ServisFirst Bancshares, Inc. 10-Q

ITEM 1. FINANCIAL STATEMENTS     SERVISFIRST BANCSHARES, INC.   CONSOLIDATED BALANCE SHEETS   (In thousands, except share and per share amounts)                           September 30, 2022     December 31, 2021       (Unaudited)       (1)   ASSETS                 Cash and due from banks   $ 249,051     $ 56,934   Interest-bearing balances due from depository institutions     156,959       4,106,790   Federal funds sold     82,316       58,372   Cash and cash equivalents     488,326       4,222,096   Available for sale debt securities, at fair value     665,763       842,570   Held to maturity debt securities (fair value $ 942,282 at September 30, 2022 and $ 466,286 at December 31, 2021)     1,048,840       462,957   Restricted equity securities     7,734       7,311   Mortgage loans held for sale     2,003       1,114   Loans     11,278,614       9,532,934   Less allowance for credit losses     ( 140,967 )     ( 116,660 ) Loans, net     11,137,647       9,416,274   Premises and equipment, net     59,080       60,300   Accrued interest and dividends receivable     39,946       34,831   Deferred tax asset, net     54,599       37,772   Other real estate owned and repossessed assets     1,245       1,208   Bank owned life insurance contracts     286,152       283,074   Goodwill and other identifiable intangible assets     13,615       13,638   Other assets     85,080       65,661   Total assets   $ 13,890,030     $ 15,448,806   LIABILITIES AND STOCKHOLDERS' EQUITY                 Liabilities:                 Deposits:                 Non-interest-bearing demand   $ 3,661,936     $ 4,799,767   Interest-bearing     7,389,979       7,653,069   Total deposits     11,051,915       12,452,836   Federal funds purchased     1,466,322       1,711,777   Other borrowings     64,721       64,706   Accrued interest and dividends payable     14,881       13,619   Other liabilities     49,602       53,853   Total liabilities     12,647,441       14,296,791   Stockholders' equity:                 Preferred stock, par value $ 0.001 per share; 1,000,000 authorized and undesignated at September 30, 2022 and December 31, 2021     -       -   Common stock, par value $ 0.001 per share; 200,000,000 shares authorized, 54,324,007 shares issued and outstanding at September 30, 2022; and 100,000,000 shares authorized, 54,227,060 shares issued and outstanding at December 31, 2021     54       54   Additional paid-in capital     228,738       226,397   Retained earnings     1,057,387       911,008   Accumulated other comprehensive (loss) income     ( 44,090 )     14,056   Total stockholders' equity attributable to ServisFirst Bancshares, Inc.     1,242,089       1,151,515   Noncontrolling interest     500       500   Total stockholders' equity     1,242,589       1,152,015   Total liabilities and stockholders' equity   $ 13,890,030     $ 15,448,806     (1) Derived from audited financial statements.   See Notes to Consolidated Financial Statements.   4       SERVISFIRST BANCSHARES, INC.   CONSOLIDATED STATEMENTS OF INCOME   (In thousands, except per share amounts)   (Unaudited)                                           Three Months Ended     Nine Months Ended       September 30,     September 30,       2022     2021     2022     2021   Interest income:                                 Interest and fees on loans   $ 131,375     $ 96,119     $ 345,767     $ 285,373   Taxable securities     11,089       6,544       29,827       18,666   Nontaxable securities     30       62       110       255   Federal funds sold     632       4       738       11   Other interest and dividends     6,173       1,507       12,600       3,046   Total interest income     149,299       104,236       389,042       307,351   Interest expense:                                 Deposits     13,655       6,581       25,925       20,298   Borrowed funds     9,226       1,335       14,609       3,700   Total interest expense     22,881       7,916       40,534       23,998   Net interest income     126,418       96,320       348,508       283,353   Provision for credit losses     15,603       5,963       30,472       23,066   Net interest income after provision for credit losses     110,815       90,357       318,036       260,287   Noninterest income:                                 Service charges on deposit accounts     1,892       1,727       6,167       5,542   Mortgage banking     784       1,423       1,924       6,869   Credit card income     2,612       2,043       7,656       5,147   Securities (losses) gains     -       -       ( 6,168 )     620   Increase in cash surrender value life insurance     1,637       1,671       4,878       5,012   Other operating income     2,014       1,162       11,936       2,897   Total noninterest income     8,939       8,026       26,393       26,087   Noninterest expenses:                                 Salaries and employee benefits     19,687       17,995       58,722       50,425   Equipment and occupancy expense     3,140       2,996       9,056       8,494   Third party processing and other services     7,213       4,144       19,163       11,506   Professional services     1,036       948       3,355       2,978   FDIC and other regulatory assessments     975       1,630       3,254       4,637   OREO expense     21       123       56       820   Other operating expenses     10,613       6,541       26,118       15,740   Total noninterest expenses     42,685       34,377       119,724       94,600   Income before income taxes     77,069       64,006       224,705       191,774   Provision for income taxes     13,038       11,507       40,925       37,793   Net income     64,031       52,499       183,780       153,981   Preferred stock dividends     -       -       31       31   Net income available to common stockholders   $ 64,031     $ 52,499     $ 183,749     $ 153,950                                     Basic earnings per common share   $ 1.18     $ 0.97     $ 3.38     $ 2.84   Diluted earnings per common share   $ 1.17     $ 0.96     $ 3.37     $ 2.83     See Notes to Consolidated Financial Statements.   5       SERVISFIRST BANCSHARES, INC. AND SUBSIDIARIES   CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME   (In thousands)   (Unaudited)                                           Three Months Ended     Nine Months Ended       September 30,     September 30,       2022     2021     2022     2021   Net income   $ 64,031     $ 52,499     $ 183,780     $ 153,981   Other comprehensive loss, net of tax:                                 Unrealized net holding losses arising during period from securities available for sale, net of tax of $ (5,707) and $ (18,409) for the three and nine months ended September 30, 2022, respectively, and net of tax of $ (1,798) and $ (1,844) for the three and nine months ended September 30, 2021, respectively     ( 21,471 )     ( 6,764 )     ( 62,301 )     ( 6,937 ) Amortization of net unrealized gains on securities transferred from available-for-sale to held-to-maturity, net of tax of $ (70) and $ (320) for three and nine months ended September 30, 2022, respectively, and net of tax of $ (36) for the three and nine months ended September 30, 2021     ( 262 )     ( 136 )     ( 1,208 )     ( 136 ) Reclassification adjustment for securities transferred from available-for-sale to held-to-maturity net of tax of $ 1,480 for the three and nine months ended September 30, 2021     -       5,705       -       5,705   Net losses on sales of securities, net of tax of $ 1,425 for nine months ended September 30, 2022, and net (gain) on call of securities, net of tax of $ (130) for nine months ended September 30, 2021 reclassified from other comprehensive income into net income     -       -       5,363       ( 490 ) Other comprehensive loss, net of tax     ( 21,733 )     ( 1,195 )     ( 58,146 )     ( 1,858 ) Comprehensive income   $ 42,298     $ 51,304     $ 125,634     $ 152,123      See Notes to Consolidated Financial Statements.                       6       SERVISFIRST BANCSHARES, INC.   CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY   (In thousands, except share amounts)(Unaudited)         Three Months Ended September 30,       Common Shares     Preferred Stock     Common Stock     Additional Paid-in Capital     Retained Earnings     Accumulated Other Comprehensive Income (Loss)     Noncontrolling interest     Total Stockholders' Equity   Balance, July 1, 2021     54,201,204     $ -     $ 54     $ 225,127     $ 828,048     $ 19,555     $ 500     $ 1,073,284   Common dividends declared, $ 0.20 per share     -       -       -       -       ( 10,842 )     -       -       ( 10,842 ) Dividends on nonvested restricted stock recognized as compensation expense     -       -       -       -       26       -       -       26   Issue restricted shares pursuant to stock incentives, net of forfeitures     346       -       -       -       -       -       -       -   Issue shares of common stock upon exercise of stock options     5,597       -       -       159       -       -       -       159   1,903 shares of common stock withheld in net settlement upon exercise of stock options     -       -       -       ( 99 )     -       -       -       ( 99 ) Stock-based compensation expense     -       -       -       461       -       -       -       461   Other comprehensive loss, net of tax     -       -       -       -       -       ( 1,195 )     -       ( 1,195 ) Net income     -       -       -       -       52,499       -       -       52,499   Balance, September 30, 2021     54,207,147     $ -     $ 54     $ 225,648     $ 869,731     $ 18,360     $ 500     $ 1,114,293                                                                     Balance, July 1, 2022     54,306,875     $ -     $ 54     $ 227,906     $ 1,005,815     $ ( 22,357 )   $ 500     $ 1,211,918   Common dividends declared, $ 0.23 per share     -       -       -       -       ( 12,494 )     -       -       ( 12,494 ) Dividends on nonvested restricted stock recognized as compensation expense     -       -       -       -       35       -       -       35   Issue restricted shares pursuant to stock incentives, net of forfeitures     1,845       -       -       -       -       -       -       -   Issue shares of common stock upon exercise of stock options     15,287       -       -       218       -       -       -       218   2,213 shares of common stock withheld in net settlement upon exercise of stock options     -       -       -       ( 189 )     -       -       -       ( 189 ) Stock-based compensation expense     -       -       -       803       -       -       -       803   Other comprehensive loss, net of tax     -       -       -       -       -       ( 21,733 )     -       ( 21,733 ) Net income     -       -       -       -       64,031       -       -       64,031   Balance, September 30, 2022     54,324,007     $ -     $ 54     $ 228,738     $ 1,057,387     $ ( 44,090 )   $ 500     $ 1,242,589       7         Nine Months Ended September 30,       Common Shares     Preferred Stock     Common Stock     Additional Paid-in Capital     Retained Earnings     Accumulated Other Comprehensive Income (Loss)     Noncontrolling interest     Total Stockholders' Equity   Balance, January 1, 2021     53,943,751     $ -     $ 54     $ 223,856     $ 748,224     $ 20,218     $ 500     $ 992,852   Common dividends paid, $ 0.40 per share     -       -       -       -       ( 21,678 )     -       -       ( 21,678 ) Common dividends declared, $ 0.20 per share     -       -       -       -       ( 10,842 )     -       -       ( 10,842 ) Preferred dividends paid     -       -       -       -       ( 31 )     -       -       ( 31 ) Dividends on nonvested restricted stock recognized as compensation expense     -       -       -       -       77       -       -       77   Issue restricted shares pursuant to stock incentives, net of forfeitures     57,570       -       -       -       -       -       -       -   Issue shares of common stock upon exercise of stock options     205,826       -       -       3,219       -       -       -       3,219   51,374 shares of common stock withheld in net settlement upon exercise of stock options     -       -       -       ( 2,737 )     -       -       -       ( 2,737 ) Stock-based compensation expense     -       -       -       1,310       -       -       -       1,310   Other comprehensive loss, net of tax     -       -       -       -       -       ( 1,858 )     -       ( 1,858 ) Net income     -       -       -       -       153,981       -       -       153,981   Balance, September 30, 2021     54,207,147     $ -     $ 54     $ 225,648     $ 869,731     $ 18,360     $ 500     $ 1,114,293                                                                     Balance, January 1, 2022     54,227,060     $ -     $ 54     $ 226,397     $ 911,008     $ 14,056     $ 500     $ 1,152,015   Common dividends paid, $ 0.46 per share     -       -       -       -       ( 24,976 )     -       -       ( 24,976 ) Common dividends declared, $ 0.23 per share     -       -       -       -       ( 12,494 )     -       -       ( 12,494 ) Preferred dividends paid     -       -       -       -       ( 31 )     -       -       ( 31 ) Dividends on nonvested restricted stock recognized as compensation expense     -       -       -       -       100       -       -       100   Issue restricted shares pursuant to stock incentives, net of forfeitures     44,613       -       -       -       -       -       -       -   Issue shares of common stock upon exercise of stock options     52,334       -       -       1,079       -       -       -       1,079   13,166 shares of common stock withheld in net settlement upon exercise of stock options     -       -       -       ( 1,129 )     -       -       -       ( 1,129 ) Stock-based compensation expense     -       -       -       2,391       -       -       -       2,391   Other comprehensive loss, net of tax     -       -       -       -       -       ( 58,146 )     -       ( 58,146 ) Net income     -       -       -       -       183,780       -       -       183,780   Balance, September 30, 2022     54,324,007     $ -     $ 54     $ 228,738     $ 1,057,387     $ ( 44,090 )   $ 500     $ 1,242,589      See Notes to Consolidated Financial Statements.   8       SERVISFIRST BANCSHARES, INC.   CONSOLIDATED STATEMENTS OF CASH FLOWS   (In thousands) (Unaudited)         Nine Months Ended September 30,       2022     2021   OPERATING ACTIVITIES                 Net income   $ 183,780     $ 153,981   Adjustments to reconcile net income to net cash provided by                 Deferred tax     476       12   Provision for credit losses     30,472       23,066   Depreciation     3,155       3,074   Accretion on acquired loans     108       43   Amortization of core deposit intangible     23       203   Amortization of investments in tax credit partnerships     8,786       3,516   Net amortization of debt securities available for sale     2,352       3,689   (Increase) decrease in accrued interest and dividends receivable     ( 5,115 )     3,026   Stock-based compensation expense     2,391       1,310   Increase in accrued interest payable     1,262       376   Proceeds from sale of mortgage loans held for sale     38,564       221,548   Originations of mortgage loans held for sale     ( 37,529 )     ( 200,832 ) Loss (gain) on sale of securities available for sale     6,168       ( 620 ) Gain on sale of mortgage loans held for sale     ( 1,924 )     ( 6,869 ) Net (gain) loss on sale of other real estate owned and repossessed assets     ( 239 )     282   Write down of other real estate owned and repossessed assets     7       876   Operating losses of tax credit partnerships     -       4   Increase in cash surrender value of life insurance contracts     ( 4,878 )     ( 5,012 ) Net change in other assets, liabilities, and other operating activities     ( 29,074 )     ( 6,144 ) Net cash provided by operating activities     198,785       195,529   INVESTMENT ACTIVITIES                 Purchases of debt securities available for sale     ( 76,360 )     ( 298,684 ) Proceeds from maturities, calls and paydowns of debt securities available for sale     95,691       188,559   Proceeds from sale of debt securities available for sale     75,036       -   Purchases of debt securities held to maturity     ( 648,266 )     -   Proceeds from maturities, calls and paydowns of debt securities held to maturity     60,854       -   Purchases of restricted equity securities     ( 423 )     -   Investment in tax credit partnership and SBIC     ( 16,295 )     ( 10,546 ) Return of capital from TC Partnerships and SBIC     434       -   Increase in loans     ( 1,752,905 )     ( 350,643 ) Purchases of premises and equipment     ( 1,935 )     ( 9,058 ) Proceeds from death benefit of bank owned life insurance contracts     1,800       -   Proceeds from sale of other real estate owned and repossessed assets     1,240       911   Expenditures for other real estate owned     ( 93 )     -   Net cash used in investing activities     ( 2,261,222 )     ( 479,461 ) FINANCING ACTIVITIES                 Net (decrease) increase in non-interest-bearing deposits     ( 1,137,831 )     1,577,882   Net (decrease) increase in interest-bearing deposits     ( 263,090 )     525,064   Net (decrease) increase in federal funds purchased     ( 245,455 )     435,211   Proceeds from exercise of stock options     1,079       3,219   Taxes paid in net settlement of tax obligation upon exercise of stock options     ( 1,129 )     ( 2,737 ) Dividends paid on common stock     ( 24,876 )     ( 21,601 ) Dividends paid on preferred stock     ( 31 )     ( 31 ) Net cash (used in) provided by financing activities     ( 1,671,333 )     2,517,007   Net (decrease) increase in cash and cash equivalents     ( 3,733,770 )     2,233,075   Cash and cash equivalents at beginning of period     4,222,096       2,211,411   Cash and cash equivalents at end of period   $ 488,326     $ 4,444,486   SUPPLEMENTAL DISCLOSURE                 Cash paid/(received) for:                 Interest   $ 39,272     $ 23,622   Income taxes     55,375       51,308   Income tax refund     ( 142 )     ( 3 ) NONCASH TRANSACTIONS                 Other real estate acquired in settlement of loans   $ 1,045     $ 1,419   Internally financed sale of other real estate owned     -       3,779   Dividends on nonvested restricted stock reclassified as compensation expense     100       77   Dividends declared     12,494       10,842      See Notes to Consolidated Financial Statements.   9     SERVISFIRST BANCSHARES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS September 30, 2022 (Unaudited)     NOTE 1 - GENERAL   The accompanying unaudited 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 recurring nature. The consolidated results of operations are not necessarily indicative of the consolidated results of operations which ServisFirst Bancshares, Inc. (the “Company”) and its consolidated subsidiaries, including ServisFirst Bank (the “Bank”), may achieve for future interim periods or the entire year. For further information, refer to the consolidated financial statements and footnotes included in the Company’s Form 10 -K for the year ended December 31, 2021.   All reported amounts are in thousands except share and per share data.     NOTE 2 - CASH AND CASH EQUIVALENTS   Cash on hand, cash items in process of collection, amounts due from banks, and federal funds sold are included in cash and cash equivalents.     NOTE 3 - EARNINGS PER COMMON SHARE   Basic earnings per common share are computed by dividing net income 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. The difference in earnings per share under the two -class method was not significant for the three and nine months ended September 30, 2022 and 2021, respectively.       Three Months Ended September 30,     Nine Months Ended September 30,       2022     2021     2022     2021       (In Thousands, Except Shares and Per Share Data)   Earnings per common share                                 Weighted average common shares outstanding     54,315,671       54,205,565       54,291,739       54,143,324   Net income available to common stockholders   $ 64,031     $ 52,499     $ 183,749     $ 153,950   Basic earnings per common share   $ 1.18     $ 0.97     $ 3.38     $ 2.84                                     Weighted average common shares outstanding     54,315,671       54,205,565       54,291,739       54,143,324   Dilutive effects of assumed exercise of stock options and vesting of performance shares     231,011       272,175       242,054       296,680   Weighted average common and dilutive potential common shares outstanding     54,546,682       54,477,740       54,533,793       54,440,004   Net income available to common stockholders   $ 64,031     $ 52,499     $ 183,749     $ 153,950   Diluted earnings per common share   $ 1.17     $ 0.96     $ 3.37     $ 2.83       NOTE 4 - SECURITIES   The amortized cost and fair value of available-for-sale and held-to-maturity securities at September 30, 2022 and December 31, 2021 are summarized as follows:   10                 Gross     Gross               Amortized     Unrealized     Unrealized     Fair       Cost     Gain     Loss     Value   September 30, 2022   (In Thousands)   Debt Securities Available for Sale                                 U.S. Treasury Securities   $ 6,003     $ -     $ ( 51 )   $ 5,952   Government Agency Securities     9       -       -       9   Mortgage-backed securities     294,289       3       ( 36,528 )     257,764   State and municipal securities     16,677       2       ( 1,659 )     15,020   Corporate debt     410,685       5       ( 23,671 )     387,019   Total   $ 727,663     $ 10     $ ( 61,910 )   $ 665,763   Debt Securities Held to Maturity                                 U.S. Treasury Securities   $ 506,697     $ -     $ ( 38,184 )   $ 468,513   Mortgage-backed securities     534,107       5       ( 67,336 )     466,776   State and municipal securities     8,036       -       ( 1,043 )     6,993   Total   $ 1,048,840     $ 5     $ ( 106,563 )   $ 942,282                                     December 31, 2021                                 Debt Securities Available for Sale                                 U.S Treasury Securities   $ 9,003     $ 101     $ -     $ 9,104   Government Agency Securities     6,022       19       -       6,041   Mortgage-backed securities     424,372       3,474       ( 2,685 )     425,161   State and municipal securities     21,531       173       ( 70 )     21,634   Corporate debt     369,618       11,659       ( 647 )     380,630   Total   $ 830,546     $ 15,425     $ ( 3,402 )   $ 842,570   Debt Securities Held to Maturity                                 U.S. Treasury Securities   $ 149,263     $ 25     $ ( 668 )   $ 148,620   Mortgage-backed securities     310,641       5,251       ( 1,271 )     314,621   State and municipal securities     3,053       2       ( 10 )     3,045   Total   $ 462,957     $ 5,278     $ ( 1,949 )   $ 466,286     During the third quarter of 2021, the company transferred, at fair value, $ 261.3 million of mortgage-backed securities from the available-for-sale portfolio to the held-to-maturity portfolio. The related unrealized after-tax gains of $ 5.6 million remained in accumulated other comprehensive income and are being amortized over the remaining life of the securities, offsetting the related amortization of discount on the transferred securities. No gains or losses were recognized at the time of the transfer.   The amortized cost and fair value of debt securities as of September 30, 2022 and December 31, 2021 by contractual maturity are shown below. Actual maturities may differ from contractual maturities of mortgage-backed securities since the mortgages underlying the securities may be called or prepaid with or without penalty. Therefore, these securities are not included in the maturity categories along with the other categories of debt securities.       September 30, 2022     December 31, 2021       Amortized Cost     Fair Value     Amortized Cost     Fair Value       (In thousands)   Debt securities available for sale                                 Due within one year   $ 21,679     $ 21,528     $ 32,913     $ 33,232   Due from one to five years     57,337       55,676       31,760       32,307   Due from five to ten years     351,358       328,142       338,407       348,594   Due after ten years     3,000       2,653       3,094       3,276   Mortgage-backed securities     294,289       257,764       424,372       425,161       $ 727,663     $ 665,763     $ 830,546     $ 842,570                                     Debt securities held to maturity                                 Due within one year   $ 250     $ 250     $ 250     $ 250   Due from one to five years     386,028       364,652       49,663       49,419   Due from five to ten years     128,455       110,604       102,403       101,996   Mortgage-backed securities     534,107       466,776       310,641       314,621       $ 1,048,840     $ 942,282     $ 462,957     $ 466,286     All mortgage-backed securities are with government-sponsored enterprises (GSEs) such as Federal National Mortgage Association, Government National Mortgage Association, Federal Home Loan Bank, and Federal Home Loan Mortgage Corporation.   The carrying value of debt securities pledged to secure public funds on deposit and for other purposes as required by law as of September 30, 2022 and December 31, 2021 was $ 748.3 million and $ 463.1 million, respectively.   11     The following table identifies, as of September 30, 2022 and December 31, 2021, the Company’s investment securities that have been in a continuous unrealized loss position for less than 12 months and those that have been in a continuous unrealized loss position for 12 or more months.       Less Than Twelve Months     Twelve Months or More     Total       Gross             Gross             Gross               Unrealized             Unrealized             Unrealized               Losses     Fair Value     Losses     Fair Value     Losses     Fair Value   September 30, 2022   (In Thousands)   Debt Securities available for sale                                                 U.S. Treasury Securities   $ ( 51 )   $ 5,952     $ -     $ -     $ ( 51 )   $ 5,952   Government Agency Securities     -       9       -       -       -       9   Mortgage-backed securities     ( 14,589 )     131,223       ( 21,938 )     126,344       ( 36,528 )     257,568   State and municipal securities     ( 790 )     9,952       ( 870 )     4,622       ( 1,659 )     14,574   Corporate debt     ( 19,242 )     336,583       ( 4,429 )     31,571       ( 23,670 )     368,154   Total   $ ( 34,672 )   $ 483,719     $ ( 27,237 )   $ 162,537     $ ( 61,909 )   $ 646,256                                                     Debt Securities held to maturity                                                 U.S. Treasury Securities   $ ( 31,859 )   $ 425,216     $ ( 6,325 )   $ 43,296     $ ( 38,184 )   $ 468,512   Mortgage-backed securities     ( 56,458 )     418,140       ( 10,878 )     44,132       ( 67,336 )     462,272   State and municipal securities     ( 1,043 )     6,743       -       -       ( 1,043 )     6,743   Total   $ ( 89,360 )   $ 850,099     $ ( 17,203 )   $ 87,428     $ ( 106,563 )   $ 937,527                                                     December 31, 2021                                                 Debt Securities available for sale                                                 Mortgage-backed securities   $ ( 2,685 )   $ 303,297     $ -     $ -     $ ( 2,685 )   $ 303,297   State and municipal securities     ( 61 )     5,198       ( 9 )     228       ( 70 )     5,426   Corporate debt     ( 647 )     61,677       -       -       ( 647 )     61,677   Total   $ ( 3,393 )   $ 370,172     $ ( 9 )   $ 228     $ ( 3,402 )   $ 370,400                                                     Debt Securities held to maturity                                                 U.S. Treasury Securities   $ ( 668 )   $ 123,698     $ -     $ -     $ ( 668 )   $ 123,698   Mortgage-backed securities     ( 1,271 )     134,192       -       -       ( 1,271 )     134,192   State and municipal securities     ( 10 )     482       -       -       ( 10 )     482   Total   $ ( 1,950 )   $ 258,372     $ -     $ -     $ ( 1,949 )   $ 258,372     The following table summarizes information about sales and calls of debt securities available for sale.       Three Months Ended September 30,     Nine Months Ended September 30,       2022     2021     2022     2021       (In Thousands)   Sale and call proceeds   $ -     $ -     $ 75,036     $ 6,272   Gross realized gains   $ -     $ -     $ -     $ 620   Gross realized losses     -       -       ( 6,168 )     -   Net realized (loss) gain   $ -     $ -     $ ( 6,168 )   $ 620     At September 30, 2022, no allowance for credit losses has been recognized on available for sale debt securities in an unrealized loss position as the Company does not believe any of the debt securities are credit impaired. This is based on the Company’s analysis of the risk characteristics, including credit ratings, and other qualitative factors related to available for sale debt securities. The issuers of these debt securities continue to make timely principal and interest payments under the contractual terms of the securities. The Company does not intend to sell these debt securities and it is more likely than not that the Company will not be required to sell the debt securities before recovery of their amortized cost, which may be at maturity. The unrealized losses are due to increases in market interest rates over the yields available at the time the debt securities were purchased. Furthermore, the Company performed an analysis that determined that the following held-to-maturity securities have a zero expected credit loss: U.S. Treasury Securities; State and Municipal Securities and, Agency-Backed Securities, including securities issued by GNMA, FNMA, FHLB, FFCB and SBA. All of the U.S. Treasury and Agency-Backed Securities have the full faith and credit backing of the United States Government or one of its agencies. All debt securities in an unrealized loss position as of September 30, 2022, continue to perform as scheduled and the Company does not believe there is a possible credit loss or that an allowance for credit loss on these debt securities is necessary.   12     Restricted equity securities are comprised entirely of a restricted investment in Federal Home Loan Bank of Atlanta stock for membership requirement.     NOTE 5 – LOANS   The loan portfolio is classified based on the underlying collateral utilized to secure each loan for financial reporting purposes. This classification is consistent with the Quarterly Report of Condition and Income filed by the Bank with the Federal Deposit Insurance Corporation (FDIC).   Commercial, financial and agricultural - Includes loans to business enterprises issued for commercial, industrial, agricultural production and/or other professional purposes. These loans are generally secured by equipment, inventory, and accounts receivable of the borrower and repayment is primarily dependent on business cash flows.   Real estate – construction – Includes loans secured by real estate to finance land development or the construction of industrial, commercial or residential buildings. Repayment is dependent upon the completion and eventual sale, refinance or operation of the related real estate project.   Owner-occupied commercial real estate mortgage – Includes loans secured by nonfarm nonresidential properties for which the primary source of repayment is the cash flow from the ongoing operations conducted by the party that owns the property.   1 - 4 family real estate mortgage – Includes loans secured by residential properties, including home equity lines of credit. Repayment is primarily dependent on the personal cash flow of the borrower.   Other real estate mortgage – Includes loans secured by nonowner-occupied properties, including office buildings, industrial buildings, warehouses, retail buildings, multifamily residential properties and farmland. Repayment is primarily dependent on income generated from the underlying collateral.   Consumer – Includes loans to individuals not secured by real estate. Repayment is dependent upon the personal cash flow of the borrower.   The Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) provided for Paycheck Protection Program (“PPP”) loans made by banks to employers with less than  500  employees if they continued to employ their existing workers. The American Rescue Plan Act of 2021, which was signed into law on March 21, 2021, provided additional relief for businesses, states, municipalities and individuals by, among other things, allocating additional funds for the PPP. Effective May 28, 2021, the PPP was closed to new applications. The Company funded approximately  7,400 loans for a total amount of $ 1.5  billion for clients under the PPP since April 2020. At September 30, 2022 and December 31, 2021,  unaccreted deferred loan origination fees, net of costs, related to PPP loans were $ 138,000 and $ 7.2  million, respectively. PPP loan fees recorded to interest income totaled $ 400,000 and $ 5.2 million for the  three months ended  September 30, 2022 and 2021, respectively, and totaled $ 7.6 million and $ 22.3 million for the nine months ended September 30, 2022 and 2021, respectively. PPP loans outstanding totaled $ 7.2 million and $ 230.2 million at September 30, 2022 and December 31, 2021, respectively. PPP loans are included within the commercial, financial and agricultural loan category in the table below.   The following table details the Company’s loans at September 30, 2022 and December 31, 2021:       September 30,     December 31,       2022     2021                         (Dollars In Thousands)   Commercial, financial and agricultural   $ 3,104,155     $ 2,984,053   Real estate - construction     1,433,698       1,103,076   Real estate - mortgage:                 Owner-occupied commercial     2,145,621       1,874,103   1-4 family mortgage     1,089,826       826,765   Other mortgage     3,438,762       2,678,084   Subtotal: Real estate - mortgage     6,674,209       5,378,952   Consumer     66,552       66,853   Total Loans     11,278,614       9,532,934   Less: Allowance for credit losses     ( 140,967 )     ( 116,660 ) Net Loans   $ 11,137,647     $ 9,416,274                                       Commercial, financial and agricultural     27.52 %     31.30 % Real estate - construction     12.71 %     11.57 % Real estate - mortgage:                 Owner-occupied commercial     19.02 %     19.66 % 1-4 family mortgage     9.66 %     8.67 % Other mortgage     30.50 %     28.09 % Subtotal: Real estate - mortgage     59.18 %     56.42 % Consumer     0.59 %     0.70 % Total Loans     100.00 %     100.00 %   13     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 credit portfolio segments and classes. These categories are utilized to develop the associated allowance for credit losses using historical losses adjusted for current economic conditions defined as follows:     ● Pass – loans which are well protected by the current net worth and paying capacity of the borrower (or guarantors, 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 currently jeopardize debt repayment. These loans are characterized by the distinct possibility that the company will sustain some loss if the weaknesses are not corrected.   ● Doubtful – loans that have all the weaknesses inherent in loans classified substandard, plus the added characteristic that the weaknesses make collection or liquidation in full on the basis of currently existing facts, conditions, and values highly questionable and improbable.   The table below presents loan balances classified by credit quality indicator, loan type and based on year of origination as of September 30, 2022:                                                       Revolving           September 30, 2022   2022     2021     2020     2019     2018     Prior     Loans     Total       (In thousands)   Commercial, financial and agricultural                                                                 Pass   $ 602,395     $ 528,653     $ 240,523     $ 151,397     $ 86,005     $ 147,217     $ 1,247,732     $ 3,003,922   Special Mention     5,720       2,674       1,199       580       475       10,411       21,505       42,564   Substandard     -       -       381       9,645       3,381       8,699       35,563       57,669   Doubtful     -       -       -       -       -       -       -       -   Total Commercial, financial and agricultural   $ 608,115     $ 531,327     $ 242,103     $ 161,622     $ 89,861     $ 166,327     $ 1,304,800     $ 3,104,155   Real estate - construction                                                                 Pass   $ 473,174     $ 627,269     $ 208,182     $ 19,262     $ 12,481     $ 20,208     $ 68,533     $ 1,429,109   Special Mention     2,500       -       -       -       -       876       -       3,376   Substandard     -       -       -       -       1,213       -       -       1,213   Doubtful     -       -       -       -       -       -       -       -   Total Real estate - construction   $ 475,674     $ 627,269     $ 208,182     $ 19,262     $ 13,694     $ 21,084     $ 68,533     $ 1,433,698   Owner-occupied commercial                                                                 Pass   $ 342,593     $ 496,759     $ 350,151     $ 205,457     $ 163,853     $ 499,130     $ 67,827     $ 2,125,770   Special Mention     2,375       199       -       2,730       2,188       8,441       -       15,933   Substandard     -       -       -       73       -       3,845       -       3,918   Doubtful     -       -       -       -       -       -       -       -   Total Owner-occupied commercial   $ 344,968     $ 496,958     $ 350,151     $ 208,260     $ 166,041     $ 511,416     $ 67,827     $ 2,145,621   1-4 family mortgage                                                                 Pass   $ 341,944     $ 276,451     $ 97,968     $ 55,579     $ 29,782     $ 61,967     $ 217,420     $ 1,081,111   Special Mention     82       445       828       376       424       983       3,055       6,193   Substandard     -       80       156       785       221       958       322       2,522   Doubtful     -       -       -       -       -       -       -       -   Total 1-4 family mortgage   $ 342,026     $ 276,976     $ 98,952     $ 56,740     $ 30,427     $ 63,908     $ 220,797     $ 1,089,826   Other mortgage                                                                 Pass   $ 913,219     $ 928,942     $ 496,188     $ 390,408     $ 142,416     $ 486,039     $ 61,875     $ 3,419,087   Special Mention     232       -       -       -       -       7,231       -       7,463   Substandard     -       -       -       130       4,800       7,282       -       12,212   Doubtful     -       -       -       -       -       -       -       -   Total Other mortgage   $ 913,451     $ 928,942     $ 496,188     $ 390,538     $ 147,216     $ 500,552     $ 61,875     $ 3,438,762   Consumer                                                                 Pass   $ 7,713     $ 6,310     $ 3,297     $ 1,859     $ 473     $ 17,005     $ 29,836     $ 66,493   Special Mention     -       -       -       -       -       16       -       16   Substandard     -       43       -       -       -       -       -       43   Doubtful     -       -       -       -       -       -       -       -   Total Consumer   $ 7,713     $ 6,353     $ 3,297     $ 1,859     $ 473     $ 17,021     $ 29,836     $ 66,552   Total Loans                                                                 Pass   $ 2,681,038     $ 2,864,384     $ 1,396,309     $ 823,962     $ 435,010     $ 1,231,566     $ 1,693,223     $ 11,125,492   Special Mention     10,909       3,318       2,027       3,686       3,087       27,958       24,560       75,545   Substandard     -       123       537       10,633       9,615       20,784       35,885       77,577   Doubtful     -       -       -       -       -       -       -       -   Total Loans   $ 2,691,947     $ 2,867,825     $ 1,398,873     $ 838,281     $ 447,712     $ 1,280,308     $ 1,753,668     $ 11,278,614     14     The table below presents loan balances classified by credit quality indicator, loan type and based on year of origination as of December 31, 2021:                                                       Revolving           December 31, 2021   2021     2020     2019     2018     2017     Prior     Loans     Total       (In thousands)   Commercial, financial and agricultural                                                                 Pass   $ 800,822     $ 294,841     $ 209,086     $ 130,579     $ 114,870     $ 127,572     $ 1,216,153     $ 2,893,923   Special Mention     1,245       1,323       942       846       915       784       19,801       25,856   Substandard     -       387       10,039       1,741       1,501       7,966       42,640       64,274   Doubtful     -       -       -       -       -       -       -       -   Total Commercial, financial and agricultural   $ 802,067     $ 296,551     $ 220,067     $ 133,166     $ 117,286     $ 136,322     $ 1,278,594     $ 2,984,053   Real estate - construction                                                                 Pass   $ 597,497     $ 260,723     $ 110,671     $ 16,452     $ 13,704     $ 17,356     $ 76,662     $ 1,093,065   Special Mention     -       -       6,594       2,500       -       917       -       10,011   Substandard     -       -       -       -       -       -       -       -   Doubtful     -       -       -       -       -       -       -       -   Total Real estate - construction   $ 597,497     $ 260,723     $ 117,265     $ 18,952     $ 13,704     $ 18,273     $ 76,662     $ 1,103,076   Owner-occupied commercial                                                                 Pass   $ 406,473     $ 352,642     $ 231,197     $ 182,812     $ 162,648     $ 430,638     $ 96,860     $ 1,863,270   Special Mention     101       -       2,417       779       476       2,688       -       6,461   Substandard     -       -       -       -       -       4,372       -       4,372   Doubtful     -       -       -       -       -       -       -       -   Total Owner-occupied commercial   $ 406,574     $ 352,642     $ 233,614     $ 183,591     $ 163,124     $ 437,698     $ 96,860     $ 1,874,103   1-4 family mortgage                                                                 Pass   $ 299,686     $ 117,579     $ 68,044     $ 46,954     $ 37,374     $ 37,970     $ 210,338     $ 817,945   Special Mention     -       1,000       517       116       260       912       3,033       5,838   Substandard     -       150       593       241       231       611       1,156       2,982   Doubtful     -       -       -       -       -       -       -       -   Total 1-4 family mortgage   $ 299,686     $ 118,729     $ 69,154     $ 47,311     $ 37,865     $ 39,493     $ 214,527     $ 826,765   Other mortgage                                                                 Pass   $ 882,849     $ 481,012     $ 411,426     $ 174,700     $ 272,555     $ 353,621     $ 81,202     $ 2,657,365   Special Mention     -       -       130       376       2,720       4,656       -       7,882   Substandard     -       -       -       4,497       8,340       -       -       12,837   Doubtful     -       -       -       -       -       -       -       -   Total Other mortgage   $ 882,849     $ 481,012     $ 411,556     $ 179,573     $ 283,615     $ 358,277     $ 81,202     $ 2,678,084   Consumer                                                                 Pass   $ 16,303     $ 4,845     $ 2,896     $ 983     $ 903     $ 3,649     $ 37,250     $ 66,829   Special Mention     -       -       -       -       -       24       -       24   Substandard     -       -       -       -       -       -       -       -   Doubtful     -       -       -       -       -       -       -       -   Total Consumer   $ 16,303     $ 4,845     $ 2,896     $ 983     $ 903     $ 3,673     $ 37,250     $ 66,853   Total Loans                                                                 Pass   $ 3,003,630     $ 1,511,642     $ 1,033,320     $ 552,480     $ 602,054     $ 970,806     $ 1,718,465     $ 9,392,397   Special Mention     1,346       2,323       10,600       4,617       4,371       9,981       22,834       56,072   Substandard     -       537       10,632       6,479       10,072       12,949       43,796       84,465   Doubtful     -       -       -       -       -       -       -       -   Total Loans   $ 3,004,976     $ 1,514,502     $ 1,054,552     $ 563,576     $ 616,497     $ 993,736     $ 1,785,095     $ 9,532,934     15     Loans by performance status as of September 30, 2022 and December 31, 2021 were as follows:   September 30, 2022   Performing     Nonperforming     Total                                 (In Thousands)   Commercial, financial and agricultural   $ 3,095,346     $ 8,809     $ 3,104,155   Real estate - construction     1,433,698       -       1,433,698   Real estate - mortgage:                         Owner-occupied commercial     2,144,601       1,020       2,145,621   1-4 family mortgage     1,088,375       1,451       1,089,826   Other mortgage     3,433,708       5,054       3,438,762   Total real estate mortgage     6,666,683       7,526       6,674,209   Consumer     66,428       124       66,552   Total   $ 11,262,155     $ 16,459     $ 11,278,614     December 31, 2021   Performing     Nonperforming     Total                                 (In Thousands)   Commercial, financial and agricultural   $ 2,979,671     $ 4,382     $ 2,984,053   Real estate - construction     1,103,076       -       1,103,076   Real estate - mortgage:                         Owner-occupied commercial     1,873,082       1,021       1,874,103   1-4 family mortgage     824,756       2,009       826,765   Other mortgage     2,673,428       4,656       2,678,084   Total real estate mortgage     5,371,266       7,686       5,378,952   Consumer     66,824       29       66,853   Total   $ 9,520,837     $ 12,097     $ 9,532,934     16     Loans by past due status as of September 30, 2022 and December 31, 2021 were as follows:   September 30, 2022   Past Due Status (Accruing Loans)                                                               Total Past     Total                     Nonaccrual       30-59 Days     60-89 Days     90+ Days     Due     Nonaccrual     Current     Total Loans     With no ACL                                                                         (In Thousands)   Commercial, financial and agricultural   $ 1,385     $ 134     $ 95     $ 1,614     $ 8,714     $ 3,093,827     $ 3,104,155     $ 1,252   Real estate - construction     -       -       -       -       -       1,433,698       1,433,698       -   Real estate - mortgage:                                                                 Owner-occupied commercial     3,599       -       -       3,599       1,020       2,141,002       2,145,621       883   1-4 family mortgage     627       128       79       834       1,372       1,087,620       1,089,826       287   Other mortgage     -       -       4,548       4,548       506       3,433,708       3,438,762       376   Total real estate - mortgage     4,226       128       4,627       8,981       2,899       6,662,329       6,674,209       1,546   Consumer     79       86       82       247       42       66,262       66,552       42   Total   $ 5,690     $ 348     $ 4,804     $ 10,842     $ 11,655     $ 11,256,117     $ 11,278,614     $ 2,840     December 31, 2021   Past Due Status (Accruing Loans)                                                               Total Past     Total                     Nonaccrual       30-59 Days     60-89 Days     90+ Days     Due     Nonaccrual     Current     Total Loans     With no ACL                                                                         (In Thousands)   Commercial, financial and agricultural   $ 516     $ 77     $ 39     $ 632     $ 4,343     $ 2,979,078     $ 2,984,053     $ 2,059   Real estate - construction     -       -       -       -       -       1,103,076       1,103,076       -   Real estate - mortgage:                                                                 Owner-occupied commercial     143       -       -       143       1,021       1,872,939       1,874,103       1,021   1-4 family mortgage     -       703       611       1,314       1,398       824,053       826,765       483   Other mortgage     -       -       4,656       4,656       -       2,673,428       2,678,084       -   Total real estate - mortgage     143       703       5,267       6,113       2,419       5,370,420       5,378,952       1,504   Consumer     93       23       29       145       -       66,708       66,853       -   Total   $ 752     $ 803     $ 5,335     $ 6,890     $ 6,762     $ 9,519,282     $ 9,532,934     $ 3,563     Under the current expected credit losses (“CECL”) methodology, the allowance for credit losses ("ACL") is measured on a collective basis for pools of loans with similar risk characteristics. For loans that do not share similar risk characteristics with the collectively evaluated pools, evaluations are performed on an individual basis. For all loan segments collectively evaluated, losses are predicted over a period of time determined to be reasonable and supportable, and at the end of the reasonable and supportable forecast period losses are reverted to long-term historical averages. The estimated loan losses for all loan segments are adjusted for changes in qualitative factors not inherently considered in the quantitative analyses.            The Company uses the discounted cash flow (“DCF”) method to estimate ACL for all loan pools except for commercial and industrial ("C&I") revolving lines of credit and credit cards.  For all loan pools utilizing the DCF method, the Company utilizes and forecasts national unemployment rate as a loss driver. The Company also utilizes and forecasts GDP growth as a second loss driver for its agricultural and consumer loan pools.  Consistent forecasts of the loss drivers are used across the loan segments.  At September 30, 2022 and December 31, 2021, the Company utilized a reasonable and supportable forecast period of twelve months followed by a six -month straight-line reversion to long term averages. The Company leveraged economic projections from reputable and independent sources to inform its loss driver forecasts. At September 30, 2022, the Company expects the national unemployment to rise during the forecast period with a declining national GDP growth rate compared to December 31, 2021.   The Company uses a loss-rate method to estimate expected credit losses for its C&I revolving lines of credit and credit card pools.  The C&I revolving lines of credit pool incorporates a probability of default (“PD”) and loss given default (“LGD”) modeling approach.  This approach involves estimating the pool average life and then using historical correlations of default and loss experience over time to calculate the lifetime PD and LGD.  These two inputs are then applied to the outstanding pool balance.  The credit card pool incorporates a remaining life modeling approach, which utilizes an attrition-based method to estimate the remaining life of the pool.  A quarterly average loss rate is then calculated using the Company’s historical loss data. The model reduces the pool balance quarterly on a straight-line basis over the estimated life of the pool. The quarterly loss rate is multiplied by the outstanding balance at each period-end resulting in an estimated loss for each quarter. The sum of estimated loss for all quarters is the total calculated reserve for the pool.  Management has applied the loss-rate method to C&I lines of credit and to credit cards due to their generally short-term nature.  An expected loss ratio is applied based on internal and peer historical losses.   17     Each loan pool is adjusted for qualitative factors not inherently considered in the quantitative analyses. The qualitative adjustments either increase or decrease the quantitative model estimation.  The Company considers factors that are relevant within the qualitative framework which include the following:  lending policy, changes in nature and volume of loans, staff experience, changes in volume and trends of problem loans, concentration risk, trends in underlying collateral values, external factors, quality of loan review system and other economic conditions.   Inherent risks in the loan portfolio will differ based on type of loan. Specific risk characteristics by loan portfolio segment are listed below:   Commercial, financial and agricultural loans include risks associated with the  borrower’s cash flow, debt service coverage, and management’s expertise.  These loans are subject to the risk that the Company may have difficulty converting collateral to a liquid asset if necessary, as well as risks associated with the  degree of specialization, mobility, and general collectability in a default situation. These commercial loans may be subject to many different types of risks, including fraud, bankruptcy, economic downturn, deteriorated or non-existent collateral, and changes in interest rates.   Real estate construction loans include risks associated with the borrower’s credit-worthiness, contractor’s qualifications, borrower and contractor performance, and the overall risk and complexity of the proposed project.  Construction lending is also subject to risks associated with sub-market dynamics, including population, employment trends and household income.  During times of economic stress, this type of loan has typically had a greater degree of risk than other loan types.     Real estate mortgage loans consist of loans secured by commercial and residential real estate.  Commercial real estate lending is dependent upon successful management, marketing and expense supervision necessary to maintain the property.  Repayment of these loans may be adversely affected by conditions in the real estate market or the general economy.  Also, commercial real estate loans typically involve relatively large loan balances to a single borrower.  Residential real estate lending risks are generally less significant than those of other loans.  Real estate lending risks include fluctuations in the value of real estate, bankruptcies, economic downturn and customer financial problems.   Consumer loans carry a moderate degree of risk compared to other loans.  They are generally more risky than traditional residential real estate loans but less risky than commercial loans.  Risk of default is usually determined by the well-being of the local economies.  During times of economic stress, there is usually some level of job loss both nationally and locally, which directly affects the ability of the consumer to repay debt.   The following table presents changes in the allowance for credit losses, segregated by loan type, for the three and nine months ended September 30, 2022 and September 30, 2021.       Commercial,                                       financial and     Real estate -     Real estate -                       agricultural     construction     mortgage     Consumer     Total                                                 (In Thousands)       Three Months Ended September 30, 2022   Allowance for credit losses:                                         Balance at June 30, 2022   $ 41,610     $ 35,992     $ 48,793     $ 1,992     $ 128,387   Charge-offs     ( 2,902 )     -       ( 170 )     ( 260 )     ( 3,332 ) Recoveries     297       -       -       12       309   Provision     3,829       4,024       7,420       330       15,603   Balance at September 30, 2022   $ 42,834     $ 40,016     $ 56,043     $ 2,074     $ 140,967                                                 Three Months Ended March September 30, 2021   Allowance for credit losses:                                         Balance at June 30, 2021   $ 42,433     $ 22,413     $ 38,530     $ 1,294     $ 104,670   Charge-offs     ( 1,541 )     -       ( 208 )     ( 86 )     ( 1,835 ) Recoveries     140       -       4       8       152   Provision     ( 144 )     2,124       3,681       302       5,963   Balance at September 30, 2021   $ 40,888     $ 24,537     $ 42,007     $ 1,518     $ 108,950                                                 Nine Months Ended September 30, 2022   Allowance for credit losses:                                         Balance at December 31, 2021   $ 41,869     $ 26,994     $ 45,829     $ 1,968     $ 116,660   Charge-offs     ( 7,141 )     -       ( 221 )     ( 459 )     ( 7,821 ) Recoveries     1,619       -       -       37       1,656   Provision     6,487       13,022       10,435       528       30,472   Balance at September 30, 2022   $ 42,834     $ 40,016     $ 56,043     $ 2,074     $ 140,967                                                 Nine Months Ended September 30, 2021   Allowance for credit losses:                                         Balance at December 31, 2020   $ 36,370     $ 16,057     $ 33,722     $ 1,793     $ 87,942   Charge-offs     ( 2,168 )     -       ( 279 )     ( 227 )     ( 2,674 ) Recoveries     464       52       68       32       616   Provision     6,222       8,428       8,496       ( 80 )     23,066   Balance at September 30, 2021   $ 40,888     $ 24,537     $ 42,007     $ 1,518     $ 108,950     18     We maintain an allowance for credit losses on unfunded lending commitments and letters of credit to provide for the risk of loss inherent in these arrangements. The allowance is computed using a methodology similar to that used to determine the allowance for credit losses for loans, modified to take into account the probability of a drawdown on the commitment. The allowance for credit losses on unfunded loan commitments is classified as a liability account on the Consolidated Balance Sheet within other liabilities, while the corresponding provision for these credit losses is recorded as a component of other expense. The allowance for credit losses on unfunded commitments was $ 1.9 million at September 30, 2022 and $ 1.3 million at December 31, 2021. The provision expense for unfunded commitments was $ 329,000 and $ 629,000 for the three and nine months ended September 30, 2022, respectively, and was $( 300,000 ) and $ 800,000 for the three and nine months ended September 30, 2021.   Loans that no longer share similar risk characteristics with collectively evaluated pools are estimated on an individual basis. A loan is considered collateral-dependent when the borrower is experiencing financial difficulty and repayment is expected to be provided substantially through the operation or sale of the collateral. The following table summarizes collateral-dependent gross loans held for investment by collateral type as follows:                 Accounts                             ACL   September 30, 2022   Real Estate     Receivable     Equipment     Other     Total     Allocation       (In Thousands)   Commercial, financial and agricultural   $ 12,144     $ 15,885     $ 2,452     $ 27,186     $ 57,667     $ 9,766   Real estate - construction     -       -       -       1,213       1,213       11   Real estate - mortgage:                                                 Owner-occupied commercial     3,177       -       -       -       3,177       178   1-4 family mortgage     3,846       -       -       74       3,920       30   Other mortgage     12,212       -       -       -       12,212       -   Total real estate - mortgage     19,235       -       -       74       19,309       208   Consumer     -       -       -       43       43       43   Total   $ 31,379     $ 15,885     $ 2,452     $ 28,516     $ 78,232     $ 10,028                 Accounts                             ACL   December 31, 2021   Real Estate     Receivable     Equipment     Other     Total     Allocation       (In Thousands)   Commercial, financial and agricultural   $ 13,067     $ 5,075     $ 18,533     $ 27,599     $ 64,274     $ 9,727   Real estate - construction     -       -       -       -       -       -   Real estate - mortgage:                                                 Owner-occupied commercial     4,372       -       -       -       4,372       1,371   1-4 family mortgage     2,982       -       -       -       2,982       163   Other mortgage     12,837       -       -       -       12,837       31   Total real estate - mortgage     20,191       -       -       -       20,191       1,565   Consumer     -       -       -       -       -       -   Total   $ 33,258     $ 5,075     $ 18,533     $ 27,599     $ 84,465     $ 11,292     19     Troubled Debt Restructuring (“TDR”) at September 30, 2022, December 31, 2021 and September 30, 2021 totaled $‐‐2.0 million, $ 2.6 million and $ 2.9 million, respectively. The portion of those TDRs accruing interest at September 30, 2022, December 31, 2021 and September 30, 2021 totaled $ 236,000 , $ 431,000 and $ 437,000 , respectively. There were no modifications made to new TDRs or renewals of existing TDRs for the three and nine ended September 30, 2022. The following tables present loans modified in a TDR during three and nine months ended September 30, 2021 by portfolio segment and the financial impact of those modifications. The tables include modifications made to new TDRs, as well as renewals of existing TDRs.       Three Months Ended September 30, 2021     Nine Months Ended September 30, 2021               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     $ 1,155     $ 1,155       2     $ 1,155     $ 1,155   Real estate - construction     -       -       -       -       -       -   Real estate - mortgage:                                                 Owner-occupied commercial     1       991       991       1       991       991   1-4 family mortgage     -       -       -       -       -       -   Other mortgage     -       -       -       -       -       -   Total real estate mortgage     1       991       991       1       991       991   Consumer     -       -       -       -       -       -         3     $ 2,146     $ 2,146       3     $ 2,146     $ 2,146     There were  no  loans which were modified in the previous  twelve  months (i.e., the  twelve  months prior to default) that defaulted during the  three and nine months ended  September 30, 2022 and September 30, 2021, respectively. For purposes of this disclosure, default is defined as  90  days past due and still accruing or placement on nonaccrual status.     NOTE 6 - LEASES   The Company leases space under non-cancelable operating leases for several of its banking offices and certain office equipment. The leases have remaining terms up to 9.1 years. At September 30, 2022, the Company had lease right-of-use assets and lease liabilities totaling $ 16.8 million and $ 17.5 million, respectively, compared to $ 17.9 million and $ 18.5 million, respectively, at December 31, 2021 which are reflected in other assets and other liabilities, respectively, in the Company’s Consolidated Balance Sheets.   Maturities of operating lease liabilities as of September 30, 2022 are as follows:       September 30, 2022       (In Thousands)   2022 (remaining)   $ 1,055   2023     3,831   2024     2,863   2025     2,742   2026     2,177   thereafter     6,126   Total lease payments     18,794   Less: imputed interest     ( 1,322 ) Present value of operating lease liabilities   $ 17,472     20     As of September 30, 2022, the weighted average remaining term of operating leases is 6.4 years and the weighted average discount rate used in the measurement of operating lease liabilities was 2.48 %.   Operating cash flows related to leases were $ 1.1 million and $ 3.1 million for the three and nine months ended September 30, 2022, respectively, compared to $ 967,000 and $ 2.5 million for the three and nine months ended September 30, 2021, respectively.   Lease costs during the three and nine months ended September 30, 2022 and September 30, 2021 were as follows (in thousands):       Three Months Ended September 30,       2022     2021   Operating lease cost   $ 1,051     $ 1,048   Short-term lease cost     22       -   Variable lease cost     153       148   Sublease income     ( 5 )     ( 24 ) Net lease cost   $ 1,221     $ 1,172         Nine Months Ended September 30,       2022     2021   Operating lease cost   $ 3,098     $ 2,960   Short-term lease cost     47       -   Variable lease cost     4,502       346   Sublease income     ( 34 )     ( 86 ) Net lease cost   $ 7,613     $ 3,220       NOTE 7 - EMPLOYEE AND DIRECTOR BENEFITS   Stock Options   The Company has a stock incentive plan as described below. The compensation cost that has been charged to earnings for the plan was approximately $ 804,000 and $ 2.4 million for the three and nine months ended September 30, 2022, respectively, and $ 461,000 and $ 1.3 million for the three and nine months ended September 30, 2021, respectively.   The Company’s 2009 Amended and Restated Stock Incentive Plan authorizes the grant of up to 5,550,000 shares and allows for the issuance of Stock Appreciation Rights, Restricted Stock, Stock Options, Non-stock Share Equivalents, Performance Shares or Performance Units. The plan allows for the grant of incentive stock options and non-qualified stock options, and option awards are granted with an exercise price equal to the fair market value of the Company’s common stock at the date of grant. The maximum term of the options granted under the plan is ten years.   The Company estimates the fair value of each stock option award using a Black-Scholes-Merton valuation model which incorporates the assumptions noted in the following table. Expected volatilities are based on an index of southeastern United States publicly traded banks. The expected term for options granted is based on the simplified 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.       2021   Expected volatility     40.00 % Expected dividends     1.78 % Expected term (in years)     7.5   Risk-free rate     2.43 %   There were no grants of stock options during the nine months ended September 30, 2022. The weighted average grant-date fair value of options granted during the nine months ended September 30, 2021 was $ 12.73 .   21     The following table summarizes stock option activity during the nine months ended September 30, 2022 and September 30, 2021:                       Weighted                       Weighted     Average                       Average     Remaining     Aggregate               Exercise     Contractual     Intrinsic       Shares     Price     Term (years)     Value                               (In Thousands)   Nine Months Ended September 30, 2022:                                 Outstanding at January 1, 2022     353,250     $ 19.28       3.8     $ 23,525   Exercised     ( 65,500 )     16.42       2.3       4,164   Forfeited     ( 1,500 )     35.21       5.8       67   Outstanding at September 30, 2022     286,250       19.51       3.4     $ 18,431                                     Exercisable at September 30, 2022     225,500     $ 14.89       2.3     $ 14,990                                     Nine Months Ended September 30, 2021:                                 Outstanding at January 1, 2021     640,950     $ 18.14       4.6     $ 16,981   Granted     500       32.60       7.7       23   Exercised     ( 257,200 )     12.46       3.2       16,805   Forfeited     ( 9,000 )     16.57       2.1       256   Outstanding at September 30, 2021     375,250     $ 19.56       4.1     $ 22,438                                     Exercisable at September 30, 2021     281,000     $ 12.79       3.0     $ 18,565     As of September 30, 2022, there was $ 246,000 of total unrecognized compensation cost related to non-vested stock options. The cost is expected to be recognized on the straight-line method over the next 1.4 years.   Restricted Stock and Performance Shares   The Company periodically grants restricted stock awards that vest upon time-based service conditions. Dividend payments are made during the vesting period. The value of restricted stock is determined to be the current value of the Company’s stock, and this total value will be recognized as compensation expense over the vesting period. As of September 30, 2022, there was $ 5.0 million of total unrecognized compensation cost related to non-vested time-based restricted stock. The cost is expected to be recognized evenly over the remaining 2.5 years of the restricted stock’s vesting period.   The Company periodically grants performance shares that give plan participants the opportunity to earn between 0 % and 150 % of the number of performance shares granted based on achieving certain performance metrics. The number of performance shares earned is determined by reference to the Company’s total shareholder return relative to a peer group of other publicly traded banks and bank holding companies during the performance period. The performance period is generally three years starting on the grant date. The fair value of the performance shares is determined using a Monte Carlo simulation model on the grant date. As of September 30, 2022, there was $ 907,000 of total unrecognized compensation cost related to non-vested performance shares. As of September 30, 2022, non-vested performance shares had a weighted average remaining time to vest of 2.0 years.       Restricted Stock     Performance Shares       Shares     Weighted Average Grant Date Fair Value     Shares     Weighted Average Grant Date Fair Value   Nine Months Ended September 30, 2022:                                 Non-vested at January 1, 2022     127,602     $ 42.27       12,437     $ 37.05   Granted     52,819       83.33       11,415       72.81   Vested     ( 26,563 )     43.51       -       -   Forfeited     ( 8,206 )     61.70       -       -   Non-vested at September 30, 2022     145,652     $ 55.84       23,852     $ 54.16                                     Nine Months Ended September 30, 2021:                                 Non-vested at January 1, 2021     84,307     $ 34.92       -     $ -   Granted     69,295       48.92       12,437       37.05   Vested     ( 13,024 )     28.44       -       -   Forfeited     ( 11,725 )     39.59       -       -   Non-vested at September 30, 2021     128,853     $ 42.68       12,437     $ 37.05     22       NOTE 8 - DERIVATIVES   The Company periodically enters into derivative contracts to manage exposures to movements in interest rates. The Company purchased an interest rate cap in May of 2020 to limit exposures to increases in interest rates. The interest rate cap is not designated as a hedging instrument. The interest rate cap has an original term of 3 years, a notional amount of $ 300 million and is tied to the one -month LIBOR rate with a strike rate of 0.50 %. The fair value of the interest rate cap is carried on the Consolidated Balance Sheet in other assets and the change in fair value is recognized in noninterest income each quarter. At September 30, 2022, the interest rate cap had a fair value of $ 6.5 million and remaining term of 0.5 years. If LIBOR is deemed unrepresentative at any time, the reference rate for the cap would be governed by the fallback protocol where LIBOR will be adjusted to the Secured Overnight Financing Rate (“SOFR”) plus the five -year median spread.   The Company has entered into forward loan sale commitments with secondary market investors to deliver loans on a “best efforts delivery” basis, which do not meet the definition of a derivative instrument. When a rate is committed to a borrower, it is based on the best price that day and locked with the investor for the customer for a 30 -day period. In the event the loan is not delivered to the investor, the Company has no risk or exposure with the investor. Interest rate lock commitments with customers related to loans that are originated for later sale are classified as derivatives. The fair values of the Company’s rate lock commitments to customers as of September 30, 2022 and December 31, 2021 were not material.     NOTE 9 – RECENTLY ADOPTED ACCOUNTING PRONOUNCEMENTS   In  July 2021,  the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”)  2021 - 05 ,   Leases (Topic   842 ) :  Lessors-Certain Leases with Variable Lease Payments , which amends guidance so that lessors are  no  longer required to record a selling loss at lease commencement for a lease with any variable lease payments that do  not  depend on an index or rate. A lessor would classify such leases as an operating lease rather than a sales-type or direct financing lease. The update was effective for the Company as of January 1, 2022. The adoption of ASU  2021 - 05  did not have an impact on the Company’s consolidated financial statements.     NOTE 10 - RECENT ACCOUNTING PRONOUNCEMENTS   In March 2022, the FASB issued ASU 2022 - 02, Financial Instruments — Credit Losses (Topic 326 ): Troubled Debt Restructurings and Vintage Disclosures. The update eliminates the TDR recognition and measurement guidance and, instead, requires that an entity evaluate whether all modifications represent a new loan or a continuation of an existing loan. The amendments also enhance existing disclosure requirements and introduce new requirements related to certain modifications of loans made to borrowers experiencing financial difficulty. These amendments also require disclosure of current-period gross write-offs by year of origination for financing receivables and net investment in leases within the scope of Subtopic 326 - 20.   The update is effective for entities that have adopted ASU No. 2016 - 13 (the CECL model) for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. These amendments should be applied prospectively, except that an entity has the option to apply a modified retrospective transition method to the recognition and measurement of TDRs. Early adoption is permitted if an entity has adopted ASU No. 2016 - 13, including adoption in an interim period as of the beginning of the fiscal year that includes the interim period. An entity may elect to early adopt the amendments about TDRs and related disclosure enhancements separately from the amendments related to vintage disclosures. The Company is assessing the impact of adopting the update on its financial statements and disclosures and is currently planning to adopt effective January 1, 2023.   In  June 2022,  The FASB issued ASU 2022 - 03, Fair Value Measurement (Topic 820 ): Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions. The update clarifies that a contractual restriction on the sale of an equity security is not considered part of the unit of account of the equity security and, therefore, is not considered in measuring fair value. This update is effective for public business entities for fiscal years, including interim periods within those fiscal years, beginning after December 15, 2023. Early adoption is permitted. The Company is assessing the impact of adopting the update on its financial statements and disclosures.     NOTE 11 - FAIR VALUE MEASUREMENT   Measurement of fair value under U.S. GAAP establishes a hierarchy that prioritizes observable and unobservable inputs used to measure fair value, as of the measurement date, into three broad levels, which are described below:   Level 1: Quoted prices (unadjusted) in active markets that are accessible at the measurement date for assets or liabilities. The fair value hierarchy gives the highest priority to Level 1 inputs. Level 2: Observable prices that are based on inputs not quoted on active markets, but corroborated by market data. Level 3: Unobservable inputs are used when little or no market data is available. The fair value hierarchy gives the lowest priority to Level 3 inputs.   In determining fair value, the Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible and also considers counterparty credit risk in its assessment of fair value.   23     Debt Securities. Where quoted prices are available in an active market, securities are classified within Level 1 of the hierarchy. Level 1 securities include highly liquid government securities such as U.S. Treasuries and exchange-traded equity securities. For securities traded in secondary markets for which quoted market prices are not available, the Company generally relies on pricing services provided by independent vendors. Such independent pricing services are to advise the Company on the carrying value of the securities available for sale portfolio. As part of the Company’s procedures, the price provided from the service is evaluated for reasonableness given market changes. When a questionable price exists, the Company investigates further to determine if the price is valid. If needed, other market participants may be utilized to determine the correct fair value. The Company has also reviewed and confirmed its determinations in discussions with the pricing source regarding their methods of price discovery. Securities measured with these techniques are classified within Level 2 of the hierarchy and often involve using quoted market prices for similar securities, pricing models or discounted cash flow calculations using inputs observable in the market where available. Examples include U.S. government agency securities, mortgage-backed securities, obligations of states and political subdivisions, and certain corporate, asset-backed and other securities. The Company periodically buys corporate debt securities in private placement transactions.  Level 2 inputs are not available for these securities.  The Company uses average observable prices of similar corporate securities owned by the Company to value such securities and are classified in Level 3 of the hierarchy.    Derivative instruments. The fair values of derivatives are determined based on a valuation pricing model using readily available observable market parameters such as interest rate curves, adjusted for counterparty credit risk. These measurements are classified as level 2 within the valuation hierarchy.   Loans Individually Evaluated. Loans individually evaluated are measured and reported at fair value when full payment under the loan terms is not probable. Loans individually evaluated are carried at the present value of expected future cash flows using a discounted cash flow calculation, or the fair value of the collateral if the loan is collateral-dependent. Expected cash flows are based on internal inputs reflecting expected default rates on contractual cash flows. This method of estimating fair value does not incorporate the exit-price concept of fair value described in ASC 820 - 10 and would generally result in a higher value than the exit-price approach. For loans measured using the estimated fair value of collateral less costs to sell, fair value is generally determined based on appraisals performed by certified and licensed appraisers using inputs such as absorption rates, capitalization rates and market comparables, adjusted for estimated costs to sell. Management modifies the appraised values, if needed, to take into account recent developments in the market or other factors, such as changes in absorption rates or market conditions from the time of valuation, and anticipated sales values considering management’s plans for disposition. Such modifications to the appraised values could result in lower valuations of such collateral. Estimated costs to sell are based on current amounts of disposal costs for similar assets. These measurements are classified as Level 3 within the valuation hierarchy. Loans individually evaluated are subject to nonrecurring fair value adjustment upon initial recognition or subsequent individual evaluation. A portion of the allowance for credit losses is allocated to loans individually evaluated if the value of such loans is deemed to be less than the unpaid balance. The range of fair value adjustments and weighted average adjustment as of September 30, 2022 was 0 % to 100 % and 18.7 %, respectively. The range of fair value adjustments and weighted average adjustment as of December 31, 2021 was 0 % to 75 % and 24.1 % respectively. Loans individually evaluated are reviewed and evaluated on at least a quarterly basis for additional impairment and adjusted accordingly based on the same factors identified above. The amount recognized to write-down individually evaluated loans that are measured at fair value on a nonrecurring basis was $ 1.4 million and $ 3.2 million during the three and nine months ended September 30, 2022, respectively, and $ 113,000 and $ 3.4 million during the three and nine months ended September 30, 2021, 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 credit losses subsequent to foreclosure. Values are derived from appraisals of underlying collateral and discounted cash flow analysis. Appraisals are performed by certified and licensed appraisers. Subsequent to foreclosure, valuations are updated periodically and assets are marked to current fair value, not to exceed the new cost basis. In the determination of fair value subsequent to foreclosure, management also considers other factors or recent developments, such as changes in absorption rates and market conditions from the time of valuation, and anticipated sales values considering management’s plans for disposition, which could result in adjustment to lower the property value estimates indicated in the appraisals. The range of fair value adjustments and weighted average adjustment as of September 30, 2022 was 0 % to 53 % and 44.2 %, respectively. The range of fair value adjustments and weighted average adjustment as of December 31, 2021 was 0 % to 100 % and 40.6 %, respectively. These measurements are classified as Level 3 within the valuation hierarchy. A gain on the sale and write-downs of OREO and repossessed assets of $ 232,000 was recognized for the nine months ended September 30, 2022, and a loss of $ 115,000 and $ 1.1 million for the three and nine months ended September 30, 2021, respectively. These charges were for write-downs in the value of OREO subsequent to foreclosure and losses on the disposal of OREO.   There were two residential real estate loans with a balance of $ 287,000 foreclosed and classified as OREO as of September 30, 2022, compared to one residential real estate loan foreclosure for $ 50,000 as of December 31, 2021.   24     There were no residential real estate loans in the process of being foreclosed as of September 30, 2022. There was one residential real estate loan for $ 299,000 in process of foreclosure as of December 31, 2021.   The following table presents the Company’s financial assets carried at fair value on a recurring basis as of September 30, 2022 and December 31, 2021. There were no liabilities measured at fair value on a recurring basis as of September 30, 2022 and December 31, 2021.       Fair Value Measurements at September 30, 2022 Using               Quoted Prices in                               Active Markets     Significant Other     Significant               for Identical     Observable Inputs     Unobservable               Assets (Level 1)     (Level 2)     Inputs (Level 3)     Total   Assets Measured on a Recurring Basis:   (In Thousands)   Available-for-sale debt securities:                                 U.S. Treasury securities   $ 5,952     $ -     $ -     $ 5,952   Government agencies     -       9       -       9   Mortgage-backed securities     -       257,764       -       257,764   State and municipal securities     -       15,020       -       15,020   Corporate debt     -       381,019       6,000       387,019   Total available-for-sale debt securities     5,952       653,812       6,000       665,763   Interest rate cap derivative     -       6,446       -       6,446   Total assets at fair value   $ 5,952     $ 660,258     $ 6,000     $ 672,209                         Fair Value Measurements at December 31, 2021 Using               Quoted Prices in                               Active Markets     Significant Other     Significant               for Identical     Observable Inputs     Unobservable               Assets (Level 1)     (Level 2)     Inputs (Level 3)     Total   Assets Measured on a Recurring Basis:   (In Thousands)   Available-for-sale debt securities:                                 U.S. Treasury securities   $ 9,104     $ -     $ -     $ 9,104   Government agencies     -       6,041       -       6,041   Mortgage-backed securities     -       425,161       -       425,161   State and municipal securities     -       21,634       -       21,634   Corporate debt     -       363,638       16,992       380,630   Total available-for-sale debt securities     9,104       816,474       16,992       842,570   Interest rate cap derivative     -       1,152       -       1,152   Total assets at fair value   $ 9,104     $ 817,626     $ 16,992     $ 843,722     The following table presents the Company’s financial assets carried at fair value on a nonrecurring basis as of September 30, 2022 and December 31, 2021. There were no liabilities measured at fair value on a non-recurring basis as of September 30, 2022, and December 31, 2021.       Fair Value Measurements at September 30, 2022               Quoted Prices in Active Markets for Identical Assets (Level 1)     Significant Other Observable Inputs (Level 2)     Significant Unobservable Inputs (Level 3)     Total   Assets Measured on a Nonrecurring Basis:   (In Thousands)   Loans individually evaluated   $ -     $ -     $ 68,204     $ 68,204   Other real estate owned and repossessed assets     -       -       1,245       1,245   Total assets at fair value   $ -     $ -     $ 69,449     $ 69,449                       Fair Value Measurements at December 31, 2021               Quoted Prices in Active Markets for Identical Assets (Level 1)     Significant Other Observable Inputs (Level 2)     Significant Unobservable Inputs (Level 3)     Total   Assets Measured on a Nonrecurring Basis:   (In Thousands)   Loans individually evaluated   $ -     $ -     $ 73,173     $ 73,173   Other real estate owned and repossessed assets     -       -       1,208       1,208   Total assets at fair value   $ -     $ -     $ 74,381     $ 74,381       25     In the case of the investment securities portfolio, the Company monitors the portfolio to ascertain when transfers between levels are required.  The nature of the remaining assets and liabilities is such that transfers in and out of any level are expected to be rare.  For the nine months ended September 30, 2022, there were three transfers between Levels 1, 2 or 3.   The table below includes a rollforward of the balance sheet amounts for the three and nine months ended September 30, 2022 and September 30, 2021 ( including the change in fair value) for financial instruments classified by the Company within Level 3 of the valuation hierarchy measured at fair value on a recurring basis including changes in fair value due in part to observable factors that are part of the valuation methodology:       For the three months ended September 30,     For the nine months ended September 30,       2022     2021     2022     2021       Available-for- sale Securities     Available-for- sale Securities     Available-for- sale Securities     Available-for- sale Securities       (In Thousands)   Fair value, beginning of period   $ 6,000     $ 14,994     $ 16,992     $ -   Transfers into Level 3     -       -       -       6,000   Total realized gains included in income     -       -       -       -   Changes in unrealized gains/losses included in other comprehensive income for assets and liabilities still held at period-end     -       24       ( 805 )     518   Purchases     -       5,500       -       18,000   Transfers out of Level 3     -       ( 3,500 )     ( 10,187 )     ( 7,500 ) Fair value, end of period   $ 6,000     $ 17,018     $ 6,000     $ 17,018     The fair value of a financial instrument is the current amount that would be exchanged in a sale between willing parties, other than in a forced liquidation. Fair value is best determined based upon quoted market prices. However, in many instances, there are no quoted market prices for the Company’s various financial instruments. In cases where quoted market prices are not available, fair values are based on estimates using present value or other valuation techniques. Those techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. Accordingly, the fair value estimates may not be realized in an immediate settlement of the instrument. Current U.S. GAAP excludes certain financial instruments and all nonfinancial instruments from its fair value disclosure requirements. Accordingly, the aggregate fair value amounts presented may not necessarily represent the underlying fair value of the Company.   The estimated fair values of the Company’s financial instruments not measured at fair value on a recurring or non-recurring basis as of September 30, 2022 and December 31, 2021 were as follows:       September 30, 2022     December 31, 2021       Carrying             Carrying               Amount     Fair Value     Amount     Fair Value       (In Thousands)   Financial Assets:                                 Level 1 inputs:                                 Cash and due from banks   $ 406,010     $ 406,010     $ 4,163,724     $ 4,163,724                                     Level 2 inputs:                                 Federal funds sold     82,316       82,316       58,372       58,372   Held to maturity debt securities     1,048,590       942,032       462,707       466,036   Mortgage loans held for sale     2,003       1,942       1,114       1,111   Restricted equity securities     7,734       7,734       7,311       7,311                                     Level 3 inputs:                                 Held to maturity debt securities     250       250       250       250   Loans, net     11,069,443       10,916,118       9,416,274       9,403,012                                     Financial liabilities:                                 Level 2 inputs:                                 Deposits   $ 11,051,915     $ 11,030,991     $ 12,452,836     $ 12,454,140   Federal funds purchased     1,466,322       1,466,322       1,711,777       1,711,777   Other borrowings     64,721       56,860       64,706       65,476     26       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 and for the three and nine months ended September 30, 2022 and September 30, 2021.   Forward-Looking Statements   Statements in this document that are not historical facts, including, but not limited to, statements concerning future operations, results or performance, are hereby identified as “forward-looking statements” for the purpose of the safe harbor provided by Section 21E of the Securities Exchange Act of 1934 (the “Exchange Act”) and Section 27A of the Securities Act of 1933. The words “believe,” “expect,” “anticipate,” “project,” “plan,” “intend,” “will,” “could,” “would,” “might” and similar expressions often signify forward-looking statements. Such statements involve inherent risks and uncertainties. The Company cautions that such forward-looking statements, wherever they occur in this quarterly report or in other statements attributable to the Company, are necessarily estimates reflecting the judgment of the Company’s senior management and involve a number of risks and uncertainties that could cause actual results to differ materially from those suggested by the forward-looking statements. Such forward-looking statements should, therefore, be considered in light of various factors that could affect the accuracy of such forward-looking statements, including, but not limited to: the global health and economic crisis precipitated by the COVID-19 outbreak; general economic conditions, especially in the credit markets and in the Southeast; the performance of the capital markets; changes in interest rates, yield curves and interest rate spread relationships; changes in accounting and tax principles, policies or guidelines; changes in legislation or regulatory requirements; changes as a result of our reclassification as a large financial institution by the FDIC; changes in our loan portfolio and the deposit base; economic crisis and associated credit issues in industries most impacted by the COVID-19 outbreak, including but not limited to, the restaurant, hospitality and retail sectors; possible changes in laws and regulations and governmental monetary and fiscal policies, including, but not limited to, economic stimulus initiatives and the ability of the U.S. Congress to increase the U.S. statutory debt limit as needed; 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, our Quarterly Reports on Form 10-Q for fiscal year 2022 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. The Company assumes no obligation to update or revise any forward-looking statements that are made from time to time.   Business   We are a bank holding company under the Bank Holding Company Act of 1956 and are headquartered in Birmingham, Alabama. Our wholly-owned subsidiary, ServisFirst Bank, an Alabama banking corporation, provides commercial banking services through full-service banking offices located in Alabama, Florida, Georgia, South Carolina, and Tennessee. We also operate loan production offices in Florida and North Carolina. Through the Bank, we originate commercial, consumer and other loans and accept deposits, provide electronic banking services, such as online and mobile banking, including remote deposit capture, deliver treasury and cash management services and provide correspondent banking services to other financial institutions.   Our principal business is to accept deposits from the public and to make loans and other investments. Our principal sources of funds for loans and investments are demand, time, savings, and other deposits. Our principal sources of income are interest and fees collected on loans, interest and dividends collected on other investments and service charges. Our principal expenses are interest paid on savings and other deposits, interest paid on our other borrowings, employee compensation, office expenses and other overhead expenses.   27     Third quarter highlights     ● Diluted earnings per common share of $1.17 for the third quarter of 2022, an increase of 22%, from the third quarter 2021.   ● Average loans of $10.92 billion for the third quarter of 2022 increased $2.24 billion, or 26%, from a year ago.   ● Net interest income of $126.4 million for the third quarter of 2022, an increase of $30.1 million, or 31%, from the third quarter of 2021. Net interest margin of 3.64% for the third quarter of 2022 increased 79 basis points from 2.85% in the third quarter of 2021. The increase primarily resulted from increased yields in 2022 and increases in average non-interest-bearing deposits and equity.   Overview   As of September 30, 2022, we had consolidated total assets of $13.89 billion, down $1.6 billion, or 10.1%, from total assets of $15.45 billion at December 31, 2021.  Total loans were $11.28 billion at September 30, 2022, up $1.75 billion, or 18.3%, from $9.53 billion at December 31, 2021. Total deposits were $11.05 billion at September 30, 2022, down $1.40 billion, or 11.3%, from $12.45 billion at December 31, 2021.   Net income available to common stockholders for the three months ended September 30, 2022 was $64.0 million, up  $11.5 million, or 22.0%, from $52.5 million for the three months ended September 30, 2021.  Basic and diluted earnings per common share were $1.18 and $1.17, respectively, for the three months ended September 30, 2022, compared to $0.97 and $0.96, respectively, in the corresponding period in 2021.    Net income available to common stockholders for the nine months ended September 30, 2022 was $183.7 million, up $29.8 million, or 19.4%, from $154.0 million for the corresponding period in 2021.  Basic and diluted earnings per common share were $3.38 and $3.37, respectively, for the nine months ended September 30, 2022, compared to $2.84 and $2.83, respectively, for the corresponding period in 2021.   Performance Ratios   The following table presents selected ratios of our results of operations for the three and nine ended September 30, 2022, and 2021.       Three Months Ended September 30,     Nine Months Ended September 30,       2022     2021     2022     2021   Return on average assets     1.77 %     1.50 %     1.64 %     1.58 % Return on average stockholders' equity     20.49 %     18.93 %     20.44 %     19.45 % Dividend payout ratio     19.07 %     20.75 %     20.28 %     21.22 % Net interest margin (1)     3.64 %     2.85 %     3.26 %     3.03 % Efficiency ratio (2)     31.54 %     32.95 %     31.93 %     30.57 % Average stockholders' equity to average total assets     8.61 %     7.91 %     8.02 %     8.12 %   (1) Net interest margin in the net yield on interest earning assets and is the difference between the interest yield earned on interest-earning assets and interest rate paid on interest-bearing liabilities, divided by average earning assets.   (2) Efficiency ratio is the result of noninterest expense divided by the sum of net interest income and noninterest income.     Financial Condition   Cash and Cash Equivalents   At September 30, 2022, we had $82.3 million in federal funds sold, compared to $58.4 million at December 31, 2021.  We also maintain balances at the Federal Reserve Bank of Atlanta, which earn interest.  At September 30, 2022, we had $145.3 million in balances at the Federal Reserve, compared to $4.07 billion at December 31, 2021. This decrease in balances at the Federal Reserve is the result of loan growth and decreases in deposits.   28     Investment Securities   Debt securities available for sale totaled $665.8 million at September 30, 2022 and  $842.6 million at December 31, 2021. Investment securities held to maturity totaled $1.05 billion at September 30, 2022 and $463.0 million at December 31, 2021. We had paydowns of $107.4 million on mortgage-backed securities and government agencies, maturities of $25.9 million on municipal bonds, corporate securities and treasury securities, and calls of $24.5 million on U.S. government agencies and municipal securities during the nine months ended September 30, 2022. We recognized a $6.2 million loss on the sale of available for sale debt securities during the nine months ended September 30, 2022. We sold sixteen debt securities available for sale for $75.0 million that were yielding less than 1.00%. We purchased $361.6 million in US Treasuries, $286.7 million in mortgage-backed securities, and $76.4 million in corporate securities during the nine months ended September 30, 2022.  For a tabular presentation of debt securities available for sale and held to maturity at September 30, 2022 and December 31, 2021, see “Note 4 – Securities” in our Notes to Consolidated Financial Statements.   The objective of our investment policy is to invest funds not otherwise needed to meet our loan demand to earn the maximum return, yet still maintain sufficient liquidity to meet fluctuations in our loan demand and deposit structure.  In doing so, we balance the market and credit risks against the potential investment return, make investments compatible with the pledge requirements of any deposits of public funds, maintain compliance with regulatory investment requirements, and assist certain public entities with their financial needs.  The investment committee has full authority over the investment portfolio and makes decisions on purchases and sales of securities.  The entire portfolio, along with all investment transactions occurring since the previous board of directors meeting, is reviewed by the board at each monthly meeting.  The investment policy allows portfolio holdings to include short-term securities purchased to provide us with needed liquidity and longer-term securities purchased to generate level income for us over periods of interest rate fluctuations.   All investment securities in an unrealized loss position as of September 30, 2022 continue to perform as scheduled. We have evaluated the securities and have determined that the decline in fair value, relative to their amortized cost, is not due to credit-related factors. In addition, we have the ability to hold these securities within the portfolio until maturity or until the value recovers, and we believe that it is not likely that we will be required to sell these securities prior to recovery. We continue to monitor all of our securities with a high degree of scrutiny. There can be no assurance that we will not conclude in future periods that conditions existing at that time indicate some or all of its securities may be sold or would require a charge to earnings as a provision for credit losses in such periods.    The Company does not invest in collateralized debt obligations (“CDOs”). As of September 30, 2022, we had $410.7 billion of bank holding company subordinated notes. If rated, all such bonds were rated BBB or better by Kroll Bond Rating Agency at the time of our initial investment. All other corporate bonds had a Standard and Poor’s or Moody’s rating of A-1 or better when purchased. Municipal investments have a combined average credit rating of AA as of September 30, 2022.   The carrying value of investment securities pledged to secure public funds on deposit and for other purposes as required by law was $748.3 million and $463.1 million as of September 30, 2022 and December 31, 2021, respectively.   Loans   We had total loans of $11.28 billion at September 30, 2022, up $1.75 billion, or 18.3%, compared to $9.53 billion at December 31, 2021. We originated approximately 7,400 PPP loans totaling $1.5 billion during the COVID-19 pandemic. Total remaining PPP loans outstanding were $7.2 million and $230.2 million at September 30, 2022 and December 31, 2021, respectively.   Asset Quality   The Company assesses the adequacy of its allowance for credit losses ("ACL") at the end of each calendar quarter. The level of ACL is based on the Company’s evaluation of historical default and loss experience, current and projected economic conditions, asset quality trends, known and inherent risks in the portfolio, adverse situations that may affect the borrowers’ ability to repay a loan, the estimated value of any underlying collateral, composition of the loan portfolio and other relevant factors. The ACL is increased by a provision for credit losses, which is charged to expense, and reduced by charge-offs, net of recoveries. The ACL is believed adequate to absorb all expected future losses to be recognized over the contractual life of the loans in the portfolio.   Loans with similar risk characteristics are evaluated in pools and, depending on the nature of each identified pool, the Company utilizes a discounted cash flow (“DCF”), probability of default / loss given default (“PD/LGD”) or remaining life method. The historical loss experience estimate by pool is then adjusted by forecast factors that are quantitatively related to the Company’s historical credit loss experience, such as national unemployment rates and gross domestic product. Losses are predicted over a period of time determined to be reasonable and supportable, and at the end of the reasonable and supportable period losses are reverted to long term historical averages. The reasonable and supportable period and reversion period are re-evaluated each quarter by the Company and are dependent on the current economic environment among other factors. See “Note 1 – General” and “Note 5 – Loans” in the Notes to Consolidated Financial Statements included in Item 1. Consolidated Financial Statements elsewhere in this report.   29     The expected credit losses for each loan pool are then adjusted for changes in qualitative factors not inherently considered in the quantitative analyses. The qualitative adjustments either increase or decrease the quantitative model estimation. The Company considers factors that are relevant within the qualitative framework which include the following: lending policy, changes in nature and volume of loans, staff experience, changes in volume and trends of problem loans, concentration risk, trends in underlying collateral values, external factors, quality of loan review system and other economic conditions.   Expected credit losses for loans that no longer share similar risk characteristics with the collectively evaluated pools are excluded from the collective evaluation and estimated on an individual basis. Individual evaluations are performed for nonaccrual loans, loans rated substandard, and modified loans classified as TDRs. Specific allocations of the ACL for credit losses are estimated on one of several methods, including the estimated fair value of the underlying collateral, observable market value of similar debt or the present value of expected cash flows.       As of and for the Three Months Ended     As of and for the Nine Months Ended       September 30,     September 30,       2022     2021     2022     2021       (Dollars in thousands)   Total loans outstanding, net of unearned income   $ 11,278,614     $ 8,812,811     $ 11,278,614     $ 8,812,811   Average loans outstanding, net of unearned income   $ 10,919,957     $ 8,680,174     $ 10,034,565     $ 8,613,172   Allowance for credit losses at beginning of period     128,387       104,670       116,660       87,942   Charge-offs:                                 Commercial, financial and agricultural loans     2,902       1,541       7,143       2,168   Real estate - construction     -       -       -       -   Real estate - mortgage     170       208       220       279   Consumer loans     261       86       459       227   Total charge-offs     3,333       1,835       7,822       2,674   Recoveries:                                 Commercial, financial and agricultural loans     297       140       1,619       464   Real estate - construction     -       -       -       52   Real estate - mortgage     -       4       -       68   Consumer loans     12       8       37       32   Total recoveries     309       152       1,656       616   Net charge-offs     3,024       1,683       6,166       2,058   Provision for credit losses     15,603       5,963       30,472       23,066   Allowance for credit losses at period end   $ 140,967     $ 108,950     $ 140,967     $ 108,950   Allowance for credit losses to period end loans     1.25 %     1.24 %     1.25 %     1.24 % Net charge-offs to average loans     0.11 %     0.08 %     0.08 %     0.03 %               Percentage of loans               in each category   September 30, 2022   Amount     to total loans         (In Thousands)           Commercial, financial and agricultural   $ 42,834       33.22 % Real estate - construction     40,016       10.08 % Real estate - mortgage     56,043       55.97 % Consumer     2,074       0.73 % Total   $ 140,967       100.00 %               Percentage of loans               in each category   December 31, 2021   Amount     to total loans         (In Thousands)           Commercial, financial and agricultural   $ 41,869       31.30 % Real estate - construction     26,994       11.57 % Real estate - mortgage     45,829       56.43 % Consumer     1,968       0.70 % Total   $ 116,660       100.00 %   30     Nonperforming Assets   Total nonperforming loans, which include nonaccrual loans and loans 90 or more days past due and still accruing, increased to $16.5 million at September 30, 2022, compared to $12.1 million at December 31, 2021. Of this total, nonaccrual loans of $11.7 million at September 30, 2022 represented a net increase of $4.9 million from nonaccrual loans at December 31, 2021. Excluding credit card accounts, there were two loans 90 or more days past due and still accruing totaling $4.8 million at September 30, 2022, compared to four loans totaling $5.3 million at December 31, 2021. TDRs at September 30, 2022 and December 31, 2021 were $2.0 million and $2.6 million, respectively.   The following table summarizes our nonperforming assets and TDRs at September 30, 2022 and December 31, 2021:       September 30, 2022     December 31, 2021               Number of             Number of       Balance     Loans     Balance     Loans       (Dollar Amounts In Thousands)   Nonaccrual loans:                                 Commercial, financial and agricultural   $ 8,714       22     $ 4,343       17   Real estate - construction     -       -       -       -   Real estate - mortgage:                                 Owner-occupied commercial     1,020       3       1,021       2   1-4 family mortgage     1,372       13       1,398       12   Other mortgage     506       2       -       -   Total real estate - mortgage     2,899       18       2,419       14   Consumer     42       1       -       -   Total Nonaccrual loans:   $ 11,655       41     $ 6,762       31                                     90+ days past due and accruing:                                 Commercial, financial and agricultural   $ 95       10     $ 39       4   Real estate - construction     -       -       -       -   Real estate - mortgage:                                 Owner-occupied commercial     -       -       -       -   1-4 family mortgage     79       1       611       3   Other mortgage     4,548       1       4,656       1   Total real estate - mortgage     4,627       2       5,267       4   Consumer     82       26       29       22   Total 90+ days past due and accruing:   $ 4,803       38     $ 5,335       30                                     Total Nonperforming Loans:   $ 16,458       79     $ 12,097       61                                     Plus: Other real estate owned and repossessions     1,245       7       1,208       5   Total Nonperforming Assets   $ 17,703       86     $ 13,305       66                                     Restructured accruing loans:                                 Commercial, financial and agricultural   $ 236       1     $ 431       2   Real estate - construction     -       -       -       -   Real estate - mortgage:                                 Owner-occupied commercial     -       -       -       -   1-4 family mortgage     -       -       -       -   Other mortgage     -       -       -       -   Total real estate - mortgage     -       -       -       -   Consumer     -       -       -       -   Total restructured accruing loans:   $ 236       1     $ 431       2                                     Total Nonperforming assets and restructured accruing loans   $ 17,939       87     $ 13,736       68                                     Ratios:                                 Nonperforming loans to total loans     0.15 %             0.13 %         Nonperforming assets to total loans plus other real estate owned and repossessions     0.16 %             0.14 %         Nonperforming assets plus restructured accruing loans to total loans plus other real estate owned and repossessions     0.16 %             0.14 %           31     OREO and repossessed assets remained unchanged at $1.2 million at September 30, 2022, from December 31, 2021. The following table summarizes OREO and repossessed asset activity for the nine months ended September 30, 2022 and 2021:       Nine Months Ended September 30,       2022     2021       (In thousands)   Balance at beginning of period   $ 1,208     $ 6,497   Transfers from loans and capitalized expenses     1,045       1,419   Proceeds from sales     (1,240 )     (911 ) Internally financed sales     -       (3,779 ) Write-downs / net gain (loss) on sales     232       (1,158 ) Balance at end of period   $ 1,245     $ 2,068     The balance of nonperforming assets can fluctuate due to changes in economic conditions. We have established a policy to discontinue accruing interest on a loan (i.e., place the loan on nonaccrual status) after it has become 90 days delinquent as to payment of principal or interest, unless the loan is considered to be well-collateralized and is actively in the process of collection. In addition, a loan will be placed on nonaccrual status before it becomes 90 days delinquent if management believes that the collection of interest is not expected. Interest previously accrued but uncollected on such loans is reversed and charged against current income when the receivable is determined to be uncollectible. Interest income on nonaccrual loans is recognized only as received. If we believe that a loan will not be collected in full, we will increase the allowance for credit losses to reflect management’s estimate of any potential exposure or loss. Generally, payments received on nonaccrual loans are applied directly to principal.   In keeping with guidance from regulators, the Company continues to work with COVID-19 affected borrowers to defer their payments and interest. While interest continues to accrue to income, through normal GAAP accounting, should eventual credit losses on these deferred payments emerge, the related loans would be placed on nonaccrual status and interest income accrued would be reversed. In such a scenario, interest income in future periods could be negatively impacted. As of September 30, 2022, the Company carries $2.5 million of accrued interest income on deferrals made to COVID-19 affected borrowers compared to $4.0 million at December 31, 2021. At this time, the Company is unable to project the materiality of such an impact on future deferrals to COVID-19 affected borrowers but recognizes the breadth of the economic impact may affect its borrowers’ ability to repay in future periods.   Deposits   We rely on increasing our deposit base to fund loan and other asset growth. Each of our markets is highly competitive. We compete for local deposits by offering attractive products with competitive rates. We expect to have a higher average cost of funds for local deposits than competitor banks due to our lack of an extensive branch network. Our management’s strategy is to offset the higher cost of funding with a lower level of operating expense and firm pricing discipline for loan products. We have promoted electronic banking services by providing them without charge and by offering in-bank customer training. Total deposits were $11.05 billion at September 30, 2022, a decrease of $1.40 billion, or 11.3%, from $12.45 billion at December 31, 2021. We saw some run-off in correspondent deposits during the third quarter of 2022, while the non-correspondent deposits were stable during the quarter. It was to be expected that our correspondent banks would engage in lending, security purchases, and funding their balance sheet; however, the volume may be slightly higher than we anticipated. We anticipate long-term sustainable growth in deposits through continued development of market share in our less mature markets and through organic growth in our mature markets.   For amounts and rates of our deposits by category, see the table “Average Balance Sheets and Net Interest Analysis on a Fully Taxable-Equivalent Basis” under the subheading “Net Interest Income.”   The following table summarizes balances of our deposits and the percentage of each type to the total at September 30, 2022 and December 31, 2021:       September 30, 2022     December 31, 2021   Noninterest-bearing demand   $ 3,661,936       33.13 %   $ 4,799,767       38.54 % Interest-bearing demand     1,773,122       16.04 %     1,652,710       13.27 % Money market     4,605,010       41.67 %     5,094,313       40.91 % Savings     145,504       1.32 %     97,946       0.79 % Time deposits , $250,000 and under     263,634       2.39 %     267,164       2.15 % Time deposits, over $250,000     552,708       5.00 %     490,936       3.94 % Brokered time deposits     50,000       0.45 %     50,000       0.40 %     $ 11,051,915       100.00 %   $ 12,452,836       100.00 %     32     At September 30, 2022 and December 31, 2021, we estimate that we had approximately $8.58 billion and $10.65 billion, respectively, in uninsured deposits, which are the portion of deposit accounts that exceed the FDIC insurance limit.   The following table presents the maturities of our time deposits in excess of FDIC insurance limits as of September 30, 2022.       Portion of time deposits in excess of insurance limit       September 30, 2022   Time deposits otherwise uninsured with a maturity of:   (In Thousands)   3 months or less   $ 93,433   Over 3 through 6 months     76,820   Over 6 months through 12 months     94,878   Over 12 months     132,310   Total   $ 397,441     The uninsured deposit data for 2022 and 2021 reflect the deposit insurance impact of “combined ownership segregation” of escrow and other accounts at an aggregate level but do not reflect an evaluation of all of the account styling distinctions that would determine the availability of deposit insurance to individual accounts based on FDIC regulations.   Other Borrowings   Our borrowings consist of federal funds purchased and subordinated notes payable. We had $1.47 billion and $1.71 billion at September 30, 2022 and December 31, 2021, respectively, in federal funds purchased from correspondent banks that are clients of our correspondent banking unit. The average rate paid on these borrowings was 2.27% for the quarter ended September 30, 2022.  Other borrowings consist of the following:     ● $34.75 million of the Company’s 4% Subordinated Notes due October 21, 2030, which were issued in a private placement in October 2020 and pay interest semi-annually. The Notes may not be prepaid by the Company prior to October 21, 2025.   ● $30.0 million of 4.5% Subordinated Notes due November 8, 2027, which were issued in a private placement in November 2017 and pay interest semi-annually. The Notes may not be prepaid by the Company prior to November 8, 2022.   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. Our current deposit levels are sufficient to maintain liquidity needs but 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, 2022, liquid assets, which are represented by cash and due from banks, federal funds sold and unpledged available-for-sale securities, totaled $1.57 billion.  At September 30, 2022, the Bank had borrowing availability of approximately $963.0 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 our anticipated funding needs.   Our management meets on a quarterly basis to review sources and uses of funding to determine the appropriate strategy to ensure an appropriate level of liquidity. At the current time, our long-term liquidity needs primarily relate to funds required to support loan originations and commitments and deposit withdrawals. Our regular sources of funding are from the growth of our deposit base, correspondent banking relationships and related federal funds purchased, repayment of principal and interest on loans, the sale of loans and the renewal of time deposits. In addition, we have issued debt as described above under “Other Borrowings”. We believe these sources of funding are adequate to meet both our immediate (within the next 12 months) and our longer term anticipated funding needs. However, we may need additional funding in order to maintain our current growth rate into the future.   33     We are subject to general FDIC guidelines that require a minimum level of liquidity. Management believes our liquidity ratios meet or exceed these guidelines. However, uncertainties brought about by the increasing interest rates and inflation may adversely affect our ability to obtain funding or may increase the cost of funding.   The following table illustrates, during the periods presented, the mix of our funding sources and the assets in which those funds are invested as a percentage of our average total assets for the period indicated. Average assets totaled $14.39 billion and $15.00 billion for the three and nine months ended September 30, 2022 and 2021, respectively.       For the Three Months Ended September 30,     For the Nine Months Ended September 30,       2022     2021     2022     2021   Sources of Funds:                                 Deposits:                                 Non-interest-bearing     30.6 %     27.3 %     32.1 %     25.3 % Interest-bearing     49.4       55.3       48.7       57.7   Federal funds purchased     10.4       8.7       10.4       7.8   Long term debt and other borrowings     0.5       0.5       0.4       0.5   Other liabilities     0.4       0.4       0.3       0.7   Equity capital     8.8       7.8       8.1       8.0   Total sources     100.0 %     100.0 %     100.0 %     100.0 %                                   Uses of Funds:                                 Loans     75.9 %     62.4 %     67.0 %     66.2 % Securities     12.5       7.1       11.2       7.2   Interest-bearing balances with banks     6.6       27.1       18.1       22.6   Federal funds sold     0.7       0.1       0.2       0.1   Other assets     4.3       3.4       3.5       3.9   Total uses     100.0 %     100.0 %     100.0 %     100.0 %   Capital Adequacy   Total stockholders’ equity attributable to us at September 30, 2022 was $1.24 billion, or 8.94% of total assets. At December 31, 2021, total stockholders’ equity attributable to us was $1.15 billion, or 7.45% of total assets.   As of September 30, 2022, our most recent notification from the FDIC categorized us as well-capitalized under the regulatory framework for prompt corrective action. To remain categorized as well-capitalized, we must maintain minimum common equity Tier 1, Tier 1 risk-based, total risk-based, and Tier 1 leverage ratios as disclosed in the table below. Our management believes that we are well-capitalized under the prompt corrective action provisions and that we meet leverage ratio requirements inclusive of the applicable 2.5% capital conservation buffer as of September 30, 2022   34     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, not including the applicable 2.5% capital conservation buffer, of capital to total regulatory or risk-weighted assets, as of September 30, 2022, December 31, 2021 and September 30, 2021:                                       To Be Well Capitalized                       For Capital Adequacy     Under Prompt Corrective       Actual     Purposes     Action Provisions       Amount     Ratio     Amount     Ratio     Amount     Ratio   As of September 30, 2022   (Dollars in Thousands)   CET 1 Capital to Risk-Weighted Assets:                                                 Consolidated   $ 1,272,564       9.42 %   $ 607,684       4.50 %     N/A       N/A   ServisFirst Bank     1,332,933       9.87 %     607,645       4.50 %   $ 877,710       6.50 % Tier 1 Capital to Risk-Weighted Assets:                                                 Consolidated     1,273,064       9.43 %     810,245       6.00 %     N/A       N/A   ServisFirst Bank     1,333,433       9.87 %     810,194       6.00 %     1,080,259       8.00 % Total Capital to Risk-Weighted Assets:                                                 Consolidated     1,480,681       10.96 %     1,080,326       8.00 %     N/A       N/A   ServisFirst Bank     1,476,329       10.93 %     1,080,259       8.00 %     1,350,323       10.00   Tier 1 Capital to Average Assets:                                                 Consolidated     1,273,064       8.84 %     576,098       4.00 %     N/A       N/A   ServisFirst Bank     1,333,433       9.26 %     576,009       4.00 %     720,011       5.00 %                                                   As of December 31, 2021                                                 CET 1 Capital to Risk-Weighted Assets:                                                 Consolidated   $ 1,123,826       9.95 %   $ 508,027       4.50 %     N/A       N/A   ServisFirst Bank     1,185,161       10.50 %     507,969       4.50 %   $ 733,733       6.50 % Tier 1 Capital to Risk-Weighted Assets:                                                 Consolidated     1,124,326       9.96 %     677,370       6.00 %     N/A       N/A   ServisFirst Bank     1,185,661       10.50 %     677,292       6.00 %     903,056       8.00 % Total Capital to Risk-Weighted Assets:                                                 Consolidated     1,306,992       11.58 %     903,160       8.00 %     N/A       N/A   ServisFirst Bank     1,303,621       11.55 %     903,056       8.00 %     1,128,821       10.00 % Tier 1 Capital to Average Assets:                                                 Consolidated     1,124,326       7.39 %     608,883       4.00 %     N/A       N/A   ServisFirst Bank     1,185,661       7.79 %     608,826       4.00 %     761,033       5.00 %                                                   As of September 30, 2021                                                 CET 1 Capital to Risk-Weighted Assets:                                                 Consolidated   $ 1,081,750       10.46 %   $ 465,322       4.50 %     N/A       N/A   ServisFirst Bank     1,143,936       11.06 %     465,264       4.50 %   $ 672,047       6.50 % Tier 1 Capital to Risk-Weighted Assets:                                                 Consolidated     1,082,250       10.47 %     620,429       6.00 %     N/A       N/A   ServisFirst Bank     1,144,436       11.07 %     620,352       6.00 %     827,135       8.00 % Total Capital to Risk-Weighted Assets:                                                 Consolidated     1,258,901       12.17 %     827,239       8.00 %     N/A       N/A   ServisFirst Bank     1,256,386       12.15 %     827,135       8.00 %     1,033,919       10.00 % Tier 1 Capital to Average Assets:                                                 Consolidated     1,082,250       7.80 %     554,910       4.00 %     N/A       N/A   ServisFirst Bank     1,144,436       8.25 %     554,858       4.00 %     693,572       5.00 %   We are a legal entity separate and distinct from the Bank. Our principal source of cash flow, including cash flow to pay dividends to our stockholders, is dividends the Bank pays to us as the Bank’s sole shareholder. Statutory and regulatory limitations apply to the Bank’s payment of dividends to us as well as to our payment of dividends to our stockholders. The requirement that a bank holding company must serve as a source of strength to its subsidiary banks also results in the position of the Federal Reserve that a bank holding company should not maintain a level of cash dividends to its stockholders that places undue pressure on the capital of its bank subsidiaries or that can be funded only through additional borrowings or other arrangements that may undermine the Bank holding company’s ability to serve as such a source of strength. Our ability to pay dividends is also subject to the provisions of Delaware corporate law.   The Alabama Banking Department also regulates the Bank’s dividend payments. Under Alabama law, a state-chartered bank may not pay a dividend in excess of 90% of its net earnings until the Bank’s surplus is equal to at least 20% of its capital (our Bank’s surplus currently exceeds 20% of its capital). Moreover, our Bank is also required by Alabama law to obtain the prior approval of the Superintendent of Banks (“Superintendent”) for its payment of dividends if the total of all dividends declared by the Bank in any calendar year will exceed the total of (i) the Bank’s net earnings (as defined by statute) for that year, plus (ii) its retained net earnings for the preceding two years, less any required transfers to surplus. In addition, no dividends, withdrawals or transfers may be made from the Bank’s surplus without the prior written approval of the Superintendent.   The Bank’s payment of dividends may also be affected or limited by other factors, such as the requirement to maintain adequate capital above regulatory guidelines. The federal banking agencies have indicated that paying dividends that deplete a depository institution’s capital base to an inadequate level would be an unsafe and unsound banking practice. Under the Federal Deposit Insurance Corporation Improvement Act of 1991, a depository institution may not pay any dividends if payment would cause it to become undercapitalized or if it already is undercapitalized. Moreover, the federal agencies have issued policy statements that provide that bank holding companies and insured banks should generally only pay dividends out of current operating earnings. If, in the opinion of the federal banking regulators, the Bank were engaged in or about to engage in an unsafe or unsound practice, the federal banking regulators could require, after notice and a hearing, that the Bank stop or refrain from engaging in the questioned practice.   35     Commitments and Contingencies   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 arrangements. All such credit arrangements bear interest at variable rates and we have no such credit arrangements which bear interest at fixed rates.   Our exposure to credit loss in the event of non-performance by the other party to such financial instrument for commitments to extend credit, credit card arrangements and standby letters of credit is represented by the contractual or notional amount of these instruments. We use the same credit policies in making commitments and conditional obligations as we do for on-balance sheet instruments.   As part of our mortgage operations, we originate and sell certain loans to investors in the secondary market. We continue to experience a manageable level of investor repurchase demands. For loans sold, we have an obligation to either repurchase the outstanding principal balance of a loan or make the purchaser whole for the economic benefits of a loan if it is determined that the loans sold were in violation of representations and warranties made by the Bank at the time of the sale. Representations and warranties typically include those made regarding loans that had missing or insufficient file documentation or loans obtained through fraud by borrowers or other third parties such as appraisers.   Financial instruments whose contract amounts represent credit risk at September 30, 2022 are as follows:       September 30, 2022       (In Thousands)   Commitments to extend credit   $ 4,236,751   Credit card arrangements     408,550   Standby letters of credit     72,740       $ 4,718,041     Commitments to extend credit beyond current funded amounts are agreements to lend to a customer as long as there is no violation of any condition established in the applicable loan agreement. Such commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. We evaluate each customer’s creditworthiness on a case-by-case basis. The amount of collateral obtained if deemed necessary by us upon extension of credit is based on our management’s credit evaluation. Collateral held varies but may include accounts receivable, inventory, property, plant and equipment and income-producing commercial properties.   Standby letters of credit are conditional commitments issued by us to guarantee the performance of a customer to a third party. Those guarantees are primarily issued to support public and private borrowing arrangements, including commercial paper, bond financing, and similar transactions. All letters of credit are due within one year or less of the original commitment date. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers.   Federal funds lines of credit are uncommitted lines issued to downstream correspondent banks for the purpose of providing liquidity to them. The lines are unsecured, and we have no obligation to sell federal funds to the correspondent, nor does the correspondent have any obligation to request or accept purchases of federal funds from us.   Results of Operations   Summary of Net Income   Net income and net income available to common stockholders for the three months ended September 30, 2022 was $64.0 million compared to net income and net income available to common stockholders of $52.5 million for the three months ended September 30, 2021.  Net income and net income available to common stockholders for the nine months ended September 30, 2022 was $183.8 million and $183.7 million, respectively, compared to net income and net income available to common stockholders of $154.0 million for the nine months ended September 30, 2021.  For the three and nine months ended September 30, 2022 compared to 2021 net interest income increased $30.1 million, and $65.2 million, respectively. The increase in net interest income for the three and nine -month periods is primarily attributable to growth in average earning assets and non-interest-bearing deposit balances. Increases in non-interest expense of $8.3 million and $25.1 million and increases in income tax expense of $1.5 million and $3.1 million, respectively, for the three and nine months ended September 30, 2022 compared to 2021 partially offset increases in net interest income.   36     Basic and diluted earnings per common share were $1.18 and $1.17, respectively, for the three months ended September 30, 2022, compared to $0.97 and $0.96, respectively, for the corresponding period in 2021.  Basic and diluted earnings per common share were $3.38 and $3.37, respectively, for the nine months ended September 30, 2022, compared to $2.84 and $2.83, respectively, for the corresponding period in 2021.  Return on average assets for the three and nine months ended September 30, 2022 was 1.77% and 1.64% compared to 1.50% and 1.63%, respectively, for the corresponding periods in 2021.  Return on average common stockholders’ equity for the three and nine months ended September 30, 2022 was 20.49% and 20.44%, respectively, compared to 18.93% and 19.73%, respectively, for the corresponding periods in 2021.   Net Interest Income and Net Interest Margin Analysis   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 $30.1 million, or 31.2%, to $126.5 million for the three months ended September 30, 2022 compared to $96.4 million for the corresponding period in 2021, and increased $65.1 million, or 23.0%, to $348.7 million for the nine months ended September 30, 2022 compared to $283.6 million for the corresponding period in 2021.  This increase was primarily attributable to growth in average earning assets, which increased $341.7 million, or 2.5%, from the third quarter of 2021 to the third quarter of 2022, and $1.79 billion, or 14.3%, from the nine months ended September 30, 2021 to the same period in 2022. The taxable-equivalent yield on interest-earning assets increased to 4.30% for the three months ended September 30, 2022 from 3.08% for the corresponding period in 2021, and increased to 3.63% for the nine months ended September 30, 2022 from 3.28% for the corresponding period in 2021.  The yield on loans for the three months ended September 30, 2022 was 4.77% compared to 4.39% for the corresponding period in 2021, and 4.51% compared to 4.43% for the nine months ended September 30, 2022 and September 30, 2021, respectively.  The cost of total interest-bearing liabilities increased to 1.05% for the three months ended September 30, 2022 compared to 0.35% for the corresponding period in 2021, and increased to 0.61% for the nine months ended September 30, 2022 from 0.37% for the corresponding period in 2021.  Net interest margin for the three months ended September 30, 2022 was 3.64% compared to 2.85% for the corresponding period in 2021, and 3.26% for the nine months ended September 30, 2022 compared to 3.03% for the corresponding period in 2021. During the third quarter of 2022, the Federal Reserve Bank increased their targeted federal funds rate from 1.50 - 1.75%  to 3.00 – 3.25%. We believe our net interest income will benefit from this and future rate increases as we anticipate a lag in deposit pricing increases to loan pricing increases.   The following tables show, for the three and nine months ended September 30, 2022 and September 30, 2021, 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:   37     Average Balance Sheets and Net Interest Analysis   On a Fully Taxable-Equivalent Basis   For the Three Months Ended September 30,   (In thousands, except Average Yields and Rates)                                                         2022     2021               Interest     Average             Interest     Average       Average     Earned /     Yield /     Average     Earned /     Yield /       Balance     Paid     Rate     Balance     Paid     Rate   Assets:                                                 Interest-earning assets:                                                 Loans, net of unearned                                                 Taxable   $ 10,900,105     $ 131,187       4.77 %   $ 8,653,632     $ 95,870       4.40 % Tax-exempt (3)     19,852       207       4.14       26,542       271       4.05   Total loans, net of unearned income     10,919,957       131,394       4.77       8,680,174       96,141       4.39   Mortgage loans held for sale     2,906       20       2.73       7,050       30       1.69   Investment securities:                                                 Taxable     1,797,560       11,089       2.47       969,715       6,545       2.70   Tax-exempt (3)     5,863       35       2.39       12,382       74       2.39   Total debt     1,803,423       11,124       2.47       982,097       6,619       2.70   Federal funds sold     102,028       632       2.46       8,551       4       0.19   Restricted equity securities     7,724       71       3.65       -       -       -   Interest-bearing balances with banks     945,142       6,102       2.56       3,761,652       1,506       0.16   Total interest-earning assets   $ 13,781,180     $ 149,343       4.30     $ 13,439,524     $ 104,300       3.08   Non-interest-earning assets:                                                 Cash and due from banks     256,607                       90,034                   Net fixed assets and equipment     60,155                       62,845                   Allowance for credit losses, accrued interest and other assets     294,006                       315,178                   Total assets   $ 14,391,948                     $ 13,907,581                                                                     Liabilities and stockholders' equity:                                           Interest-bearing liabilities:                                                 Interest-bearing demand deposits   $ 1,722,926     $ 1,235       0.28 %   $ 1,431,420     $ 694       0.19 % Savings deposits     144,368       75       0.21       122,579       54       0.17   Money market accounts     4,444,583       9,982       0.89       5,328,291       3,494       0.26   Time deposits     809,057       2,363       1.16       806,108       2,341       1.15   Total interest-bearing deposits     7,120,934       13,655       0.76       7,688,398       6,583       0.34   Federal funds purchased     1,493,444       8,536       2.27       1,205,327       643       0.21   Other borrowings     65,406       690       4.19       64,694       690       4.23   Total interest-bearing liabilities   $ 8,679,784     $ 22,881       1.05 %   $ 8,958,419     $ 7,916       0.35 % Non-interest-bearing liabilities:                                                 Non-interest-bearing demand deposits     4,410,318                       3,800,972                   Other liabilities     62,093                       48,060                   Stockholders' equity     1,263,870                       1,078,987                   Accumulated other comprehensive (loss) income     (24,117 )                     21,143                   Total liabilities and stockholders' equity   $ 14,391,948                     $ 13,907,581                   Net interest income           $ 126,462                     $ 96,384           Net interest spread                     3.25 %                     2.73 % Net interest margin                     3.64 %                     2.85 %   (1) Non-accrual loans are included in average loan balances in all periods. Loan fees of $3,849 and $7,203 are included in interest income in the third quarter of 2022 and 2021, respectively. Loan fees include accretion of PPP loan fees. (2) Amortization of acquired loan premiums of $38 and $21 is included in interest income in 2022 and 2021, respectively. (3) Interest income and yields are presented on a fully taxable equivalent basis using a tax rate of 21%. (4) Unrealized (losses) gains of $(36,817) and $26,709 are excluded from the yield calculation in the third quarter of 2022 and 2021, respectively.   38         For the Three Months Ended September 30,       2022 Compared to 2021 Increase (Decrease) in Interest Income and Expense Due to Changes in:       Volume     Rate     Total       (In Thousands)   Interest-earning assets:                         Loans, net of unearned income                         Taxable   $ 26,501     $ 8,816     $ 35,317   Tax-exempt     (70 )     6       (64 ) Total loans, net of unearned income     26,431       8,822       35,253   Mortgages held for sale     (23 )     13       (10 ) Debt securities:                         Taxable     5,151       (607 )     4,544   Tax-exempt     (39 )     -       (39 ) Total debt securities     5,112       (607 )     4,505   Federal funds sold     297       331       628   Restricted equity securities     71       -       71   Interest-bearing balances with banks     (1,933 )     6,529       4,596   Total interest-earning assets   $ 29,955     $ 15,088     $ 45,043                             Interest-bearing liabilities:                         Interest-bearing demand deposits   $ 161     $ 380     $ 541   Savings     11       10       21   Money market accounts     (669 )     7,157       6,488   Time deposits     9       13       22   Total interest-bearing deposits     (488 )     7,560       7,072   Federal funds purchased     190       7,703       7,893   Other borrowed funds     8       (8 )     -   Total interest-bearing liabilities     (290 )     15,255       14,965   Increase in net interest income   $ 30,245     $ (167 )   $ 30,078     Our growth in loans continues to drive favorable volume component change and overall change. The rate component was unfavorable as loan yields increased 38 basis points and average rates paid on interest-bearing liabilities increased 70 basis points. Growth in non-interest-bearing deposits and equity also contributed to the increase in net interest revenue during the three months ended September 30, 2022 compared to the same period in 2021.   39       Average Balance Sheets and Net Interest Analysis On a Fully Taxable-Equivalent Basis For the Nine Months Ended September 30, (In thousands, except Average Yields and Rates)       2022     2021               Interest                     Interest               Average     Earned /     Average     Average     Earned /     Average       Balance     Paid     Yield / Rate     Balance     Paid     Yield / Rate   Assets:                                                 Interest-earning assets:                                                 Loans, net of unearned income (1)(2):                                                 Taxable   $ 10,233,704     $ 345,165       4.51 %   $ 8,586,180     $ 284,548       4.43 % Tax-exempt (3)     22,868       717       4.19       26,992       834       4.13   Total loans, net of unearned income     10,256,572       345,882       4.51       8,613,172       285,382       4.43   Mortgage loans held for sale     1,442       29       2.69       10,683       150       1.88   Investment securities:                                                 Taxable     1,698,208       29,828       2.35       928,567       18,666       2.69   Tax-exempt (3)     7,263       136       2.50       16,748       315       2.51   Total debt securities (4)     1,705,471       29,964       2.35       945,315       18,981       2.68   Federal funds sold     50,102       738       1.97       9,558       11       0.15   Restricted equity securities     7,608       211       4       -       -       -   Interest-bearing balances with banks     2,295,282       12,389       1       2,943,629       3,046       3.28   Total interest-earning assets   $ 14,316,477     $ 389,213       3.63 %   $ 12,522,357     $ 307,570       3.28 % Non-interest-earning assets:                                                 Cash and due from banks     179,378                       127,963                   Net fixed assets and equipment     60,675                       60,448                   Allowance for credit losses, accrued interest and other assets     301,675                       318,745                   Total assets   $ 14,858,205                     $ 13,029,513                                                                     Liabilities and stockholders' equity:                                                 Interest-bearing liabilities:                                                 Interest-bearing demand deposits   $ 1,672,861     $ 2,903       0.23 %   $ 1,359,212     $ 1,954       0.19 % Savings deposits     138,160       194       0.19       106,853       142       0.18   Money market accounts     4,680,296       17,017       0.49       5,236,809       10,348       0.26   Time deposits     789,463       5,811       0.98       805,523       7,854       1.30   Total interest-bearing deposits     7,280,780       25,925       0.48       7,508,397       20,298       0.36   Federal funds purchased     1,554,283       12,539       1.08       1,009,905       1,630       0.22   Other borrowings     65,406       2,070       4.23       64,691       2,070       4.28   Total interest-bearing liabilities   $ 8,900,469     $ 40,534       0.61 %   $ 8,582,993     $ 23,998       0.37 % Non-interest-bearing liabilities:                                                 Non-interest-bearing demand deposits     4,700,160                       3,295,530                   Other liabilities     59,362                       92,641                   Stockholders' equity     1,209,209                       1,038,336                   Accumulated other comprehensive (loss) income     (10,995 )                     20,013                   Total liabilities and stockholders' equity   $ 14,858,205                     $ 13,029,513                   Net interest income           $ 348,679                     $ 283,572           Net interest spread                     3.02 %                     2.91 % Net interest margin                     3.26 %                     3.03 %   (1)   Non-accrual loans are included in average loan balances in all periods. Loan fees include accretion of PPP loan fees of $15,975 and $27,519 are included in interest income in 2022 and 2021, respectively. (2)   Amortization of acquired loan premiums of $108 and $43 is included in interest income in 2022 and 2021, respectively. (3)   Interest income and yields are presented on a fully taxable equivalent basis using a tax rate of 21%. (4)   Unrealized (losses) gains of $(14,920) and $25,276 are excluded from the yield calculation in 2022 and 2021, respectively.       40           For the Nine Months Ended September 30,       2022 Compared to 2021 Increase (Decrease) in Interest Income and Expense Due to Changes in:       Volume     Rate     Total       (In Thousands)   Interest-earning assets:                         Loans, net of unearned income                         Taxable   $ 55,486     $ 5,131     $ 60,617   Tax-exempt     (129 )     12       (117 ) Total loans, net of unearned income     55,357       5,143       60,500   Mortgages held for sale     (167 )     46       (121 ) Debt securities:                         Taxable     13,776       (2,614 )     11,162   Tax-exempt     (178 )     (1 )     (179 ) Total debt securities     13,598       (2,615 )     10,983   Federal funds sold     193       534       727   Restricted equity securities     211       -       211   Interest-bearing balances with banks     (811 )     10,154       9,343   Total interest-earning assets   $ 68,381     $ 13,262     $ 81,643                             Interest-bearing liabilities:                         Interest-bearing demand deposits   $ 500     $ 449     $ 949   Savings     44       8       52   Money market accounts     (1,204 )     7,873       6,669   Time deposits     (154 )     (1,889 )     (2,043 ) Total interest-bearing deposits     (814 )     6,441       5,627   Federal funds purchased     1,297       9,612       10,909   Other borrowed funds     23       (23 )     -   Total interest-bearing liabilities     506       16,030       16,536   Increase in net interest income   $ 67,875     $ (2,768 )   $ 65,107     Our growth in loans continues to drive favorable volume component change and overall change. The rate component was unfavorable as loan yields increased 8 basis points while average rates paid on interest-bearing liabilities increased 24 basis point.  Growth in non-interest-bearing deposits and equity also contributed to the increase in net interest revenue during the nine months ended September 30, 2022 compared to the same period in 2021.   Provision for Credit Losses   The provision for credit losses was $15.6 million for the three months ended September 30, 2022, an increase of $9.6 million from $5.9 million for the three months ended September 30, 2021, and was $30.5 million for the nine months ended September 30, 2022, a $7.4 million increase compared to $23.1 million for the nine months ended September 30, 2021. The increase in provision expense is primarily the result of deterioration in the economic projections used to inform loss driver forecasts within the ACL model. The ACL for September 30, 2022 and December 31, 2021 was $141.0 million and $116.7 million, or 1.25% and 1.22% of loans, net of unearned income, respectively. Annualized net credit charge-offs to quarter-to-date average loans were 0.11% for the three months ended September 30, 2022, compared to 0.08% for the same period in 2021. Annualized net credit charge-offs to year-to-date average loans were 0.08% for the nine months ended September 30, 2022, compared to 0.03% for the corresponding period in 2021.  Nonperforming loans increased to $16.5 million, or 0.15% of total loans, at September 30, 2022 from $12.1 million, or 0.13% of total loans, at December 31, 2021, and were $14.5 million, or 0.16% of total loans, at September 30, 2021. See the section captioned “Asset Quality” located elsewhere in this item for additional discussion related to provision for credit losses.   Noninterest Income       Three Months Ended September 30,                     Nine Months Ended September 30,                       2022     2021     $ change     % change     2022     2021     $ change     % change   Noninterest income:                                                                 Service charges on deposit accounts   $ 1,892     $ 1,727     $ 165       9.6 %   $ 6,167     $ 5,542     $ 625       11.3 % Mortgage banking     784       1,423       (639 )     (44.9 )%     1,924       6,869       (4,945 )     (72.0 )% Credit card income     2,612       2,043       569       27.9 %     7,656       5,147       2,509       48.7 % Securities gains     -       -       -       - %     (6,168 )     620       (6,788 )     (1,094.8 )% Increase in cash surrender value life insurance     1,637       1,671       (34 )     (2.0 )%     4,878       5,012       (134 )     (2.7 )% Other operating income     2,014       1,162       852       73.3 %     11,936       2,897       9,039       312.0 % Total non-interest income   $ 8,939     $ 8,026     $ 913       11.4 %   $ 26,393     $ 26,087     $ 306       1.2 %   41     Noninterest income totaled $8.9 million for the three months ended September 30, 2022, an increase of $913,000 compared to the corresponding period in 2021, and totaled $26.4 million for the nine months ended September 30, 2022, an increase of  $306,000, or 1.2%, compared to the corresponding period in 2021. Mortgage banking income decreased  $639,000, or 44.9%, to  $784,000 for the three months ended September 30, 2022 compared to $1.4 million for the same period in 2021, and decreased $4.9 million, or 72.0%, to $1.9 million for the nine months ended September 30, 2022 compared to $6.9 million for the same period in 2021. The decrease in mortgage revenue was predominantly driven by rising borrowing costs and slowing housing sales. Net credit card income increased $569,000 to $2.6 million for the three months ended September 30, 2022 compared to the same period in 2021, and increased $2.5 million to $7.7 million for the nine months ended September 30, 2022 compared to the same period in 2021. The aggregate amount of spend on all credit card accounts increased 27.2% during the third quarter of 2022 compared to the third quarter of 2021. Increase in cash surrender value of life insurance decreased $34,000, or 2.0%, to $1.6 million during the three months ended September 30, 2022, compared to the corresponding period in 2021, and decreased $134,000, or 2.7%, to $4.9 million for the nine months ended September 30, 2022 compared to $5 million for the same period in 2021. Other income increased  $852,000, or 73.3%, to $2.0 million for the three months ended September 30, 2022 compared to $1.2 million for the same period in 2021, and increased $9.0 million, or 312.0%, to $11.9 million for the nine months ended September 30, 2022 compared to $2.9 million for the same period in 2021. We recognized $1.3 million of income related to our interest rate cap during the third quarter 2022 and $6.5 million year-to-date 2022 compared to a write down of $98,000 during the third quarter of 2021 and a write-up of $174,000 year-to-date 2021. Merchant service revenue increased from $375,000 during the third quarter of 2021 to $468,000, or 25%, during the third quarter of 2022.   Noninterest Expense       Three Months Ended September 30,                     Nine Months Ended September 30,                       2022     2021     $ change     % change     2022     2021     $ change     % change   Noninterest expense:                                                                 Salaries and employee benefits   $ 19,687     $ 17,995     $ 1,692       9.4 %   $ 58,722     $ 50,425     $ 8,297       16.5 % Equipment and occupancy expense     3,140       2,996       144       4.8 %     9,056       8,494       562       6.6 % Third party processing and other services     7,213       4,144       3,069       74.1 %     19,163       11,506       7,657       66.5 % Professional services     1,036       948       88       9.3 %     3,355       2,978       377       12.7 % FDIC and other regulatory assessments     975       1,630       (655 )     (40.2 )%     3,254       4,637       (1,383 )     (29.8 )% OREO expense     21       123       (102 )     (82.9 )%     56       820       (764 )     (93.2 )% Other operating expense     10,613       6,541       4,072       62.3 %     26,118       15,740       10,378       65.9 % Total non-interest expense   $ 42,685     $ 34,377     $ 8,308       24.2 %   $ 119,724     $ 94,600     $ 25,124       26.6 %   Noninterest expense totaled $42.7 million for the three months ended September 30, 2022, an increase of $8.3 million, or 24.2%, compared to $34.4 million for the same period in 2021, and totaled $119.7 million for the nine months ended September 30, 2022, an increase of $25.1 million, or 26.6%, compared to $94.6 million for the same period in 2021.   Details of more significant expense fluctuations are as follows:       ● Salary and benefit expense increased $1.7 million, or 9.4%, to $19.7 million for the three months ended September 30, 2022, from $18.0 million for the same period in 2021, and increased $8.3 million, or 16.5%, to $58.7 million for the nine months ended September 30, 2022 from $50.4 million for the same period in 2021. The increase is primarily due to an increase in the number of employees, adding 13 bankers during the third quarter of 2022, and 15 bankers during the second quarter of 2022. Total employees increased from 518 as of September 30, 2021, to 558 as of September 30, 2022.   ● Third party processing and other services increased $3.1 million, or 74.1%, to $7.2 million for the three months ended September 30, 2022, from $4.1 million for the corresponding period in 2021, and increased $7.7 million, or 66.5%, to $19.2 million for the nine months ended September 30, 2022 compared to $11.5 million for the corresponding period in 2021. This increase in third party processing includes Federal Reserve Bank charges related to correspondent bank settlement activities. These charges increased by $3.0 million year-over-year to $3.7 million during the third quarter of 2022. 42       ● FDIC and other regulatory assessments decreased $655,000, or 40.2%, to $975,000.0 for the three months ended September 30, 2022 from $1.6 million for the corresponding period in 2021, and decreased $1 million, or 29.8%, to $3.3 million for the nine months ended September 30, 2022 compared to $4.6 million for the corresponding period in 2021.   ● OREO expense decreased $102,000, or 82.9%, to $21,000 for the three months ended September 30, 2022 from  $123,000 for the corresponding period in 2021, and decreased  $764,000, or 93.2%, to  $56,000 from  $820,000 for the nine months ended September 30, 2022 compared to the corresponding period in 2021. The decrease in OREO expense was largely due to decreases in our OREO balances between September 30, 2021 and September 30, 2022.   ● Other operating expenses increased $4.1 million, or 62.3%, to $10.6 million for the three months ended September 30, 2022, from $6.5 million for the corresponding period in 2021, and increased $10.4 million, or 65.9%, to $26.1 million from $15.7 million for the nine months ended September 30, 2022 compared to the corresponding period in 2021. During the third quarter of 2022 we reached a preliminary settlement on a lawsuit and wrote down the value of a private investment resulting together in charges of $3.1 million, or $2.4 million net of income tax.   Income Tax Expense   Income tax expense was $13.0 million for the three months ended September 30, 2022 compared to $11.5 million for the same period in 2021, and was $40.9 million for the nine months ended September 30, 2022, compared to $37.8 million for the same period in 2021. Our effective tax rate for the three and nine months ended September 30, 2022 was 16.92% and 18.21%, respectively, compared to 17.98% and 19.71% for the corresponding periods in 2021, respectively.  We recognized $3.1 million and $9.4 million related to investments in tax credit partnerships during the three and nine months ended September 30, 2022, respectively, compared to $3.3 million and $3.6 million during the same periods in 2021, respectively. We recognized excess tax benefits as an income tax credit to our income tax expense from the exercise and vesting of stock options and restricted stock during the three and nine months ended September 30, 2022 of $370,000 and $1.3 million, respectively, compared to $78,000 and $2.4 million during the three and nine months ended September 30, 2021, respectively.  Our primary permanent differences are related to tax exempt income on securities, state income tax benefit on real estate investment trust dividends, various qualifying tax credits and change in cash surrender value of bank-owned life insurance.   We own real estate investment trusts for the purpose of holding and managing participations in residential mortgages and commercial real estate loans originated by the Bank. The trusts are wholly-owned subsidiaries of a trust holding company, which in turn is an indirect wholly-owned subsidiary of the Bank. The trusts earn interest income on the loans they hold and incur operating expenses related to their activities. They pay their net earnings, in the form of dividends, to the Bank, which receives a deduction for state income taxes.   Critical Accounting Estimates   The accounting and financial policies of the Company conform to U.S. generally accepted accounting principles 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. In management’s opinion, certain accounting policies have a more significant impact than others on the Company’s financial reporting. The allowance for credit losses and income taxes are particularly significant for the Company’s financial reporting. Information concerning our accounting policies and critical accounting estimates with respect to these items is available in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021. There were no changes to the accounting policies for the allowance for credit losses or income taxes during the three and nine months ended September 30, 2022.