

SERVISFIRST BANCSHARES, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

SIX MONTHS ENDED JUNE 30, 2011

(In thousands, except share amounts)

(Unaudited)

	Preferred Stock		Common Stock		Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Income		Total Stockholders' Equity
Balance, December 31, 2010		-		6		75,914		38,343		2,837		117,100
Sale of 340,000 shares of common stock		-		-		10,159		-		-		10,159
Sale of 40,000 shares of preferred stock, net		39,958		-		-		-		-		39,958
Exercise 5,000 stock options		-		-		53		-		-		53
Other comprehensive income		-		-		-		-		2,750		2,750
Stock based compensation expense		-		-		465		-		-		465
Net income		-		-		-		10,716		-		10,716
Balance, June 30, 2011	$	39,958	$	6	$	86,591	$	49,059	$	5,587	$	181,201

See Notes to Consolidated Financial Statements

6

SERVISFIRST BANCSHARES, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

SIX MONTHS ENDED JUNE 30, 2011 AND 2010

(In thousands) (Unaudited)

	2011			2010
OPERATING ACTIVITIES
Net income	$	10,716		$	8,034
Adjustments to reconcile net income to net cash provided by operating activities:
Deferred tax (benefit) expense		(2,452	)		(925	)
Provision for loan losses		3,725			5,075
Depreciation and amortization		566			537
Net amortization (accretion) of investments		417			331
Market value adjustment of interest rate cap		99			-
Decrease in accrued interest and dividends receivable		143			56
Stock compensation expense		465			314
Increase (decrease) in accrued interest payable		85			(139	)
Proceeds from sale of mortgage loans held for sale		67,237			60,934
Originations of mortgage loans held for sale		(63,871	)		(59,981	)
Gain on sale of securities available for sale		(666	)		(53	)
Net (gain) loss on sale of other real estate owned		(32	)		175
Write down of other real estate owned		156			487
Decrease in special prepaid FDIC insurance assessments		793			1,462
Loss on prepayment of other borrowings		738			-
Net change in other assets, liabilities, and other operating activities		(46	)		(3,190	)
Net cash provided by operating activities		18,073			13,117
INVESTMENT ACTIVITIES
Purchase of securities available for sale		(26,007	)		(20,865	)
Proceeds from maturities, calls and paydowns of securities available for sale		13,504			16,002
Purchase of securities held to maturity		(8,704	)		(1,014	)
Proceeds from maturities, calls and paydowns of securities held to maturity		43			-
Increase in loans		(169,996	)		(88,814	)
Purchase of premises and equipment		(789	)		(150	)
Purchase of restricted equity securities		(543	)		(269	)
Proceeds from sale of securities available for sale		63,270			29,999
Proceeds from sale restricted equity securities		154			-
Proceeds from sale of other real estate owned and repossessions		1,882			5,514
Additions to other real estate owned		-			(75	)
Net cash used in investing activities		(127,186	)		(59,672	)
FINANCING ACTIVITIES
Net increase (decrease) in noninterest-bearing deposits		33,478			(22,650	)
Net decrease in interest-bearing deposits		11,680			105,199
Proceeds from issuance of trust preferred securities		-			15,050
Proceeds from sale of common stock, net		10,212			-
Proceeds from sale of preferred stock, net		39,958			-
Repayment of other borrowings		(20,738	)		-
Net cash provided by financing activities		74,590			97,599
Net (decrease) increase in cash and cash equivalents		(34,523	)		51,044
Cash and cash equivalents at beginning of year		231,978			76,206
Cash and cash equivalents at end of year	$	197,455		$	127,250
SUPPLEMENTAL DISCLOSURE
Cash paid for:
Interest	$	7,932		$	7,423
Income taxes		8,136			5,058
NONCASH TRANSACTIONS
Transfers of loans from held for sale to held for investment	$	417		$	787
Other real estate acquired in settlement of loans		2,112			4,671
Internally financed sales of other real estate owned		141			495

See Notes to Consolidated Financial Statements.

7

SERVISFIRST BANCSHARES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2011

(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, 2010.

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

NOTE 2 - CASH AND CASH FLOWS

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 and warrants, as well as the potential common stock issuable upon possible conversion of the preferred securities described in Note 11 to the consolidated financial statements.

8

	Three Months Ended June 30,				Six Months Ended June 30,
	2011		2010		2011		2010
	(In Thousands, Except Shares and Per Share Data)
Earnings per share
Weighted average common shares outstanding		5,708,871		5,513,482		5,694,871		5,513,482
Net income	$	5,845	$	4,021	$	10,716	$	8,034
Basic earnings per share	$	1.02	$	0.73	$	1.88	$	1.46
Weighted average common shares outstanding		5,708,871		5,513,482		5,694,871		5,513,482
Dilutive effects of assumed conversions and exercise of stock options and warrants		997,082		886,447		962,488		646,359
Weighted average common and dilutive potential common shares outstanding		6,705,953		6,399,929		6,657,359		6,159,841
Net income, adjusted for effect of debt conversion	$	5,845	$	4,021	$	10,716	$	8,034
Effect of interest expense on covertible debt, net of tax and discretionary expenditures related to conversion		148		148		294		172
	$	5,993	$	4,169	$	11,010	$	8,206
Diluted earnings per share	$	0.89	$	0.65	$	1.65	$	1.33

NOTE 4 - SECURITIES

The amortized cost and fair value of available-for-sale and held-to-maturity securities at June 30, 2011 and December 31, 2010 are summarized as follows:

	Amortized Cost		Gross Unrealized Gain		Gross Unrealized Loss			Market Value
June 30, 2011:	(In Thousands)
Securities Available for Sale
U.S. Treasury and government sponsored agencies	$	35,411	$	1,406	$	-		$	36,817
Mortgage-backed securities		102,561		4,396		(43	)		106,914
State and municipal securities		83,078		3,051		(314	)		85,815
Corporate debt		1,025		100		-			1,125
Total	$	222,075	$	8,953	$	(357	)	$	230,671
Securities Held to Maturity
Mortgage-backed securities	$	8,365	$	161	$	-		$	8,526
State and municipal securities		5,530		192		(16	)		5,706
Total	$	13,895	$	353	$	(16	)	$	14,232
December 31, 2010:
Securities Available for Sale
U.S. Treasury and government sponsored agencies	$	90,631	$	1,887	$	(224	)	$	92,294
Mortgage-backed securities		101,709		2,783		(268	)		104,224
State and municipal securities		78,241		1,076		(1,051	)		78,266
Corporate debt		2,013		162		-			2,175
Total	$	272,594	$	5,908	$	(1,543	)	$	276,959
Securities Held to Maturity
State and municipal securities	$	5,234	$	-	$	(271	)	$	4,963
Total	$	5,234	$	-	$	(271	)	$	4,963

9

All mortgage-backed securities are with government-sponsored enterprises (GSEs) such as Federal National Mortgage Association, Government National Mortgage Association, Federal Home Loan Bank, and Federal Home Loan Mortgage Corporation.

The following table identifies, as of June 30, 2011 and December 31, 2010, the Company’s investment securities that have been in a continuous unrealized loss position for less than 12 months and those that have been in a continuous unrealized loss position for 12 or more months.  At June 30, 2011, 13 of the Company’s 446 debt securities had been in an unrealized loss position for 12 or more months. The Company does not intend to sell these securities and it is more likely than not that the Company will not be required to sell the securities before recovery of their amortized cost, which may be maturity; accordingly, the Company does not consider these securities to be other-than-temporarily impaired at June 30, 2011.  Further, the Company believes any deterioration in value of its current investment securities is attributable to changes in market interest rates and not credit quality of the issuer.

	Less Than Twelve Months					Twelve Months or More					Total
	Gross Unrealized Losses			Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses			Fair Value
	(In Thousands)
June 30, 2011:
U.S. Treasury and government sponsored agencies	$	-		$	-	$	-		$	-	$	-		$	-
Mortgage-backed securities		(43	)		2,765		-			-		(43	)		2,765
State and municipal securities		(115	)		6,419		(215	)		4,218		(330	)		10,637
Corporate debt		-			-		-			-		-			-
	$	(158	)	$	9,184	$	(215	)	$	4,218	$	(373	)	$	13,402
December 31, 2010:
U.S. Treasury and government sponsored agencies	$	(224	)	$	24,217	$	-		$	-	$	(224	)	$	24,217
Mortgage-backed securities		(268	)		16,417		-			-		(268	)		16,417
State and municipal securities		(1,034	)		33,282		(288	)		3,674		(1,322	)		36,956
Corporate debt		-			-		-			-		-			-
	$	(1,526	)	$	73,916	$	(288	)	$	3,674	$	(1,814	)	$	77,590

10

NOTE 5 – LOANS

The following table details the Company’s loans at June 30, 2011 and December 31, 2010:

	June 30, 2011			December 31, 2010
Commercial, financial and agricultural	$	634,367		$	536,620
Real estate - construction		159,564			172,055
Real estate - mortgage:
Owner-occupied commercial		303,204			270,767
1-4 family mortgage		209,439			199,236
Other mortgage		210,488			178,793
Subtotal: Real estate - mortgage		723,131			648,796
Consumer		43,912			37,347
Total Loans		1,560,974			1,394,818
Less: Allowance for loan losses		(19,516	)		(18,077	)
Net Loans	$	1,541,458		$	1,376,741
Commercial, financial and agricultural		40.64	%		38.47	%
Real estate - construction		10.22	%		12.34	%
Real estate - mortgage:
Owner-occupied commercial		19.42	%		19.41	%
1-4 family mortgage		13.42	%		14.28	%
Other mortgage		13.49	%		12.82	%
Subtotal: Real estate - mortgage		46.33	%		46.51	%
Consumer		2.81	%		2.68	%
Total Loans		100.00	%		100.00	%

Loans by credit quality indicator as of June 30, 2011 were as follows:

	Pass		Special Mention		Substandard		Doubtful		Total
Commercial, financial and agricultural	$	607,662	$	17,007	$	9,698	$	-	$	634,367
Real estate - construction		119,412		8,446		31,706		-		159,564
Real estate - mortgage:
Owner-occupied commercial		283,894		13,095		6,215		-		303,204
1-4 family mortgage		199,176		5,161		5,102		-		209,439
other mortgage		201,940		5,120		3,428		-		210,488
Total real estate mortgage		685,010		23,376		14,745		-		723,131
Consumer		43,130		-		782		-		43,912
Total	$	1,455,214	$	48,829	$	56,931	$	-	$	1,560,974

11

Loans by performance status as of June 30, 2011 were as follows:

	Performing		Nonperforming		Total
Commercial, financial and agricultural	$	633,311	$	1,056	$	634,367
Real estate - construction		142,028		17,536		159,564
Real estate - mortgage:
Owner-occupied commercial		301,923		1,281		303,204
1-4 family mortgage		208,561		878		209,439
other mortgage		210,488		-		210,488
Total real estate - mortgage		720,972		2,159		723,131
Consumer		43,538		374		43,912
Total	$	1,539,849	$	21,125	$	1,560,974

Loans by past-due status as of June 30, 2011 were as follows:

	Days Past Due Status (Accruing Loans)
	30-59		60-89		90+		Total		Nonaccrual		Current		Total Loans
Commercial, financial and agricultural	$	683	$	162	$	542	$	1,387	$	514	$	632,466	$	634,367
Real estate - construction		701		2,147		-		2,848		17,536		139,180		159,564
Real estate - mortgage:
Owner-occupied
commercial		1,603		-		-		1,603		1,281		300,320		303,204
1-4 family mortgage		1,357		-		-		1,357		878		207,204		209,439
Other mortgage		731		-		-		731		-		209,757		210,488
Total real estate - mortgage		3,691		-		-		3,691		2,159		717,281		723,131
Consumer		1		3		-		4		374		43,534		43,912
Total	$	5,076	$	2,312	$	542	$	7,930	$	20,583	$	1,532,461	$	1,560,974

12

The following table presents an analysis of the allowance for loan losses by portfolio segment as of June 30, 2011 and December 31, 2010.  The total allowance for loan losses is disaggregated into those amounts associated with loans individually evaluated and those associated with loans collectively evaluated.

	Commercial, financial and agricultural			Real estate - construction			Real estate - mortgage			Consumer			Unallocated			Total
	Three Months Ended June 30, 2011
Allowance for loan losses:
Balance at March 31, 2011	$	6,226		$	6,285		$	2,523		$	603		$	3,589		$	19,226
Chargeoffs		(310	)		(1,021	)		(15	)		(5	)		-			(1,351	)
Recoveries		-			74			1			72			-			147
Provision		(107	)		1,130			676			(104	)		(101	)		1,494
Balance at June 30, 2011		5,809			6,468			3,185			566			3,488			19,516
	Six Months Ended June 30, 2011
Allowance for loan losses:
Balance at December 31, 2010	$	5,348		$	6,373		$	2,443		$	749		$	3,164		$	18,077
Chargeoffs		(860	)		(1,321	)		(15	)		(329	)		-			(2,525	)
Recoveries		-			165			1			73			-			239
Provision		1,321			1,251			756			73			324			3,725
Balance at June 30, 2011		5,809			6,468			3,185			566			3,488			19,516
	June 30, 2011
Individually evaluated for impairment	$	1,228		$	2,497		$	896		$	324		$	-		$	4,945
Collectively evaluated for impairment		4,581			3,971			2,289			242			3,488			14,571
Loans:
Ending balance	$	634,367		$	159,564		$	723,131		$	43,912					$	1,560,974
Individually evaluated for impairment		9,698			31,706			14,745			782						56,931
Collectively evaluated for impairment		624,669			127,858			708,386			43,130						1,504,043
	December 31, 2010
	Commercial, financial and agricultural			Real estate – construction			Real estate – mortgage			Consumer			Unallocated			Total
Allowance for loan losses		5,348			6,373			2,443			749			3,164			18,077
Individually evaluated for impairment	$	1,602		$	1,855		$	415		$	554		$	-		$	4,426
Collectively evaluated for impairment		3,746			4,518			2,028			195			3,164			13,651
Loans:
Ending balance	$	536,620		$	172,055		$	648,796		$	37,347					$	1,394,818
Individually evaluated for impairment		14,018			28,710			15,093			1,319						59,140
Collectively evaluated for impairment		522,602			143,345			633,703			36,028						1,335,678

The following tables present details of the Company’s impaired loans as of June 30, 2011 and December 31, 2010, respectively.  Loans which have been fully charged off do not appear in the tables.

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June 30, 2011
							For the three months ended June 30, 2011				For the six months ended June 30, 2011
	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized in Period		Average Recorded Investment		Interest Income Recognized in Period
With no allowance recorded:
Commercial, financial and agricultural	$	1,790	$	2,563	$	-	$	1,870	$	21	$	1,829	$	40
Real estate - construction		18,631		19,124		-		18,823		107		18,975		215
Real estate - mortgage:
Owner-occupied commercial		3,006		3,156		-		3,017		39		3,026		92
1-4 family mortgage		503		503		-		503		3		504		7
Other mortgage		2,177		2,177		-		2,130		29		2,025		60
Total real estate - mortgage		5,686		5,836		-		5,650		71		5,555		159
Consumer		-		-		-		-		-		-		-
Total with no allowance recorded		26,107		27,523		-		26,343		199		26,359		414
With an allowance recorded:
Commercial, financial and agricultural		5,999		5,999		1,228		6,720		92		6,886		174
Real estate - construction		12,278		12,573		2,497		12,559		33		12,849		104
Real estate - mortgage:
Owner-occupied commercial		2,858		2,858		84		2,822		51		2,811		69
1-4 family mortgage		3,608		3,608		812		3,705		58		3,738		77
Other mortgage		340		340		-		342		7		341		12
Total real estate - mortgage		6,806		6,806		896		6,869		116		6,890		158
Consumer		547		567		324		547		1		631		3
Total with allowance recorded		25,630		25,945		4,945		26,695		242		27,256		439
Total Impaired Loans:
Commercial, financial and agricultural		7,789		8,562		1,228		8,590		113		8,715		214
Real estate - construction		30,909		31,697		2,497		31,382		140		31,824		319
Real estate - mortgage:
Owner-occupied commercial		5,864		6,014		84		5,839		90		5,837		161
1-4 family mortgage		4,111		4,111		812		4,208		61		4,242		84
Other mortgage		2,517		2,517		-		2,472		36		2,366		72
Total real estate - mortgage		12,492		12,642		896		12,519		187		12,445		317
Consumer		547		567		324		547		1		631		3
Total impaired loans	$	51,737	$	53,468	$	4,945	$	53,038	$	441	$	53,615	$	853

14

December 31, 2010
	Recorded Investment		Unpaid Principal Balance		Related Allowance
With no allowance recorded:
Commercial, financial and agricultural	$	2,345	$	2,930	$	-
Real estate - construction		10,532		12,705		-
Real estate - mortgage:
Owner-occupied commercial		1,614		1,801		-
1-4 family mortgage		511		511		-
Other mortgage		1,817		1,817		-
Total real estate - mortgage		3,942		4,129		-
Consumer		289		289		-
Total with no allowance recorded		17,108		20,053		-
With an allowance recorded:
Commercial, financial and agricultural		9,190		9,190		1,602
Real estate - construction		18,178		18,428		1,855
Real estate - mortgage:
Owner-occupied commercial		3,373		3,373		55
1-4 family mortgage		2,995		2,995		360
Other mortgage		-		-		-
Total real estate - mortgage		6,368		6,368		415
Consumer		704		704		554
Total with allowance recorded		34,440		34,690		4,426
Total Impaired Loans:
Commercial, financial and agricultural		11,535		12,120		1,602
Real estate - construction		28,710		31,133		1,855
Real estate - mortgage:
Owner-occupied commercial		4,988		5,174		55
1-4 family mortgage		3,506		3,506		360
Other mortgage		1,817		1,817		-
Total real estate - mortgage		10,311		10,497		415
Consumer		993		993		554
Total impaired loans	$	51,549	$	54,743	$	4,426

At June 30, 2011 and December 31, 2010, loans classified as troubled debt restructurings (“TDRs”) totaled $5.1 million and $2.4 million, respectively.  At June 30, 2011, the Company had a related allowance for loan losses of $465,000 allocated to these TDRs, compared to $486,000 at December 31, 2010.  All loans classified as TDRs as of June 30, 2011 are performing as agreed under the terms of their restructured plans.

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NOTE 6 - EMPLOYEE AND DIRECTOR BENEFITS

Stock Options

At June 30, 2011, the Company had stock-based compensation plans, as described below. The compensation cost that has been charged to earnings for the plans was approximately $240,000 and $465,000 for three and six months ended June 30, 2011 and $180,000 and $314,000 for the three and six months ended June 30, 2010, respectively.

The Company’s 2005 Amended and Restated Stock Option Plan allows for the grant of stock options to purchase up to 1,025,000 shares of the Company’s common stock. The Company’s 2009 Stock Incentive Plan authorizes the grant of up to 425,000 shares and allows for the issuance of Stock Appreciation Rights, Restricted Stock, Stock Options, Non-stock Share Equivalents, Performance Shares or Performance Units.  Both plans allow for the grant of incentive stock options and non-qualified stock options, and awards are generally granted with an exercise price equal to the estimated fair market value of the Company’s common stock at the date of grant. The maximum term of the options granted under the plans is ten years.

The Company has granted non-plan options to certain persons representing key business relationships to purchase up to an aggregate amount of 55,000 shares of the Company’s common stock at between $15.00 and $20.00 per share for 10 years. These options are non-qualified and not part of either Plan.

The Company estimates the fair value of each stock option award using a Black-Scholes-Merton valuation model that uses 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.

	2011			2010
Expected volatility		29.00	%		25.00	%
Expected dividends		0.50	%		0.50	%
Expected term (in years)	7 years			7 years
Risk-free rate		2.70	%		2.32	%

The weighted average grant-date fair value of options granted during the six months ended June 30, 2011 and 2010 was $8.54 and $7.43, respectively.

16

The following table summarizes stock option activity during the six months ended June 30, 2011 and 2010:

	Shares			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (years)		Aggregate Intrinsic Value
								(In Thousands)
Six Months Ended June 30, 2011:
Outstanding at January 1, 2011		881,000		$	15.65		6.9	$	8,238
Granted		166,500			26.05		9.6		-
Exercised		(5,000	)		10.50		4.4		-
Forfeited		-			-		-		-
Outstanding at June 30, 2011		1,042,500			17.34		6.2	$	13,203
Exercisable at June 30, 2011		332,459		$	12.71		4.8	$	5,748
Six Months Ended June 30, 2010:
Outstanding at January 1, 2010		833,500		$	15.00		6.8	$	8,333
Granted		11,000			25.00		9.6		-
Exercised		-			-		-		-
Forfeited		(10,000	)		15.00		6.7		-
Outstanding at June 30, 2010		834,500			15.13		6.4	$	8,238
Exercisable at June 30, 2010		249,696		$	11.33		5.5	$	3,413

Restricted Stock

The Company has issued restricted stock to a certain executive officer and five other employees, and currently has 26,000 non-vested shares issued.  The value of restricted stock awards 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, which is five years from the date of grant.  As of June 30, 2011, there was $510,000 of total unrecognized compensation cost related to non-vested restricted stock.  The cost is expected to be recognized evenly over the remaining 3.5 years of the restricted stock’s vesting period.

Stock Warrants

In recognition of the efforts and financial risks undertaken by the organizers of ServisFirst Bank (the “Bank”) in 2005, the Bank granted warrants to organizers to purchase a total 60,000 shares of common stock at a price of $10, which was the fair market value of the Bank’s common stock at the date of the grant. The warrants became warrants to purchase a like number of shares of the Company’s common stock upon the formation of the Company as a holding company for the Bank.  The warrants vest in equal annual increments over a three-year period commencing on the first anniversary date of the Bank’s incorporation and will terminate on the tenth anniversary of the incorporation date. The total number of these warrants outstanding at June 30, 2011 and 2010 was 60,000.

The Company issued warrants for 75,000 shares of common stock at a price of $25 per share in the third quarter of 2008. These warrants were issued in connection with the trust preferred securities that are discussed in detail in Note 10.

17

The Company issued warrants for 15,000 shares of common stock at a price of $25 per share in the second quarter of 2009.  These warrants were issued in connection with the issuance and sale of the Bank’s 8.25% Subordinated Note discussed in detail in Note 12.

NOTE 7 - DERIVATIVES

During 2008, the Company entered into interest rate swaps (“swaps”) to facilitate customer transactions and meet customer financing needs. Upon entering into these swaps, the Company entered into offsetting positions with a regional correspondent bank in order to minimize the risk to the Company.  As of June 30, 2011, the Company was party to two swaps with notional amounts totaling approximately $11.7 million with customers, and two swaps with notional amounts totaling approximately $11.7 million with a regional correspondent bank.  These swaps qualify as derivatives, but are not designated as hedging instruments.  The Company has recorded the value of these swaps at $724,000 in offsetting entries in other assets and other liabilities.

During 2010 the Company entered into an interest rate cap with a notional value of $100 million.  The cap has a strike rate of 2.00% and is indexed to the three month London Interbank Offered Rate (“LIBOR”).  The cap does not qualify for hedge accounting treatment, and is marked to market, with changes in market value reflected in interest expense.  The Company recognized $38,000 and $99,000 of interest expense related to marking the cap to market for the three and six months ended June 30, 2011, respectively.

The Company has entered into agreements with secondary market investors to deliver loans on a “best efforts delivery” basis. When a rate is committed to a borrower, it is based on the best price that day and locked with the investor for the customer for a 30-day period. In the event the loan is not delivered to the investor, the Company has no risk or exposure with the investor. The interest rate lock commitments related to loans that are originated for later sale are classified as derivatives. The fair values of the Company’s agreements with investors and rate lock commitments to customers as of June 30, 2011 and December 31, 2010 were not material.

NOTE 8 - RECENT ACCOUNTING PRONOUNCEMENTS

In April 2011, the FASB issued ASU No. 2011-02, Receivables (Topic 310): A Creditor’s Determination of Whether a Restructuring Is a Troubled Debt Restructuring, which provides guidance on determining whether a restructuring of a receivable meets the criteria to be considered a TDR.  The new guidance is required to be adopted for the first interim or annual reporting period beginning after June 15, 2011, and is to be applied retrospectively to the beginning of the annual reporting period of adoption.  The adoption of this ASU is not expected to have a material impact to the Company’s financial position or results of operations.

In April 2011, the FASB issued ASU No. 2011-03, Transfers and Servicing (Topic 860): Reconsideration of Effective Control for Repurchase Agreements, which removes from the assessment of effective control the criterion relating to the transferor’s ability to repurchase or redeem financial assets on substantially the agreed-upon terms, even in the event of default by the transferee.  The amendments in this ASU also eliminate the requirement to demonstrate that the transferor possesses adequate collateral to fund substantially all the cost of purchasing replacement assets.  The amendments in this ASU are effective for interim and annual periods beginning after December 31, 2011, with prospective application to transactions or modifications of existing transactions that occur on or after the effective date.  Early adoption is not permitted.  The Company will adopt these amendments when required, and does not anticipate that the ASU will have an impact on its financial position or results of operations.

18

In May 2011, The FASB issued ASU No. 2011-04, Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRS, which outlines the collaborative effort of the FASB and the International Accounting Standards Board (“IASB”) to consistently define fair value and to come up with a set of consistent disclosures for fair value.  The amendments in this ASU explain how to measure fair value. They do not require additional fair value measurements and are not intended to establish valuation standards or affect valuation practices outside of financial reporting.  The amendments in this ASU are to be applied prospectively.  For public entities, the amendments are effective for interim and annual periods beginning after December 31, 2011.  Early application is not permitted.  The Company will adopt these amendments when required, and does not believe the application will have a material effect on its financial position or results of operations.

In June 2011, the FASB issued ASU No. 2011-05, Comprehensive Income (Topic 220): Presentation of Comprehensive Income, which amends existing standards to allow an entity the option to present the total of comprehensive income, the components of net income, and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements.  Under both options, an entity is required to present each component of net income along with total net income, each component of other comprehensive income along with a total for other comprehensive income, and a total amount for comprehensive income.  Any changes pursuant to the options allowed in the amendments should be applied retrospectively.  For public entities, the amendments are effective for fiscal years, and interim periods within those years, beginning after December 15, 2011.  Early adoption is permitted.  The Company is evaluating its timing of adoption, but will adopt it retrospectively by the effective date.

NOTE 9 - 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.

19

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 prices obtained from independent vendors.  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, securities are classified in Level 3 of the hierarchy.

Interest Rate Swap and Cap Agreements – The fair value is estimated by a third party using inputs that are observable or that can be corroborated by observable market data and, therefore, are classified within Level 2 of the hierarchy.  These fair value estimations include primarily market observable inputs such as yield curves and option volatilities, and include the value associated with counterparty credit risk.

Impaired Loans- Impaired loans are measured and reported at fair valuewhen full payment under the loan terms is not expected.  Impaired loans are carried at the present value of estimated future cash flows using the loan’s existing rate or the fair value of the collateral if the loan is collateral-dependent.  Impaired loans are subject to nonrecurring fair value adjustment upon initial recognition or subsequent impairment.  A portion of the allowance for loan losses is allocated to impaired loans if the value of such loans is deemed to be less than the unpaid balance.  The amount recognized as an impairment charge related to impaired loans that are measured at fair value on a nonrecurring basis was $1,508,000 and $3,135,000 during the three and six months ended June 30, 2011, respectively, and $1,244,000 and $3,852,000 during the three and six months ended June 30, 2010, respectively.  Impaired loans are classified within Level 3 of the hierarchy.

Other real estate owned – Other real estate assets (“OREO”) acquired through, or in lieu of, foreclosure are held for sale and are initially recorded at the lower of cost or fair value, less selling costs.  Any write-downs to fair value at the time of transfer to OREO are charged to the allowance for loan losses subsequent to foreclosure.  Values are derived from appraisals of underlying collateral and discounted cash flow analysis.  The amount charged to earnings was $144,000 and $91,000 during the three and six months ended June 30, 2011 and $558,000 and $659,000 during the three and six months ended June 30, 2010, 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.

20

The following table presents the Company’s financial assets and financial liabilities carried at fair value on a recurring basis as of June 30, 2011 and December 31, 2010:

	Fair Value Measurements at June 30, 2011 Using
	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
Assets Measured on a Recurring Basis:	(In Thousands)
Available-for-sale securities	$	-	$	230,671	$	-	$	230,671
Interest rate swap agreements		-		724		-		724
Interest rate cap		-		16				16
Total assets at fair value	$	-	$	231,411	$	-	$	231,411
Liabilities Measured on a Recurring Basis:
Interest rate swap agreements	$	-	$	724	$	-	$	724

	Fair Value Measurements at December 31, 2010 Using
	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
Assets Measured on a Recurring Basis:	(In Thousands)
Available-for-sale securities	$	-	$	276,959	$	-	$	276,959
Interest rate swap agreements		-		803				803
Interest rate cap		-		115		-		115
Total assets at fair value	$	-	$	277,877	$	-	$	277,877
Liabilities Measured on a Recurring Basis:
Interest rate swap agreements	$	-	$	803	$	-	$	803

21

The following table presents the Company’s financial assets and financial liabilities carried at fair value on a nonrecurring basis as of June 30, 2011:

	Fair Value Measurements at June 30, 2011 Using
	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
Assets Measured on a Nonrecurring Basis:	(In Thousands)
Impaired loans	$	-	$	-	$	6,417	$	6,417
Other real estate owned		-		-		6,931		6,931
Total assets at fair value	$	-	$	-	$	13,348	$	13,348

	Fair Value Measurements at December 31, 2010 Using
	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
Assets Measured on a Nonrecurring Basis:	(In Thousands)
Impaired loans	$	-	$	-	$	35,183	$	35,183
Other real estate owned		-		-		6,966		6,966
Total assets at fair value	$	-	$	-	$	42,149	$	42,149

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.

22

The carrying amount and estimated fair value of the Company’s financial instruments, including those that are not measured and reported at fair value on a recurring basis or nonrecurring basis, at June 30, 2011 and December 31, 2010 were as follows:

	June 30, 2011				December 31, 2010
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
	(In Thousands)
Financial Assets:
Cash and cash equivalents	$	197,455	$	197,455	$	231,978	$	231,978
Investment securities available for sale		230,671		230,671		276,959		276,959
Investment securities held to maturity		13,895		14,232		5,234		4,963
Restricted equity securities		3,899		3,899		3,510		3,510
Mortgage loans held for sale		4,092		4,092		7,875		7,875
Loans, net		1,541,458		1,545,710		1,376,741		1,388,154
Accrued interest and dividends receivable		6,847		6,847		6,990		6,990
Derivatives		740		740		918		918
Financial Liabilities:
Deposits	$	1,803,874	$	1,807,300	$	1,758,716	$	1,761,906
Borrowings		4,945		5,243		24,937		25,717
Trust preferred securities		30,490		27,384		30,420		27,989
Accrued interest payable		983		983		898		898
Derivatives		724		724		803		803

The following methods and assumptions were used by the Company in estimating its fair value disclosures for financial instruments:

Cash and cash equivalents:  The carrying amounts reported in the statements of financial condition for cash and cash equivalents approximate those assets’ fair values.

Investment securities:  Fair values for investment securities are based on quoted market prices, where available.  If a quoted market price is not available, fair value is based on quoted market prices of comparable instruments.

Restricted equity securities:  Fair values for other investments are considered to be their cost.

Loans:  For variable-rate loans that re-price frequently and with no significant change in credit risk, fair value is based on carrying amounts.  The fair value of other loans (for example, fixed-rate commercial real estate loans, mortgage loans, and industrial loans) is estimated using discounted cash flow analysis, based on interest rates currently being offered for loans with similar terms to borrowers of  similar credit quality.  Loan fair value estimates include judgments regarding future expected loss experience and risk characteristics.  The method of estimating fair value does not incorporate the exit-price concept of fair value as prescribed by FASB Accounting Standards Compilation (ASC) 820 and generally produces a higher value than an exit-price approach.  Fair value for impaired loans is estimated using discounted cash flow analysis, or underlying collateral values, where applicable.

Mortgage loans held for sale:  Loans are committed to be delivered to investors on a “best efforts delivery” basis within 30 days of origination.  Due to this short turn-around time, the carrying amounts of the Company’s agreements approximate their fair values.

23

Derivatives:  The fair values of the derivative agreements are based on quoted prices from an outside third party.

Accrued interest and dividends receivable:  The carrying amount of accrued interest and dividends receivable approximates its fair value.

Deposits:  The fair values disclosed for demand deposits are, by definition, equal to the amount payable on demand at the reporting date (that is, their carrying amounts).  The carrying amounts of variable-rate, fixed-term money market accounts and certificates of deposit approximate their fair values.  Fair values for fixed-rate certificates of deposit are estimated using a discounted cash flow calculation.

Federal funds purchased:  The carrying amounts of federal funds purchased approximate their market value.

Other borrowings:  The fair values of other borrowings are estimated using discounted cash flow analysis, based on interest rates currently being offered by the Federal Home Loan Bank for borrowings of similar terms as those being valued.

Trust preferred securities:  The fair values of trust preferred securities are estimated using a discounted cash flow analysis, based on interest rates currently being offered on the best alternative debt available at the measurement date.

Accrued interest payable:  The carrying amount of accrued interest payable approximates its fair value.

Loan commitments:  The fair values of the Company’s off-balance sheet financial instruments are based on fees currently charged to enter into similar agreements.  Since the majority of the Company’s other off-balance-sheet instruments consist of non-fee-producing, variable-rate commitments, the Company has determined they do not have a distinguishable fair value.

NOTE 10 - SUBORDINATED DEFERRABLE INTEREST DEBENTURES

On September 2, 2008, ServisFirst Capital Trust I, a subsidiary of the Company (the “2008 Trust”), sold 15,000 shares of its 8.5% trust preferred securities to accredited investors for $15,000,000 or $1,000 per share and 463,918 shares of its common securities to the Company for $463,918 or $1.00 per share. The 2008 Trust invested the $15,463,918 of the proceeds from such sale in the Company’s 8.5% junior subordinated deferrable interest debenture due September 1, 2038 in the principal amount of $15,463,918 (the “Debenture”). The Debenture bears a fixed rate of interest at 8.5% per annum and is subordinate and junior in right of payment to all of the Company’s senior debt; provided, however, the Company will not incur any additional senior debt in excess of 0.5% of the Company’s average assets for the fiscal year immediately preceding, unless such incurrence is approved by a majority of the holders of the outstanding trust preferred securities.

Holders of the trust preferred securities are entitled to receive distributions accruing from the original date of issuance. The distributions are payable quarterly in arrears on December 1, March 1, June 1 and September 1 of each year, commencing December 1, 2008. The distributions accrue at an annual fixed rate of 8.5%. Payments of distributions on the trust preferred securities will be deferred in the event interest payments on the Debenture is deferred, which may occur at any time and from time to time, for up to 20 consecutive quarterly  periods.  During any deferral period, the Company may not pay dividends or make certain other distributions or payments as provided for in the Indenture.  If payments are deferred, holders accumulate additional distributions thereon at 8.5%, compounded quarterly, to the extent permitted by law.

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In addition, the Company issued a total of 75,000 warrants, each with the right to purchase one share of the Company’s common stock for a purchase price of $25.00. The warrants were issued in increments of 500 for each $100,000 of trust preferred securities purchased. Each warrant is exercisable for a period beginning upon its date of issuance and ending upon the later to occur of either (i) September 1, 2013 or (ii) 60 days following the date upon which the Company’s common stock becomes listed for trading upon a “national securities exchange” as defined under the Securities Exchange Act of 1934. The Company estimated the fair value of each warrant using a Black-Scholes-Merton valuation model and determined the fair value per warrant to be $5.65. This total value of $423,000 was recorded as a discount and reduced the net book value of the debentures to $15,052,000 with an offsetting increase to the Company’s additional paid-in capital. The discount will be amortized over a three-year period.

The trust preferred securities are subject to mandatory redemption upon repayment of the Debenture at its maturity, September 1, 2038, or its earlier redemption. The Debenture is redeemable by the Company (i) prior to September 1, 2011, in whole upon the occurrence of a Special Event, as defined in the Indenture, or (ii) in whole or in part on or after September 1, 2011 for any reason. In the event of the redemption of the trust preferred securities prior to September 1, 2011, the holders of the trust preferred securities will be entitled to $1,050 per share, plus accumulated and unpaid distributions thereon (including accrued interest thereon), if any, to the date of payment. In the event of the redemption of the trust preferred securities on or after September 1, 2011, the holders of the trust preferred securities will be entitled to receive $1,000 per share plus accumulated and unpaid distributions thereon (including accrued interest thereon), if any, to the date of payment.

The Company has the right at any time to terminate the 2008 Trust and cause the Debenture to be distributed to the holders of the trust preferred securities in liquidation of the Trust. This right is optional and wholly within the Company’s discretion as set forth in the Indenture.

Payment of periodic cash distributions and payment upon liquidation or redemption with respect to the trust preferred securities are guaranteed by the Company to the extent of funds held by the Trust (the “Preferred Securities Guarantee”). The Preferred Securities Guarantee, when taken together with the Company’s other obligations under the debentures, constitutes a full and unconditional guarantee, on a subordinated basis, by the Company of payments due on the trust preferred securities.

The Company is required by the Federal Reserve Board to maintain certain levels of capital for bank regulatory purposes. The Federal Reserve Board has determined that certain cumulative preferred securities having the characteristics of trust preferred securities qualify as minority interests, which is included in Tier 1 capital for bank and financial holding companies. In calculating the amount of Tier 1 qualifying capital, the trust preferred securities can only be included up to the amount constituting 25% of total Tier 1 capital elements (including trust preferred securities). Such Tier 1 capital treatment provides the Company with a more cost-effective means of obtaining capital for bank regulatory purposes than if the Company were to issue preferred stock.

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NOTE 11 – JUNIOR SUBORDINATED MANDATORY CONVERTIBLE DEFERRABLE INTEREST DEBENTURES DUE MARCH 15, 2040

On February 9, 2010 the Company established a new Delaware statutory trust subsidiary, ServisFirst Capital Trust II (the “2010 Trust”), which issued 15,000 shares of its 6.0% Mandatory Convertible Trust Preferred Securities (the “Preferred Securities”) for $15,000,000, or $1,000 per Preferred Security, on March 15, 2010. The 2010 Trust simultaneously issued 50,000 shares of its common securities to the Company for a purchase price of $50,000, or $1.00 per share, which together with the Preferred Securities, constitutes all of the issued and outstanding securities of the 2010 Trust (collectively, the “Trust Securities”).  The 2010 Trust invested all of the proceeds from the sale of the Trust Securities in the Company’s 6.0% Junior Subordinated Mandatory Convertible Deferrable Interest Debentures due March 15, 2040 in the principal amount of $15,050,000 (the “Subordinated Debentures”).  The Preferred Securities were offered and sold to accredited investors in a private placement.

Holders of the Preferred Securities are entitled to receive distributions accruing from March 15, 2010, and payable quarterly in arrears on March 15, June 15, September 15 and December 15 of each year, commencing June 15, 2010 unless the Company defers interest payments on the Subordinated Debentures.  Distributions accrue at an annual rate equal to 6.0% of the liquidation amount of $1,000 per Preferred Security.  The rate and the distribution dates for the Preferred Securities correspond to the interest rate and payment dates on the Subordinated Debentures, which constitute substantially all the assets of the 2010 Trust.  As a result, if principal or interest is not paid on the Subordinated Debentures, no corresponding amounts will be paid on the Preferred Securities.  The 2010 Trust also pays a distribution on the common securities at an annual rate of 6.0% of the purchase price of the common securities, but such payments are financially immaterial since they simply represent a return of funds to the Company.

The Subordinated Debentures are subordinate and junior in right of payment to all of the Company’s senior debt, as defined in the Indenture (as defined below); provided, however, that, while any of the Preferred Securities remain outstanding, the Company shall not incur any additional senior debt in excess of 0.5% of the Company’s average assets for the fiscal year immediately preceding, unless approved by the holders of a majority of the outstanding Preferred Securities.  The Company has the right to defer payments of interest on the Subordinated Debentures from time to time, for up to 20 consecutive quarterly periods for each deferral period.  During any deferral period, the Company may not (i) pay dividends on or redeem any of its capital stock, (ii) pay principal of or interest on any debt securities ranking pari passu with or subordinate to the Subordinated Debentures or (iii) make any guaranty payments with respect to any guaranty of the debt securities of any of the Company’s subsidiaries if such guaranty ranks pari passu with or junior in right of payment to the Subordinated Debentures.

If not previously redeemed or converted into common stock of the Company, the Preferred Securities will automatically and mandatorily convert into common stock of the Company on March 15, 2013 at a conversion price of $25 per share of common stock.  In addition to such mandatory conversion, the Preferred Securities may be converted into common stock of the Company at the option of the holder at any time prior to the earliest to occur of maturity, redemption or mandatory conversion at the same conversion price.

The Preferred Securities are subject to mandatory redemption upon repayment of the Subordinated Debentures at their stated maturity (as defined in the Indenture), or upon earlier redemption of the Subordinated Debentures. The Subordinated Debentures are redeemable by the Company at any time in whole, but not in part, upon the occurrence of a special event, as defined in the Indenture.

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The Company has the right at any time to terminate the 2010 Trust and cause the Subordinated Debentures to be distributed to the holders of the Preferred Securities in liquidation of the 2010 Trust. This right is optional and wholly within the Company’s discretion.

The Company is required by the Federal Reserve Board to maintain certain levels of capital for bank regulatory purposes. The Federal Reserve Board has determined that certain cumulative preferred securities having the characteristics of trust preferred securities qualify as minority interests, which is included in Tier 1 capital for bank and financial holding companies.  In calculating the amount of Tier 1 qualifying capital, the trust preferred securities can only be included up to the amount constituting 25% of total Tier 1 capital elements (including trust preferred securities). Such Tier 1 capital treatment provides the Company with a more cost-effective means of obtaining capital for bank regulatory purposes than if the Company were to issue preferred stock.

NOTE 12 - SUBORDINATED NOTE DUE SEPTEMBER 1, 2016

On June 23, 2009, the Bank issued $5,000,000 aggregate principal amount of its 8.25% Subordinated Note due June 1, 2016 to an accredited investor at 100% of par.  The note is subordinate and junior in right of payment upon any liquidation of the Bank as to principal, interest and premium to obligations to the Bank’s depositors and other obligations to its general and secured creditors.  Interest payments are due and payable on each September 1, December 1, March 1 and June 1, commencing on September 1, 2009.  Interest accrues at an annual rate of 8.25%.  The proceeds from the note payable are included in Tier 2 capital of the Bank and the Company.

In addition, the Company issued to the investor a total of 15,000 warrants, each representing the right to purchase one share of the Company’s common stock for a purchase price of $25.00. Each warrant is exercisable for a period beginning upon its date of issuance and ending on June 1, 2016.  The Company estimated the fair value of each warrant using a Black-Scholes-Merton valuation model and determined the fair value per warrant to be $5.41. This total value of $86,000 was recorded as a discount and reduced the net book value of the debentures to $4,914,000 with an offsetting increase to the Company’s additional paid-in capital. The discount will be amortized over a five-year period.

NOTE 13 – PARTICIPATION IN THE SMALL BUSINESS LENDING FUND OF THE U.S. TREASURY DEPARTMENT

On June 21, 2011, the Company entered into a Securities Purchase Agreement with the Secretary of the Treasury, pursuant to which the Company issued and sold to the Treasury 40,000 shares of its Senior Non-Cumulative Perpetual Preferred Stock, Series A, having a liquidation preference of $1,000 per share, for aggregate proceeds of $40,000,000.  The issuance was pursuant to the Treasury’s Small Business Lending Fund program, a $30 billion fund established under the Small Business Jobs Act of 2010, which encourages lending to small businesses by providing capital to qualified community banks with assets of less than $10 billion.  The Series A Preferred Stock is entitled to receive non-cumulative dividends payable quarterly on each January 1, April 1, July 1 and October 1, beginning October 1, 2011.  The dividend rate, which is calculated on the aggregate Liquidation Amount, has been initially set at 1% per annum based upon the current level of “Qualified Small Business Lending” (“QSBL”) by the Bank.  The dividend rate for future dividend periods will be set based upon the percentage change in qualified lending between each dividend period and the baseline QSBL level established at the time the Agreement was entered into.  Such dividend rate may vary from 1% per annum to 5% per annum for the second through tenth dividend periods, from 1% per annum to 7% per annum for the eleventh through the first half of the nineteenth dividend periods.  If the Series A Preferred Stock remains outstanding for more than four-and-one-half years, the dividend rate will be fixed at 9%.  Prior to that time, in general, the dividend rate decreases as the level of the Bank’s QSBL increases.  Such dividends are not cumulative, but the Company may only declare and pay dividends on its common stock (or any other equity securities junior to the Series A Preferred Stock) if it has declared and paid dividends for the current dividend period on the Series A Preferred Stock, and will be subject to other restrictions on its ability to repurchase or redeem other securities.  In addition, if (i) the Company has not timely declared and paid dividends on the Series A Preferred Stock for six dividend periods or more, whether or not consecutive, and (ii) shares of Series A Preferred Stock with an aggregate liquidation preference of at least $25,000,000 are still outstanding, the Treasury (or any successor holder of Series A Preferred Stock) may designate two additional directors to be elected to the Company’s Board of Directors.

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As more completely described in the Certificate of Designation, holders of the Series A Preferred Stock have the right to vote as a separate class on certain matters relating to the rights of holders of Series A Preferred Stock and on certain corporate transactions.  Except with respect to such matters and, if applicable, the election of the additional directors described above, the Series A Preferred Stock does not have voting rights.

The Company may redeem the shares of Series A Preferred Stock, in whole or in part, at any time at a redemption price equal to the sum of the Liquidation Amount per share and the per-share amount of any unpaid dividends for the then-current period, subject to any required prior approval by the Company’s primary federal banking regulator.

NOTE 14 – PRIVATE PLACEMENT OF COMMON STOCK

On June 30, 2011, the Company completed the sale of 340,000 shares of its common stock in a private placement to 105 accredited investors and 20 non-accredited investors for $30.00 per share, for aggregate proceeds of $10,200,000.  The private placement was in conjunction with the Company’s entry into the Pensacola, Florida market.  The offering, completed on June 30, 2011, was exempt from registration under the Securities Act of 1933, and no underwriter or placement agent was involved in the private placement.

NOTE 15 – SUBSEQUENT EVENTS

The Company has evaluated all subsequent events through the date of this filing to ensure that this Form 10-Q includes appropriate disclosure of events both recognized in the financial statements as of June 30, 2011, and events which occurred subsequent to June 30, 2011 but were not recognized in the financial statements.  As of the date of this filing, there were no subsequent events which required recognition or disclosure.

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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 financial statements as of June 30, 2011 and for the three and six months ended June 30, 2011 and 2010.

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,” “would,” “might” and similar expressions often signify forward-looking statements. Such statements involve inherent risks and uncertainties. ServisFirst Bancshares, Inc. cautions that such forward-looking statements, wherever they occur in this press release or in other statements attributable to ServisFirst Bancshares, Inc., are necessarily estimates reflecting the judgment of ServisFirst Bancshares, Inc.’s senior management and involve a number of risks and uncertainties that could cause actual results to differ materially from those suggested by the forward-looking statements.  Such forward-looking statements should, therefore, be considered in light of various factors that could affect the accuracy of such forward-looking statements, including: general economic conditions, especially in the credit markets and in the Southeast; the performance of the capital markets; changes in interest rates, yield curves and interest rate spread relationships; changes in accounting and tax principles, policies or guidelines; changes in legislation or regulatory requirements; changes in our loan portfolio and the deposit base, possible changes in laws and regulations and governmental monetary and fiscal policies, including, but not limited to, economic stimulus initiatives and so-called “bailout” initiatives; the cost and other effects of legal and administrative cases and similar contingencies; possible changes in the creditworthiness of customers and the possible impairment of the collectability of loans and the value of collateral; the effect of natural disasters, such as hurricanes, 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 “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 contained herein. Accordingly, you should not place undue reliance on any forward-looking statements, which speak only as of the date made.

Business

We are a bank holding company under the Bank Holding Company Act of 1956 incorporated in Delaware and headquartered at 850 Shades Creek Parkway, Birmingham, Alabama 35209 (Jefferson County). Through the Bank, we operate ten full-service banking offices, with nine offices located in Jefferson, Shelby, Madison, Montgomery and Houston counties in the metropolitan statistical areas (“MSAs”) of Birmingham-Hoover, Huntsville, Montgomery and Dothan, Alabama, and one office located in Escambia County in the Pensacola-Ferry Pass-Brent, Florida MSA, which opened April 1, 2011.  These MSAs constitute our primary service areas.

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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 (including negotiable orders of withdrawal, or NOW accounts). 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 (including NOW accounts), interest paid on our other borrowings, employee compensation, office expenses and other overhead expenses.

Overview

As of June 30, 2011, we had consolidated total assets of $2,024,597,000, an increase of $89,431,000, or 4.62%, from $1,935,166,000 at December 31, 2010.  Total loans were $1,560,974,000 at June 30, 2011, up $166,156,000, or 11.91%, over $1,394,818,000 at December 31, 2010. Total deposits were $1,803,874,000 at June 30, 2011, an increase of $45,158,000, or 2.57%, from $1,758,716,000 at December 31, 2010.

Net income for the quarter ended June 30, 2011 was $5,845,000, an increase of $1,824,000, or 45.36%, from $4,021,000 for the quarter ended June 30, 2010.  Basic and fully diluted earnings per common share were $1.02 and $0.89, respectively, for the three months ended June 30, 2011, compared with $0.73 and $0.65, respectively, for the same period in 2010.  This increase was primarily attributable to a $343,986,000, or 22.47%, increase in average earning assets from the second quarter of 2010 to the second quarter of 2011, and a $1,043,000, or 41.11%, decrease in the provision for loan losses from the second quarter of 2010 to the second quarter of 2011.

Net income for the six months ended June 30, 2011 was $10,716,000, an increase of $2,682,000, or 33.38%, from $8,034,000 for the six months ended June 30, 2010.  Basic and fully diluted earnings per common share were $1.88 and $1.65, respectively, for the six months ended June 30, 2011, compared with $1.46 and $1.33, respectively, for the same period in 2010.  This increase was primarily attributable to a $340,432,000, or 22.60%, increase in average earning assets in 2011 from 2010, and a $1,350,000, or 26.60%, decrease in the provision for loan losses from 2010 to 2011.

Critical Accounting Policies

The accounting and financial policies of the Company conform to U.S. generally accepted accounting principles 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 allowance for loan losses, valuation of foreclosed real estate, deferred taxes, and fair value of financial instruments 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, 2010.

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Financial Condition

Cash and Cash Equivalents

At June 30, 2011, we had $94,541,000 in federal funds sold and other investments, compared with $346,000 at December 31, 2010.  We assess our risk-weighted capital ratios at each quarter end and determine if excess funds need to be maintained at correspondent banks versus the Federal Reserve. We determined as of March 31, 2011 that excess funds could remain at correspondent banks, but had determined as of December 31, 2010 that it was preferable to keep excess funds at the Federal Reserve at that time.

Investment Securities

Investment securities available for sale totaled $230,671,000 at June 30, 2011 and $276,959,000 at December 31, 2010.  Investment securities held to maturity totaled $13,895,000 at June 30, 2011 and $5,234,000 at December 31, 2010.  Approximately $30,007,000 in U.S. Treasury Notes and $33,263,000 in mortgage-backed securities, government agency securities and corporate bonds were sold during the first half of 2011, and were partially replaced by the purchase of approximately $28,348,000 in mortgage-backed securities and $5,360,000 in municipal securities.  The purchased securities will increase the portfolio yield and will also provide higher monthly principal cash flow.

Each quarter, management assesses whether there have been events or economic circumstances to indicate 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 have the ability to hold our investment securities for the foreseeable future, 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.

The following table shows the amortized cost of our investment securities by their stated maturity at June 30, 2011:

	Less Than One Year			One Year to Five Years			Five Years to Ten Years			More Than Ten Years			Total
	(In Thousands)
U.S. Treasury and government sponsored agencies	$	-		$	31,274		$	3,444		$	693		$	35,411
Mortgage-backed securities		265			1,568			34,846			74,247			110,926
State and municipal securities		-			14,291			60,200			14,117			88,608
Corporate debt		-			-			1,025			-			1,025
	$	265		$	47,133		$	99,515		$	89,057		$	235,970
Taxable-equivalent Yield		4.47	%		3.03	%		4.63	%		4.38	%		4.22	%

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All securities held are traded in liquid markets. As of June 30, 2011, we owned certain restricted securities of the Federal Home Loan Bank with an aggregate book value and market value of $3,649,000 and certain securities of First National Bankers Bank in which we invested $250,000.  We had no investments in any one security, restricted or liquid, in excess of 10% of our stockholders’ equity.

The Bank does not invest in collateralized debt obligations (“CDOs”). All tax-exempt securities currently held are issued by government issuers within the State of Alabama. All corporate bonds had a Standard and Poor’s or Moody’s rating of A-1 or better when purchased.  The June 30, 2011 total investment portfolio has a combined average credit rating of AA.

The carrying value of investment securities pledged to secure public funds on deposit and for other purposes as required by law was $176,536,000 and $111,347,000 as of June 30, 2011 and December 31, 2010, respectively.

Loans

We had total loans of $1,560,974,000 at June 30, 2011, an increase of $166,156,000, or 11.91%, compared to $1,394,818,000 at December 31, 2010.  At June 30, 2011, 51% of our loans were in our Birmingham offices, 22% in our Huntsville offices, 12% in our Montgomery offices, 14% in our Dothan offices, and 1% in our Pensacola, Florida office.

Asset Quality

The allowance for loan losses is established and maintained at levels management deems adequate to absorb anticipated credit losses from identified and otherwise inherent risks in the loan portfolio as of the balance sheet date. In assessing the adequacy of the allowance for loan losses management considers its evaluation of the loan portfolio, past due loan experience, collateral values, current economic conditions and other factors considered necessary to maintain the allowance at an adequate level.  Our management feels that the allowance was adequate at June 30, 2011.

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The following table presents the allocation of the allowance for loan losses for each respective loan category with the corresponding percentage of loans in each category to total loans.  The comprehensive allowance analysis developed by our credit administration group is in compliance with all current regulatory guidelines.

June 30, 2011	Amount		Percentage of loans in each category to total loans
Commercial, financial and agricultural	$	5,809		40.64	%
Real estate - construction		6,468		10.22	%
Real estate - mortgage		3,185		46.33	%
Consumer		566		2.81	%
Other		3,488		-
Total	$	19,516		100.00	%

December 31, 2010	Amount		Percentage of loans in each category to total loans
Commercial, financial and agricultural	$	5,348		38.47	%
Real estate - construction		6,373		12.34	%
Real estate - mortgage		2,443		46.51	%
Consumer		749		2.68	%
Other		3,164		-
Total	$	18,077		100.00	%

Nonperforming Assets

Total nonperforming loans, which include nonaccrual loans and loans 90 or more days past due and still accruing, increased to $21.1 million as of June 30, 2011, compared to $14.3 million at December 31, 2010. Of this total, nonaccrual loans of $20.6 million at June 30, 2011, represented a net increase of $6.2 million over nonaccrual loans of $14.3 million at December 31, 2010.  The largest change to nonaccrual loans was the addition of $8.3 million in loans related to two residential land developers. The Bank had one loan 90 days past due and still accruing at June 30, 2011 in the amount of $542,000, compared to zero loans 90 days past due at December 31, 2010. However, the bank’s net exposure in this loan is only $54,200 due to a 90% Small Business Administration guaranty. Troubled debt restructurings (TDRs) at June 30, 2011, were $5.1 million compared to $2.4 million at December 31, 2010.  The majority of this increase is attributable to a single commercial relationship. All of the Bank’s TDR loans at both June 30, 2011 and December 31, 2010 have been performing as agreed under the terms of their restructuring plans.

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Other real estate owned (OREO) decreased slightly to $6.9 million at June 30, 2011, from $7.0 million at December 31, 2010.  The total number of OREO accounts decreased from 39 to 29 over the same period due to increased sales activity.  However, the dollar value of this reduction was largely offset by foreclosures on two common-ownership residential land developments.

The following table summarizes our nonperforming assets and TDRs at June 30, 2011, and December 31, 2010:

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	June 30, 2011					December 31, 2010
	Balance			Number of Loans		Balance			Number of Loans
Nonaccrual loans:
Commercial, financial and agricultural	$	514			8	$	2,164			8
Real estate - construction		17,536			36		10,722			24
Real estate - mortgage:
Owner-occupied commercial		1,281			2		635			1
1-4 family mortgage		878			5		202			1
Other mortgage		-			-		-			-
Total real estate - mortgage		2,159			7		837			2
Consumer		374			1		624			1
Total nonaccrual loans:	$	20,583			52	$	14,347			35
90+ days past due and accruing:
Commercial, financial and agricultural	$	542			1	$	-			-
Real estate - construction		-			-		-			-
Real estate - mortgage:
Owner-occupied commercial		-			-		-			-
1-4 family mortgage		-			-		-			-
Other mortgage		-			-		-			-
Total real estate - mortgage		-			-		-			-
Consumer		-			-		-			-
Total 90+ days past due and accruing:	$	542			1	$	-			-
Total nonperforming loans:	$	21,125			53	$	14,347			35
Plus: Other real estate owned		6,931			29		6,966			39
Total nonperforming assets	$	28,056			82	$	21,313			74
Restructured accruing loans (TDRs):
Commercial, financial and agricultural	$	2,440			10	$	2,398			9
Real estate - construction							-			-
Real estate - mortgage:
Owner-occupied commercial		2,357			1		-			-
1-4 family mortgage		-			-		-			-
Other mortgage		340			1		-			-
Total real estate - mortgage		2,697			2		-			-
Consumer		-			-		-			-
Total restructured accruing loans:	$	5,137			12	$	2,398			9
Total nonperforming assets and
restructured accruing loans	$	33,193			94	$	23,711			83
Ratios:
Nonperforming loans to total loans		1.35	%				1.03	%
Nonperforming assets to total loans plus other real estate owned		1.79	%				1.52	%
Nonperforming loans plus restructured accruing loans to total loans plus other real estate owned		1.67	%				1.19	%

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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 unless management believes that the collection of interest is 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 allowance for loan losses to reflect management’s estimate of any potential exposure or loss.  Generally, payments received on nonaccrual loans are applied directly to principal.

Impaired Loans and Allowance for Loan Losses

We have allocated approximately $6.5 million of our allowance for loan losses to real estate construction, including acquisition and development and lot loans, $5.8 million to commercial, financial and agricultural loans, and $3.7 million to other loan types. We have a total loan loss reserve as of June 30, 2011 allocable to specific loan types of $16.0 million.  Another $3.5 million of our allowance for loan losses is based on our judgments regarding various external and internal factors, including macroeconomic trends, our assessment of the Bank’s loan growth prospects, and evaluations of internal risk controls.  The total resulting loan loss reserve is $19.5 million.  Based upon historical performance, known factors, overall judgment, and regulatory methodologies, including consideration for the effect of current residential housing market defaults and business failures plaguing financial institutions in general, management believes that the current methodology used to determine the adequacy of the allowance for loan losses is reasonable.

As of June 30, 2011, we had impaired loans of $51.7 million inclusive of nonaccrual loans, a slight increase of $0.2 million from $51.5 million as of December 31, 2010.  We allocated $4.9 million of our allowance for loan losses at June 30, 2011 to these impaired loans. A loan is considered impaired, based on current information and events, if it is probable that we will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the original loan agreement.  Impairment does not always indicate credit loss, but provides an indication of collateral exposure based on prevailing market conditions and third-party valuations.  Impaired loans are measured by either the present value of expected future cash flows discounted at the loan’s effective interest rate, the loan’s obtainable market price, or the fair value of the collateral if the loan is collateral-dependent. The amount of impairment, if any, and subsequent changes are included in the allowance for loan losses. Interest on accruing impaired loans is recognized as long as such loans do not meet the criteria for nonaccrual status.  Our credit risk management team performs verification and testing to ensure appropriate identification of impaired loans and that proper reserves are held on these loans.

Of the $51.7 million of impaired loans reported as of June 30, 2011, $30.9 million were real estate – construction loans, $7.8 million were commercial, financial, and agricultural loans, $5.9 million were commercial real estate loans, and $4.1 million were residential real estate loans.  The remaining $3.0 million of impaired loans consisted of other mortgages and consumer loans. Of the $30.9 million of impaired real estate – construction loans, $15.3 million (a total of 27 loans with 13 builders) were residential construction loans, and $6.2 million consisted of various residential lot loans to nine builders.

Deposits

Total deposits increased $45,158,000, or 2.57%, to $1,803,874,000 at June 30, 2011 compared to $1,758,716,000 at December 31, 2010.  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.

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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”

Other Borrowings

We have paid off our two advances from the Federal Home Loan Bank of Atlanta.  The payoffs occurred in March and June 2011.  As discussed more fully under “Noninterest Expense” below, we incurred prepayment penalties totaling $738,000 by repaying these advances early.  As discussed in Note 10 to the Consolidated Financial Statements, we borrowed $15.5 million through the issuance of trust preferred securities and the related debenture on September 2, 2008.  Both financial instruments bear an identical annual rate of interest of 8.50% and pay interest on March 1, June 1, September 1 and December 1 of each year.  The current book value of this borrowing is $15.4 million as a result of amortization of the discount associated with 75,000 warrants issued to the holders of the Preferred Securities.  As discussed in Note 11 to the Consolidated Financial Statements, we borrowed $15.0 million through the issuance of trust preferred securities and the related debenture on March 15, 2010.  Both financial instruments bear an identical rate of interest of 6.00% and pay interest on March 15, June 15, September 15 and December 15 of each year.  As discussed in Note 12 to the Consolidated Financial Statements, on June 23, 2009, the Bank issued a $5.0 million subordinated note due June 1, 2016 in a private placement.  The note bears interest at an annual rate of 8.25% payable on March 1, June 1, September 1 and December 1 of each year.

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 were 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 June 30, 2011, liquid assets, which are represented by cash and due from banks, federal funds sold and unpledged available-for-sale securities, totaled $317 million.  Additionally, the Bank had additional borrowing availability of approximately $416 million in unused federal funds lines of credit with regional banks, subject to certain restrictions and collateral requirements. We believe these sources of funding are adequate to meet immediate anticipated funding needs, but we will need additional capital to maintain our current growth. 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 “Other Borrowings”.

We are subject to general FDIC guidelines that require a minimum level of liquidity. Management believes our liquidity ratios meet or exceed these guidelines. Our management is not currently aware of any trends or demands that are reasonably likely to result in liquidity materially increasing or decreasing.

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The following table reflects the contractual maturities of our term liabilities as of June 30, 2011. The amounts shown do not reflect any early withdrawal or prepayment assumptions.

	Payments due by Period
	Total		1 year or less		Over 1 - 3 years		Over 3 - 5 years		Over 5 years
	(In Thousands)
Contractual Obligations (1)
Deposits without a stated maturity	$	1,473,035	$	-	$	-	$	-	$	-
Certificates of deposit (2)		330,839		194,386		106,041		30,390		22
Subordinated debentures		30,000		-		-		-		30,000
Subordinated note payable		5,000		-		-		-		5,000
Operating lease commitments		18,009		2,193		3,952		3,914		7,950
Total	$	1,856,883	$	196,579	$	109,993	$	34,304	$	42,972

(1)  Excludes interest

(2)  Certificates of deposit give customers the right to early withdrawal.  Early withdrawals may be subject to penalties.

The penalty amount depends on the remaining time to maturity at the time of early withdrawal.

Capital Adequacy

In the first quarter of 2010, we formed ServisFirst Capital Trust II, which issued 15,000 shares of its 6.0% Mandatory Convertible Trust Preferred Securities (the “Preferred Securities”) for $15,000,000 on March 15, 2010.  The Trust invested all of the proceeds from the sale of the Trust Securities in the Company’s 6.0% Junior Subordinated Mandatory Convertible Deferrable Interest Debentures due March 15, 2040 in the principal amount of $15,050,000 (the “Subordinated Debentures”).  The Preferred Securities were offered and sold to accredited investors in a private placement.  The Federal Reserve Board has deemed these securities to qualify as Tier 1 capital of the Company up to 25% of Tier 1 capital elements.  See Note 11 to the consolidated financial statements for further discussion of the issuance and sale of the Preferred Securities.

On June 30, 2011, we completed the sale of 340,000 shares of our common stock in a private placement to 105 accredited investors and 20 non-accredited investors for $30.00 per share, for aggregate proceeds of $10,200,000.  The private placement was in conjunction with our entry into the Pensacola, Florida market.  The offering, completed on June 30, 2011, was exempt from registration under the Securities Act of 1933, and no underwriter or placement agent was involved in the private placement.

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On June 21, 2011, we entered into a Securities Purchase Agreement with the Secretary of the Treasury, pursuant to which we issued and sold to the Treasury 40,000 shares of our Senior Non-Cumulative Perpetual Preferred Stock, Series A, having a liquidation preference of $1,000 per share, for aggregate proceeds of $40,000,000.  The issuance was pursuant to the Treasury’s Small Business Lending Fund program, a $30 billion fund established under the Small Business Jobs Act of 2010, which encourages lending to small businesses by providing capital to qualified community banks with assets of less than $10 billion.  The Series A Preferred Stock is entitled to receive non-cumulative dividends payable quarterly on each January 1, April 1, July 1 and October 1, beginning October 1, 2011.  The dividend rate, which is calculated on the aggregate Liquidation Amount, has been initially set at 1% per annum based upon the current level of “Qualified Small Business Lending” (“QSBL”) by the Bank.  The dividend rate for future dividend periods will be set based upon the percentage change in qualified lending between each dividend period and the baseline QSBL level established at the time the Agreement was entered into.  Such dividend rate may vary from 1% per annum to 5% per annum for the second through tenth dividend periods, from 1% per annum to 7% per annum for the eleventh through the first half of the nineteenth dividend periods.  If the Series A Preferred Stock remains outstanding for more than four-and-one-half years, the dividend rate will be fixed at 9%.  Prior to that time, in general, the dividend rate decreases as the level of the Bank’s QSBL increases.  Such dividends are not cumulative, but the Company may only declare and pay dividends on its common stock (or any other equity securities junior to the Series A Preferred Stock) if it has declared and paid dividends for the current dividend period on the Series A Preferred Stock, and will be subject to other restrictions on its ability to repurchase or redeem other securities.  In addition, if (i) we have not timely declared and paid dividends on the Series A Preferred Stock for six dividend periods or more, whether or not consecutive, and (ii) shares of Series A Preferred Stock with an aggregate liquidation preference of at least $25,000,000 are still outstanding, the Treasury (or any successor holder of Series A Preferred Stock) may designate two additional directors to be elected to our Board of Directors.

As more completely described in the Certificate of Designation, holders of the Series A Preferred Stock have the right to vote as a separate class on certain matters relating to the rights of holders of Series A Preferred Stock and on certain corporate transactions.  Except with respect to such matters and, if applicable, the election of the additional directors described above, the Series A Preferred Stock does not have voting rights.

We may redeem the shares of Series A Preferred Stock, in whole or in part, at any time at a redemption price equal to the sum of the Liquidation Amount per share and the per-share amount of any unpaid dividends for the then-current period, subject to any required prior approval by our primary federal banking regulator.

As of June 30, 2011, 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 total risk-based, Tier 1 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 June 30, 2011.

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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 June 30, 2011, December 31, 2010, and June 30, 2010:

	Actual					For Capital Adequacy Purposes					To Be Well Capitalized Under Prompt Corrective Action Provisions
	Amount		Ratio			Amount		Ratio			Amount		Ratio
As of June 30, 2011:
Total Capital to Risk-Weighted Assets:
Consolidated	$	230,075		14.50	%	$	126,967		8.00	%		N/A		N/A
ServisFirst Bank		226,026		14.24	%		126,956		8.00	%		158,695		10.00	%
Tier 1 Capital to Risk-Weighted Assets:
Consolidated		205,614		12.96	%		63,484		4.00	%		N/A		N/A
ServisFirst Bank		201,565		12.70	%		63,478		4.00	%		95,217		6.00	%
Tier 1 Capital to Average Assets:
Consolidated		205,614		10.67	%		77,113		4.00	%		N/A		N/A
ServisFirst Bank		201,565		10.47	%		77,006		4.00	%		96,257		5.00	%
As of December 31, 2010:
Total Capital to Risk-Weighted Assets:
Consolidated	$	166,850		11.82	%	$	112,927		8.00	%		N/A		N/A
ServisFirst Bank		166,721		11.81	%		112,978		8.00	%		141,222		10.00	%
Tier 1 Capital to Risk-Weighted Assets:
Consolidated		144,263		10.22	%		56,464		4.00	%		N/A		N/A
ServisFirst Bank		144,117		10.20	%		56,489		4.00	%		84,733		6.00	%
Tier 1 Capital to Average Assets:
Consolidated		144,263		7.77	%		74,266		4.00	%		N/A		N/A
ServisFirst Bank		144,117		7.77	%		74,236		4.00	%		92,795		5.00	%
As of June 30, 2010:
Total Capital to Risk-Weighted Assets:
Consolidated	$	155,039		11.80	%	$	105,221		8.00	%		N/A		N/A
ServisFirst Bank		154,786		11.78	%		105,165		8.00	%		131,457		10.00	%
Tier 1 Capital to Risk-Weighted Assets:
Consolidated		134,397		10.23	%		52,611		4.00	%		N/A		N/A
ServisFirst Bank		134,144		10.21	%		52,583		4.00	%		78,874		6.00	%
Tier 1 Capital to Average Assets:
Consolidated		134,397		8.48	%		63,423		4.00	%		N/A		N/A
ServisFirst Bank		134,144		8.46	%		63,409		4.00	%		79,262		5.00	%

Off-Balance Sheet Arrangements

In the normal course of business we are a party to financial instruments with off-balance sheet risk to meet the financing needs of our customers. These financial instruments include commitments to extend credit beyond current fundings, credit card arrangements, standby letters of credit, and financial guarantees. Those instruments involve, to varying degrees, elements of credit risk in excess of the amount recognized in our balance sheet. The contract or notional amounts of those instruments reflect the extent of involvement we have in those particular financial instruments.

Our exposure to credit loss in the event of non-performance by the other party to such financial instruments 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.

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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 ServisFirst 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.  There were no expenses incurred as part of these buyback obligations for the three and six months ended June 30, 2011, compared to $104,000 for the three and six months ended June 30, 2010.

Financial instruments whose contract amounts represent credit risk at June 30, 2011 are as follows:

	(In Thousands)
Commitments to extend credit	$	604,929
Credit card arrangements		18,069
Standby letters of credit		52,469
Federal fund lines of credit		13,200
	$	688,667

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.

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Results of Operations

Summary of Net Income

Net income for the three months ended June 30, 2011 was $5,845,000, compared to net income of $4,021,000 for the three months ended June 30, 2010.  Net income for the six months ended June 30, 2011 was $10,716,000, compared to net income of $8,034,000 for the six months ended June 30, 2010.  The increase in net income was primarily attributable to increased net interest income as a result of growth in average earning assets and a decrease in the provision for loan losses.  Net interest income for the three months ended June 30, 2011 increased to $18,048,000, or 17.90%, compared to $15,308,000 for the same period in 2010.  Net interest income for the six months ended June 30, 2011 increased to $35,024,000, or 15.92%, compared to $30,214,000 for the same period in 2010.  Operating expenses for the three months ended June 30, 2011 increased to $9,369,000, or 23.91%, compared to $7,561,000 in 2010, and for the six months ended June 30, 2011 increased to $17,966,000, or 19.83%, compared to $14,993,000 in 2010.  The provision for loan losses decreased $1,043,000 to $1,494,000 for the three months ended June 30, 2011 compared to the same period in 2010, and decreased $1,350,000 to $3,725,000 for the six months ended June 30, 2011 compared to the same period in 2010.  This decrease in provision for loan loss was primarily due to a decline in net charge-offs compared to recent historical levels, leading to a lower overall reserve requirement.  In addition, improvements in risk ratings and pay-downs on other loans lead to smaller than normal increases in specific allocations of loan loss reserves for the first half of 2011.  Noninterest income increased $778,000 to $1,782,000 for the three months ended June 30, 2011 compared to the same period in 2010, and increased $917,000 to $3,053,000 for the six months ended June 30, 2011 compared to the same period in 2010. A portion of the increase in noninterest expense was the result of a $738,000 prepayment fee relating to the prepayment of our two $10,000,000 notes payable to the Federal Home Loan Bank, which is more fully explained in “Other Borrowings” above.  The addition of staff in our new Pensacola location, which opened April 1, and the addition of a correspondent banking team during the first quarter of 2011 also contributed to the increase in operating expenses.  Basic and diluted net income per common share were $1.02 and $0.89, respectively, for the three months ended June 30, 2011, compared to $0.73 and $0.65, respectively, for the same period in 2010.  Basic and diluted net income per common share were $1.88 and $1.65, respectively, for the six months ended June 30, 2011, compared to $1.46 and $1.33, respectively, for the same period in 2010.  Return on average assets for the three and six months ended June 30, 2011 was 1.22% and 1.14%, respectively, compared to 1.02% and 1.04% in 2010, and return on average stockholders’ equity for the three and six months ended June 30, 2011 was 17.30% and 16.56%, respectively, compared to 15.34% and 15.77% in 2010.

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 $2,852,000, or 18.35%, to $18,391,000 for the three months ended June 30, 2011 compared to $15,539,000 in 2010, and increased $5,588,000, or 18.20%, to $36,293,000 for the six months ended June 30, 2011 compared to $30,705,000 in 2010.  This increase was primarily attributable to growth in average earning assets.  The taxable-equivalent yield on interest-earning assets decreased to 4.79% for the three months ended June 30, 2011 from 5.04% for the same period in 2010, and decreased to 4.77% for the six months ended June 30, 2011 from 5.09% for the same period in 2010.  The yield on loans for the three months ended June 30, 2011 was 5.25% compared to 5.33% for the same period in 2010, and 5.27% compared to 5.36% for the six months ended June 30, 2011 and 2010, respectively.  Loan fees included in the yield calculation decreased to $153,000 for the three months ended June 30, 2011 from $211,000 for the same period in 2010, and decreased to $304,000 for the six months ended June 30, 2011 from $398,000 for the same period in 2010.  Loan fees decreased due to the origination of fewer real estate construction loans.  The cost of total interest-bearing liabilities decreased to 1.07% for the three months ended June 30, 2011 from 1.16% for the same period in 2010, and to 1.00% for the six months ended June 30, 2011 from 1.16% for the same period in 2010.

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The following tables show, for the three and six months ended June 30, 2011 and 2010, the average balances of each principal category of our assets, liabilities and stockholders’ equity, and an analysis of net interest revenue.  The accompanying tables reflect 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.  The tables are presented on a taxable-equivalent basis where applicable:

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	Average Balance Sheets and Net Interest Analysis On a Fully Taxable-Equivalent Basis For the Three Months Ended June 30,
	2011							2010
	Average Balance		Interest Earned / Paid		Average Yield / Rate			Average Balance		Interest Earned / Paid		Average Yield / Rate
Assets:
Interest-earning assets:
Loans, net of unearned income (1)	$	1,512,972	$	19,813		5.25	%	$	1,256,458	$	16,708		5.33	%
Mortgage loans held for sale		3,385		31		3.67			4,294		42		3.92
Investment securities:
Taxable		165,402		1,441		3.49			175,088		1,669		3.82
Tax-exempt (2)		78,509		1,047		5.35			55,120		776		5.65
Total investment securities (3)		243,911		2,488		4.09			230,208		2,445		4.26
Federal funds sold		78,504		36		0.18			28,171		16		0.23
Restricted equity securities		4,499		18		1.60			4,024		13		1.30
Interest-bearing balances with banks		31,491		19		0.24			7,621		3		0.16
Total interest-earning assets	$	1,874,762	$	22,405		4.79	%	$	1,530,776	$	19,227		5.04	%
Non-interest-earning assets:
Cash and due from banks		29,208							25,371
Net fixed assets and equipment		4,900							5,019
Allowance for loan losses, accrued interest and other assets		17,294							23,675
Total assets	$	1,926,164						$	1,584,841
Liabilities and stockholders' equity:
Interest-bearing liabilities:
Interest-bearing demand deposits	$	289,996	$	299		0.41	%	$	241,929	$	314		0.52	%
Savings deposits		8,162		10		0.49			2,379		3		0.51
Money market accounts		861,238		1,730		0.81			737,956		1,383		0.75
Time deposits		308,016		1,224		1.59			240,317		1,129		1.88
Federal funds purchased		-		-		0.00			1,142		3		1.05
Other borrowings		42,229		751		7.13			55,260		856		6.21
Total interest-bearing liabilities	$	1,509,641	$	4,014		1.07		$	1,278,983	$	3,688		1.16
Non-interest-bearing liabilities:
Non-interest-bearing demand deposits		274,906							195,753
Other liabilities		6,062							4,937
Stockholders' equity		131,463							102,294
Unrealized gains on securities and derivatives		4,092							2,874
Total liabilities and stockholders' equity	$	1,926,164						$	1,584,841
Net interest spread						3.73	%						3.88	%
Net interest margin						3.93	%						4.07	%

(1) Non-accrual loans are included in average loan balances in all periods.  Loan fees of $153,000 and $211,000 are included in interest income in 2011 and 2010, respectively.

(2) Interest income and yields are presented on a fully taxable equivalent basis using a tax rate of 35%.

(3) Unrealized gains of $6,295,000 and $4,356,000 are excluded from the yield calculation in 2011 and 2010, respectively.

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	Three Months Ended June 30,
	2011 Compared to 2010 Increase (Decrease) in Interest Income and Expense Due to Changes in:
	Volume			Rate			Total
Interest-earning assets:
Loans, net of unearned income		3,363			(258	)		3,105
Mortgages held for sale		(8	)		(3	)		(11	)
Investment securities:
Securities - taxable		(89	)		(139	)		(228	)
Securities - non taxable		314			(43	)		271
Federal funds sold		24			(4	)		20
Restricted equity securities		2			3			5
Interest-bearing balances with banks		13			3			16
Total interest-earning assets		3,619			(441	)		3,178
Interest-bearing liabilities:
Interest-bearing demand deposits		57			(72	)		(15	)
Savings		7			-			7
Money market accounts		243			104			347
Time deposits		286			(191	)		95
Federal funds purchased		(2	)		(1	)		(3	)
Other borrowed funds		(220	)		115			(105	)
Total interest-bearing liabilities		371			(45	)		326
Increase in net interest income		3,248			(396	)		2,852

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	Average Balance Sheets and Net Interest Analysis On a Fully Taxable-Equivalent Basis For the Six Months Ended June 30,
	2011							2010
	Average Balance		Interest Earned / Paid		Average Yield / Rate			Average Balance		Interest Earned / Paid		Average Yield / Rate
Assets:
Interest-earning assets:
Loans, net of unearned income (1)	$	1,468,728	$	38,406		5.27	%	$	1,237,864	$	32,877		5.36	%
Mortgage loans held for sale		3,769		69		3.69			3,810		77		4.08
Investment securities:
Taxable		175,407		2,986		3.43			181,681		3,422		3.80
Tax-exempt (2)		77,775		2,086		5.41			55,168		1,559		5.70
Total investment securities (3)		253,182		5,072		4.04			236,849		4,981		4.24
Federal funds sold		75,676		72		0.19			15,902		18		0.23
Restricted equity securities		4,283		35		1.65			3,886		25		1.30
Interest-bearing balances with banks		40,940		49		0.24			7,835		11		0.28
Total interest-earning assets	$	1,846,578	$	43,703		4.77	%	$	1,506,146	$	37,989		5.09	%
Non-interest-earning assets:
Cash and due from banks		27,518							23,790
Net fixed assets and equipment		4,873							5,130
Allowance for loan losses, accrued interest and other assets		15,523							21,968
Total assets	$	1,894,492						$	1,557,034
Liabilities and stockholders' equity:
Interest-bearing liabilities:
Interest-bearing demand deposits	$	301,111	$	625		0.42	%	$	232,905	$	621		0.54	%
Savings deposits		7,423		19		0.52			2,140		5		0.47
Money market accounts		849,291		3,404		0.81			722,272		2,680		0.75
Time deposits		295,190		2,350		1.61			245,927		2,376		1.95
Federal funds purchased		-		-		0.00			9,883		31		0.63
Other borrowings		48,379		1,012		4.22			49,003		1,571		6.46
Total interest-bearing liabilities	$	1,501,394	$	7,410		1.00		$	1,262,130	$	7,284		1.16
Non-interest-bearing liabilities:
Non-interest-bearing demand deposits		260,137							188,305
Other liabilites		2,503							3,884
Stockholders' equity		126,950							100,220
Unrealized gains on securities and derivatives		3,508							2,495
Total liabilities and stockholders' equity	$	1,894,492						$	1,557,034
Net interest spread						3.78	%						3.92	%
Net interest margin						3.96	%						4.11	%

(1) Non-accrual loans are included in average loan balances in all periods.  Loan fees of $304,000 and $398,000 are included

in interest income in 2011 and 2010, respectively.

(2) Interest income and yields are presented on a fully taxable equivalent basis using a tax rate of 35%.

(3) Unrealized gains of $5,396,000 and $3,781,000 are excluded from the yield calculation in 2011 and 2010, respectively.

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	Six Months Ended June 30,
	2011 Compared to 2010 Increase (Decrease) in Interest Income and Expense Due to Changes in:
	Volume			Rate			Total
Interest-earning assets:
Loans, net of unearned income		6,044			(515	)		5,529
Mortgages held for sale		(1	)		(7	)		(8	)
Investment securities:
Taxable		(115	)		(321	)		(436	)
Tax-exempt		610			(83	)		527
Federal funds sold		57			(3	)		54
Restricted equity securities		2			8			10
Interest-bearing balances with banks		40			(2	)		38
Total interest-earning assets		6,637			(923	)		5,714
Interest-bearing liabilities:
Interest-bearing demand deposits		159			(155	)		4
Savings		14			-			14
Money market accounts		497			227			724
Time deposits		431			(457	)		(26	)
Federal funds purchased		(31	)		-			(31	)
Other borrowed funds		(20	)		(539	)		(559	)
Total interest-bearing liabilities		1,050			(924	)		126
Increase in net interest income		5,587			1			5,588

Provision for Loan Losses

The provision for loan losses represents the amount determined by management to be necessary to maintain the allowance for loan losses at a level capable of absorbing inherent losses in the loan portfolio.  Our management reviews the adequacy of the allowance for loan losses on a quarterly basis.  The allowance for loan losses calculation is segregated into various segments that include classified loans, loans with specific allocations and pass rated loans.  A pass rated loan is generally characterized by a very low to average risk of default and in which management perceives there is a minimal risk of loss.  Loans are rated using a nine-point risk grade scale with loan officers having the primary responsibility for assigning risk grades and for the timely reporting of changes in the risk grades.  These processes, and the assigned risk grades, the criticized and classified loans in the portfolio are segregated into the following regulatory classifications:  Special Mention, Substandard, Doubtful or Loss, with some general allocation of reserve based on these grades.  At June 30, 2011, total loans rated Special Mention, Substandard, and Doubtful were $105.8 million, or 6.8% of total loans, compared to $98.3 million, or 7.1% of total loans, at December 31, 2010.  Impaired loans are reviewed specifically and separately under FASB ASC 310-30-35, Subsequent Measurement of Impaired Loans, to determine the appropriate reserve allocation.  Our management compares the investment in an impaired loan with the present value of expected future cash flow discounted at the loan’s effective interest rate, the loan’s observable market price or the fair value of the collateral, if the loan is collateral-dependent, to determine the specific reserve allowance.  Reserve percentages assigned to non-impaired loans are based on historical charge-off experience adjusted for other risk factors.  To evaluate the overall adequacy of the allowance to absorb losses inherent in our loan portfolio, our management considers historical loss experience based on volume and types of loans, trends in classifications, volume and trends in delinquencies and nonaccruals, economic conditions and other pertinent information.  Based on future evaluations, additional provisions for loan losses may be necessary to maintain the allowance for loan losses at an appropriate level.

47

The provision for loan losses was $1,494,000 for the three months ended June 30, 2011, a decrease of $1,043,000 from $2,537,000 for the three months ended June 30, 2010.  The provision for loan losses was $3,725,000 for the six months ended June 30, 2011, a $1,350,000 decrease compared to $5,075,000 for the six months ended June 30, 2010.  Our management continues to maintain a proactive approach to credit risk management. Nonperforming loans increased to $21.1 million, or 1.35% of total loans, at June 30, 2011 from $14,300,000, or 1.02% of total loans, at December 31, 2010, and were also higher than $8,038,000, or 0.62% of total loans, at June 30, 2010.  Impaired loans increased slightly to $51.7 million, or 3.3% of total loans at June 30, 2011, compared with $51.5 million, or 3.7% of total loans at December 31, 2010.  The allowance for loan losses totaled $19.5 million, or 1.25% of loans, net of unearned income, at June 30, 2011, compared to $18.1 million, or 1.31% of loans, net of unearned income, at December 31, 2010 and $18.1 million, or 1.30% of loans, net of unearned income, at June 30, 2010.

Noninterest Income

Noninterest income totaled $1,782,000 for the three months ended June 30, 2011, an increase of $778,000, or 77.49%, compared to the same period in 2010, and totaled $3,053,000 for the six months ended June 30, 2011, an increase of $917,000, or 42.93%, compared to the same period in 2010. These increases were primarily attributable to gains on the sale of available-for-sale securities in 2011. Income from mortgage banking operations for the three months ended June 30, 2011 was $476,000, up $143,000, or 42.94%, from $333,000 for the same period in 2010, and for the six months ended June 30, 2011 was $827,000, up $80,000, or 10.71%, from $747,000 for the same period in 2010.  Income from customer service charges and fees for the three months ended June 30, 2011 decreased $41,000, or 6.97%, to $547,000 from $588,000 for the same period in 2010, and for the six months ended June 30, 2011 decreased $40,000, or 3.47%, to $1,114,000 from $1,154,000 for the same period in 2010.  Merchant service fees were $26,000 for the three months ended June 30, 2011, a decrease of $73,000, or 73.74%, compared to $99,000 for the same period in 2010, and were $101,000 for the six months ended June 30, 2011, a decrease of $99,000, or 49.50%, compared to $200,000 for the same period in 2010. The sale of OREO resulted in a gain of $1,000 during the three months ended June 30, 2011 compared to a loss of $123,000 during the same period in 2010, and was $32,000 for the six months ended June 30, 2011 compared to a loss of $175,000 during the same period in 2010.

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Noninterest Expense

Noninterest expense totaled $9,369,000 for the three months ended June 30, 2011, an increase of $1,808,000, or 23.91%, compared to $7,561,000 in 2010, and totaled $17,966,000 for the six months ended June 30, 2011, an increase of $2,973,000, or 19.83%, compared to $14,993,000 in 2010.   The increase was primarily attributable to increased salary and benefit costs and occupancy expense associated with opening a new office in Dothan in 2010, entering the Pensacola, Florida market with a new office in April 2011, and entering the correspondent banking business during the first quarter of 2011.  Salary and benefit expense increased $1,879,000, or 59.71%, to $5,026,000 for the three months ended June 30, 2011 from $3,147,000 for the same period in 2010, and increased $2,611,000, or 39.39%, to $9,240,000 for the six months ended June 30, 2011 from $6,629,000 for the same period in 2010.  We had 195 full-time equivalent employees at June 30, 2011 compared to 162 at June 30, 2010, a 20.37% increase.  Most of this increase in number of employees was due to our expansion into the Pensacola, Florida market and our addition of new business units in Birmingham.  Occupancy expense increased $160,000, or 20.67%, to $934,000 for the three months ended June 30, 2011 from $774,000 for the same period in 2010 and increased $266,000, or 17.12%, to $1,820,000 for the six months ended June 30, 2011 from $1,554,000 for the same period in 2010.  Data processing expenses decreased $67,000, or 12.62%, to $464,000 for the three months ended June 30, 2011 from $531,000 for the same period in 2010 but increased $34,000, or 3.36%, to $1,047,000 for the six months ended June 30, 2011 from $1,013,000 for the same period in 2010.  The increase for the six months periods was due to payment of a de-conversion fee of $83,000 to our prior credit card vendor in March 2011.  Our FDIC assessment for the three months ended June 30, 2011 was $224,000, a decrease of $761,000, or 77.26%, from $985,000 in assessments during the same period in 2010.  Our FDIC assessment for the six months ended June 30, 2011 was $956,000, a decrease of $663,000, or 40.95%, from $1,619,000 in assessments during the same period in 2010.  The decreases in assessments are due to the combined impact of adjustments made in 2010 related to the prepaid assessments mandated by the FDIC at the end of 2009 and decreases in the assessment rates starting in the second quarter of 2011.  Expenses related to OREO decreased $620,000  to $135,000 for the three months ended June 30, 2011, from $755,000 for the same period in 2010 and decreased $671,000 to $389,000 for the six months ended June 30, 2011 from $1,060,000 for the same period in 2010.  ORE expenses decreased due to lower write-downs of values, which dropped to approximately $107,000 for the six months ended June 30, 2011 from approximately $533,000 for the same period in 2010, and lower costs to complete in-process construction, which dropped to approximately $62,000 for the six months ended June 30, 2011 from approximately $234,000 for the same period in 2010.  We also incurred prepayment penalties in connection with the prepayment of our two fixed rate advances from the Federal Home Loan Bank of Atlanta.  The penalty for the first advance paid off during the first quarter of 2011 was $256,000, and the penalty for the second advance paid off in the second quarter of 2011 was $482,000, for a total cost of $738,000 for the six months ended June 30, 2011.

Income Tax Expense

Income tax expense was $3,122,000 for the three months ended June 30, 2011 versus $2,193,000 for the same period in 2010, and was $5,670,000 for the six months ended June 30, 2011 versus $4,248,000 for the same period in 2010.  Our effective tax rate for the three and six months ended June 30, 2011 was 34.82% and 34.60%, respectively, compared to 35.29% and 34.59%, respectively, for the same period in 2010.  Our primary permanent differences are related to SFAS 123(R) option expenses and tax-free income.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE 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 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 status of our balance sheet. Our annual budget reflects the anticipated rate environment for the next 12 months. The asset-liability committee conducts a quarterly analysis of the rate sensitivity position and reports its results to our board of directors.

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The asset-liability committee thoroughly analyzes the maturities of rate-sensitive assets and liabilities. This analysis measures the “gap”, which is defined as the difference between the dollar amount of rate-sensitive assets repricing during a period and the volume of rate-sensitive liabilities repricing during the same period. The gap is also expressed as the ratio of rate-sensitive assets divided by rate-sensitive liabilities. If the ratio is greater than one, the dollar value of assets exceeds the dollar value of liabilities; the balance sheet is “asset-sensitive.” Conversely, if the value of liabilities exceeds the value of assets, the ratio is less than one and the balance sheet is “liability-sensitive.” Our internal policy requires management to maintain the gap such that net interest margins will not change more than 10% if interest rates change 100 basis points or more than 15% if interest rates change 200 basis points.

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 June 30, 2011. Based upon the Evaluation, our CEO and CFO have concluded that, as of June 30, 2011, 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, except as previously disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2010.

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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. We are not 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, 2010, 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, 2010, which should be taken into consideration when reviewing the information contained in this report. There have been no material changes with regard to the risk factors previously disclosed in the Form 10-K. For other factors that may cause actual results to differ materially from those indicated in any forward-looking statement or projection contained in this report, see “Forward-Looking Statements” under Part 1, Item 2 above.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

All information required by this Item has previously been reported on Form 8-K.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

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.

51

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: August 3, 2011	By	/s/ Thomas A. Broughton III
		Thomas A. Broughton III
		President and Chief Executive Officer
Date: August 3, 2011	By	/s/ William M. Foshee
		William M. Foshee
		Chief Financial Officer

52

EX-31.01

Exhibit 31.01

Section 302 Certification of the CEO

I, Thomas A. Broughton III, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of ServisFirst Bancshares, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements and other financial information included in this report fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f) for the registrant and have:

(a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report, based on such evaluation; and

(d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors or person’s performing the equivalent functions:

(a) all significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 3, 2011

By:	/s/ Thomas A. Broughton III
	Thomas A. Broughton III
	President and Chief Executive Officer

A signed original of this written statement has been provided to the registrant and will be retained by the registrant and furnished to the Securities and Exchange Commission or its staff upon request.

EX-31.02

Exhibit 31.02

Section 302 Certification of the CFO

I, William M. Foshee, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of ServisFirst Bancshares, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements and other financial information included in this report fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f) for the registrant and have:

(a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report, based on such evaluation; and

(d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors or persons performing the equivalent functions:

(a) all significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 3, 2011

By:	/s/ William M. Foshee
	William M. Foshee
	Chief Financial Officer

A signed original of this written statement has been provided to the registrant and will be retained by the registrant and furnished to the Securities and Exchange Commission or its staff upon request

EX-32.01

Exhibit 32.01

Section 906 Certification of the CEO

CERTIFICATION OF PERIODIC FINANCIAL REPORT

PURSUANT TO 18 U.S.C. SECTION 1350

Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned officer of ServisFirst Bancshares, Inc. (the “Company”) certifies that, to his knowledge, the Quarterly Report on Form 10-Q of the Company for the quarter ended June 30, 2011, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and information contained in the Report fairly presents, in all material respects, the financial condition and results of operation of the Company.

Date: August 3, 2011	By:	/s/ Thomas A. Broughton III
		Thomas A. Broughton III
		President and Chief Executive Officer

A signed original of this written statement has been provided to the registrant and will be retained by the registrant and furnished to the Securities and Exchange Commission or its staff upon request.

EX-32.02

Exhibit 32.02

Section 906 Certification of the CFO

CERTIFICATION OF PERIODIC FINANCIAL REPORT

PURSUANT TO 18 U.S.C. SECTION 1350

Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned officer of ServisFirst Bancshares, Inc. (the “Company”) certifies that, to his knowledge, the Quarterly Report on Form 10-Q of the Company for the quarter ended June 30, 2011, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and information contained in the Report fairly presents, in all material respects, the financial condition and results of operation of the Company.

Date: August 3, 2011	By:	/s/ William M. Foshee
		William M. Foshee
		Chief Financial Officer

A signed original of this written statement has been provided to the registrant and will be retained by the registrant and furnished to the Securities and Exchange Commission or its staff upon request.

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CONSOLIDATED BALANCE SHEETS (Parenthetical) (USD $)	Jun. 30, 2011	Dec. 31, 2010
Common stock, par value	$ 0.001	$ 0.001
Common stock, shares authorized	15,000,000	15,000,000
Common stock, shares issued	5,872,482	5,527,482
Common stock, shares outstanding	5,872,482	5,527,482
Preferred stock, Series A Senior Non-Cumulative Perpetual Participating
Preferred stock, par value	$ 0.001	$ 0.001
Preferred stock, liquidation preference	$ 1,000	$ 1,000
Preferred stock, shares authorized	40,000	40,000
Preferred stock, shares issued	40,000	0
Preferred stock, shares outstanding	40,000	0
Preferred stock, Series B
Preferred stock, par value	$ 0.001	$ 0.001
Preferred stock, shares authorized	1,000,000	1,000,000
Preferred stock, shares outstanding	0	0

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CONSOLIDATED STATEMENTS OF INCOME (USD $) In Thousands, except Per Share data	3 Months Ended		6 Months Ended
	Jun. 30, 2011	Jun. 30, 2010	Jun. 30, 2011	Jun. 30, 2010
Interest income:
Interest and fees on loans	$ 19,845	$ 16,750	$ 38,466	$ 32,954
Taxable securities	1,444	1,670	2,986	3,422
Nontaxable securities	719	544	1,433	1,068
Federal funds sold	35	16	71	18
Other interest and dividends	37	16	85	36
Total interest income	22,080	18,996	43,041	37,498
Interest expense:
Deposits	3,264	2,829	6,398	5,682
Borrowed funds	768	859	1,619	1,602
Total interest expense	4,032	3,688	8,017	7,284
Net interest income	18,048	15,308	35,024	30,214
Provision for loan losses	1,494	2,537	3,725	5,075
Net interest income after provision for loan losses	16,554	12,771	31,299	25,139
Noninterest income:
Service charges on deposit accounts	547	588	1,114	1,154
Securities gains	523	15	666	53
Other operating income	712	401	1,273	929
Total noninterest income	1,782	1,004	3,053	2,136
Noninterest expenses:
Salaries and employee benefits	5,026	3,147	9,240	6,629
Equipment and occupancy expense	934	774	1,820	1,554
Professional services	351	205	591	405
Other operating expenses	3,058	3,435	6,315	6,405
Total noninterest expenses	9,369	7,561	17,966	14,993
Income before income taxes	8,967	6,214	16,386	12,282
Provision for income taxes	3,122	2,193	5,670	4,248
Net income	$ 5,845	$ 4,021	$ 10,716	$ 8,034
Basic earnings per share	$ 1.02	$ 0.73	$ 1.88	$ 1.46
Diluted earnings per share	$ 0.89	$ 0.65	$ 1.65	$ 1.33

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PRIVATE PLACEMENT OF COMMON STOCK

6 Months Ended

Jun. 30, 2011

PRIVATE PLACEMENT OF COMMON STOCK

NOTE 14 – PRIVATE PLACEMENT OF COMMON STOCK

On June 30, 2011, the Company completed the sale of 340,000 shares of its common stock in a private placement to 105 accredited investors and 20 non-accredited investors for $30.00 per share, for aggregate proceeds of $10,200,000.  The private placement was in conjunction with the Company’s entry into the Pensacola, Florida market.  The offering, completed on June 30, 2011, was exempt from registration under the Securities Act of 1933, and no underwriter or placement agent was involved in the private placement.

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Document and Entity Information	6 Months Ended
	Jun. 30, 2011	Jul. 29, 2011
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Jun. 30, 2011
Document Fiscal Year Focus	2011
Document Fiscal Period Focus	Q2
Entity Registrant Name	ServisFirst Bancshares, Inc.
Entity Central Index Key	0001430723
Current Fiscal Year End Date	--12-31
Entity Filer Category	Accelerated Filer
Entity Common Stock, Shares Outstanding		5,872,482

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EARNINGS PER COMMON SHARE

6 Months Ended

Jun. 30, 2011

EARNINGS PER COMMON SHARE

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 and warrants, as well as the potential common stock issuable upon possible conversion of the preferred securities described in Note 11 to the consolidated financial statements.

	Three Months Ended June 30,				Six Months Ended June 30,
	2011		2010		2011		2010
	(In Thousands, Except Shares and Per Share Data)
Earnings per share
Weighted average common shares outstanding		5,708,871		5,513,482		5,694,871		5,513,482
Net income	$	5,845	$	4,021	$	10,716	$	8,034
Basic earnings per share	$	1.02	$	0.73	$	1.88	$	1.46
Weighted average common shares outstanding		5,708,871		5,513,482		5,694,871		5,513,482
Dilutive effects of assumed conversions and exercise of stock options and warrants		997,082		886,447		962,488		646,359
Weighted average common and dilutive potential common shares outstanding		6,705,953		6,399,929		6,657,359		6,159,841
Net income, adjusted for effect of debt conversion	$	5,845	$	4,021	$	10,716	$	8,034
Effect of interest expense on covertible debt, net of tax and discretionary expenditures related to conversion		148		148		294		172
	$	5,993	$	4,169	$	11,010	$	8,206
Diluted earnings per share	$	0.89	$	0.65	$	1.65	$	1.33

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RECENT ACCOUNTING PRONOUNCEMENTS

6 Months Ended

Jun. 30, 2011

RECENT ACCOUNTING PRONOUNCEMENTS

NOTE 8 - RECENT ACCOUNTING PRONOUNCEMENTS

In April 2011, the FASB issued ASU No. 2011-02, Receivables (Topic 310): A Creditor’s Determination of Whether a Restructuring Is a Troubled Debt Restructuring, which provides guidance on determining whether a restructuring of a receivable meets the criteria to be considered a TDR.  The new guidance is required to be adopted for the first interim or annual reporting period beginning after June 15, 2011, and is to be applied retrospectively to the beginning of the annual reporting period of adoption.  The adoption of this ASU is not expected to have a material impact to the Company’s financial position or results of operations.

In April 2011, the FASB issued ASU No. 2011-03, Transfers and Servicing (Topic 860): Reconsideration of Effective Control for Repurchase Agreements, which removes from the assessment of effective control the criterion relating to the transferor’s ability to repurchase or redeem financial assets on substantially the agreed-upon terms, even in the event of default by the transferee.  The amendments in this ASU also eliminate the requirement to demonstrate that the transferor possesses adequate collateral to fund substantially all the cost of purchasing replacement assets.  The amendments in this ASU are effective for interim and annual periods beginning after December 31, 2011, with prospective application to transactions or modifications of existing transactions that occur on or after the effective date.  Early adoption is not permitted.  The Company will adopt these amendments when required, and does not anticipate that the ASU will have an impact on its financial position or results of operations.

In May 2011, The FASB issued ASU No. 2011-04, Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRS, which outlines the collaborative effort of the FASB and the International Accounting Standards Board (“IASB”) to consistently define fair value and to come up with a set of consistent disclosures for fair value.  The amendments in this ASU explain how to measure fair value. They do not require additional fair value measurements and are not intended to establish valuation standards or affect valuation practices outside of financial reporting.  The amendments in this ASU are to be applied prospectively.  For public entities, the amendments are effective for interim and annual periods beginning after December 31, 2011.  Early application is not permitted.  The Company will adopt these amendments when required, and does not believe the application will have a material effect on its financial position or results of operations.

In June 2011, the FASB issued ASU No. 2011-05, Comprehensive Income (Topic 220): Presentation of Comprehensive Income, which amends existing standards to allow an entity the option to present the total of comprehensive income, the components of net income, and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements.  Under both options, an entity is required to present each component of net income along with total net income, each component of other comprehensive income along with a total for other comprehensive income, and a total amount for comprehensive income.  Any changes pursuant to the options allowed in the amendments should be applied retrospectively.  For public entities, the amendments are effective for fiscal years, and interim periods within those years, beginning after December 15, 2011.  Early adoption is permitted.  The Company is evaluating its timing of adoption, but will adopt it retrospectively by the effective date.

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CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (Parenthetical)	6 Months Ended
	Jun. 30, 2011
Sale of common stock, shares	340,000
Sale preferred stock, shares	40,000
Exercise stock options, shares	5,000

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LOANS

6 Months Ended

Jun. 30, 2011

LOANS

NOTE 5 – LOANS

The following table details the Company’s loans at June 30, 2011 and December 31, 2010:

	June 30, 2011			December 31, 2010
Commercial, financial and agricultural	$	634,367		$	536,620
Real estate - construction		159,564			172,055
Real estate - mortgage:
Owner-occupied commercial		303,204			270,767
1-4 family mortgage		209,439			199,236
Other mortgage		210,488			178,793
Subtotal: Real estate - mortgage		723,131			648,796
Consumer		43,912			37,347
Total Loans		1,560,974			1,394,818
Less: Allowance for loan losses		(19,516	)		(18,077	)
Net Loans	$	1,541,458		$	1,376,741
Commercial, financial and agricultural		40.64	%		38.47	%
Real estate - construction		10.22	%		12.34	%
Real estate - mortgage:
Owner-occupied commercial		19.42	%		19.41	%
1-4 family mortgage		13.42	%		14.28	%
Other mortgage		13.49	%		12.82	%
Subtotal: Real estate - mortgage		46.33	%		46.51	%
Consumer		2.81	%		2.68	%
Total Loans		100.00	%		100.00	%

Loans by credit quality indicator as of June 30, 2011 were as follows:

	Pass		Special Mention		Substandard		Doubtful		Total
Commercial, financial and agricultural	$	607,662	$	17,007	$	9,698	$	-	$	634,367
Real estate - construction		119,412		8,446		31,706		-		159,564
Real estate - mortgage:
Owner-occupied commercial		283,894		13,095		6,215		-		303,204
1-4 family mortgage		199,176		5,161		5,102		-		209,439
other mortgage		201,940		5,120		3,428		-		210,488
Total real estate mortgage		685,010		23,376		14,745		-		723,131
Consumer		43,130		-		782		-		43,912
Total	$	1,455,214	$	48,829	$	56,931	$	-	$	1,560,974

Loans by performance status as of June 30, 2011 were as follows:

	Performing		Nonperforming		Total
Commercial, financial and agricultural	$	633,311	$	1,056	$	634,367
Real estate - construction		142,028		17,536		159,564
Real estate - mortgage:
Owner-occupied commercial		301,923		1,281		303,204
1-4 family mortgage		208,561		878		209,439
other mortgage		210,488		-		210,488
Total real estate - mortgage		720,972		2,159		723,131
Consumer		43,538		374		43,912
Total	$	1,539,849	$	21,125	$	1,560,974

Loans by past-due status as of June 30, 2011 were as follows:

	Days Past Due Status (Accruing Loans)
	30-59		60-89		90+		Total		Nonaccrual		Current		Total Loans
Commercial, financial and agricultural	$	683	$	162	$	542	$	1,387	$	514	$	632,466	$	634,367
Real estate - construction		701		2,147		-		2,848		17,536		139,180		159,564
Real estate - mortgage:
Owner-occupied
commercial		1,603		-		-		1,603		1,281		300,320		303,204
1-4 family mortgage		1,357		-		-		1,357		878		207,204		209,439
Other mortgage		731		-		-		731		-		209,757		210,488
Total real estate - mortgage		3,691		-		-		3,691		2,159		717,281		723,131
Consumer		1		3		-		4		374		43,534		43,912
Total	$	5,076	$	2,312	$	542	$	7,930	$	20,583	$	1,532,461	$	1,560,974

The following table presents an analysis of the allowance for loan losses by portfolio segment as of June 30, 2011 and December 31, 2010.  The total allowance for loan losses is disaggregated into those amounts associated with loans individually evaluated and those associated with loans collectively evaluated.

	Commercial, financial and agricultural			Real estate - construction			Real estate - mortgage			Consumer			Unallocated			Total
	Three Months Ended June 30, 2011
Allowance for loan losses:
Balance at March 31, 2011	$	6,226		$	6,285		$	2,523		$	603		$	3,589		$	19,226
Chargeoffs		(310	)		(1,021	)		(15	)		(5	)		-			(1,351	)
Recoveries		-			74			1			72			-			147
Provision		(107	)		1,130			676			(104	)		(101	)		1,494
Balance at June 30, 2011		5,809			6,468			3,185			566			3,488			19,516
	Six Months Ended June 30, 2011
Allowance for loan losses:
Balance at December 31, 2010	$	5,348		$	6,373		$	2,443		$	749		$	3,164		$	18,077
Chargeoffs		(860	)		(1,321	)		(15	)		(329	)		-			(2,525	)
Recoveries		-			165			1			73			-			239
Provision		1,321			1,251			756			73			324			3,725
Balance at June 30, 2011		5,809			6,468			3,185			566			3,488			19,516
	June 30, 2011
Individually evaluated for impairment	$	1,228		$	2,497		$	896		$	324		$	-		$	4,945
Collectively evaluated for impairment		4,581			3,971			2,289			242			3,488			14,571
Loans:
Ending balance	$	634,367		$	159,564		$	723,131		$	43,912					$	1,560,974
Individually evaluated for impairment		9,698			31,706			14,745			782						56,931
Collectively evaluated for impairment		624,669			127,858			708,386			43,130						1,504,043
	December 31, 2010
	Commercial, financial and agricultural			Real estate – construction			Real estate – mortgage			Consumer			Unallocated			Total
Allowance for loan losses		5,214			6,373			1,067			554			4,869			18,077
Individually evaluated for impairment	$	1,602		$	1,855		$	415		$	554		$	-		$	4,426
Collectively evaluated for impairment		3,612			4,518			652			-			4,869			13,651
Loans:
Ending balance	$	536,620		$	172,055		$	648,796		$	37,347					$	1,394,818
Individually evaluated for impairment		14,018			28,710			15,093			1,319						59,140
Collectively evaluated for impairment		522,602			143,345			633,703			36,028						1,335,678

The following tables present details of the Company’s impaired loans as of June 30, 2011 and December 31, 2010, respectively.  Loans which have been fully charged off do not appear in the tables.

June 30, 2011
							For the three months ended June 30, 2011				For the six months ended June 30, 2011
	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized in Period		Average Recorded Investment		Interest Income Recognized in Period
With no allowance recorded:
Commercial, financial and agricultural	$	1,790	$	2,563	$	-	$	1,870	$	21	$	1,829	$	40
Real estate - construction		18,631		19,124		-		18,823		107		18,975		215
Real estate - mortgage:
Owner-occupied commercial		3,006		3,156		-		3,017		39		3,026		92
1-4 family mortgage		503		503		-		503		3		504		7
Other mortgage		2,177		2,177		-		2,130		29		2,025		60
Total real estate - mortgage		5,686		5,836		-		5,650		71		5,555		159
Consumer		-		-		-		-		-		-		-
Total with no allowance recorded		26,107		27,523		-		26,343		199		26,359		414
With an allowance recorded:
Commercial, financial and agricultural		5,999		5,999		1,228		6,720		92		6,886		174
Real estate - construction		12,278		12,573		2,497		12,559		33		12,849		104
Real estate - mortgage:
Owner-occupied commercial		2,858		2,858		84		2,822		51		2,811		69
1-4 family mortgage		3,608		3,608		812		3,705		58		3,738		77
Other mortgage		340		340		-		342		7		341		12
Total real estate - mortgage		6,806		6,806		896		6,869		116		6,890		158
Consumer		547		567		324		547		1		631		3
Total with allowance recorded		25,630		25,945		4,945		26,695		242		27,256		439
Total Impaired Loans:
Commercial, financial and agricultural		7,789		8,562		1,228		8,590		113		8,715		214
Real estate - construction		30,909		31,697		2,497		31,382		140		31,824		319
Real estate - mortgage:
Owner-occupied commercial		5,864		6,014		84		5,839		90		5,837		161
1-4 family mortgage		4,111		4,111		812		4,208		61		4,242		84
Other mortgage		2,517		2,517		-		2,472		36		2,366		72
Total real estate - mortgage		12,492		12,642		896		12,519		187		12,445		317
Consumer		547		567		324		547		1		631		3
Total impaired loans	$	51,737	$	53,468	$	4,945	$	53,038	$	441	$	53,615	$	853

December 31, 2010
	Recorded Investment		Unpaid Principal Balance		Related Allowance
With no allowance recorded:
Commercial, financial and agricultural	$	2,345	$	2,930	$	-
Real estate - construction		10,532		12,705		-
Real estate - mortgage:
Owner-occupied commercial		1,614		1,801		-
1-4 family mortgage		511		511		-
Other mortgage		1,817		1,817		-
Total real estate - mortgage		3,942		4,129		-
Consumer		289		289		-
Total with no allowance recorded		17,108		20,053		-
With an allowance recorded:
Commercial, financial and agricultural		9,190		9,190		1,602
Real estate - construction		18,178		18,428		1,855
Real estate - mortgage:
Owner-occupied commercial		3,373		3,373		55
1-4 family mortgage		2,995		2,995		360
Other mortgage		-		-		-
Total real estate - mortgage		6,368		6,368		415
Consumer		704		704		554
Total with allowance recorded		34,440		34,690		4,426
Total Impaired Loans:
Commercial, financial and agricultural		11,535		12,120		1,602
Real estate - construction		28,710		31,133		1,855
Real estate - mortgage:
Owner-occupied commercial		4,988		5,174		55
1-4 family mortgage		3,506		3,506		360
Other mortgage		1,817		1,817		-
Total real estate - mortgage		10,311		10,497		415
Consumer		993		993		554
Total impaired loans	$	51,549	$	54,743	$	4,426

At June 30, 2011 and December 31, 2010, loans classified as troubled debt restructurings (“TDRs”) totaled $5.1 million and $2.4 million, respectively.  At June 30, 2011, the Company had a related allowance for loan losses of $465,000 allocated to these TDRs, compared to $486,000 at December 31, 2010.  All loans classified as TDRs as of June 30, 2011 are performing as agreed under the terms of their restructured plans.

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SUBORDINATED DEFERRABLE INTEREST DEBENTURES

6 Months Ended

Jun. 30, 2011

SUBORDINATED DEFERRABLE INTEREST DEBENTURES

NOTE 10 - SUBORDINATED DEFERRABLE INTEREST DEBENTURES

On September 2, 2008, ServisFirst Capital Trust I, a subsidiary of the Company (the “2008 Trust”), sold 15,000 shares of its 8.5% trust preferred securities to accredited investors for $15,000,000 or $1,000 per share and 463,918 shares of its common securities to the Company for $463,918 or $1.00 per share. The 2008 Trust invested the $15,463,918 of the proceeds from such sale in the Company’s 8.5% junior subordinated deferrable interest debenture due September 1, 2038 in the principal amount of $15,463,918 (the “Debenture”). The Debenture bears a fixed rate of interest at 8.5% per annum and is subordinate and junior in right of payment to all of the Company’s senior debt; provided, however, the Company will not incur any additional senior debt in excess of 0.5% of the Company’s average assets for the fiscal year immediately preceding, unless such incurrence is approved by a majority of the holders of the outstanding trust preferred securities.

Holders of the trust preferred securities are entitled to receive distributions accruing from the original date of issuance. The distributions are payable quarterly in arrears on December 1, March 1, June 1 and September 1 of each year, commencing December 1, 2008. The distributions accrue at an annual fixed rate of 8.5%. Payments of distributions on the trust preferred securities will be deferred in the event interest payments on the Debenture is deferred, which may occur at any time and from time to time, for up to 20 consecutive quarterly  periods.  During any deferral period, the Company may not pay dividends or make certain other distributions or payments as provided for in the Indenture.  If payments are deferred, holders accumulate additional distributions thereon at 8.5%, compounded quarterly, to the extent permitted by law.

In addition, the Company issued a total of 75,000 warrants, each with the right to purchase one share of the Company’s common stock for a purchase price of $25.00. The warrants were issued in increments of 500 for each $100,000 of trust preferred securities purchased. Each warrant is exercisable for a period beginning upon its date of issuance and ending upon the later to occur of either (i) September 1, 2013 or (ii) 60 days following the date upon which the Company’s common stock becomes listed for trading upon a “national securities exchange” as defined under the Securities Exchange Act of 1934. The Company estimated the fair value of each warrant using a Black-Scholes-Merton valuation model and determined the fair value per warrant to be $5.65. This total value of $423,000 was recorded as a discount and reduced the net book value of the debentures to $15,052,000 with an offsetting increase to the Company’s additional paid-in capital. The discount will be amortized over a three-year period.

The trust preferred securities are subject to mandatory redemption upon repayment of the Debenture at its maturity, September 1, 2038, or its earlier redemption. The Debenture is redeemable by the Company (i) prior to September 1, 2011, in whole upon the occurrence of a Special Event, as defined in the Indenture, or (ii) in whole or in part on or after September 1, 2011 for any reason. In the event of the redemption of the trust preferred securities prior to September 1, 2011, the holders of the trust preferred securities will be entitled to $1,050 per share, plus accumulated and unpaid distributions thereon (including accrued interest thereon), if any, to the date of payment. In the event of the redemption of the trust preferred securities on or after September 1, 2011, the holders of the trust preferred securities will be entitled to receive $1,000 per share plus accumulated and unpaid distributions thereon (including accrued interest thereon), if any, to the date of payment.

The Company has the right at any time to terminate the 2008 Trust and cause the Debenture to be distributed to the holders of the trust preferred securities in liquidation of the Trust. This right is optional and wholly within the Company’s discretion as set forth in the Indenture.

Payment of periodic cash distributions and payment upon liquidation or redemption with respect to the trust preferred securities are guaranteed by the Company to the extent of funds held by the Trust (the “Preferred Securities Guarantee”). The Preferred Securities Guarantee, when taken together with the Company’s other obligations under the debentures, constitutes a full and unconditional guarantee, on a subordinated basis, by the Company of payments due on the trust preferred securities.

The Company is required by the Federal Reserve Board to maintain certain levels of capital for bank regulatory purposes. The Federal Reserve Board has determined that certain cumulative preferred securities having the characteristics of trust preferred securities qualify as minority interests, which is included in Tier 1 capital for bank and financial holding companies. In calculating the amount of Tier 1 qualifying capital, the trust preferred securities can only be included up to the amount constituting 25% of total Tier 1 capital elements (including trust preferred securities). Such Tier 1 capital treatment provides the Company with a more cost-effective means of obtaining capital for bank regulatory purposes than if the Company were to issue preferred stock.

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EMPLOYEE AND DIRECTOR BENEFITS

6 Months Ended

Jun. 30, 2011

EMPLOYEE AND DIRECTOR BENEFITS

NOTE 6 - EMPLOYEE AND DIRECTOR BENEFITS

Stock Options

At June 30, 2011, the Company had stock-based compensation plans, as described below. The compensation cost that has been charged to earnings for the plans was approximately $240,000 and $465,000 for three and six months ended June 30, 2011 and $180,000 and $314,000 for the three and six months ended June 30, 2010, respectively.

The Company’s 2005 Amended and Restated Stock Option Plan allows for the grant of stock options to purchase up to 1,025,000 shares of the Company’s common stock. The Company’s 2009 Stock Incentive Plan authorizes the grant of up to 425,000 shares and allows for the issuance of Stock Appreciation Rights, Restricted Stock, Stock Options, Non-stock Share Equivalents, Performance Shares or Performance Units.  Both plans allow for the grant of incentive stock options and non-qualified stock options, and awards are generally granted with an exercise price equal to the estimated fair market value of the Company’s common stock at the date of grant. The maximum term of the options granted under the plans is ten years.

The Company has granted non-plan options to certain persons representing key business relationships to purchase up to an aggregate amount of 55,000 shares of the Company’s common stock at between $15.00 and $20.00 per share for 10 years. These options are non-qualified and not part of either Plan.

The Company estimates the fair value of each stock option award using a Black-Scholes-Merton valuation model that uses 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.

	2011			2010
Expected volatility		29.00	%		25.00	%
Expected dividends		0.50	%		0.50	%
Expected term (in years)	7 years			7 years
Risk-free rate		2.70	%		2.32	%

The weighted average grant-date fair value of options granted during the six months ended June 30, 2011 and 2010 was $8.54 and $7.43, respectively.

 The following table summarizes stock option activity during the six months ended June 30, 2011 and 2010:

	Shares			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (years)		Aggregate Intrinsic Value
								(In Thousands)
Six Months Ended June 30, 2011:
Outstanding at January 1, 2011		881,000		$	15.65		6.9	$	8,238
Granted		166,500			26.05		9.6		-
Exercised		(5,000	)		10.50		4.4		-
Forfeited		-			-		-		-
Outstanding at June 30, 2011		1,042,500			17.34		6.2	$	13,203
Exercisable at June 30, 2011		332,459		$	12.71		4.8	$	5,748
Six Months Ended June 30, 2010:
Outstanding at January 1, 2010		833,500		$	15.00		6.8	$	8,333
Granted		11,000			25.00		9.6		-
Exercised		-			-		-		-
Forfeited		(10,000	)		15.00		6.7		-
Outstanding at June 30, 2010		834,500			15.13		6.4	$	8,238
Exercisable at June 30, 2010		249,696		$	11.33		5.5	$	3,413

Restricted Stock

The Company has issued restricted stock to a certain executive officer and five other employees, and currently has 26,000 non-vested shares issued.  The value of restricted stock awards 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, which is five years from the date of grant.  As of June 30, 2011, there was $510,000 of total unrecognized compensation cost related to non-vested restricted stock.  The cost is expected to be recognized evenly over the remaining 3.5 years of the restricted stock’s vesting period.

Stock Warrants

In recognition of the efforts and financial risks undertaken by the organizers of ServisFirst Bank (the “Bank”) in 2005, the Bank granted warrants to organizers to purchase a total 60,000 shares of common stock at a price of $10, which was the fair market value of the Bank’s common stock at the date of the grant. The warrants became warrants to purchase a like number of shares of the Company’s common stock upon the formation of the Company as a holding company for the Bank.  The warrants vest in equal annual increments over a three-year period commencing on the first anniversary date of the Bank’s incorporation and will terminate on the tenth anniversary of the incorporation date. The total number of these warrants outstanding at June 30, 2011 and 2010 was 60,000.

The Company issued warrants for 75,000 shares of common stock at a price of $25 per share in the third quarter of 2008. These warrants were issued in connection with the trust preferred securities that are discussed in detail in Note 10.

The Company issued warrants for 15,000 shares of common stock at a price of $25 per share in the second quarter of 2009.  These warrants were issued in connection with the issuance and sale of the Bank’s 8.25% Subordinated Note discussed in detail in Note 12.

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SECURITIES

6 Months Ended

Jun. 30, 2011

SECURITIES

NOTE 4 - SECURITIES

The amortized cost and fair value of available-for-sale and held-to-maturity securities at June 30, 2011 and December 31, 2010 are summarized as follows:

	Amortized Cost		Gross Unrealized Gain		Gross Unrealized Loss			Market Value
June 30, 2011:	(In Thousands)
Securities Available for Sale
U.S. Treasury and government sponsored agencies	$	35,411	$	1,406	$	-		$	36,817
Mortgage-backed securities		102,561		4,396		(43	)		106,914
State and municipal securities		83,078		3,051		(314	)		85,815
Corporate debt		1,025		100		-			1,125
Total	$	222,075	$	8,953	$	(357	)	$	230,671
Securities Held to Maturity
Mortgage-backed securities	$	8,365	$	161	$	-		$	8,526
State and municipal securities		5,530		192		(16	)		5,706
Total	$	13,895	$	353	$	(16	)	$	14,232
December 31, 2010:
Securities Available for Sale
U.S. Treasury and government sponsored agencies	$	90,631	$	1,887	$	(224	)	$	92,294
Mortgage-backed securities		101,709		2,783		(268	)		104,224
State and municipal securities		78,241		1,076		(1,051	)		78,266
Corporate debt		2,013		162		-			2,175
Total	$	272,594	$	5,908	$	(1,543	)	$	276,959
Securities Held to Maturity
State and municipal securities	$	5,234	$	-	$	(271	)	$	4,963
Total	$	5,234	$	-	$	(271	)	$	4,963

All mortgage-backed securities are with government-sponsored enterprises (GSEs) such as Federal National Mortgage Association, Government National Mortgage Association, Federal Home Loan Bank, and Federal Home Loan Mortgage Corporation.

The following table identifies, as of June 30, 2011 and December 31, 2010, the Company’s investment securities that have been in a continuous unrealized loss position for less than 12 months and those that have been in a continuous unrealized loss position for 12 or more months.  At June 30, 2011, 13 of the Company’s 446 debt securities had been in an unrealized loss position for 12 or more months. The Company does not intend to sell these securities and it is more likely than not that the Company will not be required to sell the securities before recovery of their amortized cost, which may be maturity; accordingly, the Company does not consider these securities to be other-than-temporarily impaired at June 30, 2011.  Further, the Company believes any deterioration in value of its current investment securities is attributable to changes in market interest rates and not credit quality of the issuer.

	Less Than Twelve Months					Twelve Months or More					Total
	Gross Unrealized Losses			Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses			Fair Value
	(In Thousands)
June 30, 2011:
U.S. Treasury and government sponsored agencies	$	-		$	-	$	-		$	-	$	-		$	-
Mortgage-backed securities		(43	)		2,765		-			-		(43	)		2,765
State and municipal securities		(115	)		6,419		(215	)		4,218		(330	)		10,637
Corporate debt		-			-		-			-		-			-
	$	(158	)	$	9,184	$	(215	)	$	4,218	$	(373	)	$	13,402
December 31, 2010:
U.S. Treasury and government sponsored agencies	$	(224	)	$	24,217	$	-		$	-	$	(224	)	$	24,217
Mortgage-backed securities		(268	)		16,417		-			-		(268	)		16,417
State and municipal securities		(1,034	)		33,282		(288	)		3,674		(1,322	)		36,956
Corporate debt		-			-		-			-		-			-
	$	(1,526	)	$	73,916	$	(288	)	$	3,674	$	(1,814	)	$	77,590

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CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Parenthetical) (USD $) In Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2011	Jun. 30, 2010	Jun. 30, 2011	Jun. 30, 2010
Unrealized holding gains arising during period from securities available for sale, tax	$ 1,550	$ 1,557	$ 1,713	$ 1,693
Reclassification adjustment for net gains on sale of securities in net income, tax	$ 184	$ 6	$ 234	$ 19

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CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $) In Thousands	6 Months Ended
	Jun. 30, 2011	Jun. 30, 2010
OPERATING ACTIVITIES
Net income	$ 10,716	$ 8,034
Adjustments to reconcile net income to net cash provided by operating activities:
Deferred tax (benefit) expense	(2,452)	(925)
Provision for loan losses	3,725	5,075
Depreciation and amortization	566	537
Net amortization (accretion) of investments	417	331
Market value adjustment of interest rate cap	99
Decrease in accrued interest and dividends receivable	143	56
Stock compensation expense	465	314
Increase (decrease) in accrued interest payable	85	(139)
Proceeds from sale of mortgage loans held for sale	67,237	60,934
Originations of mortgage loans held for sale	(63,871)	(59,981)
Gain on sale of securities available for sale	(666)	(53)
Net (gain) loss on sale of other real estate owned	(32)	175
Write down of other real estate owned	156	487
Decrease in special prepaid FDIC insurance assessments	793	1,462
Loss on prepayment of other borrowings	738
Net change in other assets, liabilities, and other operating activities	(46)	(3,190)
Net cash provided by operating activities	18,073	13,117
INVESTMENT ACTIVITIES
Purchase of securities available for sale	(26,007)	(20,865)
Proceeds from maturities, calls and paydowns of securities available for sale	13,504	16,002
Purchase of securities held to maturity	(8,704)	(1,014)
Proceeds from maturities, calls and paydowns of securities held to maturity	43
Increase in loans	(169,996)	(88,814)
Purchase of premises and equipment	(789)	(150)
Purchase of restricted equity securities	(543)	(269)
Proceeds from sale of securities available for sale	63,270	29,999
Proceeds from sale restricted equity securities	154
Proceeds from sale of other real estate owned and repossessions	1,882	5,514
Additions to other real estate owned		(75)
Net cash used in investing activities	(127,186)	(59,672)
FINANCING ACTIVITIES
Net increase (decrease) in noninterest-bearing deposits	33,478	(22,650)
Net decrease in interest-bearing deposits	11,680	105,199
Proceeds from issuance of trust preferred securities		15,050
Proceeds from sale of common stock, net	10,212
Proceeds from sale of preferred stock, net	39,958
Repayment of other borrowings	(20,738)
Net cash provided by financing activities	74,590	97,599
Net (decrease) increase in cash and cash equivalents	(34,523)	51,044
Cash and cash equivalents at beginning of year	231,978	76,206
Cash and cash equivalents at end of year	197,455	127,250
Cash paid for:
Interest	7,932	7,423
Income taxes	8,136	5,058
NONCASH TRANSACTIONS
Transfers of loans from held for sale to held for investment	417	787
Other real estate acquired in settlement of loans	2,112	4,671
Internally financed sales of other real estate owned	$ 141	$ 495

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GENERAL

6 Months Ended

Jun. 30, 2011

GENERAL

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, 2010.

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

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FAIR VALUE MEASUREMENT

6 Months Ended

Jun. 30, 2011

FAIR VALUE MEASUREMENT

NOTE 9 - 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.

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 prices obtained from independent vendors.  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, securities are classified in Level 3 of the hierarchy.

Interest Rate Swap and Cap Agreements – The fair value is estimated by a third party using inputs that are observable or that can be corroborated by observable market data and, therefore, are classified within Level 2 of the hierarchy.  These fair value estimations include primarily market observable inputs such as yield curves and option volatilities, and include the value associated with counterparty credit risk.

Impaired Loans- Impaired loans are measured and reported at fair valuewhen full payment under the loan terms is not expected.  Impaired loans are carried at the present value of estimated future cash flows using the loan’s existing rate or the fair value of the collateral if the loan is collateral-dependent.  Impaired loans are subject to nonrecurring fair value adjustment upon initial recognition or subsequent impairment.  A portion of the allowance for loan losses is allocated to impaired loans if the value of such loans is deemed to be less than the unpaid balance.  The amount recognized as an impairment charge related to impaired loans that are measured at fair value on a nonrecurring basis was $1,508,000 and $3,135,000 during the three and six months ended June 30, 2011, respectively, and $1,244,000 and $3,852,000 during the three and six months ended June 30, 2010, respectively.  Impaired loans are classified within Level 3 of the hierarchy.

Other real estate owned – Other real estate assets (“OREO”) acquired through, or in lieu of, foreclosure are held for sale and are initially recorded at the lower of cost or fair value, less selling costs.  Any write-downs to fair value at the time of transfer to OREO are charged to the allowance for loan losses subsequent to foreclosure.  Values are derived from appraisals of underlying collateral and discounted cash flow analysis.  The amount charged to earnings was $144,000 and $91,000 during the three and six months ended June 30, 2011 and $558,000 and $659,000 during the three and six months ended June 30, 2010, 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.

The following table presents the Company’s financial assets and financial liabilities carried at fair value on a recurring basis as of June 30, 2011 and December 31, 2010:

	Fair Value Measurements at June 30, 2011 Using
	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
Assets Measured on a Recurring Basis:	(In Thousands)
Available-for-sale securities	$	-	$	230,671	$	-	$	230,671
Interest rate swap agreements		-		724		-		724
Interest rate cap		-		16				16
Total assets at fair value	$	-	$	231,411	$	-	$	231,411
Liabilities Measured on a Recurring Basis:
Interest rate swap agreements	$	-	$	724	$	-	$	724

	Fair Value Measurements at December 31, 2010 Using
	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
Assets Measured on a Recurring Basis:	(In Thousands)
Available-for-sale securities	$	-	$	276,959	$	-	$	276,959
Interest rate swap agreements		-		803				803
Interest rate cap		-		115		-		115
Total assets at fair value	$	-	$	277,877	$	-	$	277,877
Liabilities Measured on a Recurring Basis:
Interest rate swap agreements	$	-	$	803	$	-	$	803

The following table presents the Company’s financial assets and financial liabilities carried at fair value on a nonrecurring basis as of June 30, 2011:

	Fair Value Measurements at June 30, 2011 Using
	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
Assets Measured on a Nonrecurring Basis:	(In Thousands)
Impaired loans	$	-	$	-	$	6,417	$	6,417
Other real estate owned		-		-		6,931		6,931
Total assets at fair value	$	-	$	-	$	13,348	$	13,348

	Fair Value Measurements at December 31, 2010 Using
	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
Assets Measured on a Nonrecurring Basis:	(In Thousands)
Impaired loans	$	-	$	-	$	35,183	$	35,183
Other real estate owned		-		-		6,966		6,966
Total assets at fair value	$	-	$	-	$	42,149	$	42,149

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 carrying amount and estimated fair value of the Company’s financial instruments, including those that are not measured and reported at fair value on a recurring basis or nonrecurring basis, at June 30, 2011 and December 31, 2010 were as follows:

	June 30, 2011				December 31, 2010
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
	(In Thousands)
Financial Assets:
Cash and cash equivalents	$	197,455	$	197,455	$	231,978	$	231,978
Investment securities available for sale		230,671		230,671		276,959		276,959
Investment securities held to maturity		13,895		14,232		5,234		4,963
Restricted equity securities		3,899		3,899		3,510		3,510
Mortgage loans held for sale		4,092		4,092		7,875		7,875
Loans, net		1,541,458		1,545,710		1,376,741		1,388,154
Accrued interest and dividends receivable		6,847		6,847		6,990		6,990
Derivatives		740		740		918		918
Financial Liabilities:
Deposits	$	1,803,874	$	1,807,300	$	1,758,716	$	1,761,906
Borrowings		4,945		5,243		24,937		25,717
Trust preferred securities		30,490		27,384		30,420		27,989
Accrued interest payable		983		983		898		898
Derivatives		724		724		803		803

The following methods and assumptions were used by the Company in estimating its fair value disclosures for financial instruments:

Cash and cash equivalents:  The carrying amounts reported in the statements of financial condition for cash and cash equivalents approximate those assets’ fair values.

Investment securities:  Fair values for investment securities are based on quoted market prices, where available.  If a quoted market price is not available, fair value is based on quoted market prices of comparable instruments.

Restricted equity securities:  Fair values for other investments are considered to be their cost.

Loans:  For variable-rate loans that re-price frequently and with no significant change in credit risk, fair value is based on carrying amounts.  The fair value of other loans (for example, fixed-rate commercial real estate loans, mortgage loans, and industrial loans) is estimated using discounted cash flow analysis, based on interest rates currently being offered for loans with similar terms to borrowers of  similar credit quality.  Loan fair value estimates include judgments regarding future expected loss experience and risk characteristics.  The method of estimating fair value does not incorporate the exit-price concept of fair value as prescribed by FASB Accounting Standards Compilation (ASC) 820 and generally produces a higher value than an exit-price approach.  Fair value for impaired loans is estimated using discounted cash flow analysis, or underlying collateral values, where applicable.

Mortgage loans held for sale:  Loans are committed to be delivered to investors on a “best efforts delivery” basis within 30 days of origination.  Due to this short turn-around time, the carrying amounts of the Company’s agreements approximate their fair values.

Derivatives:  The fair values of the derivative agreements are based on quoted prices from an outside third party.

Accrued interest and dividends receivable:  The carrying amount of accrued interest and dividends receivable approximates its fair value.

Deposits:  The fair values disclosed for demand deposits are, by definition, equal to the amount payable on demand at the reporting date (that is, their carrying amounts).  The carrying amounts of variable-rate, fixed-term money market accounts and certificates of deposit approximate their fair values.  Fair values for fixed-rate certificates of deposit are estimated using a discounted cash flow calculation.

Federal funds purchased:  The carrying amounts of federal funds purchased approximate their market value.

Other borrowings:  The fair values of other borrowings are estimated using discounted cash flow analysis, based on interest rates currently being offered by the Federal Home Loan Bank for borrowings of similar terms as those being valued.

Trust preferred securities:  The fair values of trust preferred securities are estimated using a discounted cash flow analysis, based on interest rates currently being offered on the best alternative debt available at the measurement date.

Accrued interest payable:  The carrying amount of accrued interest payable approximates its fair value.

Loan commitments:  The fair values of the Company’s off-balance sheet financial instruments are based on fees currently charged to enter into similar agreements.  Since the majority of the Company’s other off-balance-sheet instruments consist of non-fee-producing, variable-rate commitments, the Company has determined they do not have a distinguishable fair value.

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CASH AND CASH FLOWS

6 Months Ended

Jun. 30, 2011

CASH AND CASH FLOWS

NOTE 2 - CASH AND CASH FLOWS

Cash on hand, cash items in process of collection, amounts due from banks, and federal funds sold are included in cash and cash equivalents.

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SUBORDINATED NOTE DUE SEPTEMBER 1, 2016

6 Months Ended

Jun. 30, 2011

SUBORDINATED NOTE DUE SEPTEMBER 1, 2016

NOTE 12 - SUBORDINATED NOTE DUE SEPTEMBER 1, 2016

On June 23, 2009, the Bank issued $5,000,000 aggregate principal amount of its 8.25% Subordinated Note due June 1, 2016 to an accredited investor at 100% of par.  The note is subordinate and junior in right of payment upon any liquidation of the Bank as to principal, interest and premium to obligations to the Bank’s depositors and other obligations to its general and secured creditors.  Interest payments are due and payable on each September 1, December 1, March 1 and June 1, commencing on September 1, 2009.  Interest accrues at an annual rate of 8.25%.  The proceeds from the note payable are included in Tier 2 capital of the Bank and the Company.

In addition, the Company issued to the investor a total of 15,000 warrants, each representing the right to purchase one share of the Company’s common stock for a purchase price of $25.00. Each warrant is exercisable for a period beginning upon its date of issuance and ending on June 1, 2016.  The Company estimated the fair value of each warrant using a Black-Scholes-Merton valuation model and determined the fair value per warrant to be $5.41. This total value of $86,000 was recorded as a discount and reduced the net book value of the debentures to $4,914,000 with an offsetting increase to the Company’s additional paid-in capital. The discount will be amortized over a five-year period.

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CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (USD $) In Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2011	Jun. 30, 2010	Jun. 30, 2011	Jun. 30, 2010
Net income	$ 5,845	$ 4,021	$ 10,716	$ 8,034
Other comprehensive income, net of tax:
Unrealized holding gains arising during period from securities available for sale, net of tax of $1,550 and $1,713 for the three and six months ended June 30, 2011, respectively, and $1,557 and $1,693 for the three and six months ended June 30, 2010, respectively	2,877	2,821	3,182	3,110
Reclassification adjustment for net gains on sale of securities in net income, net of tax of $184 and $234 for the three and six months ended June 30, 2011, respectively, and $6 and $19 for the three and six months ended June 30, 2010, respectively	(339)	(9)	(432)	(34)
Other comprehensive income, net of tax	2,538	2,812	2,750	3,076
Comprehensive income	$ 8,383	$ 6,833	$ 13,466	$ 11,110

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PARTICIPATION IN THE SMALL BUSINESS LENDING FUND OF THE U.S. TREASURY DEPARTMENT

6 Months Ended

Jun. 30, 2011

PARTICIPATION IN THE SMALL BUSINESS LENDING FUND OF THE U.S. TREASURY DEPARTMENT

NOTE 13 – PARTICIPATION IN THE SMALL BUSINESS LENDING FUND OF THE U.S. TREASURY DEPARTMENT

On June 21, 2011, the Company entered into a Securities Purchase Agreement with the Secretary of the Treasury, pursuant to which the Company issued and sold to the Treasury 40,000 shares of its Senior Non-Cumulative Perpetual Preferred Stock, Series A, having a liquidation preference of $1,000 per share, for aggregate proceeds of $40,000,000.  The issuance was pursuant to the Treasury’s Small Business Lending Fund program, a $30 billion fund established under the Small Business Jobs Act of 2010, which encourages lending to small businesses by providing capital to qualified community banks with assets of less than $10 billion.  The Series A Preferred Stock is entitled to receive non-cumulative dividends payable quarterly on each January 1, April 1, July 1 and October 1, beginning October 1, 2011.  The dividend rate, which is calculated on the aggregate Liquidation Amount, has been initially set at 1% per annum based upon the current level of “Qualified Small Business Lending” (“QSBL”) by the Bank.  The dividend rate for future dividend periods will be set based upon the percentage change in qualified lending between each dividend period and the baseline QSBL level established at the time the Agreement was entered into.  Such dividend rate may vary from 1% per annum to 5% per annum for the second through tenth dividend periods, from 1% per annum to 7% per annum for the eleventh through the first half of the nineteenth dividend periods.  If the Series A Preferred Stock remains outstanding for more than four-and-one-half years, the dividend rate will be fixed at 9%.  Prior to that time, in general, the dividend rate decreases as the level of the Bank’s QSBL increases.  Such dividends are not cumulative, but the Company may only declare and pay dividends on its common stock (or any other equity securities junior to the Series A Preferred Stock) if it has declared and paid dividends for the current dividend period on the Series A Preferred Stock, and will be subject to other restrictions on its ability to repurchase or redeem other securities.  In addition, if (i) the Company has not timely declared and paid dividends on the Series A Preferred Stock for six dividend periods or more, whether or not consecutive, and (ii) shares of Series A Preferred Stock with an aggregate liquidation preference of at least $25,000,000 are still outstanding, the Treasury (or any successor holder of Series A Preferred Stock) may designate two additional directors to be elected to the Company’s Board of Directors.

As more completely described in the Certificate of Designation, holders of the Series A Preferred Stock have the right to vote as a separate class on certain matters relating to the rights of holders of Series A Preferred Stock and on certain corporate transactions.  Except with respect to such matters and, if applicable, the election of the additional directors described above, the Series A Preferred Stock does not have voting rights.

The Company may redeem the shares of Series A Preferred Stock, in whole or in part, at any time at a redemption price equal to the sum of the Liquidation Amount per share and the per-share amount of any unpaid dividends for the then-current period, subject to any required prior approval by the Company’s primary federal banking regulator.

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SUBSEQUENT EVENTS

6 Months Ended

Jun. 30, 2011

SUBSEQUENT EVENTS

NOTE 15 – SUBSEQUENT EVENTS

The Company has evaluated all subsequent events through the date of this filing to ensure that this Form 10-Q includes appropriate disclosure of events both recognized in the financial statements as of June 30, 2011, and events which occurred subsequent to June 30, 2011 but were not recognized in the financial statements.  As of the date of this filing, there were no subsequent events which required recognition or disclosure.

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CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (USD $) In Thousands	Total	Preferred Stock	Common Stock	Additional Paid-in Capital	Retained Earnings	Accumulated Other Comprehensive Income
Beginning Balance at Dec. 31, 2010	$ 117,100		$ 6	$ 75,914	$ 38,343	$ 2,837
Sale of 340,000 shares of common stock	10,159			10,159
Sale of 40,000 shares of preferred stock, net	39,958	39,958
Exercise 5,000 stock options	53			53
Other comprehensive income	2,750					2,750
Stock based compensation expense	465			465
Net income	10,716				10,716
Ending Balance at Jun. 30, 2011	$ 181,201	$ 39,958	$ 6	$ 86,591	$ 49,059	$ 5,587

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DERIVATIVES

6 Months Ended

Jun. 30, 2011

DERIVATIVES

NOTE 7 - DERIVATIVES

During 2008, the Company entered into interest rate swaps (“swaps”) to facilitate customer transactions and meet customer financing needs. Upon entering into these swaps, the Company entered into offsetting positions with a regional correspondent bank in order to minimize the risk to the Company.  As of June 30, 2011, the Company was party to two swaps with notional amounts totaling approximately $11.7 million with customers, and two swaps with notional amounts totaling approximately $11.7 million with a regional correspondent bank.  These swaps qualify as derivatives, but are not designated as hedging instruments.  The Company has recorded the value of these swaps at $724,000 in offsetting entries in other assets and other liabilities.

During 2010 the Company entered into an interest rate cap with a notional value of $100 million.  The cap has a strike rate of 2.00% and is indexed to the three month London Interbank Offered Rate (“LIBOR”).  The cap does not qualify for hedge accounting treatment, and is marked to market, with changes in market value reflected in interest expense.  The Company recognized $38,000 and $99,000 of interest expense related to marking the cap to market for the three and six months ended June 30, 2011, respectively.

The Company has entered into agreements with secondary market investors to deliver loans on a “best efforts delivery” basis. When a rate is committed to a borrower, it is based on the best price that day and locked with the investor for the customer for a 30-day period. In the event the loan is not delivered to the investor, the Company has no risk or exposure with the investor. The interest rate lock commitments related to loans that are originated for later sale are classified as derivatives. The fair values of the Company’s agreements with investors and rate lock commitments to customers as of June 30, 2011 and December 31, 2010 were not material.

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JUNIOR SUBORDINATED MANDATORY CONVERTIBLE DEFERRABLE INTEREST DEBENTURES DUE MARCH 15, 2040

6 Months Ended

Jun. 30, 2011

JUNIOR SUBORDINATED MANDATORY CONVERTIBLE DEFERRABLE INTEREST DEBENTURES DUE MARCH 15, 2040

NOTE 11 – JUNIOR SUBORDINATED MANDATORY CONVERTIBLE DEFERRABLE INTEREST DEBENTURES DUE MARCH 15, 2040

On February 9, 2010 the Company established a new Delaware statutory trust subsidiary, ServisFirst Capital Trust II (the “2010 Trust”), which issued 15,000 shares of its 6.0% Mandatory Convertible Trust Preferred Securities (the “Preferred Securities”) for $15,000,000, or $1,000 per Preferred Security, on March 15, 2010. The 2010 Trust simultaneously issued 50,000 shares of its common securities to the Company for a purchase price of $50,000, or $1.00 per share, which together with the Preferred Securities, constitutes all of the issued and outstanding securities of the 2010 Trust (collectively, the “Trust Securities”).  The 2010 Trust invested all of the proceeds from the sale of the Trust Securities in the Company’s 6.0% Junior Subordinated Mandatory Convertible Deferrable Interest Debentures due March 15, 2040 in the principal amount of $15,050,000 (the “Subordinated Debentures”).  The Preferred Securities were offered and sold to accredited investors in a private placement.

Holders of the Preferred Securities are entitled to receive distributions accruing from March 15, 2010, and payable quarterly in arrears on March 15, June 15, September 15 and December 15 of each year, commencing June 15, 2010 unless the Company defers interest payments on the Subordinated Debentures.  Distributions accrue at an annual rate equal to 6.0% of the liquidation amount of $1,000 per Preferred Security.  The rate and the distribution dates for the Preferred Securities correspond to the interest rate and payment dates on the Subordinated Debentures, which constitute substantially all the assets of the 2010 Trust.  As a result, if principal or interest is not paid on the Subordinated Debentures, no corresponding amounts will be paid on the Preferred Securities.  The 2010 Trust also pays a distribution on the common securities at an annual rate of 6.0% of the purchase price of the common securities, but such payments are financially immaterial since they simply represent a return of funds to the Company.

The Subordinated Debentures are subordinate and junior in right of payment to all of the Company’s senior debt, as defined in the Indenture (as defined below); provided, however, that, while any of the Preferred Securities remain outstanding, the Company shall not incur any additional senior debt in excess of 0.5% of the Company’s average assets for the fiscal year immediately preceding, unless approved by the holders of a majority of the outstanding Preferred Securities.  The Company has the right to defer payments of interest on the Subordinated Debentures from time to time, for up to 20 consecutive quarterly periods for each deferral period.  During any deferral period, the Company may not (i) pay dividends on or redeem any of its capital stock, (ii) pay principal of or interest on any debt securities ranking pari passu with or subordinate to the Subordinated Debentures or (iii) make any guaranty payments with respect to any guaranty of the debt securities of any of the Company’s subsidiaries if such guaranty ranks pari passu with or junior in right of payment to the Subordinated Debentures.

If not previously redeemed or converted into common stock of the Company, the Preferred Securities will automatically and mandatorily convert into common stock of the Company on March 15, 2013 at a conversion price of $25 per share of common stock.  In addition to such mandatory conversion, the Preferred Securities may be converted into common stock of the Company at the option of the holder at any time prior to the earliest to occur of maturity, redemption or mandatory conversion at the same conversion price.

The Preferred Securities are subject to mandatory redemption upon repayment of the Subordinated Debentures at their stated maturity (as defined in the Indenture), or upon earlier redemption of the Subordinated Debentures. The Subordinated Debentures are redeemable by the Company at any time in whole, but not in part, upon the occurrence of a special event, as defined in the Indenture.

The Company has the right at any time to terminate the 2010 Trust and cause the Subordinated Debentures to be distributed to the holders of the Preferred Securities in liquidation of the 2010 Trust. This right is optional and wholly within the Company’s discretion.

The Company is required by the Federal Reserve Board to maintain certain levels of capital for bank regulatory purposes. The Federal Reserve Board has determined that certain cumulative preferred securities having the characteristics of trust preferred securities qualify as minority interests, which is included in Tier 1 capital for bank and financial holding companies.  In calculating the amount of Tier 1 qualifying capital, the trust preferred securities can only be included up to the amount constituting 25% of total Tier 1 capital elements (including trust preferred securities). Such Tier 1 capital treatment provides the Company with a more cost-effective means of obtaining capital for bank regulatory purposes than if the Company were to issue preferred stock.

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CONSOLIDATED BALANCE SHEETS (USD $) In Thousands	Jun. 30, 2011	Dec. 31, 2010
ASSETS
Cash and due from banks	$ 27,963	$ 27,454
Interest-bearing balances due from depository institutions	74,951	204,178
Federal funds sold	94,541	346
Cash and cash equivalents	197,455	231,978
Debt securities:
Available for sale	230,671	276,959
Held to maturity	13,895	5,234
Restricted equity securities	3,899	3,510
Mortgage loans held for sale	4,092	7,875
Loans	1,560,974	1,394,818
Less allowance for loan losses	(19,516)	(18,077)
Loans, net	1,541,458	1,376,741
Premises and equipment, net	4,673	4,450
Accrued interest and dividends receivable	6,847	6,990
Deferred tax assets	7,338	6,366
Other real estate owned	6,931	6,966
Other assets	7,338	8,097
Total assets Total assets	2,024,597	1,935,166
Deposits:
Noninterest-bearing	283,968	250,490
Interest-bearing	1,519,906	1,508,226
Total deposits	1,803,874	1,758,716
Other borrowings	4,945	24,937
Trust preferred securities	30,490	30,420
Accrued interest payable	983	898
Other liabilities	3,104	3,095
Total liabilities Total liabilities	1,843,396	1,818,066
Stockholders' equity:
Common stock, par value $.001 per share; 15,000,000 shares authorized; 5,872,482 shares issued and outstanding at June 30, 2011 and 5,527,482 shares issued and outstanding at December 31, 2010	6	6
Additional paid-in capital	86,591	75,914
Retained earnings	49,059	38,343
Accumulated other comprehensive income	5,587	2,837
Total stockholders' equity	181,201	117,100
Total liabilities and shareholders' equity Total liabilities and stockholders' equity	2,024,597	1,935,166
Preferred stock, Series A Senior Non-Cumulative Perpetual Participating
Stockholders' equity:
Preferred stock, net of discount	39,958
Preferred stock, Series B
Stockholders' equity:
Preferred stock