Silicon Valley Bancshares 1994 net income up fivefold over previous year

Business Wire, Jan 24, 1995

SAN JOSE, Calif.--(BUSINESS WIRE)--Jan. 24, 1995--Silicon Valley Bancshares (the "Company"), parent company of Silicon Valley Bank, Tuesday announced net income of $9.1 million for the year ended December 31, 1994, a substantial increase from the $1.6 million earned in 1993.

Net income per share was $1.06 in 1994, compared to $0.20 in 1993. Net income for the Company for the quarter ended December 31, 1994 was $3.0 million, or $0.34 per share, compared with $172,000, or $0.02 per share for the comparable 1993 period.

"The initiatives launched by the Company in 1993 led to significantly improved performance in 1994," said John C. Dean, president and chief executive officer. "In addition to achieving an ROA (return on average assets) ratio of 0.9% and an ROE (return on average equity) ratio of 12.3% for 1994, we were able to reduce nonperforming assets and improve credit quality substantially."

For the fourth quarter of 1994, ROA was 1.2%, versus 0.1% in the 1993 fourth quarter. ROE was 15.8% in the 1994 fourth quarter, compared to 1.0% in the fourth quarter of 1993.

Total assets topped the billion-dollar mark during 1994, closing the year at $1.2 billion, versus $992.3 million at the end of 1993. Total loans were $702.4 million at December 31, 1994, compared to $550.7 million at the end of 1993, a 27.5% increase. Total deposits increased 17.5% to $1.1 billion at the end of 1994, compared to $915.0 million a year earlier.

"Much of the increase in our earnings was the result of growth in the technology portfolio," said Dean. "Technology Division loans in Silicon Valley Bank increased 30.5% to $412.8 million at year-end 1994, from $316.9 million a year earlier."

Net interest income was $17.1 million for the fourth quarter of 1994 and $60.3 million for the year, compared to $12.3 million and $50.4 million, respectively, for comparable periods in the prior year. The net interest margin, on a fully taxable equivalent basis, was 8.0% for the fourth quarter of 1994 and 7.3% for the year, compared to 6.0% and 6.6%, respectively, for the comparable periods in 1993. This increase results primarily from increased market interest rates and growth in average loans outstanding during 1994.

Total noninterest income declined 47.2% to $4.9 million in 1994, from $9.3 million in 1993, due primarily to a reduction in income from the disposition of client warrants to $2.8 million in 1994 from $5.8 million in 1993. Securities losses were $2.4 million in 1994, compared with a gain of $69,000 in 1993. These factors were partially offset, however, by an increase in letters of credit and foreign exchange income, which rose to $2.4 million in 1994, versus $1.4 million in 1993.

Noninterest expense declined 3.7% to $45.6 million in 1994, compared to $47.4 million in 1993. The cost of Other Real Estate Owned (OREO) dropped significantly to $1.4 million in 1994, from $10.2 million in 1993. The Company's efficiency ratio, which measures the level of adjusted operating expenses as a percentage of adjusted operating revenues, improved to 68.3% in 1994, versus 68.9% in 1993. Full-time equivalent staff rose to 312 at the end of 1994, compared to 291 at year-end 1993.

In the fourth quarter of 1994, noninterest expense declined to $11.4 million, down from $13.2 million in the comparable 1993 period. The Company's efficiency ratio in the fourth quarter of 1994 was 62.3%, an improvement from the 80.7% reported for the 1993 fourth quarter.

During 1994, nonperforming loans declined $20.9 million and were $10.3 million or 1.5% of total loans at year-end. This compares to $31.2 million or 5.7% of total loans at December 31, 1993. OREO also declined $19.6 million to $8.5 million at the end of 1994, versus $28.1 million at year-end 1993.

As of December 31, 1994, total nonperforming assets were $18.8 million, a decline of $40.5 million, or 68.3%, from the $59.3 million reported at year-end 1993. Nonperforming assets represented 1.6% and 6.0% of total assets at December 31, 1994 and 1993, respectively.

The allowance for loan losses was $20.0 million or 2.8% of total loans as of December 31, 1994, down from the $25.0 million or 4.5% of total loans at December 31, 1993. As of December 31, 1994, the allowance for loan losses was twice the level of nonaccrual loans, resulting in a coverage ratio for nonaccrual loans of 202.2%, compared with 85.7% one year earlier.

At year-end 1994, the coverage of nonperforming loans (nonaccrual loans plus loans past due 90 days or more) was 193.5% and coverage of nonperforming assets was 106.4%, up from 80.2% and 42.2%, respectively, at year-end 1993.

The reduction of the allowance level to $20.0 million at December 31, 1994 from $25.0 million at December 31, 1993 was the result of $5.9 million in net charge-offs during the fourth quarter of 1994, as compared to net recoveries of $944,000 for the fourth quarter of 1993. Net charge-offs for 1994 were $8.1 million as compared to $6.7 million for 1993.

Included in the fourth quarter charge-offs for 1994 were partial charge-offs totaling approximately $5.5 million on two nonperforming loans. There was no significant increase in the provision to the allowance for loan losses as a result of the fourth quarter net charge-offs.