Silvergate Bank Reports Fourth Quarter And Full Year 2016 Results

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Feb 02, 2017, 08:05 ET

LA JOLLA, Calif., Feb. 2, 2017 /PRNewswire/ -- Silvergate Bank today announced financial results for the quarter and fiscal year ended December 31, 2016, with net income of $2.4 million and $8.1 million, respectively. The Bank's total assets increased to $978.1 million from $948.2 million at year end 2015 and equity increased to $85.2 million from $83.5 million over the same time period.

"We are pleased to report that 2016 was the Bank's nineteenth consecutive year of profitability with net income consistent with 2015, the highest net income year in our history," said Alan Lane, the Bank's chief executive officer. "We did this while simultaneously making a very substantial investment in technology that will allow Silvergate to expand our products and services to our business customers."

Financial Performance

The Bank's net income for the fourth quarter of 2016 was $2.4 million, compared to $2.1 million in the third quarter and $1.7 million in the fourth quarter of last year. For the twelve-month period ending December 31, 2016, net income was $8.1 million, consistent with the prior year's results. Last year's twelve-month period ending December 31, 2015 included a non-recurring gain of $1.1 million from the sale of an asset.

The Bank's net interest income for the fourth quarter of 2016 was $9.2 million, compared to $9.1 million in the third quarter and $8.1 million for the fourth quarter of last year. Net interest income totaled $34.9 million for the year ended 2016, a $3.4 million, or 11%, increase over the same period in 2015, as both loan volumes and asset yields improved over the prior period. The Bank's net interest margin for the fourth quarter was 3.88%, compared to 3.86% for the prior quarter, and 3.64% for the fourth quarter last year. The increase from the prior quarters reflects an increase in higher yielding assets over the prior periods.

The Bank's provision for loan losses totaled $52 thousand for the fourth quarter and $1.1 million year-to-date 2016, compared to $679 thousand and $1.9 million for the fourth quarter and full year of 2015, respectively. 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 net recoveries of $18 thousand in the fourth quarter of 2016, compared to net charge-offs of $3 thousand in the previous quarter, and net charge-offs of $15 thousand in the fourth quarter of 2015. Total charge-offs in 2016 were $11 thousand and recoveries were $18 thousand, resulting in a net recovery of $7 thousand for the year. Over the same period last year total charge-offs were $56 thousand and recoveries were $94 thousand.

Noninterest income totaled $790 thousand for the fourth quarter, compared to $833 thousand for the prior quarter, and $375 thousand for the fourth quarter of 2015. For the year-ended December 31, 2016, the Bank generated $3.3 million of noninterest income, compared to $4.8 million in 2015. The reduction from 2015 reflects a decline in the gains on sales of loans and other assets.

Noninterest expense was $5.8 million for the fourth quarter of 2016, compared to $6.2 million for the prior quarter and $5.1 million for the same period last year. For the year ended December 31, 2016, noninterest expense was $23.6 million, compared to $21.0 million last year. The increase over the prior year reflects increased compensation expense resulting from stronger production activity as well as additional communication and data processing expenses related to a data processing system conversion successfully completed in the third quarter of 2016.

"The Bank's success in 2016 was largely due to strong loan production at good yields," noted Dennis Frank, the Bank's chairman. "The Bank experienced record growth in our residential lending activity as we continued to focus on expanding the partnerships that we've developed with both our local business customers and our national residential loan originators."

Balance Sheet Activity

The Bank's total loan balances were $836.1 million at December 31, 2016, compared to $834.2 million for the prior quarter and $835.5 million at December 31, 2015. The Bank's Mortgage Warehouse Lending Division experienced its strongest production year, with $1.3 billion and $4.8 billion in loans funded in the fourth quarter and full year of 2016, respectively. This compares to $839 million and $3.9 billion in loans funded during the same periods last year.

Total commercial real estate loan balances increased 3.9% during the fourth quarter, totaling $377.4 million at December 31, 2016, compared to $363.7 million and $300.9 million at September 30, 2016, and December 31, 2015, respectively. Residential loan balances totaled $445.6 million at December 31, 2016, compared to $457.6 million and $496.4 million at September 30, 2016, and December 31, 2015, respectively.

At December 31, 2016, deposits totaled $769.9 million, compared to $769.2 million at the prior quarter-end and $634.3 million at December 31, 2015. Deposit balances increased by 0.09% compared to the prior quarter and 21.4% compared to December 31, 2015. The year-over-year growth in deposits reflects focused marketing efforts to increase the Bank's core deposits resulting in increases of $86.8 million in other transaction, money market and savings accounts and $48.8 million in noninterest bearing demand deposits.

At December 31, 2016, Silvergate Bank's Tier 1 Leverage Capital Ratio was 9.03% and Total Risk-Based Capital Ratio was 14.31%, 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 0.42% in the prior quarter to 0.61%, and nonperforming assets to total assets increased from 0.45% in the prior quarter to 0.58%.

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.