ServisFirst Bancshares, Inc.

Previous wording

The following discussion and analysis is designed to provide a better understanding of various factors relating to the results of operations and financial condition of ServisFirst Bancshares, Inc. (the “Company”) and its wholly-owned subsidiary, ServisFirst Bank. This discussion is intended to supplement and highlight information contained in the accompanying unaudited consolidated financial statements as of and for the three and nine months ended September 30, 2024 and September 30, 2023.

Current wording

The following discussion and analysis is designed to provide a better understanding of various factors relating to the results of operations and financial condition of ServisFirst Bancshares, Inc. (the “Company”) and its wholly owned subsidiary, ServisFirst Bank (the “Bank”). This discussion is intended to supplement and highlight information contained in the accompanying unaudited consolidated balance sheets as of March 31, 2025 and December 31, 2024 and consolidated statements of income for the three months ended March 31, 2025 and March 31, 2024.

Previous wording

Statements in this document 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, as amended (the “Exchange Act”) and Section 27A of the Securities Act of 1933, as amended (the “Securities Act”). The words “believe,” “expect,” “anticipate,” “project,” “plan,” “intend,” “will,” “could,” “would,” “might” and similar expressions often signify forward-looking statements. Such statements involve inherent risks and uncertainties. The Company cautions that such forward-looking statements, wherever they occur in this Quarterly Report on Form 10-Q or in other statements attributable to the Company, are necessarily estimates reflecting the judgment of the Company’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, but not limited to: 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 as a result of our reclassification as a large financial institution by the FDIC; 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, the Federal Reserve policies in connection with continued or re-emerging inflationary pressures and the ability of the U.S. Congress to increase the U.S. statutory debt limit as needed; computer hacking or cyber-attacks resulting in unauthorized access to confidential or proprietary information; substantial, unexpected or prolonged changes in the level or cost of liquidity; 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. 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, our subsequent Quarterly Reports on Form 10-Q and our other SEC filings. If one or more of the factors affecting our forward-looking information an…

Excerpt shortened here; the source contains the full paragraph.

Current wording

Statements in this document 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 (the “Exchange Act”) and Section 27A of the Securities Act of 1933. The words “believe,” “expect,” “anticipate,” “project,” “plan,” “intend,” “will,” “could,” “would,” “might” and similar expressions often signify forward-looking statements. Such statements involve inherent risks and uncertainties. The Company cautions that such forward-looking statements, wherever they occur in this quarterly report or in other statements attributable to the Company, are necessarily estimates reflecting the judgment of the Company’s senior management and involve 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, but not limited to: general economic conditions, especially in the credit markets and in the Southeast; the impact of tariffs and trade wars on general economic conditions, 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 as a result of our reclassification as a large financial institution by the FDIC; 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, Federal Reserve policies in connection with continued inflationary pressures and the ability of the U.S. Congress to increase the U.S. statutory debt limit as needed; computer hacking or cyber-attacks resulting in unauthorized access to confidential or proprietary information; substantial, unexpected or prolonged changes in the level or cost of liquidity; 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 nonbank 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 i…

Excerpt shortened here; the source contains the full paragraph.

Previous wording

We are a bank holding company under the Bank Holding Company Act of 1956 and are headquartered in Birmingham, Alabama. Our wholly-owned subsidiary, ServisFirst Bank, an Alabama banking corporation, provides business and personal financial services through full-service banking offices located in Alabama, Florida, Georgia, North and South Carolina, Tennessee, and Virginia. We also operate loan production offices in Florida and Tennessee. Through the Bank, we originate commercial, consumer and other loans and accept deposits, provide electronic banking services, such as online and mobile banking, including remote deposit capture, deliver treasury and cash management services and provide correspondent banking services to other financial institutions.

Current wording

We are a bank holding company under the Bank Holding Company Act of 1956 and are headquartered in Birmingham, Alabama. Our wholly-owned subsidiary, ServisFirst Bank, an Alabama banking corporation, provides commercial banking services through full-service banking offices located in Alabama, Florida, Georgia, North and South Carolina, Tennessee, and Virginia. We also operate a loan production office in Florida. Through the Bank, we originate commercial, consumer and other loans and accept deposits, provide electronic banking services, such as online and mobile banking, including remote deposit capture, deliver treasury and cash management services and provide correspondent banking services to other financial institutions.

Previous wording

As of September 30, 2024, we had consolidated total assets of $16.45 billion, an increase of $319.5 million, or 2.0%, from $16.13 billion at December 31, 2023. Total loans were $12.34 billion, an increase of $679.4 million, or 5.8%, from $11.66 billion at December 31, 2023. Total deposits were $13.15 billion, a decrease of $127.0 million, or 1.0%, from $13.27 billion at December 31, 2023.

Current wording

As of March 31, 2025, we had consolidated total assets of $18.64 billion, an increase of $1.29 billion, or 7.4%, from $17.35 billion at December 31, 2024. Total loans were $12.89 billion, an increase of $281.0 million, or 2.2%, from $12.61 billion at December 31, 2024. Total deposits were $14.43 billion, an increase of $885.6 million, or 6.5%, from $13.54 billion at December 31, 2024.

Previous wording

Net income and net income available to common stockholders of $59.9 million for the quarter ended September 30, 2024, compared to net income and net income available to common stockholders of $53.3 million for the third quarter of 2023. Basic and diluted earnings per common share were both $1.10 for the three months ended September 30, 2024, compared to $0.98 for both in the corresponding period in 2023.

Current wording

Net income and net income available to common stockholders of $63.2 million for the quarter ended March 31, 2025, compared to net income and net income available to common stockholders of $50.0 million for the first quarter of 2024. Basic and diluted earnings per common share were both $1.16 for the three months ended March 31, 2025 compared to $0.92 for both in the corresponding period in 2024. Changes in income and expenses are more fully explained in “Results of Operations” below.

Previous wording

The following table presents selected ratios of our results of operations for the three and nine months ended September 30, 2024, and 2023.

Current wording

The following table presents selected ratios of our results of operations for the three months ended March 31, 2025, and 2024.

Previous wording

At September 30, 2024, we had $3.5 million in federal funds sold, compared to $100.6 million at December 31, 2023. We also maintain balances at the Federal Reserve Bank of Atlanta, which earn interest. At September 30, 2024, we had 0 in balances at the Federal Reserve, compared to 0 at December 31, 2023.

Current wording

At March 31, 2025, we had $9.3 million in federal funds sold, compared to $1.0 million at December 31, 2024. We also maintain balances at the Federal Reserve Bank of Atlanta, which earn interest. At March 31, 2025, we had $3.20 billion in balances at the Federal Reserve, compared to $2.25 billion at December 31, 2024.

Previous wording

Debt securities available-for-sale totaled $1.14 billion at September 30, 2024 and $900.2 million at December 31, 2023. Investment securities held to maturity totaled $728.6 million at September 30, 2024 and $982.7 million at December 31, 2023. We had paydowns of $72.8 million on mortgage-backed securities and government agencies, maturities of $667.7 million on municipal bonds, corporate securities and treasury securities, and calls of $2.0 million on corporate securities during the nine months ended September 30, 2024. We purchased $95.3 million in mortgage-backed securities, and $591.5 million in U.S. Treasury securities during the nine months ended September 30, 2024. For a tabular presentation of debt securities available for sale and held to maturity at September 30, 2024 and December 31, 2023, see “Note 4 – Securities” in our Notes to Consolidated Financial Statements.

Current wording

Debt securities available-for-sale totaled $1.20 billion at March 31, 2025 and $1.16 billion at December 31, 2024. Debt securities held to maturity totaled $701.7 million at March 31, 2025 and $714.9 million at December 31, 2024. We had paydowns of $23.3 million on mortgage-backed securities, calls of $19.6 million on corporate debt, and maturities of $52.4 million on U.S. Treasury securities, mortgage-backed securities, State and municipal securities, and corporate debt during the three months ended March 31, 2025. We purchased $5.5 million in corporate debt, and $109.4 million in U.S. Treasury securities during the first three months of 2025. For a tabular presentation of debt securities available for sale and held to maturity at March 31, 2025 and December 31, 2024, see “Note 4 – Securities” in our Notes to Consolidated Financial Statements.

Previous wording

The objective of our investment policy is to invest funds not otherwise needed to meet our loan demand to earn the maximum return, yet still maintain sufficient liquidity to meet fluctuations in our loan demand and deposit structure. In doing so, we balance the market and credit risks against the potential investment return, make investments compatible with the pledge requirements of any deposits of public funds, maintain compliance with regulatory investment requirements, and assist certain public entities with their financial needs. The investment committee has full authority over the investment portfolio and makes decisions on purchases and sales of securities. The entire portfolio, along with all investment transactions occurring since the previous board of directors meeting, is reviewed by the board at each monthly meeting. The investment policy allows portfolio holdings to include short-term securities purchased to provide us with needed liquidity and longer-term securities purchased to generate level income for us over periods of interest rate fluctuations.

Current wording

The objective of our investment policy is to invest funds not otherwise needed to meet our loan demand to earn the maximum return, yet still maintain sufficient liquidity to meet fluctuations in our loan demand and deposit structure. In doing so, we seek to balance the market and credit risks against the potential investment return, make investments compatible with the pledge requirements of any deposits of public funds, maintain compliance with regulatory investment requirements, and assist certain public entities with their financial needs. The investment committee has full authority over the investment portfolio and makes decisions on purchases and sales of securities. The entire portfolio, along with all investment transactions occurring since the previous board of directors meeting, is reviewed by the board at each monthly meeting. The investment policy allows portfolio holdings to include short-term securities purchased to provide us with needed liquidity and longer-term securities purchased to generate level income for us over periods of interest rate fluctuations.

Previous wording

The Company does not invest in collateralized debt obligations (“CDOs”). As of September 30, 2024, we had $323.6 million of bank holding company subordinated notes. If rated, all such bonds were rated BBB or better by Kroll Bond Rating Agency at the time of our initial investment. All other corporate bonds had a Standard and Poor’s or Moody’s rating of A-1 or better when purchased. The total investment portfolio has a combined average credit rating of AA as of September 30, 2024.

Current wording

The Company does not invest in collateralized debt obligations (“CDOs”). As of March 31, 2025, we had $303.9 million of bank holding company subordinated notes. If rated, all such bonds were rated BBB or better by Kroll Bond Rating Agency at the time of our initial investment. All other corporate bonds had a Standard and Poor’s or Moody’s rating of A-1 or better when purchased. The total investment portfolio has a combined average credit rating of AA as of March 31, 2025.

Previous wording

The carrying value of investment securities pledged to secure public funds on deposit and for other purposes as required by law was $1.52 billion and $1.49 billion as of September 30, 2024 and December 31, 2023, respectively.

Current wording

The carrying value of investment securities pledged to secure public funds on deposit and for other purposes as required by law was $1.58 billion and $1.43 billion as of March 31, 2025 and December 31, 2024, respectively.

Previous wording

We had total loans of $12.34 billion, an increase of $679.4 million, or 5.8%, from $11.66 billion at December 31, 2023. Other mortgage increased $424.8 million from last year, and increased $118.9 million during the quarter, making up over half of total loan growth for both periods. Our loan pipeline has expanded and indicates that loan demand is improving in our market areas.

Current wording

We had total loans of $12.89 billion at March 31, 2025, an increase of $281.0 million, or 2.2% from $12.61 billion at December 31, 2024. Real estate – mortgage loans increased $124.6 million and Real estate – construction loans increased $110.1 million during the quarter, making up 44% and 39% respectively of total loan growth. Our loan pipeline has expanded and indicates that loan demand is improving in our market areas.

Previous wording

The Company assesses the adequacy of its allowance for credit losses ("ACL") at the end of each calendar quarter. The level of ACL is based on the Company’s evaluation of historical default and loss experience, current and projected economic conditions, asset quality trends, known and inherent risks in the portfolio, adverse situations that may affect the borrowers’ ability to repay a loan, the estimated value of any underlying collateral, composition of the loan portfolio and other relevant factors. The ACL is increased by a provision for credit losses, which is charged to expense, and reduced by charge-offs, net of recoveries. The ACL is believed adequate to absorb all expected future losses to be recognized over the contractual life of the loans in the portfolio.

Current wording

The Company assesses the adequacy of its ACL at the end of each calendar quarter. The level of ACL is based on the Company’s evaluation of historical default and loss experience, current and projected economic conditions, asset quality trends, known and inherent risks in the portfolio, adverse situations that may affect the borrowers’ ability to repay a loan, the estimated value of any underlying collateral, composition of the loan portfolio and other relevant factors. The ACL is increased by a provision for credit losses, which is charged to expense, and reduced by charge-offs, net of recoveries. We believe the ACL is adequate to absorb all expected future losses to be recognized over the contractual life of the loans in the portfolio.

Previous wording

Loans with similar risk characteristics are evaluated in pools and, depending on the nature of each identified pool, the Company utilizes a discounted cash flow (“DCF”), probability of default / loss given default (“PD/LGD”) or remaining life method. The historical loss experience estimate by pool is then adjusted by forecast factors that are quantitatively related to the Company’s historical credit loss experience, such as national unemployment rates and gross domestic product. Losses are predicted over a period of time determined to be reasonable and supportable, and at the end of the reasonable and supportable period losses are reverted to long term historical averages. The reasonable and supportable period and reversion period are re-evaluated each quarter by the Company and are dependent on the current economic environment among other factors. See “Note 1 – General” and “Note 5 – Loans” in the Notes to Consolidated Financial Statements included in Item 1. Consolidated Financial Statements elsewhere in this report.

Current wording

Loans with similar risk characteristics are evaluated in pools and, depending on the nature of each identified pool, the Company utilizes a discounted cash flow (“DCF”), probability of default / loss given default (“PD/LGD”) or remaining life method. The historical loss experience estimate by pool is then adjusted by forecast factors that are quantitatively related to the Company’s historical credit loss experience, such as national unemployment rates and gross domestic product. Losses are predicted over a period of time determined to be reasonable and supportable, and at the end of the reasonable and supportable period losses are reverted to long term historical averages. The reasonable and supportable period and reversion period are re-evaluated each quarter by the Company and are dependent on the current economic environment among other factors. See “Note 1 – General” in the Notes to Consolidated Financial Statements included in Item 1. Consolidated Financial Statements elsewhere in this report.

Previous wording

Expected credit losses for loans that no longer share similar risk characteristics with the collectively evaluated pools are excluded from the collective evaluation and estimated on an individual basis. Individual evaluations are performed for nonaccrual loans, loans rated substandard, and certain modified loans. Specific allocations of the ACL are estimated on one of several methods, including the estimated fair value of the underlying collateral, observable market value of similar debt or the present value of expected cash flows.

Current wording

Loans that no longer share similar risk characteristics with the collectively evaluated pools are excluded from the collective evaluation and expected credit losses are estimated on an individual basis. Individual evaluations are performed for nonaccrual loans, loans rated substandard, and certain modified loans. The allowance for credit losses on these individually evaluated loans is calculated using methods such as the estimated fair value of underlying collateral, observable market prices of comparable debt, or the present value of expected future cash flows.

Previous wording

Total nonperforming loans at September 30, 2024, which include nonaccrual loans and loans 90 or more days past due and still accruing, increased $17.6 million, or 81.9%, to $39.2 million from $21.5 million at December 31, 2023. Of this total, nonaccrual loans of $37.1 million at September 30, 2024 represented a net increase of $17.7 million from nonaccrual loans at December 31, 2023. The increase in non-performing assets to total assets can primarily be attributed to a single relationship that moved to non-accrual status during the first quarter of 2024. Excluding credit card accounts, there were seven loans 90 or more days past due and still accruing totaling $951,000 at September 30, 2024, compared to nine loans totaling $1.9 million at December 31, 2023. Loans made to borrowers experiencing financial difficulty that were modified during the three months ended September 30, 2024 and 2023 were $56.1 million and $25.9 million, respectively.

Current wording

Total nonperforming loans at March 31, 2025, which include nonaccrual loans and loans 90 or more days past due and still accruing, increased $31.4 million, or 74.0%, to $73.9 million from $42.5 million at December 31, 2024. Of this total, nonaccrual loans of $73.8 million at March 31, 2025 represented a net increase of $34.3 million from nonaccrual loans at December 31, 2024. The majority of the year-over-year increase in non-performing assets is attributable to two relationships, both of which are secured by real estate. Excluding credit card accounts, there were no loans 90 or more days past due and still accruing at March 31, 2025, compared to seven loans totaling $2.2 million at December 31, 2024. Loans made to borrowers experiencing financial difficulty that were modified during the three months ended March 31, 2025 and 2024 were $11.1 million and $18.4 million, respectively.

Previous wording

OREO and repossessed assets at September 30, 2024 were $2.7 million, an increase of $1.7 million, or 173.7%, from $995,000 at December 31, 2023. The following table summarizes OREO and repossessed asset activity for the nine months ended September 30, 2024 and 2023:

Current wording

OREO and repossessed assets at March 31, 2025 were $756,000, a decrease of $1.8 million, or 70.1%, from $2.5 million at December 31, 2024. The following table summarizes OREO and repossessed asset activity for the three months ended March 31, 2025 and 2024:

Previous wording

The following table details our nonperforming assets at September 30, 2024 and December 31, 2023:

Current wording

The following table summarizes our nonperforming assets at March 31, 2025 and December 31, 2024:

Previous wording

The balance of nonperforming assets can fluctuate due to changes in economic conditions. We have established a policy to discontinue accruing interest on a loan (i.e., place the loan on nonaccrual status) after it has become 90 days delinquent as to payment of principal or interest, unless the loan is considered to be well-collateralized and is actively in the process of collection. In addition, a loan will be placed on nonaccrual status before it becomes 90 days delinquent unless management believes that the collection of interest is expected. Interest previously accrued but uncollected on such loans is reversed and charged against current income when the receivable is determined to be uncollectible. Interest income on nonaccrual loans is recognized only as received. If we believe that a loan will not be collected in full, we will increase the ACL to reflect management’s estimate of any potential exposure or loss. Generally, payments received on nonaccrual loans are applied directly to principal.

Current wording

The balance of nonperforming assets can fluctuate due to changes in economic conditions. We have established a policy to discontinue accruing interest on a loan (i.e., place the loan on nonaccrual status) after it has become 90 days delinquent as to payment of principal or interest, unless the loan is considered to be well-collateralized and is actively in the process of collection. In addition, a loan will be placed on nonaccrual status before it becomes 90 days delinquent if management believes that the collection of interest is not expected. Interest previously accrued but uncollected on such loans is reversed and charged against current income when the receivable is determined to be uncollectible. Interest income on nonaccrual loans is recognized only as received. If we believe that a loan will not be collected in full, we will increase the ACL to reflect management’s estimate of any potential exposure or loss. Generally, payments received on nonaccrual loans are applied directly to principal.

Previous wording

We rely on increasing our deposit base to fund loan and other asset growth. Each of our markets is highly competitive. We compete for local deposits by offering attractive products with competitive rates. We expect to have a higher average cost of funds for local deposits than competitor banks due to our lack of an extensive branch network. Our management’s strategy is to offset the higher cost of funding with a lower level of operating expense and firm pricing discipline for loan products. We have promoted electronic banking services by providing them without charge and by offering in-bank customer training. At September 30, 2024, our total deposits were $13.15 billion, a decrease of $127.0 million, or 1.0%, from $13.27 billion at December 31, 2023.

Current wording

We rely on increasing our deposit base to fund loan and other asset growth. Each of our markets is highly competitive. We compete for local deposits by offering attractive products with competitive rates. We expect to have a higher average cost of funds for local deposits than competitor banks due to our lack of an extensive branch network. Our management’s strategy is to offset the higher cost of funding with a lower level of operating expense and firm pricing discipline for loan products. We have promoted electronic banking services by providing them without charge and by offering in-bank customer training. Our total deposits at March 31, 2025 were $14.43 billion, an increase of $885.6 million, or 6.5%, from $13.54 billion at December 31, 2024. The increase in total deposits is primarily due to organic growth across nine of our eleven markets, with most of that increase attributable to money market products.

Previous wording

Net Interest Income and Net Interest Margin Analysis

Current wording

For amounts and rates of our deposits by category, see the table “Average Consolidated Balance Sheets and Net Interest Analysis on a Fully Taxable-equivalent Basis” under the subheading “Net Interest Income” below.

Previous wording

At September 30, 2024 and December 31, 2023, we estimate that we had approximately $8.74 billion and $8.76 billion, respectively, in uninsured deposits, which are the portion of deposit accounts that exceed the FDIC insurance limit. The uninsured deposit data for 2024 and 2023 reflect the deposit insurance impact of “combined ownership segregation” of escrow and other accounts at an aggregate level but do not reflect an evaluation of all of the account styling distinctions that would determine the availability of deposit insurance to individual accounts based on FDIC regulations.

Current wording

At March 31, 2025, and December 31, 2024, we estimate that we had approximately $9.81 billion and $9.03 billion, respectively, in uninsured deposits. The uninsured deposit data for 2025 and 2024 reflects the deposit insurance impact of “combined ownership segregation” of escrow and other accounts at an aggregate level but does not reflect an evaluation of all of the account styling distinctions that would determine the availability of deposit insurance to individual accounts based on FDIC regulations.

Previous wording

Our borrowings consist of federal funds purchased and subordinated notes payable. We had $1.54 billion and $1.26 billion at September 30, 2024 and December 31, 2023, respectively, in federal funds purchased from correspondent banks that are clients of our correspondent banking unit. The average rate paid on these borrowings was 4.97% for the quarter ended September 30, 2024. Other borrowings consist of the following:

Current wording

Our borrowings consist of federal funds purchased and subordinated notes payable. We had $2.36 billion and $1.99 billion at March 31, 2025 and December 31, 2024, respectively, in federal funds purchased from correspondent banks that are clients of our correspondent banking unit. The average rate paid on these borrowings was 4.51% for the quarter ended March 31, 2025. Other borrowings consist of the following:

Previous wording

The retention of existing deposits and attraction of new deposit sources through new and existing customers is critical to our liquidity position. If our liquidity was to decline due to deposit withdrawals, we have procedures that provide for certain actions under varying liquidity conditions. These actions include borrowing from existing correspondent banks, selling or participating loans, and curtailing loan commitments and funding. At September 30, 2024, our liquid assets, represented by cash and due from banks, federal funds sold and unpledged available-for-sale securities, totaled $2.11 billion. The Bank had loans pledged to both the FHLB and the Federal Reserve Bank of Atlanta, which provided approximately $2.93 billion and $2.15 billion, respectively, in available funding. The Bank’s policy limits on brokered deposits would allow for up to $4.11 billion in available funding for brokered deposits. Additionally, the Bank had approximately $225.0 million in available unused federal funds lines of credit with regional banks, subject to certain restrictions and collateral requirements, to meet short term funding needs.

Current wording

The retention of existing deposits and attraction of new deposit sources through new and existing customers is critical to our liquidity position. If our liquidity was to decline due to a run-off in deposits, we have procedures that provide for certain actions under varying liquidity conditions. These actions include borrowing from existing correspondent banks, selling or participating loans, and curtailing loan commitments and funding. At March 31, 2025, our liquid assets, represented by cash and due from banks, federal funds sold and unpledged available-for-sale securities, totaled $3.68 billion. The Bank had loans pledged to both the FHLB and the Federal Reserve Bank of Atlanta, which provided approximately $3.08 billion and $2.20 billion, respectively, in available funding. The Bank’s policy limits on brokered deposits would allow for up to $4.66 billion in available funding for brokered deposits. Additionally, the Bank had approximately $312.0 million in available unused federal funds lines of credit with regional banks, subject to certain restrictions and collateral requirements, to meet short term funding needs.

Previous wording

Our management meets on a quarterly basis to review sources and uses of funding to determine the appropriate strategy to ensure an appropriate level of liquidity. At the current time, our long-term liquidity needs primarily relate to funds required to support loan originations and commitments and deposit withdrawals. Our regular sources of funding are from the growth of our deposit base, repayment of principal and interest on loans, the sale of loans and the renewal of time deposits. In addition, we have issued debt as described above under “Borrowings” and have various other sources of liquidity as discussed herein. We believe these sources of funding are adequate to meet both our immediate (within the next 12 months) and our longer term anticipated funding needs. However, we may need additional funding if we are successful in maintaining our current growth rate into the future.

Current wording

Our management meets on a quarterly basis to review sources and uses of funding to determine the appropriate strategy to ensure an appropriate level of liquidity. At the current time, our long-term liquidity needs primarily relate to funds required to support loan originations and commitments and deposit withdrawals. Our regular sources of funding are from the growth of our deposit base, repayment of principal and interest on loans, the sale of loans and the renewal of time deposits. In addition, we have issued debt as described above under “Borrowings” and have various other sources of liquidity as discussed herein. We believe these sources of funding are adequate to meet both our immediate (within the next 12 months) and our longer term anticipated funding needs. However, we may need additional funding if we are able to maintain our current growth rate into the future.

Previous wording

The following table illustrates, during the periods presented, the mix of our funding sources and the assets in which those funds are invested as a percentage of our average total assets for the period indicated. Average assets totaled $16.63 billion and $16.10 billion, respectively, for the three and nine months ended September 30, 2024.

Current wording

The following table illustrates, during the periods presented, the mix of our funding sources and the assets in which those funds are invested as a percentage of our average total assets for the period indicated. Average assets totaled $17.71 billion and $15.96 billion for the quarters ended March 31, 2025 and 2024, respectively.

Previous wording

Total stockholders’ equity attributable to us at September 30, 2024 was $1.57 billion, or 9.55% of total assets. At December 31, 2023, total stockholders’ equity attributable to us was $1.44 billion, or 8.93% of total assets.

Current wording

Total stockholders’ equity attributable to us at March 31, 2025 was $1.67 billion, or 8.95% of total assets. At December 31, 2024, total stockholders’ equity attributable to us was $1.62 billion, or 9.32% of total assets.

Previous wording

As of September 30, 2024, our most recent notification from the FDIC categorized us as well-capitalized under the regulatory framework for prompt corrective action. To remain categorized as well-capitalized, we must maintain minimum Common Equity Tier 1, Tier 1 risk-based, total risk-based, and Tier 1 leverage ratios as disclosed in the table below. Our management believes that we are well-capitalized under the prompt corrective action provisions as of September 30, 2024.

Current wording

As of March 31, 2025, our most recent notification from the FDIC categorized us as well-capitalized under the regulatory framework for prompt corrective action. To remain categorized as well-capitalized, the Bank must maintain minimum common equity Tier 1, Tier 1 risk-based, total risk-based, and Tier 1 leverage ratios as disclosed in the table below, and not be subject to any written agreement, order, or directive from the FDIC requiring us to maintain a specific capital level for any capital measure. Our management believes that we are well-capitalized under the prompt corrective action provisions as of March 31, 2025.

Previous wording

The following table sets forth (i) the capital ratios required by the FDIC and the Alabama Banking Department’s leverage ratio requirement and (ii) our actual ratios, not including the applicable 2.5% capital conservation buffer, of capital to total regulatory or risk-weighted assets, as of September 30, 2024, December 31, 2023 and September 30, 2023:

Current wording

The following table sets forth (i) the capital ratios required by Basel III and prompt corrective action and (ii) our actual ratios, as of March 31, 2025, December 31, 2024 and March 31, 2024:

Previous wording

We are a legal entity separate and distinct from the Bank. Our principal source of cash flow, including cash flow to pay dividends to our stockholders, are dividends the Bank pays to us as the Bank’s sole stockholder. Statutory and regulatory limitations apply to the Bank’s payment of dividends to us as well to our payment of dividends to our stockholders. The requirement that a bank holding company must serve as a source of strength to its subsidiary banks also results in the position of the Federal Reserve that a bank holding company should not maintain a level of cash dividends to its stockholders that places undue pressure on the capital of its bank subsidiaries or that can be funded only through additional borrowings or other arrangements that may undermine the bank holding company’s ability to serve as a source of strength. Our ability to pay dividends is also subject to the provisions of Delaware corporate law.

Current wording

We are a legal entity separate and distinct from the Bank. Our principal source of cash flow, including cash flow to pay dividends to our stockholders, is dividends the Bank pays to us as the Bank’s sole shareholder. Statutory and regulatory limitations apply to the Bank’s payment of dividends to us as well as to our payment of dividends to our stockholders. The requirement that a bank holding company must serve as a source of strength to its subsidiary banks also results in the position of the Federal Reserve that a bank holding company should not maintain a level of cash dividends to its stockholders that places undue pressure on the capital of its bank subsidiaries or that can be funded only through additional borrowings or other arrangements that may undermine the bank holding company’s ability to serve as such a source of strength. Our ability to pay dividends is also subject to the provisions of Delaware corporate law.

Previous wording

In the normal course of business, we are a party to financial instruments with off-balance sheet risk to meet the financing needs of our customers. These financial instruments include commitments to extend credit beyond current fundings, credit card arrangements, standby letters of credit, and financial guarantees. Those instruments involve, to varying degrees, elements of credit risk in excess of the amount recognized in our balance sheet. The contract or notional amounts of those instruments reflect the extent of involvement we have in those particular financial arrangements. All such credit arrangements bear interest at variable rates and we have no such credit arrangements that bear interest at fixed rates.

Current wording

In the normal course of business, we are a party to financial credit arrangements with off-balance sheet risk to meet the financing needs of our customers. These financial credit arrangements include commitments to extend credit beyond current fundings, credit card arrangements, standby letters of credit and financial guarantees. Those credit arrangements involve, to varying degrees, elements of credit risk in excess of the amount recognized in the balance sheet. The contract or notional amounts of those instruments reflect the extent of involvement we have in those particular financial credit arrangements. All such credit arrangements bear interest at variable rates and we have no such credit arrangements that bear interest at fixed rates.

Previous wording

Our exposure to credit loss for commitments to extend credit, credit card arrangements and standby letters of credit is represented by the contractual or notional amount of these instruments in the event of non-performance by the other party to such financial instrument. We use the same credit policies in making commitments and conditional obligations as we do for on-balance sheet instruments.

Current wording

Our exposure to credit loss in the event of non-performance by the other party to the financial instrument for commitments to extend credit, credit card arrangements and standby letters of credit is represented by the contractual or notional amount of those instruments. We use the same credit policies in making commitments and conditional obligations as we do for on-balance sheet instruments.

Previous wording

Financial instruments whose unfunded contract amounts represent credit risk at September 30, 2024 are as follows:

Current wording

Financial instruments whose contract amounts represent credit risk at March 31, 2025 are as follows:

Previous wording

Basic and diluted earnings per common share were both $1.10 for the three months ended September 30, 2024, compared to $0.98 for both in the corresponding period in 2023. Basic and diluted earnings per common share were both $2.97 for the nine months ended September 30, 2024, compared to $3.03 and $3.02, respectively, for the corresponding period in 2023. Return on average assets for the three and nine months ended September 30, 2024 was 1.43% and 1.35% compared to 1.37% and 1.50%, respectively, for the corresponding periods in 2023. Return on average common stockholders’ equity for the three and nine months ended September 30, 2024 was 15.55% and 14.51%, respectively, compared to 15.34% and 16.23%, respectively, for the corresponding periods in 2023.

Current wording

Basic and diluted earnings per common share were both $1.16 for the three months ended March 31, 2025, compared to $0.92 for both in the corresponding period in 2024. Return on average assets for the three months ended March 31, 2025 was 1.45% compared to 1.26% for the corresponding period in 2024, and return on average common stockholders’ equity for the three months ended March 31, 2025 was 15.63% compared to 13.82% for the corresponding period in 2024.

Previous wording

Net interest income is the difference between the income earned on interest-earning assets and interest paid on interest-bearing liabilities used to support such assets. The major factors which affect net interest income are changes in volumes, the yield on interest-earning assets and the cost of interest-bearing liabilities. Our management’s ability to respond to changes in interest rates by effective asset-liability management techniques is critical to maintaining the stability of the net interest margin and the momentum of our primary source of earnings.

Current wording

Net interest income is the difference between the income earned on interest-earning assets and interest paid on interest-bearing liabilities used to support such assets. The major factors that affect net interest income are changes in volumes, the yield on interest-earning assets and the cost of interest-bearing liabilities. Management’s ability to respond to changes in interest rates by effective asset-liability management techniques is critical to maintaining the stability of the net interest margin and the momentum of our primary source of earnings.

Previous wording

The Federal Reserve Bank decreased their targeted federal funds rate from 5.25 – 5.50% at September 30, 2023 to its current range as of September 30, 2024 of 4.75 – 5.00%.

Current wording

The Federal Reserve Bank decreased their targeted federal funds rate from 5.25 – 5.50% at March 31, 2024 to its current range as of March 31, 2025 of 4.25 – 4.50%. Our cost of funding has decreased as a result of the decrease in the targeted federal funds rate.

Previous wording

The following tables show, for the three and nine months ended September 30, 2024 and September 30, 2023, the average balances of each principal category of our assets, liabilities and stockholders’ equity, and an analysis of net interest revenue. The accompanying tables reflect changes in our net interest margin as a result of changes in the volume and rate of our interest-earning assets and interest-bearing liabilities for the same periods. Changes as a result of mix or the number of days in the periods have been allocated to the volume and rate changes in proportion to the relationship of the absolute dollar amounts of the change in each. The tables are presented on a taxable-equivalent basis where applicable:

Current wording

The following table shows, for the three months ended March 31, 2025 and March 31, 2024, the average balances of each principal category of our assets, liabilities and stockholders’ equity, and an analysis of net interest revenue. The accompanying table reflects changes in our net interest margin as a result of changes in the volume and rate of our interest-earning assets and interest-bearing liabilities for the same periods. Changes as a result of mix or the number of days in the periods have been allocated to the volume and rate changes in proportion to the relationship of the absolute dollar amounts of the change in each. Both tables are presented on a taxable-equivalent basis where applicable:

Previous wording

The accounting and financial policies of the Company conform to U.S. generally accepted accounting principles and to general practices within the banking industry. To prepare consolidated financial statements in conformity with U.S. (GAAP), management makes estimates and assumptions based on available information. These estimates and assumptions affect the amounts reported in the financial statements and the disclosures provided, and future results could differ. In management’s opinion, certain accounting policies have a more significant impact than others on the Company’s financial reporting. The allowance for credit losses and income taxes are particularly significant for the Company’s financial reporting. Information concerning our accounting policies and critical accounting estimates with respect to these items is available in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023. There were no changes to the accounting policies for the allowance for credit losses or income taxes during the three and nine months ended September 30, 2024.

Current wording

The accounting and financial policies of the Company conform to U.S. GAAP and to general practices within the banking industry. To prepare consolidated financial statements in conformity with U.S. generally accepted accounting principles, management makes estimates and assumptions based on available information. These estimates and assumptions affect the amounts reported in the financial statements and the disclosures provided, and future results could differ. The allowance for credit losses is particularly subject to change. Information concerning our accounting policies with respect to these items is available in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2024.