Silvergate Reports Strong Q2 Earnings, Highlights Reverse Mortgage Activity

Silvergate Bank reported strong second quarter earnings for the period ended June 30, 2013, highlighting the company’s reverse mortgage segment as a key contributor. 

Silvergate reported a second quarter net income of $1.37 million, compared to $1.39 million for the prior quarter. This was down compared to the same period a year ago, where the company reported $1.46 million in 2012.

While net income declined for the second quarter on a year-over-year basis, Silvergate’s assets were up $82.2 million from what they were during the same period a year ago to $642.7 million. 

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Part of these assets include Silvergate’s reverse mortgage lending activity. 

In the second quarter, Silvergate acquired and/or funded $85.7 million in HECM loans and completed four HECM loan pool sales and one securitization of HECM loan participations.

Although the company’s net interest margin declined year-over-year from 4.22% to 3.47% in the second quarter of 2013, the decline in earning asset yield was due primarily to growth in lower yielding assets, including cash and reverse mortgage loans.

“Silvergate Bank’s sustained profitability from our core commercial banking activities and diversified revenue streams continues to strengthen our capital base and enhance our ability to serve our entire range of clients,” said Dennis S. Frank, Silvergate’s chairman.

In late 2011, SIlvergate began to acquire Home Equity Conversion Mortgage (HECM) loans insured by the Federal Housing Administration, and in mid-2012 the bank was approved by Ginnie Mae to be an issuer of HECM backed securities.  

Despite significant costs of opening two new branch offices and relocating a third in the past 24 months, Silvergate generated strong profits due to the ongoing strength of its core commercial lending actives and the expanded lending activities the bank has added in recent years.

Silvergate’s Mortgage Warehouse Lending Divison funded $705.3 million in loans and almost $1.4 billion in the first half of 2013.

Despite forecasts by the Mortgage Bankers Association of America for decreases in 2013 single-family residential loan originations, Silvergate’s Mortgage Warehouse Lending Division was able to maintain high loan volumes through the first half of the year by increasing the number of mortgage banking clients it serves.

“We are pleased to report that Silvergate Bank delivered another solid earnings performance in the second quarter of 2013,” said Alan J. Lane, Silvergate’s president and CEO. “Our capital and asset quality ratios continue to be superior to comparable averages for all FDIC insured banks.”

Written by Jason Oliva

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