UNITED
STATES
 SECURITIES
AND EXCHANGE COMMISSION
 WASHINGTON,
D.C. 20549
  
 
 FORM
10-Q


(Mark one)


x
              QUARTERLY
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934
 FOR
      THE QUARTERLY PERIOD ENDED MARCH 31,
2010





o
              TRANSITION
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIESEXCHANGE ACT OF
      1934
 For the transition period from
_______to_______


Commission
file number 000-53149
 
 SERVISFIRST
BANCSHARES, INC.
 (Exact
Name of Registrant as Specified in Its Charter)





Delaware
              
              26-0734029(State
      or Other Jurisdiction of
              
              (I.R.S.
      EmployerIncorporation
      or Organization)
              
              Identification
      No.)


(205)
949-0302
 (Registrant’s
Telephone Number, Including Area Code)


Indicate
by check mark whether the registrant: (1) has filed all reports required to be
filed by Section 13 or Section 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes x No o
 
 Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T during the 
preceding 12 months (or for such shorter period that the registrant was required
to submit and post such files).
 Yes o No o
 
 Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
the definition of “large accelerated filer”, “accelerated filer”, and small
reporting company” in Rule 12b-2 of the Exchange Act (Check one):


Large
accelerated filer o
Accelerated filer x
Non-accelerated filer o Smaller reporting
company o


Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Act).  Yes o No x





Indicate
the number of shares outstanding of each of the issuer’s classes of common
stock, as of the latest practical date.





Class
              
              Outstanding as of April 30,
      2010Common
      stock, $.001 par value
              
              5,513,482













TABLE
OF CONTENTS





PART I. FINANCIAL
    INFORMATIONItem
      1.
                          Consolidated
      Financial Statements
                          3Item
      2.
                          Management’s
      Discussion and Analysis of Financial Condition and Results of
      Operations
                          20Item
      3.
                          Quantitative
      and Qualitative Disclosure about Market Risk
                          35Item
      4.
                          Controls
      and Procedures
                          35PART II. OTHER INFORMATIONItem
      1
                          Legal
      Proceedings
                          36Item
      1A.
                          Risk
      Factors
                          36Item
      2.
                          Unregistered
      Sales of Equity Securities and Use of Proceeds
                          36Item
      3.
                          Defaults
      Upon Senior Securities
                          36Item
      4.
                          Other
      Information
                          37Item
      5.
                          Exhibits
                          37





EX-31.01
SECTION 302, CERTIFICATION OF THE CEO


EX-31.02
SECTION 302, CERTIFICATION OF THE CFO


EX-31.01
SECTION 906, CERTIFICATION OF THE CEO


EX-31.01
SECTION 906, CERTIFICATION OF THE CFO


2




PART
1. FINANCIAL INFORMATION





ITEM
1. CONSOLIDATED FINANCIAL STATEMENTS





SERVISFIRST
BANCSHARES, INC.


CONSOLIDATED
BALANCE SHEETS MARCH 31, 2010 AND DECEMBER 31, 2009


(In
thousands, except share and per share amounts)





March 31, 2010
                      
                      
                      December 31,
                        2009(Unaudited)
                      
                      
                      (Audited)ASSETSCash
      and due from banks
                      
                      $
                      20,449
                      
                      
                      $
                      26,982Interest-bearing
      balances due from depository institutions
                      
                      
                      5,313
                      
                      
                      
                      48,544Federal
      funds sold
                      
                      
                      110
                      
                      
                      
                      680Cash
      and cash equivalents
                      
                      
                      25,872
                      
                      
                      
                      76,206Debt
      securities:Available
      for sale
                      
                      
                      232,975
                      
                      
                      
                      255,453Held
      to maturity
                      
                      
                      1,145
                      
                      
                      
                      645Restricted
      equity securities
                      
                      
                      3,510
                      
                      
                      
                      3,241Mortgage
      loans held for sale
                      
                      
                      4,521
                      
                      
                      
                      6,202Loans
                      
                      
                      1,235,504
                      
                      
                      
                      1,207,084Less
      allowance for loan losses
                      
                      
                      (15,671
                      )
                      
                      
                      (14,911
                      )Loans,
      net
                      
                      
                      1,219,833
                      
                      
                      
                      1,192,173Premises
      and equipment, net
                      
                      
                      4,892
                      
                      
                      
                      5,088Accrued
      interest and dividends receivable
                      
                      
                      6,664
                      
                      
                      
                      6,200Deferred
      tax assets
                      
                      
                      4,357
                      
                      
                      
                      4,872Other
      real estate owned
                      
                      
                      12,344
                      
                      
                      
                      12,525Other
      assets
                      
                      
                      11,451
                      
                      
                      
                      10,892Total
      assets
                      
                      $
                      1,527,564
                      
                      
                      $
                      1,573,497LIABILITIES
      AND STOCKHOLDERS' EQUITYLiabilities:Deposits:Noninterest-bearing
                      
                      $
                      174,068
                      
                      
                      $
                      211,307Interest-bearing
                      
                      
                      1,176,492
                      
                      
                      
                      1,221,048Total
      deposits
                      
                      
                      1,350,560
                      
                      
                      
                      1,432,355Federal
      funds purchased
                      
                      
                      17,350
                      
                      
                      
                      -Other
      borrowings
                      
                      
                      24,925
                      
                      
                      
                      24,922Trust
      preferred securities
                      
                      
                      30,314
                      
                      
                      
                      15,228Accrued
      interest payable
                      
                      
                      937
                      
                      
                      
                      1,026Other
      liabilities
                      
                      
                      1,444
                      
                      
                      
                      2,344Total
      liabilities
                      
                      
                      1,425,530
                      
                      
                      
                      1,475,875Stockholders'
      equity:Common
      stock, par value $.001 per share; 15,000,000 shares
      authorized;5,513,482
      shares issued and outstanding
                      
                      
                      6
                      
                      
                      
                      6Preferred
      stock, par value $.001 per share; 1,000,000 shares
    authorized;no
      shares outstanding
                      
                      
                      -
                      
                      
                      
                      -Additional
      paid-in capital
                      
                      
                      75,213
                      
                      
                      
                      75,078Retained
      earnings
                      
                      
                      24,978
                      
                      
                      
                      20,965Accumulated
      other comprehensive income
                      
                      
                      1,837
                      
                      
                      
                      1,573Total
      stockholders' equity
                      
                      
                      102,034
                      
                      
                      
                      97,622Total
      liabilities and shareholders' equity Total liabilities and stockholders'
      equity
                      
                      $
                      1,527,564
                      
                      
                      $
                      1,573,497





See
Notes to Consolidated Financial  Statements.


3





SERVISFIRST
BANCSHARES, INC.


CONSOLIDATED
STATEMENTS OF INCOME


(Unaudited)


(In
thousands, except share and per share amounts)





Three
      Months Ended March 31,2010
                    
                    
                    2009Interest
      income:Interest
      and fees on loans
                    
                    $
                    16,204
                    
                    
                    $
                    12,509Taxable
      securities
                    
                    
                    1,752
                    
                    
                    
                    1,108Nontaxable
      securities
                    
                    
                    524
                    
                    
                    
                    278Federal
      funds sold
                    
                    
                    10
                    
                    
                    
                    24Other
      interest and dividends
                    
                    
                    12
                    
                    
                    
                    18Total
      interest income
                    
                    
                    18,502
                    
                    
                    
                    13,937Interest
      expense:Deposits
                    
                    
                    2,853
                    
                    
                    
                    4,393Borrowed
      funds
                    
                    
                    743
                    
                    
                    
                    498Total
      interest expense
                    
                    
                    3,596
                    
                    
                    
                    4,891Net
      interest income
                    
                    
                    14,906
                    
                    
                    
                    9,046Provision
      for loan losses
                    
                    
                    2,712
                    
                    
                    
                    2,460Net
      interest income after provision for loan losses
                    
                    
                    12,194
                    
                    
                    
                    6,586Noninterest
      income:Service
      charges on deposit accounts
                    
                    
                    572
                    
                    
                    
                    356Securities
      gains
                    
                    
                    38
                    
                    
                    
                    -Other
      operating income
                    
                    
                    522
                    
                    
                    
                    563Total
      noninterest income
                    
                    
                    1,132
                    
                    
                    
                    919Noninterest
      expenses:Salaries
      and employee benefits
                    
                    
                    3,482
                    
                    
                    
                    3,367Equipment
      and occupancy expense
                    
                    
                    780
                    
                    
                    
                    588Professional
      services
                    
                    
                    200
                    
                    
                    
                    214Other
      operating expenses
                    
                    
                    2,796
                    
                    
                    
                    2,263Total
      noninterest expenses
                    
                    
                    7,258
                    
                    
                    
                    6,432Income
      before income taxes
                    
                    
                    6,068
                    
                    
                    
                    1,073Provision
      for income taxes
                    
                    
                    2,055
                    
                    
                    
                    352Net
      income
                    
                    $
                    4,013
                    
                    
                    $
                    721Basic
      earnings per share
                    
                    $
                    0.73
                    
                    
                    $
                    0.13Diluted
      earnings per share
                    
                    $
                    0.68
                    
                    
                    $
                    0.13





See
Notes to Consolidated Financial  Statements.


4





SERVISFIRST
BANCSHARES, INC.


CONSOLIDATED
STATEMENTS OF COMPREHENSIVE INCOME


THREE
MONTHS ENDED MARCH 31, 2010 AND 2009


(Unaudited)


(In
thousands)





2010
                      
                      
                      2009Net
      income
                      
                      $
                      4,013
                      
                      
                      $
                      721Other
      comprehensive income (loss), net of tax:Unrealized
      holding gains arising during period from securities available for sale,
      net of tax of $149 and $71 for 2010 and 2009, respectively
                      
                      
                      289
                      
                      
                      
                      138Reclassification
      adjustment for net gains on sale of securities in net income, net of tax
      of $13
                      
                      
                      (25
                      )
                      
                      
                      -Reclassification
      adjustment for net gains realized on derivatives in net income, net of tax
      of $46 for 2009
                      
                      
                      -
                      
                      
                      
                      (90
                      )Other
      comprehensive income
                      
                      
                      264
                      
                      
                      
                      48Comprehensive
      income
                      
                      $
                      4,277
                      
                      
                      $
                      769





See
Notes to Consolidated Financial Statements


5





SERVISFIRST
BANCSHARES, INC.


CONSOLIDATED
STATEMENTS OF STOCKHOLDERS' EQUITY


THREE
MONTHS ENDED MARCH 31, 2010


(Unaudited)


(In
thousands, except share amounts)





Common
                    Stock
                  
                  
                  Additional
                    Paid-in
                    Capital
                  
                  
                  Retained
                    Earnings
                  
                  
                  Accumulated
                    Other
                    Comprehensive
                    Income
                  
                  
                  Total
                    Stockholders'
                    EquityBalance,
      December 31, 2009
                  
                  
                  6
                  
                  
                  
                  75,078
                  
                  
                  
                  20,965
                  
                  
                  
                  1,573
                  
                  
                  
                  97,622Other
      comprehensive income
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  264
                  
                  
                  
                  264Stock-based
      compensation expense
                  
                  
                  -
                  
                  
                  
                  135
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  135Net
      income
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  4,013
                  
                  
                  
                  -
                  
                  
                  
                  4,013Balance,
      March 31, 2010
                  
                  $
                  6
                  
                  
                  $
                  75,213
                  
                  
                  $
                  24,978
                  
                  
                  $
                  1,837
                  
                  
                  $
                  102,034





See
Notes to Consolidated Financial Statements


6





SERVISFIRST
BANCSHARES, INC.


CONSOLIDATED
STATEMENTS OF CASH FLOWS


THREE
MONTHS ENDED MARCH 31, 2010 AND 2009


(In
thousands) (Unaudited)





2010
                    
                    
                    2009OPERATING
      ACTIVITIESNet
      income
                    
                    $
                    4,013
                    
                    
                    $
                    721Adjustments
      to reconcile net income to net cash provided by operating
      activities:Deferred
      tax expense (benefit)
                    
                    
                    379
                    
                    
                    
                    (967
                    )Provision
      for loan losses
                    
                    
                    2,712
                    
                    
                    
                    2,460Depreciation
      and amortization
                    
                    
                    270
                    
                    
                    
                    273Net
      amortization (accretion) of investments
                    
                    
                    150
                    
                    
                    
                    (156
                    )Amortized
      gain on derivative
                    
                    
                    -
                    
                    
                    
                    (136
                    )(Decrease)
      increase in accrued interest and dividends receivable
                    
                    
                    (463
                    )
                    
                    
                    92Stock
      compensation expense
                    
                    
                    135
                    
                    
                    
                    195Decrease
      in accrued interest payable
                    
                    
                    (89
                    )
                    
                    
                    (130
                    )Proceeds
      from sale of mortgage loans held for sale
                    
                    
                    29,235
                    
                    
                    
                    51,562Originations
      of mortgage loans held for sale
                    
                    
                    (27,934
                    )
                    
                    
                    (54,320
                    )Gain
      on sale of securities available for sale
                    
                    
                    (38
                    )
                    
                    
                    -Net
      loss on sale of other real estate owned
                    
                    
                    52
                    
                    
                    
                    612Decrease
      in special prepaid FDIC insurance assessments
                    
                    
                    564
                    
                    
                    
                    -Net
      change in other assets, liabilities, and otheroperating
      activities
                    
                    
                    (1,988
                    )
                    
                    
                    (1,179
                    )Net
      cash provided by operating activities
                    
                    
                    6,998
                    
                    
                    
                    (973
                    )INVESTMENT
      ACTIVITIESPurchase
      of securities available for sale
                    
                    
                    (17,274
                    )
                    
                    
                    (6,972
                    )Proceeds
      from maturities, calls and paydowns of securities available for
      sale
                    
                    
                    10,041
                    
                    
                    
                    4,417Purchase
      of securities held to maturity
                    
                    
                    (500
                    )
                    
                    
                    -Increase
      in loans
                    
                    
                    (31,955
                    )
                    
                    
                    (57,179
                    )Purchase
      of premises and equipment
                    
                    
                    (74
                    )
                    
                    
                    (167
                    )Purchase
      of restricted equity securities
                    
                    
                    (269
                    )
                    
                    
                    (582
                    )Proceeds
      from sale of securities available for sale
                    
                    
                    29,999
                    
                    
                    
                    -Proceeds
      from sale of other real estate owned and repossessions
                    
                    
                    2,172
                    
                    
                    
                    2,926Additions
      to other real estate owned
                    
                    
                    (77
                    )
                    
                    
                    -Net
      cash used in investing activities
                    
                    
                    (7,937
                    )
                    
                    
                    (57,557
                    )FINANCING
      ACTIVITIESNet
      (decrease) increase in noninterest-bearing deposits
                    
                    
                    (37,239
                    )
                    
                    
                    88,644Net
      (decrease) increase in interest-bearing deposits
                    
                    
                    (44,556
                    )
                    
                    
                    1,184Net
      increase in federal funds purchased
                    
                    
                    17,350
                    
                    
                    
                    -Proceeds
      from issuance of trust preferred securities
                    
                    
                    15,050
                    
                    
                    
                    -Proceeds
      from sale of stock, net
                    
                    
                    -
                    
                    
                    
                    3,479Net
      cash (used in) provided by financing activities
                    
                    
                    (49,395
                    )
                    
                    
                    93,307Net
      (decrease) increase in cash and cash equivalents
                    
                    
                    (50,334
                    )
                    
                    
                    34,777Cash
      and cash equivalents at beginning of year
                    
                    
                    76,206
                    
                    
                    
                    72,918Cash
      and cash equivalents at end of year
                    
                    $
                    25,872
                    
                    
                    $
                    107,695SUPPLEMENTAL
      DISCLOSURECash
      paid for:Interest
                    
                    $
                    3,685
                    
                    
                    $
                    5,021Income
      taxes
                    
                    
                    1,560
                    
                    
                    
                    1,365NONCASH
      TRANSACTIONSTransfers
      of loans from held for sale to held for investment
                    
                    $
                    380
                    
                    
                    $
                    293Other
      real estate acquired in settlement of loans
                    
                    
                    2,068
                    
                    
                    
                    1,436





See
Notes to Consolidated Financial Statements.


7





SERVISFIRST
BANCSHARES, INC.


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


March
31, 2010


(Unaudited)





NOTE
1 - GENERAL





The
accompanying condensed consolidated financial statements in this report have
been prepared in accordance with the rules and regulations of the Securities and
Exchange Commission, including Regulation S-X and the instructions for Form
10-Q, and have not been audited. These consolidated financial statements do not
include all of the information and footnotes required by U. S. generally
accepted accounting principles for complete financial statements. In the opinion
of management, all adjustments necessary to present fairly the consolidated
financial position and the consolidated results of operations for the interim
periods have been made. All such adjustments are of a normal nature. The
consolidated results of operations are not necessarily indicative of the
consolidated results of operations which ServisFirst Bancshares, Inc. (the
“Company”) may achieve for future interim periods or the entire year. For
further information, refer to the consolidated financial statements and
footnotes included in the Company’s Form 10-K for the year ended December 31,
2009.





All
reported amounts are in thousands except share and per share data.





NOTE
2 - CASH AND CASH FLOWS





Cash on
hand, cash items in process of collection, amounts due from banks, and Federal
funds sold are included in cash and cash equivalents.





NOTE
3 - EARNINGS PER COMMON SHARE





Basic
earnings per common share are computed by dividing net income by the weighted
average number of common shares outstanding during the
period.  Diluted earnings per common share include the dilutive effect
of additional potential common shares issuable under stock options and warrants,
as well as the potential common stock issuable upon possible conversion of the
preferred securities described in Note 10 to the Consolidated Financial
Statements.


8





Three
      Months Ended March 31,2010
                  
                  
                  2009(In
      Thousands, Except Shares
                    and
      Per Share Data)Earnings
      Per ShareWeighted
      average common shares outstanding
                  
                  
                  5,513,482
                  
                  
                  
                  5,401,914Net
      income
                  
                  $
                  4,013
                  
                  
                  $
                  721Basic
      earnings per share
                  
                  $
                  0.73
                  
                  
                  $
                  0.13Weighted
      average common shares outstanding
                  
                  
                  5,513,482
                  
                  
                  
                  5,401,914Dilutive
      effects of assumed conversions and exercise of stock options and
      warrants
                  
                  
                  388,296
                  
                  
                  
                  287,495Weighted
      average common and dilutive potential common shares
      outstanding
                  
                  
                  5,901,778
                  
                  
                  
                  5,689,409Net
      income
                  
                  $
                  4,041
                  
                  
                  $
                  721Diluted
      earnings per share
                  
                  $
                  0.68
                  
                  
                  $
                  0.13





NOTE
4 - SECURITIES





The
amortized cost and fair value of available-for-sale and held-to-maturity
securities at March 31, 2010 and December 31, 2009 are summarized as
follows:





Amortized
                                                  Cost
                                                
                                                
                                                Gross
                                                  Unrealized
                                                  Gain
                                                
                                                
                                                Gross
                                                  Unrealized
                                                  Loss
                                                
                                                
                                                Market
                                                  Value(In
      Thousands)March
      31, 2010:Securities
      Available for SaleU.S.
      Treasury and government sponsored agencies
                                                
                                                $
                                                60,487
                                                
                                                
                                                $
                                                363
                                                
                                                
                                                $
                                                (357
                                                )
                                                
                                                $
                                                60,493Mortgage-backed
      securities
                                                
                                                
                                                107,727
                                                
                                                
                                                
                                                2,699
                                                
                                                
                                                
                                                (616
                                                )
                                                
                                                
                                                109,810State
      and municipal securities
                                                
                                                
                                                58,973
                                                
                                                
                                                
                                                1,009
                                                
                                                
                                                
                                                (406
                                                )
                                                
                                                
                                                59,576Corporate
      debt
                                                
                                                
                                                3,006
                                                
                                                
                                                
                                                90
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                3,096Total
                                                
                                                $
                                                230,193
                                                
                                                
                                                $
                                                4,161
                                                
                                                
                                                $
                                                (1,379
                                                )
                                                
                                                $
                                                232,975Securities
      Held to MaturityState
      and municipal securities
                                                
                                                $
                                                1,145
                                                
                                                
                                                $
                                                1
                                                
                                                
                                                $
                                                (17
                                                )
                                                
                                                $
                                                1,129Total
                                                
                                                $
                                                1,145
                                                
                                                
                                                $
                                                1
                                                
                                                
                                                $
                                                (17
                                                )
                                                
                                                $
                                                1,129December
      31, 2009:Securities
      Available for SaleU.S.
      Treasury and government sponsored agencies
                                                
                                                $
                                                92,368
                                                
                                                
                                                $
                                                412
                                                
                                                
                                                $
                                                (453
                                                )
                                                
                                                $
                                                92,327Mortgage-backed
      securities
                                                
                                                
                                                99,608
                                                
                                                
                                                
                                                2,717
                                                
                                                
                                                
                                                (625
                                                )
                                                
                                                
                                                101,700State
      and municipal securities
                                                
                                                
                                                58,090
                                                
                                                
                                                
                                                876
                                                
                                                
                                                
                                                (567
                                                )
                                                
                                                
                                                58,399Corporate
      debt
                                                
                                                
                                                3,004
                                                
                                                
                                                
                                                36
                                                
                                                
                                                
                                                (13
                                                )
                                                
                                                
                                                3,027Total
                                                
                                                $
                                                253,070
                                                
                                                
                                                $
                                                4,041
                                                
                                                
                                                $
                                                (1,658
                                                )
                                                
                                                $
                                                255,453Securities
      Held to MaturityState
      and municipal securities
                                                
                                                $
                                                645
                                                
                                                
                                                $
                                                1
                                                
                                                
                                                $
                                                (3
                                                )
                                                
                                                $
                                                643Total
                                                
                                                $
                                                645
                                                
                                                
                                                $
                                                1
                                                
                                                
                                                $
                                                (3
                                                )
                                                
                                                $
                                                643





All
mortgage-backed securities are with government sponsored enterprises (GSEs) such
as Federal National Mortgage Association, Government National Mortgage
Association, Federal Home Loan Bank, and Federal Home Loan Mortgage
Corporation.


9




The
following table identifies, as of March 31, 2010 and December 31, 2009, the
Company’s investment securities that have been in a continuous unrealized loss
position for less than 12 months and those that have been in a continuous
unrealized loss position for 12 or more months.  The Company has the
ability and intent to hold its securities until such time as lost value is
recovered, or the securities mature.  Further, the Company believes
any deterioration in value on its current investment securities is attributable
to changes in market interest rates and not credit quality of the
issuer.





Less Than Twelve Months
                    
                    
                    Twelve Months or MoreGross
                      Unrealized
                      Losses
                    
                    
                    Fair Value
                    
                    
                    Gross
                      Unrealized
                      Losses
                    
                    
                    Fair Value(In
      Thousands)March
      31, 2010:U.S.
      Treasury and government sponsored agencies
                    
                    $
                    (357
                    )
                    
                    $
                    38,346
                    
                    
                    $
                    -
                    
                    
                    $
                    -Mortgage-backed
      securities
                    
                    
                    (616
                    )
                    
                    
                    54,235
                    
                    
                    
                    -
                    
                    
                    
                    -State
      and municipal securities
                    
                    
                    (423
                    )
                    
                    
                    20,232
                    
                    
                    
                    -
                    
                    
                    
                    -Corporate
      debt
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -$
                    (1,396
                    )
                    
                    $
                    112,813
                    
                    
                    $
                    -
                    
                    
                    $
                    -December
      31, 2009:U.S.
      Treasury and government sponsored agencies
                    
                    $
                    (437
                    )
                    
                    $
                    42,836
                    
                    
                    $
                    -
                    
                    
                    $
                    -Mortgage-backed
      securities
                    
                    
                    (625
                    )
                    
                    
                    44,993
                    
                    
                    
                    -
                    
                    
                    
                    -State
      and municipal securities
                    
                    
                    (569
                    )
                    
                    
                    20,479
                    
                    
                    
                    -
                    
                    
                    
                    -Corporate
      debt
                    
                    
                    (17
                    )
                    
                    
                    2,074
                    
                    
                    
                    (13
                    )
                    
                    
                    986$
                    (1,648
                    )
                    
                    $
                    110,382
                    
                    
                    $
                    (13
                    )
                    
                    $
                    986





At March
31, 2010, none of the Company’s 328 debt securities had been in an unrealized
loss position for 12 or more months.





NOTE
5 - EMPLOYEE AND DIRECTOR BENEFITS





Stock
Options





At March
31, 2010, the Company had stock-based compensation plans, as described below.
The compensation cost that has been charged to earnings for the plans was
approximately $135,000 and $195,000 for three months ended March 31, 2010 and
2009, respectively.





The
Company’s 2005 Amended and Restated Stock Option Plan allows for the grant of
stock options to purchase up to 1,025,000 shares of the Company’s common stock.
The Company’s 2009 Stock Incentive Plan authorizes the grant of up to 425,000
shares and allows for the issuance of Stock Appreciation Rights, Restricted
Stock, Stock Options, Non-stock Share Equivalents, Performance Shares or
Performance Units.  Both plans allow for the grant of incentive stock
options and non-qualified stock options, and awards are generally granted with
an exercise price equal to the estimated fair market value of the Company’s
common stock at the date of grant. The maximum term of the options granted under
the plans is ten years.





The
Company has granted non-plan options to certain persons representing key
business relationships to purchase up to an aggregate amount of 55,000 shares of
the Company’s common stock at between $15.00 and $20.00 per share for 10 years.
These options are non-qualified and not part of either Plan.


10





The
Company estimates the fair value of each stock option award using a
Black-Scholes-Merton valuation model that uses the assumptions noted in the
following table.





Expected
volatilities are based on an index of southeastern United States publicly traded
banks. The expected term for options granted is based on the short-cut method
and represents the period of time that options granted are expected to be
outstanding. The risk-free rate for periods within the contractual life of the
option is based on the U. S. Treasury yield curve in effect at the time of
grant.





2010
                    
                    
                    2009Expected
      volatility
                    
                    
                    25.00
                    %
                    
                    
                    20.00
                    %Expected
      dividends
                    
                    
                    0.50
                    %
                    
                    
                    0.50
                    %Expected
      term (in years)
                    
                    7
      years
                    
                    
                    7
      yearsRisk-free
      rate
                    
                    
                    2.32
                    %
                    
                    
                    1.65
                    %





The
weighted average grant-date fair value of options granted during the three
months ended March 31, 2010 and 2009 was $7.43 and $6.72,
respectively.





The
following table summarizes stock option activity during the three months ended
March 31, 2010 and 2009:





Shares
                                          
                                          
                                          Weighted
                                            Average
                                            Exercise
                                            Price
                                          
                                          
                                          Weighted
                                            Average
                                            Remaining
                                            Contractual
                                            Term(years)
                                          
                                          
                                          Aggregate
                                            Intrinsic
                                            Value(In Thousands)Three
      Months Ended March 31, 2010:Outstanding
      at January 1, 2010
                                          
                                          
                                          833,500
                                          
                                          
                                          $
                                          15.00
                                          
                                          
                                          
                                          6.8
                                          
                                          
                                          $
                                          8,333Granted
                                          
                                          
                                          11,000
                                          
                                          
                                          
                                          25.00
                                          
                                          
                                          
                                          9.9
                                          
                                          
                                          
                                          -Exercised
                                          
                                          
                                          -
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          -Forfeited
                                          
                                          
                                          (10,000
                                          )
                                          
                                          
                                          15.00
                                          
                                          
                                          
                                          6.7
                                          
                                          
                                          
                                          -Outstanding
      at March 31, 2010
                                          
                                          
                                          834,500
                                          
                                          
                                          
                                          15.25
                                          
                                          
                                          
                                          6.6
                                          
                                          
                                          $
                                          8,238Exercisable
      at March 31, 2010
                                          
                                          
                                          146,196
                                          
                                          
                                          $
                                          12.05
                                          
                                          
                                          
                                          5.9
                                          
                                          
                                          $
                                          1,894Three
      Months Ended March 31, 2009:Outstanding
      at January 1, 2009
                                          
                                          
                                          796,000
                                          
                                          
                                          $
                                          14.50
                                          
                                          
                                          
                                          7.7
                                          
                                          
                                          $
                                          8,363Granted
                                          
                                          
                                          37,500
                                          
                                          
                                          
                                          25.00
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          -Exercised
                                          
                                          
                                          -
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          -Forfeited
                                          
                                          
                                          -
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          -Outstanding
      at March 31, 2009
                                          
                                          
                                          833,500
                                          
                                          
                                          
                                          14.97
                                          
                                          
                                          
                                          7.8
                                          
                                          
                                          $
                                          8,363Exercisable
      at March 31, 2009
                                          
                                          
                                          75,264
                                          
                                          
                                          $
                                          12.34
                                          
                                          
                                          
                                          6.9
                                          
                                          
                                          $
                                          953





Restricted
Stock




During
the first quarter 2010, 2,000 shares of restricted stock were granted to five
employees for a total of 10,000 shares.  During the fourth quarter
2009, 20,000 shares of restricted stock were granted to a key
executive.  The value of restricted stock awards is determined to be
the current value of the Company’s stock, and this total value will be
recognized as compensation expense over the vesting period, which is five years
from the date of grant.  As of March 31, 2010, there was $699,000 of
total unrecognized compensation cost related to non-vested restricted
stock.  The cost is expected to be recognized evenly over the
remaining 4.7 years of the restricted stock’s vesting period.


11




Stock
Warrants





In
recognition of the efforts and financial risks undertaken by the organizers of
ServisFirst Bank (the “Bank”) in 2005, the Bank granted warrants to organizers
to purchase a total 60,000 shares of common stock at a price of $10, which was
the fair market value of the Bank’s common stock at the date of the grant. The
warrants became warrants to purchase a like number of shares of the Company’s
common stock upon the formation of the Company as a holding company for the
Bank.  The warrants vest in equal annual increments over a three-year
period commencing on the first anniversary date of the Bank’s incorporation and
will terminate on the tenth anniversary of the incorporation date. The total
number of warrants outstanding at March 31, 2010 and 2009 was
60,000.





The
Company issued warrants for 75,000 shares of common stock at a price of $25 per
share in the third quarter of 2008. These warrants were issued in connection
with the trust preferred securities that are discussed in detail in Note
9.





The
Company issued warrants for 15,000 shares of common stock at a price of $25 per
share in the second quarter of 2009.  These warrants were issued in
connection with the issuance and sale of the Bank’s 8.25% Subordinated Note
discussed in detail in Note 11.





NOTE
6 - DERIVATIVES





During
2008, the Company entered into interest rate swaps (“swaps”) to facilitate
customer transactions and meet their financing needs. Upon entering into these
swaps, the Company entered into offsetting positions with a regional
correspondent bank in order to minimize the risk to the Company.  As
of March 31, 2010, the Company was party to two swaps with notional amounts
totaling approximately $12.1 million with customers, and two swaps with notional
amounts totaling approximately $12.1 million with a regional correspondent
bank.  These swaps qualify as derivatives, but are not designated as
hedging instruments.  The Company has recorded the value of these
swaps at $567,000 in offsetting entries in other assets and other
liabilities.





The
Company has entered into agreements with secondary market investors to deliver
loans on a “best efforts delivery” basis. When a rate is committed to a
borrower, it is based on the best price that day and locked with the investor
for the customer for a 30-day period. In the event the loan is not delivered to
the investor, the Company has no risk or exposure with the investor. The
interest rate lock commitments related to loans that are originated for later
sale are classified as derivatives. The fair values of the Company’s agreements
with investors and rate lock commitments to customers as of March 31, 2010 and
December 31, 2009 were not material.





NOTE
7 - ADOPTION OF RECENT ACCOUNTING PRONOUNCEMENTS





In June
2009, the Financial Accounting Standards Board (“FASB”) issued two related
accounting pronouncements changing the accounting principles and disclosure
requirements for securitizations and special purpose entities.  The
pronouncements remove the concept of a “qualifying special-purpose entity”,
change the requirements for derecognizing financial assets and change how a
company determines when an entity that is insufficiently capitalized or is not
controlled through voting should be consolidated.  These
pronouncements also expand existing disclosure requirements to include more
information about transfers of financial assets and where companies have
exposure to the risks related to transfers of financial assets.  The
Company adopted the provisions of these pronouncements as of January 1, 2010,
but neither had a material impact on the consolidated financial
statements.


12





During
January 2010, the FASB issued Accounting Standards Update (“ASU”) 2010-06 –
“Improving Disclosures About
Fair Value Measurements”, which added disclosure requirements about
transfers in and out of Levels 1 and 2, clarified existing fair value disclosure
requirements about the appropriate level of disaggregation, and clarified that a
description of valuation techniques and inputs used to measure fair value was
required for recurring and nonrecurring Level 2 and 3 fair value
measurements.  The Company adopted these provisions of the ASU in preparing
the Consolidated Financial Statements for the period ended March 31,
2010.  The adoption of these provisions of this ASU, which was subsequently
codified into Accounting Standards Codification Topic 820, “Fair Value
Measurements and Disclosures,” only affected the disclosure requirements for
fair value measurements and as a result had no impact on the Company’s
consolidated financial statements.  See Note 8 to the Consolidated
Financial Statements for the disclosures required by this ASU.




This ASU
also requires that Level 3 activity about purchases, sales, issuances, and
settlements of assets measured at fair value on a recurring basis be presented
on a gross basis rather than as a net number as currently permitted.  This
provision of the ASU is effective for the Company’s reporting period ending
March 31, 2011.  As this provision amends only the disclosure
requirements for fair value measurements, the adoption will have no impact on
the Company’s consolidated financial statements.





NOTE
8 - FAIR VALUE MEASUREMENT





Measurement
of fair value under United States generally accepted accounting principles (“US
GAAP”) establishes a hierarchy that prioritizes observable and unobservable
inputs used to measure fair value, as of the measurement date, into three broad
levels, which are described below:





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.


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.





In
determining fair value, the Company utilizes valuation techniques that maximize
the use of observable inputs and minimize the use of unobservable inputs to the
extent possible, and also considers counterparty credit risk in its assessment
of fair value.





Securities – Where quoted
prices are available in an active market, securities are classified within level
1 of the hierarchy.  Level 1 securities include highly liquid
government securities such as U.S. Treasuries and exchange-traded equity
securities.  For securities traded in secondary markets for which
quoted market prices are not available, the Company generally relies on prices
obtained from independent vendors.  Securities measured with these
techniques are classified within Level 2 of the hierarchy and often involve
using quoted market prices for similar securities, pricing models or discounted
cash flow calculations using inputs observable in the market where
available.  Examples include U.S. government agency securities,
mortgage-backed securities, obligations of states and political subdivisions,
and certain corporate, asset-backed and other securities.  In certain
cases where Level 1 or Level 2 inputs are not available, securities are
classified in Level 3 of the hierarchy.


13




Interest Rate Swap Agreements
– The fair value is estimated by a third party using inputs that are observable
or that can be corroborated by observable market data and, therefore, are
classified within Level 2 of the hierarchy.  These fair value
estimations include primarily market observable inputs such as yield curves and
option volatilities, and include the value associated with counterparty credit
risk.





Impaired Loans- Impaired
loans are measured and reported at fair valuewhen full payment under
the loan terms is not expected.  Impaired loans are carried at the
present value of estimated future cash flows using the loan’s existing rate or
the fair value of the collateral if the loan is
collateral-dependent.  Impaired loans are subject to nonrecurring fair
value adjustment.  A portion of the allowance for loan losses is
allocated to impaired loans if the value of such loans is deemed to be less than
the unpaid balance.  The amount recognized as an impairment charge
related to impaired loans that are measured at fair value on a nonrecurring
basis was $2,608,000 and $1,877,000 during the three months ended March 31, 2010
and 2009, respectively.  Impaired loans are classified within Level 3
of the hierarchy.





Other real estate owned –
Other real estate assets (“OREO”) acquired through, or in lieu of, foreclosure
are held for sale and are initially recorded at the lower of cost or fair value,
less selling costs.  Any write-downs to fair value at the time of
transfer to OREO are charged to the allowance for loan losses subsequent to
foreclosure.  Values are derived from appraisals of underlying
collateral and discounted cash flow analysis.  The amount charged to
earnings was $101,000 and $791,000 during the three months ended March 31, 2010
and 2009, respectively.  These charges were for write-downs in the
value of OREO and losses on the disposal of OREO.  OREO is classified
within Level 3 of the hierarchy.





The
following table presents the Company’s financial assets and financial
liabilities carried at fair value on a recurring basis as of March 31, 2010 and
December 31, 2009:


14





Fair Value Measurements at March 31, 2010 UsingQuoted Prices in
                                    Active Markets
                                    forIdentical
                                    Assets(Level 1)
                                  
                                  
                                  Significant Other
                                    Observable Inputs
                                    (Level 2)
                                  
                                  
                                  Significant
                                    Unobservable
                                    Inputs (Level 3)
                                  
                                  
                                  Total(In
      Thousands)Assets
      Measured on a Recurring Basis:Available-for-sale
      securities
                                  
                                  $
                                  -
                                  
                                  
                                  $
                                  232,975
                                  
                                  
                                  $
                                  -
                                  
                                  
                                  $
                                  232,975Interest
      rate swap agreements
                                  
                                  
                                  -
                                  
                                  
                                  
                                  567
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  567Total
      assets at fair value
                                  
                                  $
                                  -
                                  
                                  
                                  $
                                  233,542
                                  
                                  
                                  $
                                  -
                                  
                                  
                                  $
                                  233,542Liabilities
      Measured on a Recurring Basis:Interest
      rate swap agreements
                                  
                                  $
                                  -
                                  
                                  
                                  $
                                  567
                                  
                                  
                                  $
                                  -
                                  
                                  
                                  $
                                  567





Fair Value Measurements at December 31, 2009 UsingQuoted Prices in
                                            Active Markets
                                            forIdentical
                                            Assets(Level 1)
                                          
                                          
                                          Significant Other
                                            Observable Inputs
                                            (Level 2)
                                          
                                          
                                          Significant
                                            Unobservable
                                            Inputs (Level 3)
                                          
                                          
                                          Total(In
      Thousands)Assets
      Measured on a Recurring Basis:Available-for-sale
      securities
                                          
                                          $
                                          -
                                          
                                          
                                          $
                                          255,453
                                          
                                          
                                          $
                                          -
                                          
                                          
                                          $
                                          255,453Interest
      rate swap agreements
                                          
                                          
                                          -
                                          
                                          
                                          
                                          413
                                          
                                          
                                          
                                          
                                          
                                          
                                          
                                          413Total
      assets at fair value
                                          
                                          $
                                          -
                                          
                                          
                                          $
                                          255,866
                                          
                                          
                                          $
                                          -
                                          
                                          
                                          $
                                          255,866Liabilities
      Measured on a Recurring Basis:Interest
      rate swap agreements
                                          
                                          $
                                          -
                                          
                                          
                                          $
                                          413
                                          
                                          
                                          $
                                          -
                                          
                                          
                                          $
                                          413





The
following table presents the Company’s financial assets and financial
liabilities carried at fair value on a nonrecurring basis as of March 31,
2010:





Fair Value Measurements at March 31, 2010 UsingQuoted Prices in
                                      Active Markets
                                      for Identical
                                      Assets (Level 1)
                                    
                                    
                                    Significant Other
                                      Observable Inputs
                                      (Level 2)
                                    
                                    
                                    Significant
                                      Unobservable
                                      Inputs (Level 3)
                                    
                                    
                                    Total(In
      Thousands)Assets
      Measured on a Nonrecurring Basis:Impaired
      loans
                                    
                                    $
                                    -
                                    
                                    
                                    $
                                    -
                                    
                                    
                                    $
                                    14,135
                                    
                                    
                                    $
                                    14,135Other
      real estate owned
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    12,344
                                    
                                    
                                    
                                    12,344Total
      assets at fair value
                                    
                                    $
                                    -
                                    
                                    
                                    $
                                    -
                                    
                                    
                                    $
                                    26,479
                                    
                                    
                                    $
                                    26,479





The fair
value of a financial instrument is the current amount that would be exchanged in
a sale between willing parties, other than in a forced
liquidation.  Fair value is best determined based upon quoted market
prices.  However, in many instances, there are no quoted market prices
for the Company’s various financial instruments.  In cases where
quoted market prices are not available, fair values are based on estimates using
present value or other valuation techniques.  Those techniques are
significantly affected by the assumptions used, including the discount rate and
estimates of future cash flows.  Accordingly, the fair value estimates
may not be realized in an immediate settlement of the instrument. Current US
GAAP excludes certain financial instruments and all nonfinancial instruments
from its fair value disclosure requirements.  Accordingly, the
aggregate fair value amounts presented may not necessarily represent the
underlying fair value of the Company.




15


The
carrying amount and estimated fair value of the Company’s financial instruments,
including those that are not measured and reported at fair value on a recurring
basis or non-recurring basis, at March 31, 2010 and December 31, 2009 were as
follows:





March 31, 2010
                  
                  
                  December 31, 2009Carrying
                    Amount
                  
                  
                  Fair Value
                  
                  
                  Carrying
                    Amount
                  
                  
                  Fair Value(In
      Thousands)Financial
      Assets:Cash
      and cash equivalents
                  
                  $
                  25,872
                  
                  
                  $
                  25,872
                  
                  
                  $
                  76,206
                  
                  
                  $
                  76,206Investment
      securities available for sale
                  
                  
                  232,975
                  
                  
                  
                  232,975
                  
                  
                  
                  255,453
                  
                  
                  
                  255,453Investment
      securities held to maturity
                  
                  
                  1,145
                  
                  
                  
                  1,129
                  
                  
                  
                  645
                  
                  
                  
                  643Restricted
      equity securities
                  
                  
                  3,510
                  
                  
                  
                  3,510
                  
                  
                  
                  3,241
                  
                  
                  
                  3,241Mortgage
      loans held for sale
                  
                  
                  4,521
                  
                  
                  
                  4,521
                  
                  
                  
                  6,202
                  
                  
                  
                  6,202Loans,
      net
                  
                  
                  1,219,833
                  
                  
                  
                  1,223,260
                  
                  
                  
                  1,192,173
                  
                  
                  
                  1,193,376Accrued
      interest and dividends receivable
                  
                  
                  6,664
                  
                  
                  
                  6,664
                  
                  
                  
                  6,200
                  
                  
                  
                  6,200Derivative
                  
                  
                  567
                  
                  
                  
                  567
                  
                  
                  
                  413
                  
                  
                  
                  413Financial
      Liabilities:Deposits
                  
                  $
                  1,350,560
                  
                  
                  $
                  1,353,085
                  
                  
                  $
                  1,432,355
                  
                  
                  $
                  1,435,387Federal
      funds purchased
                  
                  
                  17,350
                  
                  
                  
                  17,350
                  
                  
                  
                  -
                  
                  
                  
                  -Borrowings
                  
                  
                  24,925
                  
                  
                  
                  25,714
                  
                  
                  
                  24,922
                  
                  
                  
                  25,981Trust
      preferred securities
                  
                  
                  30,314
                  
                  
                  
                  27,434
                  
                  
                  
                  15,228
                  
                  
                  
                  12,681Accrued
      interest payable
                  
                  
                  937
                  
                  
                  
                  937
                  
                  
                  
                  1,026
                  
                  
                  
                  1,026Derivative
                  
                  
                  567
                  
                  
                  
                  567
                  
                  
                  
                  413
                  
                  
                  
                  413





The
following methods and assumptions were used by the Company in estimating its
fair value disclosures for financial instruments:





Cash and cash
equivalents:  The carrying amounts reported in the statements
of financial condition for cash and cash equivalents approximate those assets’
fair values.





Investment
securities:  Fair values for investment securities are based on
quoted market prices, where available.  If a quoted market price is
not available, fair value is based on quoted market prices of comparable
instruments.





Restricted equity
securities:  Fair values for other investments are considered
to be their cost.





Loans:  For
variable-rate loans that re-price frequently and with no significant change in
credit risk, fair value is based on carrying amounts.  The fair value
of other loans (for example, fixed-rate commercial real estate loans, mortgage
loans, and industrial loans) is estimated using discounted cash flow analysis,
based on interest rates currently being offered for loans with similar terms to
borrowers of  similar credit quality.  Loan fair value
estimates include judgments regarding future expected loss experience and risk
characteristics.  Fair value for impaired loans is estimated using
discounted cash flow analysis, or underlying collateral values, where
applicable.





Derivatives:The
fair values of the derivative agreements are based on quoted prices from an
outside third party.





Accrued interest and dividends
receivable:  The carrying amount of accrued interest and
dividends receivable approximates its fair value.


16





Deposits:  The fair
values disclosed for demand deposits is, by definition, equal to the amount
payable on demand at the reporting date (that is, their carrying
amounts).  The carrying amounts of variable-rate, fixed-term money
market accounts and certificates of deposit approximate their fair
values.  Fair values for fixed-rate certificates of deposit are
estimated using a discounted cash flow calculation that applies interest rates
currently offered on certificates to a schedule of aggregated expected monthly
maturities on time deposits.





Federal funds
purchased:The carrying amounts of federal funds purchased
approximate their market value.





Other
borrowings:The fair values of other borrowings are estimated
using discounted cash flow analysis, based on interest rates currently being
offered by the Federal Home Loan Bank for borrowings of similar terms as those
being valued.





Trust preferred
securities:The fair values of trust preferred securities are
estimated using a discounted cash flow analysis, based on interest rates
currently being offered on the best alternative debt available at the
measurement date.





Accrued interest
payable:  The carrying amount of accrued interest payable
approximates its fair value.





Loan
commitments:  The fair values of the Company’s off-balance
sheet financial instruments are based on fees currently charged to enter into
similar agreements.  Since the majority of the Company’s other
off-balance-sheet instruments consist of non-fee-producing, variable-rate
commitments, the Company has determined they do not have a distinguishable fair
value.





NOTE
9 - SUBORDINATED DEFERRABLE INTEREST DEBENTURES





On
September 2, 2008, ServisFirst Capital Trust I, a subsidiary of the Company (the
“2008 Trust”), sold 15,000 shares of its 8.5% trust preferred securities to
accredited investors for $15,000,000 or $1,000 per share and 463,918 shares of
its common securities to the Company for $463,918 or $1.00 per share. The 2008
Trust invested the $15,463,918 of the proceeds from such sale in the Company’s
8.5% junior subordinated deferrable interest debenture due September 1, 2038 in
the principal amount of $15,463,918 (the “Debenture”). The Debenture bears a
fixed rate of interest at 8.5% per annum and is subordinate and junior in right
of payment to all of the Company’s senior debt; provided, however, the Company
will not incur any additional senior debt in excess of 0.5% of the Company’s
average assets for the fiscal year immediately preceding, unless such incurrence
is approved by a majority of the holders of the outstanding trust preferred
securities.





Holders
of the trust preferred securities are entitled to receive distributions accruing
from the original date of issuance. The distributions are payable quarterly in
arrears on December 1, March 1, June 1 and September 1 of each year, commencing
December 1, 2008. The distributions accrue at an annual fixed rate of 8.5%.
Payments of distributions on the trust preferred securities will be deferred in
the event interest payments on the Debenture is deferred, which may occur at any
time and from time to time, for up to 20 consecutive
quarterly  periods.  During any deferral period, the Company
may not pay dividends or make certain other distributions or payments as
provided for in the Indenture.  If payments are deferred, holders
accumulate additional distributions thereon at 8.5%, compounded quarterly, to
the extent permitted by law.


17





In
addition, the Company issued a total of 75,000 warrants, each with the right to
purchase one share of the Company’s common stock for a purchase price of $25.00.
The warrants were issued in increments of 500 for each $100,000 of trust
preferred securities purchased. Each warrant is exercisable for a period
beginning upon its date of issuance and ending upon the later to occur of either
(i) September 1, 2013 or (ii) 60 days following the date upon which the
Company’s common stock becomes listed for trading upon a “national securities
exchange” as defined under the Securities Exchange Act of 1934. The Company
estimated the fair value of each warrant using a Black-Scholes-Merton valuation
model and determined the fair value per warrant to be $5.65. This total value of
$423,000 was recorded as a discount and reduced the net book value of the
debentures to $15,052,000 with an offsetting increase to the Company’s
additional paid-in capital. The discount will be amortized over a three-year
period.





The trust
preferred securities are subject to mandatory redemption upon repayment of the
Debenture at its maturity, September 1, 2038, or its earlier redemption. The
Debenture is redeemable by the Company (i) prior to September 1, 2011, in whole
upon the occurrence of a Special Event, as defined in the Indenture, or (ii) in
whole or in part on or after September 1, 2011 for any reason. In the event of
the redemption of the trust preferred securities prior to September 1, 2011, the
holders of the trust preferred securities will be entitled to $1,050 per share,
plus accumulated and unpaid distributions thereon (including accrued interest
thereon), if any, to the date of payment. In the event of the redemption of the
trust preferred securities on or after September 1, 2011, the holders of the
trust preferred securities will be entitled to receive $1,000 per share plus
accumulated and unpaid distributions thereon (including accrued interest
thereon), if any, to the date of payment.





The
Company has the right at any time to terminate the 2008 Trust and cause the
Debenture to be distributed to the holders of the trust preferred securities in
liquidation of the Trust. This right is optional and wholly within the Company’s
discretion as set forth in the Indenture.





Payment
of periodic cash distributions and payment upon liquidation or redemption with
respect to the trust preferred securities are guaranteed by the Company to the
extent of funds held by the Trust (the “Preferred Securities Guarantee”). The
Preferred Securities Guarantee, when taken together with the Company’s other
obligations under the debentures, constitutes a full and unconditional
guarantee, on a subordinated basis, by the Company of payments due on the trust
preferred securities.





The
Company is required by the Federal Reserve Board to maintain certain levels of
capital for bank regulatory purposes. The Federal Reserve Board has determined
that certain cumulative preferred securities having the characteristics of trust
preferred securities qualify as minority interests, which is included in Tier 1
capital for bank and financial holding companies. In calculating the amount of
Tier 1 qualifying capital, the trust preferred securities can only be included
up to the amount constituting 25% of total Tier 1 capital elements (including
trust preferred securities). Such Tier 1 capital treatment provides the Company
with a more cost-effective means of obtaining capital for bank regulatory
purposes than if the Company were to issue preferred stock.




18




NOTE
      10 –
                  JUNIOR
      SUBORDINATED MANDATORY CONVERTIBLE DEFERRABLE INTEREST DEBENTURES DUE
      MARCH 15,
2040


On
February 9, 2010 the Company established a new Delaware statutory trust
subsidiary, ServisFirst Capital Trust II (the “2010 Trust”), which issued 15,000
shares of its 6.0% Mandatory Convertible Trust Preferred Securities (the
“Preferred Securities”) for $15,000,000, or $1,000 per Preferred Security on
March 15, 2010. The 2010 Trust simultaneously issued 50,000 shares of its common
securities to the Company for a purchase price of $50,000, or $1.00 per share,
which together with the Preferred Securities, constitutes all of the issued and
outstanding securities of the 2010 Trust (collectively, the “Trust
Securities”).  The 2010 Trust invested all of the proceeds from the
sale of the Trust Securities in the Company’s 6.0% Junior Subordinated Mandatory
Convertible Deferrable Interest Debentures due March 15, 2040 in the principal
amount of $15,050,000 (the “Subordinated Debentures”).  The Preferred
Securities were offered and sold to accredited investors in a private
placement.





Holders
of the Preferred Securities will be entitled to receive distributions accruing
from March 15, 2010, and payable quarterly in arrears on March 15, June 15,
September 15 and December 15 of each year, commencing June 15, 2010 unless the
Company defers interest payments on the Subordinated
Debentures.  Distributions accrue at an annual rate equal to 6.0% of
the liquidation amount of $1,000 per Preferred Security.  The rate and
the distribution dates for the Preferred Securities correspond to the interest
rate and payment dates on the Subordinated Debentures, which constitute
substantially all the assets of the 2010 Trust.  As a result, if
principal or interest is not paid on the Subordinated Debentures, no
corresponding amounts will be paid on the Preferred Securities.  The
2010 Trust also pays a distribution on the common securities at an annual rate
of 6.0% of the purchase price of the common securities, but such payments are
financially immaterial since they simply represent a return of funds to the
Company.





The
Subordinated Debentures are subordinate and junior in right of payment to all of
the Company’s senior debt, as defined in the Indenture (as defined below);
provided, however, that, while any of the Preferred Securities remain
outstanding, the Company shall not incur any additional senior debt in excess of
0.5% of the Company’s average assets for the fiscal year immediately preceding,
unless approved by the holders of a majority of the outstanding Preferred
Securities.  The Company has the right to defer payments of interest
on the Subordinated Debentures from time to time, for up to 20 consecutive
quarterly periods for each deferral period.  During any deferral
period, the Company may not (i) pay dividends on or redeem any of its capital
stock, (ii) pay principal of or interest on any debt securities ranking pari passuwith or
subordinate to the Subordinated Debentures or (iii) make any guaranty payments
with respect to any guaranty of the debt securities of any of the Company’s
subsidiaries if such guaranty ranks pari passuwith or junior in
right of payment to the Subordinated Debentures.





If not
previously redeemed or converted into common stock of the Company, the Preferred
Securities will automatically and mandatorily convert into common stock of the
Company on March 15, 2013 at a conversion price of $25 per share of common
stock.  In addition to such mandatory conversion, the Preferred
Securities may be converted into common stock of the Company at the option of
the holder at any time prior to the earliest to occur of maturity, redemption or
mandatory conversion at the same conversion price.





The
Preferred Securities are subject to mandatory redemption upon repayment of the
Subordinated Debentures at their stated maturity (as defined in the Indenture),
or upon earlier redemption of the Subordinated Debentures. The Subordinated
Debentures are redeemable by the Company at any time in whole, but not in part,
upon the occurrence of a special event, as defined in the
Indenture.





The
Company has the right at any time to terminate the 2010 Trust and cause the
Subordinated Debentures to be distributed to the holders of the Preferred
Securities in liquidation of the 2010 Trust. This right is optional and wholly
within the Company’s discretion.


19


The
Company is required by the Federal Reserve Board to maintain certain levels of
capital for bank regulatory purposes. The Federal Reserve Board has determined
that certain cumulative preferred securities having the characteristics of trust
preferred securities qualify as minority interests, which is included in Tier 1
capital for bank and financial holding companies.  In calculating the
amount of Tier 1 qualifying capital, the trust preferred securities can only be
included up to the amount constituting 25% of total Tier 1 capital elements
(including trust preferred securities). Such Tier 1 capital treatment provides
the Company with a more cost-effective means of obtaining capital for bank
regulatory purposes than if the Company were to issue preferred
stock.





NOTE
      11 -
            SUBORDINATED
      NOTE DUE SEPTEMBER 1, 2016





On June
23, 2009, the Bank issued $5,000,000 aggregate principal amount of its 8.25%
Subordinated Note due June 1, 2016 to an accredited investor at 100% of
par.  The note is subordinate and junior in right of payment upon any
liquidation of the Bank as to principal, interest and premium to obligations to
the Bank’s depositors and other obligations to its general and secured
creditors.  Interest payments are due and payable on each September 1,
December 1, March 1 and June 1, commencing on September 1,
2009.  Interest accrues at an annual rate of 8.25%.  The
proceeds from the note payable are included in Tier 2 capital of the Bank and
the Company.





In
addition, the Company issued to the investor a total of 15,000 warrants, each
representing the right to purchase one share of the Company’s common stock for a
purchase price of $25.00. Each warrant is exercisable for a period beginning
upon its date of issuance and ending on June 1, 2016.  The Company
estimated the fair value of each warrant using a Black-Scholes-Merton valuation
model and determined the fair value per warrant to be $5.71. This total value of
$86,000 was recorded as a discount and reduced the net book value of the
debentures to $4,914,000 with an offsetting increase to the Company’s additional
paid-in capital. The discount will be amortized over a five-year
period.





NOTE
      12 –
            SUBSEQUENT
      EVENTS





The
Company has evaluated all subsequent events through April 29, 2010, the last
business day before the filing date of this Form 10-Q with the Securities and
Exchange Commission, to ensure that this Form 10-Q includes appropriate
disclosure of events both recognized in the financial statements as of March 31,
2010, and events which occurred subsequent to March 31, 2010 but were not
recognized in the financial statements.  As of April 29, 2010, there
were no subsequent events which required recognition or disclosure.





ITEM 2.
            MANAGEMENT’S DISCUSSION AND
      ANALYSIS OF FINANCIAL CONDITIONAND
      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. (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
financial statements as of March 31, 2010 and for the three months ended March
31, 2010 and 2009.




20




Forward-Looking
Statements


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 and Section 27A
of the Securities Act of 1933. The words “believe,” “expect,” “anticipate,”
“project,” “plan,” “intend,” “will,” “would,” “might” and similar expressions
often signify forward-looking statements. Such statements involve inherent risks
and uncertainties. ServisFirst Bancshares, Inc. cautions that such
forward-looking statements, wherever they occur in this press release or in
other statements attributable to ServisFirst Bancshares, Inc., are necessarily
estimates reflecting the judgment of ServisFirst Bancshares, Inc.’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: 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 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, economic stimulus
initiatives and so-called “bailout” initiatives; 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
collectibility of loans and the value of collateral; the effect of natural
disasters, such as hurricanes, in our geographic markets; and increased
competition from both banks and non-banks.  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 “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 incorrect, then our actual results, performance or achievements could
differ materially from those expressed in, or implied by, forward-looking
information and statements contained herein. Accordingly, you should not place
undue reliance on any forward-looking statements, which speak only as of the
date made.





Business





We are a
bank holding company under the Bank Holding Company Act of 1956 incorporated in
Delaware and headquartered in Birmingham, Alabama. Through the Bank, we operate
eight full-service banking offices located in Jefferson, Shelby, Madison,
Montgomery and Houston counties in the metropolitan statistical areas (“MSAs”)
of Birmingham-Hoover, Huntsville, Montgomery and Dothan, Alabama.





We are
headquartered at 850 Shades Creek Parkway, Birmingham, Alabama 35209 (Jefferson
County). In addition to the Jefferson County headquarters, the Bank currently
operates through two offices in the Birmingham-Hoover, Alabama MSA (one office
in Jefferson County and one office in North Shelby County), two offices in the
Huntsville, Alabama MSA (Madison County), two offices in the Montgomery, Alabama
MSA (Montgomery County) and one office in the Dothan, Alabama MSA (Houston
County), which constitute our primary service areas. Our principal business is
to accept deposits from the public and to make loans and other investments. Our
principal source of funds for loans and investments are demand, time, savings,
and other deposits (including negotiable orders of withdrawal, or NOW accounts).
Our principal sources of income are interest and fees collected on loans,
interest and dividends collected on other investments and service charges. Our
principal expenses are interest paid on savings and other deposits (including
NOW accounts), interest paid on our other borrowings, employee compensation,
office expenses and other overhead expenses.





Overview


As of
March 31, 2010, the Company had total consolidated assets of $1,527,564,000, a
decrease of $45,933,000, or 2.92%, from $1,573,497,000 at December 31,
2009.  Total loans were $1,235,504,000 at March 31, 2010, up
$28,420,000, or 2.35%, over $1,207,084,000 at December 31, 2009. Total deposits
were $1,350,560,000 at March 31, 2010, a decrease of $81,795,000, or 5.71%, from
$1,432,355,000 at December 31, 2009.




21




Net
income for the quarter ended March 31, 2010 was $4,013,000, an increase of
$3,292,000, or 456.59%, from $721,000 for the quarter ended March 31,
2009.  Basic and fully diluted earnings per common share were $.73 and
$.68, respectively, for the three months ended March 31, 2010, compared with
$.13 and $.13, respectively, for the same period in 2009.  This
increase was primarily attributable to increased earning assets and a higher net
interest margin percentage, both as a result of organic growth in our Alabama
markets and the leveraging of excess liquid assets during the second half of
2009 and first quarter of 2010.





Critical
Accounting Policies





The
accounting and financial policies of the Company conform to accounting
principles generally accepted in the United States and to general practices
within the banking industry. To prepare consolidated financial statements in
conformity with accounting principles generally accepted in the United States,
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 loan losses, valuation of foreclosed real estate, deferred taxes,
and fair value of financial instruments are 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, 2009.





Financial
Condition





Investment Securities





Investment
securities available for sale totaled $232,975,000 at March 31, 2010 and
$255,453,000 at December 31, 2009.  Investment securities held to
maturity totaled $1,145,000 at March 31, 2010 and $645,000 at December 31,
2009.  Approximately $30,000,000 in callable agency securities were
sold during the first quarter 2010, and were partially replaced by the purchase
of $15,376,000 in mortgage backed securities.  The purchased securities
will increase the portfolio yield and will also provide monthly principal cash
flow.





Each
quarter, management assesses whether there have been events or economic
circumstances to indicate that a security on which there is an unrealized loss
is other-than-temporarily impaired.  Management considers several
factors, including the amount and duration of the impairment; the intent and
ability of the Company to hold the security for a period sufficient for a
recovery in value; and known recent events specific to the issuer or its
industry.  In analyzing an issuer’s financial condition, management
considers whether the securities are issued by agencies of the federal
government, whether downgrades by bond rating agencies have occurred, and
industry analysts’ reports, among other things. As the Company currently has the
ability to hold its investment securities for the foreseeable future, no
declines are deemed to be other than temporary. The Company will continue to
evaluate its investment securities for possible other-than-temporary impairment,
which could result in a future non-cash charge to earnings.





The
following table shows the amortized cost of the Company’s investment securities
by their stated maturity at March 31, 2010:


22




Less Than
                      OneYear
                    
                    
                    One Year to
                      Five Years
                    
                    
                    Five Years to
                      Ten Years
                    
                    
                    More Than
                      TenYears
                    
                    
                    Total(In
      Thousands)U.S.
      Treasury and government sponsoredagencies
                    
                    $
                    -
                    
                    
                    $
                    23,795
                    
                    
                    $
                    31,744
                    
                    
                    $
                    4,948
                    
                    
                    $
                    60,487Mortgage-backed
      securities
                    
                    
                    1,092
                    
                    
                    
                    71,277
                    
                    
                    
                    35,358
                    
                    
                    
                    -
                    
                    
                    
                    107,727State
      and municipal securities
                    
                    
                    -
                    
                    
                    
                    6,373
                    
                    
                    
                    37,044
                    
                    
                    
                    16,701
                    
                    
                    
                    60,118Corporate
      debt
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    1,991
                    
                    
                    
                    1,015
                    
                    
                    
                    3,006$
                    1,092
                    
                    
                    $
                    101,445
                    
                    
                    $
                    106,137
                    
                    
                    $
                    22,664
                    
                    
                    $
                    231,338Taxable-equivalent
      Yield
                    
                    
                    5.17
                    %
                    
                    
                    3.88
                    %
                    
                    
                    4.51
                    %
                    
                    
                    5.58
                    %
                    
                    
                    4.34
                    %




All
securities held are traded in liquid markets. As of March 31, 2010, we owned
certain restricted securities of the Federal Home Loan Bank with an aggregate
book value and market value of $3,259,000 and certain securities of First
National Bankers Bank in which we invested $250,000.  We had no
investments in any one security, restricted or liquid, in excess of 10% of our
stockholders’ equity.





The
Bank’s investment portfolio consists of mortgage-backed pass-through securities,
tax-exempt securities and corporate bonds. The Bank does not invest in
collateralized debt obligations (“CDOs”). All tax-exempt securities currently
held are issued by government issuers within the State of Alabama. All corporate
bonds have a Standard and Poor’s or Moody’s rating of A-1 or better when
purchased.  The March 31, 2010 total investment portfolio has a
combined average credit rating of AA+.





The
carrying value of investment securities pledged to secure public funds on
deposit and for other purposes as required by law was $113,293,000 and
$117,377,000 as of March 31, 2010 and December 31, 2009,
respectively.





At March
31, 2010, we had $110,000 in federal funds sold, compared with $680,000 at
December 31, 2009.





Loans





We had
total loans of $1,235,504,000 at March 31, 2010, an increase of $28,420,000, or
2.35%, compared to $1,207,084,000 at December 31, 2009.  At March 31,
2010, 51% of our loans were in our Birmingham offices, 25% in our Huntsville
offices, 13% in our Montgomery offices, and 11% in our Dothan
office.


23





The
following table details our loans at March 31, 2010 and December 31,
2009:





March
      31,
                              2010
                            
                            
                            December
      31,
                              2009(In
      Thousands)Commercial,
      financial and agricultural
                            
                            $
                            471,705
                            
                            
                            $
                            461,088Real
      estate - construction (1)
                            
                            
                            218,554
                            
                            
                            
                            224,178Real
      estate - mortgage:Owner
      occupied
                            
                            
                            216,289
                            
                            
                            
                            203,9831-4
      Family
                            
                            
                            172,083
                            
                            
                            
                            165,512Other
                            
                            
                            124,537
                            
                            
                            
                            119,749Total
      Real Estate Mortgage
                            
                            
                            512,909
                            
                            
                            
                            489,244Consumer
                            
                            
                            32,336
                            
                            
                            
                            32,574Total
      Loans
                            
                            
                            1,235,504
                            
                            
                            
                            1,207,084Allowance
      for loan losses
                            
                            
                            (15,671
                            )
                            
                            
                            (14,911
                            )Total
      Loans, Net
                            
                            $
                            1,219,833
                            
                            
                            $
                            1,192,173(1)
      includes Owner Occupied real estate construction loans in the amount
      of$9,940
      and $10,045 at March 31, 2010 and December 31, 2009,
      respectively





Asset Quality





We
establish and maintain the allowance for loan losses at levels management deems
adequate to absorb anticipated credit losses from identified and otherwise
inherent risks in the loan portfolio as of the balance sheet date. In assessing
the adequacy of the allowance for loan losses, management considers its
evaluation of the loan portfolio, past due loan experience, collateral values,
current economic conditions and other factors considered necessary to maintain
the allowance at an adequate level.  Management believes that the
allowance is adequate at March 31, 2010.





A loan is
considered impaired when it is probable, based on current information and
events, that the Company will be unable to collect all principal and interest
payments due in accordance with the contractual terms of the loan agreement.
Impaired loans are measured by the present value of expected future cash flows
discounted at the loan’s effective interest rate, the loan’s obtainable market
price, or the fair value of the collateral if the loan is collateral-dependent.
The amount of impairment, if any, and subsequent changes in impairments are
included in the allowance for loan losses. Interest on accruing impaired loans
is recognized as long as such loans do not meet the criteria for non-accrual
status.  At March 31, 2010, we evaluated $38,438,000 in loans for
impairment, including all nonaccrual loans. As a result of such evaluation,
$4,316,000 of the Company’s allowance for loan losses was specifically allocated
to $18,451,000 of these loans as impairment.  During the first quarter
2010, $9,538,000 in loans received specific allocations of the allowance for
loan losses for the first time.  At December 31, 2009, we evaluated
$21,524,000 in loans for impairment, including all nonaccrual
loans.  As a result of such evaluation, $3,082,000 of the Company’s
allowance for loan losses was specifically allocated to $11,085,000 of these
loans as impairment.





The
following table presents a summary of changes in the allowances for loan losses
for the three months ended March 31, 2010 and 2009, respectively.  The
largest balance of our charge-offs is in commercial, financial and agricultural
loans. These loans represent 38% of our loan portfolio at March 31,
2010.


24





Three
      Months Ended March 31,2010
                                  
                                  
                                  2009(In
      Thousands)Allowance
      for Loan LossesBalance,
      beginning of period
                                  
                                  $
                                  14,911
                                  
                                  
                                  $
                                  10,602Charge-offs:Commercial,
      financial and agricultural
                                  
                                  
                                  (847
                                  )
                                  
                                  
                                  -Real
      estate - construction
                                  
                                  
                                  (338
                                  )
                                  
                                  
                                  (634
                                  )Real
      estate - mortgage:Owner
      Occupied
                                  
                                  
                                  (178
                                  )
                                  
                                  
                                  (40
                                  )1-4
      family mortgage
                                  
                                  
                                  (633
                                  )
                                  
                                  
                                  -Other
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -Total
      real estate mortgage
                                  
                                  
                                  (811
                                  )
                                  
                                  
                                  (40
                                  )Consumer
                                  
                                  
                                  (16
                                  )
                                  
                                  
                                  (15
                                  )Total
      charge-offs
                                  
                                  
                                  (2,012
                                  )
                                  
                                  
                                  (689
                                  )Recoveries:Commercial,
      financial and agricultural
                                  
                                  
                                  56
                                  
                                  
                                  
                                  -Real
      estate - construction
                                  
                                  
                                  -
                                  
                                  
                                  
                                  39Real
      estate - mortgage:Owner
      Occupied
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -1-4
      family mortgage
                                  
                                  
                                  3
                                  
                                  
                                  
                                  -Other
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -Total
      real estate mortgage
                                  
                                  
                                  3
                                  
                                  
                                  
                                  -Consumer
                                  
                                  
                                  1
                                  
                                  
                                  
                                  -Total
      recoveries
                                  
                                  
                                  60
                                  
                                  
                                  
                                  39Net
      charge-offs
                                  
                                  
                                  (1,952
                                  )
                                  
                                  
                                  (650
                                  )Provision
      for loan losses charged to expense
                                  
                                  
                                  2,712
                                  
                                  
                                  
                                  2,460Balance,
      end of period
                                  
                                  $
                                  15,671
                                  
                                  
                                  $
                                  12,412As
      a percent of year to date average loans:Annualized
      net charge-offs
                                  
                                  
                                  0.65
                                  %
                                  
                                  
                                  0.27
                                  %Annualized
      provision for loan losses
                                  
                                  
                                  0.90
                                  %
                                  
                                  
                                  1.01
                                  %





The
following table presents the allocation of the allowance for loan losses for
each respective loan category with the corresponding percentage of loans in each
category to total loans. We believe the comprehensive allowance analysis
developed by our credit administration group is in compliance with all current
regulatory guidelines.





March
      31, 2010
                      
                      
                      December
      31, 2009
                      
                      
                      March
      31, 2009Amount
                      
                      
                      Percentage
      of
                        Loans
      in
                        Each
                        Category
      of
                        Total
      Loans
                      
                      
                      Amount
                      
                      
                      Percentage
      of
                        Loans
      in
                        Each
                        Category
      of
                        Total
      Loans
                      
                      
                      Amount
                      
                      
                      Percentage
      of
                        Loans
      in
                        Each
                        Category
      of
                        Total
      Loans(In
      Thousands)
                      
                      
                      
                      
                      
                      (In
      Thousands)
                      
                      
                      
                      
                      
                      (In
      Thousands)Commercial,
      financial andagricultural
                      
                      $
                      4,391
                      
                      
                      
                      38.04
                      %
                      
                      $
                      3,058
                      
                      
                      
                      38.20
                      %
                      
                      $
                      2,660
                      
                      
                      
                      34.20
                      %Real
      estate - construction
                      
                      
                      6,087
                      
                      
                      
                      17.62
                      %
                      
                      
                      6,295
                      
                      
                      
                      18.57
                      %
                      
                      
                      5,718
                      
                      
                      
                      24.11
                      %Real
      estate - mortgage
                      
                      
                      1,184
                      
                      
                      
                      41.73
                      %
                      
                      
                      1,416
                      
                      
                      
                      40.53
                      %
                      
                      
                      492
                      
                      
                      
                      38.71
                      %Consumer
                      
                      
                      79
                      
                      
                      
                      2.61
                      %
                      
                      
                      1
                      
                      
                      
                      2.70
                      %
                      
                      
                      95
                      
                      
                      
                      2.98
                      %Other
                      
                      
                      3,930
                      
                      
                      
                      -
                      
                      
                      
                      4,141
                      
                      
                      
                      -
                      
                      
                      
                      3,447
                      
                      
                      
                      -Total
                      
                      $
                      15,671
                      
                      
                      
                      100.00
                      %
                      
                      $
                      14,911
                      
                      
                      
                      100.00
                      %
                      
                      $
                      12,412
                      
                      
                      
                      100.00
                      %


25





Non-performing Assets





It is our
policy to classify loans as non-accrual when they are past due in principal or
interest payments for more than 90 days or if we believe it is otherwise not
reasonable to expect collection of principal and interest due under the original
terms. Exceptions are allowed for 90-day past due loans when such loans are
secured by real estate or negotiable collateral and are in the process of
collection. Generally, payments received on non-accrual loans are applied
directly to principal.





Non-performing
assets, comprising non-accrual loans, loans 90 days or more past due and still
accruing, troubled debt restructurings and other real estate owned (“OREO”),
totaled $25,173,000 at March 31, 2010, compared to $24,173,000 at December 31,
2009 and $23,256,000 at March 31, 2009. Non-accrual loans were $10,234,000 at
March 31, 2010, a decrease of $1,687,000 from non-accrual loans of $11,921,000
at December 31, 2009 and a decrease of $1,380,000 from non-accrual loans of
$11,614,000 at March 31, 2009.  Loans 90 days past due and still
accruing totaled $1,750,000 at March 31, 2010, compared to $267,000 at December
31, 2009 and $3,036,000 at March 31, 2009.  Troubled debt
restructurings totaled $845,000 at March 31, 2010, compared to $0 at December
31, 2009 and $518,000 at March 31, 2009.




A summary
of nonperforming assets as of March 31, 2010, December 31, 2009 and March 31,
2009 follows:




March
      31,
                                                                  2010
                                                                
                                                                
                                                                December
      31,
                                                                  2009
                                                                
                                                                
                                                                March
      31,
                                                                  2009(In
      Thousands)Nonaccrual
      loans
                                                                
                                                                $
                                                                10,234
                                                                (1)
                                                                
                                                                $
                                                                11,921
                                                                (2)
                                                                
                                                                $
                                                                11,614Past
      due 90 days and still accruing
                                                                
                                                                
                                                                1,750
                                                                
                                                                
                                                                
                                                                267
                                                                
                                                                
                                                                
                                                                3,036
                                                                (3)Troubled
      debt restructures
                                                                
                                                                
                                                                845
                                                                
                                                                
                                                                
                                                                -
                                                                
                                                                
                                                                
                                                                518All
      other real estate owned
                                                                
                                                                
                                                                12,344
                                                                
                                                                
                                                                
                                                                12,525
                                                                
                                                                
                                                                
                                                                8,088Total
      non-performing assets
                                                                
                                                                $
                                                                25,173
                                                                
                                                                
                                                                $
                                                                24,713
                                                                
                                                                
                                                                $
                                                                23,256




(1)
      $1,404 of this amount represents a loan that is guaranteed by the Small
      Business Administration(2)
      $1,785 of this amount represents a loan that is guaranteed by the U.S.
      Department of Agriculture(3)
      $1,804 of this amount represents a loan that is guaranteed by the U.S.
      Department of Agriculture




At March
31, 2010, total nonperforming assets included finished and unfinished homes of
$6,508,000, residential lots of $9,175,000, raw land of $2,947,000 and
commercial buildings of $1,771,000. Our OREO procedures currently determine
disposition value, the value used to place the property into OREO, based on the
most recent fair value appraisal of the property that we have at the time, less
estimated costs to sell the property. Any difference between the disposition
value and the loan balance is charged off. Once the property is in OREO, sales
efforts begin. Should economic conditions continue to deteriorate, the continued
and growing inability of distressed customers to service their existing debt
could cause higher levels of non-performing loans.





Deposits





Total
deposits decreased $81,795,000, or 5.71%, to $1,350,560,000 at March 31, 2010
compared to $1,432,355,000 at December 31, 2009.  This decrease in
deposits is a result of cyclical and seasonal decreases in balances related to
our clients’ business activities.  We anticipate long-term sustainable
growth in deposits through continued development of market share in our less
mature markets and through organic growth in our mature
markets.


26





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”





Other Borrowings





On March
19, 2008, we borrowed $20.0 million from the Federal Home Loan Bank of Atlanta,
of which $10.0 million bears interest at 2.995% per annum and is payable on
March 19, 2012, and $10.0 million bears interest at 3.275% per annum and is
payable on March 19, 2013.  As discussed in Note 9 to the Consolidated
Financial Statements, we borrowed $15.5 million through the issuance of trust
preferred securities and the related debenture on September 2,
2008.  Both financial instruments bear an identical annual rate of
interest of 8.50% and pay interest on March 1, June 1, September 1 and December
1 of each year.  The current book value of this borrowing is $15.3
million as a result of amortization of the discount associated with 75,000
warrants issued to the holders of the Preferred Securities.  As
discussed in Note 10 to the Consolidated Financial Statements, we borrowed $15.0
million through the issuance of trust preferred securities and the related
debenture on March 15, 2010.  Both financial instruments bear an
identical rate of interest of 6.00% and pay interest on March 15, June 15,
September 15 and December 15 of each year.  As discussed in Note 11 to
the Consolidated Financial Statements, on June 23, 2009, the Bank issued a $5.0
million subordinated note due June 1, 2016 in a private
placement.  The note bears interest at an annual rate of 8.25% payable
on March 1, June 1, September 1 and December 1 of each year.





Liquidity





Liquidity
is defined as our ability to generate sufficient cash to fund current loan
demand, deposit withdrawals, or other cash demands and disbursement needs, and
otherwise to operate on an ongoing basis.





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
were 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, 2010, liquid
assets, which are represented by cash and due from banks, federal funds sold and
unpledged available-for-sale securities, totaled $216
million.  Additionally, the Bank had additional borrowing availability
of approximately $233 million in unused federal funds lines of credit with
regional banks, subject to certain restrictions and collateral requirements, and
had additional borrowing availability of $5 million at the Federal Home Loan
Bank of Atlanta to meet short-term funding needs. We believe these sources of
funding are adequate to meet immediate anticipated funding needs, but we will
need additional capital to maintain our current growth. 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
“Other Borrowings”.





We are
subject to general FDIC guidelines that require a minimum level of liquidity.
Management believes our liquidity ratios meet or exceed these guidelines. Our
management is not currently aware of any trends or demands that are reasonably
likely to result in liquidity materially increasing or
decreasing.


27





The
following table reflects the contractual maturities of our term liabilities as
of March 31, 2010. The amounts shown do not reflect any early withdrawal or
prepayment assumptions.


Payments due by PeriodTotal
                      
                      
                      1 year or less
                      
                      
                      Over 1 - 3
                        years
                      
                      
                      Over 3 - 5
                        years
                      
                      
                      Over 5 years(In
      Thousands)Contractual
      Obligations (1)Deposits
      without a stated maturity
                      
                      $
                      1,113,276
                      
                      
                      $
                      -
                      
                      
                      $
                      -
                      
                      
                      $
                      -
                      
                      
                      $
                      -Certificates
      of deposit (2)
                      
                      
                      237,284
                      
                      
                      
                      186,848
                      
                      
                      
                      39,909
                      
                      
                      
                      10,527
                      
                      
                      
                      -FHLB
      borrowings
                      
                      
                      20,000
                      
                      
                      
                      -
                      
                      
                      
                      20,000
                      
                      
                      
                      -
                      
                      
                      
                      -Subordinated
      debentures
                      
                      
                      30,314
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      30,314Subordinated
      note payable
                      
                      
                      4,925
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      4,925Operating
      lease commitments
                      
                      
                      17,901
                      
                      
                      
                      1,769
                      
                      
                      
                      3,630
                      
                      
                      
                      3,739
                      
                      
                      
                      8,763Total
                      
                      $
                      1,423,700
                      
                      
                      $
                      188,617
                      
                      
                      $
                      63,539
                      
                      
                      $
                      14,266
                      
                      
                      $
                      44,002
  (1)  Excludes
interest
 (2)  Certificates
of deposit give customers the right to early withdrawal.  Early
withdrawals may be subject to penalties.


Capital Adequacy





In the
first quarter of 2010, we formed ServisFirst Capital Trust II, which issued
15,000 shares of its 6.0% Mandatory Convertible Trust Preferred Securities (the
“Preferred Securities”) for $15,000,000 on March 15, 2010.  The Trust
invested all of the proceeds from the sale of the Trust Securities in the
Company’s 6.0% Junior Subordinated Mandatory Convertible Deferrable Interest
Debentures due March 15, 2040 in the principal amount of $15,050,000 (the
“Subordinated Debentures”).  The Preferred Securities were offered and
sold to accredited investors in a private placement.  The Federal
Reserve Board has deemed these securities to qualify as Tier 1 capital of the
Company up to 25% of Tier 1 capital elements.  See Note 10 to the
consolidated financial statements for further discussion of the issuance and
sale of the Preferred Securities.





As of
March 31, 2010, 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 total
risk-based, Tier 1 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 March 31, 2010.





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 of capital to total regulatory or risk-weighted assets, as of March 31,
2010, December 31, 2009, and March 31, 2009:


28





Actual
                  
                  
                  For
      Capital Adequacy
                    Purposes
                  
                  
                  To
      Be Well Capitalized
                    Under
      Prompt Corrective
                    Action
      ProvisionsAmount
                  
                  
                  Ratio
                  
                  
                  Amount
                  
                  
                  Ratio
                  
                  
                  Amount
                  
                  
                  RatioAs
      of March 31, 2010:Total
      Capital to Risk-Weighted Assets:Consolidated
                  
                  $
                  150,793
                  
                  
                  
                  11.90
                  %
                  
                  $
                  101,297
                  
                  
                  
                  8.00
                  %
                  
                  $
                  126,621
                  
                  
                  
                  10.00
                  %ServisFirst
      Bank
                  
                  
                  150,333
                  
                  
                  
                  11.88
                  %
                  
                  
                  101,230
                  
                  
                  
                  8.00
                  %
                  
                  
                  126,538
                  
                  
                  
                  10.00
                  %Tier
      1 Capital to Risk-Weighted Assets:Consolidated
                  
                  
                  130,197
                  
                  
                  
                  10.28
                  %
                  
                  
                  50,649
                  
                  
                  
                  4.00
                  %
                  
                  
                  75,973
                  
                  
                  
                  6.00
                  %ServisFirst
      Bank
                  
                  
                  129,737
                  
                  
                  
                  10.25
                  %
                  
                  
                  50,615
                  
                  
                  
                  4.00
                  %
                  
                  
                  75,923
                  
                  
                  
                  6.00
                  %Tier
      1 Capital to Average Assets:Consolidated
                  
                  
                  130,197
                  
                  
                  
                  8.51
                  %
                  
                  
                  61,186
                  
                  
                  
                  4.00
                  %
                  
                  
                  76,482
                  
                  
                  
                  5.00
                  %ServisFirst
      Bank
                  
                  
                  129,737
                  
                  
                  
                  8.49
                  %
                  
                  
                  61,153
                  
                  
                  
                  4.00
                  %
                  
                  
                  76,442
                  
                  
                  
                  5.00
                  %As
      of December 31, 2009:Total
      Capital to Risk-Weighted Assets:Consolidated
                  
                  $
                  130,882
                  
                  
                  
                  10.48
                  %
                  
                  $
                  99,903
                  
                  
                  
                  8.00
                  %
                  
                  $
                  124,879
                  
                  
                  
                  10.00
                  %ServisFirst
      Bank
                  
                  
                  130,426
                  
                  
                  
                  10.45
                  %
                  
                  
                  99,851
                  
                  
                  
                  8.00
                  %
                  
                  
                  124,814
                  
                  
                  
                  10.00
                  %Tier
      1 Capital to Risk-Weighted Assets:Consolidated
                  
                  
                  111,049
                  
                  
                  
                  8.89
                  %
                  
                  
                  49,952
                  
                  
                  
                  4.00
                  %
                  
                  
                  74,927
                  
                  
                  
                  6.00
                  %ServisFirst
      Bank
                  
                  
                  110,593
                  
                  
                  
                  8.86
                  %
                  
                  
                  49,926
                  
                  
                  
                  4.00
                  %
                  
                  
                  74,888
                  
                  
                  
                  6.00
                  %Tier
      1 Capital to Average Assets:Consolidated
                  
                  
                  111,049
                  
                  
                  
                  6.97
                  %
                  
                  
                  63,737
                  
                  
                  
                  4.00
                  %
                  
                  
                  79,672
                  
                  
                  
                  5.00
                  %ServisFirst
      Bank
                  
                  
                  110,593
                  
                  
                  
                  6.94
                  %
                  
                  
                  63,737
                  
                  
                  
                  4.00
                  %
                  
                  
                  79,672
                  
                  
                  
                  5.00
                  %As
      of March 31, 2009:Total
      Capital to Risk-Weighted Assets:Consolidated
                  
                  $
                  117,628
                  
                  
                  
                  11.21
                  %
                  
                  $
                  83,945
                  
                  
                  
                  8.00
                  %
                  
                  $
                  104,931
                  
                  
                  
                  10.00
                  %ServisFirst
      Bank
                  
                  
                  116,386
                  
                  
                  
                  11.10
                  %
                  
                  
                  83,890
                  
                  
                  
                  8.00
                  %
                  
                  
                  104,862
                  
                  
                  
                  10.00
                  %Tier
      1 Capital to Risk-Weighted Assets:Consolidated
                  
                  
                  105,216
                  
                  
                  
                  10.03
                  %
                  
                  
                  41,972
                  
                  
                  
                  4.00
                  %
                  
                  
                  62,958
                  
                  
                  
                  6.00
                  %ServisFirst
      Bank
                  
                  
                  103,974
                  
                  
                  
                  9.92
                  %
                  
                  
                  41,945
                  
                  
                  
                  4.00
                  %
                  
                  
                  62,917
                  
                  
                  
                  6.00
                  %Tier
      1 Capital to Average Assets:Consolidated
                  
                  
                  105,216
                  
                  
                  
                  8.84
                  %
                  
                  
                  47,619
                  
                  
                  
                  4.00
                  %
                  
                  
                  59,524
                  
                  
                  
                  5.00
                  %ServisFirst
      Bank
                  
                  
                  103,974
                  
                  
                  
                  8.74
                  %
                  
                  
                  47,589
                  
                  
                  
                  4.00
                  %
                  
                  
                  59,486
                  
                  
                  
                  5.00
                  %





Off-Balance Sheet
Arrangements





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 instruments.





Our
exposure to credit loss in the event of non-performance by the other party to
such financial instruments 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.


29





Financial
instruments whose contract amounts represent credit risk at March 31, 2010 are
as follows:





(In
      Thousands)Commitments
      to extend credit
                    
                    $
                    495,990Credit
      card arrangements
                    
                    
                    20,265Standby
      letters of credit
                    
                    
                    39,038$
                    555,293





Commitments
to extend credit beyond current fundings are agreements to lend to a customer as
long as there is no violation of any condition established in the applicable
loan agreement. Such commitments generally have fixed expiration dates or other
termination clauses and may require payment of a fee. Since many of the
commitments are expected to expire without being drawn upon, the total
commitment amounts do not necessarily represent future cash requirements. We
evaluate each customer’s creditworthiness on a case-by-case basis. The amount of
collateral obtained if deemed necessary by us upon extension of credit is based
on our management’s credit evaluation. Collateral held varies but may include
accounts receivable, inventory, property, plant and equipment, and
income-producing commercial properties.





Standby
letters of credit are conditional commitments issued by us to guarantee the
performance of a customer to a third party. Those guarantees are primarily
issued to support public and private borrowing arrangements, including
commercial paper, bond financing, and similar transactions. All letters of
credit are due within one year or less of the original commitment date. The
credit risk involved in issuing letters of credit is essentially the same as
that involved in extending loan facilities to customers.





Results
of Operations





Summary of Net Income





Net
income for the three months ended March 31, 2010 was $4,013,000, compared to net
income of $721,000 for the three months ended March 31, 2009.  The
increase in net income was primarily attributable to increased net interest
income as a result of growth in earning assets and increased spreads between
yields on assets and rates paid on deposits.  Further discussion of
these changes is included under the topic “Net Interest Income”
below.  The provision for loan losses increased $252,000, to
$2,712,000, for the three months ended March 31, 2010 compared to the same
period in 2009.  Noninterest expenses increased $826,000, to
$7,258,000, for the three months ended March 31, 2010 compared to the same
period in 2009.  The increase in provision for loan losses was the
result of funding the loan loss reserve to match the growth in the loan
portfolio and an increase in impaired loans.  The increase in
operating expenses was the result of the relocation of our headquarters (in the
third quarter of 2009) into a new building having higher rental rates, higher
data processing expenses as a result of increased numbers of accounts and
transactions, and higher FDIC insurance assessments.  Noninterest
income increased $213,000, to $1,132,000, for the three months ended March 31,
2010 compared to the same period in 2009.  Basic and diluted net
income per common share were $.73 and $.68, respectively, for the three months
ended March 31, 2010, compared to $.13 and $.13, respectively, for the same
period in 2009.  Return on average assets and return on average equity
for the three months ended March 31, 2010 were 1.06% and 16.24%, respectively,
compared to 0.25% and 3.27% in 2009.


30




Net Interest Income





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.





Taxable-equivalent
net interest income increased $5,970,000, or 65.12%, to $15,137,000 for the
three months ended March 31, 2010 compared to $9,167,000 in
2009.  This increase was primarily attributable to growth in earning
assets and higher spreads between yields on earning assets and rates paid on
deposits.  The taxable-equivalent yield on interest-earning assets
increased to 5.13% for the three months ended March 31, 2010 from 4.92% for the
same period in 2009.  The yield on loans for the three months ended
March 31, 2010 was 5.37% compared to 5.08% for the same period in
2009.  Loan fees included in the yield calculation increased from
$136,000 in 2009 to $187,000 in 2010.  The cost of total
interest-bearing liabilities decreased to 1.17% for the three months ended March
31, 2010 from 2.01% for the same period in 2009.  This decrease in
rates paid on liabilities was partially offset by the issuance of the Company’s
8.25% subordinated note payable in June 2009, as further discussed in Note 11 to
the financial statements.





The
following tables show, for the three months ended March 31, 2010 and 2009, 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
if applicable:


31


Average
Balance Sheets and Net Interest Analysis
 On
a Fully Taxable-Equivalent Basis
 For
the Three Months Ended March 31,
 (dollars
in thousands)
 
 2010
                                              
                                              
                                              2009Average
                                                Balance
                                              
                                              
                                              Interest
                                                Earned /
                                                Paid
                                              
                                              
                                              Average
                                                Yield / Rate
                                              
                                              
                                              Average
                                                Balance
                                              
                                              
                                              Interest
                                                Earned /
                                                Paid
                                              
                                              
                                              Average
                                                Yield / RateAssets:Interest-earning
      assets:Loans,
      net of unearned income (1)
                                              
                                              $
                                              1,220,293
                                              
                                              
                                              $
                                              16,170
                                              
                                              
                                              
                                              5.37
                                              %
                                              
                                              $
                                              992,470
                                              
                                              
                                              $
                                              12,432
                                              
                                              
                                              
                                              5.08
                                              %Mortgage
      loans held for sale
                                              
                                              
                                              3,322
                                              
                                              
                                              
                                              34
                                              
                                              
                                              
                                              4.15
                                              
                                              
                                              
                                              7,252
                                              
                                              
                                              
                                              77
                                              
                                              
                                              
                                              4.31Investment
      securities:Taxable
                                              
                                              
                                              188,729
                                              
                                              
                                              
                                              1,750
                                              
                                              
                                              
                                              3.76
                                              
                                              
                                              
                                              73,787
                                              
                                              
                                              
                                              1,108
                                              
                                              
                                              
                                              6.09Tax-exempt
      (2)
                                              
                                              
                                              53,826
                                              
                                              
                                              
                                              754
                                              
                                              
                                              
                                              5.68
                                              
                                              
                                              
                                              28,340
                                              
                                              
                                              
                                              399
                                              
                                              
                                              
                                              5.71Total
      investment securities (3)
                                              
                                              
                                              242,555
                                              
                                              
                                              
                                              2,504
                                              
                                              
                                              
                                              4.19
                                              
                                              
                                              
                                              102,127
                                              
                                              
                                              
                                              1,507
                                              
                                              
                                              
                                              5.98Federal
      funds sold
                                              
                                              
                                              3,496
                                              
                                              
                                              
                                              2
                                              
                                              
                                              
                                              0.23
                                              
                                              
                                              
                                              34,457
                                              
                                              
                                              
                                              24
                                              
                                              
                                              
                                              0.28Restricted
      equity securities
                                              
                                              
                                              3,748
                                              
                                              
                                              
                                              12
                                              
                                              
                                              
                                              1.30
                                              
                                              
                                              
                                              2,672
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -Interest-bearing
      balances with banks
                                              
                                              
                                              8,052
                                              
                                              
                                              
                                              10
                                              
                                              
                                              
                                              0.50
                                              
                                              
                                              
                                              19,479
                                              
                                              
                                              
                                              18
                                              
                                              
                                              
                                              0.37Total
      interest-earning assets
                                              
                                              $
                                              1,481,466
                                              
                                              
                                              $
                                              18,732
                                              
                                              
                                              
                                              5.13
                                              %
                                              
                                              $
                                              1,158,457
                                              
                                              
                                              $
                                              14,058
                                              
                                              
                                              
                                              4.92
                                              %Noninterest-earning
      assets:Cash
      and due from banks
                                              
                                              
                                              22,191
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              18,669Net
      fixed assets and equipment
                                              
                                              
                                              5,242
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              3,865Allowance
      for loan losses, accruedinterest
      and other assets
                                              
                                              
                                              20,740
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              9,483Total
      assets
                                              
                                              $
                                              1,529,639
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              $
                                              1,190,474Liabilities
      and stockholders' equity:Interest-bearing
      liabilities:Interest-bearing
      demand deposits
                                              
                                              $
                                              223,780
                                              
                                              
                                              $
                                              308
                                              
                                              
                                              
                                              0.56
                                              %
                                              
                                              $
                                              143,743
                                              
                                              
                                              $
                                              500
                                              
                                              
                                              
                                              1.41
                                              %Savings
      deposits
                                              
                                              
                                              1,898
                                              
                                              
                                              
                                              2
                                              
                                              
                                              
                                              0.43
                                              
                                              
                                              
                                              852
                                              
                                              
                                              
                                              1
                                              
                                              
                                              
                                              0.48Money
      market accounts
                                              
                                              
                                              706,415
                                              
                                              
                                              
                                              1,297
                                              
                                              
                                              
                                              0.74
                                              
                                              
                                              
                                              629,453
                                              
                                              
                                              
                                              2,543
                                              
                                              
                                              
                                              1.64Time
      deposits
                                              
                                              
                                              251,599
                                              
                                              
                                              
                                              1,246
                                              
                                              
                                              
                                              2.01
                                              
                                              
                                              
                                              178,203
                                              
                                              
                                              
                                              1,349
                                              
                                              
                                              
                                              3.07Fed
      funds purchased
                                              
                                              
                                              18,720
                                              
                                              
                                              
                                              29
                                              
                                              
                                              
                                              0.63
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -Other
      borrowings
                                              
                                              
                                              42,679
                                              
                                              
                                              
                                              714
                                              
                                              
                                              
                                              6.78
                                              
                                              
                                              
                                              35,104
                                              
                                              
                                              
                                              498
                                              
                                              
                                              
                                              5.75Total
      interest-bearing liabilities
                                              
                                              $
                                              1,245,091
                                              
                                              
                                              $
                                              3,596
                                              
                                              
                                              
                                              1.17
                                              
                                              
                                              $
                                              987,355
                                              
                                              
                                              $
                                              4,891
                                              
                                              
                                              
                                              2.01Noninterest-bearing
      liabilities:Noninterest-bearing
      demanddeposits
                                              
                                              
                                              180,724
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              111,806Other
      liabilites
                                              
                                              
                                              3,589
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              1,990Stockholders'
      equity
                                              
                                              
                                              98,123
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              88,019Unrealized
      gains onsecurities
      and derivatives
                                              
                                              
                                              2,112
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              1,304Total
      liabilities andstockholders'
      equity
                                              
                                              $
                                              1,529,639
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              $
                                              1,190,474Net
      interest spread
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              3.96
                                              %
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              2.91
                                              %Net
      interest margin
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              4.14
                                              %
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              3.21
                                              %
 
 (1)
              Non-accrual
      loans are included in average loan balances in all
      periods.  Loan fees of $187,000 and $136,000 are included in
      interest income in 2010 and 2009,
respectively.
 (2)
              Interest
      income and yields are presented on a fully taxable equivalent basis using
      a tax rate of 34%.
 (3)
              Unrealized
      gains of $2,783,000 and $1,760,000 are excluded from the yield calculation
      in 2010 and 2009,
respectively.


32





Three
      Months Ended March 31,2010
      Compared to 2009 Increase (Decrease)
                            in
      Interest Income and Expense Due to
                            Changes
      in:Volume
                          
                          
                          Rate
                          
                          
                          TotalInterest-earning
      assets:Loans,
      net of unearned income
                          
                          
                          2,986
                          
                          
                          
                          752
                          
                          
                          
                          3,738Mortgages
      held for sale
                          
                          
                          (40
                          )
                          
                          
                          (3
                          )
                          
                          
                          (43
                          )Investment
      securities:Securities
      - taxable
                          
                          
                          1,196
                          
                          
                          
                          (554
                          )
                          
                          
                          642Securities
      - non taxable
                          
                          
                          357
                          
                          
                          
                          (2
                          )
                          
                          
                          355Federal
      funds sold
                          
                          
                          (19
                          )
                          
                          
                          (3
                          )
                          
                          
                          (22
                          )Restricted
      equity securities
                          
                          
                          -
                          
                          
                          
                          12
                          
                          
                          
                          12Interest-bearing
      balances with banks
                          
                          
                          (13
                          )
                          
                          
                          5
                          
                          
                          
                          (8
                          )Total
      interest-earning assets
                          
                          
                          4,467
                          
                          
                          
                          207
                          
                          
                          
                          4,674Interest-bearing
      liabilities:Interest-bearing
      demand deposits
                          
                          
                          197
                          
                          
                          
                          (389
                          )
                          
                          
                          (192
                          )Savings
                          
                          
                          1
                          
                          
                          
                          -
                          
                          
                          
                          1Money
      market accounts
                          
                          
                          280
                          
                          
                          
                          (1,526
                          )
                          
                          
                          (1,246
                          )Time
      deposits
                          
                          
                          452
                          
                          
                          
                          (554
                          )
                          
                          
                          (102
                          )Fed
      funds purchased
                          
                          
                          29
                          
                          
                          
                          -
                          
                          
                          
                          29Other
      borrowed funds
                          
                          
                          117
                          
                          
                          
                          98
                          
                          
                          
                          215Total
      interest-bearing liabilities
                          
                          
                          1,076
                          
                          
                          
                          (2,371
                          )
                          
                          
                          (1,295
                          )Increase
      in net interest income
                          
                          
                          3,391
                          
                          
                          
                          2,578
                          
                          
                          
                          5,969





Provision for Loan Losses





The
provision expense for loan losses represents the amount determined by management
to be necessary to maintain the allowance for loan losses at a level capable of
absorbing inherent losses in the loan portfolio. Our management reviews the
adequacy of the allowance for loan losses on a quarterly basis. The allowance
for loan losses calculation is segregated into various segments that include
classified loans, loans with specific allocations and pass rated loans. A pass
rated loan is generally characterized by a very low to average risk of default
and is a loan in which management perceives there is a minimal risk of loss.
Loans are rated using a nine-point risk grade scale, with loan officers having
the primary responsibility for assigning risk grades and for the timely
reporting of changes in the risk grades. These processes, the assigned risk
grades, and the criticized and classified loans in the portfolio are segregated
into the following regulatory classifications: Special Mention, Substandard,
Doubtful or Loss. Impaired loans are reviewed specifically and separately to
determine the appropriate reserve allocation. Our management compares the
investment in an impaired loan with the present value of expected future cash
flow discounted at the loan’s effective interest rate, the loan’s observable
market price or the fair value of the collateral, if the loan is
collateral-dependent, to determine the specific reserve allowance. Reserve
percentages assigned to non-rated loans are based on historical charge-off
experience adjusted for other risk factors. To evaluate the overall adequacy of
the allowance to absorb losses inherent in our loan portfolio, our management
considers historical loss experience based on volume and types of loans, trends
in classifications, volume and trends in delinquencies and non-accruals,
economic conditions and other pertinent information. Based on future
evaluations, additional provisions for loan losses may be necessary to maintain
the allowance for loan losses at an appropriate level.


33


The
provision for loan losses was $2,712,000 for the three months ended March 31,
2010, an increase of $252,000 over $2,460,000 for the three months ended March
31, 2009.  Our management continues to maintain a proactive approach
to credit risk management. Nonperforming loans increased slightly to
$12,829,000, or 1.04% of total loans, at March 31, 2010 from $12,188,000, or
1.01% of total loans, at December 31, 2009, and decreased from $15,168,000, or
1.48% of total loans, at March 31, 2009.  Impaired loans increased to
$38,438,000, or 3.11% of total loans at March 31, 2010 compared to $21,524,000,
or 1.78% of total loans at December 31, 2009 and $22,142,000, or 2.16% of total
loans at March 31, 2009.  The allowance for loan losses totaled
$15,671,000, or 1.27% of loans, net of unearned income, at March 31, 2010,
compared to $14,911,000, or 1.24% of loans, net of unearned income, at December
31, 2009 and $12,412,000, or 1.21% of loans, net of unearned income, at March
31, 2009.





Noninterest Income





Noninterest
income totaled $1,132,000 for the three months ended March 31, 2010, an increase
of $213,000, or 23.18%, compared to the same period in 2009.  This
increase was primarily attributable to an increase in customer service charges
and fees.  Income from customer service charges and fees for the three
months ended March 31, 2010 increased $216,000, or 60.67%, to $572,000 from
$356,000 for the same period in 2009.  The increase is primarily due
to an increase in account analysis charges from 2009 to 2010.  Income
from mortgage banking operations for the three months ended March 31, 2010 was
$414,000, a decrease of $105,000, or 20.23%, from $519,000 for the same period
in 2009.    Merchant service fees were $101,000 for the
three months ended March 31, 2010, a decrease of $48,000, or 32.21%, compared to
$149,000 for the same period in 2009.





Noninterest
Expense





Noninterest
expense totaled $7,258,000 for the three months ended March 31, 2010, an
increase of $826,000, or 12.84%, compared to $6,432,000 in 2009.  The
increase was primarily attributable to increased occupancy and data processing
expense, and higher FDIC assessments, but was offset by a significant decrease
in expenses related to OREO.  Occupancy expense increased $192,000, or
32.65%, to $780,000 for the three months ended March 31, 2010 from $588,000 for
the same period in 2009.  Most of this increase was the result of
moving our headquarters and main banking office into a new building in July
2009, which increased our rent expense.  Data processing expenses
increased $103,000, or 27.22%, to $482,000 for the three months ended March 31,
2010 from $379,000 for the same period in 2009.  This increase is the
result of increased number of accounts and higher transaction
volumes.  Our FDIC assessment for the three months ended March 31,
2010 was $634,000, an increase of $453,000, or 250.32%, from $181,000 in
assessments during the same period in 2009.  Salaries and employee
benefits increased $115,000, or 3.42%, to $3,482,000 for the three months ended
March 31, 2010 compared to $3,367,000 for the same period in
2009.  This increase is primarily the result of merit increases in
compensation.  Our employee base was relatively unchanged, totaling
154 at March 31, 2010 compared to 153 at March 31, 2009.  Expenses
related to OREO decreased significantly to $305,000 for the three months ended
March 31, 2010, from $897,000 for the same period in 2009.  This
represents a $592,000, or 66.00%, decrease.





Income Tax Expense





Income
tax expense was $2,055,000 for the three months ended March 31, 2010 versus
$352,000 for the same period in 2009. Our effective tax rate for the three
months ended March 31, 2010 was 33.87% compared to 32.81% for the same period in
2009.  Our primary permanent differences are related to SFAS 123(R)
option expenses and tax-free income.


34




ITEM
3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK




Like all
financial institutions, we are subject to market risk from changes in interest
rates. Interest rate risk is inherent in the balance sheet due to the mismatch
between the maturities of rate-sensitive assets and rate-sensitive liabilities.
If rates are rising, and the level of rate-sensitive liabilities exceeds the
level of rate-sensitive assets, the net interest margin will be negatively
impacted. Conversely, if rates are falling, and the level of rate-sensitive
liabilities is greater than the level of rate-sensitive assets, the impact on
the net interest margin will be favorable. Managing interest rate risk is
further complicated by the fact that all rates do not change at the same pace;
in other words, short-term rates may be rising while longer-term rates remain
stable. In addition, different types of rate-sensitive assets and rate-sensitive
liabilities react differently to changes in rates.




To manage
interest rate risk, we must take a position on the expected future trend of
interest rates. Rates may rise, fall or remain the same. Our asset-liability
committee develops its view of future rate trends and strives to manage rate
risk within a targeted range by monitoring economic indicators, examining the
views of economists and other experts, and understanding the current status of
our balance sheet. Our annual budget reflects the anticipated rate environment
for the next 12 months. The asset-liability committee conducts a quarterly
analysis of the rate sensitivity position and reports its results to our board
of directors.




The
asset-liability committee thoroughly analyzes the maturities of rate-sensitive
assets and liabilities. This analysis measures the “gap”, which is defined as
the difference between the dollar amount of rate-sensitive assets repricing
during a period and the volume of rate-sensitive liabilities repricing during
the same period. The gap is also expressed as the ratio of rate-sensitive assets
divided by rate-sensitive liabilities. If the ratio is greater than one, the
dollar value of assets exceeds the dollar value of liabilities; the balance
sheet is “asset-sensitive.” Conversely, if the value of liabilities exceeds the
value of assets, the ratio is less than one and the balance sheet is
“liability-sensitive.” Our internal policy requires management to maintain the
gap such that net interest margins will not change more than 10% if interest
rates change 100 basis points or more than 15% if interest rates change 200
basis points.





ITEM
4. CONTROLS AND PROCEDURES





CEO and CFO
Certification.





Appearing
as exhibits to this report are Certifications of our Chief Executive Officer
(“CEO”) and our Chief Financial Officer (“CFO”). The Certifications are required
to be made by Rule 13a-14 under the Securities Exchange Act of 1934, as amended
(the “Exchange Act”). This item contains the information about the evaluation
that is referred to in the Certifications, and the information set forth below
in this Item 4 should be read in conjunction with the Certifications for a more
complete understanding of the Certifications.





Evaluation of Disclosure Controls and
Procedures.





We
maintain disclosure controls and procedures that are designed to ensure that
information required to be disclosed in our Exchange Act reports is recorded,
processed, summarized and reported within the time periods specified in the
SEC’s rules and forms, and that such information is accumulated and communicated
to our management, including our CEO and CFO, as appropriate, to allow timely
decisions regarding required disclosure. In designing and evaluating the
disclosure controls and procedures, management recognized that any controls and
procedures, no matter how well designed and operated, can provide only
reasonable assurance of achieving the desired control
objectives.


35





We
conducted an evaluation (the “Evaluation”) of the effectiveness of the design
and operation of our disclosure controls and procedures under the supervision
and with the participation of our management, including our CEO and CFO, as of
March 31, 2010. Based upon the Evaluation, our CEO and CFO have concluded that,
as of March 31, 2010, our disclosure controls and procedures are effective to
ensure that material information relating to ServisFirst Bancshares, Inc. and
its subsidiaries is made known to management, including the CEO and CFO,
particularly during the period when our periodic reports are being
prepared.





There
have not been any changes in our internal control over financial reporting (as
defined in Rule 13a-15(f) under the Exchange Act) during the fiscal quarter to
which this report relates that have materially affected, or are reasonably
likely to materially affect, our internal control over financial reporting,
except as previously disclosed in our Annual Report on Form 10-K for the fiscal
year ended December 31, 2009.  As disclosed in that report, during the
first quarter of 2010, we discovered a material weakness in our internal control
over financial reporting relating to the treatment in our financial statements
of the Federal Deposit Insurance Corporation’s special three-year prepaid
premium assessment for the year ended December 31, 2009.  We corrected
this material weakness prior to the filing of our Annual Report on Form 10-K,
and we have changes to our internal control over financial reporting that we
believe appropriate to ensure that similar changes in FDIC assessments and
prepayments are accurately reported.





PART
II. OTHER INFORMATION





ITEM
1. LEGAL PROCEEDINGS





From time
to time we may be a party to various legal proceedings arising in the ordinary
course of business. We are not currently a party to any material legal
proceedings except as disclosed in Item 3, “Legal Proceedings”, in our Annual
Report on Form 10-K for the fiscal year ended December 31, 2009, and there has
been no material change in any matter described therein.





ITEM
1A. RISK FACTORS





Our
business is influenced by many factors that are difficult to predict, involve
uncertainties that may materially affect actual results and are often beyond our
control. We have identified a number of these risk factors in our Annual Report
on Form 10-K for the fiscal year ended December 31, 2009, which should be taken
into consideration when reviewing the information contained in this report.
There have been no material changes with regard to the risk factors previously
disclosed in the Form 10-K. For other factors that may cause actual results to
differ materially from those indicated in any forward-looking statement or
projection contained in this report, see “Forward-Looking Statements” under Part
1, Item 2 above.





ITEM
2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS





All
information required by this Item has previously been reported on Form
8-K.





ITEM
3. DEFAULTS UPON SENIOR SECURITIES





None.


36





ITEM
4. OTHER INFORMATION





None.





ITEM
5. EXHIBITS





(a)
      Exhibit:31.01
      Certification of principal executive officer pursuant to Rule
      13a-14(a).31.02
      Certification of principal financial officer pursuant to Rule
      13a-14(a).32.01
      Certification of principal executive officer pursuant to 18 U.S.C. Section
      1350.32.02
      Certification of principal financial officer pursuant to 18 U.S.C. Section
      1350.





SIGNATURES





Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.





SERVISFIRST
      BANCSHARES, INC.Date:
      April 30, 2010
              
              By
              /s/
      Thomas A. Broughton,
    IIIThomas
      A. Broughton, IIIPresident
      and Chief Executive OfficerDate:
      April 30, 2010
              
              By
              /s/
      William M. FosheeWilliam
      M. FosheeChief Financial
      Officer


37