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Silvergate Deposits Remain Steady Amid Market Downturns

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Silvergate Deposits Remain Steady Amid Market Downturns

Silvergate receives a total deposit of $13.3 billion in the second quarter. This is down from $14.7 billion in the previous three months. Earnings per share rose to $1.12, beating Wall Street estimates of $0.84. Silvergate showed continued strength in the second quarter of 2022, with the financial services group that has positioned itself as a “crypto bank” reporting record earnings despite a crash in digital assets.

Its investors remain bullish and optimistic despite the drop in deposits. Eight out of nine investors surveyed by FactSet Research Systems designated the stock as BUY. Total cumulative net income in the second quarter was $38.6 million.

Silvergate, a regulated, institutionally focused bank whose deposits are insured by the Federal Deposit Insurance Corporation (FDIC), is a member of the Federal Reserve and holds a California state charter.

Silvergate Positive Position

Silvergate managed to increase its customer base from 1503 at the end of March to 1585 at the end of June, while fee income dipped from $8.9 million in Q1 2022 to $8.8 million in Q2. Fee income is also down $2.5 million from $11.3 million a year ago.

“Silvergate had another strong quarter in light of the challenging backdrop facing the broader digital-currency ecosystem,” Alan Lane, Silvergate’s president and chief executive, said in a statement.

Despite being an institutional lender of USD against bitcoin collateral, Silvergate saw no liquidations during the credit crisis that started with crypto bank Celsius pausing withdrawals. It received $1.4 billion in leveraged commitments, an increase from $1.1 billion at the end of Q1.

The bank’s transfer system, the Silvergate Exchange Network, through which crypto companies like Coinbase, Gemini, and Kraken move funds, serviced $191.3 billion in transfers in Q2.

The Silvergate Exchange Network, the bank’s instantaneous internal bank transfer network, handled $191.3 billion in U.S. dollar transfers in the three months to the end of June, up 34% from the prior quarter.

Silvergate Deposits Remain Steady Amid Market Downturns

“Our platform was built to support our clients in this relatively nascent industry during periods of high volumes, market volatility, and transformation, and performed as designed throughout the quarter,” Lane said. “Our balance sheet is optimized for client liquidity, and risk management practices are at the forefront in all aspects of our business.”

Amid a dramatic plunge that has hit digital-asset markets, Silvergate’s average crypto customer deposits declined to $13.8 billion in the second quarter from $14.7 billion in the first three months of 2022. Bitcoin just capped its worst quarter since 2011—a year in which it crossed the $1 mark for the first time—and the total market capitalization of the crypto space has fallen to $1 trillion from nearly $3 trillion eight months ago.

Silvergate to launch its Stablecoin issued by Banks

Silvergate’s CEO touted the platform’s robustness that was able to emerge from the market downturn relatively unscathed. He said that the systems were built to handle volatility and high volumes. He emphasized the company’s strong focus on client liquidity and risk management practices.

The first institutional customer acquired by Silvergate was Second Market in 2013, which struggled to find a bank willing to bet on bitcoin. By introducing the Silvergate Exchange Network, the company eliminated some of the lost opportunities experienced by customers trying to do 24/7 bitcoin business with traditional banks operating a 40-hour work week.

Silvergate acquired assets from Meta’s failed Diem Stablecoin project in Feb. 2022 for $182 million. The CEO Alan Lane said it plans to launch its regulated Stablecoin in partnership with a consortium of banks in 2022.

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