HECMs, Warehouse Loans Boost Silvergate’s Income

Silvergate Bank, La Jolla, Calif., said gains from its reverse mortgage banking business and warehouse lending fee income were the biggest contributors to the fourth-quarter and full-year 2012 increases in noninterest income.

For 4Q12, Silvergate had noninterest income of $3 million versus $202,000 one year prior, and for all of 2012, $8 million as opposed to $1.5 million in 2011. Net income for 4Q12 was $2.5 million and for the full year was a record $7.4 million.

The warehouse business has been active since April 2009. It has funded $2.3 billion in loans during 2012, including $815 million in 4Q12.

Silvergate established its reverse mortgage division in late 2011. In its first full year of operation, it acquired and/or funded $239 million of Federal Housing Administration-insured Home Equity Conversion Mortgages. Its fourth-quarter volume was $44 million.

The bank was approved by Ginnie Mae as an issuer of HMBS in July and has done two transactions since then. Its strategy is to hold the loans on its balance sheet until they’re sold or securitized and benefit from the interest income.

Commercial real estate lending activity also contributed to its profits, funding $16.1 million in 4Q12. This brings the bank’s portfolio of these loans to $202.6 million as of Dec. 31, up from $162.3 million one year prior.