Silvergate Bank Reports Third Quarter 2015 Results

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Nov 10, 2015, 09:05 ET

LA JOLLA, Calif., Nov. 10, 2015 /PRNewswire/ -- Silvergate Bank today announced financial results for the quarter ended September 30, 2015, with net income of $2.3 million, up $1.3 million or 133% over the same quarter last year. The Bank's total assets increased to $889.6 million from $864.7 million at year end 2014 and equity grew to $82.0 million from $75.6 million over the same time period.

"Our operating results reflect the strong partnerships we've developed with both our local business customers and our national residential loan originators," said Alan Lane, the Bank's Chief Executive Officer. "Their successes this year have led to our success, and we continue to focus on strengthening and expanding these types of relationships."

Financial Performance

The Bank's net income for the quarter was $2.3 million, compared to $3.1 million for the prior quarter and $980 thousand for the third quarter last year. For the nine-month period ending September 30, 2015, net income totaled $6.5 million, an 89% increase over the same period last year. Total assets decreased $46.9 million from June 30, 2015, as increased commercial loan production was offset by sales of single family residential mortgage loans. Total loans increased by $26.7 million from year end 2014, reflecting increases in commercial real estate, commercial and residential loans, offset by the sale of residential mortgage loans. Total deposits increased by $93.2 million over the same period, including $52.4 million in non-interest bearing demand deposits.

The Bank's net interest income for the quarter ended September 30, 2015 was $7.7 million, compared to $8.9 million for the prior quarter and $6.0 million in the third quarter of last year. The Bank's net interest margin for the third quarter was 3.59%, compared to 3.87% for the prior quarter, and 3.27% for the third quarter last year. Net interest income totaled $23.5 million for the first nine months of 2015, a $7.4 million, or 46%, increase over the same period in 2014, as both loan volumes and asset yields improved over the prior period. The net interest margin for the first nine months of 2015 was 3.61% versus 3.18% in 2014. The increase in net interest margin from the prior year reflected additional volumes of higher-yielding assets and higher Federal Home Loan Bank dividend payments.

The Bank's third quarter provision for loan losses totaled $247 thousand dollars bringing year to date provision to $1.2 million dollars, compared to $396 thousand in the same period last year, as the Bank built its reserve levels in response to loan growth and the expansion of its commercial lending activities. The Bank experienced no charge-offs in the third quarter of 2015 and recorded $17 thousand in net recoveries. This compares to net charge-offs and recoveries of $30 thousand and $1 thousand, respectively, in the second quarter. Year to date net charge-offs are $41 thousand and recoveries are $94 thousand. Over the same period last year net charge-offs were $43 thousand and recoveries were $18 thousand.

Noninterest income totaled $1.5 million for the quarter ended September 30, 2015, compared to $2.5 million for the prior quarter. The decrease is due to higher gains on loan sales and other assets in the prior quarter. Year to date, the Bank generated $4.4 million in noninterest income, compared to $4.8 million in 2014. The reduction from 2014 reflects lower income from asset sales.

Noninterest expense was $5.2 million for the third quarter of 2015, compared to $5.6 million for the prior quarter and $4.6 million for the same period last year. For the nine months ended September 30, 2015, noninterest expense totaled $15.9 million, compared to $14.9 million for the same period in 2014. The increase reflects higher compensation expense resulting from stronger production activity and increased staffing.

"We continued to experience strong loan production at attractive yields during the third quarter, while maintaining our traditionally conservative credit underwriting standards" said Derek Eisele, the Bank's President. "Our performance is attributable to experienced bankers partnering with successful customers in a moderately expanding economy."

Balance Sheet Activity

The Bank's total loan balance was $786.9 million at September 30, 2015, a 4.3% reduction from June 30, 2015, and an 18% increase from September 30, 2014. The Bank's Mortgage Warehouse Lending Division continued to produce strong volumes, with $908 million and $3.0 billion in loans funded in the third quarter and the first nine months of 2015, respectively. This compares to $747 million and $1.7 billion in loans funded during the same periods last year.

Other residential loan balances totaled $284.1 million at September 30, 2015, compared to $321.3 million and $249.2 million at June 30, 2015 and September 30, 2014, respectively. The decrease from June is primarily a result of $51.1 million in sales of residential mortgages, while the increase from last year reflects higher other mortgage balances. Commercial loan balances increased 19% from last quarter, totaling $274.4 million at September 30, 2015, compared to $230.8 million and $240.7 million as of June 30, 2015 and September 30, 2014, respectively.

At September 30, 2015, deposits totaled $639.4 million, compared to $629.3 million at the prior quarter end and $493.2 million at September 30, 2014. Deposit balances have risen 1.6% since June 30, 2015 and 29.6% from September 30, 2014. The year-over-year growth in deposits reflects focused marketing efforts, including increases of $77.2 million in noninterest bearing deposit accounts, and $18.6 million in other transaction, money market and savings accounts.

At September 30, 2015, Silvergate Bank's Tier 1 Leverage Capital Ratio was 9.53% and Total Risk-Based Capital Ratio was 14.40%, both substantially exceeding "well capitalized" minimums of 5.00% and 10.00%. The Bank's ratios of nonperforming loans to total loans and nonperforming assets to total assets each decreased from the prior quarter end to 0.51% and 0.56%, respectively.

About Silvergate Bank

Silvergate Bank (www.silvergatebank.com) 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.

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.