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Silvergate Bank, the San Diego commercial bank that was unable to sell itself to a credit union in July, continues to shrink, and has reported a net loss of $67,000 in its second quarter, according to its latest financial call reports.
The reason behind the loss is difficult to decipher from call reports alone, and Chief Executive Officer Dennis Frank did not return a phone call for comment.
The net loss in the quarter compares with a net profit of $76,00 for the like period of 2005. For the six months ended June 30, Silvergate Bank reported net income of $285,000.
Silvergate, which held $600 million in assets several years ago, was down to $354 million as of June 30, and carrying a larger ratio of nonperforming loans.
Loans listed as non-accrual, or those past due more than 90 days, more than tripled to $2.9 million at the end of June, compared with $909,000 for the prior June.
Adding on those loans that were more than 30 days delinquent, the number of problem loans was more than $3.8 million, or 1.03 percent of its total portfolio. That’s a number that would cause concern by some Banks.
The bank based in University Towne Center shifted its basic lending strategy a few years ago, switching from a retail bank to one that purchased and sold residential mortgages and commercial real estate loans.
One shareholder who requested anonymity said the change in strategy didn’t work, as many loans were refinanced and weren’t replaced. Yet even without a significant retail presence, Silvergate’s losing money in a fairly healthy economy is inexcusable.
“If you can’t make money in this market, which is pretty good, I don’t know when you make it,” the shareholder said.
Silvergate was all set to sell itself to Wescom Credit Union of Pasadena earlier this year, but because of a similar pending acquisition by Wal-Mart Corp., the deal was effectively squashed.
The Federal Deposit Insurance Corp. said in July that the agency was installing a six-month moratorium on ruling about acquisitions involving industrial loan company charters (such as Silvergate’s charter). The regulators said they needed more time to determine whether laws governing this industry should be changed.
As news of Wal-Mart’s purchase of an ILC in Utah got more press, the commercial banking industry put pressure on Congress to stop the sale. Lost in the fallout was the much smaller purchase of Silvergate by Wescom, a $3.5 billion asset credit union. Wescom was seeking the ILC to legally purchase and manage credit card portfolios of fellow credit unions.
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Local Bank Acquisition Proceeds:
Shareholders of First Community Bancorp and Community Bancorp conducted two separate votes that advanced the planned purchase of Community by First Community.
Shareholders of Escondido’s Community approved the sale, with 56.8 percent of the outstanding shares voting in favor.
Shareholders of Rancho Santa Fe’s First Community approved amending its bylaws to permit its board to have between seven to 15 members. The holding company is accepting two Community Bancorp directors on its board, Chairman Gary Deems and director Mark Baker.
In tandem with the acquisition, First Community is restructuring. Right after the acquisition of Community Bancorp is completed, which should happen by mid-November, it intends to merge one subsidiary bank, First National Bank, into another subsidiary called Pacific Western Bank.
First Community has already obtained approval to change its charter from a national bank to a state charter, a move the bank said will save money on bank examinations.
The merger of First National into Pacific Western Bank still needs approval of the FDIC and the state Department of financial Institutions. Once that is obtained, the sale of Community Bancorp will be completed. Bank officials said they expect everything to be final by the first half of November.
While there will inevitably be some job loss from the acquisition, the number is limited to mainly back office support personnel, said Michael Perdue, CEO of Community Bancorp and tabbed as president of Pacific Western Bank.
“No branch or other customer service people are being lost,” he said, declining to divulge how many jobs would be cut.
At least one former Community National Bank employee who was going to be eliminated from the musical chair sequence but found a new place to work is Chief Credit Officer Don Murray.
He was recently hired as president and CEO for Inland Empire National Bank, based in Riverside.
The chief credit officer for Pacific Western Bank was tabbed as Robert Dyke, the current CCO at First Community Bancorp.
In other First Community news, Chairman John Eggemeyer purchased 50,000 more shares of company stock, bringing his total direct ownership to more than 380,000 shares. Counting his indirect holdings, mainly through Castle Creek Capital Partners LLC, Eggemeyer’s total holdings are more than 1.8 million. At the market price of $55.20 as of Oct. 2, that was valued at more than $100 million.
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SDNB Celebrates Silver Anniversary:
San Diego National Bank celebrates its 25th anniversary Nov. 12.
Launched in 1981, SDNB is one of the city’s oldest Banks.
The bank said in honor of the founding, it plans to make two $500,000 donations to two yet unnamed youth nonprofit programs. In April, the bank made a $500,000 donation to STAR/PAL, a local nonprofit that serves underprivileged youth throughout the county.
CEO Robert Horsman said the idea for the bank then, and still a guiding principle, was to provide a “friendly alternative to corporate indifference of large banks.”
But as of the end of June, SDNB was anything but small, counting total assets of $2.37 billion. It operates 21 branches in the county.
But regardless of its size, supporting nonprofit community organizations will always be a part of the bank’s mission, Horsman said.
“SDNB’s board of directors, management and staff are proud to be able to give generously to the diverse and important philanthropic organizations that help make this county a great place to live and do business,” he said.
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Seacoast Commerce To Raise $7 Million:
Chula Vista-based Seacoast Commerce Bank said it plans to raise about $7 million through a stock offering of up to 162,000 units at $44 per unit.
Each unit would consist of four shares of common stock of Seacoast, traded on the Bulletin Board under the ticker SCCB.OB, plus one warrant to purchase one share of stock at $12.65.
Given Seacoast Commerce’s most recent stock price of $13.50, the offering is a nice deal, and represents a discount of $22.65 from the market price for four shares plus the warrant price.
Chief financial Officer Toni Flannagan said she wasn’t sure what caused the recent jump in the bank’s stock from about $10 in early September, but surmised that it has much to do with the bank reporting nice earnings gains this year.
With the additional $7 million in capital, Seacoast Commerce would be able to more than double its capital base to about $13 million, and provide maximum loans secured by real estate of more than $3 million, up from the current $1.8 million.
The underwriter on the offering is Monroe Securities of Chicago.
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New Law Helps Small Banks:
Gov. Arnold Schwarzenegger has signed a bill that permits cities and other public agencies to invest public money in certificates of deposit in smaller, community banks.
Under Assembly Bill 1022, the public agencies would have FDIC insurance coverage on the CDs up to $30 million for each account.
Previously, the maximum insurance permitted on the CDs per account was $100,000, said Craig Hudson, executive director of the California Independent Bankers, which supported the bill sponsored by Assemblyman Juan Vargas, D-San Diego.
“Because many community banks are experiencing a liquidity tightening, this will help them obtain more deposits, which will in turn help banks make more loans,” Hudson said.
The law takes effect Jan. 1.
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Fast-Growing Private Lenders:
Four locally based private lending firms made this year’s list of the Fastest-Growing Private Companies compiled by the San Diego Business Journal.
They were, in order of their ranking based on revenue growth from 2003 to 2005, Five Point Capital Inc. at No. 9; Goal Financial, No. 14; Proffer Financial, No. 36; and Cuso Financial Services LP, No. 38.
Five Point Capital is an equipment lender that saw revenues grow more than 311 percent to $20 million.
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Small Change:
Joan Berry was promoted to executive vice president, head of consumer asset management division of Union Bank of California, a post based in San Diego. U.S. Bancorp was featured in a U.S. Banker magazine story on the 25 most powerful women in banking, with two female executives among the group.
Send any news on local finance to Mike Allen via e-mail at
mallen@sdbj.com
. He can be reached at (858) 277-6359.
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