ServisFirst Bancshares, Inc. Annual report pursuant to Section 13 and 15(d)

Annual report pursuant to Section 13 and 15(d)

INCOME TAXES

INCOME TAXES

12 Months Ended

Dec. 31, 2013

Income Tax Disclosure [Abstract]

INCOME TAXES

NOTE 17. INCOME TAXES

The components of income tax expense are as follows:

	Year Ended December 31,
	2013		2012		2011
	(In Thousands)
Current tax expense:
Federal	$	21,264	$	17,993	$	12,045
State		899		1,308		1,584
Total current tax expense		22,163		19,301		13,629
Deferred tax expense (benefit):
Federal		(1,616)		(1,999)		(1,100)
State		(189)		(182)		(140)
Total deferred tax expense		(1,805)		(2,181)		(1,240)
Total income tax expense	$	20,358	$	17,120	$	12,389

The Company’s total income tax expense differs from the amounts computed by applying the Federal income tax statutory rates to income before income taxes. A reconciliation of the differences is as follows:

	Year Ended December 31, 2013
	Amount		% of Pre-tax Earnings
	(In Thousands)
Income tax at statutory federal rate	$	21,691	35.00	%
Effect on rate of:
State income tax, net of federal tax effect		558	0.90	%
Tax-exempt income, net of expenses		(1,200)	(1.94)	%
Bank owned life insurance contracts		(698)	(1.13)	%
Incentive stock option expense		66	0.11	%
Other		(59)	(0.09)	%
Effective income tax and rate	$	20,358	32.85	%

	Year Ended December 31, 2012
	Amount		% of Pre-tax Earnings
	(In Thousands)
Income tax at statutory federal rate	$	18,047	35.00	%
Effect on rate of:
State income tax, net of federal tax effect		709	1.37	%
Tax-exempt income, net of expenses		(1,007)	(1.95)	%
Bank owned life insurance contracts		(568)	(1.10)	%
Incentive stock option expense		121	0.23	%
Other		(182)	(0.35)	%
Effective income tax and rate	$	17,120	33.20	%

	Year Ended December 31, 2011
	Amount		% of Pre-tax Earnings
	(In Thousands)
Income tax at statutory federal rate	$	12,540	35.00	%
Effect on rate of:
State income tax, net of federal tax effect		967	2.70	%
Tax-exempt income, net of expenses		(875)	(2.44)	%
Bank owned life insurance contracts		(137)	(0.38)	%
Incentive stock option expense		128	0.36	%
Other		(234)	(0.65)	%
Effective income tax and rate	$	12,389	34.59	%

The components of net deferred tax asset are as follows:

	December 31,
	2013		2012

	(In Thousands)
Deferred tax assets:
Allowance for loan losses	$	11,844	$	10,142
Other real estate owned		1,222		1,064
Nonqualified equity awards		773		583
Nonaccrual interest		374		491
Other deferred tax assets		141		114
Total deferred tax assets		14,354		12,394

Deferred tax liabilities:
Net unrealized (gain) loss on securities available for sale		2,102		3,929
Depreciation		514		510
Prepaid expenses		161		140
Deferred loan fees		83		237
Investments		229		93
Other deferred tax liabilities		247		99
Total deferred tax liabilities		3,336		5,008
Net deferred income tax assets	$	11,018	$	7,386

The Company believes its net deferred tax asset is recoverable as of December 31, 2013 based on the expectation of future taxable income and other relevant considerations.

The Company and its subsidiaries file a consolidated U.S. Federal income tax return and various consolidated and separate company state income tax returns. The Company is currently open to audit under the statute of limitations by the Internal Revenue Service for the years ended December 31, 2010 through 2013. The Company is also currently open to audit by several state departments of revenue for the years ended December 31, 2010 through 2013. The audit periods differ depending on the date the Company began business activities in each state. Currently, there are no years for which the Company filed a federal or state income tax return that are under examination by the IRS or any state department of revenue.

Accrued interest and penalties on unrecognized income tax benefits totaled $0 and $6,000 as of January 1, 2013 and December 31, 2013, respectively. Unrecognized income tax benefits as of January 1, 2013 and December 31, 2013, that, if recognized, would impact the effective income tax rate totaled $161,000 and $437,000 (net of the federal benefit on state income tax issues), respectively, which includes interest and penalties of $6,000 and $0, respectively. The Company does not expect any of the uncertain tax positions to be settled or resolved during the next twelve months.

The following table presents a summary of the changes during 2013, 2012 and 2011 in the amount of unrecognized tax benefits that are included in the consolidated balance sheets.

	2013		2012		2011

	(In Thousands)
Balance, beginning of year	$	161	$	-	$	-
Increases related to prior year tax positions		276		-		-
Decreases related to prior year tax positions		-		-		-
Increases related to current year tax positions		-		161		-
Settlements		-		-		-
Lapse of statute		-		-		-
Balance, end of year	$	437	$	161	$	-

- Definition

The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information.

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