EX-99.1 2 ex991si4q21earningsrelease.htm EX-99.1 Document
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Exhibit 99.1
Silvergate Capital Corporation Announces Fourth Quarter 2021 Results
La Jolla, CA, January 18, 2022 -- 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, 2021.
Fourth Quarter 2021 Highlights
•Net income for the quarter was $21.4 million, compared to $23.5 million for the third quarter of 2021, and $9.1 million for the fourth quarter of 2020
•Net income available to common shareholders for the quarter was $18.4 million, or $0.66 per diluted common share, compared to net income of $23.5 million, or $0.88 per diluted share, for the third quarter of 2021, and net income of $9.1 million, or $0.47 per diluted share, for the fourth quarter of 2020
•The Silvergate Exchange Network (“SEN”) handled $219.2 billion of U.S. dollar transfers in the fourth quarter of 2021, an increase of 35% compared to $162.0 billion in the third quarter of 2021, and an increase of 270% compared to $59.2 billion in the fourth quarter of 2020
•Total SEN Leverage commitments were $570.5 million at December 31, 2021, compared to $322.5 million at September 30, 2021, and $82.5 million at December 31, 2020
•Digital currency customer related fee income for the quarter was $9.3 million, compared to $8.1 million for the third quarter of 2021, and $3.8 million for the fourth quarter of 2020
•Digital currency customers grew to 1,381 at December 31, 2021, compared to 1,305 at September 30, 2021, and 969 at December 31, 2020
•Average digital currency customer deposits grew to $13.3 billion during the fourth quarter of 2021, compared to $11.2 billion during the third quarter of 2021
•Completed $552.0 million equity offering, resulting in a total issuance of 3,806,895 shares of Class A common stock, for net proceeds of $530.3 million after deducting underwriting discounts and offering expenses
Full Year 2021 Highlights
•Net income for the year ended December 31, 2021 was $78.5 million compared to $26.0 million for the year ended December 31, 2020
•Net income available to common shareholders for the year ended December 31, 2021 was $75.5 million, or $2.91 per diluted common share, compared to net income of $26.0 million, or $1.36 per diluted share for the year ended December 31, 2020
•The SEN handled $787.4 billion of U.S. dollar transfers for the year ended December 31, 2021, compared to $135.7 billion for the year ended December 31, 2020
•Digital currency customer related fee income for the year ended December 31, 2021 was $35.8 million, compared to $11.1 million for the year ended December 31, 2020

Alan Lane, president and chief executive officer of Silvergate, commented, “2021 was another year of significant growth and momentum for Silvergate, driven by strong demand for our digital currency solutions powered by the SEN. Total deposits grew to $14.3 billion at the end of 2021 and our full year net income more than tripled compared to last year, reflecting growth in both fee income and net interest income. In the fourth quarter, we grew SEN utilization and transaction revenue, significantly grew SEN Leverage lines of credit and increased average deposits from digital currency customers to a record $13.3 billion. We also continued to build our stablecoin infrastructure capabilities, and announced the launch of the EJF Silvergate Venture Fund, an investment vehicle to support entrepreneurs who will help shape the future of the digital currency ecosystem. As we look forward to 2022 and beyond, I am excited about the opportunities and areas for growth that lie ahead as the digital currency industry continues to evolve.”
1

As of or for the Three Months Ended
December 31,
2021		September 30,
2021		December 31,
2020
Financial Highlights(Dollars in thousands, except per share data)
Net income$21,391 $23,492 $9,119 
Net income available to common shareholders$18,375 $23,492 $9,119 
Diluted earnings per common share$0.66 $0.88 $0.47 
Return on average assets (ROAA)(1)
0.50 %0.75 %1.14 %
Return on average common equity (ROACE)(1)
7.25 %10.45 %12.60 %
Net interest margin(1)(2)
1.11 %1.26 %2.85 %
Cost of deposits(1)
0.00 %0.00 %0.01 %
Cost of funds(1)
0.01 %0.01 %0.04 %
Efficiency ratio(4)
52.08 %43.20 %65.87 %
Total assets
$16,005,495 $12,776,621 $5,586,235 
Total deposits
$14,290,628 $11,662,520 $5,248,026 
Book value per common share
$46.55 $33.10 $15.63 
Tier 1 leverage ratio
11.07 %8.71 %8.29 %
Total risk-based capital ratio
55.60 %51.13 %23.49 %

Year Ended December 31,
20212020
Financial Highlights(Dollars in thousands, except per share data)
Net income$78,528 $26,038 
Net income available to common shareholders
$75,512 $26,038 
Diluted earnings per common share
$2.91 $1.36 
Return on average assets (ROAA)0.66 %1.03 %
Return on average common equity (ROACE)9.32 %9.78 %
Net interest margin(2)
1.20 %3.00 %
Cost of deposits(3)
0.00 %0.27 %
Cost of funds(3)
0.01 %0.32 %
Efficiency ratio(4)
51.06 %65.11 %
________________________
(1)Data has been annualized.
(2)Net interest margin is a ratio calculated as 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 for 2020 includes interest expense and accelerated premium amortization expense related to callable brokered certificates of deposit that were called during the second quarter of 2020.
(4)Efficiency ratio is calculated by dividing noninterest expenses by net interest income plus noninterest income.

Digital Currency Initiative
At December 31, 2021, the Company’s digital currency customers increased to 1,381 from 1,305 at September 30, 2021, and from 969 at December 31, 2020. At December 31, 2021, prospective digital currency customer leads in various stages of the customer onboarding process and pipeline was above 300. For the fourth quarter of 2021, $219.2 billion of U.S. dollar transfers occurred on the SEN, a 35% increase from $162.0 billion transfers in the third quarter of 2021, and an increase of 270% compared to $59.2 billion in the fourth quarter of 2020. Based on digital currency industry transaction data provided by Coin Metrics, bitcoin and ether dollar trading volumes increased by 14% during the fourth quarter of 2021 compared to the third quarter of 2021.

2

Results of Operations, Quarter Ended December 31, 2021
Net Interest Income and Net Interest Margin Analysis (Taxable Equivalent Basis)
The Company’s securities portfolio includes tax-exempt municipal bonds with tax-exempt income from these securities calculated and presented below 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 $40.2 million for the fourth quarter of 2021, compared to $39.0 million for the third quarter of 2021, and $22.4 million for the fourth quarter of 2020.
Compared to the third quarter of 2021, net interest income increased $1.2 million, due to increased interest income, while interest expense remained flat. Average total interest earning assets increased by $2.2 billion for the fourth quarter of 2021 compared to the third quarter of 2021, primarily due to increased interest earning deposits in other banks. The average yield on interest earning assets decreased from 1.27% for the third quarter of 2021 to 1.11% for the fourth quarter of 2021, primarily due to lower yields on recently purchased securities and, to a lesser extent, interest earning deposits in other banks being a greater percentage of interest earning assets.
Compared to the fourth quarter of 2020, net interest income increased $17.8 million due to increased interest income, with the largest driver being higher balances of securities, while interest expense remained relatively flat. Average total interest earning assets increased by $11.3 billion for the fourth quarter of 2021 compared to the fourth quarter of 2020, due to an increase in noninterest bearing deposits, which were deployed into securities and interest earning deposits in other banks. The average yield on total interest earning assets decreased from 2.89% for the fourth quarter of 2020 to 1.11% for the fourth quarter of 2021, primarily due to interest earning deposits in other banks being a greater percentage of interest earning assets, and lower yields on securities purchased throughout 2021. Average interest bearing liabilities decreased $44.3 million for the fourth quarter of 2021 compared to the fourth quarter of 2020, due to lower balances of interest bearing deposits and reduced FHLB advances in 2021. The average rate on total interest bearing liabilities increased from 0.87% for the fourth quarter of 2020 to 1.17% for the fourth quarter of 2021, primarily due to the decrease in lower cost interest bearing deposits and FHLB advances, which resulted in a larger proportion of higher cost subordinated debentures as a percentage of total interest bearing liabilities.
Net interest margin for the fourth quarter of 2021 was 1.11%, compared to 1.26% for the third quarter of 2021, and 2.85% for the fourth quarter of 2020. The decrease in the net interest margin compared to the third quarter of 2021 was primarily due to lower yields on recently purchased securities and, to a lesser extent, interest earning deposits in other banks being a greater percentage of interest earning assets. The decrease in the net interest margin compared to the fourth quarter of 2020 was primarily due to a higher proportion of interest earning deposits as a percentage of total interest earning assets, as well as lower yields on securities due to a declining interest rate environment.
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Three Months Ended
December 31, 2021September 30, 2021December 31, 2020
Average
Outstanding
Balance		Interest
Income/
Expense
Average
Yield/
Rate
Average
Outstanding
Balance		Interest
Income/
Expense		Average
Yield/
Rate		Average
Outstanding
Balance		Interest
Income/
Expense		Average
Yield/
Rate
(Dollars in thousands)
Assets
Interest earning assets:
Interest earning deposits in other banks$5,282,661 $2,166 0.16 %$4,104,776 $1,755 0.17 %$689,385 $314 0.18 %
Taxable securities5,735,932 10,178 0.70 %5,449,202 14,000 1.02 %671,209 3,548 2.10 %
Tax-exempt securities(1)
1,728,862 9,454 2.17 %1,187,452 6,347 2.12 %266,158 2,173 3.25 %
Loans(2)(3)
1,641,345 17,892 4.32 %1,493,590 16,972 4.51 %1,474,893 16,374 4.42 %
Other34,490 777 8.94 %31,028 195 2.49 %15,331 255 6.62 %
Total interest earning assets14,423,290 40,467 1.11 %12,266,048 39,269 1.27 %3,116,976 22,664 2.89 %
Noninterest earning assets295,841 197,477 66,477 
Total assets$14,719,131 $12,463,525 $3,183,453 
Liabilities and Shareholders’ Equity
Interest bearing liabilities:
Interest bearing deposits$77,564 $27 0.14 %$76,898 $26 0.13 %$114,782 $47 0.16 %
FHLB advances and other borrowings12 — 0.00 %1 — 0.00 %7,098 — 0.00 %
Subordinated debentures15,843 249 6.24 %15,839 247 6.19 %15,829 253 6.36 %
Total interest bearing liabilities93,419 276 1.17 %92,738 273 1.17 %137,709 300 0.87 %
Noninterest bearing liabilities:
Noninterest bearing deposits13,377,552 11,305,650 2,732,692 
Other liabilities49,023 50,657 25,143 
Shareholders’ equity1,199,137 1,014,480 287,909 
Total liabilities and shareholders’ equity
$14,719,131 $12,463,525 $3,183,453 
Net interest spread(4)
(0.06)%0.10 %2.02 %
Net interest income, taxable equivalent basis$40,191 $38,996 $22,364 
Net interest margin(5)
1.11 %1.26 %2.85 %
Reconciliation to reported net interest income:
Adjustments for taxable equivalent basis(1,985)(1,333)(456)
Net interest income, as reported$38,206 $37,663 $21,908 
________________________
(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 did not record a provision for loan losses for the fourth quarter of 2021, the third quarter of 2021, or for the fourth quarter of 2020 as a result of management’s assessment of the level of the allowance for loan losses relative to the size and composition of the loan portfolio, among other factors.
Noninterest Income
Noninterest income for the fourth quarter of 2021 was $11.1 million, a decrease of $3.0 million, or 21.3%, from the third quarter of 2021. The primary driver of this decrease was a $5.1 million decrease in gain on sale of securities offset by a $1.2 million, or 14.8%, increase in deposit related fees as a result of higher cash management fees from digital currency related customers and a $0.9 million increase in other income due to a gain on sale of other assets.
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Noninterest income for the fourth quarter of 2021 increased by $6.2 million, or 128.0%, compared to the fourth quarter of 2020. This increase was primarily due to a $5.5 million, or 144.0%, increase in deposit related fees and a $0.9 million increase in other income due to a gain on sale of other assets, partially offset by a $0.3 million, or 27.9% decrease in mortgage warehouse fee income.
Three Months Ended
December 31,
2021		September 30,
2021		December 31,
2020
(Dollars in thousands)
Noninterest income:
Mortgage warehouse fee income$684 $665 $949 
Deposit related fees9,378 8,171 3,844 
Gain on sale of securities, net56 5,182 — 
Other income937 24 55 
Total noninterest income$11,055 $14,042 $4,848 
Noninterest Expense
Noninterest expense totaled $25.7 million for the fourth quarter of 2021, an increase of $3.3 million, or 14.8%, compared to the third quarter of 2021, and an increase of $8.0 million, or 45.6%, compared to the fourth quarter of 2020. The increase in noninterest expense compared to prior quarter was primarily due to an increase in salaries and employee benefits. The increase in noninterest expense from the fourth quarter of 2020 was primarily driven by an increase in salaries and employee benefits and increased federal deposit insurance expense resulting from the significant growth in digital currency deposits. The increase in noninterest expense from the prior year was partially offset by a decrease in occupancy and equipment expense related to a $2.3 million impairment charge recorded in the fourth quarter of 2020.
Three Months Ended
December 31,
2021		September 30,
2021		December 31,
2020
(Dollars in thousands)
Noninterest expense:
Salaries and employee benefits$13,815 $10,729 $9,637 
Occupancy and equipment728 523 3,044 
Communications and data processing1,862 1,793 1,443 
Professional services2,994 2,471 1,163 
Federal deposit insurance3,100 4,297 658 
Correspondent bank charges634 572 410 
Other loan expense364 299 45 
Other general and administrative2,159 1,655 1,225 
Total noninterest expense$25,656 $22,339 $17,625 
Income Tax Expense (Benefit)
Income tax expense was $2.2 million for the fourth quarter of 2021, compared to $5.9 million for the third quarter of 2021, and a benefit of $0.1 million for the fourth quarter of 2020. Our effective tax rate for the fourth quarter of 2021 was 9.4%, compared to 20.0% for the third quarter of 2021, and (1.6)% for the fourth quarter of 2020. The lower effective tax rates for the fourth quarter of 2021 and 2020, compared to the third quarter of 2021 were due to higher excess tax benefits recognized on the exercise of stock options and tax-exempt income earned on certain municipal bonds.
Results of Operations, Year Ended December 31, 2021
Net income available to common shareholders for the year ended December 31, 2021 was $75.5 million, or $2.91 per diluted common share, compared to $26.0 million, or $1.36 per diluted share, for the comparable period in 2020.
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Net interest income for the year ended December 31, 2021 was $129.3 million, compared to $72.4 million for the same period in 2020. The increase in net interest income was primarily due to a $50.8 million increase in interest income and a $6.1 million decrease in interest expense, primarily due to significant growth in our balance sheet.
Noninterest income for the year ended December 31, 2021 was $45.3 million, compared to $19.2 million for the same period in 2020. The increase in noninterest income was primarily due to a $24.6 million increase in fee income from our digital currency customers and a $1.5 million increase in gain on sale of securities. Digital currency customer related fee income for the year ended December 31, 2021 was $35.8 million, compared to $11.1 million for the year ended December 31, 2020.
Noninterest expense was $89.1 million for the year ended December 31, 2021, compared to $59.6 million for the year ended December 31, 2020. The increase in noninterest expense was primarily due to a $12.4 million increase in federal deposit insurance and a $9.3 million increase in salaries and benefits expense.
Income tax expense was $6.9 million for the year ended December 31, 2021, compared to $5.2 million for the same period in 2020. Our effective tax rates for the years ended December 31, 2021 and 2020 were 8.1% and 16.5%, respectively. The decrease in the Company’s effective tax rate in 2021 was primarily related to higher excess tax benefit from stock-based compensation and tax-exempt income earned on certain municipal bonds.
Balance Sheet
Deposits
At December 31, 2021, deposits totaled $14.3 billion, an increase of $2.6 billion, or 22.5%, from September 30, 2021, and an increase of $9.0 billion, or 172.3%, from December 31, 2020. Noninterest bearing deposits totaled $14.2 billion, representing approximately 99.5% of total deposits at December 31, 2021, an increase of $2.6 billion from the prior quarter end, and a $9.1 billion increase compared to December 31, 2020. The increase in total deposits from the prior year quarter end was driven by an increase in deposits from digital currency exchanges, institutional investors in digital assets and other fintech related customers. The Bank’s 10 largest depositors accounted for $6.5 billion in deposits, or approximately 45.3% of total deposits at December 31, 2021, compared to $5.3 billion in deposits, or approximately 45.6% of total deposits at September 30, 2021, and $2.5 billion in deposits, or approximately 47.5% of total deposits at December 31, 2020, substantially all of which are from customers operating in the digital currency industry.
Our continued growth has been accompanied by significant fluctuations in the level of our deposits, in particular our deposits from customers operating in the digital currency industry, as our customers in this industry typically carry higher balances over the weekend to take advantage of the 24/7 availability of the SEN, and carry lower balances during the business week. The Bank’s average total digital currency customer deposits during the fourth quarter of 2021 amounted to $13.3 billion, with the high and low daily total digital currency deposit levels during such time being $16.0 billion and $10.2 billion, respectively, compared to an average of $11.2 billion during the third quarter of 2021, and high and low daily deposit levels of $12.6 billion and $9.8 billion, respectively.
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 other cash management solutions. These tools enable Silvergate’s customers to grow their businesses 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, 2021September 30, 2021December 31, 2020
Number of Customers
Total Deposits(1)
Number of Customers
Total Deposits(1)
Number of Customers
Total Deposits(1)
(Dollars in millions)
Digital currency exchanges94 $8,288 94 $6,759 76 $2,479 
Institutional investors894 4,220 830 3,344 607 1,811 
Other customers393 1,603 381 1,365 286 749 
Total1,381 $14,111 1,305 $11,468 969 $5,039 
________________________
(1)Total deposits may not foot due to rounding.
The weighted average cost of deposits for the fourth quarter of 2021 and for the third quarter of 2021 was 0.00%, compared to 0.01% for the fourth quarter of 2020.
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Three Months Ended
December 31, 2021September 30, 2021December 31, 2020
Average
Balance
Average
Rate
Average
Balance
Average
Rate
Average
Balance
Average
Rate
(Dollars in thousands)
Noninterest bearing demand accounts$13,377,552 — $11,305,650 — $2,732,692 — 
Interest bearing accounts:
Interest bearing demand accounts7,660 0.05 %8,597 0.05 %41,968 0.17 %
Money market and savings accounts69,364 0.14 %67,735 0.14 %71,871 0.15 %
Certificates of deposit540 0.73 %566 0.70 %943 0.84 %
Total interest bearing deposits77,564 0.14 %76,898 0.13 %114,782 0.16 %
Total deposits$13,455,116 0.00 %$11,382,548 0.00 %$2,847,474 0.01 %
Loan Portfolio
Total loans, including net loans held-for-investment and loans held for sale, were $1.8 billion at December 31, 2021, an increase of $152.3 million, or 9.4%, from September 30, 2021, and an increase of $167.8 million, or 10.4%, from December 31, 2020.
December 31,
2021		September 30,
2021		December 31,
2020
(Dollars in thousands)
Real estate loans:
One-to-four family$105,098 $119,817 $187,855 
Multi-family56,751 54,636 77,126 
Commercial210,136 250,295 301,901 
Construction7,573 6,046 6,272 
Commercial and industrial(1)
335,862 254,624 78,909 
Reverse mortgage and other1,410 1,385 1,495 
Mortgage warehouse177,115 128,975 97,903 
Total gross loans held-for-investment893,945 815,778 751,461 
Deferred fees, net275 883 2,206 
Total loans held-for-investment894,220 816,661 753,667 
Allowance for loan losses(6,916)(6,916)(6,916)
Loans held-for-investment, net887,304 809,745 746,751 
Loans held-for-sale(2)
893,194 818,447 865,961 
Total loans$1,780,498 $1,628,192 $1,612,712 
________________________
(1)Commercial and industrial loans includes $335.9 million, $254.5 million and $77.2 million of SEN Leverage loans as of December 31, 2021, September 30, 2021 and December 31, 2020, respectively.
(2)Loans held-for-sale are comprised entirely of mortgage warehouse loans for all periods presented.
Asset Quality and Allowance for Loan Losses
The allowance for loan losses was unchanged at $6.9 million at December 31, 2021, compared to September 30, 2021 and December 31, 2020. The ratio of the allowance for loan losses to total loans held-for-investment at December 31, 2021 was 0.77%, compared to 0.85% and 0.92% at September 30, 2021 and December 31, 2020, respectively.
Nonperforming assets totaled $4.0 million, or 0.03% of total assets, at December 31, 2021, a decrease of $1.8 million from $5.8 million, or 0.05% of total assets at September 30, 2021. Nonperforming assets decreased $0.9 million, from $4.9 million, or 0.09%, of total assets, at December 31, 2020.
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December 31,
2021		September 30,
2021		December 31,
2020
Asset Quality(Dollars in thousands)
Nonperforming Assets:
Nonaccrual loans$4,007$5,781$4,918
Troubled debt restructurings
$1,713$1,867$1,525
Other real estate owned, net
———
Nonperforming assets
$4,007$5,781$4,918
Asset Quality Ratios:
Nonperforming assets to total assets
0.03 %0.05 %0.09 %
Nonaccrual loans to total loans(1)
0.45 %0.71 %0.65 %
Net charge-offs (recoveries) to average total loans(1)
0.00 %0.00 %0.00 %
Allowance for loan losses to total loans(1)
0.77 %0.85 %0.92 %
Allowance for loan losses to nonaccrual loans172.60 %119.63 %140.63 %
________________________
(1)Loans exclude loans held-for-sale at each of the dates presented.
Securities
Securities available-for-sale increased $1.4 billion, or 19.2%, from $7.2 billion at September 30, 2021, and increased $7.7 billion, or 818.5%, from $939.0 million at December 31, 2020, to $8.6 billion at December 31, 2021. During the fourth quarter of 2021, the Company purchased $2.7 billion of securities, including $991.9 million of tax-exempt municipal bonds, $770.7 million of agency residential mortgage-backed securities, $760.8 million of agency commercial mortgage-backed securities, $121.5 million of U.S. agency securities excluding mortgage-backed securities, and $22.7 million of taxable municipal bonds, bringing total purchases during 2021 to $9.5 billion. During the fourth quarter of 2021, the Company sold $1.1 billion of longer duration securities and recognized an immaterial net gain. In addition, the Company sold its two LIBOR-based interest rate swap contracts, and the taxable municipal bond that such swap contracts hedged, in the fourth quarter of 2021. The realized gain on sale of the interest rate swap contracts of $0.9 million was recognized in other noninterest income.
Capital Ratios
At December 31, 2021, the Company’s ratio of common equity to total assets was 8.84%, compared with 6.88% at September 30, 2021, and 5.27% at December 31, 2020. At December 31, 2021, the Company’s book value per common share was $46.55, compared to $33.10 at September 30, 2021, and $15.63 at December 31, 2020.
At December 31, 2021, the Company had a tier 1 leverage ratio of 11.07%, common equity tier 1 capital ratio of 48.25%, tier 1 risk-based capital ratio of 55.35% and total risk-based capital ratio of 55.60%.
At December 31, 2021, the Bank had a tier 1 leverage ratio of 10.49%, common equity tier 1 capital ratio of 52.49%, tier 1 risk-based capital ratio of 52.49% and total risk-based capital ratio of 52.75%. These capital ratios each exceeded the “well capitalized” standards defined by federal banking regulations of 5.00% for tier 1 leverage ratio, 6.5% for common equity tier 1 capital ratio, 8.00% for tier 1 risk-based capital ratio and 10.00% for total risk-based capital ratio.
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Capital Ratios(1)
December 31,
2021		September 30,
2021		December 31,
2020
The Company
Tier 1 leverage ratio11.07 %8.71 %8.29 %
Common equity tier 1 capital ratio48.25 %40.98 %21.53 %
Tier 1 risk-based capital ratio55.35 %50.80 %22.88 %
Total risk-based capital ratio55.60 %51.13 %23.49 %
Common equity to total assets8.84 %6.88 %5.27 %
The Bank
Tier 1 leverage ratio10.49 %8.24 %8.22 %
Common equity tier 1 capital ratio52.49 %48.04 %22.71 %
Tier 1 risk-based capital ratio52.49 %48.04 %22.71 %
Total risk-based capital ratio52.75 %48.37 %23.32 %
________________________
(1)December 31, 2021 capital ratios are preliminary.
Equity Offerings
On December 9, 2021, the Company completed its underwritten public offering of 3,806,895 shares of Class A common stock at a price of $145.00 per share, including 496,551 shares of Class A common stock upon the exercise in full by the underwriters of their option to purchase additional shares. The aggregate gross proceeds of the offering were $552.0 million and net proceeds to the Company were $530.3 million after deducting underwriting discounts and offering expenses.
Subsequent Event
On January 13, 2021, the Company’s Board of Directors declared a quarterly dividend payment of $13.44 per share, equivalent to $0.336 per depositary share, on its Fixed Rate Non-Cumulative Perpetual Preferred Stock, Series A (the “Series A Preferred Stock”), for the period covering November 15, 2021 through February 14, 2022, for a total dividend of $2.7 million. The depositary shares representing the Series A Preferred Stock are traded on the New York Stock Exchange under the symbol “SI PRA.” The dividend will be payable on February 15, 2022 to shareholders of record of the Series A Preferred Stock as of January 28, 2021.
Conference Call and Webcast
The Company will host a conference call on Tuesday, January 18, 2022 at 11:00 a.m. (Eastern Time) to present and discuss fourth quarter and full year 2021 financial results. The conference call can be accessed live by dialing 1-844-200-6205 or for international callers, 1-929-526-1599, entering the access code 199002. A replay will be available starting at 1:00 p.m. (Eastern Time) on January 18, 2022 and can be accessed by dialing 1-866-813-9403, or for international callers +44-204-525-0658. The passcode for the replay is 675337. The replay will be available until 11:59 p.m. (Eastern Time) on February 1, 2022.
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.silvergate.com. The online replay will remain available for a limited time beginning immediately following the call.
About Silvergate
Silvergate Capital Corporation (NYSE: SI) is the leading provider of innovative financial infrastructure solutions and services for the growing digital currency industry. The Company’s real-time payments platform, known as the Silvergate Exchange Network, is at the heart of its customer-centric suite of payments, lending and funding solutions serving an expanding class of digital currency companies and investors around the world. Silvergate is enabling the rapid growth of digital currency markets and reshaping global commerce for a digital currency future.
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
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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 0%, the yield on our assets may decline to a greater extent than the decline in our cost of interest-bearing liabilities, reducing our net interest margin and spread and reducing net income; our cyber security risks are increased as the result of an increase in the number of employees working remotely; and FDIC premiums may increase if the agency experiences additional resolution costs.
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.

Investor Relations Contact:
Hunter Stenback / Ashna Vasa
858-200-3782
investors@silvergate.com

Source: Silvergate Capital Corporation
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SILVERGATE CAPITAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(In Thousands)
(Unaudited)
December 31,
2021		September 30,
2021		June 30,
2021		March 31,
2021		December 31,
2020
ASSETS
Cash and due from banks$208,193 $168,628 $52,859 $16,422 $16,405 
Interest earning deposits in other banks5,179,753 3,615,860 4,415,458 4,315,100 2,945,682 
Cash and cash equivalents5,387,946 3,784,488 4,468,317 4,331,522 2,962,087 
Trading securities, at fair value— — 26,998 1,990 — 
Securities available-for-sale, at fair value8,625,259 7,234,216 6,176,778 1,717,418 939,015 
Loans held-for-sale, at lower of cost or fair value893,194 818,447 748,577 897,227 865,961 
Loans held-for-investment, net of allowance for loan losses 887,304 809,745 740,155 728,390 746,751 
Federal home loan and federal reserve bank stock, at cost34,010 34,010 29,460 14,851 14,851 
Accrued interest receivable40,370 32,154 24,505 9,432 8,698 
Premises and equipment, net3,008 1,483 1,604 1,758 2,072 
Derivative assets34,056 37,210 39,454 34,442 31,104 
Other assets100,348 24,868 33,628 20,122 15,696 
Total assets$16,005,495 $12,776,621 $12,289,476 $7,757,152 $5,586,235 
LIABILITIES AND SHAREHOLDERS’ EQUITY
Deposits:
Noninterest bearing demand accounts$14,213,472 $11,586,318 $11,290,638 $6,889,281 $5,133,579 
Interest bearing accounts77,156 76,202 80,918 113,090 114,447 
Total deposits14,290,628 11,662,520 11,371,556 7,002,371 5,248,026 
Subordinated debentures, net15,845 15,841 15,838 15,834 15,831 
Accrued expenses and other liabilities
90,186 26,179 31,575 25,326 28,079 
Total liabilities14,396,659 11,704,540 11,418,969 7,043,531 5,291,936 
Commitments and contingencies
Preferred stock
2 2 — — — 
Class A common stock304 265 265 248 188 
Class B non-voting common stock— — — — 1 
Additional paid-in capital
1,421,592 891,611 697,070 551,798 129,726 
Retained earnings
193,860 175,485 151,993 131,058 118,348 
Accumulated other comprehensive (loss) income(6,922)4,718 21,179 30,517 46,036 
Total shareholders’ equity1,608,836 1,072,081 870,507 713,621 294,299 
Total liabilities and shareholders’ equity$16,005,495 $12,776,621 $12,289,476 $7,757,152 $5,586,235 
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SILVERGATE CAPITAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In Thousands, Except Per Share Data)
(Unaudited)
Three Months EndedYear Ended
December 31,
2021		September 30,
2021		December 31,
2020		December 31,
2021		December 31,
2020
Interest income
Loans, including fees$17,892 $16,972 $16,374 $68,619 $54,732 
Taxable securities10,178 14,000 3,548 36,094 17,465 
Tax-exempt securities7,469 5,014 1,717 17,301 5,062 
Other interest earning assets2,166 1,755 314 6,799 1,639 
Dividends and other777 195 255 1,581 692 
Total interest income38,482 37,936 22,208 130,394 79,590 
Interest expense
Deposits27 26 47 134 5,807 
Federal home loan bank advances— — — — 336 
Subordinated debentures and other249 247 253 993 1,083 
Total interest expense276 273 300 1,127 7,226 
Net interest income before provision for loan losses
38,206 37,663 21,908 129,267 72,364 
Provision for loan losses— — 153 — 742 
Net interest income after provision for loan losses
38,206 37,663 21,755 129,267 71,622 
Noninterest income
Mortgage warehouse fee income684 665 949 3,056 2,539 
Deposit related fees9,378 8,171 3,844 35,981 11,341 
Gain on sale of securities, net56 5,182 — 5,238 3,753 
Gain on sale of loans, net— — — — 354 
Gain on extinguishment of debt— — — — 925 
Other income937 24 55 981 265 
Total noninterest income11,055 14,042 4,848 45,256 19,177 
Noninterest expense
Salaries and employee benefits13,815 10,729 9,637 45,794 36,493 
Occupancy and equipment728 523 3,044 2,464 5,690 
Communications and data processing1,862 1,793 1,443 7,072 5,406 
Professional services2,994 2,471 1,163 9,776 4,460 
Federal deposit insurance3,100 4,297 658 13,537 1,172 
Correspondent bank charges634 572 410 2,515 1,533 
Other loan expense364 299 45 1,117 326 
Other general and administrative2,159 1,655 1,225 6,845 4,525 
Total noninterest expense25,656 22,339 17,625 89,120 59,605 
Income before income taxes
23,605 29,366 8,978 85,403 31,194 
Income tax expense (benefit)2,214 5,874 (141)6,875 5,156 
Net income
21,391 23,492 9,119 78,528 26,038 
Dividends on preferred stock
3,016 — — 3,016 — 
Net income available to common shareholders
$18,375 $23,492 $9,119 $75,512 $26,038 
Basic earnings per common share$0.67 $0.89 $0.49 $2.95 $1.39 
Diluted earnings per common share$0.66 $0.88 $0.47 $2.91 $1.36 
Weighted average common shares outstanding:
Basic27,527 26,525 18,744 25,582 18,691 
Diluted27,744 26,766 19,349 25,922 19,177 
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