ServisFirst Bancshares, Inc. Announces Results For Third Quarter Of 2016

BIRMINGHAM, Ala., Oct. 17, 2016 /PRNewswire/ -- ServisFirst Bancshares, Inc. (NASDAQ: SFBS), today announced earnings and operating results for the quarter and nine months ended September 30, 2016.

THIRD QUARTER 2016 HIGHLIGHTS:

• Diluted EPS of $0.78 for third quarter of 2016, a 28% increase year over year
• Net income of $59.7 million and diluted EPS of $2.23 for the nine months ended September 30, 2016
• Core diluted EPS* for the nine months ended September 30, 2016 increased 30% year over year as 2015 results were impacted by acquisition expenses
• Loans and deposits increased 15% and 26%, respectively, year over year
• Loans and deposits increased 10% and 36%, respectively, for the third quarter on an annualized basis

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

Tom Broughton, President and CEO, said, "We are pleased to report a solid quarter of growth in net income, loans and deposits with excellent credit quality."  Bud Foshee, CFO, stated, "Net income in our Nashville, Tennessee region has continued to grow and net operating losses in our newer regions in Atlanta, Georgia, Charleston, South Carolina and Tampa Bay, Florida decreased in the third quarter."

DETAILED FINANCIALS

ServisFirst Bancshares, Inc. reported net income and net income available to common stockholders of $20.9 million for the quarter ended September 30, 2016, compared to net income of $16.3 million and net income available to common stockholders of $16.2 million for the same quarter in 2015.  Basic and diluted earnings per common share were $0.80 and $0.78, respectively, for the third quarter of 2016, compared to $0.63 and $0.61, respectively, for the third quarter of 2015.

Return on average assets was 1.39% and return on average equity was 16.66% for the third quarter of 2016, compared to 1.38% and 15.52%, respectively, for the third quarter of 2015.

Net interest income was $47.9 million for the third quarter of 2016, compared to $45.9 million for the second quarter of 2016 and $41.9 million for the third quarter of 2015.  The increase in net interest income on a linked quarter basis is attributable to a $164.0 million increase in average loans outstanding, a $107.6 million increase in non-interest-bearing deposits and a $20.0 million increase in average stockholders' equity and other liabilities, all resulting in a positive mix change in our balance sheet.  The average yield on loans increased one basis point to 4.48% on a linked quarter basis.  The net interest margin in the third quarter of 2016 was 3.35%, a 16 basis point decrease from the second quarter of 2016 and 42 basis point decrease from the third quarter of 2015.  The decrease in the net interest margin is primarily the result of excess liquidity in the form of large amounts in federal funds sold and funds on deposit at the Federal Reserve Bank.  Average balances in these accounts increased $269.8 million on a linked quarter basis and $614.4 million when compared to the third quarter of 2015.

Average loans for the third quarter of 2016 were $4.59 billion, an increase of $164.0 million, or 4%, over average loans of $4.42 billion for the second quarter of 2016, and an increase of $660.8 million, or 17%, over average loans of $3.93 billion for the third quarter of 2015.

Average total deposits for the third quarter of 2016 were $4.98 billion, an increase of $501.9 million, or 11%, over average total deposits of $4.48 billion for the second quarter of 2016, and an increase of $1.06 billion, or 27%, over average total deposits of $3.92 billion for the third quarter of 2015.

Non-performing assets to total assets were 0.16% for the third quarter of 2016, a decrease of one basis point compared to 0.17% for the second quarter of 2016 and a decrease of 18 basis points compared to 0.34% for the third quarter of 2015.  Net credit charge-offs to average loans were 0.13%, a 5 basis point decrease compared to 0.18% for the second quarter of 2016 and an eight basis point increase compared to 0.05% for the third quarter of 2015.  We recorded a $3.5 million provision for loan losses in the third quarter of 2016 compared to $3.8 million in the second quarter of 2016 and $3.1 million in the third quarter of 2015.  The allowance for loan loss as a percentage of total loans increased one basis point to 1.05% at September 30, 2016, compared to 1.04% at June 30, 2016 and was flat compared to 1.05% at September 30, 2015.  In management's opinion, the allowance is adequate and was determined by consistent application of ServisFirst Bank's methodology for calculating its allowance for loan losses.

Non-interest income increased $1.1 million during the third quarter of 2016, or 28%, compared to the third quarter of 2015.  Mortgage banking revenue increased by $239,000 in the third quarter of 2016, or 27%, compared to the third quarter of 2015, resulting from improved operations, translating to increased net gains on sales.  Credit card income increased $593,000 in the third quarter of 2016, or 99%, compared to the third quarter of 2015, resulting from a 58% increase in the volume of spending and a 62% increase in the number of credit card accounts.  We introduced a purchase card product in the fourth quarter of 2015.  This new product also contributed to our increase in credit card income.

Non-interest expense for the third quarter of 2016 increased $1.9 million, or 10%, to $20.2 million from $18.2 million in the third quarter of 2015, and increased $658,000, or 3%, on a linked quarter basis.  Salary and benefit expense for the third quarter of 2016 increased $363,000, or 3%, to $11.0 million from $10.6 million in the third quarter of 2015, and increased $225,000, or 2%, on a linked quarter basis.  Equipment and Occupancy expense increased $525,000, or 33%, to $2.1 million in the third quarter of 2016, from $1.6 million in the third quarter of 2015.  This increase in equipment and occupancy expense was attributable to new offices in our Charleston, South Carolina and Nashville, Tennessee regions, each of which were relocations from temporary facilities we previously occupied.  We also accelerated depreciation of leasehold improvements in our Birmingham, Alabama headquarters building to coincide with our anticipated move date to our new headquarters building, which we anticipate will be in the second half of 2017.  Professional services expense increased $514,000, or 77%, to $1.2 million in the third quarter of 2016, from $668,000 in the third quarter of 2015, primarily the result of accruals for current pending litigation.  Other operating expense for the third quarter of 2016 increased $640,000, or 15%, to $5.0 million from $4.3 million in the third quarter of 2015.  This was primarily the result of higher data processing expenses related to increased online banking transaction volumes and an upgrade of our correspondent banking platform, increased Federal Reserve Bank charges from our correspondent bank clearing activities and increased credit card processing expenses.  We also contributed $113,000 to a Birmingham-based charitable organization as part of an investment in a new markets tax credit partnership.  These increases were offset by lower costs incurred related to nonperforming loans.

Income tax expense increased $160,000, or 2%, to $8.2 million in the third quarter of 2016, compared to $8.0 million in the third quarter of 2015, and increased $1.2 million, or 6%, to $22.0 million in the nine month period ended September 30, 2016, compared to $20.9 million in the nine month period ended September 30, 2015.  In the second quarter of 2016 we adopted the amendments in Accounting Standards Update 2016-09 using the modified retrospective method.  We have recognized excess tax benefits from the exercise and vesting of stock options and restricted stock of $421,000 in the third quarter of 2015 and $4.7 million in the nine months ended September 30, 2016.  Previously under generally accepted accounting principles, such credits were reflected within additional paid-in capital.

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.  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, 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 of 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 as of and for the nine month comparative periods ended September 30, 2016 and 2015 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 and Tampa Bay, Florida, Atlanta, Georgia, Charleston, South Carolina and Nashville, Tennessee.

ServisFirst Bancshares, Inc. files periodic reports with the U.S. Securities and Exchange Commission (SEC).  Copies of its filings may be obtained through the SEC's website at www.sec.gov or at 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 the deposit base; possible changes in laws and regulations and governmental monetary and fiscal policies, including, but not limited to, economic stimulus initiatives; the cost and other effects of legal and administrative cases and similar contingencies; possible changes in the creditworthiness of customers and the possible impairment of the collectability of loans and the value of collateral; the effect of natural disasters, such as hurricanes and tornados, in our geographic markets; and increased competition from both banks and non-bank financial institutions.  The foregoing list of factors is not exhaustive. For discussion of these and other risks that may cause actual results to differ from expectations, please refer to "Cautionary Note Regarding Forward-looking Statements" and "Risk Factors" in our most recent Annual Report on Form 10-K and our other SEC filings. If one or more of the factors affecting our forward-looking information and statements proves incorrect, then our actual results, performance or achievements could differ materially from those expressed in, or implied by, forward-looking information and statements contained herein. Accordingly, you should not place undue reliance on any forward-looking statements, which speak only as of the date made.  ServisFirst Bancshares, Inc. assumes no obligation to update or revise any forward-looking statements that are made from time to time.

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

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