SANTA CLARA, Calif., April 22 /PRNewswire-FirstCall/ -- Silicon Valley
Bancshares (Nasdaq: SIVB) today announced earnings per diluted common share
(EPS) of $0.38 for the first quarter of 2004, exceeding EPS guidance of
$0.31 to $0.35 given on January 29, 2004. EPS were $0.26 and $(0.44) in the
first and fourth quarters of 2003, respectively. In the fourth quarter of
2003, the company recognized a $46.0 million impairment of goodwill charge,
which, net of taxes, reduced EPS by $0.78.
Net income totaled $14.0 million for the quarter ended March 31, 2004, an
increase of $29.3 million from the fourth quarter of 2003. Net income for the
first quarter of 2003 was $10.4 million.
First Quarter Highlights
- Credit quality remained good with first quarter net charge-offs of
$1.2 million and nonperforming loans (NPLs) at 0.7 percent of total
gross loans, resulting in a $0.0 million provision.
- Quarterly average deposits are at their highest level in nearly three
years, at $3.6 billion, an increase of $168.9 million, or 4.9 percent,
from the fourth quarter of 2003.
- Noninterest income increased by $6.1 million primarily due to
increases in client investment fees, foreign exchange fee income and
corporate finance fees generated from SVB Alliant, formerly Alliant
Partners, the company's investment banking subsidiary.
- Average loans, at $1.8 billion in the first quarter, increased
slightly quarter over quarter.
- Income from client warrants was stable, totaling $2.9 million in the
first quarter of 2004, a slight decrease from the fourth quarter of
"We've spent the last three years diversifying and expanding our core
business in order to meet clients' needs at all stages of their growth,"
said Kenneth P. Wilcox, president and CEO. "Deposits are at a three-year
high, and warrant gains are returning to 2001 levels, as a result of better
funding and better valuations among our early stage companies, and greater
liquidity among our larger clients. Our strategy has also led to a 33 percent
quarterly increase in foreign exchange revenue, rising client investment fees,
and greater distributions from our funds.
"Persistent focus on adding new clients as well as complementary products
and services has strengthened our position as the financial partner of choice
for early stage companies, and we are increasing our base of established
'Corporate Technology' clients while maintaining our credit quality."
At March 31, 2004, period-end total assets were $4.5 billion, up
$26.9 million, or 0.6 percent from December 31, 2003 and up $504.2 million, or
12.6 percent, from March 31, 2003. Loans, net of unearned income, were
$2.0 billion at March 31, 2004 and at December 31, 2003 and $2.1 billion at
March 31, 2003.
Average deposit balances increased $168.9 million or 4.9 percent from the
fourth quarter of 2003 to $3.6 billion. Period-end total deposits, at
$3.7 billion, remained stable from December 31, 2003, and increased
$425.2 million from March 31, 2003. Client funds invested in private
label investments, sweep products and assets under management, at
$10.0 billion, increased $0.7 billion, or 7.2 percent, from $9.3 billion at
December 31, 2003, and increased $1.9 billion, or 23.1 percent, from
$8.1 billion at March 31, 2003. Average client investment fund balances
increased to $9.6 billion for the first quarter of 2004, up from $8.8 billion
for the fourth quarter of 2003. This represented the second consecutive
quarter-over-quarter increase in three years.
Net interest income, at $50.8 million, increased $2.9 million from the
fourth quarter of 2003 to the first quarter of 2004, and increased
$2.8 million from the first quarter of 2003. Fourth quarter of 2003 net
interest income was negatively impacted by $1.3 million of deferred issuance
costs related to redemption of $40.0 million in 8.25% Trust Preferred
Securities. The fourth quarter net interest margin was decreased by 13 basis
points due to the recognition of these deferred issuance costs. Net interest
margin increased in the first quarter to 5.2 percent from 5.0 percent in the
fourth quarter of 2003.
Noninterest income increased $6.1 million to $24.9 million in the first
quarter of 2004. The increase resulted primarily from higher corporate finance
fees and from gains on the sale of investment securities. Corporate finance
fees were up $2.5 million from the prior quarter. The company saw an increase
in investment gains, as well as stable income from client warrants.
Noninterest income was $17.4 million in the first quarter of 2003.
Investment gains were $1.3 million for the first quarter of 2004, compared to
losses of $1.2 million for the fourth quarter of 2003. Losses on the
company's equity investments, net of minority interest, stabilized at
approximately $0.5 million in the first quarter of 2004, unchanged from the
fourth quarter of 2003.
Income from client warrants was $2.9 million and $3.0 million in the first
quarter of 2004 and the fourth quarter of 2003, respectively. Based on
March 31, 2004 market valuations, the company had $4.6 million in potential
pre-tax warrant gains related to 27 companies. Silicon Valley Bancshares is
restricted from exercising many of these warrants until later in 2004. The
company continued to grow its warrant portfolio and took 63 warrants in the
first quarter of 2004. As of March 31, 2004, the company directly held
1,845 warrants in 1,334 companies, had made investments in 263 venture capital
funds, and had direct equity investments in 19 companies, many of which are
private. Additionally, Silicon Valley Bancshares has made investments in
20 venture capital funds through its fund of funds, SVB Strategic Investors
Fund, L.P., and made direct equity investments in 25 companies through its
venture capital fund, Silicon Valley BancVentures, L.P. Silicon Valley
Bancshares is often contractually precluded from taking steps to secure 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 might vary materially from the current
unrealized amount due to fluctuations in the market prices of the underlying
common stock of these companies. Income from the disposition of client
warrants is an important component of Silicon Valley Bancshares' long-term
Noninterest expense totaled $53.2 million in the first quarter of 2004,
down from $96.6 million in the fourth quarter of 2003. As previously
discussed, the company recognized a $46.0 million impairment to goodwill
charge in the fourth quarter of 2003. Compensation expense increased from the
fourth quarter of 2003 to the first quarter of 2004, partly due to increased
incentive compensation expenses associated with improved performance. First
quarter of 2004 noninterest expense increased $3.1 million from the first
quarter of 2003.
In the fourth quarter of 2003 the company reversed certain net state
income tax benefits taken in the first three quarters of 2003, in response to
a California Franchise Tax Board (FTB) announcement on December 31, 2003
relating to new tax shelter regulations. The company has not and will not
reflect any future financial statement REIT tax benefits until this matter has
been resolved with the FTB. Silicon Valley Bancshares and its financial
advisors believe that the company's position with regard to the REIT has merit
and the company plans to pursue its tax claims and defend its use of this
Return on average equity was 12.1 percent in the first quarter of 2004,
compared to (13.2) percent in the fourth quarter of 2003 and 7.3 percent in
the first quarter of 2003. Return on average assets for the first quarter of
2004 was 1.3 percent, compared to (1.4) percent in the fourth quarter of 2003,
and 1.1 percent in the first quarter of 2003.
Continuing the company's recent trend of good credit quality, NPLs were
$14.0 million or 0.7 percent of total gross loans at March 31, 2004, compared
to $12.4 million or 0.6 percent of gross loans at December 31, 2003. The
company recognized net charge-offs of $1.2 million in the first quarter of
2004, due in large part to the recovery of a portion of a non-technology
niche loan, which was charged off in 1999. Net recoveries in the prior
quarter were $0.3 million. Gross charge-offs for the 2004 first quarter
totaled $4.1 million, up from $3.3 million for the 2003 fourth quarter.
After a $0.0 million provision, the company's allowance for loan losses was
$63.3 million, or 3.2 percent of total gross loans and 453.2 percent of NPLs
at March 31, 2004. At December 31, 2003, the allowance for loan losses
totaled $64.5 million or 3.2 percent of total gross loans and 522.3 percent of
The company did not repurchase any shares in the first quarter of 2004.
As of March 31, 2004 the company had repurchased 4.5 million shares
totaling $113.2 million, pursuant to its stock repurchase program of up to
$160 million, authorized by the board of directors in the second quarter of
Stockholders' equity totaled $476.4 million at March 31, 2004, an increase
of $29.4 million compared to $447.0 million at December 31, 2003.
Stockholders' equity increased primarily as a result of the company's earnings
and the exercise of employee stock options and an increase in net unrealized
gains on available-for-sale investments. Both Silicon Valley Bancshares'
and Silicon Valley Bank's capital ratios were in excess of regulatory
guidelines for classification as a well-capitalized depository institution as
of March 31, 2004.
Silicon Valley Bancshares currently expects second quarter 2004 earnings
to be between $0.37 and $0.41 per share, although actual results may differ.
The forecast assumes no changes in market interest rates, no provision for
loan loss expense, an increase in average investment securities, and stable
average loans. In addition, it assumes noninterest income at approximately
first quarter levels, slightly higher noninterest expense, a stable economic
environment, no dilution from the zero-coupon convertible debt, and no further
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 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
- descriptions of strategic initiatives, plans or objectives of our
management for future operations, including pending acquisitions
- descriptions of products, services and industry sectors
- forecasts of venture capital funding levels
- expected levels of provisions for loan losses
- forecasts of future economic performance
- descriptions of assumptions underlying or relating to any of the
In this release, Silicon Valley Bancshares makes forward-looking
statements discussing our management's expectations about:
- future EPS
- future performance and levels of noninterest income and noninterest
- our ability to manage future risks
- returns and growth of our warrant portfolio
- future loan balances, growth and yield
- future deposit trends
- future stock buybacks
- future net interest margin and market interest rates
- future investment securities balances
- future provision for loan losses and net charge-offs
- future credit quality
- future outcome of REIT tax benefits and uses of the REIT
- potential dilution from our zero-coupon convertible debt
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
Factors that may cause the second quarter 2004 targets to change include:
- adjustments needed in the transaction closing process as required by
accounting principles generally accepted in the United States of
- material changes in the state of the economy or the markets served by
Silicon Valley Bancshares
- material changes in credit quality
- material changes in interest rates or market levels.
- volatility of the markets served by Silicon Valley Bancshares
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 7A of our 2003 Annual Report on Form 10-K. 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 have been made to prior years results to conform
with 2004 presentations. Such reclassifications had no effect on the
company's results of operations or stockholders' equity.
On April 22, 2004, the company will host a conference call at 2:00 p.m.
(PDT) to discuss the 2004 first quarter financial results. The conference
call can be accessed by dialing 877-630-8512 and referencing the passcode
"Silicon Valley Bank." A live Webcast can be accessed at www.svb.com. A
digitized replay of this conference call will be available beginning at
approximately 4:30 p.m. (PDT), on Thursday, April 22, 2004, through 5:00 p.m.
(PDT), on Sunday, May 23, 2004, by dialing 888-562-0227. A replay of the
Webcast will also be available on www.svb.com beginning Thursday, April 22,
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. Headquartered in
Santa Clara, Calif., and with 26 offices across the country, the company
offers clients commercial, investment, merchant and personal banking, as well
as private equity and value-added services, using its knowledge and networks.
Merger, acquisition, private placement and corporate partnering services are
provided through the company's investment banking subsidiary, SVB Alliant,
formerly Alliant Partners. More information on the company can be found at