Silvergate Bank Reports 16th Consecutive Profitable Year

LA JOLLA, Calif., Feb. 5, 2014 /PRNewswire/ -- Silvergate Bank today announced financial results for the fourth quarter and year ended December 31, 2013.  Full year net income of $5.40 million was the second highest in the Bank's history, and 2013 was the Bank's sixteenth consecutive profitable year.  Total assets at the end of the year were $641.1 million, and the Bank's equity capital was $70.3 million.

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"We are pleased to report that in 2013 Silvergate Bank further extended its record of consistently profitable performance," said Alan J. Lane, the Bank's president and chief executive officer.  "We also continued to maintain capital and asset quality ratios superior to comparable averages for all FDIC insured banks.  These strengths are the foundation of our ability to provide clients with the products and services they have come to expect from us to help support and grow their business."   

At December 31, 2013, Silvergate Bank's Tier 1 Leverage Capital Ratio was 11.42% and Total Risk-Based Capital Ratio was 18.40%, 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, declining to 0.69% and 1.14%, respectively.   

"Silvergate Bank is proud to have achieved its 16^th consecutive year of profitability, with core banking activities and diversified revenue streams continuing to generate income supporting our operations and ability to serve our entire range of clients," said Dennis S. Frank, the Bank's chairman.  

Financial Performance

The Bank's net income for the fourth quarter was $1.27 million, compared to $1.37 million for the prior quarter and $2.54 million for the fourth quarter last year.  Net income for the year was $5.40 million, compared to $7.39 million last year, with the decrease mainly due to reduced noninterest income.  Total assets were $641.1 million at December 31, 2013, down 6% from the prior year-end.  The Bank's equity capital was $70.3 million at December 31, 2013, compared to $70.0 million at year-end 2012, with the Bank's 2013 earnings covering its payment during the year of a $5 million dividend to its parent firm, Silvergate Capital Corporation.

The Bank's net interest income for the quarter was $4.86 million, compared to $6.91 million for the prior quarter and $6.00 million last year.  These quarterly and year-over-year decreases were due to the prior quarter's recognition of $1.3 million in nonrecurring interest income on the payoff of a loan acquired at a large discount, and 2012's fourth quarter representing the highest income quarter in the Bank's history.  Net interest margin for the fourth quarter was 3.19%, compared to 4.39% for the prior quarter (which included the nonrecurring income noted above – 3.53% excluding that income), and 3.81% for the fourth quarter last year.  Net interest income for 2013 was $22.5 million, up slightly from last year's $22.2 million, and full year net interest margin was 3.62% (3.36% excluding nonrecurring income), compared to 4.01% last year.

Benefiting from increased loan sales, noninterest income was $1.65 million for the fourth quarter, compared to $0.45 million for the prior quarter, and $3.02 in last year's fourth quarter (which was among the Bank's best ever).  Full year noninterest income was $5.63 million, compared to $7.98 million last year, with this decrease due to lower levels of loan sale gains and securitization income in 2013.  Noninterest expense was $4.73 million for the quarter, compared to $5.03 million for the prior quarter and $4.66 million last year; full year noninterest expense increased to $19.53 million this year from $17.28 million last year, with the largest part of this increase being higher employee-related costs.

Commercial Banking Platform

Commercial real estate loans totaled $180.8 million at December 31, 2013, compared to $200.9 million at December 31, 2012; as a 15% increase in loan originations for the year was exceeded by loan payoffs.  Total deposits declined by 8% for the year, comparable to the Bank's 6% reduction in total assets, but noninterest bearing demand deposits continued to grow, increasing by 9%.  Despite the significant costs of opening two new branch offices and relocating a third since mid-2011, the Bank's profitability has continued to benefit from its core commercial lending operations and the expanded residential lending activities added in recent years.   

Continued High Volumes of Residential Mortgage Loan Fundings, Acquisitions, and Sales

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 year.  The division funded $2.33 billion in loans in 2013, down only slightly from $2.36 billion in loans in 2012, even though nationwide mortgage loan originations decreased by approximately 14% in 2013 according to the Mortgage Bankers Association of America. 

In late 2011 the Bank began to acquire Home Equity Conversion Mortgage ("HECM") loans insured by the U.S. Federal Housing Administration.  In 2013 the Bank acquired and/or funded $210.1 million in HECM loans, and completed HECM sales or securitizations totaling $137.2 million, which contributed significantly to the Bank's noninterest income for the year.

Agreement Signed to Sell the Bank's Lancaster Branch Office

In December 2013 the Bank announced that it entered into an agreement for the sale of its branch office in Lancaster, California, to Americas United Bank, a community bank headquartered in Glendale, California.  Assuming required approvals from state and federal banking authorities are obtained and the sale is completed in the first half of 2014, this transaction will allow the Bank to reduce costs and better focus on its core geography in the greater San Diego County area.

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