Safe and Sound

ServisFirst Bank

Birmingham, AL
5
Star Rating
Birmingham, AL-based ServisFirst Bank is an FDIC-insured bank founded in 2005. The bank has equity of $665.7 million on $7.08 billion in assets, according to December 31, 2017, regulatory filings.

Thanks to the work of 428 full-time employees in 19 offices in multiple states, the bank holds loans and leases worth $5.80 billion, including $3.51 billion worth of real estate loans. The bank currently holds $6.10 billion in deposits from U.S. customers.

Overall, Bankrate believes that, as of December 31, 2017, ServisFirst Bank exhibited a superior condition, earning a full 5 stars for safety and soundness. Here's an analysis of how the bank fared on the three key criteria Bankrate used to score American banks on safety and soundness.

WHAT IS
SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

Capital works as a cushion against losses and affords protection for account holders during periods of economic instability for the bank. Therefore, when it comes to measuring an a bank's financial stability, capital is key. When it comes to safety and soundness, more capital is preferred.

On our test to measure capital adequacy, ServisFirst Bank received a score of 10 out of a possible 30 points, less than the national average of 13.13.

One widely used measure of this buffer is a bank's Tier 1 capital ratio. ServisFirst Bank's Tier 1 capital ratio was 10.45 percent, higher than the 6 percent level considered adequate by regulators, but under the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to stand up to financial challenges.

Overall, ServisFirst Bank held equity amounting to 9.39 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

Bankrate uses this test to determine the effect of problem assets, such as past-due mortgages, on the bank's reserves set aside to cover loan losses, as well as overall capitalization.

A bank with lots of these types of assets could eventually be required to use capital to absorb losses, reducing its cushion of equity. Many of those assets are also likely to be in non-accrual status and no longer earning money, reducing earnings and increasing the risk of a future failure.

ServisFirst Bank exceeded the national average of 37.49 on Bankrate's asset quality test, racking up 40 out of a possible 40 points .

A handy indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of December 31, 2017, 0.18 percent of ServisFirst Bank's loans were noncurrent, meaning they were more than 90 days past due or were in non-accrual status. That's below the national average of 1.01 percent.

Banks keep a reserve to handle troubled assets known as an "allowance for loan and lease losses." That reserve's size can be a widely used indicator when evaluating a bank's ability to manage problem assets, especially when compared to the total amount of problem loans. Unfortunately, the FDIC did not provide information on ServisFirst Bank's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is has an effect on its long-term survivability. A bank can retain its earnings, giving a boost to its capital cushion, or use them to deal with problematic loans, likely making the bank more resilient in times of trouble. Losses, on the other hand, lessen a bank's ability to do those things.

ServisFirst Bank did above-average on Bankrate's earnings test, achieving a score of 24 out of a possible 30.

Return on equity, calculated by dividing net income (profit, basically) by total equity, is one important way to measure a bank's earnings. ServisFirst Bank's most recent annualized quarterly return on equity was 15.38 percent, above the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank recorded net income of $95.3 million on total equity of $665.7 million. The bank reported an annualized return on average assets, or ROA, of 1.45 percent, above the 1 percent deemed satisfactory in accordance with industry standards, and above the average for U.S. banks of 1.00 percent.

WHAT IS SAFE & SOUND?

Bankrate.com's Safe & Sound Ratings provide a star rating system to evaluate the current financial status of financial institutions. The information gathered about banks, credit unions and thrifts is updated as set forth in the Terms of Use of Safe & Sound Ratings and Reports. The Safe & Sound Ratings information is grouped by categories of banks, thrifts and credit unions.

Scoring methodology

Bankrate.com evaluates the financial condition of institutions and assigns a one- to five-star rating for each with five stars representing the highest rating. Institutions with satisfactory performance will generally receive a rating of three or more stars. The majority of institutions fall into the three- to four-star range. An institution with an "NR" rating may be too new to rate or may have limited the publicly available information in their regulatory filings. The "NR" is not an indication of financial strength or weakness. The Safe & Sound rating is believed to be reliable, but the information is not guaranteed. In addition, events since the information was collected may have altered the institution's financial condition.