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Item 8. Financial Statements and Supplementary Data

2024-03-01 compared with 2023-02-28 · 772 added, 1926 removed, 1131 unchanged (70% of the section changed)

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The financial statements and supplementary data required by Regulations S-X and by Item 302 of Regulation S‑K are set forth in the pages listed below.                  

Report of Independent Registered Public Accounting Firm on Consolidated Financial Statements

7 unchanged sentences

Report of Independent Registered Public Accounting Firm

To the Stockholders and Board of Directors

ServisFirst Bancshares, Inc.

To the shareholders and the board of directors of ServisFirst Bancshares, Inc.

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheets of ServisFirst Bancshares, Inc.

and subsidiaries (the “Company”) as of December 31, 2022 and 2021, the related consolidated statements of income, comprehensive income, stockholders’

equity, and cash flows for each of the years in the three-year period ended December 31, 2022, and the related notes (collectively referred to as the “financial statements”). 

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2022, in conformity with accounting principles generally accepted in the United States of America.

Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 28, 2023, expressed an unqualified opinion thereon.

and subsidiaries (the “Company”) as of December 31, 2023 and 2022, the related consolidated statements of income, comprehensive income, stockholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2023, and the related notes (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2023, in conformity with accounting principles generally accepted in the United States of America.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the Company’s internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 29, 2024, expressed an unqualified opinion thereon.

Basis for Opinion

These financial statements are the responsibility of the Company’s management. 

Our responsibility is to express an opinion on the Company’s financial statements based on our audits.

These consolidated financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits.

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. 

Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. 

Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. 

Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. 

We conducted our audits in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.

Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements.

Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that:

(1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. 

The communication of the critical audit matter does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing separate opinions on the critical audit matter or on the accounts or disclosures to which it relates.

Allowance for Credit Losses on Loans

As described in Notes 1 and 3 to the financial statements, the Company’s loan portfolio and the associated allowance for credit losses (“allowance”) were $11.7 billion and $146.3 million as of December 31, 2022, respectively.

The amount of the allowance represents management’s best estimate of current expected credit losses on loans considering the loan portfolios, past loan loss experience, current asset quality trends, known and inherent risks in the portfolio, adverse situations that may affect the borrower’s ability to repay (including the timing of future payment), the estimated value of any underlying collateral, composition of the loan portfolio, current and projected economic conditions, industry and peer bank loan quality indications and other pertinent factors, including regulatory recommendations.

As further described in Notes 1 and 3 to the financial statements, to calculate the allowance, loans with similar risk characteristics are collectively evaluated in pools and loans that do not share similar risk characteristics are excluded from the collective pools and evaluated on an individual basis.

The critical audit matter communicated below is a matter arising from the current-period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that:

(1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Allowance for Loan Losses

The Company’s loan portfolio and the associated allowance for credit losses (“allowance”) were $11.66 billion and $153.3 million as of December 31, 2023, respectively.

As further described in Notes 1 and 3 to the consolidated financial statements, the amount of the allowance represents management’s best estimate of current expected credit losses on loans considering the characteristics of the loan portfolio and the economic environment.

To calculate the allowance, loans with similar risk characteristics are collectively evaluated in pools and loans that do not share similar risk characteristics are excluded from the collective pools and evaluated on an individual basis.

Management evaluates each loan pool utilizing a discounted cash flow, probability of default / loss given default or remaining life method, depending on the nature of the loan pool.

1 unchanged sentence

The estimated credit losses for each loan pool are then adjusted for qualitative factors not inherently considered in the quantitative analyses.

Consideration is given to the following factors: 

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.

1 unchanged sentence

We identified the allowance for credit losses, and more specifically the qualitative factor adjustments applied in the allowance, as a critical audit matter.

The principal considerations for our determination of the qualitative factor adjustments as a critical audit matter are the subjectivity of the assumptions that management utilized in determining and applying qualitative factors in the allowance model.

The principal consideration for our determination of the qualitative factor adjustments as a critical audit matter is the subjectivity of the assumptions that management utilized in determining and applying qualitative factors in the allowance model.

Furthermore, certain inputs and assumptions lack observable data and, therefore, applying audit procedures required a higher degree of auditor judgment and subjectivity due to the nature and extent of audit evidence and effort required to address this matter.

The primary audit procedures we performed to address this critical audit matter included:

Evaluated the design and tested the operating effectiveness of key controls relating to the Company’s allowance, including controls over the determination of qualitative factor adjustments, the precision of management’s review and approval of the resulting estimate, and testing of the model’s performance.

Assessed the appropriateness and reasonableness of the qualitative factor adjustment framework, including evaluating management’s judgments as to which factors and relevant assessed risks impacted the qualitative adjustments for each loan pool.

Evaluated and tested the reasonableness and relevance of data utilized in the qualitative factor adjustments, including considering the data’s completeness and accuracy and testing the mathematical accuracy of the calculations.

Utilized the assistance of the firm’s internal specialists to test the mathematical operation of the model and to evaluate the reasonableness of assumptions and judgments used in forecast components.

Analyzed the total qualitative factor adjustment applied to each loan pool, in comparison to changes in the Company’s quantitatively driven expected credit losses and loan pools and evaluated the appropriateness and level of the total qualitative factor adjustment applied in the overall allowance.

● Analyzed the total qualitative factor adjustment applied to each loan pool, in comparison to changes in the Company’s quantitatively driven expected credit losses and loan pools and evaluated the appropriateness and level of the total qualitative factor adjustment applied in the overall allowance.

/s/ FORVIS, LLP

(Formerly, Dixon Hughes Goodman LLP)

We have served as the Company’s auditor since 2014.

Atlanta, Georgia

We have served as the Company’s auditor since 2014.

Tampa, Florida

February 29, 2024

Report of Independent Registered Public Accounting Firm

To the Stockholders and Board of Directors  

To the Board of Directors and Stockholders

ServisFirst Bancshares, Inc.

Opinion on the Internal Control over Financial Reporting

Opinion on Internal Control Over Financial Reporting

We have audited ServisFirst Bancshares, Inc.

and subsidiaries’

(the “Company”) internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control –

Integrated Framework:

(2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). 

In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control –

Integrated Framework:

and subsidiaries’ (the “Company”) internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control – Integrated Framework:

(2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control – Integrated Framework:

(2013) issued by COSO.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the consolidated financial statements of the Company as of December 31, 2022 and 2021, and for each of the three years in the period ended December 31, 2022, and our report dated February 28, 2023, expressed an unqualified opinion on those consolidated financial statements.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the consolidated financial statements of the Company as of December 31, 2023 and 2022, and for each of the three years in the period ended December 31, 2023, and our report dated February 29, 2024, expressed an unqualified opinion on those consolidated financial statements.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting. 

Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. 

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. 

Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. 

Our audit also included performing such other procedures as we considered necessary in the circumstances. 

We conducted our audit in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.

Our audit also included performing such other procedures as we considered necessary in the circumstances.

We believe that our audit provides a reasonable basis for our opinion.

Definitions and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of reliable financial statements for external purposes in accordance with generally accepted accounting principles. 

A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;

(2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company;

and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. 

Definition and Limitations of Internal Control Over Financial Reporting

A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;

(2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company;

and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.

Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate.

/s/ FORVIS, LLP

(Formerly, Dixon Hughes Goodman LLP)

Atlanta, Georgia

Tampa, Florida

February 29, 2024

6 unchanged sentences

Cash and due from banks

$ 106,317  

$ 56,934  

$ 123,430 $ 106,317

Interest-bearing balances due from depository institutions

708,221  

4,106,790  

1,907,083 708,221

Federal funds sold

58,372  

100,575 1,515

Cash and cash equivalents

816,053  

4,222,096  

2,131,088 816,053

Available-for-sale debt securities, at fair value

644,815  

842,570  

Held to maturity debt securities (fair value of $ 935,953 at December 31, 2022 and $ 466,286 at December 31, 2021)

1,034,121  

462,957  

900,183 644,815

Held-to-maturity debt securities (fair value of $ 907,191 and $ 935,953 , respectively)

982,664 1,034,121

Restricted equity securities

Mortgage loans held for sale

11,687,968  

9,532,934  

11,658,829 11,687,968

Less allowance for credit losses

( 146,297 )  

11,541,671  

9,416,274  

( 153,317 ) ( 146,297 )

11,505,512 11,541,671

Premises and equipment, net

59,850  

60,300  

59,324 59,850

Accrued interest and dividends receivable

48,422  

34,831  

59,181 48,422

Deferred tax asset, net

60,448  

37,772  

62,918 60,448

Other real estate owned and repossessed assets

Bank owned life insurance contracts

287,752  

283,074  

Goodwill and other identifiable intangible assets

13,615  

13,638  

79,417  

65,661  

$ 14,595,753  

$ 15,448,806  

292,759 287,752

13,615 13,615

106,129 79,417

$ 16,129,668 $ 14,595,753

LIABILITIES AND STOCKHOLDERS' EQUITY

Non-interest-bearing demand

$ 3,321,347  

$ 4,799,767  

$ 2,643,101 $ 3,321,347

Interest-bearing

8,225,458  

7,653,069  

10,630,410 8,225,458

Total deposits

11,546,805  

12,452,836  

13,273,511 11,546,805

Federal funds purchased

1,618,798  

1,711,777  

1,256,724 1,618,798

Other borrowings

64,726  

64,706  

64,735 64,726

Accrued interest and dividends payable

18,615  

13,619  

27,545 18,615

Other liabilities

48,913  

53,853  

66,748 48,913

Total liabilities

13,297,857  

14,296,791  

14,689,263 13,297,857

Stockholders' equity:

2 unchanged sentences

Common stock, par value $ 0.001 per share;

200,000,000 shares authorized, 54,326,527 shares issued and outstanding at December 31, 2022;

and 100,000,000 shares authorized, 54,227,060 shares issued and outstanding at December 31, 2021

200,000,000 shares authorized:

54,461,580 shares issued and outstanding at December 31, 2023;

and 54,326,527 shares issued and outstanding at December 31, 2022

Additional paid-in capital

229,693  

226,397  

232,605 229,693

Retained earnings

1,109,902  

911,008  

Accumulated other comprehensive (loss) income

( 42,253 )  

14,056  

1,254,841 1,109,902

Accumulated other comprehensive loss

( 47,595 ) ( 42,253 )

Total stockholders' equity attributable to ServisFirst Bancshares, Inc.

1,297,396  

1,151,515  

1,439,905 1,297,396

Noncontrolling interest

Total stockholders' equity

1,297,896  

1,152,015  

1,440,405 1,297,896

Total liabilities and stockholders' equity

$ 14,595,753  

$ 15,448,806  

$ 16,129,668 $ 14,595,753

See Notes to Consolidated Financial Statements.

46 unchanged sentences

Year Ended December 31,

$ 251,504  

$ 207,734  

$ 169,569  

Other comprehensive (loss) income, net of tax:

Unrealized net holding (losses) gains arising during period from securities available for sale, net of tax of $ (19,336) , $ (2,705) and $ 3,845 for 2022, 2021, and 2020, respectively

( 59,768 )  

( 10,181 )  

14,469  

$ 206,853 $ 251,504 $ 207,734

Other comprehensive loss, net of tax:

Unrealized net holding losses arising during period from securities available for sale, net of tax of $( 1,593 ), $( 19,336 ), and $( 2,705 ) for 2023, 2022, and 2021, respectively

( 4,754 ) ( 59,768 ) ( 10,181 )

Amortization of net unrealized (losses) on securities transferred from available-for-sale to held-to-maturity, net of tax of $( 197 ), $( 375 ), and $( 319 ) for 2023, 2022, and 2021 respectively

( 1,414 )  

( 1,196 )  

( 588 ) ( 1,414 ) ( 1,196 )

Reclassification adjustment for securities transferred from available-for-sale to held-to-maturity net of tax of $ 1,480 for 2021

Reclassification adjustment for net losses (gains) on call and sale of securities, net of tax of $ 1,295 and $( 130 ), for 2022 and 2021, respectively

( 490 )  

Other comprehensive (loss) income, net of tax

( 56,309 )  

( 6,162 )  

14,469  

- 4,873 ( 490 )

Other comprehensive loss, net of tax

( 5,342 ) ( 56,309 ) ( 6,162 )

Comprehensive income

$ 195,195  

$ 201,572  

$ 184,038  

$ 201,511 $ 195,195 $ 201,572

See Notes to Consolidated Financial Statements.

5 unchanged sentences

Common Shares

Comprehensive

Income (loss)

Stockholders'

Preferred Stock

Additional Paid-in Capital

Retained Earnings

Accumulated Other Comprehensive Income (Loss)

Non-controlling Interest

Total Stockholders' Equity

Balance, January 1, 2021

53,623,740  

$ 219,766  

$ 616,611  

$ 5,749  

$ 842,682  

53,943,751 $ - $ 54 $ 223,856 $ 748,224 $ 20,218 $ 500 $ 992,852

Common dividends paid, $ 0.60 per share

( 28,230 )  

- - - ( 32,520 ) - - ( 32,520 )

Common dividends declared, $ 0.23 per share

( 10,787 )  

- - - ( 12,472 ) - - ( 12,472 )

Preferred dividends paid

( 63 )  

Exit tax credit partnership

Impact of adopting ASC 326

- - - ( 62 ) - - ( 62 )

Dividends on nonvested restricted stock recognized as compensation expense

- - - - 104 - - 104

Issue restricted shares pursuant to stock incentives, net of forfeitures

33,195  

57,570 - - - - - - -

Issue shares of common stock upon exercise of stock options

286,816  

225,739 - - 3,534 - - - 3,534

52,461 shares of common stock withheld in net settlement upon exercise of stock options

( 729 )  

( 2,848 ) - - - ( 2,848 )

Stock-based compensation expense

Other comprehensive income, net of tax

14,469  

169,569  

- - 1,855 - - - 1,855

Other comprehensive loss, net of tax

- - - - ( 6,162 ) - ( 6,162 )

- - - 207,734 - - 207,734

Balance, December 31, 2021

53,943,751  

$ 223,856  

$ 748,224  

$ 20,218  

$ 992,852  

54,227,060 $ - $ 54 $ 226,397 $ 911,008 $ 14,056 $ 500 $ 1,152,015

Common dividends paid, $ 0.69 per share

( 32,520 )  

- - - ( 37,470 ) - - ( 37,470 )

Common dividends declared, $ 0.28 per share

( 12,472 )  

- - - ( 15,211 ) - - ( 15,211 )

Preferred dividends paid

( 62 )  

- - - ( 62 ) - - ( 62 )

Dividends on nonvested restricted stock recognized as compensation expense

- - - - 133 - - 133

Issue restricted shares pursuant to stock incentives, net of forfeitures

57,570  

42,765 - - - - - - -

Issue shares of common stock upon exercise of stock options

225,739  

56,702 - - 1,232 - - - 1,232

13,798 shares of common stock withheld in net settlement upon exercise of stock options

( 2,848 )  

( 1,143 ) - - - ( 1,143 )

Stock-based compensation expense

- - 3,207 - - - 3,207

Other comprehensive loss, net of tax

( 6,162 )  

207,734  

- - - - ( 56,309 ) - ( 56,309 )

- - - 251,504 - - 251,504

Balance, December 31, 2022

54,227,060  

$ 226,397  

$ 911,008  

$ 14,056  

$ 1,152,015  

54,326,527 $ - $ 54 $ 229,693 $ 1,109,902 $ ( 42,253 ) $ 500 $ 1,297,896

Common dividends paid, $ 0.84 per share

( 37,470 )  

- - - ( 45,711 ) - - ( 45,711 )

Common dividends declared, $ 0.30 per share

( 15,211 )  

- - - ( 16,338 ) - - ( 16,338 )

Preferred dividends paid

( 62 )  

- - - ( 62 ) - - ( 62 )

Dividends on nonvested restricted stock recognized as compensation expense

- - - - 197 - - 197

Issue restricted shares pursuant to stock incentives, net of forfeitures

42,765  

51,881 - - - - - - -

Issue shares of common stock upon exercise of stock options

56,702  

83,172 - - 1,287 - - - 1,287

29,028 shares of common stock withheld in net settlement upon exercise of stock options

( 1,143 )  

( 1,975 ) - - - ( 1,975 )

Stock-based compensation expense

- - 3,600 - - - 3,600

Other comprehensive loss, net of tax

( 56,309 )  

251,504  

- - - - ( 5,342 ) - ( 5,342 )

- - - 206,853 - - 206,853

Balance, December 31, 2023

54,326,527  

$ 229,693  

$ 1,109,902  

$ ( 42,253 )  

$ 1,297,896  

54,461,580 $ - $ 54 $ 232,605 $ 1,254,841 $ ( 47,595 ) $ 500 $ 1,440,405

See Notes to Consolidated Financial Statements.

5 unchanged sentences

OPERATING ACTIVITIES

$ 251,504  

$ 207,734  

$ 169,569  

Adjustments to reconcile net income to net cash provided by operating activities:

( 2,615 )  

( 5,061 )  

Adjustments to reconcile net income to net cash provided by operations

Deferred tax benefit

Provision for credit losses

37,607  

31,517  

42,434  

Accretion on acquired loans

Amortization of core deposit intangible

Amortization of investments in tax credit partnerships

11,716  

Amortization of investments in tax credit partnerships

Net amortization of debt securities available-for-sale

14,665  

(Increase) decrease in accrued interest and dividends receivable

( 13,591 )  

Increase in accrued interest and dividends receivable

Stock-based compensation expense

1 unchanged sentence

Proceeds from sale of mortgage loans held for sale

50,922  

234,086  

284,881  

Originations of mortgage loans held for sale

( 48,977 )  

( 213,435 )  

Loss (gain) on sale of securities available for sale

( 620 )  

Gain on sale of mortgage loans held for sale

( 2,438 )  

( 7,340 )  

Net (gain) loss on sale of other real estate owned and repossessed assets

( 501 )  

Loss (gain) on sale of securities available for sale

Net loss (gain) on sale of other real estate owned and repossessed assets

Write down of other real estate owned and repossessed assets

1 unchanged sentence

Increase in cash surrender value of life insurance contracts

( 6,478 )  

( 6,642 )  

Net change in other assets, liabilities, and other operating activities

( 25,980 )  

( 6,144 )  

Net cash provided by operating activities

272,627  

266,331  

191,290  

INVESTMENT ACTIVITIES

Purchases of debt securities available-for-sale

( 76,360 )  

( 416,903 )  

Proceeds from maturities, calls and paydowns of debt securities available-for-sale

115,750  

177,166  

220,993  

Proceeds from sale of debt securities available-for-sale

75,036  

Purchases of debt securities held-to-maturity

( 648,266 )  

( 290,769 )  

Proceeds from maturities, calls and paydowns of debt securities held-to-maturity

75,311  

94,797  

Purchases of restricted equity securities

( 423 )  

( 7,311 )  

Proceeds from sale of restricted equity securities

Investment in tax credit partnerships and SBIC

( 20,277 )  

( 43,912 )  

Return of capital from tax credit partnerships and SBIC

Increase in loans

( 2,164,114 )  

( 1,072,363 )  

( 1,236,698 )

Decrease (increase) in loans

Purchases of premises and equipment

( 3,650 )  

( 9,449 )  

Purchase of bank owned life insurance contracts

( 45 )  

Proceeds from death benefit of bank owned life insurance contracts

1 unchanged sentence

Expenditures for other real estate owned

( 93 )  

Net cash used in investing activities

( 2,642,217 )  

( 1,561,094 )  

( 1,411,071 )

FINANCING ACTIVITIES

Net (decrease) increase in non-interest-bearing deposits

( 1,478,420 )  

2,010,995  

1,038,893  

Net increase in interest-bearing deposits

572,389  

466,117  

1,406,398  

Net (decrease) increase in federal funds purchased

( 92,979 )  

860,232  

380,796  

Proceeds from issuance of 4 % Subordinated Notes due October 21, 2030, net of issuance cost

34,750  

Repayment of 5 % Subordinated Notes due July 15, 2025

FHLB advances

Repayment of FHLB advances

Proceeds from exercise of stock options

Taxes paid in net settlement of tax obligation upon exercise of stock options

( 1,143 )  

( 2,848 )  

Dividends paid on common stock

( 37,470 )  

( 32,520 )  

Dividends paid on preferred stock

( 62 )  

Net cash (used in) provided by financing activities

( 1,036,453 )  

3,305,448  

2,800,592  

Net (decrease) increase in cash and cash equivalents

( 3,406,043 )  

2,010,685  

1,580,811  

Net cash provided by (used in) financing activities

Net increase (decrease) in cash and cash equivalents

Cash and cash equivalents at beginning of period

4,222,096  

2,211,411  

630,600  

Cash and cash equivalents at end of period

$ 816,053  

$ 4,222,096  

$ 2,211,411  

SUPPLEMENTAL DISCLOSURE

Cash paid/(received) for:

$ 83,427  

$ 30,504  

$ 50,598  

68,665  

56,651  

50,867  

Income tax refund

( 142 )  

NONCASH TRANSACTIONS

Other real estate acquired in settlement of loans

$ 1,046  

$ 2,318  

$ 2,945  

Internally financed sale of other real estate owned

Debt securities available for sale transferred to held to maturity

261,026  

Dividends on nonvested restricted stock reclassified as compensation expense

Dividends declared

15,211  

12,472  

10,787  

See Notes to Consolidated Financial Statements.

SERVISFIRST BANCSHARES, INC.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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ServisFirst Bancshares, Inc.

(the “Company”) was formed on August 16, 2007 and is a bank holding company whose business is conducted by its wholly owned subsidiary ServisFirst Bank (the “Bank”).

The Bank is headquartered in Birmingham, Alabama, and has provided a full range of banking services to individual and corporate customers throughout the Birmingham market since opening for business in May 2005.

The Bank has since expanded into the Huntsville, Montgomery, Dothan and Mobile, Alabama, Pensacola, Sarasota, Tallahassee, and Tampa Bay, Florida, Atlanta, Georgia, Charleston, South Carolina, Charlotte and Asheville, North Carolina and Nashville, Tennessee markets.

The Bank owns all of the stock of SF Intermediate Holding Company, Inc., which, in turn, owns all of the stock of SF TN Realty Holdings, Inc., which, in turn, owns all of the common stock of the Company’s real estate investment trusts, SF Realty 1, Inc., SF FLA Realty, Inc., SF GA Realty, Inc.

The Bank has since expanded into the Huntsville, Montgomery, Dothan and Mobile, Alabama;

Pensacola, Sarasota, Tallahassee, and Tampa Bay, Florida;

Atlanta, Georgia;

Charleston, South Carolina;

Charlotte and Asheville, North Carolina;

Nashville, Tennessee;

and Virginia Beach, Virginia markets.

and SF TN Realty, Inc.

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Reclassification

Certain amounts reported in prior years have been reclassified to conform to the current year’s presentation.

These reclassifications had no effect on the Company’s results of operations, financial position, or net cash flow.

Certain amounts reported in prior years have been reclassified to conform to the current year’s presentation.

These reclassifications had no effect on the Company’s results of operations, financial position, or net cash flow.

Basis of Presentation and Accounting Estimates

To prepare consolidated financial statements in conformity with U.S.

generally accepted accounting principles, management makes estimates and assumptions based on available information.

generally accepted accounting principles (“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.

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The consolidated financial statements include the accounts of the Company and other entities in which it has a controlling financial interest.

All significant intercompany balances and transactions have been eliminated in consolidation. Non-controlling interest consists of preferred shares in the Company's real estate investment trusts, SF Realty 1, Inc., SF FLA Realty, Inc., SF GA Realty, Inc.

and SF TN Realty, Inc.

that are owned by third parties. 

The preferred shares in the real estate investment trusts receive dividends, which are included in the consolidated statements of income shown as income to non-controlling interest, and are redeemable at the Company's option. 

All significant intercompany balances and transactions have been eliminated in consolidation.

Cash, Due from Banks, Interest-Bearing Balances due from Financial Institutions

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Debt Securities

Debt securities are classified based on the Company’s intention on the date of purchase.

All debt securities classified as available-for-sale are recorded at fair value with any unrealized gains and losses reported in accumulated other comprehensive income (loss), net of the deferred income tax effects.

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The Company determines past due or delinquency status of a loan based on contractual payment terms.

Troubled debt restructurings (“TDRs”) are concessions granted to borrowers in the normal course of business, which would not otherwise be considered, where the borrowers are experiencing financial difficulty.

The concessions granted most frequently for TDRs involve reductions or delays in required payments of principal and interest for a specified time, the rescheduling of payments in accordance with a bankruptcy plan or the charge-off of a portion of the loan.

In some cases, the conditions of the credit also warrant nonaccrual status, even after the restructure occurs.

As part of the credit approval process, the restructured loans are evaluated for adequate collateral protection in determining the appropriate accrual status at the time of restructure.

TDR loans may be returned to accrual status if there has been at least a six -month sustained period of repayment performance by the borrower.

Allowance for Credit Losses ( “

) and Impairment of Debt Securities

As described below under Recently Adopted Accounting Pronouncements, the Company adopted Accounting Standards Update (“ASU”) 

2016 - 13 ,  

Financial Instruments-Credit Losses (Topic  

Measurement of Credit Losses on Financial Instruments (“CECL”) Accounting Standard Codification (“ASC”) 326 effective January 1, 2020.

Debt Securities Held to Maturity

Loan modifications are concessions granted to borrowers in the normal course of business, which would not otherwise be considered, where the borrowers are experiencing financial difficulty.

The concessions granted most frequently involve reductions or delays in required payments of principal and interest for a specified time, the rescheduling of payments in accordance with a bankruptcy plan or the charge-off of a portion of the loan.

ACL – Debt Securities Held to Maturity

Management uses a systematic methodology to determine its ACL for held-to-maturity debt securities.

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Management considers the effects of past events, current conditions, and reasonable and supportable forecasts on the collectability of the portfolio.

The Company’s estimate of its ACL involves a high degree of judgment;

therefore, Management’s process for determining expected credit losses may result in a range of expected credit losses.

The Company’s estimate of its ACL involves a high degree of judgment;

therefore, Management’s process for determining expected credit losses may result in a range of expected credit losses.

Management monitors the held-to-maturity portfolio to determine whether an ACL would need to be recorded.

As of December 31, 2022 and 2021, the Company had $ 1.03 billion and $ 463.0 million, respectively, of held-to-maturity securities and no related ACL recorded, respectively.

As of December 31, 2023 and 2022, the Company had $ 982.7 million and $ 1.03 billion, respectively, of held-to-maturity securities and no related ACL recorded for either year.

Impairment of Debt Securities Available for Sale

For available-for-sale debt securities in an unrealized loss position, the Company will first assess whether i) it intends to sell or ii) it is more likely than not that it will be required to sell the debt security before recovery of its amortized cost basis.

If either case is applicable, any previously recognized allowances are charged off and the debt security’s amortized cost is written down to fair value through income.

If neither case is applicable, the debt security is evaluated to determine whether the decline in fair value has resulted from credit losses or other factors.

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The Company excludes the accrued interest receivable balance from the amortized cost basis in measuring expected credit losses on debt securities and does not record an ACL on accrued interest receivable.

The ACL is based on the Company’s evaluation of the loan portfolios, past loan loss experience, current asset quality trends, known and inherent risks in the portfolio, adverse situations that 

affect the borrower’s ability to repay (including the timing of future payment), the estimated value of any underlying collateral, composition of the loan portfolio, economic conditions, industry and peer bank loan quality indications and other pertinent factors, including regulatory recommendations.

The ACL is based on the Company’s evaluation of the loan portfolios, past loan loss experience, current asset quality trends, known and inherent risks in the portfolio, adverse situations that may affect the borrower’s ability to repay (including the timing of future payment), the estimated value of any underlying collateral, composition of the loan portfolio, economic conditions, industry and peer bank loan quality indications and other pertinent factors, including regulatory recommendations.

The process is inherently subjective and subject to significant change as it requires material estimates.

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Such agencies may require the Company to recognize adjustments to the allowance based on their judgments about information available to them at the time of their examination.

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.

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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.

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 troubled debt restructurings.

Specific allowances were estimated based 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.

Specific allowances were estimated based 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.

The Company measures expected credit losses over the contractual term of a loan, adjusted for estimated prepayments.

The contractual term excludes expected extensions, renewals and modifications unless there is a reasonable expectation that a troubled debt restructuring will be executed.

The contractual term excludes expected extensions, renewals and modifications.

Credit losses are estimated on the amortized cost basis of loans, which includes the principal balance outstanding, purchase discounts and premiums and deferred loan fees and costs.

Accrued interest receivable on loans is excluded from the estimate of credit losses.

Unfunded Loan Commitments

ACL – Unfunded Loan Commitments

The ACL is a liability account representing expected credit losses over the contractual period for which the Company is exposed to credit risk resulting from a contractual obligation to extend credit.

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The ACL is reported as a component of other liabilities within the Consolidated Balance Sheets.

Adjustments to the ACL for unfunded commitments are reported in the Consolidated Income Statements  as a component of other operating expense.

Adjustments to the ACL for unfunded commitments are reported in the Consolidated Income Statements as a component of other operating expense.

Foreclosed Real Estate

Foreclosed real estate includes both formally foreclosed property and in-substance foreclosed property.

At the time of foreclosure, foreclosed real estate is recorded at fair value less cost to sell, which becomes the property’s new basis.

Any write downs based on the asset’s fair value at date of acquisition are charged to the allowance for credit losses.

At the time of foreclosure, foreclosed real estate is recorded at fair value less cost to sell, which becomes the property’s new basis.

Any write downs based on the asset’s fair value at date of acquisition are charged to the allowance for credit losses.

After foreclosure, these assets are carried at the lower of their new cost basis or fair value less cost to sell.

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The Company leases certain office space and equipment under operating leases.

Leases are recognized as a liability to make lease payments and as an asset representing the right to use the asset during the lease term, or “lease liability”

and “right-of-use asset,”

respectively.

The lease liability is measured as the present value of remaining lease payments, discounted at the Company’s incremental borrowing rate. 

Leases are recognized as a liability to make lease payments and as an asset representing the right to use the asset during the lease term, or “lease liability” and “right-of-use asset,” respectively.

The lease liability is measured as the present value of remaining lease payments, discounted at the Company’s incremental borrowing rate.

The Company reports its right-of-use assets in other assets and its lease liabilities in other liabilities within the Consolidated Balance Sheets.

Certain of the leases include 

one  or more renewal options that extend the initial lease term 

1  to 

5  years.

The exercise of lease renewal options is typically at the Company’s sole discretion;

therefore, a majority of renewals to extend lease terms are 

not  included in the right-of-use assets and lease liabilities as they are 

not  reasonably certain to be exercised.

Certain of the leases include one or more renewal options that extend the initial lease term 1 to 5 years.

The exercise of lease renewal options is typically at the Company’s sole discretion;

therefore, a majority of renewals to extend lease terms are not included in the right-of-use assets and lease liabilities as they are not reasonably certain to be exercised.

Renewal options are regularly evaluated and when they are reasonably certain to be exercised, are included in lease terms.

None  of the Company’s leases provide an implicit discount rate.

None of the Company’s leases provide an implicit discount rate.

The Company uses its incremental collateralized borrowing rate based on the information available at the lease commencement date in determining the present value of the lease payments.

The Company does not recognize short-term leases on its Consolidated Balance Sheets. 

A short-term operating lease has an original term of 12 months or less and does not have a purchase option that is likely to be exercised.

Bank Owned Life Insurance ( “

BOLI ”

Bank Owned Life Insurance ( “ BOLI ” )

BOLI is comprised of long-term life insurance contracts on the lives of certain current and past employees where the insurance policy benefit and ownership are retained by the employer.

Its cash surrender value is an asset that the Company uses to partially offset the future cost of employee benefits.

The cash surrender value accumulation on BOLI is permanently tax deferred if the policy is held to the insured person’s death and certain other conditions are met.

Goodwill and Other Identifiable Intangible Assets

The cash surrender value accumulation on BOLI is permanently tax deferred if the policy is held to the insured person’s death and certain other conditions are met.

The Company has recorded $ 13.6 million of goodwill at December 31, 2023 in connection with the acquisition of Metro Bancshares, Inc.

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For the purposes of evaluating goodwill, the Company has determined that it operates only one reporting unit.

Other identifiable intangible assets include a core deposit intangible recorded in connection with the acquisition of Metro Bancshares, Inc.

The core deposit intangible was fully amortized as of January of 2022.

Derivatives and Hedging Activities

As part of its overall interest rate risk management, the Company uses derivative instruments, which can include interest rate swaps, caps, and floors.

All derivative instruments are carried at fair value on the Consolidated Balance Sheets.

Accounting standards provide special accounting provisions for derivative instruments that qualify for hedge accounting.

GAAP requires all derivative instruments to be carried at fair value on the Consolidated Balance Sheets.

This accounting standard provides special accounting provisions for derivative instruments that qualify for hedge accounting.

To be eligible, the Company must specifically identify a derivative as a hedging instrument and identify the risk being hedged.

The derivative instrument must be shown to meet specific requirements under this accounting standard.

The Company designates the derivative on the date the derivative contract is entered into as a hedge of the ( 1 ) fair value of a recognized asset or liability or of an unrecognized firm commitment (a “fair-value”

hedge) or ( 2 ) a forecasted transaction of the variability of cash flows to be received or paid related to a recognized asset or liability (a “cash-flow”

The Company designates the derivative on the date the derivative contract is entered into as a hedge of ( 1 ) the fair value of a recognized asset or liability or of an unrecognized firm commitment (a “fair-value” hedge) or ( 2 ) the variability of cash flows to be received generally in a forecasted transaction related to a recognized asset or liability (a “cash-flow” hedge).

Changes in the fair value of a derivative that is highly effective as a fair-value hedge, and that is designated and qualifies as a fair-value hedge, along with the loss or gain on the hedged asset or liability that is attributable to the hedged risk (including losses or gains on firm commitments), are recorded in current-period earnings.

The changes in a derivative’s fair value for a derivative that is highly effective and that is designated and qualifies as a cash-flow hedge are recorded in other comprehensive income until earnings are affected by the variability of cash flows (e.g., when periodic settlements on a variable-rate asset or liability are recorded in earnings).

The changes in a derivative’s fair value that are included in the assessment of hedge effectiveness for a derivative that is highly effective and that is designated and qualifies as a cash-flow hedge are recorded in other comprehensive income until earnings are affected by the variability of cash flows (e.g., when periodic settlements on a variable-rate asset or liability are recorded in earnings).

The Company formally documents all relationships between hedging instruments and hedged items, as well as its risk-management objective and strategy for undertaking various hedge transactions.

This process includes linking all derivatives that are designated as fair-value or cash-flow hedges to specific assets and liabilities on the Consolidated Balance Sheets or to specific firm commitments or forecasted transactions.

The Company also formally assesses, both at the hedge’s inception and on an ongoing basis, as necessary, whether the derivatives that are used in hedging transactions are highly effective in offsetting changes in fair values or cash flows of hedged items.

When it is determined that a derivative is not highly effective as a hedge or that it has ceased to be a highly effective hedge, the Company discontinues hedge accounting prospectively, as discussed below.

The Company also formally assesses, both at the hedge’s inception and on an ongoing basis, as necessary, whether the derivatives that are used in hedging transactions are highly effective in offsetting changes in fair values or cash flows of hedged items.

When it is determined that a derivative is not highly effective as a hedge or that it has ceased to be a highly effective hedge, the Company discontinues hedge accounting prospectively.

The Company discontinues hedge accounting prospectively when:

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The Company uses derivatives to hedge interest rate exposures associated with mortgage loan originations.

Interest rate lock commitments related to loans that are originated for later sale are classified as derivatives. 

In the normal course of business, the Company regularly extends these rate lock commitments to customers during the loan origination process. 

The fair values of the Company’s rate lock commitments to customers as of December 31, 2022 and 2021 were not material and have not been recorded.

Interest rate lock commitments related to loans that are originated for later sale are classified as derivatives.

In the normal course of business, the Company regularly extends these rate lock commitments to customers during the loan origination process.

The fair values of the Company’s rate lock commitments to customers as of December 31, 2023 and 2022 were not material and have not been recorded.

Revenue Recognition

The Company recognizes revenue from contracts with customers in accordance with ASC Topic 606, Revenue from Contracts with Customers (“ASC 606”

The guidance requires recognition of revenue to depict the transfer of goods or services from contracts with customers in an amount that reflects the consideration that it expects to be entitled to receive in exchange for those goods or services recognized as performance obligations are satisfied.

While the majority of the Company’s revenue-generating transactions are excluded from the model for contracts with customers, including revenue generated from financial instruments, such as securities and loans, relevant revenue-generating transactions are classified within non-interest income and are described as follows:

Deposit account service charges – represent service fees for monthly activity and maintenance on customer accounts.

The Company records revenue from contracts with customers in accordance with ASC Topic 606, Revenue from Contracts with Customers (“ASC 606” ) .

The guidance requires recognition of revenue to depict the transfer of goods or services to customers in an amount that reflects the consideration that it expects to be entitled to receive in exchange for those goods or services recognized as performance obligations are satisfied.

While the majority of the Company’s revenue-generating transactions are excluded from the scope of ASC 606, including revenue generated from financial instruments, such as securities and loans, the relevant revenue-generating transactions are classified within non-interest income and are described as follows:

Deposit account service charges – represent service fees for monthly activity and maintenance on customer accounts.

Attributes can be transaction-based, item-based or time-based.

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Payment for such performance obligations are generally received at the time the performance obligations are satisfied.

Credit card rewards program membership fees – represent memberships in our credit card rewards program and are paid annually by our cardholders at the time they open an account and on each anniversary.

Credit card rewards program membership fees – represent memberships in our credit card rewards program and are paid annually by our cardholders at the time they open an account and on each anniversary.

Revenue is recognized ratably over the membership period.

Other non-interest income primarily includes income on bank owned life insurance contracts, letter of credit fees and gains on sale of loans held for sale.

Other non-interest income primarily includes income on BOLI contracts, letter of credit fees and gains on sale of loans held for sale.

Income tax expense is the total of the current year income tax due or refundable and the change in deferred tax assets and liabilities.

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A valuation allowance, if needed, reduces deferred tax assets to the amount expected to be realized.

The Company uses the provisions of ASC 740 - 10, Income Taxes.

ASC 740 - 10 establishes a single model to address accounting for uncertain tax positions which prescribes a minimum recognition threshold a tax position is required to meet before being recognized in the financial statements.

The Company follows the provisions of ASC 740 - 10, Income Taxes.

ASC 740 - 10 establishes a single model to address accounting for uncertain tax positions and prescribes a minimum recognition threshold a tax position is required to meet before being recognized in the financial statements.

There is a two -step process in the evaluation of a tax position.

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At December 31, 2023, the Company had a stock-based compensation plan for grants of equity compensation to key employees and directors.

The plan has been accounted for under the provisions of GAAP with respect to employee stock options, restricted stock and performance-based stock.

The plan has been accounted for under the provisions of ASC 718 - 10, Compensation – Stock Compensation with respect to employee stock options, restricted stock and performance-based stock units (“PSUs”).

Specifically, awards are accounted for using the fair value-based method of accounting.

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Compensation expense related to restricted stock awards is based upon the fair value of the awards on the date of grant and is charged to earnings over the requisite service period of the award.

Performance shares represent the opportunity to earn shares of the Company’s common stock after a prescribed period and based on the relative market performance of the Company’s stock, subject to the recipient’s continued employment through the end of the performance period.

The actual shares earned under the performance shares units generally range between zero and 150 % of the target level award, depending on the total stockholder return (TSR) of the Company over the performance period ranked relative to the TSR of a defined peer group of companies.

A Monte Carlo simulation is used to estimate the fair value of the performance shares as of the valuation date.

Compensation expense is recognized regardless of the extent to which the market condition is satisfied.

PSUs represent the opportunity to earn shares of the Company’s common stock after a prescribed period and based on the relative market performance of the Company’s stock, subject to the recipient’s continued employment through the end of the performance period.

The actual shares earned under the PSUs generally range between zero and 150 % of the target level award, depending on the total stockholder return (TSR) of the Company over the performance period ranked relative to the TSR of a defined peer group of companies.

A Monte Carlo simulation is used to estimate the fair value of the PSUs as of the valuation date.

Compensation expense for PSUs is recognized regardless of the extent to which the market condition is satisfied.

Earnings per Common Share

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Loan Commitments and Related Financial Instruments

Financial instruments, which include credit card arrangements, commitments to make loans and standby letters of credit, are issued to meet customer financing needs. 

The face amount for these items represents the exposure to loss before considering customer collateral or ability to repay. 

Such financial instruments are recorded when they are funded. 

Instruments such as stand-by letters of credit are considered, and accounted for as, financial guarantees. 

Financial instruments, which include credit card arrangements, commitments to make loans and standby letters of credit, are issued to meet customer financing needs.

The face amount for these items represents the exposure to loss before considering customer collateral or ability to repay.

Such financial instruments are recorded when they are funded.

Instruments such as stand-by letters of credit are considered, and accounted for as, financial guarantees.

The fair value of these financial guarantees is not material.

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Advertising expense for the years ended December 31, 2023, 2022 and 2021 was $ 768,000 , $ 447,000 and $ 499,000 , respectively.

Advertising typically consists of local print media aimed at businesses that the Company targets as well as sponsorships of local events in which the Company’s clients and prospects are involved.

Recently Adopted Accounting Pronouncements

In June 2016, the FASB issued Accounting Standards Update (“ASU”) 2016 - 13, Financial Instruments-Credit Losses (Topic 326 ):

Measurement of Credit Losses on Financial Instruments, which is essentially the final rule on use of the so-called CECL model, or current expected credit losses.

Among other things, ASC 326 requires the measurement of all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amount.

Financial institutions and other organizations now use forward-looking information to better inform their credit loss estimates.

In addition, the ASU amends the accounting for credit losses on available-for-sale debt securities and purchased financial assets with credit deterioration.

The Company adopted ASC 326 effective January 1, 2020.

Amounts reported for periods beginning on or after January 1, 2020 are presented under ASC 326, except quarterly periods in 2020, which were not restated under CECL and all prior period information is presented in accordance with previously applicable GAAP.

Based on prevailing economic conditions and forecasts as of January 1, 2020, the Company recognized a cumulative net increase to retained earnings of $ 1.1 million, net of tax, attributable to a decrease in the allowance for credit losses of $ 2.0 million, an increase in the allowance for off balance sheet credit exposures of $ 500,000 , and a decrease in deferred tax assets of $ 376,000 .

This was the result of implementing a more quantitative methodology.

The commercial, financial, and agricultural loan category decreased $ 8.2 million due to the portfolio primarily consisting of loans with generally short contractual maturities.

This was partially offset by an increase of $ 6.2 million in the real estate –

construction loan category due to the application of peer loss rates within the discounted cash flow pool reserve methodology.

Peer historical loss rates were utilized to better align with loss expectations given the Company’s low historical loss experience in this category.

March 2020 ,  the FASB issued ASU 

2020 - 04,  

Reference Rate Reform (Topic  

Advertising typically consists of local print media aimed at businesses that the Company targets as well as sponsorships of local events in which the Company’s clients and prospects are involved.

Recent Accounting Pronouncements

In March 2020, the FASB issued ASU 2020 - 04, Reference Rate Reform (Topic 848 ):

Facilitation of the Effects of Reference Rate Reform on Financial Reporting .

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The guidance is intended to help stakeholders during the global market-wide reference rate transition period.

Therefore, it will be effective for a limited time, starting 

March 12, 2020  through 

December 31, 2024 as recently amended by the FASB.

 The Company has identified a replacement reference rate established by the American Financial Exchange.

Therefore, it will be effective for a limited time, starting March 12, 2020 through December 31, 2024 as recently amended by the FASB .

The Company has identified a replacement reference rate established by the American Financial Exchange.

This rate is based on an active market of daily fund trading among participant banks.

The Company is applying the guidance provided by this ASU in transitioning to the new reference rate.

August 2021 ,  the FASB issued ASU 

2021 - 06  

Presentation of Financial Statements (Topic  

205 ), Financial Services —

Depository and Lending (Topic  

942 ), and Financial Services —

Investment Companies (Topic  

Amendments to SEC Paragraphs Pursuant to SEC Final Rule Releases  

33 - 10786,  

Amendments to Financial Disclosures about Acquired and Disposed Businesses, and  

33 - 10835,  

Update of Statistical Disclosures for Bank and Savings and Loan Registrants . This ASU amends and adds various SEC paragraphs to the codification pursuant to the issuance of SEC Final Rule Releases 

33 - 10786  and 

33 - 10835  issued to improve disclosure rules.

In August 2021, the FASB issued ASU 2021 - 06, Presentation of Financial Statements (Topic 205 ), Financial Services — Depository and Lending (Topic 942 ), and Financial Services — Investment Companies (Topic 946 ):

Amendments to SEC Paragraphs Pursuant to SEC Final Rule Releases No.

33 - 10786, Amendments to Financial Disclosures about Acquired and Disposed Businesses, and No.

33 - 10835, Update of Statistical Disclosures for Bank and Savings and Loan Registrants .

This ASU amends and adds various SEC paragraphs to the codification pursuant to the issuance of SEC Final Rule Releases No.

33 - 10786 and No.

33 - 10835 issued to improve disclosure rules.

The ASU was effective upon issuance.

The adoption of this disclosure guidance did 

not  have a material impact on the Company's consolidated financial statements.

July 2021 ,  the FASB issued 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.

The adoption of this disclosure guidance did not have a material impact on the Company's consolidated financial statements.

In July 2021, the FASB issued 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 adoption of ASU 2021 - 05 as of January 1, 2022 did not have a material impact on the Company’s consolidated financial statements.

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.

201613, 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.

The adoption of ASU 2021 - 05 as of January 1, 2022 did not have a material impact on the Company’s consolidated financial statements.

In March 2022, the FASB issued ASU 2022 - 02, Financial Instruments — Credit Losses (Topic 326 ):

Troubled Debt Restructurings and Vintage Disclosure.

For public business entities, the amendments 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.

Gross write-off information must be included in the vintage disclosures required for public business entities in accordance with paragraph 326 - 20 - 50 - 6, which requires that an entity disclose the amortized cost basis of financing receivables by credit quality indicator and class of financing receivable by year of origination.

The Company adopted ASU 2022 - 02 effective January 1, 2023 on a prospective basis.

Adoption of ASU 2022 - 02 did not have a material impact on the Company’s consolidated financial statements other than providing the new required disclosures.

In June 2022, the FASB issued ASU 2022 - 03, Fair Value Measurement (Topic 820 ):

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The Company is assessing the impact of adopting the update on its financial statements and disclosures.

In March 2023, the Financial Accounting Standards Board issued ASU 2023 - 02, Investments-Equity Method and Joint Ventures (Topic 323 ):

Accounting for Investments in Tax Credit Structures Using the Proportional Amortization Method.

These amendments allow entities to elect to account for qualifying tax equity investments using the proportional amortization method, regardless of the program giving rise to the related income tax credits.

The ASU responds to stakeholder feedback that the proportional amortization method provides investors and other allocators of capital with a better understanding of the returns from investments that are made primarily for the purpose of receiving income tax credits and other income tax benefits.

ASU 2023 - 02 is effective for public entities for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years.

Early adoption is permitted for all entities in any interim period.

The Company is assessing its tax credit investments for whether they qualify for proportional amortization treatment and plans to adopt the amendments soon after.

The Company does not currently believe the amendments will have a material impact on its consolidated financial statements.

In November 2023, the FASB issued ASU 2023 - 07, Segment Reporting — Improvements to Reportable Segment Disclosures.

This amendment is intended to improve disclosures about a public entity’s reportable segments and addresses requests from investors and other decision makers for additional, more detailed information about a reportable segment’s expenses.

The amendment applies to all public entities that are required to report segment information in accordance with Topic 280.

All public entities will be required to report segment information in accordance with the new guidance starting in annual periods beginning after December 15, 2023, and interim periods within fiscal years beginning after December 31, 2024.

Early adoption is permitted.

The amendments are to be applied retrospectively to all periods presented and segment expense categories should be based on the categories identified at adoption.

The Company does not currently expect adoption of the amendment to have a material impact on its consolidated financial statements.

In December 2023, the FASB issued ASU No.

2023 - 09, Income Taxes (Topic 740 ):

Improvements to Income Tax Disclosures .

ASU 2023 - 09 requires enhanced income tax disclosures primarily related to the rate reconciliation and income taxes paid information to provide more transparency by requiring (i) consistent categories and greater disaggregation of information in the rate reconciliation table and (ii) income taxes paid, net of refunds, to be disaggregated by jurisdiction based on an established threshold.

The amendments in this standard will be effective for the Company on January 1, 2025.

The Company is currently evaluating the impact the amendments will have the consolidated financial statements and related disclosures.

DEBT SECURITIES

The amortized cost and fair values of available-for-sale and held-to-maturity debt securities at December 31, 2023 and 2022 are summarized as follows:

December 31, 2022

(In Thousands)

December 31, 2023

Debt Securities Available-for-Sale

Treasury Securities

$ 3,002  

$ ( 33 )  

$ 2,969  

Government Agency Securities

$ 340,556 $ 251 $ - $ 340,807

Mortgage-backed securities

282,480  

( 32,782 )  

249,703  

241,458 6 ( 25,979 ) 215,485

State and municipal securities

15,205  

( 1,597 )  

13,609  

11,400 1 ( 1,178 ) 10,223

Corporate debt

406,680  

( 28,155 )  

378,525  

$ 707,376  

$ ( 62,567 )  

$ 644,815  

375,676 - ( 42,009 ) 333,667

$ 969,090 $ 258 $ ( 69,166 ) $ 900,183

Debt Securities Held-to-Maturity

Treasury Securities

$ 507,151  

$ ( 36,197 )  

$ 470,954  

$ 508,985 $ - $ ( 24,718 ) $ 484,267

Mortgage-backed securities

518,929  

( 60,960 )  

457,976  

465,615 3 ( 50,025 ) 415,593

State and municipal securities

( 1,018 )  

$ 1,034,121  

$ ( 98,175 )  

$ 935,953  

8,063 - ( 732 ) 7,331

$ 982,664 $ 3 $ ( 75,475 ) $ 907,191

December 31, 2022

Debt Securities Available-for-Sale

U.S Treasury Securities

$ 9,003  

$ 9,104  

Treasury Securities

$ 3,002 $ - $ ( 33 ) $ 2,969

Government Agency Securities

Mortgage-backed securities

424,372  

( 2,685 )  

425,161  

282,480 5 ( 32,782 ) 249,703

State and municipal securities

21,531  

( 70 )  

21,634  

15,205 1 ( 1,597 ) 13,609

Corporate debt

369,618  

11,659  

( 647 )  

380,630  

$ 830,546  

$ 15,426  

$ ( 3,402 )  

$ 842,570  

406,680 - ( 28,155 ) 378,525

$ 707,376 $ 6 $ ( 62,567 ) $ 644,815

Debt Securities Held-to-Maturity

Treasury Securities

$ 149,263  

$ ( 668 )  

$ 148,620  

$ 507,151 $ - $ ( 36,197 ) $ 470,954

Mortgage-backed securities

310,641  

( 1,271 )  

314,621  

518,929 7 ( 60,960 ) 457,976

State and municipal securities

( 10 )  

$ 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 will be 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.

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

8,041 - ( 1,018 ) 7,023

$ 1,034,121 $ 7 $ ( 98,175 ) $ 935,953

All mortgage-backed debt securities are issued by government sponsored enterprises 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 deposits and for other purposes as required by law as of December 31, 2023 and 2022 was $ 1.49 billion and $ 789.3 million, respectively.

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

At December 31, 2023 and 2022, there were no holdings of debt securities of any issuer, other than the U.S.

government and its agencies, in an amount greater than 10% of stockholders’

government and its agencies, in an amount greater than 10% of stockholders’ equity.

The amortized cost and fair value of debt securities as of December 31, 2023 and 2022 by contractual maturity are shown below.

7 unchanged sentences

Due within one year

$ 24,712  

$ 24,432  

$ 32,913  

$ 33,232  

$ 350,400 $ 350,396 $ 24,712 $ 24,432

Due from one to five years

58,554  

57,092  

31,760  

32,307  

70,016 67,334 58,554 57,092

Due from five to ten years

338,630  

311,100  

338,407  

348,594  

304,216 264,892 338,630 311,100

Due after ten years

3,000 2,076 3,000 2,488

Mortgage-backed securities

282,480  

249,703  

424,372  

425,161  

$ 707,376  

$ 644,815  

$ 830,546  

$ 842,570  

241,458 215,485 282,480 249,703

$ 969,090 $ 900,183 $ 707,376 $ 644,815

Debt securities held-to-maturity

Due within one year

$ 260,047 $ 257,835 $ 250 $ 250

Due from one to five years

386,465  

366,095  

49,663  

49,419  

203,481 185,741 386,465 366,095

Due from five to ten years

128,477  

111,632  

102,403  

101,996  

Due after ten years

53,521 48,022 128,477 111,632

Mortgage-backed securities

518,929  

457,976  

310,641  

314,621  

$ 1,034,121  

$ 935,953  

$ 462,957  

$ 466,286  

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

465,615 415,593 518,929 457,976

$ 982,664 $ 907,191 $ 1,034,121 $ 935,953

Less Than Twelve Months

3 unchanged sentences

Debt Securities available-for-sale

Treasury Securities

$ ( 33 )  

$ 2,969  

$ ( 33 )  

$ 2,969  

Government Agency Securities

Mortgage-backed securities

( 3,473 )  

60,234  

( 29,309 )  

189,109  

( 32,782 )  

249,343  

$ ( 6 ) $ 704 $ ( 25,973 ) $ 214,393 $ ( 25,979 ) $ 215,097

State and municipal securities

( 186 )  

( 1,411 )  

( 1,597 )  

13,163  

- - ( 1,178 ) 9,777 ( 1,178 ) 9,777

Corporate debt

( 18,566 )  

304,254  

( 9,589 )  

63,411  

( 28,155 )  

367,666  

$ ( 22,258 )  

$ 372,749  

$ ( 40,309 )  

$ 260,400  

$ ( 62,567 )  

$ 633,150  

( 794 ) 15,141 ( 41,214 ) 311,666 ( 42,009 ) 326,807

$ ( 801 ) $ 15,845 $ ( 68,365 ) $ 535,836 $ ( 69,166 ) $ 551,681

Debt Securities held-to-maturity

Treasury Securities

$ ( 12,662 )  

$ 295,383  

$ ( 23,537 )  

$ 175,570  

$ ( 36,197 )  

$ 470,953  

$ - $ - $ ( 24,718 ) $ 484,267 $ ( 24,718 ) $ 484,267

Mortgage-backed securities

( 31,367 )  

278,746  

( 29,592 )  

174,842  

( 60,960 )  

453,588  

( 1 ) 430 ( 50,024 ) 411,585 ( 50,025 ) 412,015

State and municipal securities

( 544 )  

( 474 )  

( 1,018 )  

$ ( 44,573 )  

$ 578,572  

$ ( 53,603 )  

$ 352,742  

$ ( 98,175 )  

$ 931,314  

- - ( 732 ) 7,081 ( 732 ) 7,081

$ ( 1 ) $ 430 $ ( 75,474 ) $ 902,933 $ ( 75,475 ) $ 903,363

December 31, 2022

Debt Securities available-for-sale

Treasury Securities

$ ( 33 ) $ 2,969 $ - $ - $ ( 33 ) $ 2,969

Government Agency Securities

Mortgage-backed securities

$ ( 2,685 )  

$ 303,297  

$ ( 2,685 )  

$ 303,297  

$ ( 3,473 ) $ 60,234 $ ( 29,309 ) $ 189,109 $ ( 32,782 ) $ 249,343

State and municipal securities

( 61 )  

( 70 )  

( 186 ) 5,283 ( 1,411 ) 7,880 ( 1,597 ) 13,163

Corporate debt

( 647 )  

61,677  

( 647 )  

61,677  

$ ( 3,393 )  

$ 370,172  

$ ( 9 )  

$ ( 3,402 )  

$ 370,400  

Debt Securities held to maturity

( 18,566 ) 304,254 ( 9,589 ) 63,411 ( 28,155 ) 367,666

$ ( 22,258 ) $ 372,749 $ ( 40,309 ) $ 260,400 $ ( 62,567 ) $ 633,149

Treasury Securities

$ ( 668 )  

$ 123,698  

$ ( 668 )  

$ 123,698  

$ ( 12,662 ) $ 295,383 $ ( 23,537 ) $ 175,570 $ ( 36,197 ) $ 470,953

Mortgage-backed securities

( 1,271 )  

134,192  

( 1,271 )  

134,192  

( 31,367 ) 278,746 ( 29,592 ) 174,842 ( 60,960 ) 453,588

State and municipal securities

( 10 )  

$ ( 1,949 )  

$ 258,372  

$ ( 1,949 )  

$ 258,372  

( 544 ) 4,443 ( 474 ) 2,330 ( 1,018 ) 6,773

$ ( 44,573 ) $ 578,572 $ ( 53,603 ) $ 352,742 $ ( 98,175 ) $ 931,314

At December 31, 2023 and 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.

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.

9 unchanged sentences

Furthermore, as of December 31, 2023 and 2022, there were no past due principal or interest payments associated with these securities.

Based upon (i) the issuer’s strong bond ratings and (ii) a zero historical loss rate, no allowance for credit losses has been recorded for held-to-maturity State and Municipal Securities as such amount is not material at December 31, 2022 and 2021.

All debt securities in an unrealized loss position as of December 31, 2023 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.

3 unchanged sentences

Sale and call proceeds

$ 75,036  

$ 6,272  

$ 27,857  

$ - $ 75,036 $ 6,272

Gross realized gains

$ - $ - $ 620

Gross realized losses

( 6,168 )  

- ( 6,168 ) -

Net realized (loss) gain

$ ( 6,168 )  

The carrying value of debt securities pledged to secure public funds on deposits and for other purposes as required by law as of December 31, 2022 and 2021 was $ 789.3 million and $ 481.3 million, respectively.

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

$ - $ ( 6,168 ) $ 620

The loan portfolio is classified based on the underlying collateral utilized to secure each loan for financial reporting purposes.

2 unchanged sentences

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.

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.

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.

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.

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 to be made by banks to employers with less than 500 employees if they continued to employ their existing workers.

The American Rescue Plan Act of 2021, which was signed into law on March 21, 2021, provided additional relief for businesses, states, municipalities and individuals by, among other things, allocating additional funds for the PPP.

Effective May 28, 2021, the PPP was closed to new applications.

The Company funded approximately 7,400 loans for a total amount of $ 1.5 billion for clients under the PPP since April 2020.

PPP loan origination fees recorded to interest income totaled $ 7.7 million and$27.3 million for the years ended December 31, 2022 and 2021, respectively.

PPP loans outstanding totaled $ 2.0 million and $ 230.2 million at December 31, 2022 and 2021, respectively.

PPP loans are included within the commercial, financial and agricultural loan category in the table below.

The composition of loans at December 31, 2023 and 2022 is summarized as follows:

1 unchanged sentence

Commercial, financial and agricultural

$ 3,145,317  

$ 2,984,053  

$ 2,823,986 $ 3,145,317

Real estate - construction

1,532,388  

1,103,076  

1,519,619 1,532,388

Real estate - mortgage:

Owner-occupied commercial

2,199,280  

1,874,103  

2,257,163 2,199,280

1-4 family mortgage

1,146,831  

826,765  

1,249,938 1,146,831

Other mortgage

3,597,750  

2,678,084  

3,744,346 3,597,750

Total real estate - mortgage

6,943,861  

5,378,952  

66,402  

66,853  

11,687,968  

9,532,934  

7,251,447 6,943,861

63,777 66,402

11,658,829 11,687,968

Allowance for credit losses

( 146,297 )  

$ 11,541,671  

$ 9,416,274  

( 153,317 ) ( 146,297 )

$ 11,505,512 $ 11,541,671

Changes in the ACL during the years ended December 31, 2023, 2022 and 2021 are as follows:

2 unchanged sentences

Balance, beginning of year

$ 116,660  

$ 87,942  

$ 76,584  

Impact of adopting ASC 326

$ 146,297 $ 116,660 $ 87,942

Loans charged off

( 10,137 )  

( 4,114 )  

( 14,581 ) ( 10,137 ) ( 4,114 )

2,886 2,167 1,315

Provision for credit losses

37,607  

31,517  

42,434  

18,715 37,607 31,517

Balance, end of year

$ 146,297  

$ 116,660  

$ 87,942  

As described in Note 1, “

Summary of Significant Accounting Policies, ”

the Company adopted ASU 2016 - 13 on January 1, 2020, which introduced the CECL methodology for estimating all expected losses over the life of a financial asset.

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.

$ 153,317 $ 146,297 $ 116,660

GAAP requires a CECL methodology for estimating all expected losses over the life of a financial asset.

Under the CECL methodology, the ACL is measured on a collective basis for pools of loans with similar risk characteristics.

For loans that do not share similar risk characteristics with the collectively evaluated pools, evaluations are performed on an individual basis.

For all loan segments collectively evaluated, losses are predicted over a period of time determined to be reasonable and supportable, and at the end of the reasonable and supportable forecast period losses are reverted to long-term historical averages.

The estimated loan losses for all loan segments are adjusted for changes in qualitative factors not inherently considered in the quantitative analyses.    

The Company uses the discounted cash flow (“DCF”) method to estimate ACL for all loan pools except for commercial 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.

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 and gross domestic product (“GDP”) as loss drivers.

Consistent forecasts of the loss drivers are used across the loan segments.

1 unchanged sentence

The Company leveraged economic projections from reputable and independent sources to inform its loss driver forecasts.

At December 31, 2022, the Company expects the national unemployment rate 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  and a remaining life methodology on 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. 

At December 31, 2023, the Company expects the national unemployment rate to fall during the forecast period with a rising national GDP growth rate, with both economic indicators showing improvement when compared to the forecast at December 31, 2022.

The Company uses a loss-rate method to estimate expected credit losses for its C&I revolving lines of credit and a remaining life methodology on 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 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. 

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.

2 unchanged sentences

The Company considers factors that are relevant within the qualitative framework which include the following:

Inherent risks in the loan portfolio will differ based on type of loan.

Specific risk characteristics by loan portfolio segment are listed below:

Commercial and industrial loans include risks associated with borrower’s cash flow, debt service coverage and management’s expertise.

These loans are subject to the risk that the Company may have difficulty converting collateral to a liquid asset if necessary, as well as risks associated with degree of specialization, mobility and general collectability in a default situation.

These commercial loans may be subject to many different types of risks, including fraud, bankruptcy, economic downturn, deteriorated or non-existent collateral, and changes in interest rates.

Real estate construction loans include risks associated with the borrower’s credit-worthiness, contractor’s qualifications, borrower and contractor performance, and the overall risk and complexity of the proposed project.

Construction lending is also subject to risks associated with sub-market dynamics, including population, employment trends and household income.

18 unchanged sentences

Balance at December 31, 2022

$ 41,869  

$ 26,994  

$ 45,829  

$ 1,968  

$ 116,660  

( 9,256 )  

( 221 )  

( 660 )  

15,895  

13,044  

37,607  

$ 42,830 $ 42,889 $ 58,652 $ 1,926 $ 146,297

( 13,229 ) ( 108 ) ( 171 ) ( 1,073 ) ( 14,581 )

2,796 3 2 85 2,886

19,720 1,874 ( 3,355 ) 476 18,715

Balance at December 31, 2023

$ 42,830  

$ 42,889  

$ 58,652  

$ 1,926  

$ 146,297  

$ 52,117 $ 44,658 $ 55,128 $ 1,414 $ 153,317

Twelve Months Ended December 31, 2022

1 unchanged sentence

Balance at December 31, 2021

$ 36,370  

$ 16,057  

$ 33,722  

$ 1,793  

$ 87,942  

( 3,453 )  

( 14 )  

( 279 )  

( 368 )  

10,899  

12,301  

31,517  

$ 41,869 $ 26,994 $ 45,829 $ 1,968 $ 116,660

( 9,256 ) - ( 221 ) ( 660 ) ( 10,137 )

2,012 - - 155 2,167

8,205 15,895 13,044 463 37,607

Balance at December 31, 2022

$ 41,869  

$ 26,994  

$ 45,829  

$ 1,968  

$ 116,660  

$ 42,830 $ 42,889 $ 58,652 $ 1,926 $ 146,297

Twelve Months Ended December 31, 2021

Allowance for credit losses:

Balance at December 31, 2020

$ 36,370 $ 16,057 $ 33,722 $ 1,793 $ 87,942

( 3,453 ) ( 14 ) ( 279 ) ( 368 ) ( 4,114 )

1,135 52 85 43 1,315

7,817 10,899 12,301 500 31,517

Balance at December 31, 2021

$ 41,869 $ 26,994 $ 45,829 $ 1,968 $ 116,660

We maintain an ACL for credit losses on unfunded commercial 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 ACL for loans, modified to take into account the probability of a drawdown on the commitment.  The ACL on unfunded loan commitments is classified as a liability account on the Consolidated Balance Sheets 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 $ 575,000 and $ 1.3 million at December 31, 2022 and 2021, respectively. 

The provision expense for unfunded commitments was reduced by $ 1.4 million for the year ended December 31, 2022 and was reduced by $ 1.7  million for the year ended December 31, 2021.

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 allowance is computed using a methodology similar to that used to determine the ACL for loans, modified to take into account the probability of a drawdown on the commitment.

The ACL on unfunded loan commitments is classified as a liability account on the Consolidated Balance Sheets 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 $ 575,000 at both December 31, 2023 and 2022.

The provision expense for unfunded commitments was zero for the year ended December 31, 2023 and was reduced by $ 725,000 for the year ended December 31, 2022 compared to December 31, 2021.

The credit quality of the loan portfolio is determined no less frequently than quarterly using categories similar to the standard asset classification system used by the federal banking agencies.

The following table presents credit quality indicators for the loan loss portfolio segments and classes.

These categories are utilized to develop the associated allowance for credit losses using historical losses adjusted for current economic conditions defined as follows:

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

Special Mention – loans with potential weakness that may, if not reversed or corrected, weaken the credit or inadequately protect the Company’s position at some future date.

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

Special Mention – loans with potential weakness that may, if not reversed or corrected, weaken the credit or inadequately protect the Company’s position at some future date.

These loans are not adversely classified and do not expose an institution to sufficient risk to warrant an adverse classification.

Substandard – loans that exhibit well-defined weakness or weaknesses that presently jeopardize debt repayment.

These loans are characterized by the distinct possibility that the institution will sustain some loss if the weaknesses are not corrected.

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

Substandard – loans that exhibit well-defined weakness or weaknesses that presently 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 tables below presents loan balances classified by credit quality indicator, loan type and based on year of origination as of December 31, 2023 and 2022:

December 31, 2023

Revolving Loans

Revolving lines of credit converted to term loans

(In Thousands)

Commercial, financial and agricultural

$ 691,817  

$ 502,648  

$ 223,096  

$ 144,587  

$ 78,477  

$ 134,893  

$ 1,267,333  

$ 3,042,851  

Commercial, financial, and agricultural

$ 341,335 $ 455,281 $ 354,034 $ 162,543 $ 100,032 $ 151,527 $ 1,161,324 $ 491 $ 2,726,567

Special Mention

29,516  

44,476  

16,329  

16,595  

14,986  

57,990  

4,275 1,982 5,105 5,765 1,320 3,549 21,769 7 43,772

Substandard - accruing

1,410 - 2,830 368 9,501 27,962 4,360 - 46,431

Substandard -Non-accrual

- 2 767 206 - 3,336 2,905 - 7,216

Total Commercial, financial and agricultural

$ 698,923  

$ 506,385  

$ 224,576  

$ 155,836  

$ 95,376  

$ 152,386  

$ 1,311,835  

$ 3,145,317  

$ 347,020 $ 457,265 $ 362,736 $ 168,882 $ 110,853 $ 186,374 $ 1,190,358 $ 498 $ 2,823,986

Current-period gross writeoffs

$ 1,213 $ 4,690 $ 2,531 $ 779 $ 4 $ 2,014 $ 1,998 $ - $ 13,229

Real estate - construction

$ 618,578  

$ 638,126  

$ 156,834  

$ 15,197  

$ 12,063  

$ 14,847  

$ 72,172  

$ 1,527,817  

$ 216,745 $ 874,903 $ 283,012 $ 49,668 $ 4,866 $ 16,558 $ 72,156 $ - $ 1,517,908

Special Mention

589 - - - - - - - 589

Substandard - accruing

- 33 - - - 978 - - 1,011

Substandard -Non-accrual

- - - - - - - 111 111

Total Real estate - construction

$ 621,078  

$ 638,126  

$ 156,834  

$ 15,197  

$ 13,261  

$ 15,720  

$ 72,172  

$ 1,532,388  

$ 217,334 $ 874,936 $ 283,012 $ 49,668 $ 4,866 $ 17,536 $ 72,156 $ 111 $ 1,519,619

Current-period gross write-offs

$ - $ - $ 19 $ - $ - $ - $ - $ 89 $ 108

Owner-occupied commercial

$ 424,321  

$ 496,298  

$ 352,375  

$ 199,987  

$ 157,204  

$ 477,926  

$ 64,152  

$ 2,172,263  

$ 148,915 $ 478,364 $ 517,667 $ 300,978 $ 181,864 $ 512,752 $ 64,170 $ 844 $ 2,205,554

Special Mention

18,371  

5,369 1,411 7,705 8,317 8,530 7,539 - - 38,871

Substandard - accruing

1,358 - - - - 4,292 - - 5,650

Substandard -Non-accrual

- - - - 2,329 4,759 - - 7,088

Total Owner-occupied commercial

$ 426,683  

$ 496,298  

$ 352,375  

$ 202,783  

$ 161,886  

$ 493,416  

$ 65,839  

$ 2,199,280  

$ 155,642 $ 479,775 $ 525,372 $ 309,295 $ 190,394 $ 524,583 $ 64,170 $ 844 $ 2,257,163

Current-period gross write-offs

$ - $ - $ - $ - $ 117 $ - $ - $ - $ 117

1-4 family mortgage

$ 388,778  

$ 273,515  

$ 93,272  

$ 52,209  

$ 28,999  

$ 57,512  

$ 243,302  

$ 1,137,587  

$ 166,927 $ 376,964 $ 228,183 $ 75,104 $ 40,697 $ 61,046 $ 286,066 $ - $ 1,234,987

Special Mention

574 721 2,504 1,009 3,865 439 727 - 9,839

Substandard - accruing

- - - - - 425 261 - 686

Substandard -Non-accrual

155 380 741 572 877 901 800 - 4,426

Total 1-4 family mortgage

$ 389,093  

$ 274,239  

$ 94,492  

$ 53,232  

$ 29,639  

$ 59,617  

$ 246,519  

$ 1,146,831  

$ 167,656 $ 378,065 $ 231,428 $ 76,685 $ 45,439 $ 62,811 $ 287,854 $ - $ 1,249,938

Current-period gross write-offs

$ - $ 40 $ - $ - $ - $ 14 $ - $ - $ 54

Other mortgage

$ 1,027,747  

$ 976,208  

$ 517,392  

$ 380,104  

$ 130,228  

$ 470,699  

$ 75,669  

$ 3,578,047  

$ 162,418 $ 1,119,609 $ 1,106,055 $ 448,781 $ 249,059 $ 540,325 $ 100,516 $ 247 $ 3,727,010

Special Mention

12,311  

- - - - - - 850 - 850

Substandard - accruing

- 4,975 - - - 11,005 - - 15,980

Substandard -Non-accrual

- - - - 130 376 - - 506

Total Other mortgage

$ 1,027,978  

$ 976,208  

$ 517,392  

$ 380,234  

$ 134,797  

$ 485,472  

$ 75,669  

$ 3,597,750  

$ 21,132  

$ 5,845  

$ 4,203  

$ 1,759  

$ 2,988  

$ 30,021  

$ 66,388  

$ 162,418 $ 1,124,584 $ 1,106,055 $ 448,781 $ 249,189 $ 551,706 $ 101,366 $ 247 $ 3,744,346

Current-period gross write-offs

$ - $ - $ - $ - $ - $ - $ - $ - $ -

$ 22,227 $ 3,890 $ 4,542 $ 1,794 $ 1,295 $ 2,687 $ 27,342 $ - $ 63,777

Special Mention

- - - - - - - - -

Substandard - accruing

- - - - - - - - -

Substandard -Non-accrual

- - - - - - - - -

Total Consumer

$ 21,132  

$ 5,845  

$ 4,203  

$ 1,759  

$ 3,002  

$ 30,021  

$ 66,402  

$ 3,172,373  

$ 2,892,640  

$ 1,347,172  

$ 793,843  

$ 407,411  

$ 1,158,865  

$ 1,752,649  

$ 11,524,953  

$ 22,227 $ 3,890 $ 4,542 $ 1,794 $ 1,295 $ 2,687 $ 27,342 $ - $ 63,777

Current-period gross write-offs

$ - $ - $ - $ - $ 4 $ 49 $ 1,020 $ - $ 1,073

$ 1,058,567 $ 3,309,011 $ 2,493,493 $ 1,038,868 $ 577,813 $ 1,284,895 $ 1,711,574 $ 1,582 $ 11,475,803

Special Mention

12,314  

16,744  

34,057  

79,606  

10,352  

22,442  

34,004  

15,349  

83,409  

$ 3,184,887  

$ 2,897,101  

$ 1,349,872  

$ 809,041  

$ 435,399  

$ 1,209,613  

$ 1,802,055  

$ 11,687,968  

10,807 4,114 15,314 15,091 13,715 11,527 23,346 7 93,921

Substandard - accruing

2,768 5,009 2,830 368 9,501 44,662 4,621 - 69,758

Substandard -Non-accrual

155 382 1,508 778 3,336 9,372 3,705 111 19,347

$ 1,072,297 $ 3,318,515 $ 2,513,145 $ 1,055,105 $ 604,365 $ 1,350,456 $ 1,743,246 $ 1,700 $ 11,658,829

Current-period gross write-offs

$ 1,213 $ 4,730 $ 2,550 $ 779 $ 125 $ 2,077 $ 3,018 $ 89 $ 14,581

December 31, 2022

1 unchanged sentence

(In Thousands)

Commercial, financial and agricultural

$ 800,822  

$ 294,841  

$ 209,086  

$ 130,579  

$ 114,870  

$ 127,572  

$ 1,216,153  

$ 2,893,923  

Commercial, financial and agricultural

$ 691,817 $ 502,648 $ 223,096 $ 144,587 $ 78,477 $ 134,893 $ 1,267,333 $ 3,042,851

Special Mention

19,801  

25,856  

10,039  

42,640  

64,274  

6,906 3,737 1,101 1,748 570 898 29,516 44,476

200 - 379 9,501 16,329 16,595 14,986 57,990

- - - - - - - -

Total Commercial, financial

- - - - - - - -

and agricultural

$ 802,067  

$ 296,551  

$ 220,067  

$ 133,166  

$ 117,286  

$ 136,322  

$ 1,278,594  

$ 2,984,053  

$ 698,923 $ 506,385 $ 224,576 $ 155,836 $ 95,376 $ 152,386 $ 1,311,835 $ 3,145,317

Real estate - construction

$ 597,497  

$ 260,723  

$ 110,671  

$ 16,452  

$ 13,704  

$ 17,356  

$ 76,662  

$ 1,093,065  

$ 618,578 $ 638,126 $ 156,834 $ 15,197 $ 12,063 $ 14,847 $ 72,172 $ 1,527,817

Special Mention

10,011  

2,500 - - - - 873 - 3,373

- - - - 1,198 - - 1,198

- - - - - - - -

Total Real estate - construction

$ 597,497  

$ 260,723  

$ 117,265  

$ 18,952  

$ 13,704  

$ 18,273  

$ 76,662  

$ 1,103,076  

$ 621,078 $ 638,126 $ 156,834 $ 15,197 $ 13,261 $ 15,720 $ 72,172 $ 1,532,388

Owner-occupied commercial

$ 406,473  

$ 352,642  

$ 231,197  

$ 182,812  

$ 162,648  

$ 430,638  

$ 96,860  

$ 1,863,270  

$ 424,321 $ 496,298 $ 352,375 $ 199,987 $ 157,204 $ 477,926 $ 64,152 $ 2,172,263

Special Mention

2,362 - - 2,723 4,682 6,917 1,687 18,371

- - - 73 - 8,573 - 8,646

- - - - - - - -

Total Owner-occupied commercial

$ 406,574  

$ 352,642  

$ 233,614  

$ 183,591  

$ 163,124  

$ 437,698  

$ 96,860  

$ 1,874,103  

$ 426,683 $ 496,298 $ 352,375 $ 202,783 $ 161,886 $ 493,416 $ 65,839 $ 2,199,280

1-4 family mortgage

$ 299,686  

$ 117,579  

$ 68,044  

$ 46,954  

$ 37,374  

$ 37,970  

$ 210,338  

$ 817,945  

$ 388,778 $ 273,515 $ 93,272 $ 52,209 $ 28,999 $ 57,512 $ 243,302 $ 1,137,587

Special Mention

315 445 816 375 294 881 2,854 5,980

- 279 404 648 346 1,224 363 3,264

- - - - - - - -

Total 1-4 family mortgage

$ 299,686  

$ 118,729  

$ 69,154  

$ 47,311  

$ 37,865  

$ 39,493  

$ 214,527  

$ 826,765  

$ 389,093 $ 274,239 $ 94,492 $ 53,232 $ 29,639 $ 59,617 $ 246,519 $ 1,146,831

Other mortgage

$ 882,849  

$ 481,012  

$ 411,426  

$ 174,700  

$ 272,555  

$ 353,621  

$ 81,202  

$ 2,657,365  

$ 1,027,747 $ 976,208 $ 517,392 $ 380,104 $ 130,228 $ 470,699 $ 75,669 $ 3,578,047

Special Mention

12,837  

231 - - - - 7,161 - 7,392

- - - 130 4,569 7,612 - 12,311

- - - - - - - -

Total Other mortgage

$ 882,849  

$ 481,012  

$ 411,556  

$ 179,573  

$ 283,615  

$ 358,277  

$ 81,202  

$ 2,678,084  

$ 16,303  

$ 4,845  

$ 2,896  

$ 3,649  

$ 37,250  

$ 66,829  

$ 1,027,978 $ 976,208 $ 517,392 $ 380,234 $ 134,797 $ 485,472 $ 75,669 $ 3,597,750

$ 21,132 $ 5,845 $ 4,203 $ 1,759 $ 440 $ 2,988 $ 30,021 $ 66,388

Special Mention

- - - - - 14 - 14

- - - - - - - -

Total Consumer

$ 16,303  

$ 4,845  

$ 2,896  

$ 3,673  

$ 37,250  

$ 66,853  

$ 3,003,630  

$ 1,511,642  

$ 1,033,320  

$ 552,480  

$ 602,054  

$ 970,806  

$ 1,718,465  

$ 9,392,397  

$ 21,132 $ 5,845 $ 4,203 $ 1,759 $ 440 $ 3,002 $ 30,021 $ 66,402

$ 3,172,373 $ 2,892,640 $ 1,347,172 $ 793,843 $ 407,411 $ 1,158,865 $ 1,752,649 $ 11,524,953

Special Mention

10,600  

22,834  

56,072  

10,632  

10,072  

12,949  

43,796  

84,465  

$ 3,004,976  

$ 1,514,502  

$ 1,054,552  

$ 563,576  

$ 616,497  

$ 993,736  

$ 1,785,095  

$ 9,532,934  

12,314 4,182 1,917 4,846 5,546 16,744 34,057 79,606

200 279 783 10,352 22,442 34,004 15,349 83,409

- - - - - - - -

$ 3,184,887 $ 2,897,101 $ 1,349,872 $ 809,041 $ 435,399 $ 1,209,613 $ 1,802,055 $ 11,687,968

Nonperforming loans include nonaccrual loans and loans 90 or more days past due and still accruing.

4 unchanged sentences

Commercial, financial and agricultural

$ 3,138,014  

$ 7,303  

$ 3,145,317  

$ 2,816,599 $ 7,387 $ 2,823,986

Real estate - construction

1,532,388  

1,519,508 111 1,519,619

Real estate - mortgage:

Owner-occupied commercial

2,195,968  

2,199,280  

2,250,074 7,089 2,257,163

1-4 family mortgage

1,144,713  

1,146,831  

1,243,603 6,335 1,249,938

Other mortgage

3,592,732  

3,597,750  

3,743,840 506 3,744,346

Total real estate - mortgage

6,933,413  

10,448  

6,943,861  

66,312  

66,402  

$ 11,670,127  

$ 17,841  

$ 11,687,968  

7,237,517 13,930 7,251,447

63,672 105 63,777

$ 11,637,296 $ 21,533 $ 11,658,829

December 31, 2022

2 unchanged sentences

Commercial, financial and agricultural

$ 2,979,671  

$ 4,382  

$ 2,984,053  

$ 3,138,014 $ 7,303 $ 3,145,317

Real estate - construction

1,103,076  

1,532,388 - 1,532,388

Real estate - mortgage:

Owner-occupied commercial

1,873,082  

1,874,103  

2,195,968 3,312 2,199,280

1-4 family mortgage

824,756  

826,765  

1,144,713 2,118 1,146,831

Other mortgage

2,673,428  

2,678,084  

3,592,732 5,018 3,597,750

Total real estate - mortgage

5,371,266  

5,378,952  

66,824  

66,853  

$ 9,520,837  

$ 12,097  

$ 9,532,934  

6,933,413 10,448 6,943,861

66,312 90 66,402

$ 11,670,127 $ 17,841 $ 11,687,968

Loans by past due status as of December 31, 2023 and 2022 are as follows:

3 unchanged sentences

Commercial, financial and agricultural

$ 1,075  

$ 1,679  

$ 7,108  

$ 3,136,530  

$ 3,145,317  

$ 3,238  

$ 3,418 $ 3,718 $ 170 $ 7,306 $ 7,217 $ 2,809,463 $ 2,823,986 $ 5,028

Real estate - construction

1,531,677  

1,532,388  

- 34 - 34 111 1,519,474 1,519,619 -

Real estate - mortgage:

Owner-occupied commercial

2,195,433  

2,199,280  

- - - - 7,089 2,250,074 2,257,163 7,089

1-4 family mortgage

1,143,728  

1,146,831  

540 4,920 1,909 7,369 4,426 1,238,143 1,249,938 1,224

Other mortgage

3,592,501  

3,597,750  

676 10,703 - 11,379 506 3,732,461 3,744,346 506

Total real estate - mortgage

6,931,662  

6,943,861  

66,010  

66,402  

$ 1,968  

$ 2,280  

$ 5,391  

$ 9,639  

$ 12,450  

$ 11,665,879  

$ 11,687,968  

$ 4,407  

1,216 15,623 1,909 18,748 12,021 7,220,678 7,251,447 8,819

58 31 105 194 - 63,583 63,777 -

$ 4,692 $ 19,406 $ 2,184 $ 26,282 $ 19,349 $ 11,613,198 $ 11,658,829 $ 13,847

December 31, 2022

2 unchanged sentences

Commercial, financial and agricultural

$ 4,343  

$ 2,979,078  

2,984,053  

$ 2,059  

$ 1,075 $ 409 $ 195 $ 1,679 $ 7,108 $ 3,136,530 3,145,317 $ 3,238

Real estate - construction

1,103,076  

- 711 - 711 - 1,531,677 1,532,388 -

Real estate - mortgage:

Owner-occupied commercial

1,872,939  

1,874,103  

83 452 - 535 3,312 2,195,433 2,199,280 57

1-4 family mortgage

824,053  

826,765  

405 580 594 1,579 1,524 1,143,728 1,146,831 491

Other mortgage

2,673,428  

2,678,084  

231 - 4,512 4,743 506 3,592,501 3,597,750 -

Total real estate - mortgage

5,370,420  

5,378,952  

66,708  

66,853  

$ 5,335  

$ 6,890  

$ 6,762  

$ 9,519,282  

9,532,934  

$ 3,563  

719 1,032 5,106 6,857 5,342 6,931,662 6,943,861 548

174 128 90 392 - 66,010 66,402 621

$ 1,968 $ 2,280 $ 5,391 $ 9,639 $ 12,450 $ 11,665,879 11,687,968 $ 4,407

There was no interest earned on nonaccrual loans for the years ended December 31, 2023 and 2022.

Loans that 

no  longer share similar risk characteristics with the collectively evaluated pools are estimated on an individual basis.

Loans that no longer share similar risk characteristics with the 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.

3 unchanged sentences

Commercial, financial and agricultural

$ 20,061  

$ 12,092  

$ 24,998  

$ 57,988  

$ 9,910  

$ 20,266 $ 7,240 $ 2,126 $ 24,016 $ 53,648 $ 16,189

Real estate - construction

145 - - 978 1,123 1

Real estate - mortgage:

Owner-occupied commercial

12,038 - - 698 12,736 475

1-4 family mortgage

15,694 - - - 15,694 1,058

Other mortgage

12,311  

5,862 - - - 5,862 603

Total real estate - mortgage

24,144  

24,218  

$ 44,205  

$ 12,092  

$ 26,270  

$ 83,404  

$ 10,387  

33,594 - - 698 34,292 2,136

$ 54,005 $ 7,240 $ 2,126 $ 25,692 $ 89,063 $ 18,326

December 31, 2022

1 unchanged sentence

Commercial, financial and agricultural

$ 13,067  

$ 5,075  

$ 18,533  

$ 27,599  

$ 64,274  

$ 9,727  

$ 20,061 $ 12,092 $ 837 $ 24,998 $ 57,988 $ 9,910

Real estate - construction

- - - 1,198 1,198 7

Real estate - mortgage:

Owner-occupied commercial

8,573 - - 74 8,647 154

1-4 family mortgage

3,260 - - - 3,260 316

Other mortgage

12,837  

12,311 - - - 12,311 -

Total real estate - mortgage

20,191  

$ 33,258  

$ 5,075  

$ 18,533  

$ 27,599  

$ 84,465  

$ 11,292  

On March 22, 2020, an Interagency Statement was issued by banking regulators that encouraged financial institutions to work prudently with borrowers who were or may have been unable to meet their contractual payment obligations due to the effects of COVID- 19.

Additionally, Section 4013 of the CARES Act further provided that a qualified loan modification was exempt by law from classification as a Troubled Debt Restructurings (“TDR”) as defined by GAAP, from the period beginning March 1, 2020 until the earlier of December 31, 2020 or the date that was 60 days after the date on which the national emergency concerning the COVID- 19 outbreak declared by the President of the United States under the National Emergencies Act terminates.

The Interagency Statement was subsequently revised in April 2020 to clarify the interaction of the original guidance with Section 4013 of the CARES Act, as well as setting forth the banking regulators’

views on consumer protection considerations.

On December 27, 2020, President Trump signed into law the Consolidated Appropriations Act 2021, which extended the period established by Section 4013 of the CARES Act to the earlier of January 1, 2022 or the date that wa 60 days after the date on which the national COVID- 19 emergency terminates.

24,144 - - 74 24,218 470

$ 44,205 $ 12,092 $ 837 $ 26,270 $ 83,404 $ 10,387

On March 22, 2020, an Interagency Statement was issued by banking regulators that encouraged financial institutions to work prudently with borrowers who are or may be unable to meet their contractual payment obligations due to the effects of COVID- 19.

Additionally, Section 4013 of the CARES Act further provided that a qualified loan modification is exempt by law from classification as a Troubled Debt Restructuring (“TDR”) as defined by GAAP, from the period beginning March 1, 2020 until the earlier of December 31, 2020 or the date that is 60 days after the date on which the national emergency concerning the COVID- 19 outbreak declared by the President of the United States under the National Emergencies Act terminated.

On December 27, 2020, President Trump signed into law the Consolidated Appropriations Act 2021, which extended the period established by Section 4013 of the CARES Act to the earlier of January 1, 2022 or the date that is 60 days after the date on which the national COVID- 19 emergency terminated.

In accordance with such guidance, the Bank offered short-term modifications made in response to COVID- 19 to borrowers who were current and otherwise not past due.

These included short-term ( 180 days or less) modifications in the form of payment deferrals, fee waivers, extensions of repayment terms, or other delays in payment that were insignificant.

As of December 31, 2021, there were 12 loans outstanding totaling $ 1.5 million that had payment deferrals in connection with the COVID- 19 relief provided by the CARES Act.

At December 31, 2022, there were no loans with payment deferrals in connection with COVID- 19 relief.

TDRs at December 31, 2022 and 2021 totaled $ 2.5 million and $ 2.6 million, respectively.

The following tables present loans modified in a TDR during the periods presented 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.

These included short-term ( 180 days or less) modifications in the form of payment deferrals, fee waivers, extensions of repayment terms, or other delays in payment that are insignificant.

The Bank adopted ASU 2022 - 02, Financial Instruments - Credit Losses (Topic 326 ) Troubled Debt Restructurings and Vintage Disclosures effective January 1, 2023.

The amendments in ASU 2022 - 02 eliminated the recognition and measure of TDRs and enhanced disclosures for loan modifications to borrowers experiencing financial difficulty.

The table below details the amortized cost basis at the end of the reporting period for loans made to borrowers experiencing financial difficulty that were modified during the year ended December 31, 2023:

Year Ended December 31, 2023

Payment Deferral

Percentage of

(In Thousands)

Troubled Debt Restructurings

Commercial, financial and agricultural

Real estate - construction

Real estate - mortgage:

$ 28,363 $ - $ 28,363 0.24 %

Owner-occupied commercial

1-4 family mortgage

3,021 - 3,021 0.03 %

Other mortgage

Total real estate - mortgage

10,932 303 11,234 0.10 %

$ 42,315 $ 303 $ 42,618 0.37 %

The following table summarizes the financial impacts of loan modifications made to borrowers experiencing financial difficulty during the twelve months ended December 31, 2023:

Twelve Months Ended December 31, 2023

Total Payment

Term Extensions

(In Thousands)

Commercial, financial and agricultural 1 to 65 -

Owner-occupied commercial

Other mortgage

TDRs at December 31, 2022 totaled $ 2.5 million.

The following tables present loans modified in a TDR during the period presented by portfolio segment and the financial impact of those modifications.

The table includes modifications made to new TDRs, as well as renewals of existing TDRs.

Year Ended December 31, 2022

2 unchanged sentences

Commercial, financial and agricultural

$ 1,155  

3 $ 444 $ 444

Real estate - construction

4 unchanged sentences

Total real estate - mortgage

$ 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 years ended December 31, 2022 and December 31, 2021, respectively.

3 $ 444 $ 444

There were no loans that were modified in the previous twelve months (i.e., the twelve months prior to default) that defaulted during the years ended December 31, 2023.

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

5 unchanged sentences

Balance, beginning of year

$ 51,180  

$ 36,969  

103,513  

90,553  

( 102,085 )  

$ 52,608 $ 51,180

67,106 103,513

( 79,883 ) ( 102,085 )

Balance, end of year

$ 52,608  

$ 51,180  

$ 39,831 $ 52,608

FORECLOSED PROPERTIES

3 unchanged sentences

Balance at beginning of year

$ 1,208  

$ 6,497  

$ 8,178  

Transfers from loans and capitalized expenses

Foreclosed properties sold

( 2,281 )  

( 6,474 )  

Write downs and partial liquidations

( 1,133 )  

Balance at end of year

$ 1,208  

$ 6,497  

PREMISES AND EQUIPMENT

1 unchanged sentence

(In Thousands)

$ 5,809  

$ 5,830  

38,319  

38,261  

Furniture and equipment

32,454  

31,183  

Leasehold improvements

13,773  

13,400  

Construction in progress

Total premises and equipment, cost

92,288  

88,736  

Accumulated depreciation

( 32,438 )  

Total premises and equipment, net

$ 59,850  

$ 60,300  

The provisions for depreciation charged to occupancy and equipment expense for the years ended December 31, 2023, 2022 and 2021 were $ 4.4 million, $4.1million, and $ 4.1 million, respectively.

The Company leases space under non-cancelable operating leases for several of its banking offices and certain office equipment.

The Company reports its right-of-use asset in other assets and its lease liabilities in other liabilities in its Consolidated Balance Sheet.

The Company reports its right-of-use asset in other assets and its lease liabilities in other liabilities in its Consolidated Balance Sheets.

Supplemental balance sheet information related to operating leases is as follows:

2 unchanged sentences

Right-of-use assets

$ 18,816  

$ 17,916  

Lease liabilities

$ 19,614  

$ 18,549  

Weighted average remaining lease term

2 unchanged sentences

Operating lease cost

$ 4,379  

$ 4,009  

Short-term lease cost

1 unchanged sentence

Sublease income

( 40 )  

Net lease cost

$ 5,017  

$ 4,345  

The following table reconciles future undiscounted lease payments due under non-cancelable leases to the aggregate lease liability as of December 31, 2023:

(In Thousands)

$ 4,281  

Total lease payments

$ 21,690  

imputed interest

Present value of operating lease liabilities

$ 19,614  

VARIABLE INTEREST ENTITIES ( “ VIEs ” )

The Company utilizes special purpose entities (“SPEs”) that constitute investments in limited partnerships that undertake certain development projects to achieve federal and state tax credits.

These SPEs are typically structured as VIEs and are thus subject to consolidation by the reporting enterprise that absorbs the majority of the economic risks and rewards of the VIE.

To determine whether it must consolidate a VIE, the Company analyzes the design of the VIE to identify the sources of variability within the VIE, including an assessment of the nature of risks created by the assets and other contractual obligations of the VIE, and determines whether it will absorb a majority of that variability and has the power to direct the activities that most significantly impact the economic performance of the entity.

The Company has invested in limited partnerships as a funding investor. 

The partnerships are single purpose entities that lend money to real estate investors for the purpose of acquiring and operating, or rehabbing, commercial property. 

The investments qualify for New Market Tax Credits under Internal Revenue Code Section 45D, as amended, or Historic Rehabilitation Tax Credits under Code Section 47, as amended, or Low-Income Housing Tax Credits under Code Section 42, as amended. 

For each of the partnerships, the Company acts strictly in a limited partner capacity. 

economic performance and therefore the partnerships are not consolidated in our financial statements. 

The amount of recorded investment in these partnerships as of December 31, 2022 and 2021 was $ 46.3 million and $ 69.9 million, respectively. 

During 2022, the Company invested in one Federal Historic Tax Credit partnership and two Low-Income Housing Tax Credit partnerships with recorded investment in each totaling $1.2 million and $ 7.6 million, respectively, at December 31, 2022. 

There was no recorded investment included in loans of the Company at December 31, 2022. 

There amount of loans included in the Company’s recorded investment at December 31, 2021 was $ 32.0 million. 

These SPEs are typically structured as VIEs and are thus subject to consolidation by the reporting enterprise that has both power over governance and absorbs the majority of the economic risks and rewards of the VIE.

To determine whether it must consolidate a VIE, the Company analyzes the design of the VIE to identify the sources of variability within the VIE, including an assessment of the nature of risks created by the assets and other contractual obligations of the VIE, and determines whether it will absorb a majority of that variability and, if so, whether it has power to direct the activities that most significantly impact the economic performance of the entity.

The Company has invested in limited partnerships as a funding investor.

The partnerships are single purpose entities that lend money to real estate investors for the purpose of acquiring and operating, or rehabbing, commercial property.

For each of the partnerships, the Company acts strictly in a limited partner capacity.

The Company has determined that it is not the primary beneficiary of these partnerships because it does not have the power to direct the activities of the entity that most significantly impact the entities’ economic performance and therefore the partnerships are not consolidated in our financial statements.

The amount of recorded investment in these partnerships as of December 31, 2023 and 2022 was $ 42.8 million and $ 46.3 million, respectively.

During 2023, the Company invested in two Federal Historic Tax Credit partnerships and six Low-Income Housing Tax Credit partnerships with recorded investment in each totaling $ 754,000 and $ 7.8 million, respectively, at December 31, 2023.

Additionally, the Company funded an existing investment obligation of $ 2.4 million for one Federal Historic Tax Credit partnership.

There was no recorded investment included in loans of the Company at either December 31, 2023 or 2022 .

The remaining amounts are included in other assets.

Deposits at December 31, 2023 and 2022 were as follows:

1 unchanged sentence

Noninterest-bearing demand

$ 3,321,347  

$ 4,799,767  

Interest-bearing checking

7,224,201  

6,707,778  

138,450  

131,955  

Time deposits, $250,000 and under

239,772  

256,185  

Time deposits, over $250,000

573,035  

507,151  

Brokered time deposits

50,000  

$ 11,546,805  

$ 12,452,836  

The scheduled maturities of time deposits at December 31, 2023 were as follows:

(In Thousands)

$ 647,382  

132,892  

44,019  

22,573  

15,941  

$ 862,807  

At December 31, 2023 and 2022, overdraft deposits reclassified to loans were $ 1.1 million and $ 1.9 million, respectively.

FEDERAL FUNDS PURCHASED

At December 31, 2022, the Company had $ 1.36 billion (excludes the Company’s federal funds purchases reported in the next paragraph) in federal funds purchased from its correspondent banks that are clients of its correspondent banking unit, compared to $ 1.71 billion at December 31, 2021.

At December 31, 2023, the Company had $ 1.26 billion in federal funds purchased from its correspondent banks that are clients of its correspondent banking unit, compared to $ 1.35 billion (excludes the Company’s federal funds purchases reported in the next paragraph) at December 31, 2022.

Rates paid on these funds were between 5.40 % and 5.50 % as of December 31, 2023 and 4.40 % and 4.50 % as of December 31, 2022.

At December 31, 2023, the Company had available lines of credit totaling approximately $ 880.0 million with various financial institutions for borrowing on a short-term basis, compared to $ 963.0 million at December 31, 2022.

At December 31, 2022, the Company had $ 265.0 million outstanding borrowings from these lines, compared to no  outstanding borrowings from these lines at December 31, 2021.

The Company had no outstanding borrowings from these lines at December 31, 2023, compared to $ 265.0 million outstanding borrowings from these lines at December 31, 2022.

OTHER BORROWINGS

Other borrowings are comprised of:

$ 30.0 million on the Company’s 4.5 % Subordinated Notes due November 8, 2027, which were issued in a private placement in November 2017 and pay interest semi-annually.

The Notes may be prepaid by the Company.

$ 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.

Debt is reported net of unamortized issuance costs of $ 15,000 and $ 24,000 as of December 31, 2023 and 2022, respectively.

SF INTERMEDIATE HOLDING COMPANY, INC., SF HOLDING 1, INC., SF TN REALTY HOLDINGS, INC., SF REALTY 1, INC., SF FLA REALTY, INC., SF GA REALTY, INC.

AND SF TN REALTY, INC.

In January 2012, the Company formed SF Holding 1, Inc., an Alabama corporation, and its subsidiary, SF Realty 1, Inc., an Alabama corporation. 

In September 2013, the Company formed SF FLA Realty, Inc., an Alabama corporation and a subsidiary of SF Holding 1, Inc. 

In May 2014, the Company formed SF GA Realty, Inc., an Alabama corporation and a subsidiary of SF Holding 1, Inc. 

In February 2016, the Company formed SF TN Realty, Inc., an Alabama corporation and a subsidiary of SF Holding 1, Inc. 

Also in February 2016, the Company formed SF Intermediate Holding Company, Inc., an Alabama corporation. 

In January 2012, the Company formed SF Holding 1, Inc., an Alabama corporation, and its subsidiary, SF Realty 1, Inc., an Alabama corporation.

In September 2013, the Company formed SF FLA Realty, Inc., an Alabama corporation and a subsidiary of SF Holding 1, Inc.

In May 2014, the Company formed SF GA Realty, Inc., an Alabama corporation and a subsidiary of SF Holding 1, Inc.

In February 2016, the Company formed SF TN Realty, Inc., an Alabama corporation and a subsidiary of SF Holding 1, Inc.

Also in February 2016, the Company formed SF Intermediate Holding Company, Inc., an Alabama corporation.

Immediately following the formation of SF Intermediate Holding Company, Inc., ServisFirst Bank assigned all of the outstanding capital stock of SF Holding 1, Inc.

4 unchanged sentences

In December 2022, SF Holding 1, Inc.

merged with and into SF TN Realty Holdings, Inc.

with SF TN Realty Holdings, Inc.

being the surviving entity.

Following the merger, SF Realty 1, SF FLA Realty, SF GA Realty and SF TN Realty are all subsidiaries of SF TN Realty Holdings, Inc. 

SF Realty 1, SF FLA Realty, SF GA Realty and SF TN Realty all hold and manage participations in residential mortgages and commercial real estate loans originated by ServisFirst Bank and have elected to be treated as real estate investment trusts (“REIT”) for U.S.

income tax purposes. 

merged with and into SF TN Realty Holdings, Inc., with SF TN Realty Holdings, Inc, being the surviving entity.

Following the merger, SF Realty 1, SF FLA Realty, SF GA Realty and SF TN Realty are all subsidiaries of SF TN Realty Holdings, Inc.

income tax purposes.

SF Intermediate Holding Company, Inc., SF TN Realty Holdings, Inc., SF Realty 1, Inc., SF FLA Realty, Inc., SF GA Realty, Inc.

1 unchanged sentence

are all consolidated into the Company.

The Company periodically enters into derivative contracts to manage exposures to movements in interest rates.

The Company purchased an interest rate cap in 

2020  to limit exposures to increases in interest rates.

The interest rate cap is 

not  designated as a hedging instrument but rather is a stand-alone derivative.

The interest rate cap has an original term of 

3  years, a notional amount of $ 300  million and is tied to the 

one -month LIBOR rate with a strike rate of 

The fair value of the interest rate cap is carried on the Consolidated Balance Sheets in other assets and the change in fair value is recognized in noninterest income each quarter.

December 31, 2022, 

the interest rate cap had a fair value of $ 4.2 million and remaining term of 

0.3  years, compared to a fair value of $ 1.15 million and remaining term of 1.4 years at December 31, 2021.

The Company has entered into forward loan sale commitments with secondary market investors to deliver loans on a “best efforts delivery”

basis, which do not meet the definition of a derivative instrument.

When a rate is committed to a borrower, it is based on the best price that day and locked with the investor for the customer for a 30 -day period.

In the event the loan is not delivered to the investor, the Company has no risk or exposure with the investor.

The interest rate lock commitments related to loans that are originated for later sale are classified as derivatives.

The fair values of the Company’s agreements with investors and rate lock commitments to customers as of December 31, 2022 and 2021 were not material.

The Company purchased an interest rate cap in May of 2020 to limit exposures to increases in interest rates.

The interest rate cap was not designated as a hedging instrument but rather as a stand-alone derivative.

The interest rate cap had an original term of 3 three years, a notional amount of $ 300 million and was tied to the one -month LIBOR rate with a strike rate of 0.50 %.

The fair value of the interest rate cap was carried on the Consolidated Balance Sheets in other assets and the change in fair value is recognized in noninterest income each quarter.

The interest rate cap had a fair value of $ 4.2 million and remaining term of 0.3 years at December 31, 2022, and expired on May 4, 2023.

The Bank has entered into agreements with secondary market investors to deliver loans on a “best efforts delivery” basis.

When a rate is committed to a borrower, it is based on the best price that day and locked with our investor for our customer for a 30 -day period.

In the event the loan is not delivered to the investor, the Bank has no risk or exposure with the investor.

The interest rate lock commitments to customers related to loans that are originated for later sale are classified as derivatives.

The fair values of our agreements with investors and rate lock commitments to customers as of December 31, 2023 and 2022 were not material.

EMPLOYEE AND DIRECTOR BENEFITS

2 unchanged sentences

Stock Incentive Plan

On March 23, 2009, the Company’s board of directors adopted the 2009 Stock Incentive Plan (the “Plan”), which was effective upon approval by the stockholders at the 2009 Annual Meeting of Stockholders.

The 2009 Plan originally permitted the grant of up to 2,550,000 shares of common stock.

1 unchanged sentence

The Plan authorizes the grant of stock appreciation rights, restricted stock, incentive stock options, non-qualified stock options, non-stock share equivalents, performance shares or performance units and other equity-based awards.

Option awards are generally granted with an exercise price equal to the fair market value of the Company’s stock at the date of grant.

As of December 31, 2023, there are a total of 3,031,065 shares available to be granted under the Plan.

2 unchanged sentences

This model requires the input of highly subjective assumptions, changes to which can materially affect the fair value estimate.

The fair value of each option granted is estimated on the date of grant using the Black-Scholes-Merton model based on the weighted-average assumptions for expected dividend yield, expected stock price volatility, risk-free interest rate and expected life of options granted.

The Black-Scholes-Merton model is based on the weighted-average assumptions for expected dividend yield, expected stock price volatility, risk-free interest rate and expected life of options granted.

There were no grants of stock options during the years ended December 31, 2023, 2022, and 2021.

6 unchanged sentences

Outstanding at beginning of year

353,250  

$ 19.28  

$ 23,525  

( 70,500 )  

( 2,750 )  

280,000 $ 19.43 3.0 $ 14,088

( 112,200 ) 11.84 0.7 6,148

( 2,000 ) 34.64 5.1 64

Outstanding at end of year

280,000  

$ 19.43  

$ 14,088  

165,800 24.35 2.9 7,211

Exercisable at December 31, 2023:

220,500  

$ 14.37  

$ 12,279  

143,300 $ 21.84 2.2 $ 6,419

Year Ended December 31, 2022:

Outstanding at beginning of year

641,450  

$ 18.15  

$ 16,985  

( 278,200 )  

20,131  

( 10,000 )  

353,250 $ 19.28 3.8 $ 23,525

( 70,500 ) 17.96 2.2 3,592

( 2,750 ) 37.94 5.4 85

Outstanding at end of year

353,250  

$ 19.28  

$ 23,525  

280,000 19.43 3.0 14,088

Exercisable at December 31, 2022:

264,000  

$ 12.89  

$ 19,353  

220,500 $ 14.37 2.0 $ 12,279

Year Ended December 31, 2021:

Outstanding at beginning of year

965,750  

$ 15.20  

$ 21,914  

( 306,300 )  

( 18,000 )  

641,450 $ 18.15 4.6 $ 16,985

( 278,200 ) 12.58 2.8 20,131

( 10,000 ) 38.38 5.2 466

Outstanding at end of year

641,450  

$ 18.15  

$ 16,985  

353,250 19.28 3.8 23,525

Exercisable at December 31, 2021:

182,200  

$ 12.86  

$ 4,998  

264,000 $ 12.89 2.8 $ 19,353

Exercisable options at December 31, 2023 were as follows:

4 unchanged sentences

(In Thousands)

$ 5.00 - 6.00  

40,000  

$ 5.50  

$ 2,536  

6.00 - 7.00  

41,500  

15.00 - 16.00  

59,000  

17.00 - 18.00  

21,500  

18.00 - 19.00  

19.00 - 20.00  

36,000  

25.00 - 26.00  

38.00 - 39.00  

12,500  

220,500  

$ 14.37  

$ 12,279  

$ 6.00 - 7.00 7,500 6.92 0.1 448

15.00 - 16.00 42,800 15.52 1.1 2,188

17.00 - 18.00 21,500 17.17 1.3 1,063

18.00 - 19.00 6,000 18.49 1.7 289

19.00 - 20.00 24,000 19.16 2.1 1,139

25.00 - 26.00 4,000 25.41 2.7 165

33.00 - 34.00 2,000 33.48 5.0 66

35.00 - 36.00 25,000 35.65 4.8 775

38.00 - 39.00 8,000 38.29 3.1 227

41.00 - 42.00 1,000 41.21 4.1 25

43.00 - 44.00 1,500 43.80 4.5 34

143,300 $ 21.84 2.2 $ 6,419

As of December 31, 2023, there was $ 52,000 of total unrecognized compensation cost related to non-vested stock options.

As of December 31, 2022, non-vested stock options had a weighted average remaining time to vest of 1.1 years.

As of December 31, 2023, non-vested stock options had a weighted average remaining time to vest of 8 months.

Restricted Stock and Performance Shares

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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 December 31, 2023, there was $ 5.1 million of total unrecognized compensation cost related to non-vested restricted stock.

As of December 31, 2023, non-vested restricted stock had a weighted average remaining time to vest of 2.1 years.

The Company periodically grants performance stock that give plan participants the opportunity to earn between 

0 % and 

150 % of the number of performance shares granted based on achieving certain performance metrics.

The number of performance shares earned is determined by reference to the Company’s total shareholder return relative to a peer group of other publicly traded banks and bank holding companies during the performance period.

The performance period is generally 

three  years starting on the grant date.

The fair value of performance stock is determined using a Monte Carlo simulation model on the grant date.

As of December 31, 2022, there was $ 801,000 of total unrecognized compensation cost related to non-vested performance stock.

As of December 31, 2022, non-vested performance stock had a weighted average remaining time to vest of 1.7 years.

The following table summarizes restricted stock and performance stock activity:

The Company periodically grants PSUs that give plan participants the opportunity to earn between 0 % and 150 % of the number of PSUs granted based on achieving certain performance metrics.

The number of stock units earned upon vesting of PSUs is determined by reference to the Company’s total stockholder 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 PSUs is determined using a Monte Carlo simulation model on the grant date.

As of December 31, 2023, there was $ 744,000 of total unrecognized compensation cost related to non-vested PSUs.

As of December 31, 2023, non-vested performance stock had a weighted average remaining time to vest of 1.0 year.

The following table summarizes restricted stock and PSU activity:

Restricted Stock

Performance Stock

Weighted Average Grant Date Fair Value

2 unchanged sentences

Non-vested at beginning of year

126,975  

$ 42.28  

12,437  

$ 37.05  

53,974  

11,415  

( 28,160 )  

( 11,209 )  

141,580 $ 56.39 23,852 $ 54.16

64,880 58.45 8,092 70.29

( 35,163 ) 49.85 - -

( 12,999 ) 63.78 - -

Non-vested at end of year

141,580  

$ 56.39  

23,852  

$ 54.16  

158,298 58.08 31,944 58.25

Year Ended December 31, 2022:

Non-vested at beginning of year

84,307  

$ 34.93  

69,295  

12,437  

( 14,274 )  

( 12,353 )  

126,975 $ 42.74 12,437 $ 37.05

53,974 83.24 11,415 72.81

( 28,160 ) 43.27 - -

( 11,209 ) 58.82 - -

Non-vested at end of year

126,975  

$ 42.28  

12,437  

$ 37.05  

141,580 56.39 23,852 54.16

Year Ended December 31, 2021:

Non-vested at beginning of year

71,290  

$ 32.24  

33,695  

( 20,178 )  

( 500 )  

84,307 $ 34.93 - $ -

69,295 48.92 12,437 37.05

( 14,274 ) 29.33 - -

( 12,353 ) 39.60 - -

Non-vested at end of year

84,307  

$ 34.93  

126,975 42.74 12,437 37.05

Retirement Plans

The Company has a retirement savings 401 (k) and profit-sharing plan in which all employees age 21 and older may participate after completion of one year of service.

For employees in service with the Company at June 15, 2005, the length of service and age requirements were waived.

The Company matches employees’

contributions based on a percentage of salary contributed by participants and may make additional discretionary profit-sharing contributions.

The Company’s expense for the plan was $ 1.8 million, $ 1.6 million, and $ 2.0 million for 2022, 2021 and 2020, respectively.

The Company has a retirement savings 401 (k) and profit-sharing plan in which all employees 21 years of age and older may participate after completion of one year of service.

The Company matches employees’ contributions based on a percentage of salary contributed by participants and may make additional discretionary profit-sharing contributions.

The Company’s expense for the plan was $ 2.1 million, $ 1.8 million, and $ 1.6 million for 2023, 2022 and 2021, respectively.

REGULATORY MATTERS

The Bank is subject to dividend restrictions set forth in the Alabama Banking Code and by the Alabama State Banking Department.

Under such restrictions, the Bank may not, without the prior approval of the Alabama State Banking Department, declare dividends in excess of the sum of the current year’s earnings plus the retained earnings from the prior two years.

Based on these restrictions, the Bank would be limited to paying $ 573.9 million in dividends as of December 31, 2023.

1 unchanged sentence

Failure to meet minimum capital requirements can initiate certain mandatory and possible additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Bank and the financial statements.

Under regulatory capital adequacy guidelines and the regulatory framework for prompt corrective action, the Bank must meet specific capital guidelines involving quantitative measures of the Bank’s assets, liabilities, and certain off-balance-sheet items as calculated under regulatory accounting practices.

The Bank’s capital amounts and classification under the prompt corrective guidelines are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors.

Quantitative measures established by regulation to ensure capital adequacy require the Bank to maintain minimum amounts and ratios (set forth in the table below) of common equity Tier 1 capital, total risk-based capital and Tier 1 capital to risk-weighted assets (as defined in the regulations), and Tier 1 capital to adjusted total assets (as defined).

Management believes, as of December 31, 2023, that the Bank meets all capital adequacy requirements to which it is subject.

As of December 31, 2022, the most recent notification from the Federal Deposit Insurance Corporation categorized ServisFirst Bank as well capitalized under the regulatory framework for prompt corrective action.

As of December 31, 2023, the most recent notification from the FDIC categorized ServisFirst Bank as well capitalized under the regulatory framework for prompt corrective action.

To remain categorized as well capitalized, the Bank will have to maintain minimum CET1, total risk-based, Tier 1 risk-based, and Tier 1 leverage ratios as disclosed in the table below.

Management believes that it is well capitalized under the prompt corrective action provisions as of December 31, 2023.

The Company’s and Bank’s actual capital amounts and ratios are presented in the following table:

For Capital Adequacy Purposes

2 unchanged sentences

CET I Capital to Risk Weighted Assets:

$ 1,326,035  

$ 624,986  

ServisFirst Bank

1,385,697  

624,942  

$ 902,694  

Tier I Capital to Risk Weighted Assets:

1,326,535  

833,315  

ServisFirst Bank

1,386,197  

833,256  

1,111,008  

Total Capital to Risk Weighted Assets:

1,532,134  

1,111,086  

ServisFirst Bank

1,533,069  

1,111,008  

1,388,760  

Tier I Capital to Average Assets:

1,326,535  

570,960  

ServisFirst Bank

1,386,197  

570,924  

713,656  

As of December 31, 2022:

CET I Capital to Risk Weighted Assets:

$ 1,123,826  

$ 508,065  

ServisFirst Bank

1,185,161  

508,007  

$ 733,787  

Tier I Capital to Risk Weighted Assets:

1,124,326  

677,420  

ServisFirst Bank

1,185,661  

677,342  

903,123  

Total Capital to Risk Weighted Assets:

1,306,992  

903,226  

ServisFirst Bank

1,303,621  

903,123  

1,128,903  

Tier I Capital to Average Assets:

1,124,326  

608,880  

ServisFirst Bank

1,185,661  

608,826  

761,033  

OTHER OPERATING INCOME AND EXPENSES

4 unchanged sentences

ATM fee income

$ 1,443  

$ 1,234  

Mark to market interest rate cap derivative

Gain (loss) on sale of ORE

( 288 )  

(Loss) gain on sale of fixed assets

( 12 )  

Death benefit of bank owned life insurance contracts

1 unchanged sentence

Total other operating income

$ 12,661  

$ 4,664  

$ 1,615  

Other Operating Expenses

Other loan expenses

$ 2,226  

$ 2,744  

$ 4,886  

Customer and public relations

6 unchanged sentences

Core processing deconverison expense

Privilege tax expense

Total other operating expenses

$ 31,075  

$ 27,157  

$ 15,490  

The components of income tax expense are as follows:

2 unchanged sentences

Current tax expense:

$ 56,318  

$ 45,248  

$ 50,016  

Total current tax expense

59,939  

50,676  

54,366  

Deferred tax (benefit) expense:

( 4,110 )  

( 5,596 )  

Total deferred tax (benefit)

( 2,615 )  

( 5,061 )  

Total income tax expense

$ 57,324  

$ 45,615  

$ 44,639  

The Company’s total income tax expense differs from the amounts computed by applying the Federal income tax statutory rates to income before income taxes.

A reconciliation of the differences is as follows:

3 unchanged sentences

Income tax at statutory federal rate

$ 64,796  

21.00  %

Effect on rate of:

State income tax, net of federal tax effect

Tax-exempt income, net of expenses  

( 188 )  

Bank-owned life insurance contracts  

( 1,812 )  

Excess tax benefit from stock compensation  

( 1,091 )  

Federal tax credits, net of related amortization  

( 11,131 )  

( 497 )  

Tax-exempt income, net of expenses

Bank-owned life insurance contracts

Excess tax benefit from stock compensation

Federal tax credits, net of related amortization

Effective income tax and rate

$ 57,324  

18.58  %

Year Ended December 31, 2022

2 unchanged sentences

Income tax at statutory federal rate

$ 53,203  

21.00  %

Effect on rate of:

State income tax, net of federal tax effect

Tax-exempt income, net of expenses  

( 242 )  

Bank-owned life insurance contracts  

( 1,395 )  

Excess tax benefit from stock compensation  

( 2,335 )  

Federal tax credits, net of related amortization  

( 11,019 )  

Tax-exempt income, net of expenses

Bank-owned life insurance contracts

Excess tax benefit from stock compensation

Federal tax credits, net of related amortization

Effective income tax and rate

$ 45,615  

18.00  %

Year Ended December 31, 2021

2 unchanged sentences

Income tax at statutory federal rate

$ 44,984  

21.00  %

Effect on rate of:

State income tax, net of federal tax effect

Tax-exempt income, net of expenses  

( 354 )  

Bank-owned life insurance contracts  

( 1,325 )  

Excess tax benefit from stock compensation  

( 1,306 )  

Federal tax credits  

( 563 )  

( 27 )  

Tax-exempt income, net of expenses

Bank-owned life insurance contracts

Excess tax benefit from stock compensation

Federal tax credits

Effective income tax and rate

$ 44,639  

20.84  %

The components of net deferred tax asset are as follows:

2 unchanged sentences

Allowance for credit losses

$ 36,720  

$ 29,237  

Other real estate owned

1 unchanged sentence

Nonaccrual interest

State tax credits

State tax credits carryforward

Deferred loan fees

5 unchanged sentences

Net unrealized loss on securities available for sale

16,339  

Other deferred tax assets

Total deferred tax assets

72,984  

52,263  

Deferred tax liabilities:

Net unrealized gain on securities available for sale

Prepaid expenses

Right-of-use assets and other leasing transactions

Acquired intangible assets

Other deferred tax liabilities

Total deferred tax liabilities

12,536  

14,491  

Net deferred tax assets

$ 60,448  

$ 37,772  

The Company believes its net deferred tax asset is recoverable as of December 31, 2023 and 2022 based on the expectation of future taxable income and other relevant considerations.

Deferred tax assets and liabilities are measured using enacted tax rates applicable to taxable income in the years in which those temporary differences are expected to be recovered or settled.

Pursuant to ASC 740 - 10 - 30 - 2 Income Taxes , deferred tax assets and liabilities are measured using enacted tax rates applicable to taxable income in the years in which those temporary differences are expected to be recovered or settled.

The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

1 unchanged sentence

Federal income tax return and various consolidated and separate company state income tax returns.

The Company is currently open to audit under the statute of limitations by the Internal Revenue Service for the years ended December 31, 2019 

through 2022.

The Company is also currently open to audit by several state departments of revenue for the years ended December 31, 2019 

through 2022.

The Company is currently open to audit under the statute of limitations by the Internal Revenue Service for the years ended December 31, 2020 through 2023.

The Company is also currently open to audit by several state departments of revenue for the years ended December 31, 2020 through 2023.

The audit periods differ depending on the date the Company began business activities in each state.

1 unchanged sentence

Interest and penalties related to unrecognized income tax benefits are recorded in the provision for income taxes.

The Company has $ 1,653,000 of unrecognized tax benefits (net of the federal benefit on state income tax issues) recorded as of December 31, 2023.

Unrecognized income tax benefits as of December 31, 2023, and December 31, 2022, that, if recognized, would impact the effective income tax rate totaled $ 1,653,000 and $ 0 (net of the federal benefit on state income tax issues), respectively.

The Company does not have any unrecognized tax benefits as of December 31, 2022.

The following table presents a summary of the changes during 2023, 2022 and 2021 in the amount of unrecognized tax benefits that are included in the consolidated balance sheets.

1 unchanged sentence

Balance, beginning of year

$ 3,659  

$ 3,238  

$ 2,683  

Increases related to prior year tax positions

Decreases related to prior year tax positions

( 2,860 )  

Increases related to current year tax positions

Lapse of statute

( 799 )  

( 443 )  

Balance, end of year

$ 3,659  

$ 3,238  

COMMITMENTS AND CONTINGENCIES

3 unchanged sentences

Such commitments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the balance sheets.

A summary of the Company’s approximate commitments and contingent liabilities is as follows:

(In Thousands)

Commitments to extend credit

$ 4,230,485  

$ 3,515,818  

$ 2,606,258  

Credit card arrangements

368,749  

366,525  

286,128  

Standby letters of credit and financial guarantees

67,285  

61,856  

66,208  

$ 4,666,519  

$ 3,944,199  

$ 2,958,594  

Commitments to extend credit, credit card arrangements, commercial letters of credit and standby letters of credit all include exposure to some credit loss in the event of nonperformance of the customer.

1 unchanged sentence

Because these instruments have fixed maturity dates, and because many of them expire without being drawn upon, they do not generally present any significant liquidity risk to the Company.

CONCENTRATIONS OF CREDIT

The Company originates primarily commercial, residential, and consumer loans to customers in the Company’s market area.

The ability of the majority of the Company’s customers to honor their contractual loan obligations is dependent on the economy in the market area.

The Company’s loan portfolio is concentrated primarily in loans secured by real estate, principally secured by real estate in the Company’s primary market areas.

The Company originates primarily commercial, residential, and consumer loans to customers in the Company’s market area.

The ability of the majority of the Company’s customers to honor their contractual loan obligations is dependent on the economy in the market area.

The Company’s loan portfolio is concentrated primarily in loans secured by real estate, principally secured by real estate in the Company’s primary market areas.

In addition, a substantial portion of the other real estate owned is located in that same market.

Accordingly, the ultimate collectability of the loan portfolio and the recovery of the carrying amount of other real estate owned are susceptible to changes in market conditions in the Company’s primary market area.

EARNINGS PER COMMON SHARE

6 unchanged sentences

Weighted average common shares outstanding

54,300,366  

54,160,990  

53,844,482  

Net income available to common stockholders

$ 251,442  

$ 207,672  

$ 169,506  

Basic earnings per common share

$ 4.63  

$ 3.83  

$ 3.15  

Weighted average common shares outstanding

54,300,366  

54,160,990  

53,844,482  

Dilutive effects of assumed exercise of stock options and vesting of performance shares

234,408  

273,583  

374,555  

Weighted average common and dilutive potential common shares outstanding

54,534,774  

54,434,573  

54,219,037  

Net income available to common stockholders

$ 251,442  

$ 207,672  

$ 169,506  

Diluted earnings per common share

$ 4.61  

$ 3.82  

$ 3.13  

RELATED PARTY TRANSACTIONS

As more fully described in Note 3 “

Loans ”, the Company had outstanding loan balances, as made in the ordinary course of business, to related parties as of December 31, 2022 and 2021 in the amount of $ 52.6 million and $ 51.2 million, respectively.

As more fully described in Note 3 “ Loans ”, the Company had outstanding loan balances, as made in the ordinary course of business, to related parties as of December 31, 2023 and 2022 in the amount of $ 39.8 million and $ 52.6 million, respectively.

Deposits of related parties are also accepted in the ordinary course of business.

The aggregate balances of related party deposits are insignificant as of December 31, 2023 and 2022, respectively.

FAIR VALUE MEASUREMENT

1 unchanged sentence

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:

            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.

            Observable prices that are based on inputs not quoted on active markets, but corroborated by market data.

            Unobservable inputs are used when little or no market data is available.

Observable prices that are based on inputs not quoted on active markets, but corroborated by market data.

Unobservable inputs are used when little or no market data is available.

The fair value hierarchy gives the lowest priority to Level 3 inputs.

6 unchanged sentences

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.

7 unchanged sentences

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.

These measurements are classified as level 2 within the valuation hierarchy.

Loans Individually Evaluated.

Loans individually evaluated are measured and reported at fair value when full payment under the loan terms is not probable.

Loans individually evaluated are carried at the present value of expected future cash flows using the loan’s existing rate in a discounted cash flow calculation, or the fair value of the collateral if the loan is collateral-dependent.

Expected cash flows are based on internal inputs reflecting expected default rates on contractual cash flows.

1 unchanged sentence

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.

3 unchanged sentences

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 adjustments as of 

December 31, 2022 

0 % to 82 % and 19.5 %, respectively. 

The range of fair value adjustments and weighted average adjustment as of 

December 31, 2021 

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 range of fair value adjustments and weighted average adjustments as of December 31, 2023 was 0 % to 66 % and 25 %, respectively.

The range of fair value adjustments and weighted average adjustment as of December 31, 2022 was 0 % to 82 % and 19.5 %, 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 $ 16.6 million and $ 4.2 million during the years ended December 31, 2023 and 2022, respectively.

Other Real Estate Owned and Repossessed Assets .

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.

2 unchanged sentences

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 

December 31, 2022 

100 % and 

53.3 %, respectively.  

The range of fair value adjustments and weighted average adjustment as of 

December 31, 2021 

100 % and 

40.6 %, respectively.

The range of fair value adjustments and weighted average adjustment as of December 31, 2023 was 25 % to 100 % and 38.3 %, respectively.

The range of fair value adjustments and weighted average adjustment as of December 31, 2022 was 0 % to 100 % and 53.3 % respectively.

These measurements are classified as Level 3 within the valuation hierarchy.

Net losses on the sale and write-downs of OREO of $ 153,000 and $ 1.1 million was recognized during the years ended December 31, 2022 and 2021, respectively.

Net losses on the sale and write-downs of OREO of $ 7,000 and $ 153,000 was recognized during the years ended December 31, 2023 and 2022, respectively.

These charges were for write-downs in the value of OREO subsequent to foreclosure and losses on the disposal of OREO.

OREO is classified within Level 3 of the hierarchy.

There were two residential real estate loan foreclosures for $ 248,000 classified as OREO as of December 31, 2022, compared to $ 50,000 classified as OREO as of December 31, 2021.

There were no residential real estate loan that was in the process of being foreclosed as of December 31, 2022, compared one residential real estate loan that was in the process of being foreclosed for $ 299,000 as of December 31, 2021.

The following table presents the Company’s financial assets and financial liabilities carried at fair value on a recurring basis as of December 31, 2022 and 2021.

There were three residential real estate loan foreclosures for $ 360,000 classified as OREO as of December 31, 2023, compared to two residential real estate loan foreclosures for $ 248,000 as of December 31, 2022.

There were three residential real estate loans $ 292,000 that were in the process of being foreclosed as of December 31, 2023.

There were no residential real estate loan that was in the process of being foreclosed as of December 31, 2022.

The following table presents the Company’s financial assets and financial liabilities carried at fair value on a recurring basis as of December 31, 2023 and 2022.

There were no liabilities measured at fair value on a recurring basis as of December 31, 2023 and 2022.

7 unchanged sentences

Inputs (Level 3)

Assets Measured on a Recurring Basis:

(In Thousands)

Assets Measured on a Recurring Basis:

Available-for-sale debt securities:

Treasury securities

$ 2,969  

Government agency securities

$ 340,807 $ - $ - $ 340,807

Mortgage-backed securities

249,703  

- 215,485 - 215,485

State and municipal securities

13,609  

- 10,223 - 10,223

Corporate debt

367,665  

10,860  

378,525  

- 326,808 6,860 333,668

Total available-for-sale debt securities

630,986  

10,860  

644,815  

Interest rate cap derivative

340,807 552,516 6,860 900,183

Total assets at fair value

$ 2,969  

$ 635,187  

$ 10,860  

$ 649,016  

$ 340,807 $ 552,516 $ 6,860 $ 900,183

Fair Value Measurements at December 31, 2022 Using

6 unchanged sentences

Inputs (Level 3)

Assets Measured on a Recurring Basis:

(In Thousands)

Assets Measured on a Recurring Basis:

Available-for-sale debt securities:

Treasury securities

$ 9,104  

$ 2,969 $ - $ - $ 2,969

Government agency securities

Mortgage-backed securities

425,161  

- 249,703 - 249,703

State and municipal securities

21,634  

- 13,609 - 13,609

Corporate debt

363,638  

16,992  

380,630  

- 367,665 10,860 378,525

Total available-for-sale debt securities

816,474  

16,992  

842,570  

2,969 630,986 10,860 644,815

Interest rate cap derivative

- 4,201 - 4,201

Total assets at fair value

$ 9,104  

$ 817,626  

$ 16,992  

$ 843,722  

The carrying amount and estimated fair value of the Company’s financial instruments measured on a nonrecurring basis were as follows:

$ 2,969 $ 635,187 $ 10,860 $ 649,016

The carrying amount and estimated fair value of the Company’s financial instruments measured on a nonrecurring basis were as follows:

Fair Value Measurements at December 31, 2023 Using

6 unchanged sentences

Inputs (Level 3)

Assets Measured on a Nonrecurring Basis:

(In Thousands)

Assets Measured on a Nonrecurring Basis:

Loans individually evaluated

$ 73,017  

$ - $ - $ 70,735 $ 70,735

Other real estate owned and repossessed assets

Total assets at fair value

$ 73,265  

$ - $ - $ 71,730 $ 71,730

Fair Value Measurements at December 31, 2022 Using

6 unchanged sentences

Inputs (Level 3)

Assets Measured on a Nonrecurring Basis:

(In Thousands)

Assets Measured on a Nonrecurring Basis:

Loans individually evaluated

$ 73,173  

$ - $ - $ 73,017 $ 73,017

Other real estate owned and repossessed assets

Total assets at fair value

$ 74,381  

$ - $ - $ 73,265 $ 73,265

There were no liabilities measured at fair value on a non-recurring basis as of December 31, 2023 and 2022.

In the case of the debt securities portfolio, the Company monitors the portfolio to ascertain when transfers between levels have been affected. For the year ended December 31, 2022, there were four transfers between Levels 1, 2 or 3.

In the case of the debt securities portfolio, the Company monitors the portfolio to ascertain when transfers between levels have been affected.

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 year ended December 31, 2023, there was one transfer from Level 3 to Level 2.

The table below includes a rollforward of the balance sheet amounts for the years ended December 31, 2023 and 2022 (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:

4 unchanged sentences

Fair value, beginning of period

$ 16,992  

$ 10,860 $ 16,992

Transfers into Level 3

1 unchanged sentence

Changes in unrealized gains/losses included in other comprehensive income for assets and liabilities still held at period-end

( 805 )  

18,000  

Transfers out of Level 3

( 10,187 )  

( 4,160 ) ( 10,187 )

Fair value, end of period

$ 10,860  

$ 16,992  

$ 6,860 $ 10,860

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.

9 unchanged sentences

Cash and cash equivalents

$ 814,538  

$ 4,163,724  

$ 2,030,513 $ 2,030,513 $ 814,538 $ 814,538

Held-to-maturity U.S.

Treasury securities

507,151  

470,954  

149,263  

148,620  

508,985 484,267 507,151 470,954

Level 2 Inputs:

Federal funds sold

58,372  

100,575 100,575 1,515 1,515

Held-to-maturity debt securities

526,720  

464,749  

313,444  

317,416  

473,429 422,674 526,720 464,749

Mortgage loans held for sale

5,071 5,071 1,607 1,604

Restricted equity securities

10,226 10,226 7,734 7,734

Level 3 Inputs:

Held-to-maturity debt securities

11,541,671  

11,265,517  

9,416,274  

9,403,012  

250 250 250 250

11,505,512 11,032,819 11,541,671 11,265,517

Financial Liabilities:

Level 2 Inputs:

$ 11,546,805  

$ 11,529,647  

$ 12,452,836  

$ 12,454,140  

$ 13,273,511 $ 13,266,640 $ 11,546,805 $ 11,529,647

Federal funds purchased

1,618,798  

1,711,777  

1,256,724 1,256,724 1,618,798 1,618,798

Other borrowings

64,726  

57,101  

64,706  

65,475  

64,735 58,083 64,726 57,101

PARENT COMPANY FINANCIAL INFORMATION

5 unchanged sentences

Cash and due from banks

$ 19,292  

$ 14,553  

$ 20,014 $ 19,292

Investment in subsidiary

1,357,058  

1,212,850  

$ 1,377,333  

$ 1,228,694  

1,501,777 1,357,058

$ 1,522,348 $ 1,377,333

LIABILITIES AND STOCKHOLDERS' EQUITY

Other borrowings

$ 64,726  

$ 64,706  

$ 64,735 $ 64,726

Other liabilities

15,211  

12,473  

17,708 15,211

Total liabilities

79,937  

77,179  

82,443 79,937

Stockholders' equity:

2 unchanged sentences

Common stock, par value $ 0.001 per share;

200,000,000 shares authorized and 

200,000,000 shares authorized:

54,461,580 shares issued and outstanding at December 31, 2023;

100,000,000 shares authorized and 54,227,060 shares issued and outstanding at December 31, 2021

and 54,326,527 shares issued and outstanding at December 31, 2022 54 54

Additional paid-in capital

229,693  

226,397  

232,605 229,693

Retained earnings

1,109,902  

911,008  

Accumulated other comprehensive (loss) income

( 42,253 )  

14,056  

1,254,841 1,109,902

Accumulated other comprehensive loss

( 47,595 ) ( 42,253 )

Total stockholders' equity

1,297,396  

1,151,515  

1,439,905 1,297,396

Total liabilities and stockholders' equity

$ 1,377,333  

$ 1,228,694  

$ 1,522,348 $ 1,377,333

CONDENSED STATEMENTS OF INCOME

2 unchanged sentences

Dividends received from subsidiary

$ 57,500  

$ 46,000  

$ 45,000  

57,500  

46,000  

45,000  

Other expenses

1 unchanged sentence

Equity in undistributed earnings of subsidiary

196,764  

164,387  

127,442  

251,504  

207,672  

169,506  

Net income available to common stockholders

$ 251,504  

$ 207,672  

$ 169,506  

STATEMENTS OF CASH FLOW

2 unchanged sentences

Operating activities

$ 251,504  

$ 207,672  

$ 169,506  

Adjustments to reconcile net income to net cash provided by operating activities:

( 93 )  

$ 206,791 $ 251,442 $ 207,672

Adjustments to reconcile net income to net cash provided by operating activities:

2,227 ( 290 ) ( 93 )

Equity in undistributed earnings of subsidiary

( 196,764 )  

( 164,387 )  

Net cash provided by operating activities

55,401  

43,192  

42,268  

( 147,076 ) ( 197,221 ) ( 164,387 )

Net cash (used in) provided by operating activities

61,945 53,931 43,192

Investing activities

( 750 )  

( 120 )  

( 300 ) 750 ( 120 )

Net cash used in investing activities

( 750 )  

( 120 )  

( 300 ) 750 ( 120 )

Financing activities

Proceeds from issuance of subordinated notes

34,710  

Redemption of subordinated notes

Dividends paid on common stock

( 49,942 )  

( 43,204 )  

( 60,923 ) ( 49,942 ) ( 43,204 )

Net cash used in financing activities

( 49,942 )  

( 43,204 )  

( 60,923 ) ( 49,942 ) ( 43,204 )

Net change in cash and cash equivalents

( 132 )  

722 4,739 ( 132 )

Cash and cash equivalents at beginning of year

14,553  

14,685  

10,071  

19,292 14,553 14,685

Cash and cash equivalents at end of year

$ 19,262  

$ 14,553  

$ 14,685  

$ 20,014 $ 19,292 $ 14,553

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.

There were no disagreements with accountants regarding accounting and financial disclosure matters during the year ended December 31, 2022.

CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Our management, under supervision and with the participation of the Chief Executive Officer and the Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures, as defined under Exchange Act Rule 13a-15(e).

Based upon that evaluation of these disclosure controls and procedures, the Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of December 31, 2022.

Changes in Internal Control over Financial Reporting

The Chief Executive Officer and Chief Financial Officer have concluded that there were no changes in our internal control over financial reporting identified in the evaluation of the effectiveness of our disclosure controls and procedures that occurred during the fiscal quarter ended December 31, 2022, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Management ’

s Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined under Exchange Act Rules 13a-15(f) and 14d-14(f).

Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

All internal controls systems, no matter how well designed, have inherent limitations and may not prevent or detect misstatements in the Company’s financial statements, including the possibility of circumvention or overriding of controls.

Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.

Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

As of December 31, 2022, management assessed the effectiveness of our internal control over financial reporting based on criteria for effective internal control over financial reporting established in “Internal Control –

Integrated Framework (2013),”

issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

Based on the assessment, management determined that the Company maintained effective internal control over financial reporting as of December 31, 2022, based on those criteria.

The effectiveness of the Company’s internal control over financial reporting as of December 31, 2022, has been audited by FORVIS, LLP, an independent registered public accounting firm, as stated in their report herein —

“Report of Independent Registered Public Accounting Firm.”

OTHER INFORMATION

DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS

Not Applicable.

DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

We respond to this Item by incorporating by reference the material responsive to this Item in our definitive proxy statement to be filed with the Securities and Exchange Commission in connection with our 2023 Annual Meeting of Stockholders.

Information regarding the Company’s executive officers is provided in Part I, Item 1 of this Form 10-K.

Code of Ethics

Our Board of Directors has adopted a Code of Ethics that applies to all of our employees, officers and directors.

The Code of Ethics covers compliance with law;

fair and honest dealings with us, with competitors and with others;

fair and honest disclosure to the public;

and procedures for compliance with the Code of Ethics.

A copy of the Code of Ethics is available on our website at www.servisfirstbank.com.

We will disclose any amendments or waivers, including implicit waivers, of the Code of Ethics applicable to our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, on our website.

EXECUTIVE COMPENSATION

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The information called for by this item relating to “Securities Authorized for Issuance Under Equity Compensation Plans”

is provided in Part II, Item 5 of this Form 10-K.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

PRINCIPAL ACCOUNTANT FEES AND SERVICES

The Independent Registered Public Accounting Firm is FORVIS, LLP (PCAOB Firm ID NO.

686 ) located in Atlanta, Georgia .

Exhibits, Financial Statement Schedules

 The following statements are filed as a part of this Annual Report on Form 10-K

Report of Independent Registered Public Accounting Firm on Consolidated Financial Statements

Report of Independent Registered Public Accounting Firm on Internal Control over Financial Reporting

Consolidated Balance Sheets at December 31, 2022 and 2021

Consolidated Statements of Income for the Years Ended December 31, 2022, 2021 and 2020

Consolidated Statements of Comprehensive Income for the Years Ended December 31, 2022, 2021 and 2020

Consolidated Statements of Stockholders' Equity for the Years Ended December 31, 2022, 2021 and 2020

Consolidated Statements of Cash Flows for the Years Ended December 31, 2022, 2021 and 2020

Notes to Consolidated Financial Statements

All applicable financial statement schedules required under Regulation S-X have been included in the Notes to the Consolidated Financial Statements.

The following exhibits are furnished with this Annual Report on Form 10-K

NAME OF EXHIBIT

Restated Certificate of Incorporation as amended (incorporated by reference to Exhibit 3.02 to the Company's Quarterly Report on Form 10-Q, filed July 29, 2022).

Certificate of Elimination of the Senior-Non Cumulative Perpetual Preferred Stock, Series A (incorporated by reference to Exhibit 3.2 to the Company ’

s Current Report on Form 8-K/A, filed on June 28, 2016).

Bylaws (Restated for SEC filing purposes only) (incorporated by reference to Exhibit 3.1 to the Company ’

s Current Report on Form 8-K, filed on April 4, 2014).

Form of Common Stock Certificate (incorporated by reference to Exhibit 4.1 to the Company’

s Registration Statement on Form 10, filed on March 28, 2008).

Revised Form of Common Stock Certificate (incorporated by reference to Exhibit 4.1 to the Company’

s Current Report on Form 8-K, filed on September 15, 2008, Commission File No.

Description of Capital Stock (incorporated by reference to Exhibit 4.3 to the Company ’

s Annual Report on Form 10-K, filed on February 25, 2020).

2009 Amended and Restated Stock Incentive Plan (incorporated by reference to Appendix A to the Company ’

s Definitive Proxy Statement on Schedule 14A, filed on March 18, 2014).

Note Purchase Agreement, dated November 8, 2017, between ServisFirst Bancshares, Inc.

and certain accredited investors (incorporated by reference to Exhibit 4.1 to the Company ’

s Current Report on Form 8-K, filed on November 9, 2017).

Note Purchase Agreement, dated October 21, 2020, between ServisFirst Bancshares, Inc.

and certain accredited investors (incorporated by reference to Exhibit 4.1 to the Company ’

s Current Report on Form 8-K, filed on October 22, 2020).

First Amendment to the ServisFirst Bancshares, Inc.

Amended and Restated 2009 Stock Incentive Plan (incorporated by reference to Exhibit 10.1 to the Company ’

s Quarterly Report on Form 10-Q, filed November 1, 2016).

Form of Nonqualified Stock Option Award pursuant to the ServisFirst Bancshares, Inc.

Amended and Restated 2009 Stock Incentive Plan (incorporated by reference to Exhibit 10.3 to the Company ’

s Quarterly Report on Form 10-Q, filed November 1, 2016).

Form of Restricted Stock Award Agreement pursuant to the ServisFirst Bancshares, Inc.

Amended and Restated 2009 Stock Incentive Plan (incorporated by reference to Exhibit 4.4 to the Company ’

s Registration Statement on Form S-8, filed June 17, 2014).

Second Amendment to the ServisFirst Bancshares, Inc.

Amended and Restated 2009 Stock Incentive Plan (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K, filed September 17, 2018).

Third Amendment to the ServisFirst Bancshares, Inc.

Amended and Restated 2009 Stock Incentive Plan (incorporated by reference to Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q, filed April 30, 2019).

Form of Nonqualified Stock Option Award (Revised 2019)(incorporated by reference to Exhibit 10.2 to the Company's Quarterly Report on Form 10-Q, filed April 30, 2019).

Form of Restricted Stock Award Agreement (Revised 2019)(incorporated by reference to Exhibit 10.3 to the Company's Quarterly Report on Form 10-Q, filed April 30, 2019).

Endorsement Split-Dollar Agreement with Thomas A.

Broughton III dated November 9, 2020 (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed November 13, 2020.

Endorsement Split-Dollar Agreement with William M.

Foshee dated November 9, 2020 (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K, filed November 13, 2020.

Endorsement Split-Dollar Agreement with Rodney E.

Rushing dated November 9, 2020 (incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K, filed November 13, 2020.

Form of Executive Officer Change in Control Agreement (filed as Exhibit 10 to the Company’s Current Report on Form 8-K dated February 25, 2021)

ServisFirst Bancshares, Inc.

Annual Incentive Plan, effective January 1, 2021 (filed as Exhibit 10 to the Company’s Current Report on Form 8-K dated January 25, 2021)

Form of ServisFirst Bancshares, Inc.

2021 Performance Share Award Agreement (filed as Exhibit 10.4 to the Company’s Quarterly Report on Form 10-Q, filed April 29, 2021).

Form of ServisFirst Bancshares, Inc.

2021 Restricted Stock Award Agreement (filed as Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q, filed April 29, 2021).

List of Subsidiaries

Consent of FORVIS, LLP

Power of Attorney

Certification of Chief Executive Officer pursuant to Rule 13a-14(a)

Certification of Chief Financial Officer pursuant to Rule 13a-14(a)

Certification of Chief Executive Officer pursuant to 18 U.S.C.

Certification of Chief Financial Officer pursuant to 18 U.S.C.

Inline XBRL Instance Document

Inline XBRL Schema Documents

Inline XBRL Calculation Linkbase Document

Inline XBRL Label Linkbase Document

Inline XBRL Presentation Linkbase Document

Inline XBRL Definition Linkbase Document

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

 * denotes management contract or compensatory plan or arrangement

FORM 10-K SUMMARY

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

SERVISFIRST BANCSHARES, INC.

Broughton, III                  

President and Chief Executive Officer

February 28, 2023

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the date indicated.

Signature  

/s/ Thomas A.

Broughton, III          

Chairman, President, Chief

February 28, 2023

Broughton, III

Executive Officer and Director

(Principal Executive Officer)

/s/ William M.

Foshee          

     William M.

Executive Vice President

and Chief Financial Officer

(Principal Financial Officer and

Principal Accounting Officer)

February 28, 2023

Director 

February 28, 2023

 Irma L.

Director 

February 28, 2023

 Michael D.

Director 

February 28, 2023

 James J.

Director 

February 28, 2023

 Joseph R.

February 28, 2023

 Hatton C.

February 28, 2023

 Christopher J.

*The undersigned, acting pursuant to a Power of Attorney, has signed this Annual Report on Form 10-K for and on behalf of the persons indicated above as such persons’

true and lawful attorney-in-fact and in their names, places and stated, in the capacities indicated above and on the date indicated below.

/s/ William M.

Foshee          

Attorney-in-Fact

February 28, 2023

There were no disagreements with accountants regarding accounting and financial disclosure matters during the year ended December 31, 2023.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data