ServisFirst Bancshares, Inc. Quarterly report pursuant to Section 13 or 15(d)

Quarterly report pursuant to Section 13 or 15(d)

Note 5 - Loans

Note 5 - Loans

3 Months Ended

Mar. 31, 2017

Notes to Financial Statements

Loans, Notes, Trade and Other Receivables Disclosure [Text Block]

NOTE

– LOANS

The following table details the Company’s loans at

March

31,

2017

and

December

31,

2016:

	March 31,			December 31,
	2017			2016
	(Dollars In Thousands)
Commercial, financial and agricultural	$	2,061,503		$	1,982,267
Real estate - construction		345,777			335,085
Real estate - mortgage:
Owner-occupied commercial		1,262,578			1,171,719
1-4 family mortgage		554,261			536,805
Other mortgage		872,955			830,683
Subtotal: Real estate - mortgage		2,689,794			2,539,207
Consumer		54,910			55,211
Total Loans		5,151,984			4,911,770
Less: Allowance for loan losses		(53,892	)		(51,893	)
Net Loans	$	5,098,092		$	4,859,877

Commercial, financial and agricultural		40.01	%		40.36	%
Real estate - construction		6.71	%		6.82	%
Real estate - mortgage:
Owner-occupied commercial		24.51	%		23.86	%
1-4 family mortgage		10.76	%		10.93	%
Other mortgage		16.94	%		16.91	%
Subtotal: Real estate - mortgage		52.21	%		51.70	%
Consumer		1.07	%		1.12	%
Total Loans		100.00	%		100.00	%

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 following table presents credit quality indicators for the loan loss portfolio segments and classes. These categories are utilized to develop the associated allowance for loan 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(s) 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 deficiencies 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.

Loans by credit quality indicator as of

March

31,

2017

and

December

31,

2016

were as follows:

			Special
March 31, 2017	Pass		Mention		Substandard		Doubtful		Total
	(In Thousands)
Commercial, financial and agricultural	$	1,989,337	$	48,280	$	23,886	$	-	$	2,061,503
Real estate - construction		334,480		7,639		3,658		-		345,777
Real estate - mortgage:
Owner-occupied commercial		1,248,552		6,126		7,900		-		1,262,578
1-4 family mortgage		549,371		1,161		3,729		-		554,261
Other mortgage		857,553		14,573		829		-		872,955
Total real estate - mortgage		2,655,476		21,860		12,458		-		2,689,794
Consumer		54,823		87		-		-		54,910
Total	$	5,034,116	$	77,866	$	40,002	$	-	$	5,151,984

			Special
December 31, 2016	Pass		Mention		Substandard		Doubtful		Total
	(In Thousands)
Commercial, financial and agricultural	$	1,893,664	$	61,035	$	27,568	$	-	$	1,982,267
Real estate - construction		324,958		5,861		4,266		-		335,085
Real estate - mortgage:
Owner-occupied commercial		1,158,615		6,037		7,067		-		1,171,719
1-4 family mortgage		531,868		2,065		2,872		-		536,805
Other mortgage		818,724		11,224		735		-		830,683
Total real estate - mortgage		2,509,207		19,326		10,674		-		2,539,207
Consumer		55,135		76		-		-		55,211
Total	$	4,782,964	$	86,298	$	42,508	$	-	$	4,911,770

Loans by performance status as of

March

31,

2017

and

December

31,

2016

were as follows:

March 31, 2017	Performing		Nonperforming		Total
	(In Thousands)
Commercial, financial and agricultural	$	2,054,524	$	6,979	$	2,061,503
Real estate - construction		343,116		2,661		345,777
Real estate - mortgage:
Owner-occupied commercial		1,261,205		1,373		1,262,578
1-4 family mortgage		553,190		1,071		554,261
Other mortgage		872,955		-		872,955
Total real estate - mortgage		2,687,350		2,444		2,689,794
Consumer		54,894		16		54,910
Total	$	5,139,884	$	12,100	$	5,151,984

December 31, 2016	Performing		Nonperforming		Total
	(In Thousands)
Commercial, financial and agricultural	$	1,974,975	$	7,292	$	1,982,267
Real estate - construction		331,817		3,268		335,085
Real estate - mortgage:
Owner-occupied commercial		1,165,511		6,208		1,171,719
1-4 family mortgage		536,731		74		536,805
Other mortgage		830,683		-		830,683
Total real estate - mortgage		2,532,925		6,282		2,539,207
Consumer		55,166		45		55,211
Total	$	4,894,883	$	16,887	$	4,911,770

Loans by past due status as of

March

31,

2017

and

December

31,

2016

were as follows:

March 31, 2017	Past Due Status (Accruing Loans)
							Total Past
	30-59 Days		60-89 Days		90+ Days		Due		Non-Accrual		Current		Total Loans
	(In Thousands)
Commercial, financial and agricultural	$	1,023	$	8	$	-	$	1,031	$	6,979	$	2,053,493	$	2,061,503
Real estate - construction		363		-		-		363		2,661		342,753		345,777
Real estate - mortgage:
Owner-occupied commercial		1,001		-		-		1,001		1,373		1,260,204		1,262,578
1-4 family mortgage		215		45		-		260		1,071		552,930		554,261
Other mortgage		2,950		-		-		2,950		-		870,005		872,955
Total real estate - mortgage		4,166		45		-		4,211		2,444		2,683,139		2,689,794
Consumer		29		30		16		75		-		54,835		54,910
Total	$	5,581	$	83	$	16	$	5,680	$	12,084	$	5,134,220	$	5,151,984

December 31, 2016	Past Due Status (Accruing Loans)
							Total Past
	30-59 Days		60-89 Days		90+ Days		Due		Non-Accrual		Current		Total Loans
	(In Thousands)
Commercial, financial and agricultural	$	710	$	40	$	10	$	760	$	7,282	$	1,974,225	$	1,982,267
Real estate - construction		59		-		-		59		3,268		331,758		335,085
Real estate - mortgage:
Owner-occupied commercial		-		-		6,208		6,208		-		1,165,511		1,171,719
1-4 family mortgage		160		129		-		289		74		536,442		536,805
Other mortgage		95		811		-		906		-		829,777		830,683
Total real estate - mortgage		255		940		6,208		7,403		74		2,531,730		2,539,207
Consumer		52		17		45		114		-		55,097		55,211
Total	$	1,076	$	997	$	6,263	$	8,336	$	10,624	$	4,892,810	$	4,911,770

The allowance for loan losses is maintained at a level which, in management’s judgment, is adequate to absorb credit losses inherent in the loan portfolio. The amount of the allowance is based on management’s evaluation of the collectability of the loan portfolio, including the nature of the portfolio, credit concentrations, trends in historical loss experience, specific impaired loans, economic conditions, and other risks inherent in the portfolio. Allowances for impaired loans are generally determined based on collateral values or the present value of the estimated cash flows. The allowance is increased by a provision for loan losses, which is charged to expense, and reduced by charge-offs, net of recoveries. In addition, various regulatory agencies, as an integral part of their examination process, periodically review the allowance for losses on loans. 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.

The methodology utilized for the calculation of the allowance for loan losses is divided into

four

distinct categories. Those categories include allowances for non-impaired loans (ASC

450),

impaired loans (ASC

310),

external qualitative factors, and internal qualitative factors. A description of each category of the allowance for loan loss methodology is listed below.

Non-Impaired Loans.

Non-impaired loans are grouped into the following homogeneous loan pools by loan type: commercial and industrial, construction and development, commercial real estate,

second

lien home equity lines of credit, and all other loans. Each loan pool is stratified by internal risk rating and multiplied by a loss allocation percentage derived from the loan pool historical loss rate. The historical loss rate is based on an age weighted

five

year history of net charge-offs experienced by pool, with the most recent net charge-off experience given a greater weighting. This results in the expected loss rate per year, adjusted by a qualitative adjustment factor and a years-to-impairment factor, for each pool of loans to derive the total amount of allowance for non-impaired loans.

Impaired Loans.

Loans are considered impaired when based on current information and events it is probable that the Bank will be unable to collect all amounts due according to the original terms of the loan agreement. The collection of all amounts due according to contractual terms means that both the contractual interest and principal payments of a loan will be collected as scheduled in the loan agreement. Impaired loans are measured based on the present value of expected future cash flows discounted at the loan’s effective interest rate, at the loan’s observable market price or the fair value of the underlying collateral. The fair value of collateral, reduced by costs to sell on a discounted basis, is used if a loan is collateral-dependent. Fair value estimates for specifically impaired collateral-dependent loans are derived from appraised values based on the current market value or “as is” value of the property, normally from recently received and reviewed appraisals. Appraisals are obtained from certified and licensed appraisers and are based on certain assumptions, which

may

include construction or development status and the highest and best use of the property.

These appraisals are reviewed by our credit administration department, and values are adjusted downward to reflect anticipated disposition costs. Once this estimated net realizable value has been determined, the value used in the impairment assessment is updated for each impaired loan. As subsequent events dictate and estimated net realizable values decline, required reserves

may

be established or further adjustments recorded.

External Qualitative Factors

. The determination of the portion of the allowance for loan losses relating to external qualitative factors is based on consideration of the following factors: gross domestic product growth rate, changes in prime rate, delinquency trends, peer delinquency trends, year over year loan growth and state unemployment rate trends. Data for the

three

most recent periods is utilized in the calculation for each external qualitative component. The factors have a consistent weighted methodology to calculate the amount of allowance due to external qualitative factors.

Internal Qualitative Factors

. The determination of the portion of the allowance for loan losses relating to internal qualitative factors is based on the consideration of criteria which includes the following: number of extensions and deferrals, single pay and interest only loans, current financial information, credit concentrations and risk grade accuracy. A self-assessment for each of the criteria is made with a consistent weighted methodology used to calculate the amount of allowance required for internal qualitative factors.

The following table presents an analysis of the allowance for loan losses by portfolio segment and changes in the allowance for loan losses for the

three

months ended

March

31,

2017

and

March

31,

2016.

The total allowance for loan losses is disaggregated into those amounts associated with loans individually evaluated and those associated with loans collectively evaluated.

	Commercial,
	financial and			Real estate -			Real estate -
	agricultural			construction			mortgage			Consumer			Total
	(In Thousands)
	Three Months Ended March 31, 2017
Allowance for loan losses:
Balance at December 31, 2016	$	28,872		$	5,125		$	17,504		$	392		$	51,893
Charge-offs		(2,855	)		-			(266	)		(75	)		(3,196	)
Recoveries		190			16			2			1			209
Provision		2,500			(316	)		2,722			80			4,986
Balance at March 31, 2017	$	28,707		$	4,825		$	19,962		$	398		$	53,892

	Three Months Ended March 31, 2016
Allowance for loan losses:
Balance at December 31, 2015	$	21,495		$	5,432		$	16,061		$	431		$	43,419
Charge-offs		(50	)		(381	)		-			(18	)		(449	)
Recoveries		3			16			97			-			116
Provision		1,391			(62	)		743			(13	)		2,059
Balance at March 31, 2016	$	22,839		$	5,005		$	16,901		$	400		$	45,145

	As of March 31, 2017
Allowance for loan losses:
Individually Evaluated for Impairment	$	5,297		$	921		$	1,814		$	-		$	8,032
Collectively Evaluated for Impairment		23,410			3,904			18,148			398			45,860

Loans:
Ending Balance	$	2,061,503		$	345,777		$	2,689,794		$	54,910		$	5,151,984
Individually Evaluated for Impairment		24,230			3,705			15,084			2			43,021
Collectively Evaluated for Impairment		2,037,273			342,072			2,674,710			54,908			5,108,963

	As of December 31, 2016
Allowance for loan losses:
Individually Evaluated for Impairment	$	6,607		$	923		$	622		$	-		$	8,152
Collectively Evaluated for Impairment		22,265			4,202			16,882			392			43,741

Loans:
Ending Balance	$	1,982,267		$	335,085		$	2,539,207		$	55,211		$	4,911,770
Individually Evaluated for Impairment		27,922			4,314			13,350			3			45,589
Collectively Evaluated for Impairment		1,954,345			330,771			2,525,857			55,208			4,866,181

The following table presents details of the Company’s impaired loans as of

March

31,

2017

and

December

31,

2016,

respectively. Loans which have been fully charged off do not appear in the table.

	March 31, 2017
							For the three months
							ended March 31, 2017
									Interest
			Unpaid				Average		Income
	Recorded		Principal		Related		Recorded		Recognized
	Investment		Balance		Allowance		Investment		in Period
	(In Thousands)
With no allowance recorded:
Commercial, financial and agricultural	$	1,001	$	1,001	$	-	$	1,007	$	16
Real estate - construction		330		333		-		333		1
Real estate - mortgage:
Owner-occupied commercial		2,561		2,725		-		2,750		40
1-4 family mortgage		2,758		2,758		-		2,831		22
Other mortgage		924		924		-		931		14
Total real estate - mortgage		6,243		6,407		-		6,512		76
Consumer		2		4		-		4		-
Total with no allowance recorded		7,576		7,745		-		7,856		93

With an allowance recorded:
Commercial, financial and agricultural		23,229		23,229		5,297		23,063		228
Real estate - construction		3,375		3,375		921		3,374		14
Real estate - mortgage:
Owner-occupied commercial		7,774		7,774		1,445		7,317		79
1-4 family mortgage		971		971		273		972		12
Other mortgage		96		96		96		287		4
Total real estate - mortgage		8,841		8,841		1,814		8,576		95
Consumer		-		-		-		-		-
Total with allowance recorded		35,445		35,445		8,032		35,013		337

Total Impaired Loans:
Commercial, financial and agricultural		24,230		24,230		5,297		24,070		244
Real estate - construction		3,705		3,708		921		3,707		15
Real estate - mortgage:
Owner-occupied commercial		10,335		10,499		1,445		10,067		119
1-4 family mortgage		3,729		3,729		273		3,803		34
Other mortgage		1,020		1,020		96		1,218		18
Total real estate - mortgage		15,084		15,248		1,814		15,088		171
Consumer		2		4		-		4		-
Total impaired loans	$	43,021	$	43,190	$	8,032	$	42,869	$	430

	December 31, 2016
							For the twelve months
							ended December 31, 2016
									Interest
			Unpaid				Average		Income
	Recorded		Principal		Related		Recorded		Recognized
	Investment		Balance		Allowance		Investment		in Period
	(In Thousands)
With no allowance recorded:
Commercial, financial and agricultural	$	1,003	$	1,003	$	-	$	992	$	64
Real estate - construction		938		1,802		-		1,159		3
Real estate - mortgage:
Owner-occupied commercial		2,615		2,778		-		2,884		166
1-4 family mortgage		1,899		1,899		-		1,901		102
Other mortgage		940		940		-		965		60
Total real estate - mortgage		5,454		5,617		-		5,750		328
Consumer		3		5		-		6		-
Total with no allowance recorded		7,398		8,427		-		7,907		395

With an allowance recorded:
Commercial, financial and agricultural		26,919		31,728		6,607		26,955		1,162
Real estate - construction		3,376		3,376		923		3,577		68
Real estate - mortgage:
Owner-occupied commercial		6,924		6,924		348		6,934		362
1-4 family mortgage		972		972		274		313		19
Other mortgage		-		-		-		-		-
Total real estate - mortgage		7,896		7,896		622		7,247		381
Consumer		-		-		-		-		-
Total with allowance recorded		38,191		43,000		8,152		37,779		1,611

Total Impaired Loans:
Commercial, financial and agricultural		27,922		32,731		6,607		27,947		1,226
Real estate - construction		4,314		5,178		923		4,736		71
Real estate - mortgage:
Owner-occupied commercial		9,539		9,702		348		9,818		528
1-4 family mortgage		2,871		2,871		274		2,214		121
Other mortgage		940		940		-		965		60
Total real estate - mortgage		13,350		13,513		622		12,997		709
Consumer		3		5		-		6		-
Total impaired loans	$	45,589	$	51,427	$	8,152	$	45,686	$	2,006

Troubled Debt Restructurings (“TDR”) at

March

31,

2017,

December

31,

2016

and

March

31,

2016

totaled

$7.3

million,

$7.3

million and

$6.8

million, respectively. At

March

31,

2017,

the Company had a related allowance for loan losses of

$2.3

million allocated to these TDRs, compared to

$2.3

million at

December

31,

2016

and

$0.9

million at

March

31,

2016.

There were no modifications made to new TDRs or renewals of existing TDRs for the

three

months ended

March

31,

2017

and

2016.

TDRs which were modified in the previous

twelve

months (i.e., the

twelve

months prior to default) defaulted during the

three

months ended

March

31,

2017

2016.

For purposes of this disclosure, default is defined as

days past due and still accruing or placement on nonaccrual status.

- Definition

The entire disclosure for claims held for amounts due a entity, excluding financing receivables. Examples include, but are not limited to, trade accounts receivables, notes receivables, loans receivables. Includes disclosure for allowance for credit losses.

+ References + Details