Critical Review: ServisFirst Bancshares (NYSE:SFBS) & VersaBank (NASDAQ:VBNK)

ServisFirst Bancshares (NYSE:SFBS) and VersaBank (NASDAQ:VBNK) are both finance companies, but which is the superior business? We will contrast the two companies based on the strength of their valuation, risk, analyst recommendations, earnings, dividends, profitability and institutional ownership.

Risk & Volatility

ServisFirst Bancshares has a beta of 0.92, meaning that its share price is 8% less volatile than the S&P 500. Comparatively, VersaBank has a beta of 1.03, meaning that its share price is 3% more volatile than the S&P 500.

Institutional & Insider Ownership

67.3% of ServisFirst Bancshares shares are owned by institutional investors. Comparatively, 56.9% of VersaBank shares are owned by institutional investors. 6.5% of ServisFirst Bancshares shares are owned by insiders. Comparatively, 5.3% of VersaBank shares are owned by insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a stock will outperform the market over the long term.

Analyst Recommendations

This is a breakdown of recent ratings for ServisFirst Bancshares and VersaBank, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
ServisFirst Bancshares	1	0	4	0	2.60
VersaBank	0	1	3	0	2.75

ServisFirst Bancshares currently has a consensus price target of $46.50, indicating a potential upside of 11.36%. VersaBank has a consensus price target of $24.00, indicating a potential downside of 0.95%. Given ServisFirst Bancshares’ higher possible upside, research analysts clearly believe ServisFirst Bancshares is more favorable than VersaBank.

Valuation and Earnings

This table compares ServisFirst Bancshares and VersaBank”s revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
ServisFirst Bancshares	$1.02 billion	4.49	$276.60 million	$3.13	13.34
VersaBank	$148.71 million	5.29	$20.32 million	$0.76	31.88

ServisFirst Bancshares has higher revenue and earnings than VersaBank. ServisFirst Bancshares is trading at a lower price-to-earnings ratio than VersaBank, indicating that it is currently the more affordable of the two stocks.

Dividends

ServisFirst Bancshares pays an annual dividend of $0.76 per share and has a dividend yield of 1.8%. VersaBank pays an annual dividend of $0.07 per share and has a dividend yield of 0.3%. ServisFirst Bancshares pays out 24.3% of its earnings in the form of a dividend. VersaBank pays out 9.2% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. ServisFirst Bancshares has raised its dividend for 10 consecutive years. ServisFirst Bancshares is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Profitability

This table compares ServisFirst Bancshares and VersaBank’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
ServisFirst Bancshares	32.53%	17.66%	1.89%
VersaBank	9.92%	8.66%	0.75%

Summary

ServisFirst Bancshares beats VersaBank on 12 of the 17 factors compared between the two stocks.

About ServisFirst Bancshares

ServisFirst Bancshares, Inc. operates as the bank holding company for ServisFirst Bank that provides various banking services to individual and corporate customers. It accepts demand, time, savings, and other deposits; checking, money market, and IRA accounts; and certificates of deposit. The company's loan products include commercial lending products, including seasonal, bridge, and term loans for working capital, expansion of the business, acquisition of property, and plant and equipment, as well as commercial lines of credit; commercial real estate loans, construction and development loans, and residential real estate loans; and consumer loans, such as home equity loans, vehicle financing, loans secured by deposits, and secured and unsecured personal loans. It also offers other banking products and services comprising telephone and mobile banking, Internet banking, direct deposit, traveler's checks, safe deposit boxes, attorney trust accounts, automatic account transfers, automated teller machines, and debit and credit card systems; treasury and cash management services; wire transfer, night depository, banking-by-mail, and remote capture services; and correspondent banking services to other financial institutions. In addition, the company holds and manages participations in residential mortgages and commercial real estate loans originated by ServisFirst Bank in Alabama, Florida, Georgia, and Tennessee. The company was founded in 2005 and is headquartered in Birmingham, Alabama.

About VersaBank

VersaBank provides various banking products and services in Canada and the United States. It offers deposit products, such as web-based chequing accounts, guaranteed investment certificates, registered retirement savings plans, and tax-free savings accounts, as well as deposit insurance products. The company also provides lending services, including point of sale financing that covers purchasing loan and lease receivables from finance companies operating in various industries; commercial banking services comprising commercial real estate, public sector/infrastructure financing, and condominium financing; and residential mortgages. In addition, it offers cybersecurity services. The company was formerly known as Pacific & Western Bank of Canada and changed its name to VersaBank in May 2016. VersaBank was incorporated in 1979 and is headquartered in London, Canada.