Small Business Banking: a Standout Performer

Last April we wrote about ServisFirst, (Small Business Banking: Making Housecalls). This Birmingham, Alabama community bank opened its doors in May 2005 and now have $1.2 billion in assets — very heady growth!

The current economic environment has not been kind to most new banks. So how has ServisFirst fared? Quite well.

Deposits continue to grow at a rapid pace – up 36% last year to $1 billion. But at the same time, full year profits increased 27% to $7 million. Nonperforming assets have risen, but are still well below the industry average.

We were impressed a year ago by their focus, disciplined sales process, and high level of customer service. These remain the keys to their success — and good lessons for others to emulate:

• They have a laser beam on their target market. This is a business bank, and they have a clear idea of who their customers are, what products and services they need, and the competitive value proposition they can offer.
• They are a sales organization. Here’s how their CEO describes it: “We run a sales business. I am the head of sales.”
• They fund their growth organically. Loan officers are incented to bring in deposits as well as loans. ServisFirst has no brokered deposits.
• They invested in the right infrastructure – treasury management, lockbox, and remote capture services appropriate for their customers. They then pursue those prospects where these products will be valued.
• They have a conservative credit culture. Unlike many new business banks, they strictly limited the amount of real estate loans on their books. In addition, loans over $500,000 must go through a credit committee.

We have always said that focus is the essence of strategy, and I think that is one of the key lessons from ServisFirst. It is a unique organization that can grow this rapidly and at the same time avoid the general industry travails.