##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 
 FORM 10-Q
 (Mark one)
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2008
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period fromto
 Commission file number 000-53149
 SERVISFIRST BANCSHARES, INC.
  Delaware
(State or Other Jurisdiction of
    
    26-0734029(I.R.S. EmployerIncorporation or Organization)
    
    Identification No.)
 (205) 949-0302  (Registrants Telephone Number, Including Area Code)
 þ o
  Large accelerated filer o   
    Accelerated filer o
    Non-accelerated filer þ
    Smaller reporting company o(Do not check if a smaller reporting company)
 o þ
  Class
    
    Outstanding as of October 31, 2008Common stock, $.001 par value
    
    5,113,482




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##### 



TABLE OF CONTENTS
 PART I. FINANCIAL INFORMATION
    
    
    3Item 1. Consolidated Financial Statements (unaudited)
    
    
    3Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    16Item 3. Quantitative and Qualitative Disclosure about Market Risk
    
    
    30Item 4. Controls and Procedures
    
    
    31PART II. OTHER INFORMATIONItem 1 Legal Proceedings
    
    
    32Item 1A. Risk Factors
    
    
    32Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    34Item 3. Defaults Upon Senior Securities
    
    
    34Item 4. Submission of Matters to a Vote of Security Holders
    
    
    34Item 5. Other Information
    
    
    34Item 6. Exhibits
    
    
    34EX-31.1EX-31.2EX-32.1EX-32.2
  2




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##### Table of Contents



PART 1. FINANCIAL INFORMATION
 
 ITEM 1. FINANCIAL STATEMENTS
 SERVISFIRST BANCSHARES, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands except share and per share amounts)
 September 30,
    
    
    December 31,2008
    
    
    2007(Unaudited)AssetsCash and due from banks
    
    $
    28,434
    
    
    $
    15,756Interest bearing balances due from depository institutions
    
    
    332
    
    
    
    34,068Federal funds sold
    
    
    30,022
    
    
    
    16,598Cash and cash equivalents
    
    
    58,788
    
    
    
    66,422Securities available for sale
    
    
    90,139
    
    
    
    87,233Restricted equity securities
    
    
    2,659
    
    
    
    1,202Mortgage loans held for sale
    
    
    4,060
    
    
    
    2,463Loans
    
    
    898,826
    
    
    
    675,281Less allowance for loan losses
    
    
    (10,384
    )
    
    
    (7,732
    )Loans, net
    
    
    888,442
    
    
    
    667,549Premises and equipment, net
    
    
    3,884
    
    
    
    4,176Accrued interest and dividends receivable
    
    
    4,068
    
    
    
    3,949Deferred tax assets
    
    
    4,075
    
    
    
    2,432Other real estate owned
    
    
    8,211
    
    
    
    1,623Other assets
    
    
    582
    
    
    
    1,201Total assets
    
    $
    1,064,908
    
    
    $
    838,250Liabilities and Shareholders EquityLiabilities:Deposits:Noninterest-bearing
    
    $
    105,884
    
    
    $
    85,018Interest-bearing
    
    
    844,854
    
    
    
    677,665Total deposits
    
    
    950,738
    
    
    
    762,683Other borrowings
    
    
    20,000
    
    
    
    73Subordinated debentures
    
    
    15,052
    
    
    
    Accrued interest payable
    
    
    1,190
    
    
    
    782Other liabilities
    
    
    1,170
    
    
    
    2,465Total liabilities
    
    
    988,150
    
    
    
    766,003Shareholders equity:Common stock, par value $.001 per share; 15,000,000 shares authorized;
5,113,482 shares issued and outstanding
    
    
    5
    
    
    
    5Preferred stock, par value $.001 per share; 1,000,000 shares authorized;
No shares outstanding
    
    
    
    
    
    
    Additional paid-in capital
    
    
    64,076
    
    
    
    63,159Retained earnings
    
    
    13,127
    
    
    
    8,082Accumulated other comprehensive income (loss)
    
    
    (450
    )
    
    
    1,001Total shareholders equity
    
    
    76,758
    
    
    
    72,247Total liabilities and shareholders equity
    
    $
    1,064,908
    
    
    $
    838,250
 See Notes to Unaudited Consolidated Financial Statements.
 3




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SERVISFIRST BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(In Thousands, except per share amounts)
 Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Interest income:Interest and fees on loans
    
    $
    12,657
    
    
    
    11,673
    
    
    
    36,969
    
    
    
    31,575Taxable securities
    
    
    951
    
    
    
    667
    
    
    
    2,832
    
    
    
    1,317Nontaxable securities
    
    
    233
    
    
    
    180
    
    
    
    677
    
    
    
    473Federal funds sold
    
    
    12
    
    
    
    1,206
    
    
    
    449
    
    
    
    3,299Other interest and dividends
    
    
    28
    
    
    
    17
    
    
    
    130
    
    
    
    32Total interest income
    
    
    13,881
    
    
    
    13,743
    
    
    
    41,057
    
    
    
    36,696Interest expense:Deposits
    
    
    4,640
    
    
    
    7,099
    
    
    
    14,819
    
    
    
    18,458Borrowed funds
    
    
    364
    
    
    
    
    
    
    
    580
    
    
    
    Total interest expense
    
    
    5,004
    
    
    
    7,099
    
    
    
    15,399
    
    
    
    18,458Net interest income
    
    
    8,877
    
    
    
    6,644
    
    
    
    25,658
    
    
    
    18,238Provision for loan losses
    
    
    1,381
    
    
    
    1,041
    
    
    
    4,900
    
    
    
    2,500Net interest income after
provision for loan losses
    
    
    7,496
    
    
    
    5,603
    
    
    
    20,758
    
    
    
    15,738Noninterest income:Service charges on deposit accounts
    
    
    358
    
    
    
    165
    
    
    
    904
    
    
    
    382Other operating income
    
    
    314
    
    
    
    222
    
    
    
    1,007
    
    
    
    570Total noninterest income
    
    
    672
    
    
    
    387
    
    
    
    1,911
    
    
    
    952Noninterest expense:Salaries and employee benefits
    
    
    2,684
    
    
    
    2,515
    
    
    
    7,910
    
    
    
    6,497Equipment and occupancy
    
    
    546
    
    
    
    448
    
    
    
    1,598
    
    
    
    1,161Professional services
    
    
    254
    
    
    
    161
    
    
    
    829
    
    
    
    388Other operating expense
    
    
    1,977
    
    
    
    910
    
    
    
    4,484
    
    
    
    2,295Total noninterest expense
    
    
    5,461
    
    
    
    4,034
    
    
    
    14,821
    
    
    
    10,341Income before income taxes
    
    
    2,707
    
    
    
    1,956
    
    
    
    7,848
    
    
    
    6,349Provision for income taxes
    
    
    983
    
    
    
    712
    
    
    
    2,803
    
    
    
    2,301Net income
    
    $
    1,724
    
    
    
    1,244
    
    
    
    5,045
    
    
    
    4,048Basic earnings per share
    
    $
    .34
    
    
    
    .28
    
    
    
    .99
    
    
    
    .90Diluted earnings per share
    
    $
    .32
    
    
    
    .28
    
    
    
    .95
    
    
    
    .90
 See Notes to Unaudited Consolidated Financial Statements.
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SERVISFIRST BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
(In Thousands)
 Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Net income
    
    $
    1,724
    
    
    
    1,244
    
    
    
    5,045
    
    
    
    4,048Other comprehensive income (loss), net of tax:Unrealized holding gains (losses) arising
during the period from securities available
for sale, net of tax (benefit) of $(177) and
$(643) for the three and nine months ended
September 30, 2008, respectively, and $277
and $(89) for the three and nine months ended
September 30, 2007, respectively
    
    
    (344
    )
    
    
    537
    
    
    
    (1,248
    )
    
    
    (173
    )Unrealized gains(losses) arising during the
period from the derivative, net of tax of $35
for the nine months ended September 30, 2008,
and $113 and $59 for the three and nine
months ended September 30, 2007, respectively
    
    
    
    
    
    
    199
    
    
    
    67
    
    
    
    100Reclassification adjustment for net gains
realized on derivatives in net income, net of
tax of $46 and $138 for the three and nine
months ended September 30, 2008, respectively
    
    
    (90
    )
    
    
    
    
    
    
    (270
    )
    
    
    Other comprehensive income (loss)
    
    
    (434
    )
    
    
    736
    
    
    
    (1,451
    )
    
    
    (73
    )Comprehensive income
    
    $
    1,290
    
    
    
    1,980
    
    
    
    3,594
    
    
    
    3,975
 See Notes to Unaudited Consolidated Financial Statements.
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SERVISFIRST BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY
(Unaudited)
(In Thousands)
 AccumulatedAdditional
    
    
    
    
    
    
    Other
    
    
    TotalCommon
    
    
    Paid-in
    
    
    Retained
    
    
    Comprehensive
    
    
    ShareholdersStock
    
    
    Capital
    
    
    Earnings
    
    
    Income (Loss)
    
    
    EquityBalance December 31, 2007
    
    $
    5
    
    
    $
    63,159
    
    
    $
    8,082
    
    
    $
    1,001
    
    
    $
    72,247Other comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,451
    )
    
    
    (1,451
    )Stock based compensation expense
    
    
    
    
    
    
    492
    
    
    
    
    
    
    
    
    
    
    
    492Relative fair value of warrants
issued in connection with
subordinated debentures
    
    
    
    
    
    
    425
    
    
    
    
    
    
    
    
    
    
    
    425Net income
    
    
    
    
    
    
    
    
    
    
    5,045
    
    
    
    
    
    
    
    5,045Balance September 30, 2008
    
    $
    5
    
    
    
    64,076
    
    
    $
    13,127
    
    
    $
    (450
    )
    
    $
    76,758
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SERVISFIRST BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30, 2008 AND 2007
(Unaudited)
(In Thousands)
 2008
    
    
    2007OPERATING ACTIVITIESNet income
    
    $
    5,045
    
    
    
    4,048Adjustments to reconcile net income to net cash provided by operating
activities:Deferred tax benefit
    
    
    (818
    )
    
    
    (1,125
    )Provision for loan losses
    
    
    4,900
    
    
    
    2,500Depreciation and amortization
    
    
    683
    
    
    
    441Net accretion of investments
    
    
    (248
    )
    
    
    (258
    )Amortized gain on derivative
    
    
    408
    
    
    
    Increase in accrued interest and dividends receivable
    
    
    (119
    )
    
    
    (809
    )Stock compensation expense
    
    
    492
    
    
    
    396Increase in accrued interest payable
    
    
    408
    
    
    
    245Proceeds from sale of mortgages held for sale
    
    
    60,553
    
    
    
    39,040Originations of mortgages held for sale
    
    
    (62,149
    )
    
    
    (37,716
    )(Gain) loss on sale of other real estate
    
    
    172
    
    
    
    (15
    )Net change in other operating activities
    
    
    (1,774
    )
    
    
    (229
    )Net cash provided by operating activities
    
    
    7,553
    
    
    
    6,518INVESTING ACTIVITIESPurchases of securities available for sale
    
    
    (11,960
    )
    
    
    (65,776
    )Proceeds from maturities/calls, pay downs of securities available for sale
    
    
    7,419
    
    
    
    5,190Increase in loans
    
    
    (233,285
    )
    
    
    (139,776
    )Purchase of premises and equipment
    
    
    (391
    )
    
    
    (1,589
    )Purchase of restricted equity securities
    
    
    (1,457
    )
    
    
    (397
    )Proceeds from sale of other real estate
    
    
    1,505
    
    
    
    276Net cash used in investing activities
    
    
    (238,169
    )
    
    
    (202,072
    )FINANCING ACTIVITIESNet increase in non-interest bearing deposits
    
    
    20,866
    
    
    
    35,029Net increase in interest bearing deposits
    
    
    167,189
    
    
    
    239,448Repayment of other borrowings
    
    
    (73
    )
    
    
    Proceeds from other borrowings
    
    
    20,000
    
    
    
    Net proceeds from issuance of trust preferred securities
    
    
    15,000
    
    
    
    Proceeds from issuance of common shares, net
    
    
    
    
    
    
    10,964Net cash provided by financing activities
    
    
    222,982
    
    
    
    285,441Net increase (decrease) in cash and cash equivalents
    
    
    (7,634
    )
    
    
    89,887Cash and cash equivalents at beginning of period
    
    
    66,422
    
    
    
    53,335Cash and cash equivalents at end of period
    
    $
    58,788
    
    
    
    143,222
 See Notes to Unaudited Consolidated Financial Statements.
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SERVISFIRST BANCSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2008
(Unaudited)
 NOTE 1 GENERAL
   NOTE 2 CASH AND CASH FLOWS
  Nine Months EndedSeptember 30,2008
    
    2007(In Thousands)Interest paid
    
    $
    15,807
    
    
    
    18,703Income taxes paid
    
    $
    3,561
    
    
    
    2,585Transfers of loans to other real estate
    
    $
    7,492
    
    
    
    967
 NOTE 3 EARNINGS PER COMMON SHARE
  8




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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2008
    
    
    2007
    
    
    2008
    
    
    2007(In Thousands, Except Share and Per Share Amounts)Weighted average common shares outstanding
    
    $
    5,113,482
    
    
    $
    4,482,782
    
    
    $
    5,113,482
    
    
    $
    4,477,930Net income
    
    $
    1,724
    
    
    $
    1,244
    
    
    $
    5,045
    
    
    $
    4,048Basic earnings per common share
    
    $
    .34
    
    
    $
    .28
    
    
    $
    .99
    
    
    $
    .90Weighted average common shares outstanding
    
    
    5,113,482
    
    
    
    4,482,782
    
    
    
    5,113,482
    
    
    
    4,477,930Dilutive effects of assumed conversions
and exercises of stock options and
warrants
    
    
    230,448
    
    
    
    11,371
    
    
    
    225,011
    
    
    
    30,224Weighted average common and dilutive
potential common shares outstanding
    
    
    5,343,930
    
    
    
    4,494,153
    
    
    
    5,338,493
    
    
    
    4,508,154Net income
    
    $
    1,724
    
    
    $
    1,244
    
    
    $
    5,045
    
    
    $
    4,048Diluted earnings per common share
    
    $
    .32
    
    
    $
    .28
    
    
    $
    .95
    
    
    $
    .90
 NOTE 4 EMPLOYEE AND DIRECTOR BENEFITS
 Stock Options
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 September 30,2008
    
    2007Expected volatility
    
    
    21.53
    %
    
    
    20.00
    %Expected dividends
    
    
    .50
    %
    
    
    .50
    %Expected term in years
    
    7 years
    
    

    7 yearsRisk-free rate
    
    
    2.87
    %
    
    
    4.56
    %
  Weighted
    
    
    Weighted AverageAverage
    
    
    Remaining
    
    
    AggregateExercise
    
    
    Contractual Term
    
    
    Intrinsic ValueShares
    
    
    Price
    
    
    (years)
    
    
    (In Thousands)Outstanding January 1, 2008
    
    
    712,500
    
    
    $
    13.12
    
    
    
    8.43
    
    
    $
    4,905Granted
    
    
    98,500
    
    
    
    24.31
    
    
    
    
    
    
    
    Exercised
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Forfeited
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Outstanding at September 30, 2008
    
    
    811,000
    
    
    $
    14.48
    
    
    
    7.97
    
    
    $
    8,536Exercisable at September 30, 2008
    
    
    61,932
    
    
    $
    11.77
    
    
    
    7.18
    
    
    $
    819
  Stock Warrants
   Year EndedDecember 31,2005Expected volatility
    
    
    20.00
    %Expected dividends
    
    
    0.00
    %Expected term (in years)
    
    3 yearsRisk-free rate
    
    
    3.69
    %
  10




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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 NOTE 5 ADOPTION OF NEW ACCOUNTING INTERPRETATIONS
 The Fair Value Option for Financial Assets and Financial Liabilities  Including an
Amendment of FASB Statement No. 115
 Fair Value Measurements, Effective
Date FASB Statement No. 157.
 NOTE 6 RECENT ACCOUNTING PRONOUNCEMENTS
 Disclosures about Credit Derivatives and Certain Guarantees: An Amendment
of FASB Statement No. 133 and FASB Interpretation No. 45; and Clarification of the Effective Date
of FASB Statement No. 161
 11




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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
    NOTE 7 FAIR VALUE MEASUREMENT
 Fair value Measurements
 Level 1:
    
    Quoted prices (unadjusted) in active markets that are accessible
at the measurement date for assets or liabilities. The fair value
hierarchy gives the highest priority to Level 1 inputs.Level 2:
    
    Observable prices that are based on inputs not quoted on active
markets, but corroborated by market data.
 12




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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Level 3:
    
    Unobservable inputs are used when little or no market data is
available. The fair value hierarchy gives the lowest priority to
Level 3 inputs.
   Fair Value Measurement at September 30, 2008(Dollar amounts in thousands)Quoted Prices in
    
    
    SignificantActive Markets
    
    
    Other
    
    
    Significantfor Identical
    
    
    Observable
    
    
    UnobservableAssets
    
    
    Inputs
    
    
    Inputs(Level 1)
    
    
    (Level 2)
    
    
    (Level 3)
    
    
    TotalAssets Measured on a Recurring
Basis:Available-for-sale securities (1)
    
    $
    
    
    
    $
    90,139
    
    
    
    
    
    
    $
    90,139Assets measured on a
Nonrecurring Basis:Impaired loans
    
    
    
    
    
    
    
    
    
    
    14,293
    
    
    $
    14,293
 
 (1)
    
    The Company chose not to elect the fair value option as prescribed by SFAS No. 159 for its
financial assets and financial liabilities that had not been previously carried at fair value.
Therefore, certain financial assets and financial liabilities not carried at fair value, such
as the Companys investment in the Federal Home Loan Bank are still reported at their carrying
values.  NOTE 8 SUBORDINATED DEFERRABLE INTEREST DEBENTURES
  13




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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
   pari passu
    14




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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  15




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ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF CONSOLIDATED FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
 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. (hereinafter referred to as we, our or us) and its wholly-owned subsidiary, ServisFirst
Bank. This discussion is intended to supplement and highlight information contained in the
accompanying unaudited consolidated financial statements for the three months and nine months ended
September 30, 2008 and September 30, 2007.
 Forward Looking Statements
  Business
   16




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Recent Events
   17




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pari passu
    Overview
   Significant Accounting Policies
  18




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Financial Condition
 Investment Securities
  Gross
    
    
    GrossAmortized
    
    
    Unrealized
    
    
    UnrealizedCost
    
    
    Gain
    
    
    Loss
    
    
    Market Value(In Thousands)As of September 30, 2008:Securities available for sale:Mortgage backed securities
    
    $
    58,533
    
    
    $
    781
    
    
    $
    (50
    )
    
    $
    59,264State and municipal securities
    
    
    26,729
    
    
    
    79
    
    
    
    (811
    )
    
    
    25,997Corporate bonds
    
    
    5,968
    
    
    
    
    
    
    
    (1,090
    )
    
    
    4,878Total
    
    $
    91,230
    
    
    $
    860
    
    
    $
    (1,951
    )
    
    $
    90,139As of December 31, 2007:Securities available for sale:Mortgage backed securities
    
    $
    62,162
    
    
    $
    471
    
    
    $
    (30
    )
    
    $
    62,603State and municipal securities
    
    
    24,271
    
    
    
    374
    
    
    
    (15
    )
    
    
    24,630Total
    
    $
    86,433
    
    
    $
    845
    
    
    $
    (45
    )
    
    $
    87,233
   Less than
    
    
    One year to
    
    
    Five years
    
    
    More thanone year
    
    
    five years
    
    
    to ten years
    
    
    ten years
    
    
    Total(In Thousands)As of September 30, 2008Mortgage backed securities
    
    $
    
    
    
    $
    27,417
    
    
    
    26,533
    
    
    
    4,583
    
    
    
    58,533State and municipal securities
    
    
    
    
    
    
    2,020
    
    
    
    13,161
    
    
    
    11,548
    
    
    
    26,729Corporate bonds
    
    
    
    
    
    
    
    
    
    
    4,033
    
    
    
    1,935
    
    
    
    5,968Total
    
    $
    
    
    
    $
    29,437
    
    
    
    43,727
    
    
    
    18,066
    
    
    
    91,230
   19




---



##### Table of Contents



Loans
  September 30, 2008
    
    
    December 31, 2007(In Thousands)Commercial, financial and agricultural
    
    $
    293,381
    
    
    $
    219,684Real estate  construction
    
    
    233,992
    
    
    
    195,238Real estate  mortgage:Owner occupied
    
    
    134,810
    
    
    
    89,0141-4 family
    
    
    106,309
    
    
    
    64,325Other
    
    
    102,265
    
    
    
    83,663Total real estate mortgage
    
    
    343,384
    
    
    
    237,002Consumer
    
    
    28,069
    
    
    
    23,357Total loans
    
    
    898,826
    
    
    
    675,281Less allowance for loan losses
    
    
    (10,384
    )
    
    
    (7,732
    )Net loans
    
    $
    888,442
    
    
    $
    667,549
 Asset Quality
   20




---



##### Table of Contents



Three Months Ended
    
    
    Nine Months EndedSeptember 30
    
    
    September 302008
    
    
    2007
    
    
    2008
    
    
    2007(In Thousands)Allowance for loan losses at beginning of
period
    
    $
    9,438
    
    
    
    6,825
    
    
    
    7,732
    
    
    
    5,418Charge-offsCommercial, financial and agricultural
    
    
    (94
    )
    
    
    (17
    )
    
    
    (95
    )
    
    
    (60
    )Real estate  construction
    
    
    (78
    )
    
    
    (81
    )
    
    
    (1,826
    )
    
    
    (81
    )Real estate  mortgageOwner occupied
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1-4 family
    
    
    (155
    )
    
    
    
    
    
    
    (232
    )
    
    
    Other
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total real estate mortgage
    
    
    (155
    )
    
    
    
    
    
    
    (232
    )
    
    
    Consumer
    
    
    (108
    )
    
    
    
    
    
    
    (114
    )
    
    
    (10
    )Total charge-offs
    
    
    (435
    )
    
    
    (98
    )
    
    
    (2,267
    )
    
    
    (151
    )RecoveriesCommercial, financial and industrial
    
    
    
    
    
    
    12
    
    
    
    19
    
    
    
    12Real estate  construction
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Real estate  mortgage
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Owner occupied
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1-4 family
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Other
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total real estate mortgage
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Consumer
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total recoveries
    
    
    0
    
    
    
    12
    
    
    
    19
    
    
    
    12Net charge-offs
    
    
    (435
    )
    
    
    (86
    )
    
    
    (2,248
    )
    
    
    (139
    )Provision for loan losses charged to expense
    
    
    1,381
    
    
    
    1,041
    
    
    
    4,900
    
    
    
    2,500Allowance for loan losses at end of period
    
    $
    10,384
    
    
    
    7,780
    
    
    
    10,384
    
    
    
    7,780As a percentage of year to date average loans:Annualized charge-offs
    
    
    0.20
    %
    
    
    0.06
    %
    
    
    0.38
    %
    
    
    0.04
    %Annualized provision for loan losses
    
    
    0.64
    %
    
    
    0.76
    %
    
    
    0.83
    %
    
    
    0.67
    %
  September 30,
    
    December 31,2008
    
    2007
    
    2007Percentage of
    
    
    
    
    
    Percentage of
    
    
    
    
    
    Percentage ofloans in each
    
    
    
    
    
    loans in each
    
    
    
    
    
    loans in eachcategory of
    
    
    
    
    
    category of
    
    
    
    
    
    category ofAmount
    
    total loans
    
    Amount
    
    total loans
    
    Amount
    
    total loans(Dollars in Thousands)Commercial, financial
and agricultural
    
    $
    1,175
    
    
    
    32.63
    %
    
    $
    1,386
    
    
    
    35.39
    %
    
    $
    1,714
    
    
    
    32.53
    %Real estate 
construction
    
    
    5,334
    
    
    
    26.05
    %
    
    
    5,245
    
    
    
    32.68
    %
    
    
    3,487
    
    
    
    28.91
    %Real estate  mortgage
    
    
    987
    
    
    
    38.20
    %
    
    
    375
    
    
    
    28.76
    %
    
    
    340
    
    
    
    35.10
    %Consumer
    
    
    51
    
    
    
    3.12
    %
    
    
    108
    
    
    
    3.17
    %
    
    
    12
    
    
    
    3.46
    %Other
    
    
    2,837
    
    
    
    
    
    
    
    666
    
    
    
    
    
    
    
    2,179
    
    
    
    Total
    
    $
    10,384
    
    
    
    100.00
    %
    
    $
    7,780
    
    
    
    100.00
    %
    
    $
    7,732
    
    
    
    100.00
    %x
 Non-performing Assets
  21




---



##### Table of Contents



September 30, 2008
    
    
    December 31, 2007
    
    
    September 30, 2007(Dollars in Thousands)Non-accrual loans
    
    $
    6,663
    
    
    
    4,284
    
    
    
    1,449Loans 90 days or more past
due and still accruing
    
    
    489
    
    
    
    187
    
    
    
    5All other real estate owned
    
    
    8,211
    
    
    
    1,623
    
    
    
    1,261Total non-performing assets
    
    $
    15,363
    
    
    
    6,094
    
    
    
    2,715
  Deposits
   22




---



##### Table of Contents



Other Borrowings
  Liquidity
     23




---



##### Table of Contents



Payments due by Period(In Thousands)Less than
    
    
    1-3
    
    
    4-5
    
    
    More thanContractual Obligations (1)
    
    Total
    
    
    1 Year
    
    
    Years
    
    
    Years
    
    
    5 YearsDeposits without a stated maturity
    
    $
    808,902
    
    
    
    808,902
    
    
    
    
    
    
    
    
    
    
    
    Certificates of deposit (2)
    
    $
    141,836
    
    
    
    115,072
    
    
    
    22,788
    
    
    
    3,876
    
    
    
    100FHLB borrowings
    
    $
    20,000
    
    
    
    
    
    
    
    10,000
    
    
    
    10,000
    
    
    
    Subordinated debentures
    
    $
    15,052
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    15,052Operating lease commitments
    
    $
    5,971
    
    
    
    915
    
    
    
    1,509
    
    
    
    1,085
    
    
    
    2,462Total
    
    $
    991,761
    
    
    
    924,889
    
    
    
    34,297
    
    
    
    14,961
    
    
    
    17,614
 
 (1)
    
    Excludes interest(2)
    
    Certificates of deposit give customers the right to early withdrawal. Early withdrawals
may be subject to penalties. The penalty amount depends on the remaining time to maturity
at the time of early withdrawal. Capital Adequacy
   For
    
    To Be WellActual
    
    Capital
    
    Capitalized UnderServisFirst
    
    ServisFirst
    
    Adequacy
    
    Prompt CorrectiveBancshares
    
    Bank
    
    Purposes
    
    Action ProvisionsSeptember 30, 2008Total Capital to Risk Weighted Assets
    
    
    11.26
    %
    
    
    11.14
    %
    
    
    8.00
    %
    
    
    10.00
    %Tier 1 Capital to Risk Weighted Assets
    
    
    10.12
    %
    
    
    10.00
    %
    
    
    4.00
    %
    
    
    6.00
    %Tier 1 Capital to Average Assets
    
    
    9.27
    %
    
    
    9.16
    %
    
    
    4.00
    %
    
    
    5.00
    %December 31, 2007Total Capital to Risk Weighted Assets
    
    
    11.22
    %
    
    
    11.22
    %
    
    
    8.00
    %
    
    
    10.00
    %Tier 1 Capital to Risk Weighted Assets
    
    
    10.12
    %
    
    
    10.12
    %
    
    
    4.00
    %
    
    
    6.00
    %Tier 1 Capital to Average Assets
    
    
    8.40
    %
    
    
    8.40
    %
    
    
    4.00
    %
    
    
    5.00
    %September 30, 2007Total Capital to Risk Weighted Assets
    
    
    N/A
    
    
    
    11.91
    %
    
    
    8.00
    %
    
    
    10.00
    %Tier 1 Capital to Risk Weighted Assets
    
    
    N/A
    
    
    
    10.68
    %
    
    
    4.00
    %
    
    
    6.00
    %Tier 1 Capital to Average Assets
    
    
    N/A
    
    
    
    9.21
    %
    
    
    4.00
    %
    
    
    5.00
    %
 Off-balance sheet arrangements
  24




---



##### Table of Contents



(In Thousands)Commitments to extend credit beyond current fundings
    
    $
    304,514Credit card arrangements
    
    
    10,278Standby letters of credit and financial guarantees
    
    
    18,785Total
    
    $
    333,577
   Derivatives
  Net Income
  25




---



##### Table of Contents



Net Interest Income
 
   26




---



##### Table of Contents



Average Consolidated Balance Sheet and Net Interest Analysis on a Fully Tax Equivalent Basis
 Three Months Ended September 30,2008
    
    
    2007Average
    
    
    Income/
    
    
    Yield/
    
    
    Average
    
    
    Income/
    
    
    Yield/Balance
    
    
    Expense
    
    
    Rate
    
    
    Balance
    
    
    Expense
    
    
    Rate(Dollar Amounts In Thousands)Assets:Interest-earning assets:Loans, net of unearned income (1)
    
    $
    864,523
    
    
    
    12,620
    
    
    
    5.79
    %
    
    
    552,696
    
    
    
    11,644
    
    
    
    8.36
    %Mortgage loans held for sale
    
    
    2,416
    
    
    
    37
    
    
    
    6.07
    %
    
    
    2,310
    
    
    
    29
    
    
    
    5.06
    %Investment securities:Taxable
    
    
    67,759
    
    
    
    951
    
    
    
    5.61
    %
    
    
    48,148
    
    
    
    667
    
    
    
    5.54
    %Tax-exempt (2) (3)
    
    
    23,661
    
    
    
    335
    
    
    
    5.67
    %
    
    
    18,329
    
    
    
    259
    
    
    
    5.66
    %Total investment securities (3)
    
    
    91,420
    
    
    
    1,286
    
    
    
    5.62
    %
    
    
    66,477
    
    
    
    926
    
    
    
    5.57
    %Federal funds sold
    
    
    2,190
    
    
    
    12
    
    
    
    2.18
    %
    
    
    93,983
    
    
    
    1,206
    
    
    
    5.13
    %Restricted equity securities
    
    
    2,659
    
    
    
    26
    
    
    
    3.83
    %
    
    
    1,201
    
    
    
    17
    
    
    
    5.35
    %Interest bearing balances with banks
    
    
    13
    
    
    
    0
    
    
    
    3.88
    %
    
    
    53
    
    
    
    0
    
    
    
    5.98
    %Total interest-earning assets
    
    
    963,221
    
    
    
    13,981
    
    
    
    5.72
    %
    
    
    716,720
    
    
    
    13,822
    
    
    
    7.73
    %Non-interest earning assetsCash and due from banks
    
    
    21,524
    
    
    
    
    
    
    
    
    
    
    
    15,305Net fixed assets
    
    
    3,928
    
    
    
    
    
    
    
    
    
    
    
    3,505Allowance for loan losses, accrued
interest and other assets
    
    
    5,782
    
    
    
    
    
    
    
    
    
    
    
    (778
    )Total assets
    
    $
    994,455
    
    
    
    
    
    
    
    
    
    
    
    734,752Liabilities and stockholders equity:Interest-bearing liabilities:Interest bearing demand deposits
    
    $
    92,480
    
    
    
    387
    
    
    
    1.66
    %
    
    
    38,686
    
    
    
    302
    
    
    
    3.10
    %Savings deposits
    
    
    443
    
    
    
    1
    
    
    
    0.57
    %
    
    
    176
    
    
    
    
    
    
    
    1.72
    %Money market accounts
    
    
    540,314
    
    
    
    2,810
    
    
    
    2.06
    %
    
    
    490,379
    
    
    
    6,095
    
    
    
    4.93
    %Time deposits
    
    
    147,918
    
    
    
    1,443
    
    
    
    3.87
    %
    
    
    54,974
    
    
    
    702
    
    
    
    5.06
    %Federal funds purchased
    
    
    13,695
    
    
    
    88
    
    
    
    2.55
    %
    
    
    
    
    
    
    
    
    
    
    Other borrowed funds
    
    
    24,945
    
    
    
    275
    
    
    
    4.38
    %
    
    
    
    
    
    
    
    
    
    
    Total interest- bearing Liabilities
    
    
    819,795
    
    
    
    5,004
    
    
    
    2.46
    %
    
    
    584,215
    
    
    
    7,099
    
    
    
    4.82
    %Non-interest liabilitiesNon-interest bearing demand deposits
    
    
    95,634
    
    
    
    
    
    
    
    
    
    
    
    91,551Other liabilities
    
    
    2,736
    
    
    
    
    
    
    
    
    
    
    
    3,384Stockholders equity
    
    
    76,290
    
    
    
    
    
    
    
    
    
    
    
    55,602Total liabilities and Stockholders equity
    
    $
    994,455
    
    
    
    
    
    
    
    
    
    
    
    734,752Net interest spread
    
    
    
    
    
    
    
    
    
    
    3.26
    %
    
    
    
    
    
    
    
    
    
    
    2.91
    %Net interest margin
    
    
    
    
    
    
    
    
    
    
    3.66
    %
    
    
    
    
    
    
    
    
    
    
    3.76
    %
 
 (1)
    
    Non-accrual loans are included in average loan balances in all years. Loan fees of $145,000
and $379,000 are included in interest income in 2008 and 2007, respectively.(2)
    
    Interest income and yields are presented on a fully taxable equivalent basis using a tax
rate of 34%.(3)
    
    Unrealized gains (losses) of ($216,000) and ($1,008,000) are excluded from the yield
calculation in 2008 and 2007, respectively. 27




---



##### Table of Contents



Average Consolidated Balance Sheet and Net Interest Analysis on a Fully Tax Equivalent Basis
 Nine Months Ended September 30,2008
    
    
    2007Average
    
    
    Income/
    
    
    Yield/
    
    
    Average
    
    
    Income/
    
    
    Yield/Balance
    
    
    Expense
    
    
    Rate
    
    
    Balance
    
    
    Expense
    
    
    RateAssets:Interest-earning assets:Loans, net of unearned income(1)
    
    $
    790,918
    
    
    
    36,858
    
    
    
    6.21
    %
    
    
    499,631
    
    
    
    31,486
    
    
    
    8.43
    %Mortgage loans held for sale
    
    
    2,562
    
    
    
    111
    
    
    
    5.79
    %
    
    
    1,763
    
    
    
    89
    
    
    
    6.73
    %Investment securities:Taxable
    
    
    67,268
    
    
    
    2,831
    
    
    
    5.61
    %
    
    
    31,925
    
    
    
    1,317
    
    
    
    5.50
    %Tax-exempt (2)(3)
    
    
    22,961
    
    
    
    973
    
    
    
    5.65
    %
    
    
    15,991
    
    
    
    677
    
    
    
    5.67
    %Total investment securities (3)
    
    
    90,229
    
    
    
    3,804
    
    
    
    5.62
    %
    
    
    47,916
    
    
    
    1,994
    
    
    
    5.63
    %Federal funds sold
    
    
    23,502
    
    
    
    449
    
    
    
    2.55
    %
    
    
    85,508
    
    
    
    3,299
    
    
    
    5.14
    %Restricted equity securities
    
    
    2,230
    
    
    
    79
    
    
    
    4.70
    %
    
    
    1,079
    
    
    
    32
    
    
    
    3.84
    %Interest bearing balances with banks
    
    
    1,742
    
    
    
    53
    
    
    
    4.04
    %
    
    
    39
    
    
    
    0
    
    
    
    2.96
    %Total interest-earning assets
    
    
    911,183
    
    
    
    41,353
    
    
    
    6.05
    %
    
    
    635,936
    
    
    
    36,899
    
    
    
    7.76
    %Non-interest earning assetsCash and due from banks
    
    
    19,743
    
    
    
    
    
    
    
    
    
    
    
    13,809Net fixed assets
    
    
    4,027
    
    
    
    
    
    
    
    
    
    
    
    3,096Allowance for loan losses, accrued
interest and other assets
    
    
    4,354
    
    
    
    
    
    
    
    
    
    
    
    (588
    )Total assets
    
    $
    939,307
    
    
    
    
    
    
    
    
    
    
    
    652,253Liabilities and stockholders equity:Interest-bearing liabilities:Interest bearing demand deposits
    
    $
    85,275
    
    
    
    1,101
    
    
    
    1.72
    %
    
    
    39,596
    
    
    
    822
    
    
    
    2.77
    %Savings deposits
    
    
    417
    
    
    
    2
    
    
    
    .68
    %
    
    
    192
    
    
    
    2
    
    
    
    1.60
    %Money market accounts
    
    
    537,217
    
    
    
    9,682
    
    
    
    2.40
    %
    
    
    422,158
    
    
    
    15,686
    
    
    
    4.97
    %Time deposits
    
    
    127,757
    
    
    
    4,034
    
    
    
    4.21
    %
    
    
    50,784
    
    
    
    1,948
    
    
    
    5.13
    %Federal funds purchased
    
    
    6,272
    
    
    
    118
    
    
    
    2.51
    %
    
    
    
    
    
    
    
    
    
    
    Other borrowings
    
    
    16,127
    
    
    
    462
    
    
    
    3.81
    %
    
    
    
    
    
    
    
    
    
    
    Total interest- bearing Liabilities
    
    
    773,065
    
    
    
    15,399
    
    
    
    2.65
    %
    
    
    512,730
    
    
    
    18,458
    
    
    
    4.81
    %Non-interest liabilitiesNon-interest bearing demand deposits
    
    
    86,537
    
    
    
    
    
    
    
    
    
    
    
    82,031Other liabilities
    
    
    4,535
    
    
    
    
    
    
    
    
    
    
    
    2,923Stockholders equity
    
    
    75,170
    
    
    
    
    
    
    
    
    
    
    
    54,569Total liabilities and Stockholders equity
    
    $
    939,307
    
    
    
    
    
    
    
    
    
    
    
    652,253Net interest spread
    
    
    
    
    
    
    
    
    
    
    3.40
    %
    
    
    
    
    
    
    
    
    
    
    2.95
    %Net interest margin
    
    
    
    
    
    
    
    
    
    
    3.80
    %
    
    
    
    
    
    
    
    
    
    
    3.88
    %
 
 (1)
    
    Non-accrual loans are included in average loan balances in all years. Loan fees of
$761,000 and $1,062,000 are included in interest income in 2008 and 2007, respectively.(2)
    
    Interest income and yields are presented on a fully taxable equivalent basis using a tax
rate of 34%.(3)
    
    Unrealized gains (losses) of $986,000 and $(479,000) are excluded from the yield
calculation in 2008 and 2007, respectively. Provision for Loan Losses
  28




---



##### Table of Contents



Noninterest Income
   Noninterest Expense
   29




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##### Table of Contents



Income Tax Expense
  
 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
    30




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Economic Value of Equity Under Rate Shock
At September 30, 2008
 -200bps
    
    -100bps
    
    0bps
    
    +100bps
    
    +200bps(Dollars in Thousands)Economic value of equity
    
    $
    83,642
    
    
    
    78,455
    
    
    
    76,758
    
    
    
    79,388
    
    
    
    84,696Actual dollar change
    
    $
    5,187
    
    
    
    1,697
    
    
    
    0
    
    
    
    2,630
    
    
    
    5,308Percent change
    
    
    6.20
    %
    
    
    2.16
    %
    
    
    0.00
    %
    
    
    3.31
    %
    
    
    6.27
    %
   
 ITEM 4. CONTROLS AND PROCEDURES
 CEO and CFO Certification
  31




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Evaluation of Disclosure Controls and Procedures
    
 PART II. OTHER INFORMATION
 
 ITEM 1. LEGAL PROCEEDINGS
  
 ITEM 1A. RISK FACTORS
  32




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There can be no assurance that recently enacted legislation authorizing the U.S. government to
purchase large amounts of illiquid mortgages and mortgage-backed securities from financial
institutions will help stabilize the U.S. financial system.
  Difficult market conditions have adversely affected our industry.
  Current levels of market volatility are unprecedented.
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ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
  
 ITEM 3. DEFAULTS UPON SENIOR SECURITIES
  
 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
  
 ITEM 5. OTHER INFORMATION
  
 ITEM 6. EXHIBITS
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SIGNATURES
  Date: October 31, 2008
    SERVISFIRST BANCSHARES, INC.By:
    /s/ Thomas A. Broughton, IIIPresident and Chief Executive OfficerDate: October 31, 2008
    By:
    /s/ William M. FosheeWilliam M. FosheeChief Financial Officer 35