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Section 1: 10-Q (FORM 10-Q)

sfbs20200331_10q.htm
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

_________________________

FORM 10-Q

 

 

(Mark one)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

             FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2020

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES    EXCHANGE ACT OF 1934

             

             For the transition period from _______to_______

 

 

Commission file number 001-36452

 

SERVISFIRST BANCSHARES, INC.

(Exact Name of Registrant as Specified in Its Charter)

 

Delaware

26-0734029

(State or Other Jurisdiction of 

Incorporation or Organization)

(I.R.S. Employer

Identification No.)

 

2500 Woodcrest Place, Birmingham, Alabama

35209

(Address of Principal Executive Offices)

(Zip Code)

 

(205) 949-0302

(Registrant's Telephone Number, Including Area Code)

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

Trading Symbol(s)

Name of exchange on which registered

Common stock, par value $.001 per share

SFBS

NASDAQ Global Select Market

 

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 for 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 ☒  No ☐

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files). 

Yes ☒ No ☐

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act (Check one):

 

Large accelerated filer ☒ Accelerated filer ☐ Non-accelerated filer ☐ Smaller reporting company Emerging growth company 

 

If an emerging growth company, indicate by check mark if registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act ☐

 

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

 

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 27, 2020
Common stock, $.001 par value 53,844,009

 

 

 

 

 

 

TABLE OF CONTENTS

 

PART I. FINANCIAL INFORMATION 3
        Item 1. Consolidated Financial Statements 3
        Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 22
        Item 3. Quantitative and Qualitative Disclosures about Market Risk  34
        Item 4. Controls and Procedures 35
     
PART II. OTHER INFORMATION  36
        Item 1. Legal Proceedings 36
        Item 1A. Risk Factors 36
        Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 37
        Item 3. Defaults Upon Senior Securities 37
        Item 4.  Mine Safety Disclosures 37
        Item 5.  Other Information 37
        Item 6.  Exhibits 37

 

EX-31.01 SECTION 302 CERTIFICATION OF THE CEO

EX-31.02 SECTION 302 CERTIFICATION OF THE CFO

EX-32.01 SECTION 906 CERTIFICATION OF THE CEO

EX-32.02 SECTION 906 CERTIFICATION OF THE CFO

 

 

 

 

 

 
2

 

PART 1. FINANCIAL INFORMATION

ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS

 

 

SERVISFIRST BANCSHARES, INC.

 

CONSOLIDATED BALANCE SHEETS

 

(In thousands, except share and per share amounts)

 
                 
   

March 31, 2020

   

December 31, 2019

 
   

(Unaudited)

      (1)  

ASSETS

               

Cash and due from banks

  $ 80,461     $ 78,618  

Interest-bearing balances due from depository institutions

    297,943       451,509  

Federal funds sold

    306,127       100,473  

Cash and cash equivalents

    684,531       630,600  

Available for sale debt securities, at fair value

    826,782       759,399  

Held to maturity debt securities (fair value of $250 at March 31, 2020 and December 31, 2019)

    250       250  

Mortgage loans held for sale

    6,747       6,312  

Loans

    7,568,836       7,261,451  

Less allowance for loan losses

    (85,414 )     (76,584 )

Loans, net

    7,483,422       7,184,867  

Premises and equipment, net

    55,992       56,496  

Accrued interest and dividends receivable

    25,314       26,262  

Deferred tax assets, net

    23,723       25,566  

Other real estate owned and repossessed assets

    7,448       8,178  

Bank owned life insurance contracts

    210,847       209,395  

Goodwill and other identifiable intangible assets

    14,111       14,179  

Other assets

    25,715       26,149  

Total assets

  $ 9,364,882     $ 8,947,653  

LIABILITIES AND STOCKHOLDERS' EQUITY

               

Liabilities:

               

Deposits:

               

Noninterest-bearing

  $ 1,925,626     $ 1,749,879  

Interest-bearing

    5,907,029       5,780,554  

Total deposits

    7,832,655       7,530,433  

Federal funds purchased

    543,623       470,749  

Other borrowings

    64,707       64,703  

Accrued interest payable

    12,399       11,934  

Other liabilities

    29,613       27,152  

Total liabilities

    8,482,997       8,104,971  

Stockholders' equity:

               

Preferred stock, par value $0.001 per share; 1,000,000 authorized and undesignated at March 31, 2020 and December 31, 2019

    -       -  

Common stock, par value $0.001 per share; 100,000,000 shares authorized; 53,844,009 shares issued and outstanding at March 31, 2020, and 53,623,740 shares issued and outstanding at December 31, 2019

    54       54  

Additional paid-in capital

    221,901       219,766  

Retained earnings

    641,980       616,611  

Accumulated other comprehensive income

    17,448       5,749  

Total stockholders' equity attributable to ServisFirst Bancshares, Inc.

    881,383       842,180  

Noncontrolling interest

    502       502  

Total stockholders' equity

    881,885       842,682  

Total liabilities and stockholders' equity

  $ 9,364,882     $ 8,947,653  

 

(1) derived from audited financial statements.

 

See Notes to Consolidated Financial Statements.

 

3

 

 

SERVISFIRST BANCSHARES, INC.

 

CONSOLIDATED STATEMENTS OF INCOME

 

(In thousands, except share and per share amounts)

 

(Unaudited)

 
   

THREE MONTHS ENDED MARCH 31,

 
   

2020

   

2019

 

Interest income:

               

Interest and fees on loans

  $ 89,385     $ 85,524  

Taxable securities

    5,154       3,746  

Nontaxable securities

    233       446  

Federal funds sold

    277       1,219  

Other interest and dividends

    1,718       2,764  

Total interest income

    96,767       93,699  

Interest expense:

               

Deposits

    16,745       22,145  

Borrowed funds

    2,382       2,776  

Total interest expense

    19,127       24,921  

Net interest income

    77,640       68,778  

Provision for loan losses

    13,584       4,885  

Net interest income after provision for loan losses

    64,056       63,893  

Noninterest income:

               

Service charges on deposit accounts

    1,916       1,702  

Mortgage banking

    1,071       575  

Credit cards

    1,765       1,576  

Increase in cash surrender value life insurance

    1,453       762  

Other operating income

    469       329  

Total noninterest income

    6,674       4,944  

Noninterest expense:

               

Salaries and employee benefits

    15,658       14,265  

Equipment and occupancy

    2,400       2,259  

Third party processing and other services

    3,345       2,411  

Professional services

    948       994  

FDIC and other regulatory assessments

    1,332       1,019  

Other real estate owned

    601       22  

Other operating expense

    3,636       4,358  

Total noninterest expense

    27,920       25,328  

Income before income taxes

    42,810       43,509  

Provision for income taxes

    8,032       8,499  

Net income

    34,778       35,010  

Dividends on preferred stock

    -       -  

Net income available to common stockholders

  $ 34,778     $ 35,010  

Basic earnings per common share

  $ 0.65     $ 0.65  

Diluted earnings per common share

  $ 0.64     $ 0.65  

 

See Notes to Consolidated Financial Statements.

 

4

 

 

 

SERVISFIRST BANCSHARES, INC.

 

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

 

(In thousands)

 

(Unaudited)

 
   

THREE MONTHS ENDED MARCH 31,

 
   

2020

   

2019

 

Net income

  $ 34,778     $ 35,010  

Other comprehensive income, net of tax:

               

Unrealized net holding gains arising during period from securities available for sale, net of tax of $3,110 and $1,002 for 2020 and 2019, respectively

    11,699       3,772  

Comprehensive income

  $ 46,477     $ 38,782  

 

See Notes to Consolidated Financial Statements.

               

 

 

 

 

 

 

 

 

5

 

 

SERVISFIRST BANCSHARES, INC.

 

CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY

 

(In thousands, except share amounts)

 

(Unaudited)

 
   

Three Months Ended March 31,

 
                                           

Accumulated

                 
                           

Additional

           

Other

           

Total

 
   

Common

   

Preferred

   

Common

   

Paid-in

   

Retained

   

Comprehensive

   

Noncontrolling

   

Stockholders'

 
   

Shares

   

Stock

   

Stock

   

Capital

   

Earnings

   

Income (loss)

   

Interest

   

Equity

 

Balance, January 1, 2019

    53,375,195     $ -     $ 53     $ 218,521     $ 500,868     $ (4,741 )   $ 502     $ 715,203  

Common dividends declared, $0.15 per share

    -       -       -       -       (8,025 )     -       -       (8,025 )

Issue restricted shares pursuant to stock incentives

    2,700       -       -       -       -       -       -       -  

Issue shares of common stock upon exercise of stock options

    117,313       -       -       797       -       -       -       797  

45,187 shares of common stock withheld in net settlement upon exercise of stock options

    -       -       -       (1,453 )     -       -       -       (1,453 )

Stock-based compensation expense

    -       -       -       282       -       -       -       282  

Other comprehensive income, net of tax

    -       -       -       -       -       3,772       -       3,772  

Net income

    -       -       -       -       35,010       -       -       35,010  

Balance, March 31, 2019

    53,495,208     $ -     $ 53     $ 218,147     $ 527,853     $ (969 )   $ 502     $ 745,586  
                                                                 

Balance, January 1, 2020

    53,623,740     $ -     $ 54     $ 219,766     $ 616,611     $ 5,749     $ 502     $ 842,682  

Common dividends declared, $0.175 per share

    -       -       -       -       (9,409 )     -       -       (9,409 )

Issue restricted shares pursuant to stock incentives

    15,300       -       -       -       -       -       -       -  

Issue shares of common stock upon exercise of stock options

    204,969       -       -       2,261       -       -       -       2,261  

11,031 shares of common stock withheld in net settlement upon exercise of stock options

    -       -       -       (403 )     -       -       -       (403 )

Stock-based compensation expense

    -       -       -       277       -       -       -       277  

Other comprehensive income, net of tax

    -       -       -       -       -       11,699       -       11,699  

Net income

    -       -       -       -       34,778       -       -       34,778  

Balance, March 31, 2020

    53,844,009     $ -     $ 54     $ 221,901     $ 641,980     $ 17,448     $ 502     $ 881,885  

 

See Notes to Consolidated Financial Statements.

 

 

6

 

 

SERVISFIRST BANCSHARES, INC.

 

CONSOLIDATED STATEMENTS OF CASH FLOWS

 

(In thousands) (Unaudited)

 
   

Three Months Ended March 31,

 
   

2020

   

2019

 

OPERATING ACTIVITIES

               

Net income

  $ 34,778     $ 35,010  

Adjustments to reconcile net income to net cash provided by

               

Deferred tax (benefit) expense

    (1,267 )     1,068  

Provision for loan losses

    13,584       4,885  

Depreciation

    921       917  

Accretion on acquired loans

    -       (91 )

Amortization of core deposit intangible

    68       68  

Net amortization of debt securities available for sale

    966       626  

Decrease (increase) in accrued interest and dividends receivable

    948       (2,928 )

Stock-based compensation expense

    277       282  

Increase in accrued interest payable

    465       1,095  

Proceeds from sale of mortgage loans held for sale

    36,308       15,581  

Originations of mortgage loans held for sale

    (35,672 )     (16,109 )

Gain on sale of mortgage loans held for sale

    (1,071 )     (575 )

Net (gain) loss on sale of other real estate owned and repossessed assets

    (24 )     2  

Write down of other real estate owned and repossessed assets

    587       20  

Operating losses of tax credit partnerships

    3       35  

Increase in cash surrender value of life insurance contracts

    (1,453 )     (762 )

Net change in other assets, liabilities, and other operating activities

    2,814       2,550  

Net cash provided by operating activities

    52,232       41,674  

INVESTMENT ACTIVITIES

               

Purchase of debt securities available for sale

    (80,149 )     (65,507 )

Proceeds from maturities, calls and paydowns of debt securities available for sale

    26,778       28,469  

Purchase of debt securities held to maturity

    -       (250 )

Investment in tax credit partnership and SBIC

    (111 )     -  

Increase in loans

    (312,426 )     (129,977 )

Purchase of premises and equipment

    (417 )     (759 )

Proceeds from sale of other real estate owned and repossessed assets

    454       48  

Net cash used in investing activities

    (365,871 )     (167,976 )

FINANCING ACTIVITIES

               

Net increase in non-interest-bearing deposits

    175,747       15,362  

Net increase in interest-bearing deposits

    126,475       152,596  

Net increase in federal funds purchased

    72,874       84,653  

Proceeds from exercise of stock options

    2,261       797  

Taxes paid in net settlement of tax obligation upon exercise of stock options

    (403 )     (1,453 )

Dividends paid on common stock

    (9,384 )     (8,019 )

Net cash provided by financing activities

    367,570       243,936  

Net increase in cash and cash equivalents

    53,931       117,634  

Cash and cash equivalents at beginning of period

    630,600       681,895  

Cash and cash equivalents at end of period

  $ 684,531     $ 799,529  

SUPPLEMENTAL DISCLOSURE

               

Cash paid for:

               

Interest

  $ 18,662     $ 23,826  

Income taxes

    400       1,533  

Income tax refund

    -       (2 )

NONCASH TRANSACTIONS

               

Other real estate acquired in settlement of loans

  $ 287     $ 381  

Dividends declared

    9,409       8,025  

 

See Notes to Consolidated Financial Statements.                

 

 

 

 

7

 

SERVISFIRST BANCSHARES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2020

(Unaudited)

 

 

NOTE 1 - GENERAL

 

The accompanying 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 (“U.S. GAAP”) 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, 2019.

 

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

 

Allowance for Loan Losses

 

The Company was prepared to fully adopt Accounting Standards Update (“ASU”) 2016-13, “Financial Instruments – Credit Losses (Topic 326)” as of January 1, 2020 prior to the COVID-19 outbreak and subsequent passage of the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act on March 27, 2020, which provided financial institutions with the option to delay adoption of ASU 2016-13.  The Company has decided to delay its adoption until the earlier of the date on which the national emergency concerning COVID-19 terminates or December 31, 2020, with an effective retrospective implementation date of January 1, 2020.

 

The allowance for loan losses as of March 31, 2020 is determined under the Company’s incurred loss model. Qualitative adjustments were made to the amount of the allowance to take into effect management’s estimates of the COVID-19 pandemic’s impact on the local and regional markets which the Company operates. Further discussion of the allowance for loan losses is included in Note 5 – Loans.

 

 

NOTE 2 - CASH AND CASH EQUIVALENTS

 

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.

 

   

Three Months Ended March 31,

 
   

2020

   

2019

 
   

(In Thousands, Except Shares and Per Share Data)

 

Earnings per common share

               

Weighted average common shares outstanding

    53,704,224       53,465,091  

Net income available to common stockholders

  $ 34,778     $ 35,010  

Basic earnings per common share

  $ 0.65     $ 0.65  
                 

Weighted average common shares outstanding

    53,704,224       53,465,091  

Dilutive effects of assumed conversions and exercise of stock options and warrants

    463,190       611,447  

Weighted average common and dilutive potential common shares outstanding

    54,167,414       54,076,538  

Net income available to common stockholders

  $ 34,778     $ 35,010  

Diluted earnings per common share

  $ 0.64     $ 0.65  

 

8

 

 

NOTE 4 - SECURITIES

 

The amortized cost and fair value of available-for-sale and held-to-maturity securities at March 31, 2020 and December 31, 2019 are summarized as follows:

 

   

Amortized Cost

   

Gross Unrealized Gain

   

Gross Unrealized Loss

   

Fair Value

 

March 31, 2020

 

(In Thousands)

 

Available for sale debt securities

                               

U.S. Treasury Securities

  $ 48,956     $ 826     $ -     $ 49,782  

Government Agency Securities

    18,188       405       -       18,593  

Mortgage-backed securities

    529,126       17,305       -       546,431  

State and municipal securities

    50,989       353       (14 )     51,328  

Corporate debt

    157,496       3,652       (500 )     160,648  

Total

  $ 804,755     $ 22,541     $ (514 )   $ 826,782  

Held to maturity debt securities

                               

State and municipal securities

  $ 250     $ -     $ -     $ 250  

Total

  $ 250     $ -     $ -     $ 250  
                                 

December 31, 2019

                               

Available for sale debt securities

                               

U.S. Treasury Securities

  $ 48,923     $ 291     $ (4 )   $ 49,210  

Government Agency Securities

    18,245       143       (2 )     18,386  

Mortgage-backed securities

    470,513       4,859       (1,318 )     474,054  

State and municipal securities

    56,951       335       (14 )     57,272  

Corporate debt

    157,549       3,098       (170 )     160,477  

Total

  $ 752,181     $ 8,726     $ (1,508 )   $ 759,399  

Held to maturity debt securities

                               

State and municipal securities

  $ 250     $ -     $ -     $ 250  

Total

  $ 250     $ -     $ -     $ 250  

 

The amortized cost and fair value of debt securities as of March 31, 2020 and December 31, 2019 by contractual maturity are shown below.  Actual maturities may differ from contractual maturities of mortgage-backed securities since the mortgages underlying the securities may be called or prepaid with or without penalty.  Therefore, these securities are not included in the maturity categories along with the other categories of debt securities.

 

   

March 31, 2020

   

December 31, 2019

 
   

Amortized Cost

   

Fair Value

   

Amortized Cost

   

Fair Value

 
   

(In thousands)

 

Available for sale debt securities

                               

Due within one year

  $ 59,924     $ 60,306     $ 58,722     $ 58,975  

Due from one to five years

    83,414       84,963       90,034       91,005  

Due from five to ten years

    130,876       133,641       129,501       131,914  

Due after ten years

    1,415       1,441       3,411       3,451  

Mortgage-backed securities

    529,126       546,431       470,513       474,054  
    $ 804,755     $ 826,782     $ 752,181     $ 759,399  
                                 

Held to maturity debt securities

                               

Due from one to five years

  $ 250     $ 250     $ 250     $ 250  
    $ 250     $ 250     $ 250     $ 250  

 

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, 2020 and December 31, 2019, 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.  At March 31, 2020, 4 of the Company’s 678 debt securities had been in an unrealized loss position for 12 or more months.  The Company does not intend to sell these securities, and it is more likely than not that the Company will not be required to sell the securities before recovery of their amortized cost, which may be maturity; accordingly, the Company does not consider these securities to be other-than-temporarily impaired at March 31, 2020.  Further, the Company believes any deterioration in value of 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 More

   

Total

 
   

Gross

           

Gross

           

Gross

         
   

Unrealized

           

Unrealized

           

Unrealized

         
   

Losses

   

Fair Value

   

Losses

   

Fair Value

   

Losses

   

Fair Value

 
   

(In Thousands)

 

March 31, 2020

                                               

State and municipal securities

  $ (10 )   $ 3,582     $ (4 )   $ 721     $ (14 )   $ 4,303  

Corporate debt

    (500 )     15,478       -       -       (500 )     15,478  

Total

  $ (510 )   $ 19,060     $ (4 )   $ 721     $ (514 )   $ 19,781  
                                                 

December 31, 2019

                                               

U.S. Treasury Securities

  $ (4 )   $ 3,012     $ -     $ -     $ (4 )   $ 3,012  

Government Agency Securities

    (2 )     266       -       -       (2 )     266  

Mortgage-backed securities

    (1,206 )     153,330       (112 )     24,911       (1,318 )     178,241  

State and municipal securities

    (4 )     1,900       (10 )     2,647       (14 )     4,547  

Corporate debt

    (170 )     19,981       -       -       (170 )     19,981  

Total

  $ (1,386 )   $ 178,489     $ (122 )   $ 27,558     $ (1,508 )   $ 206,047  

 

The carrying value of investment securities pledged to secure public funds on deposit and for other purposes as required by law was $437.6 million and $389.9 million as of March 31, 2020 and December 31, 2019, respectively.

 

 

NOTE 5 – LOANS

 

The following table details the Company’s loans at March 31, 2020 and December 31, 2019:

 

   

March 31,

   

December 31,

 
   

2020

   

2019

 
   

(Dollars In Thousands)

 

Commercial, financial and agricultural

  $ 2,771,307     $ 2,696,210  

Real estate - construction

    548,578       521,392  

Real estate - mortgage:

               

Owner-occupied commercial

    1,678,532       1,587,478  

1-4 family mortgage

    675,870       644,188  

Other mortgage

    1,834,137       1,747,394  

Subtotal: Real estate - mortgage

    4,188,539       3,979,060  

Consumer

    60,412       64,789  

Total Loans

    7,568,836       7,261,451  

Less: Allowance for loan losses

    (85,414 )     (76,584 )

Net Loans

  $ 7,483,422     $ 7,184,867  
                 
                 

Commercial, financial and agricultural

    36.61

%

    37.13

%

Real estate - construction

    7.25

%

    7.18

%

Real estate - mortgage:

               

Owner-occupied commercial

    22.18

%

    21.86

%

1-4 family mortgage

    8.93

%

    8.87

%

Other mortgage

    24.23

%

    24.07

%

Subtotal: Real estate - mortgage

    55.34

%

    54.80

%

Consumer

    0.80

%

    0.89

%

Total Loans

    100.00

%

    100.00

%

 

10

 

The credit quality of the loan portfolio is summarized no less frequently than quarterly using categories similar to the standard asset classification system used by the federal banking agencies.  The following table presents credit quality indicators for the loan loss portfolio segments and classes.  These categories are utilized to develop the associated allowance for loan losses using historical losses adjusted for current economic conditions defined as follows:

 

 

Pass – loans which are well protected by the current net worth and paying capacity of the obligor(s) or by the fair value, less cost to acquire and sell, of any underlying collateral.

 

 

Special Mention – loans with potential weakness that may, if not reversed or corrected, weaken the credit or inadequately protect the Company’s position at some future date.  These loans are not adversely classified and do not expose an institution to sufficient risk to warrant an adverse classification.

 

 

Substandard – loans that exhibit well-defined weakness or weaknesses that presently jeopardize debt repayment.  These loans are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected.

 

 

Doubtful – loans that have all the weaknesses inherent in loans classified substandard, plus the added characteristic that the weaknesses make collection or liquidation in full on the basis of currently existing facts, conditions, and values highly questionable and improbable.

 

Loans by credit quality indicator as of March 31, 2020 and December 31, 2019 were as follows:

 

           

Special

                         

March 31, 2020

 

Pass

   

Mention

   

Substandard

   

Doubtful

   

Total

 
                                         
   

(In Thousands)

 

Commercial, financial and agricultural

  $ 2,708,845     $ 17,902     $ 44,560     $ -     $ 2,771,307  

Real estate - construction

    542,659       4,136       1,783       -       548,578  

Real estate - mortgage:

                                       

Owner-occupied commercial

    1,658,909       11,014       8,609       -       1,678,532  

1-4 family mortgage

    671,407       2,080       2,383       -       675,870  

Other mortgage

    1,824,825       7,557       1,755       -       1,834,137  

Total real estate - mortgage

    4,155,141       20,651       12,747       -       4,188,539  

Consumer

    60,403       -       9       -       60,412  

Total

  $ 7,467,048     $ 42,689     $ 59,099     $ -     $ 7,568,836  
                                         
           

Special

                         

December 31, 2019

 

Pass

   

Mention

   

Substandard

   

Doubtful

   

Total

 
   

(In Thousands)

 

Commercial, financial and agricultural

  $ 2,629,487     $ 46,176     $ 20,547     $ -     $ 2,696,210  

Real estate - construction

    512,373       4,731       4,288       -       521,392  

Real estate - mortgage:

                                       

Owner-occupied commercial

    1,555,283       18,240       13,955       -       1,587,478  

1-4 family mortgage

    639,959       2,787       1,442       -       644,188  

Other mortgage

    1,735,869       10,018       1,507       -       1,747,394  

Total real estate - mortgage

    3,931,111       31,045       16,904       -       3,979,060  

Consumer

    64,789       -       -       -       64,789  

Total

  $ 7,137,760     $ 81,952     $ 41,739     $ -     $ 7,261,451  

 

11

 

Loans by performance status as of March 31, 2020 and December 31, 2019 were as follows:

 

March 31, 2020

 

Performing

   

Nonperforming

   

Total

 
   

(In Thousands)

 

Commercial, financial and agricultural

  $ 2,756,132     $ 15,175     $ 2,771,307  

Real estate - construction

    546,774       1,804       548,578  

Real estate - mortgage:

                       

Owner-occupied commercial

    1,668,297       10,235       1,678,532  

1-4 family mortgage

    674,134       1,736       675,870  

Other mortgage

    1,829,244       4,893       1,834,137  

Total real estate - mortgage

    4,171,675       16,864       4,188,539  

Consumer

    60,387       25       60,412  

Total

  $ 7,534,968     $ 33,868     $ 7,568,836  
                         

December 31, 2019

 

Performing

   

Nonperforming

   

Total

 
   

(In Thousands)

 

Commercial, financial

                       

and agricultural

  $ 2,681,280     $ 14,930     $ 2,696,210  

Real estate - construction