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 twelve months ended December 31, 2020.
Fourth Quarter 2020 Financial Highlights
- Net income for the quarter was $9.1 million, or $0.47 per diluted share, compared to net income of $7.1 million, or $0.37 per diluted share, for the third quarter of 2020, and net income of $3.6 million, or $0.19 per diluted share, for the fourth quarter of 2019
- The Silvergate Exchange Network (“SEN”) handled 90,763 transactions in the fourth quarter of 2020, an increase of 33%, compared to 68,361 transactions in the third quarter of 2020, and an increase of 530% compared to 14,400 transactions in the fourth quarter of 2019
- The SEN handled $59.2 billion of U.S. dollar transfers in the fourth quarter, an increase of 62% compared to $36.7 billion in the third quarter of 2020, and an increase of 516% compared to $9.6 billion in the fourth quarter of 2019
- Digital currency customer related fee income for the quarter was $3.8 million, compared to $3.3 million for the third quarter of 2020, and $1.4 million for the fourth quarter of 2019
- Digital currency customers grew to 969 at December 31, 2020, compared to 928 at September 30, 2020, and 804 at December 31, 2019
- Digital currency deposits grew by $2.9 billion to $5.0 billion as of December 31, 2020, compared to $2.1 billion as of September 30, 2020
- At December 31, 2020, outstanding loan deferrals related to COVID-19 were 8.5% of total gross loans held-for-investment compared to 4.4% at September 30, 2020 and 15.5% at June 30, 2020
- Book value per share was $15.63 at December 31, 2020, compared to $15.18 at September 30, 2020, and $12.38 at December 31, 2019
- The Company’s total risk-based capital ratio was 23.49% at December 31, 2020, compared to 24.68% at September 30, 2020 and 26.90% at December 31, 2019
- The Company’s tier 1 leverage ratio was 8.29% at December 31, 2020, compared to 10.36% at September 30, 2020 and 11.23% at December 31, 2019
Full Year 2020 Financial Highlights
- Net income for the year ended December 31, 2020 was $26.0 million, or $1.36 per diluted share, compared to net income of $24.8 million, or $1.35 per diluted share for the year ended December 31, 2019
- The SEN handled 230,815 transactions for the year ended December 31, 2020 as compared to 46,063 for the year ended December 31, 2019
- The SEN handled $135.7 billion of U.S. dollar transfers for the year ended December 31, 2020 as compared to $32.7 billion for the year ended December 31, 2019
- Digital currency customer related fee income for the year ended December 31, 2020 was $11.1 million compared to $4.9 million for the year ended December 31, 2019
Alan Lane, president and chief executive officer of Silvergate, commented, “2020 was a year of significant growth and expansion for our business, with customer growth up more than 20% year-over-year as investment in digital currencies increased among the institutional investor community. Transactions on the SEN in the fourth quarter alone underscore the rapid growth of the platform with 90,763 transactions and over $59 billion in SEN volumes, up 62% from the 2020 third quarter. The SEN continues to be the foundation of the Silvergate suite of products and solutions built to address our customers’ needs.”
“Looking ahead to 2021, I am extremely excited about the multiple paths to continued growth and opportunities to monetize the SEN platform, such as digital asset lending and custodial services,” continued Mr. Lane. “In particular, SEN Leverage, a lending offering that was piloted through the majority of the past year, is now a core Silvergate product that enables customers to obtain US dollar loans collateralized by bitcoin. We anticipate increased demand for this offering over the next year.”
|
|
As of or for the Three Months Ended |
||||||||||
|
|
December 31,
|
|
September 30,
|
|
December 31,
|
||||||
Financial Highlights |
|
(Dollars in thousands, except per share data) |
||||||||||
Net income |
|
$ |
9,119 |
|
|
$ |
7,060 |
|
|
$ |
3,598 |
|
Diluted earnings per share |
|
$ |
0.47 |
|
|
$ |
0.37 |
|
|
$ |
0.19 |
|
Return on average assets (ROAA)(1) |
|
1.14 |
% |
|
1.13 |
% |
|
0.67 |
% |
|||
Return on average equity (ROAE)(1) |
|
12.60 |
% |
|
10.14 |
% |
|
6.08 |
% |
|||
Net interest margin(1)(2) |
|
2.85 |
% |
|
3.19 |
% |
|
2.97 |
% |
|||
Cost of deposits(1)(3) |
|
0.01 |
% |
|
0.01 |
% |
|
0.84 |
% |
|||
Cost of funds(1)(3) |
|
0.04 |
% |
|
0.07 |
% |
|
0.94 |
% |
|||
Efficiency ratio(4) |
|
65.87 |
% |
|
61.74 |
% |
|
72.81 |
% |
|||
Total assets |
|
$ |
5,586,235 |
|
|
$ |
2,620,573 |
|
|
$ |
2,128,127 |
|
Total deposits |
|
$ |
5,248,026 |
|
|
$ |
2,281,108 |
|
|
$ |
1,814,654 |
|
Book value per share |
|
$ |
15.63 |
|
|
$ |
15.18 |
|
|
$ |
12.38 |
|
Tier 1 leverage ratio |
|
8.29 |
% |
|
10.36 |
% |
|
11.23 |
% |
|||
Total risk-based capital ratio |
|
23.49 |
% |
|
24.68 |
% |
|
26.90 |
% |
|||
|
|
Year Ended December 31, |
||||||
|
|
2020 |
|
2019 |
||||
Financial Highlights |
|
(Dollars in thousands, except per share data) |
||||||
Net income(5) |
|
$ |
26,038 |
|
|
$ |
24,846 |
|
Diluted earnings per share |
|
$ |
1.36 |
|
|
$ |
1.35 |
|
Return on average assets (ROAA) |
|
1.03 |
% |
|
1.19 |
% |
||
Adjusted return on average assets (ROAA)(5) |
|
1.03 |
% |
|
1.00 |
% |
||
Return on average equity (ROAE) |
|
9.78 |
% |
|
11.54 |
% |
||
Adjusted return on average equity (ROAE)(5) |
|
9.78 |
% |
|
9.71 |
% |
||
Net interest margin(2) |
|
3.00 |
% |
|
3.47 |
% |
||
Cost of deposits(3) |
|
0.27 |
% |
|
0.43 |
% |
||
Cost of funds(3) |
|
0.32 |
% |
|
0.54 |
% |
||
Efficiency ratio(4) |
|
65.11 |
% |
|
60.52 |
% |
||
Adjusted efficiency ratio(4)(5) |
|
65.11 |
% |
|
64.63 |
% |
||
(1) |
Data has been annualized. |
|
(2) |
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. |
|
(3) |
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. |
|
(4) |
Efficiency ratio is calculated by dividing noninterest expenses by net interest income plus noninterest income. |
|
(5) |
In March 2019, the Bank completed the sale of its San Marcos branch and business loan portfolio which generated a pre-tax gain on sale of $5.5 million, or $3.9 million after tax, which significantly positively impacted net income, ROAA, ROAE and efficiency ratio during the first quarter and full year 2019. See “Non-GAAP Financial Measures” for further information and reconciliation of these metrics. |
Digital Currency Initiative
At December 31, 2020, the Company’s digital currency customers increased to 969 from 928 at September 30, 2020, and from 804 at December 31, 2019. At December 31, 2020, prospective digital currency customer leads in various stages of the customer onboarding process and pipeline remained above 200. There was a record 90,763 transactions on the SEN for the fourth quarter of 2020, an increase of 33%, compared to 68,361 transactions for the third quarter of 2020. In addition, for the fourth quarter of 2020, $59.2 billion of U.S. dollar transfers occurred on the SEN, another quarterly record and a 62% increase from the third quarter of 2020.
|
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Three Months Ended |
||||||||||
|
|
December 31, 2020 |
|
September 30, 2020 |
|
December 31, 2019 |
||||||
|
|
(Dollars in millions) |
||||||||||
# SEN Transactions |
|
90,763 |
|
|
68,361 |
|
|
14,400 |
|
|||
$ Volume of SEN Transfers |
|
$ |
59,227 |
|
|
$ |
36,663 |
|
|
$ |
9,607 |
|
Results of Operations, Quarter Ended December 31, 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 21.0%.
Net interest income on a taxable equivalent basis totaled $22.4 million for the fourth quarter of 2020, compared to $19.4 million for the third quarter of 2020, and $15.6 million for the fourth quarter of 2019.
Compared to the third quarter of 2020, net interest income increased $3.0 million due to an increase of $2.9 million in interest income driven primarily by higher mortgage warehouse loan balances and a decrease of $0.1 million in interest expense driven by lower federal home loan bank (“FHLB”) advances.
Average total interest earning assets increased by $699.3 million for the fourth quarter of 2020 compared to the third quarter of 2020, primarily due to an increase in interest earning deposits in other banks and loans. The average yield on interest earning assets decreased from 3.25% for the third quarter of 2020 to 2.89% for the fourth quarter of 2020, primarily due to an increased proportion of interest earning deposits in other banks as a percentage of interest earning assets in addition to lower yields on interest earning deposits, and the variable rate portion of the securities and loan portfolio. Average interest bearing liabilities decreased $111.8 million for the fourth quarter of 2020 compared to the third quarter of 2020, due to a decrease in FHLB advances. The average rate paid on total interest bearing liabilities increased from 0.60% for the third quarter of 2020 to 0.87% for the fourth quarter of 2020, primarily due to a greater proportion of higher rate subordinated debentures as a percentage of total interest bearing liabilities.
Compared to the fourth quarter of 2019, net interest income increased $6.7 million, due to a decrease of $4.2 million in interest expense, and by an increase of $2.6 million in interest income. Average total interest earning assets increased by $1.0 billion for the fourth quarter of 2020 compared to the fourth quarter of 2019, due to an increase in interest earning deposits in other banks and loans and, to a lesser extent, an increase in securities. The average yield on total interest earning assets decreased from 3.82% for the fourth quarter of 2019 to 2.89% for the fourth quarter of 2020, primarily due to lower yields on loans, securities and interest earning deposits in other banks. The lower yields were due to declines in federal funds rate and London Interbank Offered Rate (“LIBOR”), which was partially offset by the impact of interest rate floors which were put in place during 2019. Average interest bearing liabilities decreased $413.5 million for the fourth quarter of 2020 compared to the fourth quarter of 2019, due to calling the remaining balance of brokered certificates of deposit in the second quarter of 2020 and a decrease in FHLB advances. The average rate on total interest bearing liabilities decreased from 3.23% for the fourth quarter of 2019 to 0.87% for the fourth quarter of 2020, primarily due to the impact of calling the remaining outstanding balance of brokered certificates of deposits in the second quarter of 2020.
Net interest margin for the fourth quarter of 2020 was 2.85%, compared to 3.19% for the third quarter of 2020, and 2.97% for the fourth quarter of 2019. The decrease in the net interest margin compared to the third quarter of 2020 was primarily driven by a greater proportion of lower yielding cash and cash equivalents as a percentage of total interest earning assets, which was driven by the increase in noninterest bearing digital currency customer deposits. The net interest margin decrease from the fourth quarter of 2019 was primarily due to lower yields on loans, cash and cash equivalents, and securities due to a declining interest rate environment, offset by lower interest expense from calling the remainder of the brokered certificates of deposit in the second quarter as well as lower FHLB advances.
|
|
Three Months Ended |
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|
|
December 31, 2020 |
|
September 30, 2020 |
|
December 31, 2019 |
|||||||||||||||||||||||||||
|
|
Average |
|
Interest |
|
Average Yield/ Rate |
|
Average |
|
Interest |
|
Average |
|
Average |
|
Interest |
|
Average |
|||||||||||||||
|
|
(Dollars in thousands) |
|||||||||||||||||||||||||||||||
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Interest earning assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Interest earning deposits in other banks |
|
$ |
689,385 |
|
|
$ |
314 |
|
|
0.18 |
% |
|
$ |
245,855 |
|
|
$ |
196 |
|
|
0.32 |
% |
|
$ |
165,685 |
|
|
$ |
685 |
|
|
1.64 |
% |
Taxable securities |
|
671,209 |
|
|
3,548 |
|
|
2.10 |
% |
|
679,277 |
|
|
3,746 |
|
|
2.19 |
% |
|
905,399 |
|
|
6,117 |
|
|
2.68 |
% |
||||||
Tax-exempt securities(1) |
|
266,158 |
|
|
2,173 |
|
|
3.25 |
% |
|
267,511 |
|
|
2,177 |
|
|
3.24 |
% |
|
— |
|
|
— |
|
|
— |
|
||||||
Loans(2)(3) |
|
1,474,893 |
|
|
16,374 |
|
|
4.42 |
% |
|
1,209,884 |
|
|
13,527 |
|
|
4.45 |
% |
|
1,008,987 |
|
|
13,076 |
|
|
5.14 |
% |
||||||
Other |
|
15,331 |
|
|
255 |
|
|
6.62 |
% |
|
15,112 |
|
|
116 |
|
|
3.05 |
% |
|
10,744 |
|
|
234 |
|
|
8.64 |
% |
||||||
Total interest earning assets |
|
3,116,976 |
|
|
22,664 |
|
|
2.89 |
% |
|
2,417,639 |
|
|
19,762 |
|
|
3.25 |
% |
|
2,090,815 |
|
|
20,112 |
|
|
3.82 |
% |
||||||
Noninterest earning assets |
|
66,477 |
|
|
|
|
|
|
68,327 |
|
|
|
|
|
|
46,708 |
|
|
|
|
|
||||||||||||
Total assets |
|
$ |
3,183,453 |
|
|
|
|
|
|
$ |
2,485,966 |
|
|
|
|
|
|
$ |
2,137,523 |
|
|
|
|
|
|||||||||
Liabilities and Shareholders’ Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Interest bearing liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Interest bearing deposits |
|
$ |
114,782 |
|
|
$ |
47 |
|
|
0.16 |
% |
|
$ |
108,755 |
|
|
$ |
57 |
|
|
0.21 |
% |
|
$ |
449,985 |
|
|
$ |
3,793 |
|
|
3.34 |
% |
FHLB advances and other borrowings |
|
7,098 |
|
|
— |
|
|
— |
|
|
124,886 |
|
|
65 |
|
|
0.21 |
% |
|
85,451 |
|
|
419 |
|
|
1.95 |
% |
||||||
Subordinated debentures |
|
15,829 |
|
|
253 |
|
|
6.36 |
% |
|
15,825 |
|
|
257 |
|
|
6.46 |
% |
|
15,815 |
|
|
270 |
|
|
6.77 |
% |
||||||
Total interest bearing liabilities |
|
137,709 |
|
|
300 |
|
|
0.87 |
% |
|
249,466 |
|
|
379 |
|
|
0.60 |
% |
|
551,251 |
|
|
4,482 |
|
|
3.23 |
% |
||||||
Noninterest bearing liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Noninterest bearing deposits |
|
2,732,692 |
|
|
|
|
|
|
1,935,661 |
|
|
|
|
|
|
1,335,186 |
|
|
|
|
|
||||||||||||
Other liabilities |
|
25,143 |
|
|
|
|
|
|
23,860 |
|
|
|
|
|
|
16,274 |
|
|
|
|
|
||||||||||||
Shareholders’ equity |
|
287,909 |
|
|
|
|
|
|
276,979 |
|
|
|
|
|
|
234,812 |
|
|
|
|
|
||||||||||||
Total liabilities and shareholders’ equity |
|
$ |
3,183,453 |
|
|
|
|
|
|
$ |
2,485,966 |
|
|
|
|
|
|
$ |
2,137,523 |
|
|
|
|
|
|||||||||
Net interest spread(4) |
|
|
|
|
|
2.02 |
% |
|
|
|
|
|
2.65 |
% |
|
|
|
|
|
0.59 |
% |
||||||||||||
Net interest income, taxable equivalent basis |
|
|
|
$ |
22,364 |
|
|
|
|
|
|
$ |
19,383 |
|
|
|
|
|
|
$ |
15,630 |
|
|
|
|||||||||
Net interest margin(5) |
|
|
|
|
|
2.85 |
% |
|
|
|
|
|
3.19 |
% |
|
|
|
|
|
2.97 |
% |
||||||||||||
Reconciliation to reported net interest income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Adjustments for taxable equivalent basis |
|
|
|
(456) |
|
|
|
|
|
|
(457) |
|
|
|
|
|
|
— |
|
|
|
||||||||||||
Net interest income, as reported |
|
|
|
$ |
21,908 |
|
|
|
|
|
|
$ |
18,926 |
|
|
|
|
|
|
$ |
15,630 |
|
|
|
|||||||||
(1) |
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. |
|
(2) |
Loans include nonaccrual loans and loans held-for-sale, net of deferred fees and before allowance for loan losses. |
|
(3) |
Interest income includes amortization of deferred loan fees, net of deferred loan costs. |
|
(4) |
Net interest spread is the difference between interest rates earned on interest earning assets and interest rates paid on interest bearing liabilities. |
|
(5) |
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 a $0.2 million provision for loan losses for the fourth quarter of 2020, compared to no provision for the third quarter of 2020 and the fourth quarter of 2019. The level of the allowance for loan losses increased as a result of an overall increase in the loan balance.
Noninterest Income
Noninterest income for the fourth quarter of 2020 was $4.8 million, an increase of $0.9 million, or 22.3%, from the third quarter of 2020. The primary driver of this increase was a $0.6 million, or 16.7%, increase in deposit related fees and an increase in mortgage warehouse fee income. Deposit related fees from digital currency customers were $3.8 million for the fourth quarter of 2020, an increase of $0.5 million, or 16.7% compared to $3.3 million for the third quarter of 2020.
Noninterest income for the fourth quarter of 2020 increased by $1.7 million, or 54.9%, compared to the fourth quarter of 2019. This increase was primarily due to a $2.4 million, or 158.5%, increase in deposit related fees and a $0.6 million, or 144.6% increase in mortgage warehouse fee income, partially offset by a $0.7 million decrease in gain on sale of securities, a $0.2 million decrease in gain on sale of loans and a $0.2 million decrease in service fees related to off-balance sheet deposits. Deposit related fees from digital currency customers increased $2.4 million, or 178.0%, to $3.8 million compared to $1.4 million for the fourth quarter of 2019.
|
|
Three Months Ended |
|||||||||||
|
|
December 31, |
|
September 30, |
|
December 31, |
|||||||
|
|
(Dollars in thousands) |
|||||||||||
Noninterest income: |
|
|
|
|
|
|
|||||||
Mortgage warehouse fee income |
|
$ |
949 |
|
|
$ |
758 |
|
|
|
$ |
388 |
|
Service fees related to off-balance sheet deposits |
|
— |
|
|
1 |
|
|
|
183 |
|
|||
Deposit related fees |
|
3,844 |
|
|
3,293 |
|
|
|
1,487 |
|
|||
Gain on sale of securities, net |
|
— |
|
|
— |
|
|
|
740 |
|
|||
(Loss) gain on sale of loans, net |
|
— |
|
|
(96 |
) |
|
|
235 |
|
|||
Other income |
|
55 |
|
|
8 |
|
|
|
97 |
|
|||
Total noninterest income |
|
$ |
4,848 |
|
|
$ |
3,964 |
|
|
|
$ |
3,130 |
|
Noninterest Expense
Noninterest expense totaled $17.6 million for the fourth quarter of 2020, an increase of $3.5 million, or 24.7%, compared to the third quarter of 2020, and an increase of $4.0 million, or 29.0%, compared to the fourth quarter of 2019.
Noninterest expense increased from the prior quarter and from the fourth quarter of 2019 due primarily to a $2.3 million impairment charge related to its leased office space and fixed assets no longer in use and, to a lesser extent, to higher salaries and employee benefits expense and increased federal deposit insurance expense caused by a rate increase driven by the growth in deposits.
|
|
Three Months Ended |
||||||||||
|
|
December 31, |
|
September 30, |
|
December 31, |
||||||
|
|
(Dollars in thousands) |
||||||||||
Noninterest expense: |
|
|
|
|
|
|
||||||
Salaries and employee benefits |
|
$ |
9,637 |
|
|
$ |
8,899 |
|
|
$ |
8,773 |
|
Occupancy and equipment |
|
3,044 |
|
|
845 |
|
|
861 |
|
|||
Communications and data processing |
|
1,443 |
|
|
1,389 |
|
|
1,149 |
|
|||
Professional services |
|
1,163 |
|
|
1,207 |
|
|
1,198 |
|
|||
Federal deposit insurance |
|
658 |
|
|
209 |
|
|
33 |
|
|||
Correspondent bank charges |
|
410 |
|
|
403 |
|
|
323 |
|
|||
Other loan expense |
|
45 |
|
|
60 |
|
|
122 |
|
|||
Other general and administrative |
|
1,225 |
|
|
1,121 |
|
|
1,201 |
|
|||
Total noninterest expense |
|
$ |
17,625 |
|
|
$ |
14,133 |
|
|
$ |
13,660 |
|
Income Tax Expense (Benefit)
Income tax benefit was $0.1 million for the fourth quarter of 2020, compared to an expense of $1.7 million for the third quarter of 2020, and an expense of $1.5 million for the fourth quarter of 2019. Our effective tax rate for the fourth quarter of 2020 was (1.6)%, compared to 19.4% for the third quarter of 2020, and 29.5% for the fourth quarter of 2019. The lower effective tax rate for the fourth quarter of 2020 when compared to the third quarter of 2020 was due to significant tax benefit recognized on the exercise of stock options during the fourth quarter. The lower effective rate from the fourth quarter of 2019 was due to the impact of tax-exempt income and the tax benefit from the exercise of stock options.
Results of Operations, Year Ended December 31, 2020
Net income for the year ended December 31, 2020 was $26.0 million, or $1.36 per diluted share, compared to $24.8 million, or $1.35 per diluted share, for the comparable period in 2019.
Net interest income for the year ended December 31, 2020 was $72.4 million, compared to $71.0 million for the same period in 2019. The increase in net interest income was primarily due to a $2.9 million decrease in interest expense offset by a $1.4 million decrease in interest income.
Noninterest income for the year ended December 31, 2020 was $19.2 million, compared to $15.8 million for the same period in 2019. The increase in noninterest income was primarily due to a $6.0 million increase in fee income from our digital currency customers and a $3.8 million gain on sale of securities and, less the $5.5 million gain on a branch sale that occurred in the first quarter of 2019. Digital currency customer related fee income for the year ended December 31, 2020 was $11.1 million, compared to $4.9 million for the year ended December 31, 2019.
Noninterest expense was $59.6 million for the year ended December 31, 2020, compared to $52.5 million for the year ended December 31, 2019. The increase in noninterest expense was primarily due to increased salaries and benefits expense and a $2.3 million impairment charge for leased office space and fixed assets no longer in use.
Income tax expense was $5.2 million for the year ended December 31, 2020, compared to income tax expense of $9.8 million for 2019. Our effective tax rates for the year ended December 31, 2020 and 2019 were 16.5% and 28.3%, respectively. The decrease in the Company’s effective tax rate in 2020 was primarily related to tax-exempt income earned on certain municipal bonds and excess tax benefit from stock-based compensation.
Balance Sheet
Deposits
At December 31, 2020, deposits totaled $5.2 billion, an increase of $3.0 billion, or 130.1%, from September 30, 2020, and an increase of $3.4 billion, or 189.2%, from December 31, 2019. Noninterest bearing deposits totaled $5.1 billion, representing approximately 97.8% of total deposits at December 31, 2020, an increase of $3.0 billion from the prior quarter end, and a $3.8 billion increase compared to December 31, 2019. The increase in total deposits from the prior quarter was driven by an increase in deposits from digital currency exchanges, institutional investors in digital assets and other fintech related customers, with elevated client activity evidenced by the record volume of SEN transactions during the quarter. The Bank’s 10 largest depositors accounted for $2.5 billion in deposits, or approximately 47.5% of total deposits at December 31, 2020 compared to $523.6 million in deposits, or approximately 28.9% of total deposits at December 31, 2019, substantially all of which are customers operating in the digital currency industry. Deposits from digital currency exchanges represent approximately 47.2% of the Bank’s total deposits and are held by approximately 76 exchanges at December 31, 2020 compared to 29.1% of total deposits, held by 60 exchanges at December 31, 2019.
The weighted average cost of deposits for the fourth quarter of 2020 was 0.01%, compared to 0.01% for the third quarter of 2020, and 0.84% for the fourth quarter of 2019. The decrease in the weighted average cost of deposits compared to the fourth quarter of 2019 was driven by the absence of any interest expense associated with brokered certificates of deposit, which were called in the second quarter of 2020.
|
|
Three Months Ended |
|||||||||||||||||||
|
|
December 31, 2020 |
|
September 30, 2020 |
|
December 31, 2019 |
|||||||||||||||
|
|
Average Balance |
|
Average Rate |
|
Average Balance |
|
Average Rate |
|
Average Balance |
|
Average Rate |
|||||||||
|
|
(Dollars in thousands) |
|||||||||||||||||||
Noninterest bearing demand accounts |
|
$ |
2,732,692 |
|
|
— |
|
|
$ |
1,935,661 |
|
|
— |
|
|
$ |
1,335,186 |
|
|
— |
|
Interest bearing accounts: |
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Interest bearing demand accounts |
|
41,968 |
|
|
0.17 |
% |
|
41,871 |
|
|
0.10 |
% |
|
50,095 |
|
|
0.13 |
% |
|||
Money market and savings accounts |
|
71,871 |
|
|
0.15 |
% |
|
65,646 |
|
|
0.25 |
% |
|
83,199 |
|
|
1.00 |
% |
|||
Certificates of deposit: |
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Brokered certificates of deposit |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
314,262 |
|
|
4.49 |
% |
|||
Other |
|
943 |
|
|
0.84 |
% |
|
1,238 |
|
|
0.96 |
% |
|
2,429 |
|
|
1.23 |
% |
|||
Total interest bearing deposits |
|
114,782 |
|
|
0.16 |
% |
|
108,755 |
|
|
0.21 |
% |
|
449,985 |
|
|
3.34 |
% |
|||
Total deposits |
|
$ |
2,847,474 |
|
|
0.01 |
% |
|
$ |
2,044,416 |
|
|
0.01 |
% |
|
$ |
1,785,171 |
|
|
0.84 |
% |
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:
|
|
December 31, 2020 |
|
September 30, 2020 |
|
December 31, 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 |
|
76 |
|
|
$ |
2,479 |
|
|
69 |
|
|
$ |
729 |
|
|
60 |
|
|
$ |
527 |
|
Institutional investors |
|
607 |
|
|
1,811 |
|
|
599 |
|
|
850 |
|
|
509 |
|
|
432 |
|
|||
Other customers |
|
286 |
|
|
749 |
|
|
260 |
|
|
515 |
|
|
235 |
|
|
286 |
|
|||
Total |
|
969 |
|
|
$ |
5,039 |
|
|
928 |
|
|
$ |
2,095 |
|
|
804 |
|
|
$ |
1,246 |
|
Contacts
Investor Relations Contact:
Lauren Scott / Hunter Stenback
858-200-3782
investors@silvergate.com
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