Silvergate Capital Corporation Announces Third Quarter 2020 Results
Silvergate Capital Corporation reported robust financial results for Q3 2020, with net income of $7.1 million, or $0.37 per diluted share, up from $5.5 million in Q2 2020. The Silvergate Exchange Network (SEN) facilitated 68,361 transactions, a 70% increase from Q2 2020, processing $36.7 billion in transfers, marking a 64% quarter-over-quarter rise. Digital currency customer deposits rose to $2.1 billion, and digital currency customers increased to 928. The company’s total risk-based capital ratio stood at 24.68%. Noninterest income decreased by 27.1% sequentially due to lower gains on securities.
- Net income increased to $7.1 million, up from $5.5 million in Q2 2020.
- SEN handled 68,361 transactions, a 70% increase from Q2 2020.
- Digital currency deposits grew by $586 million to $2.1 billion.
- Digital currency customer base expanded to 928, up from 881 in Q2 2020.
- Total risk-based capital ratio at 24.68%, indicating strong capitalization.
- Noninterest income decreased by 27.1% compared to Q2 2020.
- Net interest income decreased to $50.5 million for the nine months ending September 30, 2020, down from $55.3 million in the same period in 2019.
LA JOLLA, Calif.--(BUSINESS WIRE)--Silvergate Capital Corporation (“Silvergate” or “Company”) (NYSE:SI) and its wholly-owned subsidiary, Silvergate Bank (“Bank”), today announced financial results for the three and nine months ended September 30, 2020.
Third Quarter 2020 Financial Highlights
-
Net income for the quarter was
$7.1 million , or$0.37 per diluted share, compared to net income of$5.5 million , or$0.29 per diluted share, for the second quarter of 2020, and net income of$6.7 million , or$0.36 per diluted share, for the third quarter of 2019 -
The Silvergate Exchange Network (“SEN”) handled 68,361 transactions in the third quarter of 2020, an increase of
70% , compared to 40,286 transactions in the second quarter of 2020, and an increase of455% compared to 12,312 transactions in the third quarter of 2019 -
The SEN handled
$36.7 billion of U.S. dollar transfers in the third quarter, an increase of64% compared to$22.4 billion in the second quarter of 2020, and an increase of252% compared to$10.4 billion in the third quarter of 2019 -
Digital currency customer related fee income for the quarter was
$3.3 million , compared to$2.4 million for the second quarter of 2020, and$1.6 million for the third quarter of 2019 - Digital currency customers grew to 928 at September 30, 2020, compared to 881 at June 30, 2020, and 756 at September 30, 2019
-
Digital currency deposits grew by
$586.0 million to$2.1 billion as of September 30, 2020, compared to$1.5 billion as of June 30, 2020 -
At September 30, 2020, outstanding loan deferrals related to COVID-19 was
4.4% of total gross loans held-for-investment compared to15.5% at June 30, 2020 -
Book value per share was
$15.18 at September 30, 2020, compared to$14.36 at June 30, 2020, and$12.92 at September 30, 2019 -
The Company’s total risk-based capital ratio was
24.68% at September 30, 2020, compared to25.54% at June 30, 2020 and25.97% at September 30, 2019
Alan Lane, president and chief executive officer of Silvergate, commented, “Our third quarter results clearly demonstrate the accelerating customer adoption of the Silvergate Exchange Network that we continue to experience as the SEN handled 68,361 transactions in the quarter, a
Mr. Lane continued, “Today, as an industry leader and innovator, our team continues to provide uninterrupted banking access for our customers with
|
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As of or for the Three Months Ended |
||||||||||
|
|
September 30,
|
|
June 30,
|
|
September 30,
|
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|
|
|
|
|
|
|
||||||
Financial Highlights |
|
(Dollars in thousands, except per share data) |
||||||||||
Net income |
|
$ |
7,060 |
|
|
$ |
5,466 |
|
|
$ |
6,656 |
|
Diluted earnings per share |
|
$ |
0.37 |
|
|
$ |
0.29 |
|
|
$ |
0.36 |
|
Return on average assets (ROAA)(1) |
|
1.13 |
% |
|
1.02 |
% |
|
1.20 |
% |
|||
Return on average equity (ROAE)(1) |
|
10.14 |
% |
|
8.72 |
% |
|
11.78 |
% |
|||
Net interest margin(1)(2) |
|
3.19 |
% |
|
3.14 |
% |
|
3.39 |
% |
|||
Cost of deposits(1)(3) |
|
0.01 |
% |
|
0.37 |
% |
|
0.50 |
% |
|||
Cost of funds(1)(3) |
|
0.07 |
% |
|
0.42 |
% |
|
0.59 |
% |
|||
Efficiency ratio(4) |
|
61.74 |
% |
|
65.03 |
% |
|
59.93 |
% |
|||
Total assets |
|
$ |
2,620,573 |
|
|
$ |
2,340,713 |
|
|
$ |
2,136,844 |
|
Total deposits |
|
$ |
2,281,108 |
|
|
$ |
1,670,909 |
|
|
$ |
1,848,095 |
|
Book value per share |
|
$ |
15.18 |
|
|
$ |
14.36 |
|
|
$ |
12.92 |
|
Tier 1 leverage ratio |
|
10.36 |
% |
|
11.57 |
% |
|
10.43 |
% |
|||
Total risk-based capital ratio |
|
24.68 |
% |
|
25.54 |
% |
|
25.97 |
% |
|||
________________________
- Data has been annualized.
-
Net interest margin is a ratio calculated as annualized net interest income, on a fully taxable equivalent basis for interest income on tax-exempt securities using the federal statutory tax rate of
21.0% , divided by average interest earning assets for the same period. - Cost of deposits and cost of funds increased beginning in the second quarter of 2019 due to callable brokered certificates of deposit that were issued as part of a hedging strategy. During the first and second quarters of 2020 all brokered certificates of deposit were called and their unamortized premium expense was fully written-off.
- Efficiency ratio is calculated by dividing noninterest expenses by net interest income plus noninterest income.
Digital Currency Initiative
At September 30, 2020, the Company’s digital currency customers increased to 928 from 881 at June 30, 2020, and from 756 at September 30, 2019. At September 30, 2020, Silvergate had over 200 prospective digital currency customer leads in various stages of the customer onboarding process and pipeline. There were a record 68,361 transactions on the SEN for the third quarter of 2020, an increase of
|
|
Three Months Ended |
||||||||||
|
|
September 30,
|
|
June 30,
|
|
September 30,
|
||||||
|
|
|
|
|
|
|
||||||
|
|
(Dollars in millions) |
||||||||||
# SEN Transactions |
|
68,361 |
|
|
40,286 |
|
|
12,312 |
|
|||
$ Volume of SEN Transfers |
|
$ |
36,663 |
|
|
$ |
22,423 |
|
|
$ |
10,425 |
|
Results of Operations, Quarter Ended September 30, 2020
Net Interest Income and Net Interest Margin Analysis (Taxable Equivalent Basis)
In 2020, the Company made multiple purchases of tax-exempt municipal bonds. Tax-exempt income from these securities is calculated on a taxable equivalent basis. Net interest income, net interest spread and net interest margin are presented on a taxable equivalent basis to consistently reflect income from taxable securities and tax-exempt securities based on the federal statutory tax rate of
Net interest income on a taxable equivalent basis totaled
Compared to the second quarter of 2020, net interest income increased
Average total interest earning assets increased by
Average interest bearing liabilities decreased
Compared to the third quarter of 2019, net interest income increased
Net interest margin for the third quarter of 2020 was
|
|
Three Months Ended |
|||||||||||||||||||||||||||||||
|
|
September 30, 2020 |
|
June 30, 2020 |
|
September 30, 2019 |
|||||||||||||||||||||||||||
|
|
Average
|
|
Interest
|
|
Average
|
|
Average
|
|
Interest
|
|
Average
|
|
Average
|
|
Interest
|
|
Average
|
|||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
|
|
(Dollars in thousands) |
|||||||||||||||||||||||||||||||
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Interest earning assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Interest earning deposits in other banks |
|
$ |
245,855 |
|
|
$ |
196 |
|
|
0.32 |
% |
|
$ |
168,297 |
|
|
$ |
405 |
|
|
0.97 |
% |
|
$ |
234,606 |
|
|
$ |
1,183 |
|
|
2.00 |
% |
Taxable securities |
|
679,277 |
|
|
3,746 |
|
|
2.19 |
% |
|
690,810 |
|
|
4,123 |
|
|
2.40 |
% |
|
935,263 |
|
|
6,510 |
|
|
2.76 |
% |
||||||
Tax-exempt securities(1) |
|
267,511 |
|
|
2,177 |
|
|
3.24 |
% |
|
231,232 |
|
|
1,996 |
|
|
3.47 |
% |
|
— |
|
|
— |
|
|
— |
|
||||||
Loans(2)(3) |
|
1,209,884 |
|
|
13,527 |
|
|
4.45 |
% |
|
1,008,242 |
|
|
11,710 |
|
|
4.67 |
% |
|
979,283 |
|
|
13,574 |
|
|
5.50 |
% |
||||||
Other |
|
15,112 |
|
|
116 |
|
|
3.05 |
% |
|
13,224 |
|
|
200 |
|
|
6.08 |
% |
|
10,742 |
|
|
121 |
|
|
4.47 |
% |
||||||
Total interest earning assets |
|
2,417,639 |
|
|
19,762 |
|
|
3.25 |
% |
|
2,111,805 |
|
|
18,434 |
|
|
3.51 |
% |
|
2,159,894 |
|
|
21,388 |
|
|
3.93 |
% |
||||||
Noninterest earning assets |
|
68,327 |
|
|
|
|
|
|
51,776 |
|
|
|
|
|
|
45,306 |
|
|
|
|
|
||||||||||||
Total assets |
|
$ |
2,485,966 |
|
|
|
|
|
|
$ |
2,163,581 |
|
|
|
|
|
|
$ |
2,205,200 |
|
|
|
|
|
|||||||||
Liabilities and Shareholders’ Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Interest bearing liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Interest bearing deposits |
|
$ |
108,755 |
|
|
$ |
57 |
|
|
0.21 |
% |
|
$ |
190,394 |
|
|
$ |
1,652 |
|
|
3.49 |
% |
|
$ |
438,277 |
|
|
$ |
2,385 |
|
|
2.16 |
% |
FHLB advances and other borrowings |
|
124,886 |
|
|
65 |
|
|
0.21 |
% |
|
78,266 |
|
|
44 |
|
|
0.23 |
% |
|
43,642 |
|
|
289 |
|
|
2.63 |
% |
||||||
Subordinated debentures |
|
15,825 |
|
|
257 |
|
|
6.46 |
% |
|
15,821 |
|
|
267 |
|
|
6.79 |
% |
|
15,810 |
|
|
271 |
|
|
6.80 |
% |
||||||
Total interest bearing liabilities |
|
249,466 |
|
|
379 |
|
|
0.60 |
% |
|
284,481 |
|
|
1,963 |
|
|
2.78 |
% |
|
497,729 |
|
|
2,945 |
|
|
2.35 |
% |
||||||
Noninterest bearing liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Noninterest bearing deposits |
|
1,935,661 |
|
|
|
|
|
|
1,611,972 |
|
|
|
|
|
|
1,468,992 |
|
|
|
|
|
||||||||||||
Other liabilities |
|
23,860 |
|
|
|
|
|
|
15,070 |
|
|
|
|
|
|
14,400 |
|
|
|
|
|
||||||||||||
Shareholders’ equity |
|
276,979 |
|
|
|
|
|
|
252,058 |
|
|
|
|
|
|
224,079 |
|
|
|
|
|
||||||||||||
Total liabilities and shareholders’ equity |
|
$ |
2,485,966 |
|
|
|
|
|
|
$ |
2,163,581 |
|
|
|
|
|
|
$ |
2,205,200 |
|
|
|
|
|
|||||||||
Net interest spread(4) |
|
|
|
|
|
2.65 |
% |
|
|
|
|
|
0.73 |
% |
|
|
|
|
|
1.58 |
% |
||||||||||||
Net interest income, taxable equivalent basis |
|
|
|
$ |
19,383 |
|
|
|
|
|
|
$ |
16,471 |
|
|
|
|
|
|
$ |
18,443 |
|
|
|
|||||||||
Net interest margin(5) |
|
|
|
|
|
3.19 |
% |
|
|
|
|
|
3.14 |
% |
|
|
|
|
|
3.39 |
% |
||||||||||||
Reconciliation to reported net interest income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Adjustments for taxable equivalent basis |
|
|
|
(457 |
) |
|
|
|
|
|
(419 |
) |
|
|
|
|
|
— |
|
|
|
||||||||||||
Net interest income, as reported |
|
|
|
$ |
18,926 |
|
|
|
|
|
|
$ |
16,052 |
|
|
|
|
|
|
$ |
18,443 |
|
|
|
|||||||||
________________________
-
Interest income on tax-exempt securities is presented on a taxable equivalent basis using the federal statutory tax rate of
21.0% for all periods presented. - Loans include nonaccrual loans and loans held-for-sale, net of deferred fees and before allowance for loan losses.
- Interest income includes amortization of deferred loan fees, net of deferred loan costs.
- Net interest spread is the difference between interest rates earned on interest earning assets and interest rates paid on interest bearing liabilities.
- Net interest margin is a ratio calculated as annualized net interest income, on a taxable equivalent basis, divided by average interest earning assets for the same period.
Provision for Loan Losses
The Company recorded no additional provision for loan losses for the third quarter of 2020, compared to
Noninterest Income
Noninterest income for the third quarter of 2020 was
Noninterest income for the third quarter of 2020 increased by
|
|
Three Months Ended |
||||||||||
|
|
September 30,
|
|
June 30,
|
|
September 30,
|
||||||
|
|
|
|
|
|
|
||||||
|
|
(Dollars in thousands) |
||||||||||
Noninterest income: |
|
|
|
|
|
|
||||||
Mortgage warehouse fee income |
|
$ |
758 |
|
|
$ |
450 |
|
|
$ |
373 |
|
Service fees related to off-balance sheet deposits |
|
1 |
|
|
7 |
|
|
283 |
|
|||
Deposit related fees |
|
3,293 |
|
|
2,438 |
|
|
1,657 |
|
|||
Gain (loss) on sale of securities, net |
|
— |
|
|
2,556 |
|
|
(16 |
) |
|||
(Loss) gain on sale of loans, net |
|
(96 |
) |
|
(56 |
) |
|
248 |
|
|||
Other income |
|
8 |
|
|
39 |
|
|
54 |
|
|||
Total noninterest income |
|
$ |
3,964 |
|
|
$ |
5,434 |
|
|
$ |
2,599 |
|
Noninterest Expense
Noninterest expense totaled
Noninterest expense increased from the prior quarter due to increases in professional services and communications and data processing, partially offset by a decrease in salaries and employee benefits.
Noninterest expense increased from the third quarter of 2019 due to increases in salaries and employee benefits, professional services and other general and administrative expense.
|
|
Three Months Ended |
||||||||||
|
|
September 30,
|
|
June 30,
|
|
September 30,
|
||||||
|
|
|
|
|
|
|
||||||
|
|
(Dollars in thousands) |
||||||||||
Noninterest expense: |
|
|
|
|
|
|
||||||
Salaries and employee benefits |
|
$ |
8,899 |
|
|
$ |
9,002 |
|
|
$ |
8,277 |
|
Occupancy and equipment |
|
845 |
|
|
894 |
|
|
892 |
|
|||
Communications and data processing |
|
1,389 |
|
|
1,313 |
|
|
1,298 |
|
|||
Professional services |
|
1,207 |
|
|
1,105 |
|
|
889 |
|
|||
Federal deposit insurance |
|
209 |
|
|
182 |
|
|
39 |
|
|||
Correspondent bank charges |
|
403 |
|
|
347 |
|
|
288 |
|
|||
Other loan expense |
|
60 |
|
|
99 |
|
|
47 |
|
|||
Other real estate owned expense |
|
23 |
|
|
— |
|
|
75 |
|
|||
Other general and administrative |
|
1,098 |
|
|
1,030 |
|
|
806 |
|
|||
Total noninterest expense |
|
$ |
14,133 |
|
|
$ |
13,972 |
|
|
$ |
12,611 |
|
Income Tax Expense
Income tax expense was
Results of Operations, Nine Months Ended September 30, 2020
Net income for the nine months ended September 30, 2020 was
Net interest income for the nine months ended September 30, 2020 was
Noninterest income for the nine months ended September 30, 2020 was
Noninterest expense was
Income tax expense was
Balance Sheet
Deposits
At September 30, 2020, deposits totaled
The weighted average cost of deposits for the third quarter of 2020 was
|
|
Three Months Ended |
|||||||||||||||||||
|
|
September 30, 2020 |
|
June 30, 2020 |
|
September 30, 2019 |
|||||||||||||||
|
|
Average Balance |
|
Average Rate |
|
Average Balance |
|
Average Rate |
|
Average Balance |
|
Average Rate |
|||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
|
|
(Dollars in thousands) |
|||||||||||||||||||
Noninterest bearing demand accounts |
|
$ |
1,935,661 |
|
|
— |
|
|
$ |
1,611,972 |
|
|
— |
|
|
$ |
1,468,992 |
|
|
— |
|
Interest bearing accounts: |
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Interest bearing demand accounts |
|
41,871 |
|
|
0.10 |
% |
|
44,643 |
|
|
0.14 |
% |
|
47,945 |
|
|
0.14 |
% |
|||
Money market and savings accounts |
|
65,646 |
|
|
0.25 |
% |
|
66,598 |
|
|
0.39 |
% |
|
81,941 |
|
|
1.00 |
% |
|||
Certificates of deposit: |
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Brokered certificates of deposit |
|
— |
|
|
— |
|
|
77,717 |
|
|
8.11 |
% |
|
303,524 |
|
|
2.81 |
% |
|||
Other |
|
1,238 |
|
|
0.96 |
% |
|
1,436 |
|
|
0.84 |
% |
|
4,867 |
|
|
1.33 |
% |
|||
Total interest bearing deposits |
|
108,755 |
|
|
0.21 |
% |
|
190,394 |
|
|
3.49 |
% |
|
438,277 |
|
|
2.16 |
% |
|||
Total deposits |
|
$ |
2,044,416 |
|
|
0.01 |
% |
|
$ |
1,802,366 |
|
|
0.37 |
% |
|
$ |
1,907,269 |
|
|
0.50 |
% |
Demand for new deposit accounts is generated by the Company’s banking platform for innovators that includes the SEN, which is enabled through Silvergate’s proprietary API, and cash management solutions. These tools enable Silvergate’s clients to grow their business and scale operations. The following table sets forth a breakdown of the Company’s digital currency customer base and the deposits held by such customers at the dates noted below:
|
|
September 30, 2020 |
|
June 30, 2020 |
|
September 30, 2019 |
|||||||||||||||
|
|
Number of Customers |
|
Total Deposits(1) |
|
Number of Customers |
|
Total Deposits(1) |
|
Number of Customers |
|
Total Deposits(1) |
|||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
|
|
(Dollars in millions) |
|||||||||||||||||||
Digital currency exchanges |
|
69 |
|
|
$ |
729 |
|
|
64 |
|
|
$ |
601 |
|
|
55 |
|
|
$ |
544 |
|
Institutional investors |
|
599 |
|
|
850 |
|
|
566 |
|
|
577 |
|
|
482 |
|
|
506 |
|
|||
Other customers |
|
260 |
|
|
515 |
|
|
251 |
|
|
331 |
|
|
219 |
|
|
247 |
|
|||
Total |
|
928 |
|
|
$ |
2,095 |
|
|
881 |
|
|
$ |
1,509 |
|
|
756 |
|
|
$ |
1,297 |
|
________________________
- Total deposits may not foot due to rounding.
Loan Portfolio
Total loans were
|
|
September 30,
|
|
June 30,
|
|
September 30,
|
||||||
|
|
|
|
|
|
|
||||||
|
|
(Dollars in thousands) |
||||||||||
Real estate loans: |
|
|
|
|
|
|
||||||
One-to-four family |
|
$ |
209,040 |
|
|
$ |
216,038 |
|
|
$ |
212,440 |
|
Multi-family |
|
72,714 |
|
|
72,007 |
|
|
77,901 |
|
|||
Commercial |
|
316,653 |
|
|
316,815 |
|
|
322,733 |
|
|||
Construction |
|
13,854 |
|
|
10,822 |
|
|
3,986 |
|
|||
Commercial and industrial |
|
25,951 |
|
|
24,707 |
|
|
14,563 |
|
|||
Consumer and other |
|
5,559 |
|
|
243 |
|
|
76 |
|
|||
Reverse mortgage |
|
1,322 |
|
|
1,309 |
|
|
1,629 |
|
|||
Mortgage warehouse |
|
94,684 |
|
|
155,308 |
|
|
61,856 |
|
|||
Total gross loans held-for-investment |
|
739,777 |
|
|
797,249 |
|
|
695,184 |
|
|||
Deferred fees, net |
|
2,843 |
|
|
3,062 |
|
|
2,997 |
|
|||
Total loans held-for-investment |
|
742,620 |
|
|
800,311 |
|
|
698,181 |
|
|||
Allowance for loan losses |
|
(6,763 |
) |
|
(6,763 |
) |
|
(6,191 |
) |
|||
Loans held-for-investment, net |
|
735,857 |
|
|
793,548 |
|
|
691,990 |
|
|||
Loans held-for-sale |
|
665,842 |
|
|
321,835 |
|
|
311,410 |
|
|||
Total loans |
|
$ |
1,401,699 |
|
|
$ |
1,115,383 |
|
|
$ |
1,003,400 |
|
Loans held-for-sale are comprised entirely of mortgage warehouse loans at September 30, 2020 and June 30, 2020, compared to
Asset Quality and Allowance for Loan Losses
The allowance for loan losses was
Nonperforming assets totaled
|
|
September 30,
|
|
June 30,
|
|
September 30,
|
||||||
|
|
|
|
|
|
|
||||||
Asset Quality |
|
(Dollars in thousands) |
||||||||||
Nonperforming Assets: |
|
|
|
|
|
|
||||||
Nonperforming loans |
|
$ |
4,107 |
|
|
$ |
4,528 |
|
|
$ |
6,707 |
|
Troubled debt restructurings |
|
$ |
1,572 |
|
|
$ |
1,620 |
|
|
$ |
1,840 |
|
Other real estate owned, net |
|
$ |
27 |
|
|
51 |
|
|
$ |
81 |
|
|
Nonperforming assets |
|
$ |
4,134 |
|
|
$ |
4,579 |
|
|
$ |
6,788 |
|
|
|
|
|
|
|
|
||||||
Asset Quality Ratios: |
|
|
|
|
|
|
||||||
Nonperforming assets to total assets |
|
0.16 |
% |
|
0.20 |
% |
|
0.32 |
% |
|||
Nonperforming loans to gross loans(1) |
|
0.56 |
% |
|
0.57 |
% |
|
0.96 |
% |
|||
Nonperforming assets to gross loans and other real estate owned(1) |
|
0.56 |
% |
|
0.57 |
% |
|
0.98 |
% |
|||
Net charge-offs (recoveries) to average total loans(1) |
|
0.00 |
% |
|
0.00 |
% |
|
0.01 |
% |
|||
Allowance for loan losses to gross loans(1) |
|
0.91 |
% |
|
0.85 |
% |
|
0.89 |
% |
|||
Allowance for loan losses to nonperforming loans |
|
164.67 |
% |
|
149.36 |
% |
|
92.31 |
% |
|||
________________________
- Loans exclude loans held-for-sale at each of the dates presented.
Coronavirus Disease 2019 (“COVID-19”) Update
During the second and third quarter of 2020, the Company modified a total of 56 loans representing
As of September 30, 2020, the remaining loans modified due to COVID-19 that are in deferral and have not resumed full contractual payments are as follows:
|
|
Loan Balance At Period End |
|
Percentage of Loan Portfolio Balance |
|||
|
|
|
|
|
|||
|
|
(Dollars in thousands) |
|||||
COVID-19 related modifications: |
|
|
|
|
|||
Real estate loans: |
|
|
|
|
|||
One-to-four family |
|
$ |
9,320 |
|
|
1.3 |
% |
Retail |
|
1,955 |
|
|
0.3 |
% |
|
Hospitality |
|
21,447 |
|
|
2.9 |
% |
|
Total commercial |
|
23,402 |
|
|
3.2 |
% |
|
Total modifications outstanding |
|
$ |
32,722 |
|
|
4.4 |
% |
Securities
Securities available-for-sale decreased
Capital Ratios
At September 30, 2020, the Company’s ratio of common equity to total assets was
At September 30, 2020, the Company had a tier 1 leverage ratio of
At September 30, 2020, the Bank had a tier 1 leverage ratio of
Capital Ratios(1) |
|
September 30,
|
|
June 30,
|
|
September 30,
|
|||
The Company |
|
|
|
|
|
|
|||
Tier 1 leverage ratio |
|
10.36 |
% |
|
11.57 |
% |
|
10.43 |
% |
Common equity tier 1 capital ratio |
|
22.58 |
% |
|
23.32 |
% |
|
23.57 |
% |
Tier 1 risk-based capital ratio |
|
24.03 |
% |
|
24.86 |
% |
|
25.28 |
% |
Total risk-based capital ratio |
|
24.68 |
% |
|
25.54 |
% |
|
25.97 |
% |
Common equity to total assets |
|
10.83 |
% |
|
11.45 |
% |
|
10.79 |
% |
The Bank |
|
|
|
|
|
|
|||
Tier 1 leverage ratio |
|
9.84 |
% |
|
10.92 |
% |
|
10.01 |
% |
Common equity tier 1 capital ratio |
|
22.82 |
% |
|
23.48 |
% |
|
24.30 |
% |
Tier 1 risk-based capital ratio |
|
22.82 |
% |
|
23.48 |
% |
|
24.30 |
% |
Total risk-based capital ratio |
|
23.47 |
% |
|
24.17 |
% |
|
25.00 |
% |
________________________
- September 30, 2020 capital ratios are preliminary.
Conference Call and Webcast
The Company will host a conference call on Monday, October 26, 2020 at 11:00 a.m. (Eastern Time) to present and discuss third quarter 2020 results. The conference call can be accessed live by dialing 1-877-407-4018 or for international callers, 1-201-689-8471, and requesting to be joined to the Silvergate Capital Corporation Third Quarter 2020 Earnings Conference Call. A replay will be available starting at 2:00 p.m. (Eastern Time) on October 26, 2020 and can be accessed by dialing 1-844-512-2921, or for international callers, 1-412-317-6671. The passcode for the replay is 13711244. The replay will be available until 11:59 p.m. (Eastern Time) on November 9, 2020.
Interested investors and other parties may also listen to a simultaneous webcast of the conference call by logging onto the investor relations section of the Company's website at https://ir.silvergatebank.com. The online replay will remain available for a limited time beginning immediately following the call.
About Silvergate
Silvergate Capital Corporation is a registered bank holding company for Silvergate Bank, headquartered in La Jolla, California. Silvergate Bank is a commercial bank that opened in 1988 and has been profitable for 22 consecutive years. The Bank has focused its strategy on creating the banking platform for innovators, especially in the digital currency industry, and developing product and service solutions addressing the needs of entrepreneurs. The Company’s assets consist primarily of its investment in the Bank and the Company’s primary activities are conducted through the Bank. The Company is subject to supervision by the Board of Governors of the Federal Reserve System (the “Federal Reserve”). The Bank is subject to supervision by the California Department of Business Oversight, Division of Financial Institutions and, as a Federal Reserve member bank, the Federal Reserve. The Bank’s deposits are insured up to legal limits by the Federal Deposit Insurance Corporation.
Forward Looking Statements
Statements in this earnings release may constitute forward-looking statements within the meaning of the Securities Exchange Act of 1934, as amended. These forward-looking statements reflect our current views with respect to, among other things, future events and our financial performance. These statements are often, but not always, made through the use of words or phrases such as “may,” “should,” “could,” “predict,” “potential,” “believe,” “will likely result,” “expect,” “continue,” “will,” “anticipate,” “seek,” “estimate,” “intend,” “plan,” “project,” “projection,” “forecast,” “goal,” “target,” “would,” “aim” and “outlook,” or the negative version of those words or other comparable words or phrases of a future or forward-looking nature. These forward-looking statements are not historical facts, and are based on current expectations, estimates and projections about our industry and management’s beliefs and certain assumptions made by management, many of which, by their nature, are inherently uncertain and beyond our control. The inclusion of these forward-looking statements should not be regarded as a representation by us or any other person that such expectations, estimates and projections will be achieved. Although we believe that the expectations reflected in these forward-looking statements are reasonable as of the date made, such forward-looking statements are not guarantees of future performance and are subject to risks, assumptions and uncertainties that are difficult to predict. For information about other important factors that could cause actual results to differ materially from those discussed in the forward-looking statements contained in this release, please refer to the Company's public reports filed with the U.S. Securities and Exchange Commission.
Further, given its ongoing and dynamic nature, it is difficult to predict the full impact of the COVID-19 outbreak on our business. The extent of such impact will depend on future developments, which are highly uncertain, including when the coronavirus can be controlled and abated and when and how the economy may be reopened. As the result of the COVID-19 pandemic and the related adverse local and national economic consequences, we could be subject to any of the following risks, any of which could have a material, adverse effect on our business, financial condition, liquidity, and results of operations: the demand for our products and services may decline, making it difficult to grow assets and income; if the economy is unable to fully reopen, and high levels of unemployment continue for an extended period of time, loan delinquencies, problem assets, and foreclosures may increase, resulting in increased charges and reduced income; collateral for loans, especially real estate, may decline in value, which could cause loan losses to increase; our allowance for loan losses may increase if borrowers experience financial difficulties, which will adversely affect our net income; the net worth and liquidity of loan guarantors may decline, impairing their ability to honor commitments to us; as the result of the decline in the Federal Reserve Board’s target federal funds rate to near
Any forward-looking statement speaks only as of the date of this earnings release, and we do not undertake any obligation to publicly update or review any forward-looking statement, whether because of new information, future developments or otherwise, except as required by law. New risks and uncertainties may emerge from time to time, and it is not possible for us to predict their occurrence. In addition, we cannot assess the impact of each risk and uncertainty on our business or the extent to which any risk or uncertainty, or combination of risks and uncertainties, may cause actual results to differ materially from those contained in any forward-looking statements.
SILVERGATE CAPITAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(In Thousands)
(Unaudited)
|
|
September 30,
|
|
June 30,
|
|
March 31,
|
|
December 31,
|
|
September 30,
|
||||||||||
ASSETS |
|
|
|
|
|
|
|
|
|
|
||||||||||
Cash and due from banks |
|
$ |
15,152 |
|
|
$ |
13,777 |
|
|
$ |
2,778 |
|
|
$ |
1,579 |
|
|
$ |
4,098 |
|
Interest earning deposits in other banks |
|
182,330 |
|
|
185,667 |
|
|
163,422 |
|
|
132,025 |
|
|
156,160 |
|
|||||
Cash and cash equivalents |
|
197,482 |
|
|
199,444 |
|
|
166,200 |
|
|
133,604 |
|
|
160,258 |
|
|||||
Securities available-for-sale, at fair value |
|
944,161 |
|
|
951,094 |
|
|
964,317 |
|
|
897,766 |
|
|
909,917 |
|
|||||
Securities held-to-maturity, at amortized cost |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|||||
Loans held-for-sale, at lower of cost or fair value |
|
665,842 |
|
|
321,835 |
|
|
435,023 |
|
|
375,922 |
|
|
311,410 |
|
|||||
Loans held-for-investment, net of allowance for loan losses |
|
735,857 |
|
|
793,548 |
|
|
679,416 |
|
|
664,622 |
|
|
691,990 |
|
|||||
Federal home loan and federal reserve bank stock, at cost |
|
14,839 |
|
|
13,499 |
|
|
10,269 |
|
|
10,264 |
|
|
10,264 |
|
|||||
Accrued interest receivable |
|
7,385 |
|
|
7,700 |
|
|
6,344 |
|
|
5,950 |
|
|
5,875 |
|
|||||
Other real estate owned, net |
|
27 |
|
|
51 |
|
|
— |
|
|
128 |
|
|
81 |
|
|||||
Premises and equipment, net |
|
3,122 |
|
|
3,326 |
|
|
3,406 |
|
|
3,259 |
|
|
3,224 |
|
|||||
Operating lease right-of-use assets |
|
3,478 |
|
|
3,846 |
|
|
4,210 |
|
|
4,571 |
|
|
4,927 |
|
|||||
Derivative assets |
|
34,138 |
|
|
35,770 |
|
|
33,506 |
|
|
23,440 |
|
|
30,885 |
|
|||||
Low income housing tax credit investment |
|
890 |
|
|
917 |
|
|
927 |
|
|
954 |
|
|
981 |
|
|||||
Other assets |
|
13,352 |
|
|
9,683 |
|
|
7,090 |
|
|
7,647 |
|
|
7,032 |
|
|||||
Total assets |
|
$ |
2,620,573 |
|
|
$ |
2,340,713 |
|
|
$ |
2,310,708 |
|
|
$ |
2,128,127 |
|
|
$ |
2,136,844 |
|
LIABILITIES AND SHAREHOLDERS’ EQUITY |
|
|
|
|
|
|
|
|
|
|
||||||||||
Deposits: |
|
|
|
|
|
|
|
|
|
|
||||||||||
Noninterest bearing demand accounts |
|
$ |
2,164,326 |
|
|
$ |
1,563,136 |
|
|
$ |
1,745,219 |
|
|
$ |
1,343,667 |
|
|
$ |
1,394,433 |
|
Interest bearing accounts |
|
116,782 |
|
|
107,773 |
|
|
257,738 |
|
|
470,987 |
|
|
453,662 |
|
|||||
Total deposits |
|
2,281,108 |
|
|
1,670,909 |
|
|
2,002,957 |
|
|
1,814,654 |
|
|
1,848,095 |
|
|||||
Federal home loan bank advances |
|
10,000 |
|
|
360,000 |
|
|
30,000 |
|
|
49,000 |
|
|
20,000 |
|
|||||
Notes payable |
|
— |
|
|
— |
|
|
— |
|
|
3,714 |
|
|
4,000 |
|
|||||
Subordinated debentures, net |
|
15,827 |
|
|
15,823 |
|
|
15,820 |
|
|
15,816 |
|
|
15,813 |
|
|||||
Operating lease liabilities |
|
3,770 |
|
|
4,146 |
|
|
4,515 |
|
|
4,881 |
|
|
5,237 |
|
|||||
Accrued expenses and other liabilities |
|
26,107 |
|
|
21,730 |
|
|
12,664 |
|
|
9,026 |
|
|
13,085 |
|
|||||
Total liabilities |
|
2,336,812 |
|
|
2,072,608 |
|
|
2,065,956 |
|
|
1,897,091 |
|
|
1,906,230 |
|
|||||
Commitments and contingencies |
|
|
|
|
|
|
|
|
|
|
||||||||||
Preferred stock |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|||||
Class A common stock |
|
186 |
|
|
184 |
|
|
184 |
|
|
178 |
|
|
167 |
|
|||||
Class B non-voting common stock |
|
1 |
|
|
3 |
|
|
3 |
|
|
9 |
|
|
12 |
|
|||||
Additional paid-in capital |
|
132,647 |
|
|
132,479 |
|
|
132,336 |
|
|
132,138 |
|
|
125,573 |
|
|||||
Retained earnings |
|
109,229 |
|
|
102,169 |
|
|
96,703 |
|
|
92,310 |
|
|
88,712 |
|
|||||
Accumulated other comprehensive income |
|
41,698 |
|
|
33,270 |
|
|
15,526 |
|
|
6,401 |
|
|
16,150 |
|
|||||
Total shareholders’ equity |
|
283,761 |
|
|
268,105 |
|
|
244,752 |
|
|
231,036 |
|
|
230,614 |
|
|||||
Total liabilities and shareholders’ equity |
|
$ |
2,620,573 |
|
|
$ |
2,340,713 |
|
|
$ |
2,310,708 |
|
|
$ |
2,128,127 |
|
|
$ |
2,136,844 |
|
SILVERGATE CAPITAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In Thousands, Except Per Share Data)
(Unaudited)
|
|
Three Months Ended |
|
Nine Months Ended |
||||||||||||||||
|
|
September 30,
|
|
June 30,
|
|
September 30,
|
|
September 30,
|
|
September 30,
|
||||||||||
Interest income |
|
|
|
|
|
|
|
|
|
|
||||||||||
Loans, including fees |
|
$ |
13,527 |
|
|
$ |
11,710 |
|
|
$ |
13,574 |
|
|
$ |
38,358 |
|
|
$ |
38,369 |
|
Taxable securities |
|
3,746 |
|
|
4,123 |
|
|
6,510 |
|
|
13,917 |
|
|
14,044 |
|
|||||
Tax-exempt securities |
|
1,720 |
|
|
1,577 |
|
|
— |
|
|
3,345 |
|
|
— |
|
|||||
Other interest earning assets |
|
196 |
|
|
405 |
|
|
1,183 |
|
|
1,325 |
|
|
8,038 |
|
|||||
Dividends and other |
|
116 |
|
|
200 |
|
|
121 |
|
|
437 |
|
|
472 |
|
|||||
Total interest income |
|
19,305 |
|
|
18,015 |
|
|
21,388 |
|
|
57,382 |
|
|
60,923 |
|
|||||
Interest expense |
|
|
|
|
|
|
|
|
|
|
||||||||||
Deposits |
|
57 |
|
|
1,652 |
|
|
2,385 |
|
|
5,760 |
|
|
3,920 |
|
|||||
Federal home loan bank advances |
|
65 |
|
|
44 |
|
|
172 |
|
|
336 |
|
|
172 |
|
|||||
Notes payable and other |
|
— |
|
|
— |
|
|
117 |
|
|
36 |
|
|
702 |
|
|||||
Subordinated debentures |
|
257 |
|
|
267 |
|
|
271 |
|
|
794 |
|
|
802 |
|
|||||
Total interest expense |
|
379 |
|
|
1,963 |
|
|
2,945 |
|
|
6,926 |
|
|
5,596 |
|
|||||
Net interest income before provision for loan losses |
|
18,926 |
|
|
16,052 |
|
|
18,443 |
|
|
50,456 |
|
|
55,327 |
|
|||||
Provision for (reversal of) loan losses |
|
— |
|
|
222 |
|
|
(858 |
) |
|
589 |
|
|
(439 |
) |
|||||
Net interest income after provision for loan losses |
|
18,926 |
|
|
15,830 |
|
|
19,301 |
|
|
49,867 |
|
|
55,766 |
|
|||||
Noninterest income |
|
|
|
|
|
|
|
|
|
|
||||||||||
Mortgage warehouse fee income |
|
758 |
|
|
450 |
|
|
373 |
|
|
1,590 |
|
|
1,085 |
|
|||||
Service fees related to off-balance sheet deposits |
|
1 |
|
|
7 |
|
|
283 |
|
|
78 |
|
|
1,454 |
|
|||||
Deposit related fees |
|
3,293 |
|
|
2,438 |
|
|
1,657 |
|
|
7,497 |
|
|
3,815 |
|
|||||
Gain (loss) on sale of securities, net |
|
— |
|
|
2,556 |
|
|
(16 |
) |
|
3,753 |
|
|
(16 |
) |
|||||
(Loss) gain on sale of loans, net |
|
(96 |
) |
|
(56 |
) |
|
248 |
|
|
354 |
|
|
593 |
|
|||||
Gain on sale of branch, net |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
5,509 |
|
|||||
Gain on extinguishment of debt |
|
— |
|
|
— |
|
|
— |
|
|
925 |
|
|
— |
|
|||||
Other income |
|
8 |
|
|
39 |
|
|
54 |
|
|
132 |
|
|
184 |
|
|||||
Total noninterest income |
|
3,964 |
|
|
5,434 |
|
|
2,599 |
|
|
14,329 |
|
|
12,624 |
|
|||||
Noninterest expense |
|
|
|
|
|
|
|
|
|
|
||||||||||
Salaries and employee benefits |
|
8,899 |
|
|
9,002 |
|
|
8,277 |
|
|
26,856 |
|
|
25,124 |
|
|||||
Occupancy and equipment |
|
845 |
|
|
894 |
|
|
892 |
|
|
2,646 |
|
|
2,777 |
|
|||||
Communications and data processing |
|
1,389 |
|
|
1,313 |
|
|
1,298 |
|
|
3,963 |
|
|
3,458 |
|
|||||
Professional services |
|
1,207 |
|
|
1,105 |
|
|
889 |
|
|
3,297 |
|
|
3,407 |
|
|||||
Federal deposit insurance |
|
209 |
|
|
182 |
|
|
39 |
|
|
514 |
|
|
382 |
|
|||||
Correspondent bank charges |
|
403 |
|
|
347 |
|
|
288 |
|
|
1,123 |
|
|
868 |
|
|||||
Other loan expense |
|
60 |
|
|
99 |
|
|
47 |
|
|
281 |
|
|
290 |
|
|||||
Other real estate owned expense |
|
23 |
|
|
— |
|
|
75 |
|
|
23 |
|
|
80 |
|
|||||
Other general and administrative |
|
1,098 |
|
|
1,030 |
|
|
806 |
|
|
3,277 |
|
|
2,432 |
|
|||||
Total noninterest expense |
|
14,133 |
|
|
13,972 |
|
|
12,611 |
|
|
41,980 |
|
|
38,818 |
|
|||||
Income before income taxes |
|
8,757 |
|
|
7,292 |
|
|
9,289 |
|
|
22,216 |
|
|
29,572 |
|
|||||
Income tax expense |
|
1,697 |
|
|
1,826 |
|
|
2,633 |
|
|
5,297 |
|
|
8,324 |
|
|||||
Net income |
|
7,060 |
|
|
5,466 |
|
|
6,656 |
|
|
16,919 |
|
|
21,248 |
|
|||||
Basic earnings per share |
|
$ |
0.38 |
|
|
$ |
0.29 |
|
|
$ |
0.37 |
|
|
$ |
0.91 |
|
|
$ |
1.19 |
|
Diluted earnings per share |
|
$ |
0.37 |
|
|
$ |
0.29 |
|
|
$ |
0.36 |
|
|
$ |
0.88 |
|
|
$ |
1.16 |
|
Weighted average shares outstanding: |
|
|
|
|
|
|
|
|
|
|
||||||||||
Basic |
|
18,682 |
|
|
18,672 |
|
|
17,840 |
|
|
18,674 |
|
|
17,830 |
|
|||||
Diluted |
|
19,134 |
|
|
19,106 |
|
|
18,246 |
|
|
19,119 |
|
|
18,252 |
|
|||||
Non-GAAP Financial Measures
The Company uses certain non-GAAP financial measures to provide meaningful supplemental information regarding the Company’s operational performance and to enhance investors’ overall understanding of such financial performance. However, these non-GAAP financial measures are supplemental and are not a substitute for an analysis based on GAAP measures. As other companies may use different calculations for these adjusted measures, this presentation may not be comparable to other similarly titled adjusted measures reported by other companies.
This earnings release includes certain non-GAAP financial measures for the nine months ended September 30, 2020 and 2019, in order to present our results of operations for that period on a basis consistent with our historical operations. On November 15, 2018, the Company and the Bank entered into a purchase and assumption agreement with HomeStreet Bank to sell the Bank’s retail branch located in San Marcos, California and business loan portfolio to HomeStreet Bank. This transaction, which was completed in March 2019, generated a pre-tax gain on sale of
|
|
Nine Months Ended
|
||||||
|
|
2020 |
|
2019 |
||||
|
|
|
|
|
||||
|
|
(Dollars in thousands) |
||||||
Net income |
|
|
|
|
||||
Net income, as reported |
|
$ |
16,919 |
|
|
$ |
21,248 |
|
Adjustments: |
|
|
|
|
||||
Gain on sale of branch, net |
|
— |
|
|
(5,509 |
) |
||
Tax effect(1) |
|
— |
|
|
1,574 |
|
||
Adjusted net income |
|
$ |
16,919 |
|
|
$ |
17,313 |
|
|
|
|
|
|
||||
Noninterest income / average assets(2) |
|
|
|
|
||||
Noninterest income |
|
$ |
14,329 |
|
|
$ |
12,624 |
|
Adjustments: |
|
|
|
|
||||
Gain on sale of branch, net |
|
— |
|
|
(5,509 |
) |
||
Adjusted noninterest income |
|
14,329 |
|
|
7,115 |
|
||
Average assets |
|
2,293,277 |
|
|
2,063,298 |
|
||
Noninterest income / average assets, as reported |
|
0.83 |
% |
|
0.82 |
% |
||
Adjusted noninterest income / average assets |
|
0.83 |
% |
|
0.46 |
% |
||
|
|
|
|
|
||||
Return on average assets (ROAA)(2) |
|
|
|
|
||||
Adjusted net income |
|
$ |
16,919 |
|
|
$ |
17,313 |
|
Average assets |
|
2,293,277 |
|
|
2,063,298 |
|
||
Return on average assets (ROAA), as reported |
|
0.99 |
% |
|
1.38 |
% |
||
Adjusted return on average assets |
|
0.99 |
% |
|
1.12 |
% |
||
|
|
|
|
|
||||
Return on average equity (ROAE)(2) |
|
|
|
|
||||
Adjusted net income |
|
$ |
16,919 |
|
|
$ |
17,313 |
|
Average equity |
|
258,904 |
|
|
208,775 |
|
||
Return on average equity (ROAE), as reported |
|
8.73 |
% |
|
13.61 |
% |
||
Adjusted return on average equity |
|
8.73 |
% |
|
11.09 |
% |
||
|
|
|
|
|
||||
Efficiency ratio |
|
|
|
|
||||
Noninterest expense |
|
$ |
41,980 |
|
|
$ |
38,818 |
|
Net interest income |
|
50,456 |
|
|
55,327 |
|
||
Noninterest income |
|
14,329 |
|
|
12,624 |
|
||
Total net interest income and noninterest income |
|
64,785 |
|
|
67,951 |
|
||
Adjustments: |
|
|
|
|
||||
Gain on sale of branch, net |
|
— |
|
|
(5,509 |
) |
||
Adjusted total net interest income and noninterest income |
|
64,785 |
|
|
62,442 |
|
||
Efficiency ratio, as reported |
|
64.80 |
% |
|
57.13 |
% |
||
Adjusted efficiency ratio |
|
64.80 |
% |
|
62.17 |
% |
||
________________________
-
Amount represents the total income tax effect of the adjustment, which is calculated based on the applicable marginal tax rate of
28.58% . - Data has been annualized.
