Exhibit 99.1
3003 Tasman Drive Santa Clara, CA 95054
For release at 1:00 P.M. (PDT) | Contact: | |
January 27, 2005 | Lisa Bertolet | Meghan O’Leary |
| Investor Relations | Public Relations |
| (408) 654-7282 | (408) 654-6364 |
NASDAQ: SIVB
SILICON VALLEY BANCSHARES ANNOUNCES 2004 YEAR-END AND FOURTH QUARTER FINANCIAL RESULTS
Loan Growth and Improvements in Net Interest Margin Generate Higher Return on Equity in the Fourth Quarter
Board of Directors authorizes repurchase of up to an additional $75.0 million of Common Stock
SANTA CLARA, Calif. — January 27, 2005 — Silicon Valley Bancshares today announced earnings per diluted common share (EPS) of $0.51 for the fourth quarter of 2004, exceeding EPS guidance of $0.44 to $0.48 given on October 21, 2004. EPS for the third quarter of 2004 were $0.43, which included an impairment of goodwill charge of $0.03 per diluted common share, net of tax, related to Woodside Asset Management, Inc., a subsidiary. EPS were $(0.44) in the fourth quarter of 2003, which included an impairment of goodwill charge of $0.76 per diluted common share, net of tax, related to SVB Alliant.
EPS for 2004 were $1.74 versus $0.32 for 2003. EPS for 2004 and 2003 included the impact of impairment of goodwill charges related to Woodside Asset Management, Inc., and SVB Alliant of $0.03 and $1.04 per diluted common share on an after-tax basis, respectively.
Net income totaled $19.6 million for the quarter ended December 31, 2004, an increase of $3.5 million, or 21.4 percent, from $16.1 million for the third quarter of 2004. During the third quarter of 2004, the Company recognized a $1.9 million non-cash impairment of goodwill charge related to Woodside Asset Management, Inc., a subsidiary. The charge totaled $1.1 million on an after-tax basis. Net income increased $34.9 million compared to a loss of $15.3 million for the fourth quarter of 2003.
Net income totaled $65.4 million for 2004, an increase of $53.4 million, or 445.8 percent, compared to $12.0 million for 2003. Net income for 2003 included pre-tax impairment of goodwill charges totaling $63.0 million and $38.7 million on an after-tax basis.
2004 Highlights
• Average deposits grew 19.2 percent, or $627.9 million, over 2003, with average noninterest-bearing deposits at their highest levels in the Company’s history.
• Average loans reached the $2.0 billion mark for the first time, growing by 8.6 percent, over last year.
• Credit quality remained strong with nonperforming loans (NPLs) as a percentage of total gross loans at 0.6 percent, consistent with the prior year end.
• Net interest income rose by 24.3 percent to $234.7 million in 2004 primarily due to an increase in average interest-earning assets of $708.9 million. The average investment securities and loan portfolios increased by $502.6 million and $154.4 million, respectively during the year.
Fourth Quarter Highlights
• Net interest margin increased from 5.6 percent in the third quarter of 2004 to 5.9 percent in the fourth quarter of 2004. This increase was largely driven by improvements in yields generated by both the loan and investment securities portfolios. During the fourth quarter, yield on the Company’s loan portfolio rose from 8.2 percent to 8.8 percent primarily due to recent increases in short-term market interest rates, and income recognition of certain early payment loan fees.
• Net interest income increased by 11.3 percent to $67.9 million in the fourth quarter of 2004 from $61.0 million in the third quarter of 2004. This rise was due largely to increases in total overnight investments and total average loans, combined with the impact of recent increases in short-term market interest rates on the Company’s overnight investments and variable rate loans.
• Quarterly average loans at $2.1 billion were 4.5 percent higher than in the third quarter of 2004, and represented the highest quarterly average in the Company’s history.
• The Company recorded a recovery of provision for loan losses of ($3.4) million in the fourth quarter of 2004, compared to a recovery of provision for loan losses of ($1.4) million in the third quarter of 2004. The Company experienced $6.3 million in gross charge-offs and $3.8 million in gross recoveries in the fourth quarter of 2004. This compares to gross charge-offs of $3.2 million and gross recoveries of $3.2 million in the third quarter of 2004.
• Nonperforming loans (NPLs) were 0.6 percent of total gross loans, down from 0.7 percent in the third quarter of 2004. The allowance to cover potential loan losses was at 251.8 percent of NPLs at December 31, 2004, compared to 289.2 percent at September 30, 2004.
• Letter of credit and foreign exchange fee income of $5.0 million in the fourth quarter of 2004 represented an increase of $1.1 million over the prior quarter. The increase was largely due to higher volume in client foreign exchange transactions, which the Company believes was due to increased volatility in certain foreign currencies during the quarter.
“The final quarter of 2004 was an outstanding end to an outstanding year,” said Kenneth P. Wilcox, President and CEO of Silicon Valley Bancshares. “While we remain optimistic about the economy overall, we believe the markets we serve have regained their equilibrium and that the market we have today is the one in which we’ll likely operate for some time. We’ve done a good job of making money in this market, and expect to continue to emphasize revenue growth and expense control in 2005.”
Selected Financial Metrics
| | For the three months ended | | % Change | | % Change | |
(Dollars in millions,
except per share amounts) | | December 31,
2004 | | September 30,
2004 | | December 31,
2003 | | Current Quarter
/ Prior Quarter | | Current Quarter
/ Prior Year
Quarter | |
| | | | | | | | | | | |
EPS (Diluted) | | $ | 0.51 | | $ | 0.43 | | $ | (0.44 | ) | 18.6 | % | 215.9 | % |
Net Income | | 19.6 | | 16.1 | | (15.3 | ) | 21.4 | | 227.9 | |
Average Total Assets | | 5,072.2 | | 4,824.2 | | 4,277.7 | | 5.1 | | 18.6 | |
Return on Average Assets | | 1.5 | % | 1.3 | % | (1.4 | )% | 15.5 | | 208.1 | |
Return on Average Equity | | 14.9 | % | 13.0 | % | (13.2 | )% | 14.0 | | 212.6 | |
| | | | | | | | | | | | | | |
| | For the year ended | | | |
(Dollars in millions,
except per share amounts) | | December 31,
2004 | | December 31,
2003 | | % Change | |
| | | | | | | |
EPS (Diluted) | | $ | 1.74 | | $ | 0.32 | | 443.8 | % |
Net Income | | 65.4 | | 12.0 | | 445.8 | |
Average Total Assets | | 4,766.7 | | 4,053.9 | | 17.6 | |
Return on Average Assets | | 1.4 | % | 0.3 | % | 364.3 | |
Return on Average Equity | | 13.4 | % | 2.4 | % | 455.3 | |
| | | | | | | | | |
Average Assets and Deposits
Quarterly average assets increased $248.0 million from $4.8 billion in the third quarter of 2004, to $5.1 billion in the fourth quarter.
Quarterly average loan balance increased $90.4 million from $2.0 billion in the third quarter of 2004, to $2.1 billion in the fourth quarter.
Quarterly average deposit balances increased $196.5 million from $4.0 billion in the third quarter of 2004, to $4.1 billion in the fourth quarter. The average noninterest-bearing demand deposit balance per client was $283.5 thousand at December 31, 2004, versus $270.2 thousand at September 30, 2004, and $254.2 thousand at December 31, 2003.
Quarterly average investment securities increased $31.7 million from the third quarter of 2004 to $2.1 billion in the fourth quarter, and increased by $537.7 million from the fourth quarter of 2003. Quarterly average investment securities in the fourth quarter represented 41.3 percent of total average assets, compared to 42.7 percent of total average assets in the third quarter of 2004, and 36.3 percent of total average assets in the fourth quarter of 2003.
Period-End Assets and Deposits
Total assets of $5.2 billion at December 31, 2004, were up $207.8 million from September 30, 2004 and up $673.6 million from December 31, 2003. Loans, net of unearned income, of $2.3 billion at December 31, 2004, increased $0.1 billion from $2.2 billion at September 30, 2004, and were up $0.3 billion from $2.0 billion at December 31, 2003.
Period-end total deposits of $4.2 billion at December 31, 2004 were up $181.9 million from $4.0 billion at September 30, 2004, and $552.6 million from $3.7 billion at December 31, 2003.
Net Interest Income
Net interest income of $67.9 million in the fourth quarter of 2004 increased $6.9 million, or 11.3 percent, from $61.0 million in the third quarter of 2004, and increased $20.0 million, or 41.7 percent, from $47.9 million in the fourth quarter of 2003. This growth was primarily due to a $4.9 million increase in income from the loan portfolio, which was driven by a $90.4 million increase in total average loans, combined with improvements in loan yields. On July 1, 2004, August 11, 2004, September 22, 2004, November 10, 2004, and again on December 15, 2004, Silicon Valley Bancshares increased its lending prime rate each time by 25 basis points, bringing its prime rate to 5.25 percent. As of December 31, 2004, approximately 76.0 percent, or $1.8 billion of the Company’s outstanding loans, were variable rate loans and would reprice with an increase in the Bank’s prime rate.
Additionally, interest income from the investment portfolio increased by $1.4 million primarily driven by higher yields.
Net Interest Margin
The net interest margin rose to 5.9 percent in the fourth quarter, compared to 5.6 percent in the third quarter of 2004. Improvements in yields generated from both the loan and investment securities portfolios were the primary drivers. The loan portfolio rose from 8.2 percent to 8.8 percent due to recent increases in short-term market interest rates, and income recognition of certain early payment loan fees.
In 2004, net interest margin reached 5.5 percent increasing from 5.3 percent in 2003. Total average loans increased from $1.8 billion in 2003 to $2.0 billion in 2004.
| | For the three months ended | | % Change | | % Change | |
(Dollars in millions) | | December 31,
2004 | | September 30,
2004 | | December 31,
2003 | | Current
Quarter /
Prior
Quarter | | Current
Quarter /
Prior Year
Quarter | |
| | | | | | | | | | | |
Average Loans | | $ | 2,108.9 | | $ | 2,018.5 | | $ | 1,782.8 | | 4.5 | % | 18.3 | % |
Average Investment Securities | | 2,092.4 | | 2,060.7 | | 1,554.7 | | 1.5 | | 34.6 | |
Average Deposits | | 4,148.2 | | 3,951.7 | | 3,451.3 | | 5.0 | | 20.2 | |
Fully Taxable Equivalent: | | | | | | | | | | | |
Net Interest Income | | 68.5 | | 61.6 | | 48.7 | | 11.2 | | 40.6 | |
Net Interest Margin | | 5.9 | % | 5.6 | % | 5.0 | % | 5.4 | | 18.0 | |
Period End Bank’s Prime Rate | | 5.25 | | 4.75 | | 4.00 | | 10.5 | | 31.3 | |
| | | | | | | | | | | | | | |
| | For the year ended | | | |
(Dollars in millions) | | December 31,
2004 | | December 31,
2003 | | % Change | |
| | | | | | | |
Average Loans | | $ | 1,954.5 | | $ | 1,800.0 | | 8.6 | % |
Average Investment Securities | | 1,943.1 | | 1,440.5 | | 34.9 | |
Average Deposits | | 3,905.5 | | 3,277.6 | | 19.2 | |
Fully Taxable Equivalent: | | | | | | | |
Net Interest Income | | 237.4 | | 192.2 | | 23.5 | |
Net Interest Margin | | 5.5 | % | 5.3 | % | 3.8 | |
| | | | | | | | | |
Noninterest Income
Noninterest income of $27.8 million in the fourth quarter of 2004, increased $6.0 million, or 27.7 percent, from $21.8 million in the third quarter of 2004, and increased $9.1 million, or 48.3 percent, from $18.8 million in the fourth quarter of 2003. The increase from the third quarter to the fourth quarter of 2004 is primarily attributable to higher net gains on investment securities of $3.5 million, increased letter of credit and foreign exchange fee income of $1.1 million and higher income from client warrants of $0.7 million. These factors were partially offset by a $0.2 million decrease in deposit service charges income.
Investment Gains (Losses)
Investment gains were $3.6 million in the fourth quarter of 2004, compared to investment gains in the third quarter of 2004 of $0.1 million and representing an increase of $3.5 million. Gains on the Company’s equity investments, net of minority interest, were $0.5 million in the fourth quarter of 2004, compared with losses of $0.6 million in the third quarter of 2004 and losses of $0.5 million in fourth quarter of 2003, respectively. Compared to investment losses in the fourth quarter of 2003, the increase was $4.8 million or 409.6 percent. The carrying value of our cost-basis equity investment securities does not include an unrealized gain of approximately $2.1 million, based on its market valuation on December 31, 2004.
Letter of Credit and Foreign Exchange Fee Income
Letter of credit and foreign exchange fee income were $5.0 million in the fourth quarter of 2004. Compared to fees income in the third quarter of 2004 of $3.9 million, this represents an increase of $1.1 million, or 28.8 percent. The increase in this fee income was largely due to an increase in client foreign exchange transaction volume.
Income From Client Warrants
Income from client warrants of $1.8 million in the fourth quarter of 2004, increased $0.6 million or 58.1 percent from $1.2 million in the third quarter of 2004. Fourth quarter warrant income resulted from 21 clients contributing to the $1.8 million of revenue, with two clients contributing over $0.2 million each. In the third quarter, 17 clients contributed $1.2 million of revenue, with two clients, which contributed over $0.2 million each. The timing and amount of income from client warrants typically depend upon factors beyond the Company’s control. The Company therefore cannot predict the timing and amount of warrant related income with any
degree of accuracy, and the amount is likely to vary materially from period to period.
Income from client warrants for the year ended December 31, 2004 was $9.2 million, compared to $7.5 million for the year ended December 31, 2003.
Based on December 31, 2004 market valuations, the Company had $5.7 million in potential pre-tax warrant gains.
The Company is restricted from exercising many of these warrants until later in 2005. As of December 31, 2004, the Company directly held 1,902 warrants in 1,362 companies and made investments through its managed investment funds, in 300 venture capital funds, 40 companies and two venture debt funds. The Company is typically, contractually precluded from taking steps to hedge any current unrealized gains associated with many of these equity instruments. Hence, the amount of income realized by the Company from these equity instruments in future periods may vary materially from the current unrealized amount due to fluctuations in the market prices of the underlying common stock of these companies.
Client Investment Fees Income
| | For the three months ended | | For the year ended | |
(Dollars in millions) | | December 31,
2004 | | September 30,
2004 | | December 31,
2003 | | December 31,
2004 | | December 31,
2003 | |
| | | | | | | | | | | |
Client Investment Fees | | $ | 7.3 | | $ | 7.0 | | $ | 5.8 | | $ | 26.9 | | $ | 24.0 | |
| | | | | | | | | | | | | | | | |
Client Investment Funds and Deposits
(Dollars in millions) | | At
December 31,
2004 | | At
September 30,
2004 | | At
December 31,
2003 | |
Client Investment Funds (1): | | | | | | | |
Private Label Client Investment Funds | | $ | 7,208.3 | | $ | 7,210.6 | | $ | 7,615.3 | |
Sweep Funds | | 1,351.2 | | 1,128.5 | | 1,139.2 | |
Client Investment Assets Under Management | | 2,678.0 | | 2,338.5 | | 591.6 | |
Total Client Investment Funds | | 11,237.5 | | 10,677.6 | | 9,346.1 | |
| | | | | | | |
Deposits: | | | | | | | |
Noninterest-Bearing Demand | | $ | 2,649.8 | | $ | 2,463.8 | | $ | 2,186.3 | |
NOW | | 32.0 | | 22.8 | | 20.9 | |
Money Market | | 1,206.1 | | 1,240.9 | | 1,080.6 | |
Time | | 331.6 | | 310.1 | | 379.1 | |
Total Deposits | | 4,219.5 | | 4,037.6 | | 3,666.9 | |
| | | | | | | |
Total Client Investment Funds and Deposits | | $ | 15,457.0 | | $ | 14,715.2 | | $ | 13,013.0 | |
| | | | | | | | | | | | | |
(1) Client Funds invested through Silicon Valley Bancshares, maintained at third party financial institutions.
Average client funds in private label investments, sweep products and assets under management increased to $10.9 billion during the fourth quarter from $10.8 billion during the third quarter of 2004.
Noninterest Expense
Noninterest expense totaled $64.4 million in the fourth quarter of 2004, an increase of $5.5 million, or 9.5 percent, from the $58.9 million in the third quarter of 2004. The increase in noninterest expense was primarily due to an increase in variable compensation expense driven by improved financial performance.
Noninterest expense decreased $33.9 million, or 34.5 percent, compared to $98.3 million in the fourth quarter of 2003, primarily due to a recognition of a $46.0 million non-cash impairment of goodwill charge related to SVB Alliant in the fourth quarter of 2003,
partially offset by increases in variable compensation expense.
Income Tax Expense
The Company’s effective tax rate was 39.2 percent for the fourth quarter of 2004, compared with 36.4 percent for the third quarter of 2004. The lower rate for the third quarter of 2004 was primarily attributable to a reversal of an income tax payable due to the closing of a statute of limitations.
The Company’s effective tax rate for 2004 was 37.8 percent compared to 21.0 percent in 2003. The lower tax rate in 2003 was primarily attributable to a higher impact of the Company’s federally tax-advantaged, tax-exempt municipal bonds and tax credit funds on the overall pre-tax income.
Earnings (Loss) Per Diluted Common Share
The Company included the dilutive effect of its $150.0 million zero-coupon, convertible subordinated notes due June 15, 2008 in its fully diluted earnings per share (EPS) calculation using the treasury stock method, in accordance with the provisions of Emerging Issue Task Force (EITF) issue No. 90-19, “Convertible Bonds With Issuer Option to Settle in Cash Upon Conversion” and Statement of Financial Accounting Standard (SFAS) No. 128, “Earnings Per Share”. The exposure draft of SFAS No. 128R, if adopted in its proposed form, will require the Company to change its accounting for the calculation of EPS for its contingently convertible debt to the if converted method. If converted treatment of the contingently convertible debt would have decreased EPS by $0.05 per diluted common share, or 10 percent for the fourth quarter of 2004.
Allowance for Loan and Lease Losses
Historically, the Company aggregated its allowance for loan losses and its allowance for loan loss contingency and reflected the aggregate allowance in its Allowance for Loan Losses (ALLL) balance. Commencing in the fourth quarter, the Company reflected its allowance for loan losses in its ALLL balance and its allowance for loan loss contingency in Other Liabilities. These reclassifications were also made to prior periods’ balance sheets to conform to current period’s presentations. Additionally, the Company reclassified expense related to the ALLL to provision for loan losses and expense related to changes in the allowance for loan loss contingency into noninterest expense for all periods presented. Such reclassifications had no effect on our results of operations or stockholders’ equity but have had the effect of lowering the Company’s ALLL to total gross loans and ALLL to nonperforming loans ratios. See Credit Quality table on the last page of the Press Release.
Credit Quality
NPLs totaled $14.9 million, or 0.6 percent of total gross loans, at December 31, 2004, compared to $15.0 million, or 0.7 percent of gross loans, at September 30, 2004 and $12.4 million, or 0.6 percent at December 31, 2003. The Company’s allowance for loan losses was $37.6 million, or 1.6 percent, of total gross loans and 251.8 percent of NPLs, at December 31, 2004. This compares to $43.4 million, or 1.9 percent, of total gross loans and 289.2 percent of NPLs, at September 30, 2004. At December 31, 2003, the allowance for loan losses totaled $49.9 million, or 2.5 percent of total gross loans and 403.7 percent of NPLs.
The Company realized $6.3 million in gross charge-offs and $3.8 million in gross recoveries in the fourth quarter of 2004. This compares to gross charge-offs of $3.2 million and gross recoveries of $3.2 million in the third quarter of 2004.
The Company’s allowance for loan loss contingency was $16.2 million at December 31, 2004, a $1.0 million, or 6.7 percent increase, from the balance at September 30, 2004.
Stock Buyback Program and Stockholders’ Equity
The Company repurchased 300,000 shares of its common stock in the fourth quarter of 2004 under the Company’s stock repurchase program of up to $160.0 million of common stock, which was previously approved by the Board of Directors in May 2003. Under this program, the Company had repurchased 4.8 million shares totaling $125.8 million as of December 31, 2004.
On January 27, 2005, the Company’s Board of Directors authorized the repurchase of up to $75.0 million of common stock under the stock repurchase program, in addition to the $160.0 million initially approved in May 2003. The additional $75.0 million of shares may be repurchased at any time, at the Company’s discretion, before June 30, 2006, in the open market, through block trades or otherwise, pursuant to applicable securities laws. Depending on market conditions, availability of funds, and other relevant factors, the
repurchase of the additional shares may be commenced or suspended at any time prior to June 30, 2006, without any prior notice. As of December 31, 2004, the Company had approximately 35,970,095 shares outstanding.
Stockholders’ equity totaled $532.3 million at December 31, 2004, an increase of $20.2 million compared to $512.1 million at September 30, 2004 and an increase of $85.3 million compared to $447.0 million at December 31, 2003. Stockholders’ equity rose primarily as a result of an increase in net income and proceeds from issuance of common stock through the Company’s equity incentive and employee stock purchase plans. Both Silicon Valley Bancshares’ and Silicon Valley Bank’s capital ratios were well in excess of regulatory guidelines for classification as a well-capitalized depository institution as of December 31, 2004.
Outlook for 2005
Silicon Valley Bancshares currently expects first quarter 2005 earnings to be between $0.48 and $0.52 per diluted common share. Actual results may differ.
The outlook for 2005 is based on current economic conditions and it assumes a 75 basis point increase in market interest rates during the first three quarters of 2005. The outlook assumes that average loans are expected to grow at a faster rate than in 2004 and that average deposits are expected to grow at a slower rate than in 2004. Net interest income is expected to grow at about the same rate as occurred in 2004. The Company assumes that a provision for credit losses will be required in 2005 as average loan balances grow. Noninterest income is expected to be slightly lower than in 2004. Excluding the impact of stock option expense or the impact of restricted stock grants in lieu of option grants, noninterest expense is not expected to increase relative to 2004. There are expected to be additional share repurchases in 2005. The effective tax rate is expected to be slightly higher in 2005 compared to 2004.
Safe Harbor
This release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. The Company’s senior management has in the past and might in the future make forward-looking statements in writing or orally to analysts, investors, the media and others. Forward-looking statements are statements that are not historical facts. Broadly speaking, forward-looking statements include:
• projections of our revenues, income, earnings per share, balance sheet, cash flows, capital expenditures, capital structure or other financial items;
• descriptions of strategic initiatives, plans or objectives of our management for future operations, including pending acquisitions;
• forecasts of venture capital funding levels;
• expected levels of provisions for loan losses;
• forecasts of future economic performance;
• forecasts of future prevailing interest rates;
• future recoveries on currently held investments; or
• descriptions of assumptions underlying or relating to any of the foregoing.
In this release, Silicon Valley Bancshares makes forward-looking statements discussing our management’s expectations about:
• future EPS;
• future performance;
• future market interest rates;
• future economic conditions;
• future returns and growth of our warrant portfolio;
• future loan balances, growth and yield;
• future deposit trends;
• future levels of noninterest income and noninterest expense;
• future provision for loan losses and net charge-offs; and/or
• future credit quality.
You can identify these and other forward-looking statements by the use of words such as “becoming,” “may,” “will,” “should,” “predicts,” “potential,” “continue,” “anticipates,” “believes,” “estimates,” “seeks,” “expects,” “plans,” “intends,” or the negative of such terms, or comparable terminology. Although management believes that the expectations reflected in these forward-looking statements are reasonable, and it has based these expectations on its beliefs, as well as its assumptions, such expectations may prove to be incorrect. Actual results of operations and financial performance could differ significantly from those expressed in or implied by our management’s forward-looking statements.
Factors that may cause the first quarter 2005 and full year 2005 targets to change include:
• adjustments needed in the transaction closing process, or other accounting changes, as required by generally accepted accounting principles in the United States of America;
• changes in the state of the economy or the markets served by Silicon Valley Bancshares;
• changes in credit quality of our loan portfolio;
• changes in interest rates or market levels; and/or
• changes in the performance or equity valuation of companies we have invested in.
For information with respect to factors that could cause actual results to differ from the expectations stated in the forward-looking statements, see the text under the caption “Factors That May Affect Future Results” included under Item 2 of our most recently filed Form 10-Q for the quarterly period ended September 30, 2004. The Company urges investors to consider all of these factors carefully in evaluating the forward-looking statements contained in this discussion and analysis. All subsequent written or oral forward-looking statements attributable to the Company or persons acting on its behalf are expressly qualified in their entirety by these cautionary statements. The forward-looking statements included in this filing are made only as of the date of this filing. The Company does not intend, and undertakes no obligation, to update these forward-looking statements.
Certain reclassifications were made to prior years results to conform to 2004 presentations. Such reclassifications had no effect on the Company’s results of operations or stockholders’ equity.
Earnings Conference Call
On January 27, 2005, the Company will host a conference call at 2:00 p.m. (PDT) to discuss the fourth quarter and year-end 2004 financial results. The conference call can be accessed by dialing (877) 630-8512 and referencing the passcode “Silicon Valley Bank.” A listen-only live webcast can be accessed on the Investor Relations page of the Company’s website at www.svb.com. A digitized replay of this conference call will be available beginning at approximately 4:30 p.m. (PDT), on Thursday, January 27, 2005, through midnight (PDT), on Monday, February 28, 2005, by dialing (866) 481-9935. A replay of the webcast will also be available on www.svb.com for 12 months following the call.
About Silicon Valley Bancshares
For 20 years, Silicon Valley Bancshares, a financial holding company offering diversified financial services, has provided innovative solutions to help entrepreneurs succeed. The Company’s principal subsidiary, Silicon Valley Bank, serves emerging growth and mature companies in the technology, life science, private equity and premium wine industries through 26 offices in the U.S. and two subsidiaries in the U.K. and India. Headquartered in Santa Clara, CA, the Company offers its clients commercial, investment and private banking, funds management and private equity services, as well as the added value of its knowledge and networks. Merger, acquisition, private placement and corporate partnering services are provided through the Company’s investment banking subsidiary, SVB Alliant. More information about the Company can be found at www.svb.com.
SILICON VALLEY BANCSHARES AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
| | For the three months ended | | For the year ended | |
(Dollars in thousands, except per share amounts) | | December 31,
2004 | | September 30,
2004 | | December 31,
2003 | | December 31,
2004 | | December 31,
2003 | |
Interest Income: | | | | | | | | | | | |
Loans | | $ | 46,512 | | $ | 41,639 | | $ | 36,360 | | $ | 162,063 | | $ | 148,770 | |
Investment Securities: | | | | | | | | | | | |
Taxable | | 21,154 | | 19,763 | | 13,323 | | 72,929 | | 42,789 | |
Non-Taxable | | 1,109 | | 1,144 | | 1,491 | | 5,004 | | 6,248 | |
Federal Funds Sold and Securities | | | | | | | | | | | |
Purchased Under Agreement to Resell | | 2,046 | | 1,347 | | 1,367 | | 6,143 | | 4,530 | |
Total Interest Income | | 70,821 | | 63,893 | | 52,541 | | 246,139 | | 202,337 | |
| | | | | | | | | | | |
Interest Expense | | | | | | | | | | | |
Deposits | | 2,147 | | 2,138 | | 2,047 | | 8,423 | | 9,083 | |
Other Borrowings | | 768 | | 762 | | 2,562 | | 2,968 | | 4,370 | |
Total Interest Expense | | 2,915 | | 2,900 | | 4,609 | | 11,391 | | 13,453 | |
| | | | | | | | | | | |
Net Interest Income | | 67,906 | | 60,993 | | 47,932 | | 234,748 | | 188,884 | |
Provision for Loan Losses | | (3,382 | ) | (1,395 | ) | (5,051 | ) | (9,901 | ) | (8,727 | ) |
Net Interest Income After Provision for Loan Losses | | 71,288 | | 62,388 | | 52,983 | | 244,649 | | 197,611 | |
| | | | | | | | | | | |
Noninterest Income: | | | | | | | | | | | |
Client Investment Fees | | 7,297 | | 6,955 | | 5,832 | | 26,919 | | 23,991 | |
Corporate Finance Fees | | 3,732 | | 3,197 | | 1,627 | | 21,913 | | 13,149 | |
Letter of Credit and Foreign Exchange Fee Income | | 4,991 | | 3,874 | | 2,806 | | 16,399 | | 12,856 | |
Deposit Service Charges | | 2,943 | | 3,187 | | 3,514 | | 13,538 | | 13,202 | |
Income from Client Warrants | | 1,821 | | 1,152 | | 2,997 | | 9,191 | | 7,528 | |
Investment Gains (Losses) | | 3,638 | | 133 | | (1,175 | ) | 5,571 | | (8,402 | ) |
Credit Card Fees | | 778 | | 658 | | 759 | | 2,817 | | 3,431 | |
Other | | 2,637 | | 2,646 | | 2,409 | | 9,685 | | 9,305 | |
Total Noninterest Income | | 27,837 | | 21,802 | | 18,769 | | 106,033 | | 75,060 | |
| | | | | | | | | | | |
Noninterest Expense: | | | | | | | | | | | |
Compensation and Benefits | | 42,915 | | 36,926 | | 29,388 | | 155,097 | | 122,964 | |
Net Occupancy | | 3,968 | | 4,512 | | 4,519 | | 17,590 | | 17,638 | |
Professional Services | | 3,886 | | 4,967 | | 3,875 | | 17,068 | | 13,677 | |
Furniture and Equipment | | 2,977 | | 3,067 | | 3,731 | | 12,403 | | 11,289 | |
Business Development and Travel | | 2,893 | | 2,654 | | 2,906 | | 9,718 | | 8,692 | |
Correspondent Bank Fees | | 1,409 | | 1,407 | | 1,134 | | 5,340 | | 4,343 | |
Data Processing Services | | 1,038 | | 735 | | 879 | | 3,647 | | 4,288 | |
Telephone | | 827 | | 856 | | 845 | | 3,367 | | 3,187 | |
Postage and Supplies | | 803 | | 808 | | 795 | | 3,255 | | 2,601 | |
Tax Credit Fund Amortization | | 620 | | 620 | | 561 | | 2,480 | | 2,704 | |
Impairment of Goodwill | | — | | 1,910 | | 46,000 | | 1,910 | | 63,000 | |
Provision for Loan Loss Contingency | | 1,023 | | (1,856 | ) | 1,731 | | 1,549 | | 2,504 | |
Other | | 2,076 | | 2,244 | | 1,939 | | 9,062 | | 8,304 | |
Total Noninterest Expense | | 64,435 | | 58,850 | | 98,303 | | 242,486 | | 265,191 | |
Minority Interest in Net (Gains) Losses of Consolidated Affiliates | | (2,529 | ) | (2 | ) | 1,438 | | (3,079 | ) | 7,689 | |
Income (Loss) Before Income Taxes | | 32,161 | | 25,338 | | (25,113 | ) | 105,117 | | 15,169 | |
Income Tax Expense (Benefit) | | 12,606 | | 9,235 | | (9,819 | ) | 39,741 | | 3,192 | |
Net Income (Loss) | | $ | 19,555 | | $ | 16,103 | | $ | (15,294 | ) | $ | 65,376 | | $ | 11,977 | |
| | | | | | | | | | | |
Earnings (Loss) per Common Share | | $ | 0.55 | | $ | 0.46 | | $ | (0.44 | ) | $ | 1.86 | | $ | 0.33 | |
Earnings (Loss) per Diluted Common Share | | $ | 0.51 | | $ | 0.43 | | $ | (0.44 | ) | $ | 1.74 | | $ | 0.32 | |
| | | | | | | | | | | |
Return on Average Assets (1) | | 1.5 | % | 1.3 | % | (1.4 | )% | 1.4 | % | 0.3 | % |
Return on Average Equity (1) | | 14.9 | % | 13.0 | % | (13.2 | )% | 13.4 | % | 2.4 | % |
Weighted Average Shares Outstanding | | 35,622,925 | | 35,303,477 | | 34,472,844 | | 35,215,483 | | 36,109,404 | |
Weighted Average Diluted Shares Outstanding | | 38,254,397 | | 37,212,745 | | 34,472,844 | | 37,594,649 | | 37,320,632 | |
| | | | | | | | | | | |
(1) Quarterly ratios represent annualized net income divided by quarterly average assets/equity.
SILICON VALLEY BANCSHARES AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
| | For the three months ended | | For the year ended | |
(Dollars in thousands) | | December 31,
2004 | | September 30,
2004 | | December 31,
2003 | | December 31,
2004 | | December 31,
2003 | |
Net Income (Loss) | | $ | 19,555 | | $ | 16,103 | | $ | (15,294 | ) | $ | 65,376 | | $ | 11,977 | |
| | | | | | | | | | | |
Other Comprehensive Income (Loss) Gains, Net of Tax: | | | | | | | | | | | |
Translation Loss | | (421 | ) | — | | — | | (421 | ) | — | |
Change in Unrealized (Losses) Gains on Available-For-Sale Investments: | | | | | | | | | | | |
Unrealized Holding Gains | | 2,373 | | 16,591 | | 55 | | 1,536 | | 1,954 | |
Reclassification Adjustment for Gains Included in Net Income | | (3,179 | ) | (677 | ) | (1,825 | ) | (8,597 | ) | (4,495 | ) |
Other Comprehensive Income (Loss) Gains, Net of Tax | | (1,227 | ) | 15,914 | | (1,770 | ) | (7,482 | ) | (2,541 | ) |
Comprehensive Income (Loss) | | $ | 18,328 | | $ | 32,017 | | $ | (17,064 | ) | $ | 57,894 | | $ | 9,436 | |
SILICON VALLEY BANCSHARES AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(Dollars in thousands, except par value and per share amounts) | | December 31,
2004 | | September 30,
2004 | | December 31,
2003 | |
Assets: | | | | | | | |
Cash and Due from Banks | | $ | 279,653 | | $ | 231,656 | | $ | 252,521 | |
Federal Funds Sold and Securities Purchased Under Agreement to Resell | | 166,295 | | 217,774 | | 542,475 | |
Investment Securities | | 2,258,207 | | 2,133,614 | | 1,575,434 | |
Loans: | | | | | | | |
Gross Loans | | 2,326,496 | | 2,244,974 | | 2,001,502 | |
Unearned Income on Loans | | (14,353 | ) | (14,560 | ) | (12,273 | ) |
Loans, Net of Unearned Income | | 2,312,143 | | 2,230,414 | | 1,989,229 | |
Allowance for Loan Losses | | (37,613 | ) | (43,436 | ) | (49,862 | ) |
Net Loans | | 2,274,530 | | 2,186,978 | | 1,939,367 | |
Premises and Equipment | | 14,951 | | 14,705 | | 14,999 | |
Goodwill | | 35,639 | | 35,639 | | 37,549 | |
Accrued Interest Receivable and Other Assets | | 124,325 | | 125,431 | | 117,663 | |
Total Assets | | $ | 5,153,600 | | $ | 4,945,797 | | $ | 4,480,008 | |
| | | | | | | |
Liabilities, Minority Interest, and Stockholders’ Equity: | | | | | | | |
Liabilities: | | | | | | | |
Deposits: | | | | | | | |
Noninterest-Bearing Demand | | $ | 2,649,853 | | $ | 2,463,765 | | $ | 2,186,352 | |
NOW | | 32,009 | | 22,832 | | 20,897 | |
Money Market | | 1,206,078 | | 1,240,863 | | 1,080,559 | |
Time | | 331,574 | | 310,155 | | 379,068 | |
Total Deposits | | 4,219,514 | | 4,037,615 | | 3,666,876 | |
Short-Term Borrowings | | 9,820 | | 10,050 | | 9,124 | |
Other Liabilities | | 125,164 | | 115,236 | | 101,973 | |
Long-term Debt | | 196,160 | | 196,096 | | 204,286 | |
Total Liabilities | | 4,550,658 | | 4,358,997 | | 3,982,259 | |
| | | | | | | |
Minority Interest in Capital of Consolidated Affiliates | | 70,674 | | 74,739 | | 50,744 | |
| | | | | | | |
Stockholders’ Equity: | | | | | | | |
Common Stock, $0.001 Par Value | | 36 | | 36 | | 35 | |
Additional Paid-In Capital | | 44,886 | | 41,202 | | 14,240 | |
Retained Earnings | | 487,509 | | 467,954 | | 422,131 | |
Unearned Compensation | | (4,512 | ) | (2,707 | ) | (1,232 | ) |
Accumulated Other Comprehensive Income | | 4,349 | | 5,576 | | 11,831 | |
Total Stockholders’ Equity | | 532,268 | | 512,061 | | 447,005 | |
Total Liabilities, Minority Interest, and Stockholders’ Equity | | $ | 5,153,600 | | $ | 4,945,797 | | $ | 4,480,008 | |
Capital Ratios: | | | | | | | |
Total Risk-Based Capital Ratio | | 15.9 | % | 16.7 | % | 16.6 | % |
Tier 1 Risk-Based Capital Ratio | | 12.5 | % | 13.1 | % | 12.0 | % |
Tier 1 Leverage Ratio | | 10.9 | % | 11.1 | % | 10.3 | % |
Average Stockholders’ Equity as a Percentage of Average Assets (1) | | 10.3 | % | 10.2 | % | 10.7 | % |
Other Period-End Statistics: | | | | | | | |
Book Value Per Share | | $ | 14.80 | | $ | 14.32 | | $ | 12.76 | |
Full-Time Equivalent Employees | | 1,028 | | 1,019 | | 969 | |
Common Stock Outstanding | | 35,970,095 | | 35,754,698 | | 35,028,470 | |
(1) Represents quarterly average balances for each respective period.
SILICON VALLEY BANCSHARES AND SUBSIDIARIES
AVERAGE BALANCES, RATES AND YIELDS
(Unaudited)
| | For the three months ended December 31, | |
| | 2004 | | 2003 | |
(Dollars in thousands) | | Average
Balance | | Interest
Income/
Expense | | Yield/
Rate | | Average
Balance | | Interest
Income/
Expense | | Yield/
Rate | |
Interest-Earning Assets: | | | | | | | | | | | | | |
Federal Funds Sold and Securities Purchased Under Agreement to Resell (1) | | $ | 403,513 | | $ | 2,046 | | 2.0 | % | $ | 503,929 | | $ | 1,367 | | 1.1 | % |
Investment Securities: | | | | | | | | | | | | | |
Taxable | | 1,994,792 | | 21,154 | | 4.2 | | 1,418,082 | | 13,323 | | 3.7 | |
Non-Taxable (2) | | 97,595 | | 1,705 | | 7.0 | | 136,606 | | 2,294 | | 6.7 | |
Loans: | | | | | | | | | | | | | |
Commercial | | 1,728,165 | | 41,401 | | 9.5 | | 1,506,103 | | 33,049 | | 8.7 | |
Real Estate Construction and Term | | 145,764 | | 2,101 | | 5.7 | | 90,915 | | 1,323 | | 5.8 | |
Consumer and Other | | 234,971 | | 3,010 | | 5.1 | | 185,748 | | 1,988 | | 4.2 | |
Total Loans | | 2,108,900 | | 46,512 | | 8.8 | | 1,782,766 | | 36,360 | | 8.1 | |
Total Interest-Earning Assets | | 4,604,800 | | 71,417 | | 6.2 | | 3,841,383 | | 53,344 | | 5.5 | |
| | | | | | | | | | | | | |
Cash and Due From Banks | | 224,425 | | | | | | 200,339 | | | | | |
Allowance for Loan Losses | | (43,957 | ) | | | | | (55,858 | ) | | | | |
Goodwill | | 35,639 | | | | | | 83,552 | | | | | |
Other Assets (3) | | 251,337 | | | | | | 208,244 | | | | | |
Total Assets | | $ | 5,072,244 | | | | | | $ | 4,277,660 | | | | | |
| | | | | | | | | | | | | |
Funding Sources: | | | | | | | | | | | | | |
Interest-Bearing Liabilities: | | | | | | | | | | | | | |
NOW Deposits | | $ | 27,697 | | 29 | | 0.4 | | $ | 22,638 | | 24 | | 0.4 | |
Regular Money Market Deposits | | 542,342 | | 688 | | 0.5 | | 401,840 | | 509 | | 0.5 | |
Bonus Money Market Deposits | | 740,718 | | 936 | | 0.5 | | 701,266 | | 893 | | 0.5 | |
Time Deposits | | 315,486 | | 494 | | 0.6 | | 390,240 | | 621 | | 0.6 | |
Short-Term Borrowings | | 10,767 | | 16 | | 0.6 | | 9,083 | | 69 | | 3.0 | |
Long-term Debt | | 196,047 | | 752 | | 1.5 | | 212,945 | | 2,493 | | 4.6 | |
Total Interest-Bearing Liabilities | | 1,833,057 | | 2,915 | | 0.6 | | 1,738,012 | | 4,609 | | 1.1 | |
Portion of Noninterest-Bearing Funding Sources | | 2,771,743 | | | | | | 2,103,371 | | | | | |
Total Funding Sources | | 4,604,800 | | 2,915 | | 0.3 | | 3,841,383 | | 4,609 | | 0.5 | |
| | | | | | | | | | | | | |
Noninterest-Bearing Funding Sources: | | | | | | | | | | | | | |
Demand Deposits | | 2,522,003 | | | | | | 1,935,298 | | | | | |
Other Liabilities | | 122,374 | | | | | | 102,225 | | | | | |
Minority Interest in Capital of Consolidated Affiliates | | 71,281 | | | | | | 42,334 | | | | | |
Stockholders’ Equity | | 523,529 | | | | | | 459,791 | | | | | |
Portion Used to Fund Interest-Earning Assets | | (2,771,743 | ) | | | | | (2,103,371 | ) | | | | |
Total Liabilities, Minority Interest, and Stockholders’ Equity | | $ | 5,072,244 | | | | | | $ | 4,277,660 | | | | | |
| | | | | | | | | | | | | |
Net Interest Income and Margin | | | | $ | 68,502 | | 5.9 | % | | | $ | 48,735 | | 5.0 | % |
| | | | | | | | | | | | | |
Total Deposits | | $ | 4,148,246 | | | | | | $ | 3,451,282 | | | | | |
(1) Includes average interest-bearing deposits in other financial institutions of $15,087.7 thousand and $19.9 thousand for the three months ended December 31, 2004 and 2003, respectively.
(2) Interest income on non-taxable investments is presented on a fully taxable-equivalent basis using the federal statutory income tax rate of 35 percent in 2004 and 2003. The tax equivalent adjustments were $596.0 thousand and $803.0 thousand for the three months ended December 31, 2004 and 2003, respectively.
(3) Average equity investments of $121.6 million and $101.6 million for the three months ended December 31, 2004 and 2003, respectively, were reclassified to other assets as they were noninterest-yielding.
SILICON VALLEY BANCSHARES AND SUBSIDIARIES
CREDIT QUALITY
(Unaudited)
(Dollars in thousands) | | December 31,
2004 | | September 30,
2004 | | December 31,
2003 | |
Nonperforming Loans: | | | | | | | |
Loans Past Due 90 Days or More | | $ | 616 | | $ | 30 | | $ | — | |
Nonaccrual Loans | | 14,322 | | 14,988 | | 12,350 | |
Total Nonperforming Loans (1) | | $ | 14,938 | | $ | 15,018 | | $ | 12,350 | |
| | | | | | | |
Nonperforming Loans as a Percentage of Total Gross Loans | | 0.6 | % | 0.7 | % | 0.6 | % |
Nonperforming Loans as a Percentage of Total Assets | | 0.3 | % | 0.3 | % | 0.3 | % |
| | | | | | | |
Allowance for Loan Losses | | $ | 37,613 | | $ | 43,436 | | $ | 49,862 | |
As a Percentage of Total Gross Loans | | 1.6 | % | 1.9 | % | 2.5 | % |
As a Percentage of Nonperforming Loans | | 251.8 | % | 289.2 | % | 403.7 | % |
Allowance For Loan Loss Contingency | | $ | 16,187 | | $ | 15,164 | | $ | 14,638 | |
Total Gross Loans | | $ | 2,326,496 | | $ | 2,244,974 | | $ | 2,001,502 | |
(1) Nonperforming loans equal nonperforming assets for each respective period.
