Silvergate Bank Announces Second Quarter 2012 Earnings Of $1.46 Million

News provided by

Jul 31, 2012, 03:49 ET

LA JOLLA, Calif., July 31, 2012 /PRNewswire/ -- Silvergate Bank, a San Diego-based bank that specializes in serving small businesses, today announced record quarterly and semi-annual earnings, with second quarter 2012 net income of $1,460,000 and first half 2012 net income of $2,489,000. The Bank's results are the highest in its 24-year history and represent substantial increases over 2011, with second quarter net income up 89% over the same period last year and six-month net income up 61%.

(Logo: http://photos.prnewswire.com/prnh/20120731/LA49618LOGO)

In addition to continued growth in its commercial banking platform, Silvergate Bank's second quarter performance highlights included funding $467 million in residential mortgage loans through its warehouse lending division, acquiring $49.1 million in reverse mortgage loans guaranteed by the U.S. Federal Housing Administration, and completing several sales of reverse mortgage loans. At June 30, 2012, the Bank's capital ratios remained strong – Tier 1 Leverage Capital Ratio was 12.36% and Total Risk-Based Capital Ratio was 17.22%, both substantially exceeding "well capitalized" minimums of 5% and 10%.

"We are pleased to report that net income for the second quarter and first half of 2012 significantly outperformed the preceding quarter and the comparable periods in 2011, and represented the highest quarterly and semi-annual earnings in Silvergate Bank history," said Alan J. Lane, the Bank's president and chief executive officer. "Our well capitalized position ensures our ability to provide clients with innovative services and products to meet their needs today and well into the future."

Lane added that Silvergate Bank's second quarter highlights also include the opening of a new full-service branch in Carlsbad and the relocation and expansion of its La Mesa branch to a more business-friendly facility. "Enhancing our customers' banking experience is a top priority for us. These new locations provide more convenient access to banking services for our growing San Diego customer base."

Financial Performance
The Bank's net income for the second quarter of 2012 was $1,460,000, compared to $1,029,000 for the first quarter of 2012 and $771,000 for the second quarter of 2011, an increase of 89% from the prior year period. Net income for the first half of 2012 was $2,489,000, compared to $1,544,000 for the first half of 2011, an increase of 61%. Total assets grew to $560.5 million at June 30, 2012, as compared to $470.5 million at December 31, 2011. The largest factor in the Bank's asset growth was significantly increased balances in held-for-sale reverse mortgage loans, with more modest increases in other categories of loans held for investment.

The Bank's net interest margin was 4.19% for the second quarter of 2012 and 4.22% for the first half, compared to 2011 figures of 4.68% for the first quarter and 4.38% for the first half. Net interest income in 2012 was $5.3 million for the second quarter and $10.5 million for the first half, compared to 2011 figures of $3.9 million for the first quarter and $7.4 million for the first half. 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 $14.1 million to $39.6 million. Noninterest income in 2012 increased to $1.3 million for the second quarter and $1.6 million for the first half, as compared to 2011 figures of $601,000 for the second quarter and $1.1 million for the first half; gains on sales of reverse mortgage loans and increased warehouse lending fee income were the largest contributors to these increases. Noninterest expense in 2012 was $4.1 million for the second quarter and $7.8 million for the first half, compared to 2011 figures of $3.0 million for the first quarter and $5.6 million for the first half; 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 record profitability we achieved in the second quarter and first half of the year reflects the diversified revenue streams we have worked to build. Despite the challenges of a compressed interest rate environment, we have also maintained a net interest margin that exceeds the average for 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 second quarter of 2012. Loan fundings of $35.5 million in the quarter increased the Bank's commercial real estate loans to $185.4 million at June 30, 2012, representing increases of 41.7% and 19.9% over the comparable totals of $130.8 million and $154.7 million at June 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 53% in the past twelve months, with noninterest bearing demand deposits growing by 181%. The Bank has made a significant investment in opening two new branch offices and relocating a third in the past year. Despite the significant costs of this expansion, 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 second quarter of 2012 the division funded over $467.4 million in loans, bringing its total fundings for the first half of 2012 to $886.6 million, and its cumulative fundings since April 2009 to over $3.7 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 guaranteed by the U.S. Federal Housing Administration. The Bank acquired $49.1 million in HECM loans in the second quarter of 2012, bringing its total acquisitions for the first half to $102.7 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 second quarter of 2012.

Capital Ratios
The Bank continues to substantially exceed federal regulatory standards to be characterized as "well-capitalized." At June 30, 2012 its Tier 1 Leverage Capital Ratio was 12.36% and its Total Risk-Based Capital Ratio was 17.22%. These ratios exceed the "well-capitalized" minimums for each category of 5% and 10%, respectively, and also exceed the comparable average ratios reported for all FDIC-insured institutions at March 31, 2012, which were 9.20% and 15.52%, respectively.

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.

Silvergate Bank Selected Financial and Operating Data (Dollars in Thousands – Unaudited)

	Three Months Ended				Six Months Ended
INCOME STATEMENT	June 30, 2012	March 31, 2012	June, 2011	Annual Change	June 30, 2012	June 30, 2011	Annual Change

Interest Income	$ 6,472	$ 6,206	$ 5,014	29%	$ 12,678	$ 9,678	31%
Interest Expense	1,135	1,043	1,087	4%	2,178	2,248	-3%
Net Interest Income	5,337	5,163	3,927	36%	10,500	7,430	41%
Provision for Loan Losses	50	50	250	-80%	100	350	-71%
Total Noninterest Income	1,344	299	601	124%	1,643	1,134	45%
Total Noninterest Expense	4,116	3,689	2,963	39%	7,805	5,583	40%
Income Before Taxes	2,515	1,723	1,315	91%	4,238	2,631	61%
Income Tax Expense	1,055	694	544	94%	1,749	1,087	61%
Net Income	$ 1,460	$ 1,029	$ 771	89%	$ 2,489	$ 1,544	61%

Performance Ratios
Net Interest Margin	4.19%	4.37%	4.68%		4.22%	4.38%
Return on Average Assets	1.09%	0.85%	0.90%		0.97%	0.89%
Return on Average Equity	8.83%	6.36%	7.69%		7.61%	7.88%
Efficiency Ratio	61.61%	67.54%	65.43%		64.28%	65.18%
Net Loan Charge-Offs to Average Total Loans	-0.16%	0.47%	0.06%		0.14%	0.07%


BALANCE SHEET	June 30, 2012	March 31, 2012	December 31, 2011	September 30, 2011	June 30, 2011	Annual Change

Cash and Due from Banks	$ 19,179	$ 16,280	$ 23,438	$ 25,532	$ 8,200	134%
Investments	74,210	78,670	82,011	85,123	85,435	-13%
Total Cash & Investments	93,389	94,950	105,449	110,655	93,635	0%
Loans Held for Investment ("HFI")	359,503	358,429	341,210	320,819	261,950	37%
Allowance for Loan Losses	(3,846)	(3,624)	(4,028)	(4,360)	(4,450)	-14%
Loans HFI, net	355,657	354,805	337,182	316,459	257,500	38%
Loans Held for Sale	98,829	74,058	17,085	200	105	94023%
Real Estate Owned ("REO")	3,925	3,925	3,793	17	73	5277%
Other Assets	8,680	7,270	6,967	7,020	7,450	17%
Total Assets	$ 560,480	$ 535,008	$ 470,476	$ 434,351	$ 358,763	56%

Noninterest Bearing Demand Deposits	$ 39,630	$ 34,804	$ 31,530	$ 22,428	$ 14,113	181%
Interest Bearing Demand Deposits	2,630	1,894	1,800	1,542	1,840	43%
NOW, Money Market, and Savings,Accounts	116,740	108,445	104,333	95,474	82,478	42%
Certificates of Deposit	207,805	185,053	144,982	156,031	141,073	47%
Total Deposits	366,805	330,196	282,645	275,475	239,504	53%
FHLB Advances and Other Borrowings	122,316	136,823	121,890	103,111	76,254	60%
Other Liabilities	4,722	2,768	2,168	3,793	2,760	71%
Total Liabilities	493,843	469,787	406,703	382,379	318,518	55%
Total Shareholder's Equity	66,637	65,221	63,773	51,972	40,245	66%
Total Liabilities and Shareholder's Equity	$ 560,480	$ 535,008	$ 470,476	$ 434,351	$ 358,763	56%

Asset Quality Ratios
Noncurrent Loans to Total Loans	1.45%	1.71%	2.94%	3.12%	4.13%
Loss Allowance to Noncurrent Loans	57.97%	49.00%	38.25%	43.55%	41.10%
Allowance for Loan Losses to Loans HFI	1.07%	1.01%	1.18%	1.36%	1.70%
Noncurrent Loans plus REO to Total Assets	1.88%	2.12%	3.04%	2.31%	3.04%

Capital Ratios
Tier I Leverage Capital Ratio	12.36%	13.39%	15.50%	14.23%	11.74%
Total Risk-Based Capital Ratio	17.22%	17.36%	18.86%	17.20%	16.21%