Silvergate Crypto deposits remain healthy amid market downturn

by Arthur · July 20, 2022

Silvergate Capital Corporation announced a steady stream of crypto deposits in the second quarter.

Deposits in the second quarter totaled $13.3 billion, down from $14.7 billion in the previous three months. Diluted earnings per share rose to $1.12, beating Wall Street estimates of $0.84. Investors remain positive despite the drop in deposits. Eight out of nine investors surveyed by FactSet Research Systems rate the stock as a buy. Net income accrued for the second quarter was $38.6 million.

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

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Good numbers for Silvergate

Silvergate managed to grow its customer base from 1,503 at the end of March to 1,585 at the end of June, while fee income fell 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.

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

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

Silvergate launches its own stablecoin issued by banks

Silvergate’s CEO touted the platform’s resilience as it was able to emerge from the market downturn relatively unscathed. He said 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 client acquired by Silvergate was SecondMarket in 2013, which was struggling to find a bank willing to invest in bitcoin. By introducing the Silvergate Exchange Network, the company eliminated some of the lost opportunities experienced by customers trying to do 24/7 bitcoin transactions with traditional banks that operate a 40-hour work week.

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

The target price for Silvergate’s stock is $124.50, up 60% from today’s price.

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