ServisFirst Bancshares, Inc. Commitments Disclosure

NOTE 16.          COMMITMENTS AND CONTINGENCIES

 

Loan Commitments

 

The Company is a party to financial instruments with off-balance-sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments include commitments to extend credit, credit card arrangements, and standby letters of credit. Such commitments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the balance sheets. A summary of the Company’s approximate commitments and contingent liabilities is as follows:

 

		2025				2024				2023
		(In Thousands)
Commitments to extend credit		$	3,779,178			$	3,552,958			$	3,410,283
Credit card arrangements			395,780				366,843				381,524
Standby letters of credit and financial guarantees			117,371				125,147				86,065
Total		$	4,292,329			$	4,044,948			$	3,877,872

 

Commitments to extend credit, credit card arrangements, commercial letters of credit and standby letters of credit all include exposure to some credit loss in the event of nonperformance of the customer. The Company uses the same credit policies in making commitments and conditional obligations as it does for on-balance sheet financial instruments. Because these instruments have fixed maturity dates, and because many of them expire without being drawn upon, they do not generally present any significant liquidity risk to the Company.

 

The Company invests in certain affordable housing projects throughout its market area as a means of supporting local communities. The Company receives tax credits related to these investments, for which it typically acts as a limited partner and therefore does not exert control over the operating or financial policies of the partnerships. The Company typically provides financing during the construction and development of the properties. Tax credits are subject to recapture by taxing authorities based on compliance features required to be met at the project level. The Company’s maximum potential exposure to losses relative to investments in VIEs is generally limited to the sum of the outstanding balance, future funding commitments and any related loans to the entity, exclusive of any potential tax recapture associated with the investments. Loans to these entities are underwritten in substantially the same manner as the Company’s other loans and are generally secured. The Company invests as a limited partner in certain projects through the New Market Tax Credit program, which is a Federal financial program aimed to stimulate business and real estate investment in underserved communities via a Federal tax credit. The Company has investments in and future funding commitments related to private equity and certain other equity method investments. The risk exposure relating to such commitments is generally limited to the amount of investments and future funding commitments made. The following table summarizes certain tax credit and certain equity investments.

 

				December 31,
		Balance Sheet Location		2025				2024
				(In Thousands)
Investments in affordable housing projects and other qualified tax credits:
Carrying amount		Other assets		$	98,681			$	75,705
Amount of future funding commitments including in carrying amount		Other liabilities			65,439				39,502
Lending exposures		Loans			107,764				96,224
SBIC and certain other equity method investments:
Carrying amount		Other assets			13,399				4,642
Amount of future funding commitments not included in carrying amount		N/A			18,551				12,308

 

The following table presents a summary of tax credits and amortization expense associated with those investments accounted for using the proportional amortization method for the period indicated.

 

	Income Statement Location		2025				2024
			(In Thousands)
Income tax credits and other income tax benefits	Income tax expense		$	(42,762	)		$	(13,392	)
Amortization expense	Income tax expense			36,634				11,162