ServisFirst Bancshares, Inc. — FY 2023 Form 10-K
Reporting period: Fiscal year ended December 31, 2023; filed February 29, 2024. This is an annual report, not a standalone fourth-quarter filing. ServisFirst is a commercial bank holding company operating across seven southeastern states.
Financial performance and position
| Metric | FY 2023 / Dec. 31, 2023 | Comparison |
|---|---|---|
| Net income available to common shareholders | $206.8 million; diluted EPS $3.79 | Down 17.8% and 18%, respectively, from 2022 |
| Net interest income / net interest margin | $410.9 million / 2.81% | Down 12.7% / 51 basis points |
| Revenue, defined as net interest income plus noninterest income | $441.4 million | Down about 12.5% from 2022 |
| Noninterest income / expense | $30.4 million / $178.1 million | Income down 8.8%; expense up 12.8% |
| Total assets | $16.13 billion | Up 10.5% year over year |
| Loans / deposits | $11.66 billion / $13.27 billion | Year-end loans down 0.2%; deposits up 15.0% |
| Stockholders’ equity | $1.44 billion | Up from $1.30 billion |
| Cash flows | Operating $197.3 million; investing use $200.4 million; financing provided $1.32 billion | Cash and cash equivalents increased $1.32 billion to $2.13 billion |
Average loans increased 9.8% to $11.60 billion and average deposits increased 3.7% to $12.26 billion. Return on average assets was 1.37% (1.71% in 2022); return on average common equity was 15.13% (20.73%). The efficiency ratio rose to 40.67% from 31.30%.
Credit metrics: allowance for credit losses was $153.3 million, or 1.32% of loans, versus $146.3 million, or 1.25%, in 2022. Nonperforming loans were $21.5 million, or 0.18% of loans, versus $17.8 million, or 0.15%; net charge-offs were $11.7 million, or 0.10% of average loans, versus $8.0 million, or 0.08%.
Liquidity and capital: year-end liquid assets were reported at $2.51 billion, with $880 million in unused federal funds lines. The bank’s regulatory capital ratios exceeded well-capitalized thresholds: CET1 11.37%, Tier 1 11.38%, total capital 12.52%, and leverage 9.50%. Year-end federal funds purchased were $1.26 billion; other borrowings were $64.7 million, comprising subordinated notes. The filing does not present a conventional corporate cash-flow measure as a substitute for these bank liquidity and funding measures.
Material changes versus 2022
- Interest expense climbed to $402.3 million from $88.4 million, as the average rate on interest-bearing liabilities rose to 3.73% from 0.98%; the yield on earning assets rose to 5.56% from 3.94%. Higher funding costs outpaced asset-yield increases and compressed margin.
- Provision for credit losses fell 50.2% to $18.7 million, although charge-offs and nonperforming loans increased.
- Noninterest expense rose $20.2 million. FDIC and regulatory assessments increased $11.0 million to $15.6 million, including a $7.2 million special FDIC assessment; salaries and benefits also increased.
- Noninterest income declined $2.9 million, primarily because an interest-rate cap matured in May 2023; related income fell from $7.0 million to approximately $48,000. (The MD&A also describes this amount as $32,000; the filing text does not provide a clear single value.)
- Noninterest-bearing deposits fell to $2.64 billion from $3.32 billion, while interest-bearing deposits increased. Estimated uninsured deposits were $8.76 billion, including approximately $2.2 billion in public funds, which the company says are collateralized by securities.
- Available-for-sale and held-to-maturity securities had aggregate unrealized losses of about $144.6 million at year end; the company reported no related credit-loss allowance and attributed losses principally to higher market rates.
Outlook, commentary, risks and unusual items
- No numerical earnings, margin, loan-growth or deposit-growth guidance is provided. Management says available funding sources are adequate for anticipated near- and longer-term needs and reports no known trends likely to materially change liquidity. It expects quarterly cash dividends to continue subject to board approval and regulatory limits; the quarterly dividend was raised to $0.30 per share in December 2023.
- Management’s central earnings pressure is deposit and borrowing repricing. The company describes its interest sensitivity as somewhat liability-sensitive; its one-year cumulative gap was negative 10.26% of earning assets. Its model showed economic value of equity declines under all tested rate shocks, including a 2.9% decline for a +200-basis-point shock.
- Credit and concentration risks include real estate-related loans at 62.2% of the loan portfolio, geographic concentration in southeastern markets, and the 10 largest borrowing relationships representing $791.8 million in commitments, approximately 6.8% of loans. Rising rates, weaker real estate conditions, economic deterioration, deposit competition and liquidity stress are identified risks.
- The company recorded $17.7 million of Federal New Markets Tax Credit-related credits in 2023 and reported a 15.4% effective tax rate. It also reported $1.65 million of unrecognized tax benefits affecting the effective rate. These tax-credit investments entail ongoing investment and amortization costs.
- ServisFirst exceeded $10 billion in assets and faces heightened regulatory oversight and compliance costs. A new CRA rule is generally scheduled to apply beginning in 2026, with certain data reporting requirements in 2027.
- No material legal proceedings were reported. The independent auditor gave unqualified opinions on the financial statements and internal control over financial reporting; management also concluded disclosure controls were effective. CFO William Foshee retired upon filing, with Kirk Pressley appointed successor.
Most important facts for investors to verify
- Deposit trends, mix, pricing and uninsured/public-fund exposure, along with the availability and terms of contingent funding.
- Whether net interest margin stabilizes as deposit and wholesale funding costs adjust; compare actual results with the disclosed sensitivity analyses.
- Developments in criticized, nonaccrual and past-due loans, real estate concentrations, charge-offs and adequacy of the $153.3 million allowance.
- How securities’ unrealized losses, pledged collateral and any future liquidity needs affect capital and funding flexibility.
- Durability of earnings after the interest-rate cap expired, including the effect of FDIC assessments, operating-cost increases and tax-credit benefits.
- Execution of the CFO transition and ongoing regulatory, cybersecurity and compliance requirements.