Silvergate Stock Surges 20% Despite $1B Quarterly Earnings Loss

Crypto bank attributes loss in part to an industry-wide “crisis in confidence” at end of 2022 that spurred significant outflows of deposits

article-image

Silvergate modified by Blockworks

share

Silvergate lost $1 billion during the fourth quarter — enduring significant outflows of deposits as the industry spiraled from several high-profile bankruptcies. 

The loss came as the crypto industry saw “a crisis of confidence” spurring a “risk-off” position by various industry participants across digital asset trading platforms, according to commentary from the company published Tuesday. 

Silvergate’s shares opened up around 20% in early market action, before paring gains to 15%, and as trading hands at about $15 per share as of 11:05 a.m. ET. 

The California-based crypto bank’s average digital asset customer deposits were $7.3 billion during the fourth quarter — down about 40% from $12 billion in the prior quarter. 

The Silvergate Exchange Network (SEN) handled $117.1 billion of US dollar transfers in the fourth quarter, a quarter-over-quarter increase of 4%. However, the SEN handled $563.3 billion of such transfers in 2022 — a decrease from $787.4 billion in 2021. 

Silvergate seeks to maintain a highly liquid balance sheet going forward, Silvergate CEO Alan Lane said in a statement. 

“While we are taking decisive actions to navigate the current environment, our mission has not changed,” he added. “We believe in the digital asset industry, and we remain focused on providing value-added services for our core institutional customers.”

The earnings report comes nearly two weeks after Silvergate said it was forced to sell assets at a major loss to fulfill roughly $8 billion of customer withdrawals. 

Silvergate held $4.3 billion of short-term Federal Home Loan Bank advances, as of Dec. 31, according to a Jan. 5 company filing. This funding was used to satisfy outflows, according to the company. 

The bank also said earlier this month it would be cutting 200 positions, or about 40% of its staff, in an effort to reduce costs. 

Mark Palmer, BTIG head of digital assets research, commenting on the earnings report, said that Silvergate “would evaluate its product portfolio and potentially exit less profitable lines of business.”

A class-action lawsuit filed against Silvergate last week alleges that the bank held the accounts of now-bankrupt FTX and Alameda Research, a trading firm also founded by Sam Bankman-Fried, adding that it knew FTX held investor funds and that Alameda engaged in risky trading. 

The company “did nothing” when it witnessed billions of dollars of FTX customer funds being wired directly to Alameda and related entities, the complaint claims.

“As a federally regulated bank, we take our compliance and risk management responsibilities very seriously,” a Silvergate spokesperson told Blockworks. “While we don’t comment on pending litigation, we are aware of the lawsuit[s] and intend to defend against them vigorously.”

This story was updated on Jan. 17, 2023, at 11:20 a.m. ET with additional detail.


Don’t miss the next big story – join our free daily newsletter.

Tags

Upcoming Events

HYATT REGENCY SALT LAKE CITY

TUES, OCT. 8, 2024

Guided by the expertise of Blockworks Research Analysts team, this one day event will feature senior leaders, entrepreneurs, and developers from across the crypto industry. Attendees will have the opportunity to participate in an immersive experience to explore the latest trends, […]

Salt Lake City, UT

WED - FRI, OCTOBER 9 - 11, 2024

Pack your bags, anon — we’re heading west! Join us in the beautiful Salt Lake City for the third installment of Permissionless. Come for the alpha, stay for the fresh air. Permissionless III promises unforgettable panels, killer networking opportunities, and mountains […]

recent research

hivemapper.jpeg

Research

We believe crypto market participants overlook Hivemapper’s fundamental potential due to a poor understanding of both the niche map data market and Hivemapper’s positioning relative to incumbents. Hivemapper’s token model catalyzes both a cost and product advantage via unmatched map freshness and near real-time accuracy, which is its wedge into a market characterized by stale data and high data collection costs. Its current and potential future product suite may represent one of the strongest possibilities for PMF in crypto today.

article-image

👨‍⚖️ SBF’s courtroom sequel: Plus, Coinbase’s legal loss was DeFi’s gain

article-image

Public mining companies have been acquiring sites, refreshing machine fleets and diversifying business models in preparation for the event

article-image

Exploit shows centralization can sometimes be an asset

article-image

The Fidelity Ethereum Fund, like other proposed ETH ETFs, seeks to stake a portion of its assets, according to the firm’s Wednesday registration statement

article-image

The DAO first voted on enabling SAFE transfers over a year ago