Silvergate Capital reports a net loss in the fourth quarter of $1 billion
By Hannah Lang
(Reuters) – Silvergate Capital Corp reported a net income of $1billion in the fourth quarter. It had previously reported that investors were scared by the fall of crypto exchange FTX and pulled out more than $8billion in deposits during the three-months ended 2022.
The bank’s shares were up almost 4% in premarket trading.
The bank, which is crypto-focused, had previously said it would reduce its workforce by 40 percent, or around 200 employees, to cut costs during a crypto downturn.
Silvergate had published a preliminary earnings statement Jan. 5 in which it reported that digital asset customers’ total deposits declined to $3.8 Billion at the end December, as compared to $11.9 Billion at the September end. To maintain liquidity, the company sold $5.2 Billion of debt securities for a loss $718 Million in the fourth quarter.
The report’s dire earnings show the devastating impact of crypto exchange FTX’s bankruptcy filings on the digital asset market. It filed for bankruptcy in November after failing pay customers withdrawals. This is a remarkable reversal for one of the largest crypto exchanges worldwide.
Silvergate stated earlier that it did not have any outstanding loans or investments in FTX. However, its shares lost 69% since the collapse of the exchange, which sparked a wild cryptocurrency sell-off.
Silvergate, located in La Jolla California, said earlier this year that it would slow down its expansion and delay the launch blockchain-based payments solutions. This was after it bought a solution for payment from Meta Platforms Inc’s Diem Group last January.
According to the bank’s fourth quarter statement, $196 million would be taken as an impairment charge on assets acquired for the payment solutions venture.
Silvergate was founded in 1988 and ventured into crypto in 2013. Silvergate counts among its customers major crypto exchanges such as Coinbase Global Inc. and Kraken.
In addition to its mortgage warehouse business, the bank also owned a mortgage brokerage. However, it announced in December that it was closing that division due to rising interest rates and lower mortgage volumes. According to company filings, the bank received $4.3B in advances from Federal Home Loan Bank of San Francisco during the fourth quarter.
(Reporting by Hannah Lang, Washington; Editing By Andrea Ricci).