Silvergate Bank Reports Third Quarter 2013 Financial Results

LA JOLLA, Calif., Nov. 5, 2013 /PRNewswire/ -- Silvergate Bank today announced financial results for the quarter and nine-month period ended September 30, 2013, with quarterly income of $1.37 million and nine-month net income of $4.13 million.  Total assets at the end of the quarter were $616.4 million, and the Bank's equity capital was $68.9 million.

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"In an economy that remains sluggish, we are pleased to report that Silvergate Bank delivered another solid earnings performance in the third quarter of 2013," said Alan J. Lane, the Bank's president and chief executive officer.  "Our capital and asset quality ratios continue to be superior to comparable averages for all FDIC insured banks.  Our profitability, capital and asset quality all support our ability to continue providing our clients with the innovative products and services they have come to expect from us to help them grow their business."   

At September 30, 2013, Silvergate Bank's Tier 1 Leverage Capital Ratio was 10.85% and Total Risk-Based Capital Ratio was 19.26%, both substantially exceeding 'well capitalized' minimums of 5% and 10%.  The Bank's ratios of nonperforming loans to total loans and nonperforming assets to total assets both remained low, at 0.86% and 1.29%, respectively.   

Further third quarter performance figures for Silvergate Bank were its funding of $511.0 million in single family mortgage loans through the Bank's Warehouse Lending Division and the acquisition / funding of $57.5 million in U.S. Government insured reverse mortgage loans.  

"Silvergate Bank's sustained profitability from our core commercial banking activities and diversified revenue streams continues to strengthen our capital base and enhance our ability to serve our entire range of clients," said Dennis S. Frank, the Bank's chairman.  "The flexibility within our diversified revenue streams has also allowed us to grow our reverse mortgage holdings and maintain solid net interest income even as a nationwide decline in mortgage loan originations has reduced our warehouse loan balances."

Financial Performance

The Bank's net income for the third quarter was $1.37 million, compared to same level for the prior quarter and $2.36 million for the third quarter last year (which was the second highest quarterly income in Bank history).  Net income for the first nine months was $4.13 million, compared to $4.85 million last year.  Total assets were $616.4 million at September 30, 2013, down $26.2 million from the prior quarter and $13.6 million from the third quarter a year ago.  The Bank's equity capital was $68.9 million at September 30, 2013, as compared to $72.6 million at June 30, 2013; this decline reflects the combined effects of the Bank's earnings for the quarter and its payment of a $5 million dividend to its parent firm, Silvergate Capital Corporation.

The Bank's net interest income for the quarter was $6.91 million, compared to $5.39 million for the prior quarter and $5.67 million last year.  These quarterly and year-over-year increases were mainly due to recognition in the third quarter of $1.3 million in interest income from the payoff of a loan acquired at a large discount to its principal balance.  This event also contributed to an increase in the third quarter's net interest margin to 4.39%, compared to 3.47% for the prior quarter and 3.88% for the third quarter last year.

Noninterest income was $0.45 million for the quarter, compared to $1.86 million for the prior quarter and $3.33 million last year, with these declines due mainly to the third quarter's lack of any loan sale gains and a reduction in securitization income.  Nine-month noninterest income was $3.98 million, compared to $4.96 million last year, due to lower levels of loan sale gains and securitization income in the current year.  Noninterest expense was $5.0 million for the quarter, compared to $5.1 million for the prior quarter and $4.8 million last year; nine-month noninterest expense increased to $14.8 million this year from $12.63 million last year, with the largest component of this increase being higher employee-related costs.

Commercial Banking Platform

Commercial real estate loans totaled $175.0 million at September 30, 2013, compared to $196.3 million at September 30, 2012, as third quarter new loan originations were exceeded by loan payoffs.  Total deposits grew by 15% in the past twelve months, with noninterest bearing demand deposits growing by 30%.  Despite the significant costs of opening two new branch offices and relocating a third in the past 27 months, the Bank's profitability has continued to benefit from our core commercial lending operations and the expanded residential lending activities we have added in recent years.   

Continued High Volumes of Residential Mortgage Loan Fundings and Acquisitions

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 good quarter.  While a nationwide decrease in mortgage originations reduced the Bank's third quarter volumes from the prior quarter, it still funded $511.0 million in loans, bringing its nine-month total for 2013 to $1.88 billion. 

In late 2011 the Bank began to acquire Home Equity Conversion Mortgage ("HECM") loans insured by the U.S. Federal Housing Administration.  In the third quarter the Bank acquired and/or funded $57.5 million in HECM loans, bringing its year-to-date total to $183.3 million. 

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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