Silvergate Bank's First Quarter Net Income Of $1.4 Million is Among Highest In Bank's 25-Year History

LA JOLLA, Calif., May 1, 2013 /PRNewswire/ -- Silvergate Bank of San Diego reports strong first quarter 2013 earnings with net income of $1.4 million, the fourth highest quarterly profit in its 25-year history.    

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The San Diego community bank, which specializes in serving small business, also maintained capital and asset quality ratios superior to industry averages, funded over $663 million in single-family residential mortgage loans during the quarter, and reported a 13.6 percent increase in commercial real estate loans over the past 12 months.  Additionally, 84% noninterest bearing demand deposit growth fueled a 48% increase in the Bank's total deposits since March 31, 2012. 

"We are pleased to report that Silvergate Bank delivered another robust earnings performance in the first quarter of 2013," said Alan J. Lane, Silvergate Bank's president and chief executive officer.  "Additionally, our capital and asset quality ratios continue to be superior to comparable averages for all FDIC insured banks.  Our levels of 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 March 31, 2013, Silvergate Bank's Tier 1 Leverage Capital Ratio was 11.01% and Total Risk-Based Capital Ratio was 17.74%, 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 remained low, at 1.26% and 1.01%, respectively.

Among other highlights of the Silvergate Bank earnings report was its acquisition and funding of $50 million in U.S. Government insured reverse mortgage loans during the first three months of the year.  

"Silvergate Bank's continued profitability from our  core commercial banking activities and diversified revenue streams positions us well in the challenging environment in which we operate, and supports our ability to serve our entire range of clients," said Dennis S. Frank, Bank chairman.

Financial Performance

The Bank's net income for the first quarter of 2013 was $1,393,000, compared to $1,029,000 for the first quarter of 2012, a 35% increase.  Bank net income decreased as compared to the fourth quarter of 2012, due primarily to that period being an exceptionally strong quarterly performance that was not expected to be repeated in 2013.  Total assets of $638.5 million at March 31, 2013 represented a 19% increase from March 31, 2012, but a 6.7% decrease from December 31, 2012; the latter decline was due mainly to lower levels of mortgage warehouse single-family residential loans, whose balances typically peak in the fourth quarter of the year. 

The Bank's net interest margin was 3.41% for the first quarter of 2013, compared to 3.81% for the fourth quarter of 2012 and 4.37% for the first quarter of 2012.  This year over year margin decline resulted mainly from a greater decrease in the yield on our earning assets (0.97%) than in our cost of funds (0.10%); the decline in earning asset yield was due primarily to growth in lower yielding assets including cash and reverse mortgage loans.  Net interest income was $5.4 million for the first quarter, compared to $6.0 million for the fourth quarter of 2012 and $5.2 million for the first quarter of 2012; the decrease from the fourth quarter of 2012 resulted mainly from lower interest income on the reduced balances of mortgage warehouse loans noted above.  Noninterest income was $1.7 million in the first quarter, a substantial increase from $0.3 million in the first quarter of 2012, but a decrease from the fourth quarter of 2012, with that quarter having included over $1.3 million more in loan sale gains and fee income than were recognized in the first quarter of 2013.  Noninterest expense in the first quarter was $4.7 million, slightly above the fourth quarter of 2012 and up from $3.7 million for the first quarter of 2012; this annual increase reflects the full effect of higher employee related and occupancy costs associated with the Bank's growth in staffing, assets, and headquarters and branch office space, a large portion of which occurred after the first quarter of 2012.

Growth in Commercial Banking Platform

The Bank's historically strong profile in commercial real estate lending continued in the first quarter of 2013, with total commercial real estate loans growing to $202.1 million at March 31, 2013, representing an increase of 13.6% over the comparable total of $177.9 million at March 31, 2012.  The Bank's expanding deposit franchise has been a key component of the Bank's growth in total assets and net interest income.  Total deposits grew by 48% in the past twelve months, with noninterest bearing demand deposits growing by 84%.  Our total deposit growth included $10.5 million in the Bank's Internet Branch, which allows us to deliver superior service to additional clients outside our branch network.  Despite the significant costs of opening two new branch offices and relocating a third in the past 21 months, the Bank has generated strong 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, funding over $663 million in loans.  While this total was lower than record fundings in the fourth quarter of 2012, it was 58% greater than the $419 million in loan fundings during the first quarter of 2012.  This substantial year over year improvement was driven by an increase in the number of mortgage banker clients we serve, and is more impressive given the April 2013 forecasts by the Mortgage Bankers Association of America for decreases in 2013 single-family residential loan originations by 5.7% for the first quarter and 15.5% for the full year versus comparable periods in 2012.

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 $50.0 million in HECM loans and completed the sale of one pool of HECM loans in the first quarter of 2013.  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. 

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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