Silvergate Bank has reported increased net income in the second quarter compared to the first quarter and to the same period last year.
The bank’s net income for the second quarter was $1.51 million, compared to $943,000 for the prior quarter and $1.37 million for the second quarter last year. Net income for the first half of 2014 was $2.45 million, compared to $2.76 million last year.
Total assets at the end of the quarter increased to $734.1 million, up $9.24 million due to increased balances in mortgage warehouse loans, commercial real estate loans, construction loans and single-family residential mortgage loans.
The bank’s net interest income for the quarter was $5.48 million, compared to $4.66 million for the prior quarter and $5.39 million in the second quarter of last year. The bank’s net interest margin for the second quarter was 3.16 percent, compared to 3.12 percent for the prior quarter, and 3.47 percent for the second quarter last year.
The bank’s margin improved over the prior quarter due to growth in average interest earning assets; however, yields on those assets declined during the period at a faster pace than reductions in interest paid on total deposits and borrowings. The bank continues to replace higher cost maturing time deposits with lower cost deposits and short-term borrowings to match the re-pricing characteristics of the loan portfolio.
Noninterest income was $2.58 million for the second quarter, compared to $1.63 million for the prior quarter, and $1.86 in last year’s second quarter. Noninterest income for the period included a $1.4 million gain on the sale of a foreclosed real estate property as nonperforming assets continue to decline and core noninterest income grew compared to the prior quarter due to increased gain on sale of loans and mortgage warehouse fees. Noninterest expense was $5.55 million for the quarter, compared to $4.76 million for the prior quarter and $5.10 million last year, as general and administrative costs grew to facilitate the Bank’s asset growth.
Loans funded and purchased by the bank’s Mortgage Warehouse Lending Division totaled $616.6 million for the second quarter and $989.5 million for the first half of 2014. Mortgage warehouse loan balances totaled $138.5 million at June 30.
Commercial real estate loan balances grew 12 percent to $219.0 million at June 30, compared to $195.1 million as of March 31. Residential loan balances, including reverse mortgages, declined 17 percent to $231.1 million compared to $278.5 million as of March 31 due to loan sales in the quarter.
Total deposits grew by 6 percent for the second quarter. Year-to-date the bank has experienced growth in deposits of 16 percent, or $64 million, excluding the sale of the bank’s Lancaster branch office in the first quarter. At June 30, deposits totaled $472.1 million.
Silvergate Bank’s Tier 1 Leverage Capital Ratio was 10.32 percent at June 30, and Total Risk-Based Capital Ratio was 15.48 percent, both substantially exceeding ‘well capitalized’ minimums of 5 percent and 10 percent. The bank’s ratios of nonperforming loans to total loans and nonperforming assets to total assets both remained low, declining to 0.58 percent and 0.51 percent, respectively.
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Executive Editor George Chamberlin speaks with Alan Lane, president and CEO of Silvergate Bank, about Lane's view on post-recession hesitancy in the financial industry and the bank's strategy for financing small businesses.