ServisFirst Bancshares, Inc. Announces Results For Fourth Quarter Of 2015

BIRMINGHAM, Ala., Jan. 25, 2016 /PRNewswire/ -- ServisFirst Bancshares, Inc. (NASDAQ: SFBS), today announced earnings and operating results for the quarter and year ended December 31, 2015.

Fourth Quarter 2015 Highlights:

• Diluted earnings per share increased 28% from $0.58 to $0.74 year over year
• Diluted earnings per share increased 21% from $0.61 to $0.74 on a linked quarter basis
• Net income for the quarter increased 31% year over year
• Organic loan and deposit growth for the year of 20% and 18%, respectively
• Fourth quarter annualized loan and deposit growth of 17% and 18%, respectively, on a linked quarter basis
• Entry into the Tampa Bay, Florida area with hire of a new regional CEO

Tom Broughton, President and CEO, said, "We are pleased to welcome our new banking team in the Tampa Bay area led by Greg Bryant, a highly experienced and well known banker in the area."  Bud Foshee, CFO, stated, "2015 was a strong year in financial performance and growth." 

ServisFirst announces the hiring of Greg Bryant as Executive Vice President and Regional CEO.  A temporary loan production office will be opened in Pasco County, for up to a year before a permanent office is established in Tampa Bay, Florida.  Greg was formerly the President & CEO of Bay Cities Bank prior to the sale of the bank.

DETAILED FINANCIALS

ServisFirst Bancshares, Inc. reported net income of $19.8 million and net income available to common stockholders of $19.7 million for the quarter ended December 31 2015, compared to net income of $15.0 million and net income available to common stockholders of $14.9 million for the same quarter in 2014.  Basic and diluted earnings per common share were $0.76 and $0.74, respectively, for the fourth quarter of 2015, compared to $0.60 and $0.58, respectively, for the fourth quarter of 2014.

Return on average assets was 1.55% and return on average common stockholders' equity was 17.75% for the fourth quarter of 2015, compared to 1.47% and 16.39%, respectively, for the fourth quarter of 2014.

Net interest income was $43.2 million for the fourth quarter of 2015, compared to $41.9 million for the third quarter of 2015 and $34.5 million for the fourth quarter of 2014.  The increase in net interest income on a linked quarter basis is attributable to a $197.1 million increase in average loans outstanding and a $74.0 million increase in non-interest-bearing deposits, both resulting in a positive mix change in our balance sheet.  The Company completed a private placement of $34.75 million of its 5% Subordinated Notes due July 15, 2025 during the third quarter of 2015, which partially offset the positive mix change attributable to the increase in average loans and non-interest-bearing deposits.  The net interest margin in the fourth quarter of 2015 was 3.56%, a 21 basis point decrease from the third quarter of 2015 and unchanged from the fourth quarter of 2014.  Excess liquidity during the fourth quarters of 2015 and 2014 drives an unfavorable volume component change when compared to their respective comparable linked quarters.  The average yield on loans decreased 9 basis points to 4.44% on a linked quarter basis.  Three basis points of this decrease are attributable to a $318,000 decrease in the accretion on acquired loans.  Excluding accretion on acquired loans, the net interest margin decreased 22 basis points from the third quarter to the fourth quarter of 2015.  Average rates paid on interest-bearing liabilities increased from 0.58% in the third quarter to 0.60% in the fourth quarter of 2015.  The higher rates paid on federal funds purchased from our correspondent banks was the result of the 0.25% increase in the Federal Reserve's targeted rate in early December 2015. 

Average loans for the fourth quarter of 2015 were $4.12 billion, an increase of $197.1 million, or 5%, over average loans of $3.93 billion for the third quarter of 2015, and an increase of $896.9 million, or 28%, over average loans of $3.23 billion for the fourth quarter of 2014.

Average total deposits for the fourth quarter of 2015 were $4.21 billion, an increase of $288.1 million, or 7%, over average total deposits of $3.92 billion for the third quarter of 2015, and an increase of $805.7 million, or 24%, over average total deposits of $3.41 billion for the fourth quarter of 2014.

Non-performing assets to total assets were 0.26% for the fourth quarter of 2015, a decrease of 8 basis points compared to 0.34% for the third quarter of 2015 and a decrease of 15 basis points compared to 0.41% for the fourth quarter of 2014.  Net credit charge-offs to average loans were 0.24%, a 19 basis point increase compared to 0.05% for the third quarter of 2015 and a 5 basis point increase compared to 0.19% for the fourth quarter of 2014.  We recorded a $3.3 million provision for loan losses in the fourth quarter of 2015 compared to $3.1 million in the third quarter of 2015 and $2.8 million in the fourth quarter of 2014.  The allowance for loan loss as a percentage of total loans was 1.03% at December 31, 2015, a decrease of 2 basis points compared to 1.05% at September 30, 2015 and a decrease of 3 basis points compared to 1.06% at December 31, 2014.  In management's opinion, the allowance is adequate and was determined by consistent application of ServisFirst Bank's methodology for calculating its allowance for loan loss.

Non-interest income increased $449,000 during the fourth quarter of 2015, or 14%, compared to the fourth quarter of 2014.  Service charges on deposit accounts increased $158,000, or 14%, compared to the fourth quarter of 2014, resulting from an increase in the number of accounts and transactions.  Mortgage banking revenue increased $113,000, or 22%, compared to the fourth quarter of 2014.  Interchange income on credit card transactions, included in other operating income, increased $140,000, or 25%, compared to the fourth quarter of 2014, resulting from an increase in the number of credit card accounts.

Non-interest expense for the fourth quarter of 2015 increased $5.9 million, or 45%, to $19.1 million from $13.1 million in the fourth quarter of 2014, and increased $754,000, or 4%, on a linked quarter basis.  Salary and benefit expense for the fourth quarter of 2015 increased $2.6 million, or 41%, to $8.9 million from $6.3 million in the fourth quarter of 2014, and decreased $1.7 million, or 16%, on a linked quarter basis.  We reversed $2.0 million of accrued incentive pay during the fourth quarter of 2015 and reversed $1.0 million of accrued incentive pay during the fourth quarter of 2014.  Excluding these reversals, salary and benefit expenses increased $3.6 million year over year and increased $0.3 million on a linked quarter basis.  The year-over-year increase is primarily the result of the Metro Bank employees coming on board in February 2015 and employee hires in our newer markets and Birmingham.  Other operating expense for the fourth quarter of 2015 increased $3.0 million, or 79%, to $6.9 million from $3.9 million in the fourth quarter of 2014, and increased $2.5 million, or 57%, on a linked quarter basis.  Included in these increases were $2.4 million of write-downs in equity investments in tax credit partnerships during the fourth quarter of 2015.

Tax expense for the fourth quarter of 2015 decreased $2.1 million compared to the fourth quarter of 2014, and decreased $3.4 million on a linked quarter basis.  Effective tax rates for the fourth quarter of 2015, third quarter of 2015 and fourth quarter of 2014 were 18.81%, 33.00% and 30.63%, respectively.  The lower rate in the fourth quarter of 2015 was primarily the result of recognition of federal historic tax credits.

GAAP Reconciliation and Management Explanation of Non-GAAP Financial Measures

We recorded expenses of $2.1 million for the first quarter of 2015 related to the acquisition of Metro Bancshares, Inc. and the merger of Metro Bank with and into the Bank, and recorded an expense of $500,000 resulting from the initial funding of reserves for unfunded loan commitments for the first quarter of 2015, consistent with guidance provided in the Federal Reserve Bank's Inter-agency Policy Statement SR 06-17.  We recorded non-routine expenses of $2.5 million during the first half of 2014 resulting from a correction of our accounting for vested stock options and acceleration of vesting for unvested stock options previously granted to members of our advisory boards in our markets.  This change in accounting treatment is a non-cash item and did not impact our operating activities or cash from operations.  Core financial measures included in this press release are "core net income," "core net income available to common stockholders," "core diluted earnings per share," "core return on average assets" and "core return on average common stockholders' equity."  Each of these five core financial measures excludes the impact of the non-routine expenses attributable to merger expenses, the initial funding of reserves for unfunded loan commitments, the correction of our accounting for vested stock options and the acceleration of vesting of unvested stock options, and are all considered non-GAAP financial measures.  Other non-GAAP financial measures included in this press release are "tangible common stockholders' equity," "total tangible assets," "tangible book value per share," and "tangible common equity to total tangible assets."  All non-GAAP financial measures are more fully explained below.

"Core net income" is defined as net income, adjusted by the net effect of the non-routine expense.

"Core net income available to common stockholders" is defined as net income available to common stockholders, adjusted by the net effect of the non-routine expense.

"Core diluted earnings per share" is defined as net income available to common stockholders, adjusted by the net effect of the non-routine expense, divided by weighted average diluted shares outstanding.

"Core return on average assets" is defined as net income, adjusted by the net effect of the non-routine expense, divided by average total assets.

"Core return on average common stockholders' equity" is defined as net income, adjusted by the net effect of the non-routine expense, divided by average common stockholders' equity.

"Tangible common stockholders' equity" is defined as common stockholders' equity, adjusted by the total of goodwill and other identifiable intangible assets.

"Total tangible assets" is defined as total assets, adjusted by the total of goodwill and other identifiable intangible assets.

"Tangible book value per share" is defined as tangible common stockholders' equity divided by the number of common shares outstanding.

"Tangible common equity to total tangible assets" is defined as tangible common equity divided by total tangible assets.

We believe these non-GAAP financial measures provide useful information to management and investors that is supplementary to our financial condition, results of operations and cash flows computed in accordance with GAAP; however, we acknowledge that these non-GAAP financial measures have a number of limitations.  As such, you should not view these disclosures as a substitute for results determined in accordance with GAAP, and they are not necessarily comparable to non-GAAP financial measures that other companies, including those in our industry, use.  The following reconciliation table provides a more detailed analysis of the non-GAAP financial measures for the years ended December 31, 2015 and December 31, 2014 included in this press release.  Dollars are in thousands, except share and per share data.

About ServisFirst Bancshares, Inc.

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

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

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

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

Contact: ServisFirst Bank
Davis Mange (205) 949-3420
[email protected]