ServisFirst Bancshares, Inc. Announces Results for Fourth Quarter of 2017

Birmingham, Ala., Jan. 22, 2018 (GLOBE NEWSWIRE) -- ServisFirst Bancshares, Inc. (NASDAQ:SFBS), today announced earnings and operating results for the quarter and year ended December 31, 2017.

Fourth Quarter 2017 Highlights:

  • Diluted EPS increased 13.2% from $1.52 to $1.72 year over year, while core diluted EPS increased 17.1% from $1.52 to $1.78
  • Additional tax provision from the revaluation of net deferred tax assets resulting from Tax Cuts and Jobs Act reduced diluted EPS by $0.06 in the fourth quarter of 2017
  • Loans and deposits increased 19% and 12%, respectively, year over year
  • Loans and deposits increased 16% and 20%, respectively, for the fourth quarter on an annualized basis

Tom Broughton, President and CEO, said, “We are pleased to report a year of strong growth in net income and loan and deposit growth. Our business model continues to resonate with our clients because of its focus on service.” Bud Foshee, CFO, stated, “We believe we took advantage of tax law changes to the maximum advantage for our stockholders in the fourth quarter of 2017. We also continued our cost control efforts, evidenced by a consistently low efficiency ratio.”

FINANCIAL SUMMARY (UNAUDITED)
(in Thousands except share and per share amounts)
Period Ending
December 31, 2017
Period Ending
September 30, 2017
% Change
From Period
Ending
September 30, 2017
to Period
Ending
December 31, 2017
Period Ending
December 31, 2016
% Change
From Period
Ending
December 31, 2016
to Period
Ending
December 31, 2017
QUARTERLY OPERATING RESULTS
Net Income $21,150 $25,259 (16)% $21,738 (3)%
Net Income Available to Common Stockholders $21,119 $25,259 (16)% $21,714 (3)%
Diluted Earnings Per Share $0.39 $0.47 (17)% $0.40 (3)%
Return on Average Assets 1.20% 1.55% 1.39%
Return on Average Common Stockholders' Equity 13.97% 17.28% 16.71%
Average Diluted Shares Outstanding 54,161,788 54,099,672 53,961,160
Core Net Income* $24,424 $25,259 (3)% $21,738 12%
Core Net Income Available to Common Stockholders* $24,393 $25,259 (3)% $21,714 12%
Core Diluted Earnings Per Share* $0.45 $0.47 (4)% $0.40 13%
Core Return on Average Assets* 1.39% 1.55% 1.39%
Core Return on Average Common Stockholders' Equity* 16.13% 17.28% 16.71%
YEAR-TO-DATE OPERATING RESULTS
Net Income $93,092 $81,479 14%
Net Income Available to Common Stockholders $93,030 $81,432 14%
Diluted Earnings Per Share $1.72 $1.52 13%
Return on Average Assets 1.43% 1.42%
Return on Average Common Stockholders' Equity 16.37% 16.63%
Average Diluted Shares Outstanding 54,123,957 53,608,372
Core Net Income* $96,366 $81,479 18%
Core Net Income Available to Common Stockholders* $96,304 $81,432 18%
Core Diluted Earnings Per Share* $1.78 $1.52 17%
Core Return on Average Assets* 1.48% 1.42%
Core Return on Average Common Stockholders' Equity* 16.95% 16.63%
BALANCE SHEET
Total Assets $7,082,384 $6,712,103 6% $6,370,448 11%
Loans 5,851,261 5,628,765 4% 4,911,770 19%
Non-interest-bearing Demand Deposits 1,440,326 1,405,965 2% 1,281,605 12%
Total Deposits 6,091,674 5,796,901 5% 5,420,311 12%
Stockholders' Equity 607,604 590,213 3% 522,889 16%

* Core measures exclude non-routine expenses during the comparative periods presented in this press release as more fully described in “GAAP Reconciliation and Management Explanation of Non-GAAP Financial Measures” below.

DETAILED FINANCIALS

ServisFirst Bancshares, Inc. reported net income $21.2 million and net income available to common stockholders of $21.1 million for the quarter ended December 31, 2017, compared to net income and net income available to common stockholders of $21.7 million for the same quarter in 2016. Basic and diluted earnings per common share were $0.40 and $0.39, respectively, for the fourth quarter of 2017, compared to $0.41 and $0.40, respectively, for the fourth quarter of 2016.

In December 2017, we revalued our net deferred tax assets and recorded additional income tax expense of $3.1 million as a result of the reduction in the corporate income tax rate under the recently enacted Tax Cuts and Jobs Act of 2017. We also incurred $347,000 of non-routine expenses associated with moving into our new headquarters building in Birmingham, Alabama. The additional tax provision and non-routine expenses totaled $3.3 million, net of taxes, and are considered non-core components of our earnings in this press release. Excluding such non-core components, core net income and core net income available to common stockholders was $24.4 for the quarter ended December 31, 2017.

Return on average assets was 1.20% and return on average equity was 13.97% for the fourth quarter of 2017, compared to 1.39% and 16.71%, respectively, for the fourth quarter of 2016. Core return on average assets was 1.39% and core return on average equity was 16.13% for the fourth quarter of 2017.

Net interest income was $61.4 million for the fourth quarter of 2017, compared to $58.4 million for the third quarter of 2017 and $49.1 million for the fourth quarter of 2016. The net interest margin in the fourth quarter of 2017 was 3.66%, a decrease of 11 basis points from the third quarter of 2017 and an increase of 36 basis points from the fourth quarter of 2016. The decrease in net interest income on a linked quarter basis is attributable to a $224.5 million increase in excess liquidity and a five basis point increase in average rates paid on deposits.

The Company’s held-to-maturity investment portfolio was transferred to available-for-sale during the fourth quarter of 2017 to provide the Company more flexibility managing its portfolio.

Average loans for the fourth quarter of 2017 were $5.72 billion, an increase of $276.8 million, or 5%, over average loans of $5.44 billion for the third quarter of 2017, and an increase of $1.01 billion, or 22%, over average loans of $4.70 billion for the fourth quarter of 2016.

Average total deposits for the fourth quarter of 2017 were $6.03 billion, an increase of $502.6 million, or 9%, over average total deposits of $5.53 billion for the third quarter of 2017, and an increase of $761.7 million, or 14%, over average total deposits of $5.27 billion for the fourth quarter of 2016.

Non-performing assets to total assets were 0.25% for the fourth quarter of 2017, a decrease of three basis points compared to 0.28% for the third quarter of 2017 and a decrease of nine basis points compared to 0.34% for the fourth quarter of 2016. Net credit charge-offs to average loans for the fourth quarter of 2017 were 0.56%, a 46 basis point increase compared to 0.10% for the third quarter of 2017 and a 47 basis point increase compared to 0.09% for the fourth quarter of 2016. Net credit charge-offs to average loans for the year ended December 31, 2017 were 0.29% compared to 0.11% in 2016. The increase in net credit charge-offs for the fourth quarter and full year of 2017 was primarily attributable to a $5.8 million charge-off on one commercial relationship. Accordingly, we recorded a $9.1 million provision for loan losses in the fourth quarter of 2017 compared to $4.8 million in the third quarter of 2017 and $4.1 million in the fourth quarter of 2016. The allowance for loan losses as a percentage of total loans was 1.02% at December 31, 2017 compared to 1.04% at September 30, 2017 and 1.06% at December 31, 2016. In management’s opinion, the allowance is adequate and was determined by consistent application of ServisFirst Bank’s methodology for calculating its allowance for loan losses.

Non-interest income for the fourth quarter of 2017 was $4.9 million, a decrease of $1.1 million, or 18%, from the fourth quarter of 2016. During the fourth quarter of 2016 we recognized a $1.3 million gain on the sale of fixed assets. Service charges on deposit accounts increased $124,000 while mortgage banking revenue decreased by approximately $150,000 in the fourth quarter of 2017 compared to the fourth quarter of 2016. Credit card income increased approximately $246,000, or 23%, during the fourth quarter of 2017 compared to the fourth quarter of 2016. Purchases on credit cards increased by 36% year over year.

Non-interest expense for the fourth quarter of 2017 decreased $782,000, or 4%, to $21.3 million from $22.0 million in the fourth quarter of 2016, and decreased $242,000, or 1%, on a linked quarter basis. Salary and benefit expense for the fourth quarter of 2017 increased $235,000, or 2%, to $11.4 million from $11.2 million in the fourth quarter of 2016, and decreased $1.0 million, or 8%, on a linked quarter basis. The linked-quarter decrease resulted from a $786,000 reversal of incentive bonuses accrued during the first three quarters of 2017. Equipment and occupancy expense decreased $311,000, or 16%, to $1.6 million for the fourth quarter of 2017 compared to $1.9 million for the fourth quarter of 2016. We accelerated depreciation on our remaining tenant improvements of our previous headquarters building in Birmingham starting at the beginning of 2016 up to June of 2017 in anticipation of our move to our new headquarters building. Professional service expenses decreased by $225,000, or 21%, to $833,000 for the fourth quarter of 2017 compared to $1.1 million for the fourth quarter of 2016, a result of lower legal expenses. Other operating expense for the fourth quarter of 2017 decreased $508,000, or 7%, to $6.2 million from $6.7 million in the fourth quarter of 2016. Included in the fourth quarter of 2016 other operating expense is a $1.2 million write-down of a tax credit investment.

Income tax expense increased $7.6 million to $14.9 million in the fourth quarter of 2017, compared to $7.3 million in the fourth quarter of 2016. We recognized $3.1 million of additional tax expense as a result of revaluing our net deferred tax assets as of December 31, 2017 in connection with the Tax Cuts and Jobs Act passed into law in December 2017. We also recognized a $2.5 million federal tax credit during the fourth quarter of 2016. We recognized excess tax benefits from the exercise and vesting of stock options and restricted stock of $351,000 in the fourth quarter of 2017, compared to $54,000 in the fourth quarter of 2016.

Final financial results and other disclosures will be reported in our Annual Report on Form 10-K for the year ended December 31, 2017, and may differ materially from the results and disclosures in this press release due to, among other things, the completion of final review procedures, the occurrence of subsequent events, or the discovery of additional information.

GAAP Reconciliation and Management Explanation of Non-GAAP Financial Measures

We recorded $3.1 million of additional tax expense as a result of revaluing our net deferred tax assets at December 31, 2017 due to lower corporate income tax rates provided by the Tax Cuts and Jobs Act passed into law in December 2017. We also recorded expenses of $347,000 related to terminating the lease agreement on our previous headquarters building in Birmingham, Alabama and expenses of moving into our new headquarters building. Core financial measures included in this press release are “core net income,” “core net income available to common stockholders,” “core diluted earnings per share,” “core return on average assets,” and “core return on average common stockholders’ equity.” Each of these five core financial measures excludes the impact of the non-routine expenses attributable to our net deferred tax asset revaluation, lease termination and moving expenses, and are all considered non-GAAP financial measures. In addition to these financial measures adjusting for non-routine expenses, this press release contains certain non-GAAP financial measures, including tangible common stockholders’ equity, total tangible assets, tangible book value per share and tangible common equity to total tangible assets, each of which excludes goodwill and core deposit intangibles associated with our acquisition of Metro Bancshares, Inc. in January 2015. We believe these non-GAAP financial measures provide useful information to management and investors that is supplementary to our financial condition, results of operations and cash flows computed in accordance with GAAP; however, we acknowledge that these non-GAAP financial measures have a number of limitations. As such, you should not view these disclosures as a substitute for results determined in accordance with GAAP, and they are not necessarily comparable to non-GAAP financial measures that other companies, including those in our industry, use. The following reconciliation tables provide a more detailed analysis of the non-GAAP financial measures as of and for the comparative periods presented in this press release. Dollars are in thousands, except share and per share data.

Three Months Ended
December 31, 2017
Year Ended
December 31, 2017
Return on average assets - GAAP 1.20% 1.43%
Net income - GAAP $ 21,150 $ 93,092
Adjustments:
Revaluation of net deferred tax assets 3,059 3,059
Lease termination and moving expenses 347 347
Tax (benefit) of adjustments (132) (132)
Core net income - non-GAAP* $ 24,424 $ 96,366
Average assets $ 6,988,731 $ 6,495,067
Core return on average assets - non-GAAP* 1.39 % 1.48 %
Return on average common stockholders' equity - GAAP 13.97% 16.37%
Net income available to common stockholders - GAAP $ 21,119 $ 93,030
Adjustments:
Revaluation of net deferred tax assets 3,059 3,059
Lease termination and moving expenses 347 347
Tax (benefit) of adjustments (132) (132)
Core net income available to common stockholders - non-GAAP* $ 24,393 $ 96,304
Average common stockholders' equity $ 599,947 $ 568,228
Core return on average common stockholders' equity - non-GAAP* 16.13 % 16.95 %
Diluted earnings per share - GAAP $0.39 $1.72
Weighted average shares outstanding, diluted - GAAP 54,161,788 54,123,957
Core diluted earnings per share - non-GAAP* $0.45 $1.78


At December 31, 2017 At September 30, 2017 At June 30, 2017 At March 31, 2017 At December 31, 2016
Book value per share - GAAP $11.47 $11.14 $10.72 $10.32 $9.93
Total common stockholders' equity - GAAP 607,604 590,213 567,086 545,148 522,889
Adjustments:
Adjusted for goodwill and core deposit intangible asset 14,719 14,787 14,855 14,924 14,996
Tangible common stockholders' equity - non-GAAP $592,885 $575,426 $552,231 $530,224 $507,893
Tangible book value per share - non-GAAP $11.19 $10.86 $10.44 $10.04 $9.65
Stockholders' equity to total assets - GAAP 8.58% 8.79% 8.96% 8.60% 8.21%
Total assets - GAAP $7,082,384 $6,712,103 $6,329,599 $6,336,165 $6,370,448
Adjustments:
Adjusted for goodwill and core deposit intangible asset 14,719 14,787 14,855 14,924 14,996
Total tangible assets - non-GAAP $7,067,665 $6,697,316 $6,314,744 $6,321,241 $6,355,452
Tangible common equity to total tangible assets - non-GAAP 8.39% 8.59% 8.75% 8.39% 7.99%

* Core measures exclude non-routine expenses during the comparative periods presented in this press release as more fully described in “GAAP Reconciliation and Management Explanation on Non-GAAP Financial Measures” above.

Conference Call

ServisFirst Bancshares, Inc. will host a live audio webcast to discuss earnings and results on Monday, January 22, 2018 beginning at 5:15 p.m. ET. You may access the webcast at https://services.choruscall.com/links/sfbs180122.html. The webcast will be available until February 2, 2018.

About ServisFirst Bancshares, Inc.

ServisFirst Bancshares, Inc. is a bank holding company based in Birmingham, Alabama. Through its subsidiary ServisFirst Bank, ServisFirst Bancshares, Inc. provides business and personal financial services from locations in Birmingham, Huntsville, Montgomery, Mobile and Dothan, Alabama, Pensacola and Tampa Bay, Florida, Atlanta, Georgia, Charleston, South Carolina and Nashville, Tennessee.

ServisFirst Bancshares, Inc. files periodic reports with the U.S. Securities and Exchange Commission (SEC). Copies of its filings may be obtained through the SEC’s website at www.sec.gov or at www.servisfirstbancshares.com.

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

More information about ServisFirst Bancshares, Inc. may be obtained over the Internet at www.servisfirstbancshares.com or by calling (205) 949-0302.

Contact: ServisFirst Bank
Davis Mange (205) 949-3420
dmange@servisfirstbank.com

SELECTED FINANCIAL HIGHLIGHTS (UNAUDITED)
(In thousands except share and per share data)
4th Quarter 2017 3rd Quarter 2017 2nd Quarter 2017 1st Quarter 2017 4th Quarter 2016
CONSOLIDATED STATEMENT OF INCOME
Interest income $72,060 $67,641 $63,538 $59,517 $56,200
Interest expense 10,652 9,245 7,971 7,465 7,091
Net interest income 61,408 58,396 55,567 52,052 49,109
Provision for loan losses 9,055 4,803 4,381 4,986 4,075
Net interest income after provision for loan losses 52,353 53,593 51,186 47,066 45,034
Non-interest income 4,905 4,790 4,805 4,546 6,039
Non-interest expense 21,255 21,497 21,875 21,267 22,037
Income before income tax 36,003 36,886 34,116 30,345 29,036
Provision for income tax 14,853 11,627 9,952 7,826 7,298
Net income 21,150 25,259 24,164 22,519 21,738
Preferred stock dividends 31 - 31 - 24
Net income available to common stockholders $21,119 $25,259 $24,133 $22,519 $21,714
Earnings per share - basic $0.40 $0.48 $0.46 $0.43 $0.41
Earnings per share - diluted $0.39 $0.47 $0.45 $0.42 $0.40
Average diluted shares outstanding 54,161,788 54,099,672 54,100,604 54,133,722 53,961,160
CONSOLIDATED BALANCE SHEET DATA
Total assets $7,082,384 $6,712,103 $6,329,599 $6,336,165 $6,370,448
Loans 5,851,261 5,628,765 5,343,688 5,151,984 4,911,770
Debt securities 538,330 522,724 518,065 526,023 484,939
Non-interest-bearing demand deposits 1,440,326 1,405,965 1,373,353 1,292,440 1,281,605
Total deposits 6,091,674 5,796,901 5,394,810 5,361,532 5,420,311
Borrowings 64,832 54,975 55,075 55,169 55,262
Stockholders' equity $607,604 $590,213 $567,086 $545,148 $522,889
Shares outstanding 52,992,586 52,970,310 52,909,362 52,812,396 52,636,896
Book value per share $11.47 $11.14 $10.72 $10.32 $9.93
Tangible book value per share (1) $11.19 $10.86 $10.44 $10.04 $9.65
SELECTED FINANCIAL RATIOS
Net interest margin 3.66% 3.77% 3.77% 3.53% 3.30%
Return on average assets 1.20% 1.55% 1.55% 1.45% 1.39%
Return on average common stockholders' equity 13.97% 17.28% 17.36% 17.09% 16.71%
Efficiency ratio 32.05% 34.02% 36.23% 37.58% 39.96%
Non-interest expense to average earning assets 1.26% 1.38% 1.47% 1.43% 1.46%
CAPITAL RATIOS (2)
Common equity tier 1 capital to risk-weighted assets 9.51% 9.60% 9.72% 9.67% 9.78%
Tier 1 capital to risk-weighted assets 9.52% 9.61% 9.73% 9.68% 9.78%
Total capital to risk-weighted assets 11.52% 11.51% 11.67% 11.66% 11.84%
Tier 1 capital to average assets 8.51% 8.91% 8.88% 8.46% 8.22%
Tangible common equity to total tangible assets (1) 8.39% 8.59% 8.75% 8.39% 7.99%
(1) See "GAAP Reconciliation and Management Explanation of Non-GAAP Financial Measures" for a discussion of these Non-GAAP financial measures.
(2) Regulatory capital ratios for most recent period are preliminary.


CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(Dollars in thousands)
December 31, 2017 December 31, 2016 % Change
ASSETS
Cash and due from banks $86,213 $56,855 52%
Interest-bearing balances due from depository institutions 151,849 566,707 (73)%
Federal funds sold 239,524 160,435 49%
Cash and cash equivalents 477,586 783,997 (39)%
Available for sale debt securities, at fair value 538,080 422,375 27%
Held to maturity debt securities (fair value of $250 and $63,302 at
December 31, 2017 and 2016, respectively) 250 62,564 (100)%
Restricted equity securities 1,034 1,024 1%
Mortgage loans held for sale 4,459 4,675 (5)%
Loans 5,851,261 4,911,770 19%
Less allowance for loan losses (59,406) (51,893) 14%
Loans, net 5,791,855 4,859,877 19%
Premises and equipment, net 58,900 40,314 46%
Goodwill and other identifiable intangible assets 14,719 14,996 (2)%
Other assets 195,501 180,626 8%
Total assets $7,082,384 $6,370,448 11%
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposits:
Non-interest-bearing $1,440,326 $1,281,605 12%
Interest-bearing 4,651,348 4,138,706 12%
Total deposits 6,091,674 5,420,311 12%
Federal funds purchased 301,797 355,944 (15)%
Other borrowings 64,832 55,262 17%
Other liabilities 16,477 16,042 3%
Total liabilities 6,474,780 5,847,559 11%
Stockholders' equity:
Preferred stock, Series A Senior Non-Cumulative Perpetual, par value $0.001
(liquidation preference $1,000), net of discount; no shares authorized,
no shares issued or outstanding at December 31, 2017 and 2016 - - -%
Preferred stock, par value $0.001 per share; 1,000,000 shares authorized and
undesignated at December 31, 2017 and 2016 - - -%
Common stock, par value $0.001 per share; 100,000,000 shares authorized;
52,992,586 shares issued and outstanding at December 31, 2017 and
52,636,896 shares issued and outstanding at December 31, 2016 53 53 -%
Additional paid-in capital 217,693 215,932 1%
Retained earnings 389,597 307,151 27%
Accumulated other comprehensive income (241) (624) (61)%
Noncontrolling interest 502 377 33%
Total stockholders' equity 607,604 522,889 16%
Total liabilities and stockholders' equity $7,082,384 $6,370,448 11%


CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(In thousands except per share data)
Three Months Ended December 31, Year Ended December 31,
2017 2016 2017 2016
Interest income:
Interest and fees on loans $67,357 $52,533 $246,682 $200,463
Taxable securities 2,468 1,604 9,117 5,343
Nontaxable securities 702 785 2,948 3,300
Federal funds sold 508 377 1,693 1,007
Other interest and dividends 1,025 901 2,316 2,789
Total interest income 72,060 56,200 262,756 212,902
Interest expense:
Deposits 8,954 5,817 28,831 20,169
Borrowed funds 1,698 1,274 6,502 5,636
Total interest expense 10,652 7,091 35,333 25,805
Net interest income 61,408 49,109 227,423 187,097
Provision for loan losses 9,055 4,075 23,225 13,398
Net interest income after provision for loan losses 52,353 45,034 204,198 173,699
Non-interest income:
Service charges on deposit accounts 1,499 1,375 5,702 5,355
Mortgage banking 894 1,044 3,835 3,725
Credit card income 1,298 1,052 4,815 3,207
Securities gains (losses) - - - (3)
Increase in cash surrender value life insurance 797 745 3,131 2,794
Other operating income 417 1,823 1,563 3,034
Total non-interest income 4,905 6,039 19,046 18,112
Non-interest expense:
Salaries and employee benefits 11,432 11,197 47,604 43,955
Equipment and occupancy expense 1,566 1,877 8,018 7,985
Professional services 833 1,058 3,217 3,977
FDIC and other regulatory assessments 1,030 1,072 3,918 3,400
Other real estate owned expense 160 91 323 759
Other operating expense 6,234 6,742 22,814 20,917
Total non-interest expense 21,255 22,037 85,894 80,993
Income before income tax 36,003 29,036 137,350 110,818
Provision for income tax 14,853 7,298 44,258 29,339
Net income 21,150 21,738 93,092 81,479
Dividends on preferred stock 31 24 62 47
Net income available to common stockholders $21,119 $21,714 $93,030 $81,432
Basic earnings per common share $0.40 $0.41 $1.76 $1.55
Diluted earnings per common share $0.39 $0.40 $1.72 $1.52


LOANS BY TYPE (UNAUDITED)
(In thousands)
4th Quarter 2017 3rd Quarter 2017 2nd Quarter 2017 1st Quarter 2017 4th Quarter 2016
Commercial, financial and agricultural $2,279,366 $2,223,910 $2,123,498 $2,061,503 $1,982,267
Real estate - construction 580,874 467,838 395,398 345,777 335,085
Real estate - mortgage:
Owner-occupied commercial 1,328,666 1,323,383 1,272,659 1,262,578 1,171,719
1-4 family mortgage 603,063 593,180 565,121 554,261 536,805
Other mortgage 997,079 962,690 931,788 872,955 830,683
Subtotal: Real estate - mortgage 2,928,808 2,879,253 2,769,568 2,689,794 2,539,207
Consumer 62,213 57,764 55,224 54,910 55,211
Total loans $5,851,261 $5,628,765 $5,343,688 $5,151,984 $4,911,770


SUMMARY OF LOAN LOSS EXPERIENCE (UNAUDITED)
(Dollars in thousands)
4th Quarter 2017 3rd Quarter 2017 2nd Quarter 2017 1st Quarter 2017 4th Quarter 2016
Allowance for loan losses:
Beginning balance $58,459 $55,059 $ 53,892 $ 51,893 $ 48,933
Loans charged off:
Commercial, financial and agricultural 7,064 924 3,067 2,855 1,059
Real estate - construction - 16 40 - -
Real estate - mortgage 1,134 550 106 266 45
Consumer 137 65 33 75 82
Total charge offs 8,335 1,555 3,246 3,196 1,186
Recoveries:
Commercial, financial and agricultural 64 67 16 190 10
Real estate - construction 126 12 14 16 12
Real estate - mortgage 26 59 2 2 46
Consumer 11 14 - 1 3
Total recoveries 227 152 32 209 71
Net charge-offs 8,108 1,403 3,214 2,987 1,115
Provision for loan losses 9,055 4,803 4,381 4,986 4,075
Ending balance $59,406 $58,459 $55,059 $53,892 $51,893
Allowance for loan losses to total loans 1.02% 1.04% 1.03% 1.05% 1.06%
Allowance for loan losses to total average
loans 1.04% 1.07% 1.05% 1.08% 1.10%
Net charge-offs to total average loans 0.56% 0.10% 0.25% 0.24% 0.09%
Provision for loan losses to total average
loans 0.63% 0.35% 0.34% 0.40% 0.34%
Nonperforming assets:
Nonaccrual loans $10,765 $12,356 $ 9,963 $ 12,084 $ 10,624
Loans 90+ days past due and accruing 60 2,506 1,016 16 6,263
Other real estate owned and
repossessed assets 6,701 3,888 3,891 5,102 4,988
Total $17,526 $18,750 $14,870 $17,202 $21,875
Nonperforming loans to total loans 0.19% 0.26% 0.21% 0.23% 0.34%
Nonperforming assets to total assets 0.25% 0.28% 0.23% 0.27% 0.34%
Nonperforming assets to earning assets 0.25% 0.29% 0.24% 0.28% 0.35%
Reserve for loan losses to nonaccrual loans 551.84% 473.12% 552.63% 445.98% 488.45%
Restructured accruing loans $16,919 $12,700 $ 12,716 $ 536 $ 558
Restructured accruing loans to total loans 0.29% 0.23% 0.24% 0.01% 0.01%
TROUBLED DEBT RESTRUCTURINGS (TDRs) (UNAUDITED)
(In thousands)
4th Quarter 2017 3rd Quarter 2017 2nd Quarter 2017 1st Quarter 2017 4th Quarter 2016
Beginning balance: $16,354 $16,370 $7,269 $7,292 $6,738
Additions 4,233 - 12,716 - -
Removal from TDR - - (535) - -
Net (paydowns) / advances (15) (16) (1,380) (23) 554
Charge-offs - - (1,700) - -
$20,572 $16,354 $16,370 $7,269 $7,292


CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(In thousands except per share data)
4th Quarter 2017 3rd Quarter 2017 2nd Quarter 2017 1st Quarter 2017 4th Quarter 2016
Interest income:
Interest and fees on loans $67,357 $63,857 $59,912 $55,556 $52,533
Taxable securities 2,468 2,288 2,274 2,087 1,604
Nontaxable securities 702 729 752 765 785
Federal funds sold 508 379 287 519 377
Other interest and dividends 1,025 388 313 590 901
Total interest income 72,060 67,641 63,538 59,517 56,200
Interest expense:
Deposits 8,954 7,574 6,321 5,982 5,817
Borrowed funds 1,698 1,671 1,650 1,483 1,274
Total interest expense 10,652 9,245 7,971 7,465 7,091
Net interest income 61,408 58,396 55,567 52,052 49,109
Provision for loan losses 9,055 4,803 4,381 4,986 4,075
Net interest income after provision for loan losses 52,353 53,593 51,186 47,066 45,034
Non-interest income:
Service charges on deposit accounts 1,499 1,467 1,382 1,354 1,375
Mortgage banking 894 978 1,064 899 1,044
Credit card income 1,298 1,149 1,189 1,179 1,052
Increase in cash surrender value life insurance 797 825 785 724 745
Other operating income 417 371 385 390 1,823
Total non-interest income 4,905 4,790 4,805 4,546 6,039
Non-interest expense:
Salaries and employee benefits 11,432 12,428 12,031 11,713 11,197
Equipment and occupancy expense 1,566 1,947 2,265 2,250 1,877
Professional services 833 805 808 771 1,058
FDIC and other regulatory assessments 1,030 810 1,081 997 1,072
Other real estate owned expense 160 31 56 76 91
Other operating expense 6,234 5,476 5,634 5,460 6,742
Total non-interest expense 21,255 21,497 21,875 21,267 22,037
Income before income tax 36,003 36,886 34,116 30,345 29,036
Provision for income tax 14,853 11,627 9,952 7,826 7,298
Net income 21,150 25,259 24,164 22,519 21,738
Dividends on preferred stock 31 - 31 - 24
Net income available to common stockholders $21,119 $25,259 $24,133 $22,519 $21,714
Basic earnings per common share $0.40 $0.48 $0.46 $0.43 $0.41
Diluted earnings per common share $0.39 $0.47 $0.45 $0.42 $0.40


AVERAGE BALANCE SHEETS AND NET INTEREST ANALYSIS (UNAUDITED)
ON A FULLY TAXABLE-EQUIVALENT BASIS
(Dollars in thousands)
4th Quarter 2017 3rd Quarter 2017 2nd Quarter 2017 1st Quarter 2017 4th Quarter 2016
Average Balance Yield /
Rate
Average Balance Yield /
Rate
Average Balance Yield /
Rate
Average Balance Yield /
Rate
Average Balance Yield /
Rate
Assets:
Interest-earning assets:
Loans, net of unearned income (1)
Taxable $5,680,227 4.68% $5,407,109 4.66% $5,192,812 4.60% $4,976,933 4.50% $4,676,565 4.45%
Tax-exempt (2) 36,992 4.95 33,357 5.17 41,143 4.92 27,322 4.72 26,344 4.74
Total loans, net of
unearned income 5,717,219 4.68 5,440,466 4.66 5,233,955 4.60 5,004,255 4.51 4,702,909 4.45
Mortgage loans held for sale 6,199 3.52 4,862 3.51 5,958 3.90 5,637 4.10 6,271 3.36
Debt securities:
Taxable 406,488 2.43 385,431 2.37 389,505 2.34 368,349 2.27 295,608 2.17
Tax-exempt (2) 128,201 3.27 131,478 3.34 133,590 3.38 132,578 3.45 134,748 3.54
Total securities (3) 534,689 2.63 516,909 2.62 523,095 2.60 500,927 2.58 430,356 2.60
Federal funds sold 143,905 1.40 111,175 1.35 98,598 1.17 234,460 0.90 242,211 0.62
Restricted equity securities 1,030 1.93 1,030 3.47 1,030 10.51 1,030 1.57 3,042 8.24
Interest-bearing balances with banks 310,289 1.31 118,510 1.27 109,909 1.04 295,648 0.80 601,143 0.55
Total interest-earning assets $6,713,331 4.29% $6,192,952 4.37% $5,972,545 4.30% $6,041,957 4.03% $5,985,932 3.77%
Non-interest-earning assets:
Cash and due from banks 68,444 65,457 68,894 59,697 55,593
Net premises and equipment 57,320 54,727 49,813 44,739 30,421
Allowance for loan losses, accrued
interest and other assets 149,636 151,786 143,286 138,289 140,721
Total assets $6,988,731 $6,464,922 $6,234,538 $6,284,682 $6,212,667
Interest-bearing liabilities:
Interest-bearing deposits:
Checking $899,334 0.46% $800,437 0.42% $779,916 0.39% $789,273 0.38% $735,115 0.37%
Savings 49,697 0.31 48,313 0.30 48,150 0.30 50,461 0.33 51,845 0.32
Money market 3,065,298 0.80 2,774,061 0.74 2,567,817 0.64 2,694,225 0.58 2,669,513 0.56
Time deposits 576,010 1.16 546,020 1.10 537,220 1.06 530,000 1.02 527,100 1.00
Total interest-bearing deposits 4,590,339 0.77 4,168,831 0.72 3,933,103 0.64 4,063,959 0.60 3,983,573 0.58
Federal funds purchased 271,248 1.37 282,806 1.34 336,344 1.11 359,747 0.86 353,029 0.63
Other borrowings 60,829 4.98 55,034 5.17 55,130 5.22 55,239 5.26 55,315 5.16
Total interest-bearing liabilities $4,922,416 0.86% $4,506,671 0.81% $4,324,577 0.74% $4,478,945 0.68% $4,391,917 0.64%
Non-interest-bearing liabilities:
Non-interest-bearing
demand 1,444,338 1,363,207 1,338,514 1,254,496 1,289,448
Other liabilities 22,030 15,070 13,739 16,809 14,399
Stockholders' equity 599,754 578,626 556,521 535,232 514,245
Unrealized gains on securities and
derivatives 193 1,348 1,187 (800) 2,658
Total liabilities and
stockholders' equity $6,988,731 $6,464,922 $6,234,538 $6,284,682 $6,212,667
Net interest spread 3.43% 3.56% 3.56% 3.35% 3.13%
Net interest margin 3.66% 3.77% 3.77% 3.53% 3.30%
(1)Average loans include loans on which the accrual of interest has been discontinued.
(2)Interest income and yields are presented on a fully taxable equivalent basis using a tax rate of 35%.
(3)Average net unrealized gains or losses on available-for-sale debt securities are excluded from the yield calculation.

Source:ServisFirst Bancshares, Inc.