Safe and Sound

Silicon Valley Bank

Santa Clara, CA
4
Star Rating
Started in 1983, Silicon Valley Bank is an FDIC-insured bank based in Santa Clara, CA. Regulatory filings show the bank having equity of $3.76 billion on $50.39 billion in assets, as of December 31, 2017.

With 2,395 full-time employees in 6 offices in multiple states, the bank holds loans and leases worth $22.85 billion, including real estate loans of $3.12 billion. U.S. bank customers currently have $41.42 billion in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, Silicon Valley Bank exhibited a good condition, earning 4 out of 5 stars for safety and soundness. Keep reading for a breakdown of how the bank fared on the three key criteria Bankrate used to evaluate U.S. banks.

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THE INSTITUTION'S SCORE

Capital Score

When it comes to measuring an an institution's financial fortitude, capital is useful. It works as a cushion against losses and provides protection for accountholders during periods of economic trouble for the bank. When it comes to safety and soundness, the higher the capital, the better.

Silicon Valley Bank fell short of the national average of 13.13 on our test to measure the adequacy of a bank's capital, racking up 6 out of a possible 30 points.

One widely followed measure of this buffer is a bank's Tier 1 capital ratio. Silicon Valley Bank's Tier 1 capital ratio was 12.06 percent, above the 6 percent level considered adequate by regulators, but lower than the national average of 25.65 percent. A higher capital ratio means the bank will be better able to weather financial challenges.

Overall, Silicon Valley Bank held equity amounting to 7.47 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

This test's purpose is to try to understand how the bank's reserves set aside to cover loan losses, as well as overall capitalization, could be affected by troubled assets, such as past-due mortgages.

A bank with lots of these types of assets could eventually have to use capital to absorb losses, shrinking its buffer of equity. Many of those assets are also likely to be in non-accrual status and thus aren't earning interest for the bank, resulting in diminished earnings and potentially more risk of a failure in the future.

On Bankrate's test of asset quality, Silicon Valley Bank scored 40 out of a possible 40 points, exceeding the national average of 37.49 points.

The percentage of problem assets a bank holds compared to its total assets is a useful indicator of asset quality.As of December 31, 2017, 0.52 percent of Silicon Valley 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 maintain a reserve known as an "allowance for loan and lease losses" to deal with problem assets . Comparing how large that reserve is to the total amount of at-risk loans can be a useful indicator when evaluating a bank's ability to manage problem assets. Unfortunately, the FDIC did not provide information on Silicon Valley Bank's loan loss allowance in its most recent filings.

Earnings score

A bank's profitability has an effect on its long-term survivability. A bank can retain its earnings, boosting its capital buffer, or put them to work addressing problematic loans, likely making the bank more resilient in tough times. Obviously, banks that are losing money are less able to do those things.

Silicon Valley Bank outperformed the average on Bankrate's test of earnings, achieving a score of 20 out of a possible 30.

Return on equity, calculated by dividing net income (profit, basically) by total equity, is one key measure of a bank's earnings. The most recent annualized quarterly return on equity for Silicon Valley Bank was 12.39 percent, above the national average of 8.10 percent.

The bank reported net income of $446.8 million on total equity of $3.76 billion for the twelve months ended December 31, 2017. The bank experienced an annualized return on average assets, or ROA, of 0.94 percent, below the 1 percent deemed satisfactory in accordance with industry standards and below 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.