ServisFirst Bancshares, Inc. — 2021 Form 10-K
Business context and reporting period. This annual report covers the fiscal year ended December 31, 2021; it is not a standalone fourth-quarter filing. ServisFirst is a commercial bank holding company headquartered in Birmingham, Alabama, operating in five southeastern states. Its strategy emphasizes relationship banking, commercial lending, local decision-making, and a limited branch network.
Financial performance and condition
| Metric | 2021 | 2020 |
|---|---|---|
| Total assets at year-end | $15.45 billion | $11.93 billion |
| Total loans at year-end | $9.53 billion | $8.47 billion |
| Total deposits at year-end | $12.45 billion | $9.98 billion |
| Net interest income | $384.5 million | $338.0 million |
| Net income available to common stockholders | $207.7 million | $169.5 million |
| Diluted EPS | $3.82 | $3.13 |
| Net interest margin | 2.94% | 3.31% |
| Efficiency ratio | 31.84% | 30.29% |
| Return on average assets | 1.53% | 1.59% |
| Return on average common equity | 19.26% | 18.55% |
- Net interest income rose 13.7%; lower interest expense more than offset weaker asset yields. Net interest margin fell 37 basis points, largely because substantial excess funds were held in low-yielding balances at the Federal Reserve.
- Noninterest income increased 11.1% to $33.5 million. Noninterest expense increased 19.4% to $133.1 million, including a $9.2 million write-down of tax-credit partnership investments and $3.0 million of core-processing system conversion expense.
- Provision for credit losses was $31.5 million, down from $42.4 million. Net charge-offs declined to $2.8 million from $29.1 million; nonperforming loans were $12.1 million, or 0.13% of loans, versus $19.0 million, or 0.22%.
- The allowance for credit losses was $116.7 million, or 1.22% of loans, compared with $87.9 million, or 1.04%, at year-end 2020. Loan growth excluding PPP loans was strong, particularly in real estate mortgage and construction lending.
- Cash and cash equivalents were $4.22 billion at year-end. Operating cash flow was $266.3 million; investing activities used $1.56 billion and financing activities provided $3.31 billion. Management reported $5.1 billion of liquid assets and $986 million of unused federal funds lines.
- Funding included $1.71 billion of federal funds purchased and $64.7 million of other borrowings, principally subordinated notes. The bank was well-capitalized; its year-end ratios included 10.50% CET1 and 11.55% total risk-based capital.
Material changes versus 2020
- Average loans grew 7% and average deposits grew 25%. Year-end loans increased 12.6%, while deposits increased 24.8%.
- PPP loans declined from $900.5 million to $230.2 million as repayments and forgiveness progressed. Excluding the reduction in PPP loans, year-end loans grew approximately 23%.
- Average interest-bearing balances with banks rose sharply, contributing to margin compression. The company began retaining some residential mortgages rather than selling them; retained balances totaled $76.9 million at year-end.
- Nonperforming assets fell to $13.3 million from $25.5 million. Accumulated other comprehensive income declined to $14.1 million from $20.2 million, with 2021 other comprehensive loss of $6.2 million.
Outlook, commentary, and risks
- No earnings or revenue guidance is provided. Management said funding sources should meet anticipated near- and long-term needs, and reported no known trend expected to materially change liquidity.
- For 2022, the bank planned to add approximately $50 million per month, net of paydowns and maturities, to each of its U.S. Treasury and mortgage-backed securities holdings. The quarterly dividend was increased to $0.23 per share, subject to board approval and regulatory limits.
- COVID-19 effects remain uncertain. The company originated about 7,400 PPP loans totaling $1.5 billion; as of January 31, 2022, the SBA had paid on almost 6,300 loans totaling $1.3 billion. Remaining forgiveness, guarantee, and borrower repayment outcomes remain relevant.
- Key exposures include real estate concentration (56.4% of loans were real estate mortgage loans; construction loans were $1.1 billion), local-market and borrower concentration, interest-rate and liquidity risk, uninsured deposits, cyber and third-party system risks, and heightened regulation after exceeding $10 billion in assets. Approximately 5% of loans were LIBOR-indexed at year-end.
- The bank became subject to more comprehensive CFPB supervision and large-bank FDIC assessment methodology in 2021, adding compliance obligations and costs. The filing reports no material legal proceedings. The auditor issued unqualified opinions on the financial statements and internal control over financial reporting.
Important facts for investors to verify
- Whether loan and deposit growth can continue without weakening underwriting, funding costs, or credit quality—especially in real estate and newer markets.
- How the allowance for credit losses holds up as PPP support ends and economic and collateral conditions change; the allowance estimate was identified as a critical audit matter.
- Whether excess liquidity is deployed at yields sufficient to stabilize net interest margin, and how rate changes affect earnings and securities values.
- The durability of 2021 earnings after the tax-credit partnership write-downs, related tax credits, and other unusual items; confirm their treatment and repeatability in the financial statements.
- Liquidity sensitivity to deposit withdrawals, including the scale of uninsured deposits, and the bank’s reliance on federal funds purchased and correspondent-bank relationships.