Silvergate Bank Announces Record Earnings And 15th Consecutive Profitable Year

LA JOLLA, Calif., Jan. 28, 2013 /PRNewswire/ -- Silvergate Bank, a San Diego-based bank that specializes in serving small businesses, today announced its financial results for the three months and year ended December 31, 2012.  Highlights include:

• Quarterly net income of $2.5 million and full year net income of $7.4 million
• 15^th consecutive year of profitable performance for Silvergate Bank
• Return on average assets of 1.31% and return on average equity of 10.97% for 2012
• 66% noninterest bearing demand deposit growth fueled 74% total deposit growth over past 12 months
• Commercial real estate loans increased 25% over past 12 months
• Funded over $2.3 billion in single-family residential mortgage loans during the year
• Acquired / funded $238.9 million in U.S. Government insured reverse mortgage loans in 2012

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"We are pleased to report that Silvergate Bank's 2012 earnings were the highest in our history, and represented our 15^th consecutive year of profitable operations," said Alan J. Lane, the Bank's president and chief executive officer. Total assets increased to $684.4 million as of December 31, 2012, and loans and deposits both grew by over $200 million for the year. 

"Additionally, our capital ratios also remained strong – Tier 1 Leverage Capital Ratio was 10.92% and Total Risk-Based Capital Ratio was 15.66%, both substantially exceeding 'well capitalized' minimums of 5% and 10%," Lane said.  "Our strong asset and deposit 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.  As Silvergate Bank enters 2013, our profitability and solid capital position ensure our ability to continue providing our clients with the innovative products and services they have come to expect from us to meet their needs." 

Financial Performance

The Bank's net income for the fourth quarter of 2012 was $2,542,000, compared to $2,360,000 for the third quarter of 2012 and $801,000 for the fourth quarter of 2011, an increase of 217% from the prior year period.  Net income for 2012 was $7,390,000, compared to $3,084,000 for 2011, an increase of 140%.  Total assets grew to $684.4 million at December 31, 2012, as compared to $470.5 million at December 31, 2011, an increase of 45%. 

The Bank's net interest margin was 3.81% for the fourth quarter of 2012 and 4.01% for the full year, compared to 2011 figures of 4.20% for the fourth quarter and 4.37% for the year.  Net interest income in 2012 was $6.0 million for the fourth quarter and $22.2 million for the year, compared to 2011 figures of $4.3 million for the fourth quarter and $15.8 million for the year.  These sizeable net interest income improvements in 2012 as compared to 2011 were primarily due to significant increases in interest income and more modest rises in interest expense, the latter resulting in part from the Bank's substantial growth in noninterest bearing demand deposits over the twelve months, from $31.5 million to $52.3 million.  Noninterest income in 2012 increased to $3.0 million for the fourth quarter and $8.0 million for the year, as compared to 2011 figures of $202,000 for the fourth quarter and $1.5 million for the year; gains from reverse mortgage banking activity and increased warehouse lending fee income were the largest contributors to these increases.  Noninterest expense in 2012 was $4.7 million for the fourth quarter and $17.3 million for the year, compared to 2011 figures of $2.9 million for the fourth quarter and $11.3 million for the year; 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, "Silvergate's record profitability in 2012 was a product of both the diversified revenue streams we have worked to build over the past several years and continued growth and success in our core commercial banking activities.  Despite the compressed interest rate environment in which we operate, our net interest margin continues to exceed the average of all California commercial banks, and supports our ability to serve our entire range of clients."

Growth in Commercial Banking Platform

The Bank's historically strong profile in commercial real estate lending continued in the fourth quarter of 2012.  Loan fundings of $16.1 million in the quarter increased the Bank's commercial real estate loans to $202.6 million at December 31, 2012, representing an increase of 24.8% over the comparable total of $162.3 million at December 31, 2011.  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 73.6% in the past twelve months, with noninterest bearing demand deposits growing by 65.8%.  Despite the significant costs of opening two new branch offices and relocating a third in the past 18 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.  To complement the Bank's five current physical branch locations, in November 2012 the Bank expanded its banking platform by introducing a mobile banking application for smartphones and an Internet Branch offering online opening of certificates of deposit through our website at www.silvergatebank.com.

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 fourth quarter of 2012 the division funded $815.3 million in loans, bringing its total fundings for 2012 to over $2.3 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 $44.3 million in HECM loans in the fourth quarter of 2012, bringing its total acquisitions and fundings for the year to $238.9 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 a number of sales of HECM loans during 2012, and also completed two securitizations of such loans following its July 2012 approval 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