Silvergate Bank Announces Record Earnings

LA JOLLA, Calif., Oct. 23, 2012 /PRNewswire/ -- Silvergate Bank, a San Diego-based bank that specializes in serving small businesses, today announced its financial results for the three and nine months ended September 30, 2012.  Highlights included:

• Quarterly net income of $2.36 million and year-to-date net income of $4.85 million
• Return on average assets of 1.59% and return on average equity of 13.89% for the third quarter
• 113% noninterest bearing demand deposit growth fueled 48% total deposit growth over past 12 months
• Commercial real estate loan growth of 27% over past 12 months
• Funded $577 million in single-family residential mortgage loans during the third quarter
• Third Quarter acquisition / funding of $67.2 million in U.S. Government insured reverse mortgage loans
• Successful completion of our first Ginnie Mae securitization of reverse mortgage loans

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The Bank's quarterly and nine-month earnings are the highest in its 24-year history and represent substantial increases over 2011, with third quarter net income up 220% over the same period last year and nine-month net income up 112%.   The Bank's significant deposit growth is the result of its substantial investment in opening two new branch offices and relocating a third in the past 15 months, a strategic expansion of the Bank's commercial banking platform.  At September 30, 2012 the Bank's total assets increased to $630.0 million and its capital ratios remained strong – Tier 1 Leverage Capital Ratio was 11.61% and Total Risk-Based Capital Ratio was 16.46%, both substantially exceeding "well capitalized" minimums of 5% and 10%.

"We are pleased to report that net income for the third quarter and first nine months of 2012 significantly outperformed the preceding quarter and the comparable periods in 2011, and represented the highest quarterly and nine-month earnings levels in Silvergate Bank history," said Alan J. Lane, the Bank's president and chief executive officer. "Our strong deposit and asset growth over the past year has been supported by our expanded and more business friendly branches, providing better access for our growing San Diego customer base.  Our well capitalized position ensures our ability to provide clients with the innovative services and products they have come to expect from us to meet their needs today and well into the future." 

Financial Performance
The Bank's net income for the third quarter of 2012 was $2,360,000, compared to $1,460,000 for the second quarter of 2012 and $738,000 for the third quarter of 2011, an increase of 220% from the prior year period.  Net income for the first nine months of 2012 was $4,848,000, compared to $2,283,000 for the first nine months of 2011, an increase of 112%.  Total assets grew to $630.0 million at September 30, 2012, as compared to $470.5 million at December 31, 2011. 

The Bank's net interest margin was 3.88% for the third quarter of 2012 and 4.09% for the first nine months, compared to 2011 figures of 4.53% for the third quarter and 4.43% for the first nine months.  Net interest income in 2012 was $5.7 million for the third quarter and $16.2 million for the first nine months, compared to 2011 figures of $4.1 million for the third quarter and $11.5 million for the first nine months.  These sizeable net interest income improvements in 2012 as compared to 2011 were primarily due to significant increases in interest income and only modest changes in interest expense, the latter resulting in part from the Bank's substantial growth in noninterest bearing demand deposits over the twelve months, from $22.4 million to $47.7 million.  Noninterest income in 2012 increased to $3.3 million for the third quarter and $5.0 million for the first nine months, as compared to 2011 figures of $213,000 for the third quarter and $1.3 million for the first nine months; gains from reverse mortgage banking activity and increased warehouse lending fee income were the largest contributors to these increases.  Noninterest expense in 2012 was $4.8 million for the third quarter and $12.6 million for the first nine months, compared to 2011 figures of $2.8 million for the third quarter and $8.4 million for the first nine months; these increases reflect higher employee related and occupancy costs associated with the Bank's growth in staffing, assets, and headquarters and branch office space.

Commenting on the Bank's results, Dennis S. Frank, chairman, stated, "The increased and record profitability we achieved in the third quarter and first nine months of the year reflects continued growth in the diversified revenue streams we have worked to build over the past several years, combined with continued focus and success in our core commercial banking activities.  Despite the challenges of a compressed interest rate environment, we have also maintained a net interest margin that exceeds the average of all California commercial banks and supports our ability to serve the needs of our entire range of clients."

Growth in Commercial Banking Platform
The Bank's historically strong profile in commercial real estate lending continued in the third quarter of 2012.  Loan fundings of $13.0 million in the quarter increased the Bank's commercial real estate loans to $192.0 million at September 30, 2012, representing increases of 26.7% and 20.0% over the comparable totals of $151.5 million and $160.0 million at September 30, 2011 and December 31, 2011, respectively.  The Bank's expanding deposit franchise has been a key component of the Bank's substantial growth over the past year in total assets and net interest income.  Total deposits have grown by 48% in the past twelve months, with noninterest bearing demand deposits growing by 113%.  Despite the significant costs of opening two new branch offices and relocating a third in the past 15 months, the Bank has generated record profits due to the ongoing strength of its core commercial lending activities and the expanded residential lending activities it has added in recent years.

Continued High Volumes of Residential Mortgage Loan Fundings
The Bank's Mortgage Warehouse Lending Division, established in April 2009 to meet the credit needs of mortgage bankers that originate single-family residential mortgage loans, had another excellent quarter.  In the third quarter of 2012 the division funded $577.9 million in loans, bringing its total fundings for the first nine months of 2012 to almost $1.5 billion, and its cumulative fundings since April 2009 to over $4.3 billion.

Acquisitions and Sales of Reverse Mortgage Loans
The Bank's Reverse Mortgage Lending Division was established in late 2011 to acquire and hold for sale Home Equity Conversion Mortgage ("HECM") loans insured by the U.S. Federal Housing Administration.  The Bank acquired and/or funded advances on $67.2 million in HECM loans in the third quarter of 2012, bringing its total acquisitions and advances for the first nine months to $181.0 million.  The Bank's capacity to accumulate and hold these loans on its balance sheet allows it to maximize its opportunities for gains on loan sales while enjoying increased interest income during the period these loans are held for sale.  The Bank completed several sales of HECM loans during the third quarter of 2012 and also completed its first securitization of such loans since it was approved in July 2012 by the Government National Mortgage Association ("Ginnie Mae") to be an issuer of Ginnie Mae HECM backed securities.

About Silvergate Bank
Silvergate Bank is a San Diego-based bank that specializes in meeting the needs of small businesses through a comprehensive offering of lending products and personalized banking services.  Silvergate Bank opened in 1988 and is a subsidiary of Silvergate Capital Corporation.  Bank branches are located in Carlsbad, Escondido, La Jolla, La Mesa, and Lancaster.  Silvergate Bank's headquarters office is located at 4275 Executive Square, Suite 800, La Jolla, CA 92037.  The Bank's website is www.silvergatebank.com. 

Statements concerning future performance, developments or events, expectations for growth and income forecasts, and any other guidance on future periods, constitute forward-looking statements that are subject to a number of risks and uncertainties.  Actual results may differ materially from stated expectations.  When used in this release, the words or phrases such as "will continue," "is anticipated," "estimate," "expect," "projected," "believe," "seeking," or similar expressions, are intended to identify "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995.  Readers should not place undue reliance on the forward-looking statements, which reflect views only as of the date hereof.  Neither Silvergate Capital Corporation nor Silvergate Bank undertakes any obligation to publicly revise these forward-looking statements to reflect subsequent events or circumstances.

SOURCE Silvergate Bank

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