The Bank's net income for the third quarter of 2016 was $2.1 million, compared to $1.7 million in the second quarter and $2.3 million in the third quarter of last year. For the nine-month period ending September 30, 2016, net income was $5.7 million, compared to $6.5 million for the same period in the prior year. Last year's nine-month period ending September 30, 2015 included a non-recurring gain of $1.1 million from the sale of an asset.
The Bank's net interest income for the third quarter of 2016 was $9.1 million, compared to $8.5 million in the second quarter and $7.7 million for the third quarter of last year. The Bank's net interest margin for the third quarter was 3.86%, compared to 3.76% for the second quarter, and 3.59% for the same period last year. The increase in the net interest margin from the prior quarter reflects an increase in higher yielding assets over the prior period.
The Bank's provision for loan losses was $266 thousand for the third quarter of 2016, compared to $497 thousand for the second quarter and $247 thousand for the third quarter of last year. The Bank added to its allowance for loan losses during the quarter in response to loan growth and the continued expansion of its commercial lending activities. The Bank experienced $3 thousand in charge-offs with no recoveries during the third quarter of 2016, compared to $8 thousand in charge-offs with no recoveries during the second quarter. Year to date total charge-offs are $11 thousand with no recoveries. Over the same period last year total charge-offs were $41 thousand and recoveries were $94 thousand.
Noninterest income was $833 thousand for the third quarter, compared to $652 thousand for the prior quarter, and $1.5 million for the same quarter last year. The increase over the prior quarter primarily reflects an increase in the gain on sale of loans during the current quarter. For the first nine months of 2016, noninterest income was $2.5 million, compared to $4.4 million in 2015. The decrease over the prior year reflects a decline in the gains on sales of loans and other assets. Noninterest expense was $6.2 million for the quarter, compared to $5.8 million for the prior quarter and $5.2 million during the same quarter last year. For the nine-month period ending September 30, 2016, noninterest expense was $18.2 million, compared to $16.2 million last year. The increase over the prior periods reflects increased compensation expense resulting from higher loan production levels as well as additional communication and data processing expenses related to a successful core data processing system conversion.
"The third quarter's net income was supported by continued strong loan production at good yields," noted Derek Eisele, the Bank's president. "The Bank successfully completed a core system conversion during the quarter that will enhance Silvergate's ability to provide innovative products and outstanding service to our customers."
Balance Sheet Activity
The Bank's total loan balances increased by $16.7 million during the third quarter of 2016 to $834.2 million. The Bank's Mortgage Warehouse Lending Division continued to produce strong volumes, with $1.4 billion and $3.5 billion in loans funded in the third quarter and the first nine months of 2016, respectively. This compares to $908 million and $3.0 billion in loans funded during the same periods last year.
Total commercial real estate loan balances increased 11.5% during the third quarter, totaling $350.7 million at September 30, 2016, compared to $317.7 million and $252.7 million at June 30, 2016, and September 30, 2015, respectively. Residential loan balances totaled $306.1 million at September 30, 2016, compared to $327.1 million and $335.4 million at June 30, 2016, and September 30, 2015, respectively.
At September 30, 2016, deposits totaled $769.2 million, compared to $720.8 million at the prior quarter-end and $639.4 million at September 30, 2015. Deposit balances increased by 6.7% compared to the prior quarter and 20.3% compared to September 30, 2015.
At September 30, 2016, Silvergate Bank's Tier 1 Leverage Capital Ratio was 9.13% and Total Risk-Based Capital Ratio was 14.52%, both substantially exceeding "well capitalized" minimums of 5.00% and 10.00%. The Bank's asset quality ratios have continued to remain strong; nonperforming loans to total loans increased from 0.33% in the prior quarter to 0.42%, and nonperforming assets to total assets increased from 0.37% in the prior quarter to 0.45%.
About Silvergate Bank
Silvergate Bank is a San Diego-based bank that specializes in meeting the needs of businesses and residential loan producers 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, and La Mesa and a loan production office is located in Seal Beach in Orange County. 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.
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SOURCE Silvergate Bank