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 SEPTEMBER 30, 2012
¨ | 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.) |
850 Shades Creek Parkway, Birmingham, Alabama | 35209 |
(Address of Principal Executive Offices) | (Zip Code) |
(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 x 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 October 29, 2012 | |||
Common stock, $.001 par value | 6,021,218 |
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 | 27 |
Item 3. | Quantitative and Qualitative Disclosures about Market Risk | 47 |
Item 4. | Controls and Procedures | 48 |
PART II. OTHER INFORMATION | ||
Item 1 | Legal Proceedings | 48 |
Item 1A. | Risk Factors | 48 |
Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | 49 |
Item 3. | Defaults Upon Senior Securities | 49 |
Item 4. | Mine Safety Disclosures | 49 |
Item 5. | Other Information | 49 |
Item 6. | Exhibits | 49 |
EX-3.01 | CERTIFICATE OF INCORPORATION, AS AMENDED, OF SERVISFIRST BANCSHARES, INC. | |
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 | |
EX-101.INS | XBRL Instance Document | |
EX-101.SCH | XBRL Taxonomy Extension Schema | |
EX-101.CAL | XBRL Taxonomy Extension Calculation Linkbase | |
EX-101.LAB | XBRL Taxonomy Extension Label Linkbase | |
EX-101.PRE | XBRL Taxonomy Extension Presentation Linkbase | |
EX-101.DEF | XBRL Taxonomy Extension Definition Linkbase |
2 |
PART 1. FINANCIAL INFORMATION
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS
SERVISFIRST BANCSHARES, INC.
CONSOLIDATED BALANCE SHEETS SEPTEMBER 30, 2012 AND DECEMBER 31, 2011
(In thousands, except share and per share amounts)
September 30, 2012 | December 31, 2011 | |||||||
(Unaudited) | (Audited) | |||||||
ASSETS | ||||||||
Cash and due from banks | $ | 40,312 | $ | 43,018 | ||||
Interest-bearing balances due from depository institutions | 204,361 | 99,350 | ||||||
Federal funds sold | 10,672 | 100,565 | ||||||
Cash and cash equivalents | 255,345 | 242,933 | ||||||
Available for sale debt securities, at fair value | 236,582 | 293,809 | ||||||
Held to maturity debt securities (fair value of $22,327 and $15,999 at September 30, 2012 and December 31, 2011, respectively) | 20,791 | 15,209 | ||||||
Restricted equity securities | 3,941 | 3,501 | ||||||
Mortgage loans held for sale | 28,558 | 17,859 | ||||||
Loans | 2,161,130 | 1,830,742 | ||||||
Less allowance for loan losses | (24,604 | ) | (22,030 | ) | ||||
Loans, net | 2,136,526 | 1,808,712 | ||||||
Premises and equipment, net | 5,875 | 4,591 | ||||||
Accrued interest and dividends receivable | 9,188 | 8,192 | ||||||
Deferred tax assets | 6,289 | 4,914 | ||||||
Other real estate owned | 9,641 | 12,275 | ||||||
Bank owned life insurance contracts | 41,551 | 40,390 | ||||||
Other assets | 8,947 | 8,400 | ||||||
Total assets | $ | 2,763,234 | $ | 2,460,785 | ||||
LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||
Liabilities: | ||||||||
Deposits: | ||||||||
Noninterest-bearing | $ | 512,962 | $ | 418,810 | ||||
Interest-bearing | 1,896,559 | 1,725,077 | ||||||
Total deposits | 2,409,521 | 2,143,887 | ||||||
Federal funds purchased | 91,317 | 79,265 | ||||||
Other borrowings | - | 4,954 | ||||||
Trust preferred securities | 30,514 | 30,514 | ||||||
Accrued interest payable | 867 | 945 | ||||||
Other liabilities | 6,009 | 4,928 | ||||||
Total liabilities | 2,538,228 | 2,264,493 | ||||||
Stockholders' equity: | ||||||||
Preferred stock, Series A Senior Non-Cumulative Perpetual, par value $.001 | ||||||||
(liquidation preference $1,000), net of discount; 40,000 shares authorized, | ||||||||
40,000 shares issued and outstanding at March 31, 2012 and at | ||||||||
December 31, 2011 | 39,958 | 39,958 | ||||||
Preferred stock, par value $.001 per share; 1,000,000 authorized and | ||||||||
960,000 currently undesignated | - | - | ||||||
Common stock, par value $.001 per share; 15,000,000 shares authorized; | ||||||||
6,006,218 shares issued and outstanding at September 30, 2012 and | ||||||||
5,932,182 shares issued and outstanding at December 31, 2011 | 6 | 6 | ||||||
Additional paid-in capital | 89,614 | 87,805 | ||||||
Retained earnings | 87,170 | 61,581 | ||||||
Accumulated other comprehensive income | 8,258 | 6,942 | ||||||
Total stockholders' equity | 225,006 | 196,292 | ||||||
Total liabilities and stockholders' equity | $ | 2,763,234 | $ | 2,460,785 |
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 | Nine Months Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2012 | 2011 | 2012 | 2011 | |||||||||||||
Interest income: | ||||||||||||||||
Interest and fees on loans | $ | 25,609 | $ | 21,043 | $ | 73,372 | $ | 59,509 | ||||||||
Taxable securities | 1,189 | 1,374 | 3,828 | 4,360 | ||||||||||||
Nontaxable securities | 827 | 742 | 2,423 | 2,175 | ||||||||||||
Federal funds sold | 50 | 54 | 145 | 125 | ||||||||||||
Other interest and dividends | 68 | 99 | 200 | 184 | ||||||||||||
Total interest income | 27,743 | 23,312 | 79,968 | 66,353 | ||||||||||||
Interest expense: | ||||||||||||||||
Deposits | 3,079 | 3,382 | 9,229 | 9,780 | ||||||||||||
Borrowed funds | 616 | 711 | 2,048 | 2,330 | ||||||||||||
Total interest expense | 3,695 | 4,093 | 11,277 | 12,110 | ||||||||||||
Net interest income | 24,048 | 19,219 | 68,691 | 54,243 | ||||||||||||
Provision for loan losses | 1,185 | 2,740 | 6,651 | 6,465 | ||||||||||||
Net interest income after provision for loan losses | 22,863 | 16,479 | 62,040 | 47,778 | ||||||||||||
Noninterest income: | ||||||||||||||||
Service charges on deposit accounts | 666 | 569 | 1,986 | 1,683 | ||||||||||||
Mortgage banking | 865 | 814 | 2,701 | 1,641 | ||||||||||||
Securities gains | - | - | - | 666 | ||||||||||||
Increase in cash surrender value life insurance | 386 | - | 1,161 | - | ||||||||||||
Other operating income | 443 | 425 | 1,209 | 871 | ||||||||||||
Total noninterest income | 2,360 | 1,808 | 7,057 | 4,861 | ||||||||||||
Noninterest expenses: | ||||||||||||||||
Salaries and employee benefits | 5,697 | 4,723 | 16,110 | 13,963 | ||||||||||||
Equipment and occupancy expense | 988 | 923 | 2,884 | 2,743 | ||||||||||||
Professional services | 322 | 337 | 960 | 928 | ||||||||||||
FDIC and other regulatory assessments | 409 | 403 | 1,155 | 1,377 | ||||||||||||
OREO expense | 1,159 | 115 | 1,832 | 504 | ||||||||||||
Other operating expenses | 2,696 | 2,331 | 7,256 | 7,283 | ||||||||||||
Total noninterest expenses | 11,271 | 8,832 | 30,197 | 26,798 | ||||||||||||
Income before income taxes | 13,952 | 9,455 | 38,900 | 25,841 | ||||||||||||
Provision for income taxes | 4,650 | 3,320 | 13,011 | 8,990 | ||||||||||||
Net income | 9,302 | 6,135 | 25,889 | 16,851 | ||||||||||||
Preferred stock dividends | 100 | 100 | 300 | 100 | ||||||||||||
Net income available to common stockholders | $ | 9,202 | $ | 6,035 | $ | 25,589 | $ | 16,751 | ||||||||
Basic earnings per common share | $ | 1.53 | $ | 1.03 | $ | 4.28 | $ | 2.93 | ||||||||
Diluted earnings per common share | $ | 1.35 | $ | 0.90 | $ | 3.75 | $ | 2.58 |
See Notes to Consolidated Financial Statements.
4 |
SERVISFIRST BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands)
(Unaudited)
Three Months Ended | Nine Months Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2012 | 2011 | 2012 | 2011 | |||||||||||||
Net income | $ | 9,302 | $ | 6,135 | $ | 25,889 | $ | 16,851 | ||||||||
Other comprehensive income, net of tax: | ||||||||||||||||
Unrealized holding gains arising during period from securities available for sale, net of tax of $348 and $525 for the three and nine months ended September 30, 2012, respectively, and $1,473 and $3,186 for the three and nine months ended September 30, 2011, respectively | 646 | 1,784 | 1,316 | 4,966 | ||||||||||||
Reclassification adjustment for net losses on sale of securities in net income, net of tax of $234 for the nine months ended September 30, 2011 | - | - | - | (432 | ) | |||||||||||
Other comprehensive income, net of tax | 646 | 1,784 | 1,316 | 4,534 | ||||||||||||
Comprehensive income | $ | 9,948 | $ | 7,919 | $ | 27,205 | $ | 21,385 |
See Notes to Consolidated Financial Statements.
5 |
SERVISFIRST BANCSHARES, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
NINE MONTHS ENDED SEPTEMBER 30, 2012
(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, 2011 | $ | 39,958 | $ | 6 | $ | 87,805 | $ | 61,581 | $ | 6,942 | $ | 196,292 | ||||||||||||
Preferred dividends paid | - | - | - | (300 | ) | - | (300 | ) | ||||||||||||||||
Exercise 74,036 stock options and warrants, including tax benefit | - | - | 1,021 | - | - | 1,021 | ||||||||||||||||||
Other comprehensive income | - | - | - | - | 1,316 | 1,316 | ||||||||||||||||||
Stock-based compensation expense | - | - | 788 | - | - | 788 | ||||||||||||||||||
Net income | - | - | - | 25,889 | - | 25,889 | ||||||||||||||||||
Balance, September 30, 2012 | $ | 39,958 | $ | 6 | $ | 89,614 | $ | 87,170 | $ | 8,258 | $ | 225,006 |
See Notes to Consolidated Financial Statements.
6 |
SERVISFIRST BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30, 2012 AND 2011
(In thousands) (Unaudited)
2012 | 2011 | |||||||
OPERATING ACTIVITIES | ||||||||
Net income | $ | 25,889 | $ | 16,851 | ||||
Adjustments to reconcile net income to net cash provided by | ||||||||
Deferred tax benefit | (1,602 | ) | (1,476 | ) | ||||
Provision for loan losses | 6,651 | 6,465 | ||||||
Depreciation and amortization | 911 | 844 | ||||||
Net amortization of investments | 789 | 648 | ||||||
Market value adjustment of interest rate cap | 9 | 98 | ||||||
Increase in accrued interest and dividends receivable | (996 | ) | (539 | ) | ||||
Stock-based compensation expense | 788 | 719 | ||||||
(Decrease) increase in accrued interest payable | (78 | ) | 145 | |||||
Proceeds from sale of mortgage loans held for sale | 176,753 | 115,329 | ||||||
Originations of mortgage loans held for sale | (184,706 | ) | (115,344 | ) | ||||
Gain on sale of securities available for sale | - | (666 | ) | |||||
Gain on sale of mortgage loans held for sale | (2,746 | ) | (1,641 | ) | ||||
Net loss (gain) on sale of other real estate owned | 88 | (87 | ) | |||||
Write down of other real estate owned | 1,424 | 181 | ||||||
Decrease in special prepaid FDIC insurance assessments | 972 | 1,126 | ||||||
Increase in cash surrender value of life insurance contracts | (1,161 | ) | - | |||||
Loss on prepayment of other borrowings | - | 738 | ||||||
Net change in other assets, liabilities, and other operating activities | (401 | ) | 966 | |||||
Net cash provided by operating activities | 22,584 | 24,357 | ||||||
INVESTMENT ACTIVITIES | ||||||||
Purchase of securities available for sale | (34,040 | ) | (95,311 | ) | ||||
Proceeds from maturities, calls and paydowns of securities available for sale | 92,021 | 19,679 | ||||||
Purchase of securities held to maturity | (6,005 | ) | (11,188 | ) | ||||
Proceeds from maturities, calls and paydowns of securities held to maturity | 423 | 1,067 | ||||||
Increase in loans | (335,877 | ) | (309,529 | ) | ||||
Purchase of premises and equipment | (2,195 | ) | (893 | ) | ||||
Purchase of restricted equity securities | (787 | ) | (543 | ) | ||||
Purchase of bank-owned life insurance contracts | - | (40,000 | ) | |||||
Proceeds from sale of securities available for sale | - | 63,270 | ||||||
Proceeds from sale of restricted equity securities | 347 | 345 | ||||||
Proceeds from sale of other real estate owned and repossessions | 2,534 | 2,950 | ||||||
Net cash used in investing activities | (283,579 | ) | (370,153 | ) | ||||
FINANCING ACTIVITIES | ||||||||
Net increase in noninterest-bearing deposits | 94,152 | 131,605 | ||||||
Net increase in interest-bearing deposits | 171,482 | 120,960 | ||||||
Net increase in federal funds purchased | 12,052 | 16,400 | ||||||
Proceeds from sale of common stock, net | 1,021 | 10,411 | ||||||
Proceeds from sale of preferred stock, net | - | 39,958 | ||||||
Repayment of other borrowings | (5,000 | ) | (20,738 | ) | ||||
Dividends on preferred stock | (300 | ) | (100 | ) | ||||
Net cash provided by financing activities | 273,407 | 298,496 | ||||||
Net increase (decrease) in cash and cash equivalents | 12,412 | (47,300 | ) | |||||
Cash and cash equivalents at beginning of year | 242,933 | 231,978 | ||||||
Cash and cash equivalents at end of year | $ | 255,345 | $ | 184,678 | ||||
SUPPLEMENTAL DISCLOSURE | ||||||||
Cash paid for: | ||||||||
Interest | $ | 11,355 | $ | 11,965 | ||||
Income taxes | 12,203 | 10,136 | ||||||
NONCASH TRANSACTIONS | ||||||||
Transfers of loans from held for sale to held for investment | $ | - | $ | 417 | ||||
Other real estate acquired in settlement of loans | 1,436 | 6,263 | ||||||
Internally financed sales of other real estate owned | 24 | 141 |
See Notes to Consolidated Financial Statements.
7 |
SERVISFIRST BANCSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2012
(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, 2011.
All reported amounts are in thousands except share and per share data.
NOTE 2 - CASH AND CASH EQUIVALENTS
Cash on hand, cash items in process of collection, amounts due from banks, and federal funds sold are included in cash and cash equivalents.
NOTE 3 - EARNINGS PER COMMON SHARE
Basic earnings per common share are computed by dividing net income available to common stockholders 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 shares issuable upon possible conversion of the Company’s junior subordinated mandatory convertible deferrable interest debentures due March 15, 2040.
8 |
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
2012 | 2011 | 2012 | 2011 | |||||||||||||
(In Thousands, Except Shares and Per Share Data) | ||||||||||||||||
Earnings per common share | ||||||||||||||||
Weighted average common shares outstanding | 6,005,242 | 5,886,178 | 5,977,590 | 5,709,334 | ||||||||||||
Net income available to common stockholders | $ | 9,202 | $ | 6,035 | $ | 25,589 | $ | 16,751 | ||||||||
Basic earnings per common share | $ | 1.53 | $ | 1.03 | $ | 4.28 | $ | 2.93 | ||||||||
Weighted average common shares outstanding | 6,005,242 | 5,886,178 | 5,977,590 | 5,709,334 | ||||||||||||
Dilutive effects of assumed conversions and exercise of stock options and warrants | 942,187 | 996,631 | 954,088 | 962,579 | ||||||||||||
Weighted average common and dilutive potential common shares outstanding | 6,947,429 | 6,882,809 | 6,931,678 | 6,671,913 | ||||||||||||
Net income available to common stockholders | $ | 9,202 | $ | 6,035 | $ | 25,589 | $ | 16,751 | ||||||||
Effect of interest expense on convertible debt, net of tax and discretionary expenditures related to conversion | 143 | 150 | 426 | 444 | ||||||||||||
Net income available to common stockholders, adjusted for effect of debt conversion | $ | 9,345 | $ | 6,185 | $ | 26,015 | $ | 17,195 | ||||||||
Diluted earnings per common share | $ | 1.35 | $ | 0.90 | $ | 3.75 | $ | 2.58 |
NOTE 4 - SECURITIES
The amortized cost and fair value of available-for-sale and held-to-maturity securities at September 30, 2012 and December 31, 2011 are summarized as follows:
Gross | Gross | |||||||||||||||
Amortized | Unrealized | Unrealized | Market | |||||||||||||
Cost | Gain | Loss | Value | |||||||||||||
(In Thousands) | ||||||||||||||||
September 30, 2012 | ||||||||||||||||
Securities Available for Sale | ||||||||||||||||
U.S. Treasury and government sponsored agencies | $ | 32,355 | $ | 1,139 | $ | - | $ | 33,494 | ||||||||
Mortgage-backed securities | 77,067 | 4,890 | - | 81,957 | ||||||||||||
State and municipal securities | 108,682 | 6,523 | (9 | ) | 115,196 | |||||||||||
Corporate debt | 5,773 | 162 | - | 5,935 | ||||||||||||
Total | 223,877 | 12,714 | (9 | ) | 236,582 | |||||||||||
Securities Held to Maturity | ||||||||||||||||
Mortgage-backed securities | 15,254 | 860 | - | 16,114 | ||||||||||||
State and municipal securities | 5,537 | 676 | - | 6,213 | ||||||||||||
Total | $ | 20,791 | $ | 1,536 | $ | - | $ | 22,327 | ||||||||
December 31, 2011 | ||||||||||||||||
Securities Available for Sale | ||||||||||||||||
U.S. Treasury and government sponsored agencies | $ | 98,169 | $ | 1,512 | $ | (59 | ) | $ | 99,622 | |||||||
Mortgage-backed securities | 88,118 | 4,462 | - | 92,580 | ||||||||||||
State and municipal securities | 95,331 | 5,230 | (35 | ) | 100,526 | |||||||||||
Corporate debt | 1,029 | 52 | - | 1,081 | ||||||||||||
Total | 282,647 | 11,256 | (94 | ) | 293,809 | |||||||||||
Securities Held to Maturity | ||||||||||||||||
Mortgage-backed securities | 9,676 | 410 | - | 10,086 | ||||||||||||
State and municipal securities | 5,533 | 380 | - | 5,913 | ||||||||||||
Total | $ | 15,209 | $ | 790 | $ | - | $ | 15,999 |
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 September 30, 2012 and December 31, 2011, 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 September 30, 2012, two of the Company’s 555 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 September 30, 2012. Further, the Company believes any deterioration in value of its current investment securities is attributable to changes in market interest rates and not credit quality of the issuer.
Less Than Twelve Months | Twelve Months or More | Total | ||||||||||||||||||||||
Gross | Gross | Gross | ||||||||||||||||||||||
Unrealized | Unrealized | Unrealized | ||||||||||||||||||||||
Losses | Fair Value | Losses | Fair Value | Losses | Fair Value | |||||||||||||||||||
(In Thousands) | ||||||||||||||||||||||||
September 30, 2012 | ||||||||||||||||||||||||
U.S. Treasury and government sponsored agencies | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | ||||||||||||
State and municipal securities | (6 | ) | 1,421 | (3 | ) | 333 | (9 | ) | 1,754 | |||||||||||||||
Corporate debt | - | - | - | - | - | - | ||||||||||||||||||
Total | $ | (6 | ) | $ | 1,421 | $ | (3 | ) | $ | 333 | $ | (9 | ) | $ | 1,754 | |||||||||
December 31, 2011 | ||||||||||||||||||||||||
U.S. Treasury and government sponsored agencies | $ | (59 | ) | $ | 15,074 | $ | - | $ | - | $ | (59 | ) | $ | 15,074 | ||||||||||
Mortgage-backed securities | - | - | - | - | - | - | ||||||||||||||||||
State and municipal securities | (35 | ) | 4,559 | - | - | (35 | ) | 4,559 | ||||||||||||||||
Corporate debt | - | - | - | - | - | - | ||||||||||||||||||
Total | $ | (94 | ) | $ | 19,633 | $ | - | $ | - | $ | (94 | ) | $ | 19,633 |
10 |
NOTE 5 – LOANS
The following table details the company’s loans at September 30, 2012 and December 31, 2011:
September 30, | December 31, | |||||||
2012 | 2011 | |||||||
(Dollars In Thousands) | ||||||||
Commercial, financial and agricultural | $ | 910,220 | $ | 799,464 | ||||
Real estate - construction | 153,351 | 151,218 | ||||||
Real estate - mortgage: | ||||||||
Owner-occupied commercial | 530,350 | 398,601 | ||||||
1-4 family mortgage | 236,060 | 205,182 | ||||||
Other mortgage | 288,677 | 235,251 | ||||||
Subtotal: Real estate - mortgage | 1,055,087 | 839,034 | ||||||
Consumer | 42,472 | 41,026 | ||||||
Total Loans | 2,161,130 | 1,830,742 | ||||||
Less: Allowance for loan losses | (24,604 | ) | (22,030 | ) | ||||
Net Loans | $ | 2,136,526 | $ | 1,808,712 | ||||
Commercial, financial and agricultural | 42.12 | % | 43.67 | % | ||||
Real estate - construction | 7.10 | % | 8.26 | % | ||||
Real estate - mortgage: | ||||||||
Owner-occupied commercial | 24.54 | % | 21.77 | % | ||||
1-4 family mortgage | 10.92 | % | 11.21 | % | ||||
Other mortgage | 13.36 | % | 12.85 | % | ||||
Subtotal: Real estate - mortgage | 48.82 | % | 45.83 | % | ||||
Consumer | 1.96 | % | 2.24 | % | ||||
Total Loans | 100.00 | % | 100.00 | % |
The credit quality of the loan portfolio is summarized no less frequently than quarterly using categories similar to the standard asset classification system used by the federal banking agencies. The following table presents credit quality indicators for the loan loss portfolio segments and classes. These categories are utilized to develop the associated allowance for loan losses using historical losses adjusted for current economic conditions defined as follows:
· | Pass – loans which are well protected by the current net worth and paying capacity of the obligor (or obligors, if any) or by the fair value, less cost to acquire and sell, of any underlying collateral. |
· | Special Mention – loans with potential weakness that may, if not reversed or corrected, weaken the credit or inadequately protect the Company’s position at some future date. These loans are not adversely classified and do not expose an institution to sufficient risk to warrant an adverse classification. |
· | Substandard – loans that exhibit well-defined weakness or weaknesses that presently jeopardize debt repayment. These loans are characterized by the distinct possibility that the institution will sustain some loss if the weaknesses are not corrected. |
11 |
· | Doubtful – loans that have all the weaknesses inherent in loans classified substandard, plus the added characteristic that the weaknesses make collection or liquidation in full on the basis of currently existing facts, conditions, and values highly questionable and improbable. |
Loans by credit quality indicator as of September 30, 2012 and December 31, 2011 were as follows:
Special | ||||||||||||||||||||
September 30, 2012 | Pass | Mention | Substandard | Doubtful | Total | |||||||||||||||
(In Thousands) | ||||||||||||||||||||
Commercial, financial and agricultural | $ | 893,444 | $ | 9,995 | $ | 6,781 | $ | - | $ | 910,220 | ||||||||||
Real estate - construction | 125,589 | 11,756 | 16,006 | - | 153,351 | |||||||||||||||
Real estate - mortgage: | ||||||||||||||||||||
Owner-occupied commercial | 516,073 | 5,149 | 9,128 | - | 530,350 | |||||||||||||||
1-4 family mortgage | 223,659 | 6,265 | 6,136 | - | 236,060 | |||||||||||||||
Other mortgage | 278,355 | 6,794 | 3,528 | - | 288,677 | |||||||||||||||
Total real estate mortgage | 1,018,087 | 18,208 | 18,792 | - | 1,055,087 | |||||||||||||||
Consumer | 42,063 | 81 | 328 | - | 42,472 | |||||||||||||||
Total | $ | 2,079,183 | $ | 40,040 | $ | 41,907 | $ | - | $ | 2,161,130 |
Special | ||||||||||||||||||||
December 31, 2011 | Pass | Mention | Substandard | Doubtful | Total | |||||||||||||||
(In Thousands) | ||||||||||||||||||||
Commercial, financial and agricultural | $ | 780,270 | $ | 11,775 | $ | 7,419 | $ | - | $ | 799,464 | ||||||||||
Real estate - construction | 117,244 | 14,472 | 19,502 | - | 151,218 | |||||||||||||||
Real estate - mortgage: | ||||||||||||||||||||
Owner-occupied commercial | 385,084 | 7,333 | 6,184 | - | 398,601 | |||||||||||||||
1-4 family mortgage | 194,447 | 4,835 | 5,900 | - | 205,182 | |||||||||||||||
Other mortgage | 224,807 | 7,034 | 3,410 | - | 235,251 | |||||||||||||||
Total real estate mortgage | 804,338 | 19,202 | 15,494 | - | 839,034 | |||||||||||||||
Consumer | 40,353 | 96 | 577 | - | 41,026 | |||||||||||||||
Total | $ | 1,742,205 | $ | 45,545 | $ | 42,992 | $ | - | $ | 1,830,742 |
12 |
Loans by performance status as of September 30, 2012 and December 31, 2011 were as follows:
September 30, 2012 | Performing | Nonperforming | Total | |||||||||
(In Thousands) | ||||||||||||
Commercial, financial and agricultural | $ | 909,853 | $ | 367 | $ | 910,220 | ||||||
Real estate - construction | 145,130 | 8,221 | 153,351 | |||||||||
Real estate - mortgage: | ||||||||||||
Owner-occupied commercial | 527,393 | 2,957 | 530,350 | |||||||||
1-4 family mortgage | 235,591 | 469 | 236,060 | |||||||||
Other mortgage | 287,644 | 1,033 | 288,677 | |||||||||
Total real estate mortgage | 1,050,628 | 4,459 | 1,055,087 | |||||||||
Consumer | 42,308 | 164 | 42,472 | |||||||||
Total | $ | 2,147,919 | $ | 13,211 | $ | 2,161,130 | ||||||
December 31, 2011 | Performing | Nonperforming | Total | |||||||||
(In Thousands) | ||||||||||||
Commercial, financial and agricultural | $ | 798,285 | $ | 1,179 | $ | 799,464 | ||||||
Real estate - construction | 141,155 | 10,063 | 151,218 | |||||||||
Real estate - mortgage: | ||||||||||||
Owner-occupied commercial | 397,809 | 792 | 398,601 | |||||||||
1-4 family mortgage | 204,512 | 670 | 205,182 | |||||||||
Other mortgage | 234,558 | 693 | 235,251 | |||||||||
Total real estate mortgage | 836,879 | 2,155 | 839,034 | |||||||||
Consumer | 40,651 | 375 | 41,026 | |||||||||
Total | $ | 1,816,970 | $ | 13,772 | $ | 1,830,742 |
13 |
Loans by past due status as of September 30, 2012 and December 31, 2011 were as follows:
September 30, 2012 | Past Due Status (Accruing Loans) | |||||||||||||||||||||||||||
Total Past | ||||||||||||||||||||||||||||
30-59 Days | 60-89 Days | 90+ Days | Due | Non-Accrual | Current | Total Loans | ||||||||||||||||||||||
(In Thousands) | ||||||||||||||||||||||||||||
Commercial, financial and agricultural | $ | 757 | $ | 371 | $ | - | $ | 1,128 | $ | 367 | $ | 908,725 | $ | 910,220 | ||||||||||||||
Real estate - construction | - | 32 | - | 32 | 8,221 | 145,098 | 153,351 | |||||||||||||||||||||
Real estate - mortgage: | ||||||||||||||||||||||||||||
Owner-occupied commercial | 1,555 | - | - | 1,555 | 2,957 | 525,838 | 530,350 | |||||||||||||||||||||
1-4 family mortgage | 242 | - | - | 242 | 469 | 235,349 | 236,060 | |||||||||||||||||||||
Other mortgage | 1,000 | - | - | 1,000 | 1,033 | 286,644 | 288,677 | |||||||||||||||||||||
Total real estate - mortgage | 2,797 | - | - | 2,797 | 4,459 | 1,047,831 | 1,055,087 | |||||||||||||||||||||
Consumer | 216 | 20 | 38 | 274 | 126 | 42,072 | 42,472 | |||||||||||||||||||||
Total | $ | 3,770 | $ | 423 | $ | 38 | $ | 4,231 | $ | 13,173 | $ | 2,143,726 | $ | 2,161,130 | ||||||||||||||
December 31, 2011 | Past Due Status (Accruing Loans) | |||||||||||||||||||||||||||
Total Past | ||||||||||||||||||||||||||||
30-59 Days | 60-89 Days | 90+ Days | Due | Non-Accrual | Current | Total Loans | ||||||||||||||||||||||
(In Thousands) | ||||||||||||||||||||||||||||
Commercial, financial and agricultural | $ | - | $ | - | $ | - | $ | - | $ | 1,179 | $ | 798,285 | $ | 799,464 | ||||||||||||||
Real estate - construction | 2,234 | - | - | 2,234 | 10,063 | 138,921 | 151,218 | |||||||||||||||||||||
Real estate - mortgage: | ||||||||||||||||||||||||||||
Owner-occupied commercial | - | - | - | - | 792 | 397,809 | 398,601 | |||||||||||||||||||||
1-4 family mortgage | 2,107 | - | - | 2,107 | 670 | 202,405 | 205,182 | |||||||||||||||||||||
Other mortgage | - | - | - | - | 693 | 234,558 | 235,251 | |||||||||||||||||||||
Total real estate - mortgage | 2,107 | - | - | 2,107 | 2,155 | 834,772 | 839,034 | |||||||||||||||||||||
Consumer | - | 84 | - | 84 | 375 | 40,567 | 41,026 | |||||||||||||||||||||
Total | $ | 4,341 | $ | 84 | $ | - | $ | 4,425 | $ | 13,772 | $ | 1,812,545 | $ | 1,830,742 |
The Company assesses the adequacy of its allowance for loan losses prior to the end of each calendar quarter. The level of the allowance is based on management’s evaluation of the loan portfolios, past loan loss experience, current asset quality trends, known and inherent risks in the portfolio, adverse situations that may affect the borrower’s ability to repay (including the timing of future payment), the estimated value of any underlying collateral, composition of the loan portfolio, economic conditions, industry and peer bank loan quality indications and other pertinent factors, including regulatory recommendations. This evaluation is inherently subjective as it requires material estimates including the amounts and timing of future cash flows expected to be received on impaired loans that may be susceptible to significant change. Loan losses are charged off when management believes that the full collectability of the loan is unlikely. A loan may be partially charged-off after a “confirming event” has occurred which serves to validate that full repayment pursuant to the terms of the loan is unlikely. Allocation of the allowance is made for specific loans, but the entire allowance is available for any loan that in management’s judgment deteriorates and is uncollectible. The unallocated portion of the reserve is management’s evaluation of potential future losses that would arise in the loan portfolio should management’s assumption about qualitative and environmental conditions materialize. The unallocated portion of the allowance for loan losses is based on management’s judgment regarding various external and internal factors including macroeconomic trends, management’s assessment of the Company’s loan growth prospects, and evaluations of internal risk controls.
The following table presents an analysis of the allowance for loan losses by portfolio segment as of September 30, 2012 and December 31, 2011. The total allowance for loan losses is disaggregated into those amounts associated with loans individually evaluated and those associated with loans collectively evaluated.
14 |
Commercial, | ||||||||||||||||||||||||
financial and | Real estate - | Real estate - | ||||||||||||||||||||||
agricultural | construction | mortgage | Consumer | Unallocated | Total | |||||||||||||||||||
(In Thousands) | ||||||||||||||||||||||||
Three Months Ended September 30, 2012 | ||||||||||||||||||||||||
Allowance for loan losses: | ||||||||||||||||||||||||
Balance at June 30, 2012 | $ | 6,511 | $ | 7,582 | $ | 3,640 | $ | 285 | $ | 5,221 | $ | 23,239 | ||||||||||||
Charge-offs | (349 | ) | (16 | ) | (30 | ) | (79 | ) | - | (474 | ) | |||||||||||||
Recoveries | 24 | 47 | 582 | 1 | - | 654 | ||||||||||||||||||
Provision | 1,090 | (1,560 | ) | 615 | 96 | 944 | 1,185 | |||||||||||||||||
Balance at September 30, 2012 | $ | 7,276 | $ | 6,053 | $ | 4,807 | $ | 303 | $ | 6,165 | $ | 24,604 | ||||||||||||
Three Months Ended September 30, 2011 | ||||||||||||||||||||||||
Allowance for loan losses: | ||||||||||||||||||||||||
Balance at June 30, 2011 | $ | 5,822 | $ | 6,468 | $ | 3,187 | $ | 551 | $ | 3,488 | $ | 19,516 | ||||||||||||
Charge-offs | (37 | ) | (678 | ) | (88 | ) | (11 | ) | - | (814 | ) | |||||||||||||
Recoveries | 12 | 10 | 1 | 1 | - | 24 | ||||||||||||||||||
Provision | 464 | 479 | 964 | 482 | 351 | 2,740 | ||||||||||||||||||
Balance at September 30, 2011 | $ | 6,261 | $ | 6,279 | $ | 4,064 | $ | 1,023 | $ | 3,839 | $ | 21,466 | ||||||||||||
Nine Months Ended September 30, 2012 | ||||||||||||||||||||||||
Allowance for loan losses: | ||||||||||||||||||||||||
Balance at December 31, 2011 | $ | 6,627 | $ | 6,542 | $ | 3,295 | $ | 531 | $ | 5,035 | $ | 22,030 | ||||||||||||
Charge-offs | (898 | ) | (2,935 | ) | (311 | ) | (707 | ) | - | (4,851 | ) | |||||||||||||
Recoveries | 124 | 55 | 588 | 7 | - | 774 | ||||||||||||||||||
Provision | 1,423 | 2,391 | 1,235 | 472 | 1,130 | 6,651 | ||||||||||||||||||
Balance at September 30, 2012 | $ | 7,276 | $ | 6,053 | $ | 4,807 | $ | 303 | $ | 6,165 | $ | 24,604 | ||||||||||||
Nine Months Ended September 30, 2011 | ||||||||||||||||||||||||
Allowance for loan losses: | ||||||||||||||||||||||||
Balance at December 31, 2010 | $ | 5,348 | $ | 6,373 | $ | 2,443 | $ | 749 | $ | 3,164 | $ | 18,077 | ||||||||||||
Charge-offs | (897 | ) | (1,999 | ) | (103 | ) | (340 | ) | - | (3,339 | ) | |||||||||||||
Recoveries | 12 | 174 | 2 | 75 | - | 263 | ||||||||||||||||||
Provision | 1,798 | 1,731 | 1,722 | 539 | 675 | 6,465 | ||||||||||||||||||
Balance at September 30, 2011 | $ | 6,261 | $ | 6,279 | $ | 4,064 | $ | 1,023 | $ | 3,839 | $ | 21,466 | ||||||||||||
As of September 30, 2012 | ||||||||||||||||||||||||
Allowance for loan losses: | ||||||||||||||||||||||||
Ending Balance | $ | 7,276 | $ | 6,053 | $ | 4,807 | $ | 303 | $ | 6,165 | $ | 24,604 | ||||||||||||
Individually Evaluated for Impairment | 714 | 1,177 | 1,953 | 81 | - | 3,925 | ||||||||||||||||||
Collectively Evaluated for Impairment | 6,562 | 4,876 | 2,854 | 222 | 6,165 | 20,679 | ||||||||||||||||||
Loans: | ||||||||||||||||||||||||
Ending Balance | $ | 910,220 | $ | 153,351 | $ | 1,055,087 | $ | 42,472 | $ | - | $ | 2,161,130 | ||||||||||||
Individually Evaluated for Impairment | 4,063 | 16,006 | 18,353 | 328 | - | 38,750 | ||||||||||||||||||
Collectively Evaluated for Impairment | 906,157 | 137,345 | 1,036,734 | 42,144 | - | 2,122,380 | ||||||||||||||||||
As of December 31, 2011 | ||||||||||||||||||||||||
Allowance for loan losses: | ||||||||||||||||||||||||
Ending Balance | $ | 6,627 | $ | 6,542 | $ | 3,295 | $ | 531 | $ | 5,035 | $ | 22,030 | ||||||||||||
Individually Evaluated for Impairment | 1,382 | 1,533 | 941 | 325 | - | 4,181 | ||||||||||||||||||
Collectively Evaluated for Impairment | 5,245 | 5,009 | 2,354 | 206 | 5,035 | 17,849 | ||||||||||||||||||
Loans: | ||||||||||||||||||||||||
Ending Balance | $ | 799,464 | $ | 151,218 | $ | 839,034 | $ | 41,026 | $ | - | $ | 1,830,742 | ||||||||||||
Individually Evaluated for Impairment | 5,578 | 16,262 | 14,866 | 547 | - | 37,253 | ||||||||||||||||||
Collectively Evaluated for Impairment | 793,886 | 134,956 | 824,168 | 40,479 | - | 1,793,489 |
15 |
The following table presents details of the Company’s impaired loans as of September 30, 2012 and December 31, 2011, respectively. Loans which have been fully charged off do not appear in the tables.
For the three months | For the nine months | |||||||||||||||||||||||||||
ended September 30, | ended September 30, | |||||||||||||||||||||||||||
September 30, 2012 | 2012 | 2012 | ||||||||||||||||||||||||||
Interest | Interest | |||||||||||||||||||||||||||
Unpaid | Average | Income | Average | Income | ||||||||||||||||||||||||
Recorded | Principal | Related | Recorded | Recognized | Recorded | Recognized | ||||||||||||||||||||||
Investment | Balance | Allowance | Investment | in Period | Investment | in Period | ||||||||||||||||||||||
(In Thousands) | ||||||||||||||||||||||||||||
With no allowance recorded: | ||||||||||||||||||||||||||||
Commercial, financial and agricultural | $ | 2,085 | $ | 2,338 | $ | - | $ | 1,856 | $ | 73 | $ | 1,289 | $ | 119 | ||||||||||||||
Real estate - construction | 5,805 | 6,350 | - | 5,833 | 42 | 5,733 | 159 | |||||||||||||||||||||
Real estate - mortgage: | ||||||||||||||||||||||||||||
Owner-occupied commercial | 5,228 | 5,539 | - | 5,550 | 68 | 5,367 | 182 | |||||||||||||||||||||
1-4 family mortgage | 1,925 | 2,147 | - | 1,872 | 14 | 1,999 | 56 | |||||||||||||||||||||
Other mortgage | 2,886 | 2,886 | - | 2,885 | 31 | 2,855 | 96 | |||||||||||||||||||||
Total real estate - mortgage | 10,039 | 10,572 | - | 10,307 | 113 | 10,221 | 334 | |||||||||||||||||||||
Consumer | 36 | 610 | - | 36 | - | 183 | - | |||||||||||||||||||||
Total with no allowance recorded | 17,965 | 19,870 | - | 18,032 | 228 | 17,426 | 612 | |||||||||||||||||||||
With an allowance recorded: | ||||||||||||||||||||||||||||
Commercial, financial and agricultural | 1,978 | 1,978 | 714 | 1,956 | 29 | 1,954 | 89 | |||||||||||||||||||||
Real estate - construction | 10,201 | 11,712 | 1,177 | 10,949 | 4 | 11,686 | 134 | |||||||||||||||||||||
Real estate - mortgage: | ||||||||||||||||||||||||||||
Owner-occupied commercial | 3,671 | 3,671 | 804 | 3,675 | 26 | 3,794 | 81 | |||||||||||||||||||||
1-4 family mortgage | 4,001 | 4,001 | 894 | 4,001 | 38 | 4,000 | 103 | |||||||||||||||||||||
Other mortgage | 642 | 642 | 255 | 642 | 4 | 648 | 22 | |||||||||||||||||||||
Total real estate - mortgage | 8,314 | 8,314 | 1,953 | 8,318 | 68 | 8,442 | 206 | |||||||||||||||||||||
Consumer | 292 | 344 | 81 | 344 | 3 | 268 | 7 | |||||||||||||||||||||
Total with allowance recorded | 20,785 | 22,348 | 3,925 | 21,567 | 104 | 22,350 | 436 | |||||||||||||||||||||
Total Impaired Loans: | ||||||||||||||||||||||||||||
Commercial, financial and agricultural | 4,063 | 4,316 | 714 | 3,812 | 102 | 3,243 | 208 | |||||||||||||||||||||
Real estate - construction | 16,006 | 18,062 | 1,177 | 16,782 | 46 | 17,419 | 293 | |||||||||||||||||||||
Real estate - mortgage: | ||||||||||||||||||||||||||||
Owner-occupied commercial | 8,899 | 9,210 | 804 | 9,225 | 94 | 9,161 | 263 | |||||||||||||||||||||
1-4 family mortgage | 5,926 | 6,148 | 894 | 5,873 | 52 | 5,999 | 159 | |||||||||||||||||||||
Other mortgage | 3,528 | 3,528 | 255 | 3,527 | 35 | 3,503 | 118 | |||||||||||||||||||||
Total real estate - mortgage | 18,353 | 18,886 | 1,953 | 18,625 | 181 | 18,663 | 540 | |||||||||||||||||||||
Consumer | 328 | 954 | 81 | 380 | 3 | 451 | 7 | |||||||||||||||||||||
Total impaired loans | $ | 38,750 | $ | 42,218 | $ | 3,925 | $ | 39,599 | $ | 332 | $ | 39,776 | $ | 1,048 |
16 |
December 31, 2011 | ||||||||||||||||||||
Unpaid | Average | Interest Income | ||||||||||||||||||
Recorded | Principal | Related | Recorded | Recognized in | ||||||||||||||||
Investment | Balance | Allowance | Investment | Period | ||||||||||||||||
(In Thousands) | ||||||||||||||||||||
With no allowance recorded: | ||||||||||||||||||||
Commercial, financial and agricultural | $ | 1,264 | $ | 1,264 | $ | - | $ | 1,501 | $ | 74 | ||||||||||
Real estate - construction | 11,583 | 12,573 | - | 10,406 | 226 | |||||||||||||||
Owner-occupied commercial | 2,493 | 2,493 | - | 2,523 | 153 | |||||||||||||||
1-4 family mortgage | 1,293 | 1,293 | - | 1,241 | 44 | |||||||||||||||
Other mortgage | 2,837 | 2,837 | - | 2,746 | 162 | |||||||||||||||
Total real estate - mortgage | 6,623 | 6,623 | - | 6,510 | 359 | |||||||||||||||
Consumer | 173 | 173 | - | 173 | 6 | |||||||||||||||
Total with no allowance recorded | 19,643 | 20,633 | - | 18,590 | 665 | |||||||||||||||
With an allowance recorded: | ||||||||||||||||||||
Commercial, financial and agricultural | 4,314 | 4,314 | 1,382 | 4,156 | 226 | |||||||||||||||
Real estate - construction | 4,679 | 4,679 | 1,482 | 3,987 | 94 | |||||||||||||||
Real estate - mortgage: | ||||||||||||||||||||
Owner-occupied commercial | 3,515 | 3,515 | 88 | 3,504 | 365 | |||||||||||||||
1-4 family mortgage | 4,397 | 4,397 | 904 | 4,484 | 198 | |||||||||||||||
Other mortgage | 331 | 331 | - | 337 | 22 | |||||||||||||||
Total real estate - mortgage | 8,243 | 8,243 | 992 | 8,325 | 585 | |||||||||||||||
Consumer | 374 | 624 | 325 | 425 | - | |||||||||||||||
Total with allowance recorded | 17,610 | 17,860 | 4,181 | 16,893 | 905 | |||||||||||||||
Total Impaired Loans: | ||||||||||||||||||||
Commercial, financial and agricultural | 5,578 | 5,578 | 1,382 | 5,657 | 300 | |||||||||||||||
Real estate - construction | 16,262 | 17,252 | 1,482 | 14,393 | 320 | |||||||||||||||
Real estate - mortgage: | ||||||||||||||||||||
Owner-occupied commercial | 6,008 | 6,008 | 88 | 6,027 | 518 | |||||||||||||||
1-4 family mortgage | 5,690 | 5,690 | 904 | 5,725 | 242 | |||||||||||||||
Other mortgage | 3,168 | 3,168 | - | 3,083 | 184 | |||||||||||||||
Total real estate - mortgage | 14,866 | 14,866 | 992 | 14,835 | 944 | |||||||||||||||
Consumer | 547 | 797 | 325 | 598 | 6 | |||||||||||||||
Total impaired loans | $ | 37,253 | $ | 38,493 | $ | 4,181 | $ | 35,483 | $ | 1,570 |
Troubled Debt Restructurings (“TDR”) at September 30, 2012, December 31, 2011 and September 30, 2011 totaled $12.0 million, $4.5 million and $4.5 million, respectively. The increase for both periods consists of two relationships that were added in the first and third quarters of 2012. At September 30, 2012, the Company had a related allowance for loan losses of $1,433,000 allocated to these TDRs, compared to $439,000 at December 31, 2011 and $297,000 at September 30, 2011. The Company had three TDR loans to one borrower in the amount of $2.8 million enter into payment default status during the first quarter of 2012. The assets securing these loans are under a letter of intent to sell at a purchase price that is expected to be sufficient to pay the full principal owed. The final contract is still in negotiation. All other loans classified as TDRs as of September 30, 2012 are performing as agreed under the terms of their restructured plans. The following table presents an analysis of TDRs as of September 30, 2012 and September 30, 2011.
17 |
September 30, 2012 | September 30, 2011 | |||||||||||||||||||||||
Pre- | Post- | Pre- | Post- | |||||||||||||||||||||
Modification | Modification | Modification | Modification | |||||||||||||||||||||
Outstanding | Outstanding | Outstanding | Outstanding | |||||||||||||||||||||
Number of | Recorded | Recorded | Number of | Recorded | Recorded | |||||||||||||||||||
Contracts | Investment | Investment | Contracts | Investment | Investment | |||||||||||||||||||
(In Thousands) | ||||||||||||||||||||||||
Troubled Debt Restructurings | ||||||||||||||||||||||||
Commercial, financial and agricultural | 2 | $ | 1,216 | $ | 1,216 | 5 | $ | 1,831 | $ | 1,831 | ||||||||||||||
Real estate - construction | 15 | 2,899 | 2,899 | - | - | - | ||||||||||||||||||
Real estate - mortgage: | ||||||||||||||||||||||||
Owner-occupied commercial | 6 | 5,907 | 5,907 | 1 | 2,357 | 2,357 | ||||||||||||||||||
1-4 family mortgage | 5 | 1,709 | 1,709 | - | - | - | ||||||||||||||||||
Other mortgage | 1 | 304 | 304 | 1 | 334 | 334 | ||||||||||||||||||
Total real estate mortgage | 12 | 7,920 | 7,920 | 2 | 2,691 | 2,691 | ||||||||||||||||||
Consumer | - | - | - | - | - | - | ||||||||||||||||||
29 | $ | 12,035 | $ | 12,035 | 7 | $ | 4,522 | $ | 4,522 | |||||||||||||||
Number of | Recorded | Number of | Recorded | |||||||||||||||||||||
Contracts | Investment | Contracts | Investment | |||||||||||||||||||||
Troubled Debt Restructurings | ||||||||||||||||||||||||
That Subsequently Defaulted | ||||||||||||||||||||||||
Commercial, financial and agricultural | - | $ | - | - | $ | - | ||||||||||||||||||
Real estate - construction | - | - | - | - | ||||||||||||||||||||
Real estate - mortgage: | ||||||||||||||||||||||||
Owner-occupied | ||||||||||||||||||||||||
commercial | 3 | 2,786 | - | - | ||||||||||||||||||||
1-4 family mortgage | - | - | - | - | ||||||||||||||||||||
Other mortgage | - | - | - | - | ||||||||||||||||||||
Total real estate - mortgage | 3 | 2,786 | - | - | ||||||||||||||||||||
Consumer | - | - | - | - | ||||||||||||||||||||
3 | $ | 2,786 | - | $ | - |
NOTE 6 - EMPLOYEE AND DIRECTOR BENEFITS
Stock Options
At September 30, 2012, the Company had stock-based compensation plans, as described below. The compensation cost that has been charged to earnings for the plans was approximately $266,000 and $788,000 for the three and nine months ended September 30, 2012 and $254,000 and $719,000 for the three and nine months ended September 30, 2011.
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.
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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 prices between $15.00 and $20.00 per share with a term of ten 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.
2012 | 2011 | |||||||
Expected volatility | 19.88 | % | 29.00 | % | ||||
Expected dividends | - | % | 0.50 | % | ||||
Expected term (in years) | 6 years | 7 years | ||||||
Risk-free rate | 1.03 | % | 2.70 | % |
The weighted average grant-date fair value of options granted during the nine months ended September 30, 2012 and September 30, 2011 was $6.52 and $8.54, respectively.
The following table summarizes stock option activity during the nine months ended September 30, 2012 and September 30, 2011:
Weighted | ||||||||||||||||
Weighted | Average | |||||||||||||||
Average | Remaining | Aggregate | ||||||||||||||
Exercise | Contractual | Intrinsic | ||||||||||||||
Shares | Price | Term (years) | Value | |||||||||||||
(In Thousands) | ||||||||||||||||
Nine Months Ended September 30, 2012: | ||||||||||||||||
Outstanding at January 1, 2012 | 1,073,800 | $ | 18.33 | 6.0 | $ | 12,508 | ||||||||||
Granted | 41,500 | 30.00 | 9.5 | |||||||||||||
Exercised | (54,036 | ) | 11.07 | 3.3 | 1,023 | |||||||||||
Forfeited | (12,500 | ) | 25.60 | 5.6 | 55 | |||||||||||
Outstanding at September 30, 2012 | 1,048,764 | 19.11 | 5.8 | $ | 11,440 | |||||||||||
Exercisable at September 30, 2012 | 443,589 | $ | 13.40 | 3.7 | $ | 7,363 | ||||||||||
Nine Months Ended September 30, 2011: | ||||||||||||||||
Outstanding at January 1, 2011 | 881,000 | $ | 15.65 | 6.9 | $ | 8,238 | ||||||||||
Granted | 166,500 | 26.05 | 9.6 | |||||||||||||
Exercised | (23,000 | ) | 10.89 | 4.5 | - | |||||||||||
Outstanding at September 30, 2011 | 1,024,500 | 17.34 | 6.0 | $ | 12,861 | |||||||||||
Exercisable at September 30, 2011 | 418,974 | $ | 12.81 | 4.5 | $ | 7,200 |
As of September 30, 2012, there was $1,748,000 of total unrecognized compensation cost related to non-vested stock options. The cost is expected to be recognized on the straight-line method over the next 5.5 years.
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Restricted Stock
The Company has issued restricted stock to an 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 September 30, 2012, there was $324,000 of total unrecognized compensation cost related to non-vested restricted stock. The cost is expected to be recognized evenly over the remaining 2.2 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 of 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 September 30, 2012 and September 30, 2011 was 20,000 and 60,000, respectively.
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 trust preferred securities and all were outstanding as of September 30, 2012 and 2011.
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 September 30, 2012, the Company was party to two swaps with notional amounts totaling approximately $11.2 million with customers and two swaps with notional amounts totaling approximately $11.2 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 $490,000 in offsetting entries in other assets and other liabilities.
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 September 30, 2012 and December 31, 2011 were not material.
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NOTE 8 - RECENT ACCOUNTING PRONOUNCEMENTS
In December 2011, the FASB issued ASU No. 2011-11, Balance Sheet (Topic 210): Disclosures about Offsetting Assets and Liabilities, which amends disclosures by requiring improved information about financial instruments and derivative instruments that are either offset on the balance sheet or subject to an enforceable master netting arrangement or similar agreement, irrespective of whether they are offset on the balance sheet. Reporting entities are required to provide both net and gross information for these assets and liabilities in order to enhance comparability between those entities that prepare their financial statements on the basis of U.S. GAAP and those entities that prepare their financial statements on the basis of international financial reporting standards (“IFRS”). Companies are required to apply the amendments for fiscal years beginning on or after January 1, 2013, and interim periods within those years. Retrospective disclosures are required. The Company does not believe this update will have a material impact on its financial position or results of operations.
In December 2011, the FASB issued ASU No. 2011-12, Comprehensive Income (Topic 220): Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items Out of Accumulated Other Comprehensive Income in ASU No. 2011-05, which defers the effective date pertaining to reclassification adjustments out of other accumulated comprehensive income in ASU 2011-05, until the FASB is able to reconsider those requirements. All other requirements of ASU 2011-05 are not affected by this update, including the requirement to report comprehensive income either in a single continuous financial statement or in two separate but consecutive financial statements. Public entities should apply these requirements for fiscal years, and interim periods within those years, beginning after December 15, 2011, which coincide with the effective dates of the requirements in ASU 2011-05 amended by this update. Adoption of this update by the Company had no impact on its financial statements.
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 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.
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Impaired Loans. Impaired loans are measured and reported at fair value when full payment under the loan terms is not probable. Impaired loans are carried at the present value of expected future cash flows using the loan’s existing rate in a discounted cash flow calculation, or the fair value of the collateral if the loan is collateral-dependent. Expected cash flows are based on internal inputs reflecting expected default rates on contractual cash flows. This method of estimating fair value does not incorporate the exit-price concept of fair value described in Accounting Standards Codification (“ASC”) 820-10 and would generally result in a higher value than the exit-price approach. For loans measured using the estimated fair value of collateral less costs to sell, fair value is generally determined based on appraisals performed by certified and licensed appraisers using inputs such as absorption rates, capitalization rates, and market comparables, adjusted for estimated costs to sell. Management modifies the appraised values, if needed, to take into account recent developments in the market or other factors, such as changes in absorption rates or market conditions from the time of valuation, and anticipated sales values considering management’s plans for disposition. Such modifications to the appraised values could result in lower valuations of such collateral. Estimated costs to sell are based on current amounts of disposal costs for similar assets. These measurements are classified as level 3 within the valuation hierarchy. Impaired loans are subject to nonrecurring fair value adjustment upon initial recognition or subsequent impairment. A portion of the allowance for loan losses is allocated to impaired loans if the value of such loans is deemed to be less than the unpaid balance. Impaired loans are reviewed and evaluated on at least a quarterly basis for additional impairment and adjusted accordingly based on the same factors identified above. The amount recognized as an impairment charge related to impaired loans that are measured at fair value on a nonrecurring basis was $1,246,000 and $4,946,000 during the three and nine months ended September 30, 2012, respectively, and $1,431,000 and $4,567,000 during the three and nine months ended September 30, 2011, respectively.
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. A net loss on the sale and write-downs of OREO of $933,000 and $1,416,000 was recognized for the three and nine months ended September 30, 2012, respectively. A net gain on the sale of OREO of $39,000 was recognized during the three months ended September 30, 2011, while a net loss on the sale and write-downs of OREO of $105,000 was recognized during the nine months ended September 30, 2011. 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 September 30, 2012 and December 31, 2011:
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Fair Value Measurements at September 30, 2012 Using | ||||||||||||||||
Quoted Prices in | ||||||||||||||||
Active Markets | Significant Other | Significant | ||||||||||||||
for Identical | Observable Inputs | Unobservable | ||||||||||||||
Assets (Level 1) | (Level 2) | Inputs (Level 3) | Total | |||||||||||||
(In Thousands) | ||||||||||||||||
Assets Measured on a Recurring Basis: | ||||||||||||||||
Available-for-sale securities: | ||||||||||||||||
U.S. Treasury and government sponsored agencies | $ | - | $ | 33,494 | $ | - | $ | 33,494 | ||||||||
Mortgage-backed securities | - | 81,957 | - | 81,957 | ||||||||||||
State and municipal securities | - | 115,196 | - | 115,196 | ||||||||||||
Corporate debt | - | 5,935 | - | 5,935 | ||||||||||||
Interest rate swap agreements | - | 490 | - | 490 | ||||||||||||
Total assets at fair value | $ | - | $ | 237,072 | $ | - | $ | 237,072 | ||||||||
Liabilities Measured on a Recurring Basis: | ||||||||||||||||
Interest rate swap agreements | $ | - | $ | 490 | $ | - | $ | 490 |
Fair Value Measurements at December 31, 2011 Using | ||||||||||||||||
Quoted Prices in | ||||||||||||||||
Active Markets | Significant Other | Significant | ||||||||||||||
for Identical | Observable Inputs | Unobservable | ||||||||||||||
Assets (Level 1) | (Level 2) | Inputs (Level 3) | Total | |||||||||||||
(In Thousands) | ||||||||||||||||
Assets Measured on a Recurring Basis: | ||||||||||||||||
Available-for-sale securities | ||||||||||||||||
U.S. Treasury and government sponsored agencies | $ | - | $ | 99,622 | $ | - | $ | 99,622 | ||||||||
Mortgage-backed securities | - | 92,580 | - | 92,580 | ||||||||||||
State and municipal securities | - | 100,526 | - | 100,526 | ||||||||||||
Corporate debt | - | 1,081 | - | 1,081 | ||||||||||||
Interest rate swap agreements | - | 617 | - | 617 | ||||||||||||
Interest rate cap | - | 9 | - | 9 | ||||||||||||
Total assets at fair value | $ | - | $ | 294,435 | $ | - | $ | 294,435 | ||||||||
Liabilities Measured on a Recurring Basis: | ||||||||||||||||
Interest rate swap agreements | $ | - | $ | 617 | $ | - | $ | 617 |
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The following table presents the Company’s financial assets and financial liabilities carried at fair value on a nonrecurring basis as of September 30, 2012 and December 31, 2011:
Fair Value Measurements at September 30, 2012 Using | ||||||||||||||||
Quoted Prices in | ||||||||||||||||
Active Markets | Significant Other | Significant | ||||||||||||||
for Identical | Observable | Unobservable | ||||||||||||||
Assets (Level 1) | Inputs (Level 2) | Inputs (Level 3) | Total | |||||||||||||
(In Thousands) | ||||||||||||||||
Assets Measured on a Nonrecurring Basis: | ||||||||||||||||
Impaired loans | $ | - | - | $ | 34,825 | $ | 34,825 | |||||||||
Other real estate owned and repossessed assets | - | - | 9,834 | 9,834 | ||||||||||||
Total assets at fair value | - | - | $ | 44,659 | $ | 44,659 |
Fair Value Measurements at December 31, 2011 Using | ||||||||||||||||
Quoted Prices in | ||||||||||||||||
Active Markets | Significant Other | Significant | ||||||||||||||
for Identical | Observable | Unobservable | ||||||||||||||
Assets (Level 1) | Inputs (Level 2) | Inputs (Level 3) | Total | |||||||||||||
(In Thousands) | ||||||||||||||||
Assets Measured on a Nonrecurring Basis: | ||||||||||||||||
Impaired loans | $ | - | $ | - | $ | 33,072 | $ | 33,072 | ||||||||
Other real estate owned | - | - | 12,275 | 12,275 | ||||||||||||
Total assets at fair value | $ | - | $ | - | $ | 45,347 | $ | 45,347 |
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, estimated fair value, and placement in the fair value hierarchy of the Company’s financial instruments as of September 30, 2012 and December 31, 2011 are presented in the following table. This table includes those financial assets and liabilities that are not measured and reported at fair value on a recurring basis or nonrecurring basis.
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September 30, 2012 | December 31, 2011 | |||||||||||||||
Carrying | Carrying | |||||||||||||||
Amount | Fair Value | Amount | Fair Value | |||||||||||||
(In Thousands) | ||||||||||||||||
Financial Assets: | ||||||||||||||||
Level 2 inputs: | ||||||||||||||||
Investment securities available for sale | $ | 223,877 | $ | 236,582 | $ | 282,647 | $ | 293,809 | ||||||||
Investment securities held to maturity | 20,791 | 22,327 | 15,209 | 15,999 | ||||||||||||
Restricted equity securities | 3,941 | 3,941 | 3,501 | 3,501 | ||||||||||||
Mortgage loans held for sale | 28,558 | 28,558 | 17,859 | 17,859 | ||||||||||||
Derivatives | 490 | 490 | 626 | 626 | ||||||||||||
Level 3 inputs: | ||||||||||||||||
Loans, net | 2,136,526 | 2,129,675 | 1,808,712 | 1,811,612 | ||||||||||||
Financial Liabilities: | ||||||||||||||||
Level 2 inputs: | ||||||||||||||||
Deposits | 2,409,521 | 2,412,422 | 2,143,887 | 2,150,308 | ||||||||||||
Borrowings | - | - | 4,954 | 5,377 | ||||||||||||
Trust preferred securities | 30,514 | 27,085 | 30,514 | 27,402 | ||||||||||||
Derivatives | 490 | 490 | 617 | 617 |
The following methods and assumptions were used by the Company in estimating its fair value disclosures for financial instruments:
Investment securities: Fair values for investment securities held to maturity are generally based on prices provided by independent pricing services. Management evaluates the reasonableness of prices provided by such services, as well as their underlying pricing methodologies. These measurements are classified within level 2 of the fair value 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.
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 ASC 820 and generally produces a higher value than an exit-price approach. The measurement of the fair value of loans is classified within Level 3 of the fair value hierarchy.
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 estimated by a third party using inputs that are observable or can be corroborated by observable market data, and are therefore classified within Level 2 of the fair value hierarchy.
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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 using interest rates currently offered for deposits with similar remaining maturities. The fair value of the Company’s time deposits do not take into consideration the value of the Company’s long-term relationships with depositors, which may have significant value. Measurements of the fair value of certificates of deposit are classified within Level 2 of the fair value hierarchy.
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. These measurements are classified as Level 2 in the fair value hierarchy.
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. These measurements are classified as Level 2 in the fair value hierarchy.
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 financial instruments consist of non-fee-producing, variable-rate commitments, the Company has determined they do not have a distinguishable fair value.
NOTE 10 – SF HOLDING 1, INC. AND SF REALTY 1, INC.
In January 2012, the Company formed SF Holding 1, Inc., an Alabama corporation, and its subsidiary, SF Realty 1, Inc., an Alabama corporation. SF Realty 1 elected to be treated as a real estate investment trust (“REIT”) for U.S. income tax purposes. SF Realty 1 holds and manages participations in residential mortgages and commercial real estate loans originated by ServisFirst Bank.
NOTE 11 – 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 September 30, 2012, and events which occurred subsequent to September 30, 2012 but were not recognized in the financial statements.
On October 9, 2012, the Company called for redemption on November 8, 2012 of all of its outstanding 8.5% Junior Subordinated Deferrable Interest Debentures due 2038 (the “Junior Subordinated Debentures”), which are held by ServisFirst Capital Trust I. As a result, all of the outstanding 8.5% Trust Preferred Securities and 8.5% Common Securities of ServisFirst Capital Trust I will be redeemed on November 8, 2012. The redemption price for the Trust Preferred Securities will be $1,000 per security, for a total principal amount of $15,000,000, plus any accrued distributions up to the redemption date.
The aggregate principal amount of the Junior Subordinated Debentures to be redeemed is $15,000,000, plus accrued and unpaid interest thereon up to the redemption date. The Junior Subordinated Debentures were originally issued on September 2, 2008, and in accordance with their terms, are subject to optional redemption by the Company on or after September 1, 2011. Pursuant to the terms of its Amended and Restated Trust Agreement, ServisFirst Capital Trust I is required to use the proceeds it receives from the redemption of the Junior Subordinated Debentures to redeem its Trust Preferred Securities and 8.5% Common Securities on the same day.
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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 September 30, 2012 and for the three and nine months ended September 30, 2012 and September 30, 2011.
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. The Company cautions that such forward-looking statements, wherever they occur in this quarterly report or in other statements attributable to the Company, are necessarily estimates reflecting the judgment of the Company’s senior management and involve a number of risks and uncertainties that could cause actual results to differ materially from those suggested by the forward-looking statements. Such forward-looking statements should, therefore, be considered in light of various factors that could affect the accuracy of such forward-looking statements, including: 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 and tornados, in our geographic markets; and increased competition from both banks and non-banks. The foregoing list of factors is not exhaustive. For discussion of these and other risks that may cause actual results to differ from expectations, please refer to “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 eleven 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, two offices located in Escambia County in the Pensacola-Ferry Pass-Brent, Florida MSA, and one loan production office in Mobile, Alabama which opened in July 2012.
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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. 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 September 30, 2012, we had consolidated total assets of $2,763,234,000, an increase of $302,449,000, or 12.3%, from $2,460,785,000 at December 31, 2011. Total loans were $2,161,130,000 at September 30, 2012, up $330,388,000, or 18.0%, from $1,830,742,000 at December 31, 2011. Total deposits were $2,409,521,000 at September 30, 2012, an increase of $265,634,000, or 12.4%, from $2,143,887,000 at December 31, 2011.
Net income available to common stockholders for the quarter ended September 30, 2012 was $9,202,000, an increase of $3,167,000, or 52.48%, from $6,035,000 for the quarter ended September 30, 2011. Basic and diluted earnings per common share were $1.53 and $1.35, respectively, for the three months ended September 30, 2012, compared to $1.03 and $0.90, respectively, for the corresponding period in 2011.
Net income available to common stockholders for the nine months ended September 30, 2012 was $25,589,000, an increase of $8,838,000, or 52.76%, from $16,751,000 for the nine months ended September 30, 2011. Basic and diluted earnings per common share were $4.28 and $3.75, respectively, for the nine months ended September 30, 2012, compared to $2.93 and $2.58, respectively, for the corresponding period in 2011.
Critical Accounting Policies
The accounting and financial policies of the Company conform to U.S. generally accepted accounting principles (“U.S. GAAP”) and to general practices within the banking industry. To prepare consolidated financial statements in conformity with U.S. GAAP, 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, 2011.
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Financial Condition
Cash and Cash Equivalents
At September 30, 2012, we had $10,672,000 in federal funds sold and other investments, compared to $100,565,000 at December 31, 2011. We shifted balances held at correspondent banks to our reserve account at the Federal Reserve Bank of Atlanta to gain favorable capital treatment.
Investment Securities
Investment securities available for sale totaled $236,582,000 at September 30, 2012 and $293,809,000 at December 31, 2011. Investment securities held to maturity totaled $20,791,000 at September 30, 2012 and $15,209,000 at December 31, 2011. Purchases of $17,931,000 in mortgage-backed securities, $1,500,000 in government-sponsored agencies, $16,043,000 in municipal bonds and $4,700,000 in corporate bonds partially replaced $92,445,000 in total security redemptions during the first nine months of 2012.
Each quarter, management assesses whether there have been events or economic circumstances indicating that a security on which there is an unrealized loss is other-than-temporarily impaired. Management considers several factors, including the amount and duration of the impairment; the intent and ability of the Company to hold the security for a period sufficient for a recovery in value; and known recent events specific to the issuer or its industry. In analyzing an issuer’s financial condition, management considers whether the securities are issued by agencies of the federal government, whether downgrades by bond rating agencies have occurred, and industry analysts’ reports, among other things. As we currently do not have the intent to sell these securities and it is not more likely than not that we will be required to sell these securities before recovery of their amortized cost basis, which may be maturity, no declines are deemed to be other than temporary. We will continue to evaluate our investment securities for possible other-than-temporary impairment, which could result in non-cash charges to earnings in one or more future periods.
The following table shows the amortized cost of our investment securities by their stated maturity at September 30, 2012:
Less Than | One Year to | Five Years to | More Than | |||||||||||||||||
One Year | Five Years | Ten Years | Ten Years | Total | ||||||||||||||||
(In Thousands) | ||||||||||||||||||||
U.S. Treasury and government sponsored agencies | $ | 10,006 | $ | 20,297 | $ | 1,512 | $ | 540 | $ | 32,355 | ||||||||||
Mortgage-backed securities | 6 | 1,191 | 33,919 | 57,205 | 92,321 | |||||||||||||||
State and municipal securities | 990 | 46,928 | 58,295 | 8,006 | 114,219 | |||||||||||||||
Corporate debt | - | 4,737 | 1,036 | - | 5,773 | |||||||||||||||
Total | $ | 11,002 | $ | 73,153 | $ | 94,762 | $ | 65,751 | $ | 244,668 | ||||||||||
Taxable-equivalent Yield | 2.21 | % | 3.21 | % | 4.24 | % | 4.17 | % | 3.82 | % |
All securities held are traded in liquid markets. As of September 30, 2012, we owned certain restricted securities of the Federal Home Loan Bank with an aggregate book value and market value of $3,767,000 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.
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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 total investment portfolio at September 30, 2012 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 $182,884,000 and $111,347,000 as of September 30, 2012 and December 31, 2011, respectively.
Loans
We had total loans of $2,161,130,000 at September 30, 2012, an increase of $330,388,000, or 18.0% year to date, compared to $1,830,742,000 at December 31, 2011. Our loan portfolio has experienced growth in all markets and in the commercial and owner-occupied real estate segments. At September 30, 2012, 51% of our loans were in our Birmingham offices, 19% of our loans were in our Huntsville offices, 14% of our loans were in our Dothan offices, 11% of our loans were in our Montgomery offices, and 6% of our loans were in our Pensacola, Florida office. Commercial loans increased $110,756,000, or 13.8% year to date and owner-occupied real estate loans increased $216,053,000, or 25.8% year to date. We continue to limit our exposure to borrowers engaged in real estate construction, with total loans outstanding remaining relatively flat in this segment.
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 believes that the allowance was adequate at September 30, 2012.
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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. Management believes that the comprehensive allowance analysis developed by our credit administration group is in compliance with all current regulatory guidelines.
Percentage of loans | ||||||||
in each category | ||||||||
September 30, 2012 | Amount | to total loans | ||||||
(In Thousands) | ||||||||
Commercial, financial and agricultural | $ | 7,276 | 42.12 | % | ||||
Real estate - construction | 6,053 | 7.10 | % | |||||
Real estate - mortgage | 4,807 | 48.82 | % | |||||
Consumer | 303 | 1.96 | % | |||||
Other | 6,165 | - | % | |||||
Total | $ | 24,604 | 100.00 | % |
Percentage of loans | ||||||||
in each category | ||||||||
December 31, 2011 | Amount | to total loans | ||||||
(In Thousands) | ||||||||
Commercial, financial and agricultural | $ | 6,627 | 43.67 | % | ||||
Real estate - construction | 6,542 | 8.26 | % | |||||
Real estate - mortgage | 3,295 | 45.83 | % | |||||
Consumer | 531 | 2.24 | % | |||||
Other | 5,035 | - | % | |||||
Total | $ | 22,030 | 100.00 | % |
Nonperforming Assets
Total nonperforming loans, which include nonaccrual loans and loans 90 or more days past due and still accruing, decreased to $13.2 million at September 30, 2012, compared to $13.8 million at December 31, 2011. Of this total, nonaccrual loans of $13.2 million at September 30, 2012, represented a net decrease of $0.6 million from nonaccrual loans at December 31, 2011. There were three loans 90 or more days past due and still accruing at September 30, 2012, in the amount of $38,000, compared to zero loans past due and still accruing at December 31, 2011. Troubled Debt Restructurings (“TDR”) at September 30, 2012 were $12.0 million compared to $4.5 million at December 31, 2011 with the majority of this increase attributable to a residential builder relationship in the aggregate amount of $4.6 million and another relationship with loans secured by one owner occupied commercial property in the aggregate amount of $3.1 million. The Company had three TDR loans to one borrower in the amount of $2.8 million enter into payment default status during the first quarter of 2012. All TDR loans at December 31, 2011 were performing as agreed under the terms of their restructuring plans.
Other real estate owned (OREO) decreased to $9.6 million at September 30, 2012, from $12.3 million at December 31, 2011. The total number of OREO properties was 30 for both periods.
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The following table summarizes our nonperforming assets and TDRs at September 30, 2012 and December 31, 2011:
September 30, 2012 | December 31, 2011 | |||||||||||||||
Number of | Number of | |||||||||||||||
Balance | Loans | Balance | Loans | |||||||||||||
(Dollar Amounts In Thousands) | ||||||||||||||||
Nonaccrual loans: | ||||||||||||||||
Commercial, financial and agricultural | $ | 367 | 5 | $ | 1,179 | 7 | ||||||||||
Real estate - construction | 8,221 | 19 | 10,063 | 21 | ||||||||||||
Real estate - mortgage: | ||||||||||||||||
Owner-occupied commercial | 2,957 | 4 | 792 | 2 | ||||||||||||
1-4 family mortgage | 469 | 3 | 670 | 4 | ||||||||||||
Other mortgage | 1,033 | 2 | 693 | 1 | ||||||||||||
Total real estate - mortgage | 4,459 | 9 | 2,155 | 7 | ||||||||||||
Consumer | 126 | 2 | 375 | 1 | ||||||||||||
Total Nonaccrual loans: | $ | 13,173 | 35 | $ | 13,772 | 36 | ||||||||||
90+ days past due and accruing: | ||||||||||||||||
Commercial, financial and agricultural | $ | - | - | $ | - | - | ||||||||||
Real estate - construction | - | - | - | - | ||||||||||||
Real estate - mortgage: | ||||||||||||||||
Owner-occupied commercial | - | - | - | - | ||||||||||||
1-4 family mortgage | - | - | - | - | ||||||||||||
Other mortgage | - | - | - | - | ||||||||||||
Total real estate - mortgage | - | - | - | - | ||||||||||||
Consumer | 38 | 3 | - | - | ||||||||||||
Total 90+ days past due and accruing: | $ | 38 | 3 | $ | - | - | ||||||||||
Total Nonperforming Loans: | $ | 13,211 | 38 | $ | 13,772 | 36 | ||||||||||
Plus: Other real estate owned | 9,641 | 30 | 12,305 | 39 | ||||||||||||
Total Nonperforming Assets | $ | 22,852 | 68 | $ | 26,077 | 75 | ||||||||||
Restructured accruing loans: | ||||||||||||||||
Commercial, financial and agricultural | $ | 1,216 | 2 | $ | 1,369 | 2 | ||||||||||
Real estate - construction | 2,899 | 15 | - | - | ||||||||||||
Real estate - mortgage: | ||||||||||||||||
Owner-occupied commercial | 3,121 | 3 | 2,785 | 3 | ||||||||||||
1-4 family mortgage | 1,709 | 5 | - | - | ||||||||||||
Other mortgage | 304 | 1 | 331 | 1 | ||||||||||||
Total real estate - mortgage | 5,134 | 9 | 3,116 | 4 | ||||||||||||
Consumer | - | - | - | - | ||||||||||||
Total restructured accruing loans: | $ | 9,249 | 26 | $ | 4,485 | 6 | ||||||||||
Total Nonperforming assets and restructured accruing loans | $ | 32,101 | 94 | $ | 30,562 | 81 | ||||||||||
Ratios: | ||||||||||||||||
Nonperforming loans to total loans | 0.61 | % | 0.75 | % | ||||||||||||
Nonperforming assets to total loans plus other real estate owned | 1.05 | % | 1.41 | % | ||||||||||||
Nonperforming loans plus restructured accruing loans to total loans plus other real estate owned | 1.03 | % | 0.99 | % |
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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 $6.0 million of our allowance for loan losses to real estate construction, including acquisition and development and lot loans, $7.3 million to commercial, financial and agricultural loans, and $5.1 million to other loan types. We have a total loan loss reserve as of September 30, 2012 allocable to specific loan types of $18.4 million. Another $6.2 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 $24.6 million. Based upon historical performance, known factors, overall judgment, and regulatory methodologies, including consideration of the possible 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 September 30, 2012, we had impaired loans of $38.8 million inclusive of nonaccrual loans, an increase of $1.5 million from $37.3 million as of December 31, 2011. We allocated $3.9 million of our allowance for loan losses at September 30, 2012 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 $38.8 million of impaired loans reported as of September 30, 2012, $16.0 million were real estate – construction loans, $4.1 million were commercial, financial, and agricultural loans, $8.9 million were commercial real estate loans, and $6.0 million were residential real estate loans. The remaining $3.8 million of impaired loans consisted of other mortgages and consumer loans. Of the $16.0 million of impaired real estate – construction loans, $7.6 million (a total of 19 loans with 7 builders) were residential construction loans, and $2.7 million consisted of various residential lot loans to 7 builders.
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Deposits
Total deposits increased $265,634,000, or 12.4%, to $2,409,521,000 at September 30, 2012 compared to $2,143,887,000 at December 31, 2011. We anticipate long-term sustainable growth in deposits through continued development of market share in our markets.
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
On June 1, 2012, we paid off our subordinated note payable due June 1, 2016, including all related accrued interest payable. 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 trust preferred securities. 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. On October 9, 2012, we called for redemption on November 8, 2012 all of our debentures issued on September 2, 2008, as more fully discussed in Note 11 to the consolidated financial statements.
During the first and second quarter of 2011 we paid off our two advances from the Federal Home Loan Bank of Atlanta and incurred prepayment penalties totaling $738,000 by repaying these advances early.
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 September 30, 2012, liquid assets, which are represented by cash and due from banks, federal funds sold and unpledged available-for-sale securities, totaled $364.0 million. Additionally, the Bank had additional borrowing availability of approximately $130.0 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”.
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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.
The following table reflects the contractual maturities of our term liabilities as of September 30, 2012. The amounts shown do not reflect any early withdrawal or prepayment assumptions.
Payments due by Period | ||||||||||||||||||||
Over 1 - 3 | Over 3 - 5 | |||||||||||||||||||
Total | 1 year or less | years | years | Over 5 years | ||||||||||||||||
(In Thousands) | ||||||||||||||||||||
Contractual Obligations (1) | ||||||||||||||||||||
Deposits without a stated maturity | $ | 2,008,425 | $ | - | $ | - | $ | - | $ | - | ||||||||||
Certificates of deposit (2) | 401,096 | 248,698 | 111,619 | 40,779 | - | |||||||||||||||
Federal funds purchased | 91,317 | 91,317 | - | - | - | |||||||||||||||
Subordinated debentures | 30,000 | - | - | - | 30,000 | |||||||||||||||
Operating lease commitments | 14,128 | 2,011 | 3,906 | 3,720 | 4,491 | |||||||||||||||
Total | $ | 2,544,966 | $ | 342,026 | $ | 115,525 | $ | 44,499 | $ | 34,491 |
(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.
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Capital Adequacy
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 (the “Series A Preferred Stock”), 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, commencing 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 and 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 is 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 September 30, 2012, 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 September 30, 2012.
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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 September 30, 2012, December 31, 2011 and September 30, 2011:
To Be Well Capitalized | ||||||||||||||||||||||||
For Capital Adequacy | Under Prompt Corrective | |||||||||||||||||||||||
Actual | Purposes | Action Provisions | ||||||||||||||||||||||
Amount | Ratio | Amount | Ratio | Amount | Ratio | |||||||||||||||||||
As of September 30, 2012: | ||||||||||||||||||||||||
Total Capital to Risk-Weighted Assets: | ||||||||||||||||||||||||
Consolidated | $ | 287,868 | 12.99 | % | $ | 177,349 | 8.00 | % | $ | N/A | N/A | % | ||||||||||||
ServisFirst Bank | 269,760 | 12.17 | % | 177,355 | 8.00 | % | 21,694 | 10.00 | % | |||||||||||||||
Tier 1 Capital to Risk-Weighted Assets: | ||||||||||||||||||||||||
Consolidated | 263,264 | 11.88 | % | 88,674 | 4.00 | % | N/A | N/A | % | |||||||||||||||
ServisFirst Bank | 245,156 | 11.06 | % | 88,677 | 4.00 | % | 133,016 | 6.00 | % | |||||||||||||||
Tier 1 Capital to Average Assets: | ||||||||||||||||||||||||
Consolidated | 263,264 | 9.92 | % | 106,104 | 4.00 | % | N/A | N/A | % | |||||||||||||||
ServisFirst Bank | 245,156 | 9.25 | % | 106,025 | 4.00 | % | 132,532 | 5.00 | % | |||||||||||||||
As of December 31, 2011: | ||||||||||||||||||||||||
Total Capital to Risk-Weighted Assets: | ||||||||||||||||||||||||
Consolidated | $ | 246,334 | 12.79 | % | $ | 154,094 | 8.00 | % | $ | N/A | N/A | % | ||||||||||||
ServisFirst Bank | 243,279 | 12.63 | % | 154,070 | 8.00 | % | 192,588 | 10.00 | % | |||||||||||||||
Tier 1 Capital to Risk-Weighted Assets: | ||||||||||||||||||||||||
Consolidated | 219,350 | 11.39 | % | 77,047 | 4.00 | % | N/A | N/A | % | |||||||||||||||
ServisFirst Bank | 216,295 | 11.23 | % | 77,035 | 4.00 | % | 115,533 | 6.00 | % | |||||||||||||||
Tier 1 Capital to Average Assets: | ||||||||||||||||||||||||
Consolidated | 219,350 | 9.17 | % | 95,642 | 4.00 | % | N/A | N/A | % | |||||||||||||||
ServisFirst Bank | 216,295 | 9.06 | % | 95,481 | 4.00 | % | 119,352 | 5.00 | % | |||||||||||||||
As of September 30, 2011: | ||||||||||||||||||||||||
Total Capital to Risk-Weighted Assets: | ||||||||||||||||||||||||
Consolidated | $ | 238,517 | 13.40 | % | $ | 142,450 | 8.00 | % | $ | N/A | N/A | % | ||||||||||||
ServisFirst Bank | 234,967 | 13.20 | % | 142,401 | 8.00 | % | 178,001 | 10.00 | % | |||||||||||||||
Tier 1 Capital to Risk-Weighted Assets: | ||||||||||||||||||||||||
Consolidated | 212,102 | 11.91 | % | 71,225 | 4.00 | % | N/A | N/A | % | |||||||||||||||
ServisFirst Bank | 208,552 | 11.72 | % | 71,200 | 4.00 | % | 106,800 | 6.00 | % | |||||||||||||||
Tier 1 Capital to Average Assets: | ||||||||||||||||||||||||
Consolidated | 212,102 | 9.81 | % | 71,225 | 4.00 | % | N/A | N/A | % | |||||||||||||||
ServisFirst Bank | 208,552 | 9.67 | % | 71,200 | 4.00 | % | 89,000 | 5.00 | % |
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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.
As part of our mortgage operations, we originate and sell certain loans to investors in the secondary market. We continue to experience a manageable level of investor repurchase demands. For loans sold, we have an obligation to either repurchase the outstanding principal balance of a loan or make the purchaser whole for the economic benefits of a loan if it is determined that the loans sold were in violation of representations and warranties made by the Bank at the time of the sale. Representations and warranties typically include those made regarding loans that had missing or insufficient file documentation or loans obtained through fraud by borrowers or other third parties such as appraisers. We had a reserve of $194,000 as of September 30, 2012 for the settlement of any repurchase demands by investors.
Financial instruments whose contract amounts represent credit risk at September 30, 2012 are as follows:
9/30/2012 | ||||
(In Thousands) | ||||
Commitments to extend credit | $ | 821,480 | ||
Credit card arrangements | 24,414 | |||
Standby letters of credit | 34,757 | |||
$ | 880,651 |
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.
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Federal funds lines of credit are uncommitted lines issued to downstream correspondent banks for the purpose of providing liquidity to them. The lines are unsecured, and we have no obligation to sell federal funds to the correspondent, nor does the correspondent have any obligation to request or accept purchases of federal funds from us.
Results of Operations
Summary of Net Income
Net income for the three months ended September 30, 2012 was $9,302,000 compared to net income of $6,135,000 for the three months ended September 30, 2011. Net income for the nine months ended September 30, 2012 was $25,889,000 compared to net income of $16,851,000 for the nine months ended September 30, 2011. The increase in net income was primarily attributable to increased net interest income as a result of growth in average earning assets. Net interest income for the three months ended September 30, 2012 increased to $24,048,000, or 25.1%, compared to $19,219,000 for the corresponding period in 2011. Net interest income for the nine months ended September 30, 2012 increased to $68,691,000, or 26.6%, compared to $54,243,000 for the corresponding period in 2011. The provision for loan losses decreased $1,555,000 to $1,185,000 for the three months ended September 30, 2012 compared to the corresponding period in 2011, and increased $186,000 to $6,651,000 for the nine months ended September 30, 2012 compared to the corresponding period in 2011. The decrease in provision for loan loss for the three -months ended September 30, 2012 compared to the same period in 2011 was primarily due to recoveries on two borrowers which had been previously charged off. This resulted in recoveries exceeding charge-offs for the quarter by $180,000. The relative small increase in loan loss provision for the nine months ended September 30, 2012 compared to the corresponding period in 2011 was primarily attributable to the year-to-date growth in the loan portfolio of 18.0% (24.1% annualized). Noninterest income increased $552,000 to $2,360,000 for the three months ended September 30, 2012 compared to the corresponding period in 2011, and increased $2,196,000 to $7,057,000 for the nine months ended September 30, 2012 compared to the corresponding period in 2011. This increase in noninterest income was primarily attributable to increased mortgage banking income and the increase in cash surrender value of life insurance contracts, as more fully explained in “Noninterest Income” below. Operating expenses for the three months ended September 30, 2012 increased to $11,271,000, or 27.6%, compared to $8,832,000 for the corresponding period in 2011, and for the nine months ended September 30, 2012 increased to $30,197,000, or 12.7%, compared to $26,798,000 for the corresponding period in 2011. The increase in operating expenses was primarily attributable to increases in salary and employee benefits expense and in OREO expense in 2012, as more fully explained in “Noninterest Expense” below.
Basic and diluted net income per common share were $1.53 and $1.35, respectively, for the three months ended September 30, 2012, compared to $1.03 and $0.90, respectively, for the corresponding period in 2011. Basic and diluted net income per common share were $4.28 and $3.75, respectively, for the nine months ended September 30, 2012, compared to $2.93 and $2.58, respectively, for the corresponding period in 2011. Return on average assets for the three and nine months ended September 30, 2012 was 1.38% and 1.34%, respectively, compared to 1.11% and 1.13% for the corresponding period in 2011, and return on average common equity for the three and nine months ended September 30, 2012 was 16.64% and 16.22%, respectively, compared to 16.53% and 16.89% for the corresponding period in 2011.
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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 $4,886,000, or 25.0%, to $24,440,000 for the three months ended September 30, 2012 compared to $19,554,000 for the corresponding period in 2011, and increased $14,626,000, or 26.5%, to $69,846,000 for the nine months ended September 30, 2012 compared to $55,220,000 for the corresponding period in 2011. This increase was primarily attributable to growth in average earning assets. The taxable-equivalent yield on interest-earning assets decreased to 4.39% for the three months ended September 30, 2012 from 4.44% for the corresponding period in 2011, and decreased to 4.43% for the nine months ended September 30, 2012 from 4.65% for the corresponding period in 2011. The yield on loans for the three months ended September 30, 2012 was 4.88% compared to 5.18% for the corresponding period in 2011, and 4.97% compared to 5.24% for the nine months ended September 30, 2012 and September 30, 2011, respectively. Loan fees included in the yield calculation decreased to $57,000 for the three months ended September 30, 2012 from $116,000 for the corresponding period in 2011, and decreased to $241,000 for the nine months ended September 30, 2012 from $420,000 for the corresponding period in 2011. Net loan fees decreased due to the origination of fewer real estate construction loans. The cost of total interest-bearing liabilities decreased to 0.76% for the three months ended September 30, 2012 from 0.99% for the corresponding period in 2011, and to 0.80% for the nine months ended September 30, 2012 from 1.05% for the corresponding period in 2011. Net interest margin for the three months ended September 30, 2012 was 3.82% compared to 3.67% for the corresponding period in 2011, and 3.81% for both of the nine month periods ended September 30, 2012 and 2011.
The following tables show, for the three and nine months ended September 30, 2012 and September 30, 2011, 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 Consolidated Balance Sheets and Net Interest Analysis
On a Fully Taxable-Equivalent Basis
For the Three Months Ended September 30,
(Dollar Amounts In Thousands)
2012 | 2011 | |||||||||||||||||||||||
Interest | Average | Interest | Average | |||||||||||||||||||||
Average | Earned / | Yield / | Average | Earned / | Yield / | |||||||||||||||||||
Balance | Paid | Rate | Balance | Paid | Rate | |||||||||||||||||||
Assets: | ||||||||||||||||||||||||
Interest-earning assets: | ||||||||||||||||||||||||
Loans, net of unearned income (1) | ||||||||||||||||||||||||
Taxable | $ | 2,079,759 | $ | 25,502 | 4.88 | % | $ | 1,607,567 | $ | 20,988 | 5.18 | % | ||||||||||||
Tax-exempt (2) | 2,490 | 37 | 5.91 | - | - | - | ||||||||||||||||||
Mortgage loans held for sale | 21,613 | 96 | 1.77 | 6,262 | 54 | 3.42 | ||||||||||||||||||
Investment securities: | ||||||||||||||||||||||||
Taxable | 180,567 | 1,190 | 2.62 | 188,813 | 1,373 | 2.88 | ||||||||||||||||||
Tax-exempt (2) | 103,770 | 1,192 | 4.57 | 83,784 | 1,078 | 5.10 | ||||||||||||||||||
Total investment securities (3) | 284,337 | 2,382 | 3.33 | 272,597 | 2,451 | 3.57 | ||||||||||||||||||
Federal funds sold | 92,086 | 50 | 0.22 | 92,717 | 54 | 0.23 | ||||||||||||||||||
Restricted equity securities | 4,514 | 29 | 2.56 | 4,351 | 22 | 2.01 | ||||||||||||||||||
Interest-bearing balances with banks | 62,277 | 39 | 0.25 | 129,997 | 78 | 0.24 | ||||||||||||||||||
Total interest-earning assets | $ | 2,547,076 | $ | 28,135 | 4.39 | % | $ | 2,113,491 | $ | 23,647 | 4.44 | % | ||||||||||||
Non-interest-earning assets: | ||||||||||||||||||||||||
Cash and due from banks | 39,352 | 22,112 | ||||||||||||||||||||||
Net fixed assets and equipment | 6,280 | 4,755 | ||||||||||||||||||||||
interest and other assets | 59,899 | 21,577 | ||||||||||||||||||||||
Total assets | $ | 2,652,607 | 2,161,935 | |||||||||||||||||||||
Liabilities and stockholders' equity: | ||||||||||||||||||||||||
Interest-bearing liabilities: | ||||||||||||||||||||||||
Interest-bearing demand deposits | $ | 334,412 | $ | 266 | 0.32 | % | $ | 286,810 | $ | 259 | 0.36 | % | ||||||||||||
Savings deposits | 17,444 | 12 | 0.27 | 10,945 | 14 | 0.51 | ||||||||||||||||||
Money market accounts | 1,075,224 | 1,489 | 0.55 | 931,168 | 1,705 | 0.73 | ||||||||||||||||||
Time deposits | 399,268 | 1,312 | 1.31 | 351,321 | 1,405 | 1.59 | ||||||||||||||||||
Federal funds purchased | 85,153 | 54 | 0.25 | 18,056 | 12 | 0.26 | ||||||||||||||||||
Other borrowings | 30,514 | 562 | 7.33 | 35,449 | 698 | 7.81 | ||||||||||||||||||
Total interest-bearing liabilities | $ | 1,942,015 | $ | 3,695 | 0.76 | % | $ | 1,633,749 | $ | 4,093 | 0.99 | % | ||||||||||||
Non-interest-bearing liabilities: | ||||||||||||||||||||||||
Non-interest-bearing demand deposits | 486,090 | 338,330 | ||||||||||||||||||||||
Other liabilities | 4,510 | 5,059 | ||||||||||||||||||||||
Stockholders' equity | 212,002 | 178,881 | ||||||||||||||||||||||
Unrealized gains on securities and derivatives | 7,990 | 5,916 | ||||||||||||||||||||||
Total liabilities and stockholders' equity | $ | 2,652,607 | $ | 2,161,935 | ||||||||||||||||||||
Net interest spread | 3.64 | % | 3.45 | % | ||||||||||||||||||||
Net interest margin | 3.82 | % | 3.67 | % |
(1) | Non-accrual loans are included in average loan balances in all periods. Loan fees of $57,000 and $116,000 are included in interest income in 2012 and 2011, respectively. |
(2) | Interest income and yields are presented on a fully taxable equivalent basis using a tax rate of 35%. |
(3) | Unrealized gains of $12,292,000 and $1,784,000 are excluded from the yield calculation in 2012 and 2011, respectively. |
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For the Three Months Ended September 30, | ||||||||||||
2012 Compared to 2011 Increase (Decrease) in Interest Income and Expense Due to Changes in: | ||||||||||||
Volume | Rate | Total | ||||||||||
(In Thousands) | ||||||||||||
Interest-earning assets: | ||||||||||||
Loans, net of unearned income | ||||||||||||
Taxable | $ | 6,013 | $ | (1,499 | ) | $ | 4,514 | |||||
Tax-exempt | 37 | - | 37 | |||||||||
Mortgages held for sale | 80 | (38 | ) | 42 | ||||||||
Securities - taxable | (55 | ) | (128 | ) | (183 | ) | ||||||
Securities - non taxable | 246 | (132 | ) | 114 | ||||||||
Federal funds sold | - | (4 | ) | (4 | ) | |||||||
Restricted equity securities | 1 | 6 | 7 | |||||||||
Interest-bearing balances with banks | (42 | ) | 3 | (39 | ) | |||||||
Total interest-earning assets | 6,280 | (1,792 | ) | 4,488 | ||||||||
Interest-bearing liabilities: | ||||||||||||
Interest-bearing demand deposits | 41 | (34 | ) | 7 | ||||||||
Savings | 6 | (8 | ) | (2 | ) | |||||||
Money market accounts | 246 | (462 | ) | (216 | ) | |||||||
Time deposits | 183 | (276 | ) | (93 | ) | |||||||
Federal funds purchased | 43 | (1 | ) | 42 | ||||||||
Other borrowed funds | (89 | ) | (47 | ) | (136 | ) | ||||||
Total interest-bearing liabilities | 430 | (828 | ) | (398 | ) | |||||||
Increase in net interest income | $ | 5,850 | $ | (964 | ) | $ | 4,886 |
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Average Consolidated Balance Sheets and Net Interest Analysis
On a Fully Taxable-Equivalent Basis
For the Nine Months Ended September 30,
(Dollar Amounts In Thousands)
2012 | 2011 | |||||||||||||||||||||||
Interest | Interest | |||||||||||||||||||||||
Average | Earned / | Average | Average | Earned / | Average | |||||||||||||||||||
Balance | Paid | Yield / Rate | Balance | Paid | Yield / Rate | |||||||||||||||||||
Assets: | ||||||||||||||||||||||||
Interest-earning assets: | ||||||||||||||||||||||||
Loans, net of unearned income (1) | ||||||||||||||||||||||||
Taxable | $ | 1,967,039 | $ | 73,136 | 4.97 | % | $ | 1,515,516 | $ | 59,386 | 5.24 | % | ||||||||||||
Tax-exempt (2) | 1,347 | 58 | 5.75 | - | - | - | ||||||||||||||||||
Mortgage loans held for sale | 14,977 | 254 | 2.27 | 4,609 | 123 | 3.57 | ||||||||||||||||||
Investment securities: | ||||||||||||||||||||||||
Taxable | 197,980 | 3,828 | 2.58 | 179,925 | 4,358 | 3.24 | ||||||||||||||||||
Tax-exempt (2) | 98,966 | 3,500 | 4.72 | 79,800 | 3,164 | 5.30 | ||||||||||||||||||
Total investment securities (3) | 296,946 | 7,328 | 3.30 | 259,725 | 7,522 | 3.87 | ||||||||||||||||||
Federal funds sold | 93,760 | 145 | 0.21 | 81,419 | 126 | 0.21 | ||||||||||||||||||
Restricted equity securities | 4,427 | 74 | 2.23 | 4,306 | 57 | 1.77 | ||||||||||||||||||
Interest-bearing balances with banks | 67,625 | 127 | 0.25 | 70,952 | 127 | 0.24 | ||||||||||||||||||
Total interest-earning assets | $ | 2,446,121 | $ | 81,122 | 4.43 | % | $ | 1,936,527 | $ | 67,341 | 4.65 | % | ||||||||||||
Non-interest-earning assets: | ||||||||||||||||||||||||
Cash and due from banks | 36,861 | 25,697 | ||||||||||||||||||||||
Net fixed assets and equipment | 5,649 | 4,833 | ||||||||||||||||||||||
Allowance for loan losses, accrued interest and other assets | 62,366 | 18,030 | ||||||||||||||||||||||
Total assets | $ | 2,550,997 | $ | 1,985,087 | ||||||||||||||||||||
Liabilities and stockholders' equity: | ||||||||||||||||||||||||
Interest-bearing liabilities: | ||||||||||||||||||||||||
Interest-bearing demand deposits | $ | 339,898 | $ | 800 | 0.31 | % | $ | 296,292 | $ | 883 | 0.40 | % | ||||||||||||
Savings deposits | 16,468 | 34 | 0.28 | 8,610 | 33 | 0.51 | ||||||||||||||||||
Money market accounts | 1,013,300 | 4,344 | 0.57 | 876,883 | 5,108 | 0.78 | ||||||||||||||||||
Time deposits | 398,815 | 4,050 | 1.36 | 314,106 | 3,756 | 1.60 | ||||||||||||||||||
Federal funds purchased | 81,489 | 153 | 0.25 | 6,085 | 12 | - | ||||||||||||||||||
Other borrowings | 33,264 | 1,895 | 7.61 | 44,030 | 2,329 | 7.07 | ||||||||||||||||||
Total interest-bearing liabilities | $ | 1,883,234 | $ | 11,276 | 0.80 | % | $ | 1,546,006 | $ | 12,121 | 1.05 | % | ||||||||||||
Non-interest-bearing liabilities: | ||||||||||||||||||||||||
Non-interest-bearing demand deposits | 451,337 | 286,488 | ||||||||||||||||||||||
Other liabilites | 5,746 | 5,269 | ||||||||||||||||||||||
Stockholders' equity | 203,049 | 143,005 | ||||||||||||||||||||||
Unrealized gains on securities and derivatives | 7,631 | 4,319 | ||||||||||||||||||||||
Total liabilities and stockholders' equity | $ | 2,550,997 | $ | 1,985,087 | ||||||||||||||||||||
Net interest spread | 3.63 | % | 3.60 | % | ||||||||||||||||||||
Net interest margin | 3.81 | % | 3.81 | % |
(1) | Non-accrual loans are included in average loan balances in all periods. Loan fees of $241,000 and $420,000 are included in interest income in 2012 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 $11,905,000 and $4,937,000 are excluded from the yield calculation in 2012 and 2011, respectively. |
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For the Nine Months Ended September 30, | ||||||||||||
2012 Compared to 2011 Increase (Decrease) in Interest Income and Expense Due to Changes in: | ||||||||||||
Volume | Rate | Total | ||||||||||
(In Thousands) | ||||||||||||
Interest-earning assets: | ||||||||||||
Loans, net of unearned income | ||||||||||||
Taxable | $ | 16,921 | $ | (3,171 | ) | $ | 13,750 | |||||
Tax-exempt | 58 | - | 58 | |||||||||
Mortgages held for sale | 190 | (59 | ) | 131 | ||||||||
Taxable | 408 | (938 | ) | (530 | ) | |||||||
Tax-exempt | 703 | (367 | ) | 336 | ||||||||
Federal funds sold | 19 | - | 19 | |||||||||
Restricted equity securities | 2 | 15 | 17 | |||||||||
Interest-bearing balances with banks | (6 | ) | 6 | - | ||||||||
Total interest-earning assets | 18,295 | (4,514 | ) | 13,781 | ||||||||
Interest-bearing liabilities: | ||||||||||||
Interest-bearing demand deposits | 119 | (202 | ) | (83 | ) | |||||||
Savings | 21 | (20 | ) | 1 | ||||||||
Money market accounts | 717 | (1,481 | ) | (764 | ) | |||||||
Time deposits | 915 | (621 | ) | 294 | ||||||||
Federal funds purchased | 142 | (1 | ) | 141 | ||||||||
Other borrowed funds | (602 | ) | 168 | (434 | ) | |||||||
Total interest-bearing liabilities | 1,312 | (2,157 | ) | (845 | ) | |||||||
Increase in net interest income | $ | 16,983 | $ | (2,357 | ) | $ | 14,626 |
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. Based on 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 September 30, 2012, total loans rated Special Mention, Substandard, and Doubtful were $81.9 million, or 3.8% of total loans, compared to $88.5 million, or 4.8% of total loans, at December 31, 2011. 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.
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The provision for loan losses was $1,185,000 for the three months ended September 30, 2012, a decrease of $1,555,000 from $2,740,000 for the three months ended September 30, 2011. The provision for loan losses was $6,651,000 for the nine months ended September 30, 2012, a $186,000 increase, compared to $6,465,000 for the nine months ended September 30, 2011. The decrease in provision for loan loss for the three month period ended September 30, 2012 was primarily due to a decrease in charge-offs and an increase in recoveries during the third quarter compared to recent historical levels. This was partially offset by an increase in specific loan impairments. Our management continues to maintain a proactive approach to credit risk management. Nonperforming loans decreased to $13.2 million, or 0.61% of total loans, at September 30, 2012 from $13.8 million, or 0.75% of total loans, at December 31, 2011, and were also lower than $18.4 million, or 1.09% of total loans, at September 30, 2011. Impaired loans increased to $38.8 million, or 1.8% of total loans, at September 30, 2012, compared to $37.3 million, or 2.0% of total loans, at December 31, 2011. The allowance for loan losses totaled $24.6 million, or 1.14% of total loans, net of unearned income, at September 30, 2012, compared to $22.0 million, or 1.20% of loans, net of unearned income, at December 31, 2011 and $21.5 million, or 1.27% of loans, net of unearned income, at September 30, 2011.
Noninterest Income
Noninterest income totaled $2,360,000 for the three months ended September 30, 2012, an increase of $552,000, or 30.5%, compared to the corresponding period in 2011, and totaled $7,057,000 for the nine months ended September 30, 2012, an increase of $2,196,000, or 45.2%, compared to the corresponding period in 2011. Income from mortgage banking operations for the three months ended September 30, 2012 was $865,000, up $51,000, or 6.3%, from $814,000 for the corresponding period in 2011, and for the nine months ended September 30, 2012 was $2,701,000, up $1,060,000, or 64.6%, from $1,641,000 for the corresponding period in 2011. The addition of new mortgage lenders and our continued expansion in Pensacola, Florida, coupled with continued mortgage refinancings, lead to the increase in mortgage banking income. Service charges on deposit accounts increased $97,000, or 17.0%, to $666,000 for the three months ended September 30, 2012, from $569,000 for the corresponding period in 2011, and increased $303,000, or 18.0%, to $1,986,000 for the nine months ended September 30, 2012, from $1,683,000 for the corresponding period in 2011. Much of this increase in deposit charges was attributable to overdraft charges, net of waived charges, which increased 10.4% and 13.3% for the three and nine month periods ended September 30, 2012 and 2011, respectively. Interchange income on credit cards was $268,000 for the three months ended September 30, 2012 compared to $186,000 for the corresponding period in 2011, and was $735,000 for the nine months ended September 30, 2012 compared to only $245,000 for the corresponding period in 2011. This large increase in credit card interchange income was the result of our change to a new credit card program provider during the second quarter in 2011. The increase in cash surrender value of life insurance contracts contributed $386,000 and $1,161,000 in noninterest income for the three and nine months ended September 30, 2012. The investment in these life insurance contracts took place on September 30, 2011.
Noninterest Expense
Noninterest expense totaled $11,271,000 for the three months ended September 30, 2012, an increase of $2,439,000, or 27.6%, compared to $8,832,000 in 2011, and totaled $30,197,000 for the nine months ended September 30, 2012, an increase of $3,399,000, or 12.7%, compared to $26,798,000 for the corresponding period in 2011.
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Details of expenses are as follows:
· | Salary and benefit expense increased $974,000, or 20.6%, to $5,697,000 for the three months ended September 30, 2012 from $4,723,000 for the corresponding period in 2011, and increased $2,147,000, or 15.4%, to $16,110,000 for the nine months ended September 30, 2012 from $13,963,000 for the corresponding period in 2011. We had 223 full-time equivalent employees at September 30, 2012 compared to 202 at September 30, 2011, a 10.4% increase. Most of this increase in number of employees was due to our expansion into the Pensacola, Florida market and addition of new support staff necessitated by our continued growth. |
· | Occupancy expense increased $65,000, or 7.0%, to $988,000 for the three months ended September 30, 2012 from $923,000 for the corresponding period in 2011 and increased $141,000, or 5.1%, to $2,884,000 for the nine months ended September 30, 2012 from $2,743,000 for the corresponding period in 2011. |
· | FDIC and other regulatory assessments for the three months ended September 30, 2012 were $409,000, an increase of $6,000, or 1.5%, from $403,000 during the corresponding period in 2011. Assessments for the nine months ended September 30, 2012 were $1,155,000, a decrease of $222,000, or 16.1%, from $1,377,000 during the corresponding period in 2011. Changes by the FDIC during the past year in the rates charged for deposit insurance and in the methodology used to calculate the assessment base have resulted in wide variances from period to period. |
· | Expenses related to OREO increased $1,044,000 to $1,159,000 for the three months ended September 30, 2012, from $115,000 for the corresponding period in 2011, and increased $1,328,000 to $1,832,000 for the nine months ended September 30, 2012 from $504,000 for the corresponding period in 2011. OREO expenses increased due to more write-downs in value, which increased to $987,000 for the three months ended September 30, 2012 from $25,000 for the corresponding period in 2011, and increased to $1,424,000 for the nine months ended September 30, 2012 from $181,000 for the corresponding period in 2011. |
· | All other operating expenses for the three months ended September 30, 2012 were up $365,000, or 15.7%, to $2,696,000 from the corresponding period in 2011. This increase was largely comprised of higher recording fees and other non-origination loan expenses. Other operating expenses for the nine months ended September 30, 2012 were $7,256,000, or relatively flat from the corresponding period in 2011. Adjusting out $738,000 in prepayment penalties we incurred in 2011, other operating expenses increased $711,000, or 10.9%, during the nine months ended September 30, 2012 when compared to the corresponding period in 2011. This increase was largely for the same reasons as the increase in the three month period discussed above. |
Income Tax Expense
Income tax expense was $4,650,000 for the three months ended September 30, 2012 versus $3,320,000 for the same period in 2011, and was $13,011,000 for the nine months ended September 30, 2012 versus $8,990,000 for the corresponding period in 2011. Our effective tax rate for the three and nine months ended September 30, 2012 was 33.33% and 33.45%, respectively, compared to 35.11% and 34.79%, respectively, for the corresponding periods in 2011. Our primary permanent differences are related to tax exempt income on securities and incentive stock option expenses.
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We invested in bank-owned life insurance for certain named officers of the Bank on September 30, 2011. The periodic increase in cash surrender value of those policies are tax exempt and therefore contribute to a larger permanent difference between book income and taxable income.
We created a real estate investment trust in the first quarter of 2012 for the purposes of isolating certain real estate loans for tracking purposes. The trust is a wholly-owned subsidiary of a trust holding company, which in turn is a wholly-owned subsidiary of the Bank. The trust dividends its net earnings, primarily interest income derived from the loans it holds, to the bank, which receives a deduction for Alabama income tax purposes.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Like all financial institutions, we are subject to market risk from changes in interest rates. Interest rate risk is inherent in the balance sheet due to the mismatch between the maturities of rate-sensitive assets and rate-sensitive liabilities. If rates are rising, and the level of rate-sensitive liabilities exceeds the level of rate-sensitive assets, the net interest margin will be negatively impacted. Conversely, if rates are falling, and the level of rate-sensitive liabilities is greater than the level of rate-sensitive assets, the impact on the net interest margin will be favorable. Managing interest rate risk is further complicated by the fact that all rates do not change at the same pace; in other words, short-term rates may be rising while longer-term rates remain stable. In addition, different types of rate-sensitive assets and rate-sensitive liabilities react differently to changes in rates.
To manage interest rate risk, we must take a position on the expected future trend of interest rates. Rates may rise, fall or remain the same. Our asset-liability committee 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.
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. There have been no changes to our policies or procedures for analyzing our interest rate risk since December 31, 2011, and there are no significant changes to our sensitivity to changes in interest rates since December 31, 2011 as disclosed in our Form 10-K.
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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 September 30, 2012. Based upon the Evaluation, our CEO and CFO have concluded that, as of September 30, 2012, 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, 2011.
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, 2011, 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, 2011, 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.
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ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURES
Not Applicable.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS
(a) | Exhibit: |
3.01 Certificate of Incorporation, as amended, of ServisFirst Bancshares, Inc.
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.
EX-101.INS XBRL Instance Document
EX-101.SCH XBRL Taxonomy Extension Schema
EX-101.CAL XBRL Taxonomy Extension Calculation Linkbase
EX-101.LAB XBRL Taxonomy Extension Label Linkbase
EX-101.PRE XBRL Taxonomy Extension Presentation Linkbase
EX-101.DEF XBRL Taxonomy Extension Definition Linkbase
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: October 31, 2012 | By | /s/ Thomas A. Broughton III | |
Thomas A. Broughton III | |||
President and Chief Executive Officer | |||
Date: October 31, 2012 | By | /s/ William M. Foshee | |
William M. Foshee | |||
Chief Financial Officer.01, Doc: |
49 |
Exhibit 3.01
CERTIFICATE OF INCORPORATION
OF
SERVISFIRST BANCSHARES, INC.1
(As amended through October 24, 2012)
ARTICLE I
The name of the Corporation is ServisFirst Bancshares, Inc. (the “Corporation”).
ARTICLE II
Section 2.1 Registered Agent. The address of the Corporation’s registered office in the State of Delaware is 615 South Dupont Highway, in the City of Dover, County of Kent, Zip Code 19901, and the name of the registered agent at such office is Capitol Services, Inc.
Section 2.2 Incorporator. The sole incorporator is Thomas A. Broughton, III, whose mailing address is 3300 Cahaba Road, Suite 300, Birmingham, Alabama 35223.
ARTICLE III
The purposes of the Corporation are to engage in any lawful act or activity for which corporations may be organized under the Delaware General Corporation Laws (“DGCL”), including but not limited to the following:
(a) | To engage in any lawful act or activity for which corporations may be organized under the DGCL; |
(b) | To purchase and sell the stock of banks; |
(c) To acquire, and pay for in cash, stock or bonds of this Corporation or otherwise, the goodwill, rights, assets and property, and to undertake or assume the whole or any part of the obligations or liabilities of any person, firm, association or corporation;
1 Text of Certificate of Incorporation as set forth in Certificate of Incorporation filed by the Office of the Secretary of State of State of Delaware on August 16, 2007. Section 4.1. was subsequently amended on March 27, 2008, to change the authorized number of shares of all classes of capital stock from 105,000,000 shares, comprised of 100,000,000 shares of common stock, par value of $.001 per share, and 5,000,000 shares of preferred stock, par value of $.001, to 16,000,000 shares, comprised of 15,000,000 shares of common stock, with a par value of $.001 per share, and 1,000,000 shares of preferred stock, with a par value $.001 per share; and on October 24, 2012, to change the authorized number of shares of all classes of capital stock from 16,000,000 shares, comprised of 15,000,000 shares of common stock, par value of $.001 per share, and 1,000,000 shares of preferred stock, par value of $.001, to 51,000,000 shares, comprised of 50,000,000 shares of common stock, with a par value of $.001 per share, and 1,000,000 shares of preferred stock, with a par value $.001 per share.
(d) To acquire, hold, use, sell, assign, lease, grant licenses in respect of, mortgage or otherwise dispose of letters patent of the United States or any foreign country, patent rights, licenses and privileges, inventions, improvements and processes, copyrights, trademarks and trade names, relating to or useful in connection with any business of this Corporation;
(e) To acquire by purchase, subscription or otherwise, and to receive, hold, own, guarantee, sell, assign, exchange, transfer, mortgage, pledge or otherwise dispose of or deal in and with any of the shares of the capital stock, or any voting trust certificates in respect of the shares of capital stock, scrip, warrants, rights, bonds, debentures, notes, trust receipts, and other securities, obligations, choses in action and evidences of indebtedness or interest issued or created by any corporations, joint stock companies, syndicates, associations, firms, trusts or persons, public or private, or by the government of the United States of America, or by any foreign government, or by any state, territory, province, municipality or other political subdivision or by any governmental agency, and as owner thereto to possess and exercise all the rights, powers and privileges of ownership, including the right to execute consents and vote thereon, and to do any and all acts and things necessary or advisable for the preservation, protection, improvement and enhancement in value thereof;
(f) To borrow or raise money for any of the purposes of the Corporation and, from time to time without limit as to amount, to draw, make, accept, endorse, execute and issue promissory notes, drafts, bills of exchange, warrants, bonds, debentures and other negotiable or non-negotiable instruments and evidences of indebtedness, and to secure the payment of any thereof and of the interest thereon by mortgage upon or pledge, conveyance or assignment in trust of the whole or any part of the property of the Corporation, whether at the time owned or thereafter acquired, and to sell, pledge or otherwise dispose of such bonds or other obligations of the Corporation for its corporate purposes;
(g) To purchase, receive, take by grant, gift, devise, bequest or otherwise, lease, or otherwise acquire, own, hold, improve, employ, use and otherwise deal in and with real or personal property, or any interest therein, wherever situated, and to sell, convey, lease, exchange, transfer or otherwise dispose of, or mortgage or pledge, all or any of the Corporation’s property and assets, or any interest therein, wherever situated; and
(h) In general, to possess and exercise all the powers and privileges granted by the DGCL or by any other law of Delaware or by this Certificate of Incorporation together with any powers incidental thereto, so far as such powers and privileges are necessary or convenient to the conduct, promotion or attainment of the business or purposes of the Corporation.
ARTICLE IV
Section 4.1 Authorization of Capital. The total number of shares of all classes of capital stock which the Corporation shall have authority to issue shall be Fifty-One Million (51,000,000) shares, comprising Fifty Million (50,000,000) shares of Common Stock, with a par value of $.001 per share, and One Million (1,000,000) shares of Preferred Stock, with a par value of $.001 per share, as the Board of Directors may decide to issue pursuant to Section 4.3, which constitutes a total authorized capital of all classes of capital stock of Fifty-One Thousand Dollars ($51,000.00).
Section 4.2 Common Stock. The following powers, preferences and relative, participating, optional or other special rights, and qualifications, limitations or restrictions thereof, of the Common Stock of the Corporation are fixed as follows:
(a) Voting Rights. Except as otherwise required by law or this Certificate of Incorporation and subject to the rights of any outstanding Preferred Stock, if applicable, each holder of Common Stock shall have one vote in respect of each share of stock held by him of record on the books of the Corporation for the election of Directors and on all other matters submitted to a vote of the stockholders of the Corporation, and all shares shall be voted on a non-cumulative basis.
(b) Dividends. Except as otherwise provided by the resolution or resolutions of the Board of Directors providing for the issuance of any series of Preferred Stock pursuant to Section 4.3 below, the holders of shares of Common Stock shall be entitled to receive, when and if declared by the board of Directors, out of the assets of the Corporation which are by law available thereof, dividends payable either in cash, in property or in shares of capital stock,
(c) Dissolution, Liquidation or Winding Up. Except as otherwise provided by the resolution or resolutions of the Board of Directors providing for the issuance of any series of Preferred Stock pursuant to Section 4.3 below, in the event of any dissolution, liquidation or winding up of the affairs of the Corporation, after distribution in full of the preferential amounts, if any, to be distributed to the holders of such Preferred Stock, the rights of the holders of Common Stock to receive any remaining assets of the Corporation shall be as provided by law.
Section 4.3 Preferred Stock.
(a) Authority and Rights. The Board of Directors of the Corporation is authorized subject to the limitations prescribed by law and the provisions of this Section 4.3, to adopt one or more resolutions to provide for the issuance from time to time in one or more series of any number of shares of Preferred Stock, up to a maximum of five million (5,000,000) shares, and to establish the number of shares to be included in each such series, and to fix the designation, relative rights, preferences, qualifications and limitations of the shares of each such series. The authority of the Board of Directors with respect to each such series shall include, but not be limited to, a determination of the following:
(i) The number of shares constituting that series and the distinctive designation of that series;
(ii) The dividend rate on the shares of that series, whether dividends shall be cumulative and, if so, from which date or dates, and whether they should be payable in preference to, or in another relation to, the dividends payable on any other class or classes or series of stock;
(iii) Whether that series shall have voting rights, in addition to the voting rights provided by law, and, if so, the terms of such voting rights;
(iv) Whether that series shall have conversion or exchange privileges and, if so, the terms and conditions of such conversion or exchange, including provision for adjustments for the conversion or exchange rate in such events as the Board of Directors shall determine;
(v) Whether or not the shares of that series shall be redeemable and, if so, the terms and conditions of such redemption, including the manner of selecting shares for redemption if less than all shares are to be redeemed, the date or dates upon or after which they shall be redeemable, and the amount per share payable in case of redemption, which amount may vary under different conditions and at different redemption dates;
(vi) Whether that series shall be entitled to the benefit of a sinking fund to be applied to the purchase or redemption of shares of that series and, if so, the terms and amounts of such sinking funds;
(vii) The rights of the shares of that series to the benefit of conditions and restrictions upon the creation of indebtedness of the Corporation or any subsidiary, upon the issuance of any additional stock (including additional shares of such series or of any other series) and upon the payment of dividends or the making of other distributions on, and the purchase, redemption or other acquisition by the Corporation or any subsidiary of, any outstanding stock of the Corporation;
(viii) The right of the shares of that series in the event of any voluntary or involuntary liquidation, dissolution or winding up of the Corporation and whether such rights shall be in preference to, or in other relation to, the comparable rights or any other class or classes or series of stock; and
(ix) Any other relative, participating, optional or other special rights, qualifications, limitations or restrictions of that series.
(b) Issuance. Except as otherwise provided in this Certificate of Incorporation, the Board of Directors shall have the authority to authorize the issuance, from time to time without any vote or other action by the stockholders, of any or all shares of the Preferred Stock of any series at any time authorized, and any securities convertible or exchangeable for any such shares, and any options, rights or warrants to purchase or acquire any such shares, In each case to such persons and on such terms (including dividend or distribution on or with respect to, or in connection with a split or combination of, the outstanding shares of the Preferred Stock) as the Board of Directors from time to time in its discretion lawfully may determine; provided, however, that the consideration for the issuance of shares of the Preferred Stock having par value (unless issued as such a dividend or distribution or in connection with such a split or combination) shall not be less than par value. Shares so issued shall be fully paid, and the holders of such stock shall not be liable for any further assessment thereon.
(c) Certificate of Designations. Unless no longer required by the DGCL, before the Corporation shall issue any shares of the Preferred Stock of any series authorized as hereinbefore provided, the Corporation shall file a Certificate of Designations in accordance with the DGCL.
ARTICLE V
Section 5.1 General Provisions. The business and affairs of the Corporation shall be managed under the direction of the Board of Directors consisting of not less than three (3) nor more than twenty (20) persons. The exact number of Directors within the minimum and maximum limitations specified in the preceding sentence shall be fixed from time to time by, or in the manner provided in, the Bylaws of the Corporation, and may be increased or decreased as therein provided.
Section 5.2 Directors Appointed by a Specific Class of Stockholders. To the extent that any holders of any class or series of stock other than Common Stock issued by the Corporation shall have the separate right, voting as a class or series, to elect Directors, the Directors elected by such class or series shall be deemed to constitute an additional class of Directors and shall have a term of office for one year or such other period as may be designated by the provisions of such class or series providing such separate voting right to the holders of such class or series of stock.
Section 5.3 Newly Created Directorships and Vacancies. Subject to the rights of the holders of any series of Preferred Stock then outstanding, newly created directorships resulting from any increase in the authorized number of Directors, and any vacancies on the Board of Directors resulting from death, resignation, retirement, disqualification, removal from office or other cause, shall be filled by the affirmative vote of a majority of the remaining Directors then in office, even though less than a quorum of the Board of Directors, or by a sole remaining Director. Any Director elected in accordance with the preceding sentence of this Section 5.3 shall hold office for me remainder of the full term of the Directors whose vacancy is so filled. No decrease in the number of Directors constituting the Board of Directors shall shorten the term of any incumbent Director.
Section 5.4 Continuance in Office. Notwithstanding anything herein to the contrary, any director whose term of office has expired shall continue to hold office until his or her successor is duly elected and qualified.
Section 5.5 Nominations. Advance notice of nominations for the election of Directors shall be given in the manner and to the extent provided in the Bylaws of the Corporation.
Section 5.6 Ballot. Directors of the Corporation need not be elected by ballot unless required by the Bylaws.
ARTICLE VI
In furtherance and not in limitation of the powers conferred upon it by law, the Board of Directors is expressly authorized:
Section 6.1 To adopt, repeal, alter or amend the Bylaws of the Corporation by a vote of a majority of the entire Board of Directors.
Section 6.2 To authorize and cause to be executed mortgages and liens upon the real and personal property of the Corporation.
Section 6.3 To set apart, out of any of the funds of the Corporation available for dividends, a reserve or reserves for any proper purpose and to abolish any such reserve in the manner in which it was created.
Section 6.4 By a majority of the whole Board of Directors, to designate one or more committees, each committee to consist of one or more of the Directors of the Corporation. The Board of Directors may designate one or more Directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee. The Bylaws may provide that, in the absence or disqualification of a member of a committee, the member or members thereof present at any meeting and not disqualified from voting, whether or not he or they constitute a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in the place of any such absent or disqualified member. Any such committee, to the extent provided in the resolution of the Board of Directors, or in the Bylaws of the Corporation, shall have and may exercise all the powers and authority of the Board of Directors in the management of the business and affairs of the Corporation, and may authorize the seal of the Corporation to be affixed to all papers which may require it; but no such committee shall have the power or authority in reference to amending the Certificate of Incorporation, adopting an agreement of merger or consolidation, recommending to the stockholders the sale, lease or exchange of all or substantially all of the Corporation’s property and assets, recommending to the stockholders a dissolution of the Corporation or a revocation of a dissolution, or amending the Bylaws of the Corporation; and, unless the resolution or Bylaws expressly so provide, no such committee shall have the power or authority to declare a dividend or to authorize the issuance of stock.
Section 6.5 When and as authorized by the stockholders in accordance with statute, to sell, lease or exchange all or substantially all of the property and assets of the Corporation, including its goodwill and its corporate franchises, upon such terms and conditions and for such consideration, which may consist in whole or in part of money or property, including shares of stock in and/or other securities of any other corporation or corporations, as the Board of Directors shall deem expedient and for the best interests of the Corporation.
ARTICLE VII
The Corporation is to have perpetual existence.
ARTICLE VIII
Section 8.1 Except as provided in Section 8.2 of this Article VIII, any action required or permitted to be taken by the stockholders of the Corporation must be effected at a duly called annual or special meeting of the stockholders of the Corporation and may not be effected by any consent in writing by such stockholders. Advance notice of items of business to be considered at any meeting of the stockholders shall be given in the manner and to the extent provided in the Bylaws of the Corporation.
Section 8.2 Notwithstanding the foregoing, this Article VIII shall not apply to the Corporation if it does not have a class of voting stock that is either (i) listed on a national securities exchange, (ii) authorized for quotation on an inter dealer quotation system of the registered national securities association, or (iii) held of record by more than two thousand (2,000) stockholders.
ARTICLE IX
Section 9.1 Limitation of Liability of Directors. A Director of the Corporation shall not be personally liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duly as a Director, except for liability (i) for any breach of the Director’s duty of loyalty to the Corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) under Section 174 of the DGCL, or (iv) for any transaction from which the Director derived an improper personal benefit.
If the DGCL is amended after the date hereof to authorized action by corporations organized pursuant to the DGCL to further eliminate or limit the personal liability of directors, then the liability of a Director of the Corporation shall be eliminated or limited to the fullest extent permitted by the DGCL, as amended.
Section 9.2 Indemnification of Directors.
(a) Each person who was or is made a party to, or is threatened to be made a party to, or is involved in, any threatened, pending or completed action, suit or proceeding, whether formal or informal, whether of a civil, criminal, administrative or investigative nature (hereinafter a “proceeding”), by reason of the fact that he or she, or a person of whom he or she is the legal representative, is or was a Director of the Corporation, whether the basis of such proceeding is an alleged action or inaction in an official capacity or in any other capacity while serving as a Director, shall be indemnified and held harmless by the Corporation to the fullest extent permissible under Delaware law, as the same exists or may hereafter exist in the future (but, in the case of any future change, only to the extent that such change permits the Corporation to provide broader indemnification rights than the law permitted prior to such change), against all costs, charges, expenses, liabilities and losses (including, without limitation, attorneys’ fees, judgments, fines, Employee Retirement Income Security Act of 1974 (“ERISA”) excise taxes, or penalties and amounts paid or to be paid in settlement) reasonably incurred or suffered by such person in connection therewith, and such indemnification shall continue as to a person who has ceased to be a Director and shall inure to the benefit of his or her heirs, executors and administrators.
(b) The Corporation shall pay expenses actually incurred in connection with any proceeding in advance of its final disposition; provided, however, that if Delaware law then requires, the payment of such expenses incurred in advance of the final disposition of a proceeding shall be made only upon delivery to the Corporation of an undertaking, by or on behalf of such Director or officer, to repay all amounts so advanced if it shall ultimately be determined that such Director or officer is not entitled to be indemnified.
(c) If a claim under subsection 9.2(a) hereof is not paid in full by the Corporation within thirty (30) days after a written claim has been received by the Corporation, the claimant may at any time thereafter bring suit against the Corporation to recover the unpaid amount of the claim and, if successful in whole or in part, the claimant shall be entitled to be paid also the expense of prosecuting such claim. Neither the failure of the Corporation (including its Board of Directors, independent legal counsel or its stockholders) to have made a determination that indemnification of the claimant is permissible in the circumstances because the claimant has met the applicable standard of conduct, if any, nor an actual determination by the Corporation (including its Board of Directors, independent legal counsel or its stockholders) that the claimant has not met the standard of conduct, shall be a defense to the action or create a presumption that the claimant has not met the standard of conduct.
Section 9.3 Indemnification of Officers, Employees and Agents. The Corporation may provide indemnification to employees and agents of the Corporation to the fullest extent permissible under Delaware law.
Section 9.4 Expenses as a Witness. To the extent that any Director, officer, employee or agent of the Corporation is, by reason of such position, or position with another entity at the request of the Corporation, a witness in any action, suit or proceeding, he or she shall be indemnified against all costs and expenses actually and reasonably incurred by him or her on his or her behalf in connection therewith,
Section 9.5 Insurance. The Corporation may maintain insurance, at its expense, to protect itself and any Director, officer, employee or agent of the Corporation or another corporation, partnership, joint venture, trust or other enterprise against any such expense, liability or loss, whether or not the Corporation would have the power to indemnify such person against such expense, liability or loss under Delaware law.
Section 9.6 Indemnity Agreements. The Corporation may enter into agreements with any Director, officer, employee or agent of the Corporation providing for indemnification to the fullest extent permissible under Delaware law.
Section 9.7 Separability. Each and every paragraph, sentence, term and provision of this Article IX is separate and distinct so that if any paragraph, sentence, term or provision hereof shall be held to be invalid or unenforceable for any reason, such invalidity or unenforceability shall not affect the validity or enforceability of any other paragraph, sentence, term or provision hereof. To the extent required, any paragraph, sentence, term or provision of this Article IX may be modified by a court of competent jurisdiction to preserve its validity and to provide the claimant with, subject to the limitations set forth in this Article IX and any agreement between the Corporation and claimant, the broadest possible indemnification permitted under applicable law.
Section 9.8 Contract Right. Each of the rights conferred on Directors of the Corporation by Sections 9.1, 9.2 and 9.4 of this Article IX, and on officers, employees or agents of the Corporation by Section 9.4 of this Article, shall be a contract right, and any repeal or amendment of the provisions of this Article shall not adversely affect any right hereunder of any person existing at the time of such repeal or amendment with respect to any act or omission occurring prior to the time of such repeal or amendment, and, further, shall not apply to any proceeding, irrespective of when the proceeding is initiated, arising from the service of such person prior to such repeal or amendment.
Section 9.9 Nonexclusivity. The rights conferred in this Article shall not be exclusive of any other rights that any person may have or hereafter acquire under any statute, Bylaw, agreement, vote of stockholders or disinterested Directors or otherwise.
ARTICLE X
Whenever a compromise or arrangement is proposed between the Corporation and its creditors or any class of them and/or between the Corporation and its stockholders or any class of them, any court of equitable jurisdiction within the State of Delaware may, on the application in a summary way of the Corporation or of any creditor or stockholder thereof or on the application of any receiver or receivers appointed for the Corporation under the provisions of Section 291 of Title 8 of the Delaware Code or on the application of trustees in dissolution of any receiver or receivers appointed for the Corporation under the provisions of Section 279 of Title 8 of the Delaware Code order a meeting of the creditors or class of creditors, and/or of the stockholders or class of stockholders of the Corporation, as the case may be, to be summoned in such manner as the said court directs. If a majority in number representing three-fourths in value of the creditors or class of creditors, and/or of the stockholders or class of stockholders of the Corporation, as the case may be, agree to any compromise or arrangement, and to any reorganization of the Corporation as a consequence of such compromise or arrangement, the said compromise or arrangement and the said reorganization shall, if sanctioned by the court to which the said, application has been made, be binding on all the creditors or class of creditors, and/or on all the stockholders or class of stockholders, of the Corporation, as the case may be, and also on the Corporation.
ARTICLE XI
When considering a merger, consolidation, business combination (as defined in Section 203 of the DGCL) or similar transaction, the Board of Directors, committees of the Board of Directors, Individual Directors and individual officers may, in considering the best interest of the Corporation and its stockholders, consider the effects of any such transaction upon the employees, customer and suppliers of the Corporation, and upon the communities in which the offices of the Corporation are located, to the extent permitted by Delaware law.
ARTICLE XII
The Corporation reserves the right to amend, alter or repeal any provision contained in this Certificate of Incorporation, in the manner now or hereafter prescribed by statute, and all rights conferred upon stockholders herein are subject to this reservation.
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: October 31, 2012
/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.
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: October 31, 2012
/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
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 September 30, 2012, 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: October 31, 2012 | /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.
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 September 30, 2012, 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: October 31, 2012 | /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.
Financial Assets And Liabilities Carried At Fair Value On Nonrecurring Basis (Detail) (Fair Value Measurements Nonrecurring [Member], USD $)
In Thousands, unless otherwise specified |
Sep. 30, 2012
|
Dec. 31, 2011
|
---|---|---|
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Impaired loans | $ 34,825 | $ 33,072 |
Other real estate owned | 9,834 | 12,275 |
Total assets at fair value | 44,659 | 45,347 |
Fair Value Inputs Level 3 [Member]
|
||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Impaired loans | 34,825 | 33,072 |
Other real estate owned | 9,834 | 12,275 |
Total assets at fair value | $ 44,659 | $ 45,347 |
Analysis of Allowance For Loan Losses By Portfolio Segment (Detail) (USD $)
In Thousands, unless otherwise specified |
3 Months Ended | 9 Months Ended | |||
---|---|---|---|---|---|
Sep. 30, 2012
|
Sep. 30, 2011
|
Sep. 30, 2012
|
Sep. 30, 2011
|
Dec. 31, 2011
|
|
Allowance for loan losses: | |||||
Beginning Balance | $ 23,239 | $ 19,516 | $ 22,030 | $ 18,077 | |
Chargeoffs | (474) | (814) | (4,851) | (3,339) | |
Recoveries | 654 | 24 | 774 | 263 | |
Provision | 1,185 | 2,740 | 6,651 | 6,465 | |
Ending Balance | 24,604 | 21,466 | 24,604 | 21,466 | |
Allowance for loan losses: | 24,604 | 21,466 | 24,604 | 21,466 | |
Individually Evaluated for Impairment | 3,925 | 3,925 | 4,181 | ||
Collectively Evaluated for Impairment | 20,679 | 20,679 | 17,849 | ||
Ending Balance | 2,161,130 | 2,161,130 | 1,830,742 | ||
Individually Evaluated for Impairment | 38,750 | 38,750 | 37,253 | ||
Collectively Evaluated for Impairment | 2,122,380 | 2,122,380 | 1,793,489 | ||
Commercial Financial And Agricultural Financing Receivable [Member]
|
|||||
Allowance for loan losses: | |||||
Beginning Balance | 6,511 | 5,822 | 6,627 | 5,348 | |
Chargeoffs | 349 | 37 | (898) | (897) | |
Recoveries | 24 | 12 | (124) | (12) | |
Provision | 1,090 | 464 | (1,423) | (1,798) | |
Ending Balance | 7,276 | 6,261 | 7,276 | 6,261 | |
Allowance for loan losses: | 7,276 | 6,261 | 7,276 | 6,261 | |
Individually Evaluated for Impairment | 714 | 714 | 1,382 | ||
Collectively Evaluated for Impairment | 6,562 | 6,562 | 5,245 | ||
Ending Balance | 910,220 | 910,220 | 799,464 | ||
Individually Evaluated for Impairment | 4,063 | 4,063 | 5,578 | ||
Collectively Evaluated for Impairment | 906,157 | 906,157 | 793,886 | ||
Commercial Real Estate Construction Financing Receivable [Member]
|
|||||
Allowance for loan losses: | |||||
Beginning Balance | 7,582 | 6,468 | 6,542 | 6,373 | |
Chargeoffs | (16) | (678) | (2,935) | (1,999) | |
Recoveries | 47 | 10 | 55 | 174 | |
Provision | (1,560) | 479 | 2,391 | 1,731 | |
Ending Balance | 6,053 | 6,279 | 6,053 | 6,279 | |
Allowance for loan losses: | 6,053 | 6,279 | 6,053 | 6,279 | |
Individually Evaluated for Impairment | 1,177 | 1,177 | 1,533 | ||
Collectively Evaluated for Impairment | 4,876 | 4,876 | 5,009 | ||
Ending Balance | 153,351 | 153,351 | 151,218 | ||
Individually Evaluated for Impairment | 16,006 | 16,006 | 16,262 | ||
Collectively Evaluated for Impairment | 137,345 | 137,345 | 134,956 | ||
Residential Real Estate Mortgage Loans [Member]
|
|||||
Allowance for loan losses: | |||||
Beginning Balance | 3,640 | 3,187 | 3,295 | 2,443 | |
Chargeoffs | (30) | (88) | (311) | (103) | |
Recoveries | 582 | (1) | (588) | (2) | |
Provision | 615 | (964) | (1,235) | (1,722) | |
Ending Balance | 4,807 | 4,064 | 4,807 | 4,064 | |
Allowance for loan losses: | 4,807 | 4,064 | 4,807 | 4,064 | |
Individually Evaluated for Impairment | 1,953 | 1,953 | 941 | ||
Collectively Evaluated for Impairment | 2,854 | 2,854 | 2,354 | ||
Ending Balance | 1,055,087 | 1,055,087 | 839,034 | ||
Individually Evaluated for Impairment | 18,353 | 18,353 | 14,866 | ||
Collectively Evaluated for Impairment | 1,036,734 | 1,036,734 | 824,168 | ||
Consumer Portfolio Segment [Member]
|
|||||
Allowance for loan losses: | |||||
Beginning Balance | 285 | 551 | 531 | 749 | |
Chargeoffs | (79) | (11) | (707) | (340) | |
Recoveries | 1 | 1 | 7 | 75 | |
Provision | 96 | 482 | 472 | 539 | |
Ending Balance | 303 | 1,023 | 303 | 1,023 | |
Allowance for loan losses: | 303 | 1,023 | 303 | 1,023 | |
Individually Evaluated for Impairment | 81 | 81 | 325 | ||
Collectively Evaluated for Impairment | 222 | 222 | 206 | ||
Ending Balance | 42,472 | 42,472 | 41,026 | ||
Individually Evaluated for Impairment | 328 | 328 | 547 | ||
Collectively Evaluated for Impairment | 42,144 | 42,144 | 40,479 | ||
Unallocated Financing Receivables [Member]
|
|||||
Allowance for loan losses: | |||||
Beginning Balance | 5,221 | 3,488 | 5,035 | 3,164 | |
Chargeoffs | 0 | 0 | 0 | 0 | |
Recoveries | 0 | 0 | 0 | 0 | |
Provision | 944 | 351 | 1,130 | 675 | |
Ending Balance | 6,165 | 3,839 | 6,165 | 3,839 | |
Allowance for loan losses: | 6,165 | 3,839 | 6,165 | 3,839 | |
Individually Evaluated for Impairment | 0 | 0 | 0 | ||
Collectively Evaluated for Impairment | 6,165 | 6,165 | 5,035 | ||
Ending Balance | 0 | 0 | 0 | ||
Individually Evaluated for Impairment | 0 | 0 | 0 | ||
Collectively Evaluated for Impairment | $ 0 | $ 0 | $ 0 |