Silvergate Bank Reports First Quarter 2018 Results

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May 15, 2018, 09:05 ET

LA JOLLA, Calif., May 15, 2018 /PRNewswire/ -- Silvergate Bank today announced financial results for the quarter ended March 31, 2018, with net income of $3.9 million. The Bank's total assets were $1.90 billion at quarter end, compared to $1.89 billion at December 31, 2017, and equity capital increased to $154.7 million, compared to $92.3 million at yearend 2017. $60 million of this increase was a capital contribution from our parent holding company, Silvergate Capital Corporation, following its completion of a private placement during the quarter generating gross proceeds of $114 million. Our significantly increased capital will support further growth in the Bank's nationwide fintech deposit initiative and its business banking and residential lending activities.

"We are very pleased with the outcome of our parent firm's private placement and our strong earnings for the first quarter of 2018," said Alan Lane, the Bank's chief executive officer. "Our higher capital base will sustain continued investments in technology and people to expand and improve the products and services offered to our business customers."

Financial Performance

The Bank's net income for the first quarter of 2018 was $3.9 million, compared to $2.3 million for the prior quarter, and $1.6 million for the first quarter last year.

The Bank's net interest income for the first quarter of 2018 was $15.6 million, compared to $13.9 million for the prior quarter, and $10.3 million for the first quarter last year. These increases over prior periods were due to an increase in interest earning assets combined with a decline in interest bearing liabilities. The Bank's net interest margin for the first quarter was 3.19%, compared to 3.57% for the prior quarter, and 3.94% for the first quarter last year. The decrease from prior quarters is primarily the result of significant growth in lower yielding interest assets relative to the increase in interest income on those assets.

The Bank's provision for loan losses totaled $143 thousand for the first quarter, compared to $30 thousand for the prior quarter, and $23 thousand for the first quarter last year. The Bank added to its allowance for loan losses during the quarter in response to the continued expansion of its commercial lending activities. The Bank experienced net recoveries of $9 thousand in the first quarter of 2018, compared to net recoveries of $56 thousand in the previous quarter, and net charge-offs of $136 thousand in the first quarter of 2017.

Noninterest income totaled $1.4 million for the quarter ended March 31, 2018, compared to $1.5 million for the prior quarter, and $529 thousand for the first quarter of 2018. The variance over the prior year's first quarter primarily reflects increased fee income related to growth in cash management services for the Company's fintech deposit division.

Noninterest expense was $10.9 million for the first quarter of 2018, compared to $8.9 million for the prior quarter, and $6.8 million for the same period last year. These increases over prior periods primarily reflect higher compensation expense resulting from strong production activity and increases in total employees as the Bank continued to expand its fintech and business banking activities.

"The first quarter's net income was supported by continued strong loan production at good yields," noted Derek Eisele, the Bank's president.

Balance Sheet Activity

The Bank's total assets were $1.90 billion at March 31, 2018, compared to $1.89 billion at December 31, 2017, and $949.0 million at March 31, 2017. The Bank's total loans were $859.4 million at March 31, 2018, compared to $879.7 million at December 31, 2017, and $809.9 million at March 31, 2017.

The Bank's Mortgage Warehouse Lending Division experienced lower production volumes during the first quarter, with $824.9 million in loans funded for the first quarter, compared to $982.8 million in the prior quarter and $857.3 million in the first quarter of 2017. Total commercial real estate loan balances totaled $367.2 million at March 31, 2018, compared to $375.5 million and $366.5 million at December 31, 2017, and March 31, 2017, respectively. Residential loan balances totaled $432.1 million at March 31, 2018, compared to $459.8 million and $401.0 million at December 31, 2017, and March 31, 2017, respectively. Commercial and industrial loan balances totaled $66.7 million at March 31, 2018, compared to $50.7 million and $49.1 million December 31, 2017, and March 31, 2017, respectively.

At March 31, 2018, deposits totaled $1.7 billion, compared to $1.8 billion at the prior quarter-end, and $769.0 million at March 31, 2017. Deposit balances decreased by 2.2% compared to the prior quarter end, and increased 125.9% compared to March 31, 2017. At March 31, 2018, noninterest bearing deposits totaled $1.4 billion (representing approximately 83% of total deposits), consistent with the prior quarter, and representing a $1.2 billion increase compared to March 31, 2017. The substantial growth in noninterest bearing deposits reflects the Bank's special focus on deposits and cash management services for emerging financial technology companies. At March 31, 2018, deposit balances related to financial technology companies totaled $1.3 billion, an increase of $1.2 billion compared to deposit balances of $98.5 million at March 31, 2017. The Bank has experienced substantial growth in the number of new fintech deposit relationships during the first quarter of 2018, and continues to invest in technology and personnel to support this growth.

At March 31, 2018, Silvergate Bank's Tier 1 Leverage Capital Ratio was 8.13% and Total Risk-Based Capital Ratio was 22.49%, both substantially exceeding "well capitalized" minimums of 5.00% and 10.00%. At March 31, 2018, the ratios of nonperforming loans to total loans and nonperforming assets to total assets remained low, at 0.69% and 0.42%, respectively.

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. The Bank has business banking centers in La Jolla, La Mesa, and San Marcos in San Diego County, and a loan production office located in Seal Beach in Orange County. Silvergate Bank's headquarters office is located at 4250 Executive Square, Suite 300, 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.