Annual report pursuant to Section 13 and 15(d)

Note 14 - Regulatory Matters

v3.10.0.1
Note 14 - Regulatory Matters
 12 Months Ended
Dec. 31, 2018
Notes to Financial Statements  
Regulatory Capital Requirements under Banking Regulations [Text Block]
NOTE
14.
REGULATORY MATTERS
 
The Bank is subject to dividend restrictions set forth in the Alabama Banking Code and by the Alabama State Banking Department. Under such restrictions, the Bank
may
not,
without the prior approval of the Alabama State Banking Department, declare dividends in excess of the sum of the current year’s earnings plus the retained earnings from the prior
two
years. Based on these restrictions, the Bank would be limited to paying
$311.9
million in dividends as of
December 31, 2018.
 
The Bank is subject to various regulatory capital requirements administered by the state and federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory and possible additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Bank and the financial statements. Under regulatory capital adequacy guidelines and the regulatory framework for prompt corrective action, the Bank must meet specific capital guidelines involving quantitative measures of the Bank’s assets, liabilities, and certain off-balance-sheet items as calculated under regulatory accounting practices. The Bank’s capital amounts and classification under the prompt corrective guidelines are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors.
 
Quantitative measures established by regulation to ensure capital adequacy require the Bank to maintain minimum amounts and ratios (set forth in the table below) of common equity Tier
1
capital, total risk-based capital and Tier
1
capital to risk-weighted assets (as defined in the regulations), and Tier
1
capital to adjusted total assets (as defined). Management believes, as of
December 31, 2018,
that the Bank meets all capital adequacy requirements to which it is subject.
 
In
July 
2013,
the Federal Reserve announced its approval of a final rule to implement the regulatory capital reforms developed by the Basel Committee on Banking Supervision (“Basel III”), among other changes required by the Dodd-Frank Wall Street Reform and Consumer Protection Act.  The new rules became effective
January 
1,
2015,
subject to a phase-in period for certain aspects of the new rules. In order to avoid restrictions on capital distributions and discretionary bonus payments to executives, under the new rules a covered banking organization will also be required to maintain a “capital conservation buffer” in addition to its minimum risk-based capital requirements. This buffer will be required to consist solely of common equity Tier
1,
and the buffer will apply to all
three
risk-based measurements (
CET1,
Tier
1
capital and total capital). The capital conservation buffer will be phased in incrementally over time, beginning
January 
1,
2016
and becoming fully effective on
January 
1,
2019,
and will ultimately consist of an additional amount of Tier
1
common equity equal to
2.5%
of risk-weighted assets. The applicable capital conservation buffer at
December 31, 2018
was
1.875%
and the Company and bank exceeded such requirement.
 
As of
December 31, 2018,
the most recent notification from the Federal Deposit Insurance Corporation categorized ServisFirst Bank as well capitalized under the regulatory framework for prompt corrective action. To remain categorized as well capitalized, the Bank will have to maintain minimum
CET1,
total risk-based, Tier
1
risk-based, and Tier
1
leverage ratios as disclosed in the table below. Management believes that it is well capitalized under the prompt corrective action provisions as of
December 31, 2018.
 
The Company’s and Bank’s actual capital amounts and ratios are presented in the following table:
 
    Actual   For Capital Adequacy
Purposes		   To Be Well Capitalized Under
Prompt Corrective Action
Provisions
    Amount   Ratio   Amount   Ratio   Amount   Ratio
As of December 31, 2018:                                                
CET I Capital to Risk Weighted Assets:                                                
Consolidated   $
705,203
      
10.12
 %   $
313,564
      
4.50
 %    
N/A
      
N/A
  
ServisFirst Bank    
768,614
      
11.03
 %    
313,554
      
4.50
 %   $
452,911
      
6.50
 %
Tier I Capital to Risk Weighted Assets:                                                
Consolidated    
705,705
      
10.13
 %    
418,086
      
6.00
 %    
N/A
      
N/A
  
ServisFirst Bank    
769,116
      
11.04
 %    
418,071
      
6.00
 %    
557,428
      
8.00
 %
Total Capital to Risk Weighted Assets:                                                
Consolidated    
839,471
      
12.05
 %    
557,448
      
8.00
 %    
N/A
      
N/A
  
ServisFirst Bank    
838,216
      
12.03
 %    
557,428
      
8.00
 %    
696,786
      
10.00
 %
Tier I Capital to Average Assets:                                                
Consolidated    
705,705
      
9.08
 %    
311,214
      
4.00
 %    
N/A
      
N/A
  
ServisFirst Bank    
769,116
      
9.89
 %    
311,206
      
4.00
 %    
389,007
      
5.00
 %
                                                 
As of December 31, 2017:                                                
CET I Capital to Risk Weighted Assets:                                                
Consolidated   $
593,111
      
9.51
 %   $
280,553
      
4.50
 %    
N/A
      
N/A
  
ServisFirst Bank    
651,201
      
10.45
 %    
280,523
      
4.50
 %   $
405,199
      
6.50
 %
Tier I Capital to Risk Weighted Assets:                                                
Consolidated    
593,613
      
9.52
 %    
374,070
      
6.00
 %    
N/A
      
N/A
  
ServisFirst Bank    
651,703
      
10.45
 %    
374,030
      
6.00
 %    
498,707
      
8.00
 %
Total Capital to Risk Weighted Assets:                                                
Consolidated    
718,151
      
11.52
 %    
498,760
      
8.00
 %    
N/A
      
N/A
  
ServisFirst Bank    
711,609
      
11.42
 %    
498,707
      
8.00
 %    
623,384
      
10.00
 %
Tier I Capital to Average Assets:                                                
Consolidated    
593,613
      
8.51
 %    
278,970
      
4.00
 %    
N/A
      
N/A
  
ServisFirst Bank    
651,703
      
9.35
 %    
278,954
      
4.00
 %    
348,693
      
5.00
 %