Company to Host Conference Call Today at 8:00
a.m. ET to Discuss Recent Developments
Silvergate Capital Corporation (“Silvergate” or the “Company”)
(NYSE: SI), the leading provider of innovative financial
infrastructure solutions to the digital asset industry, today
announced select unaudited and preliminary financial metrics for
the three months ended December 31, 2022 and provided a business
update. These metrics are subject to change in connection with
conducting and completing normal closing procedures and an audit
for the year ended December 31, 2022. The Company will also host a
conference call at 8:00 a.m. (Eastern Time) today, January 5, 2023,
to discuss certain recent developments.
The digital asset industry has undergone a transformational
shift, with significant over-leverage in the industry leading to
several high-profile bankruptcies. These dynamics have sparked a
crisis of confidence across the ecosystem and led many industry
participants to shift to a “risk off” position across digital asset
trading platforms. In turn, Silvergate’s total deposits from
digital asset customers declined to $3.8 billion at the end of the
fourth quarter.
Alan Lane, chief executive officer of Silvergate, commented, “In
response to the rapid changes in the digital asset industry during
the fourth quarter, we took commensurate steps to ensure that we
were maintaining cash liquidity in order to satisfy potential
deposit outflows, and we currently maintain a cash position in
excess of our digital asset related deposits.”
In line with this approach, as customers began to withdraw
deposits during the fourth quarter of 2022, Silvergate utilized
wholesale funding to satisfy outflows. Subsequently, in order to
accommodate sustained lower deposit levels and maintain its highly
liquid balance sheet, Silvergate sold debt securities for cash
proceeds.
As Silvergate prepares for what it expects will be a sustained
period of transformation, it is taking several actions to help
ensure the business is resilient, including recalibrating its
expense base and evaluating its product portfolio and customer
relationships going forward. In addition, Silvergate has made the
difficult decision to substantively reduce its workforce as further
discussed below in order to account for the economic realities
facing its business and the digital asset industry today.
While Silvergate is taking decisive action to navigate the
current environment, its mission has not changed. Silvergate
believes in the digital asset industry and remains focused on
providing value-added services for its core institutional
customers. The Company is committed to maintaining a highly liquid
balance sheet with a strong capital position. Silvergate has
purpose built its business to support customers not only during
periods of growth but also in periods of volatility – that is, its
business is designed to accommodate deposit inflows and outflows
under a range of market conditions. Despite significant industry
turmoil, Silvergate stands ready to support its digital asset
customers.
Silvergate Exchange Network (“SEN”) Platform
- The SEN continues to operate 24/7 with average daily volume
totaling $1.3 billion during the fourth quarter of 2022, compared
to average daily volume of $1.2 billion in the third quarter of
2022.
- At December 31, 2022, SEN Leverage commitments declined to $1.1
billion, compared to $1.5 billion at September 30, 2022.
- The average fourth quarter 2022 outstanding balance of SEN
Leverage loans was $328 million, compared to $308 million in the
third quarter of 2022.
- All SEN Leverage loans continued to perform as expected with
zero losses and no forced liquidations.
Select Preliminary Financial Metrics
Deposits
- Total deposits from digital asset customers declined to $3.8
billion at December 31, 2022, compared to $11.9 billion at
September 30, 2022.
- Average deposits from digital asset customers declined to $7.3
billion during the fourth quarter of 2022, compared to $12.0
billion during the third quarter of 2022, with a high of $11.9
billion and a low of $3.5 billion during the fourth quarter.
- As of December 31, 2022, approximately $150 million of
Silvergate’s deposits were from customers that have filed for
bankruptcy.
Cash and Cash Equivalents
- As of December 31, 2022, Silvergate held total cash and cash
equivalents of approximately $4.6 billion, which is in excess of
deposits from digital asset customers.
Debt Securities
- In order to accommodate sustained lower deposit levels and to
maintain a highly liquid balance sheet, Silvergate sold $5.2
billion of debt securities for cash proceeds during the fourth
quarter of 2022.
- The sale resulted in a loss on the sale of securities and
related derivatives of $718 million during the fourth quarter of
2022.
- During the quarter, Silvergate sold available for sale
securities, as well as certain securities that were previously
identified as held to maturity.
- At December 31, 2022, the Company held $5.6 billion of total
debt securities at fair value, all of which are U.S. government or
agency-backed and available for sale, and which include unrealized
losses of approximately $0.3 billion. The Company anticipates
selling a portion of these securities in early 2023 to reduce
wholesale borrowings, which will result in the recognition of a
fourth quarter impairment charge related to the unrealized loss on
those securities expected to be sold.
Wholesale Funding
- At December 31, 2022, the Company held $2.4 billion of
short-term brokered certificates of deposit.
- At December 31, 2022, the Company held $4.3 billion of
short-term Federal Home Loan Bank advances.
Business Update
In response to recent industry turmoil and the corresponding
impact on Silvergate’s balance sheet, the Company is taking several
actions it believes are prudent to ensure the business is resilient
and to manage its expense base going forward.
Reduction in Force
In 2022, Silvergate increased employee headcount at a rapid rate
in an effort to keep up with its growing business and serve its
customers. The Company is reducing headcount by approximately 200
employees, or 40%, in order to account for the economic realities
facing the business and industry today. Reducing headcount will
enable Silvergate to continue to offer a tailored customer
experience, while prudently managing expenses in a more challenging
macro environment.
Impacted employees were notified on January 4, 2023, and
Silvergate is providing these individuals with severance packages
and job placement resources. The Company estimates aggregate costs
associated with this reduction in force of approximately $8
million, primarily consisting of severance payments, employee
benefits and related costs, and expects to incur the majority of
these charges in the first quarter of 2023.
Product and Customer Portfolio
Given the current macro environment, the rising interest rate
environment and related reduction in mortgage volumes, Silvergate
exited its mortgage warehouse lending product in the fourth quarter
of 2022. As a result, the Company will incur a restructuring charge
of approximately $4 million in the fourth quarter of 2022,
primarily related to severance and employee benefits.
Silvergate is focusing its strategy to provide the most
value-added solutions for its core digital asset customers. Over
the coming weeks, the Company will be streamlining its product
portfolio to reduce complexity while ensuring its institutional
clients have the tools they need to continue operating
efficiently.
Taken together, Silvergate believes these portfolio changes will
enable Silvergate to continue to serve its core customers in a
responsible and profitable manner. Given the current level of
industry uncertainty, the Company remains committed to maintaining
a highly liquid balance sheet with minimal credit exposure and a
strong capital position, ensuring maximum flexibility for its
customers.
Intangible Asset Impairment Charge
After performing an impairment analysis of the Company’s
intangible assets, Silvergate will take an impairment charge of
$196 million in the fourth quarter of 2022 related to developed
technology assets purchased from the Diem Group. Given the
significant changes in the digital asset industry landscape, this
charge reflects the Company’s belief that the launch of a
blockchain-based payment solution by Silvergate is no longer
imminent. The Company will continue to seek opportunities to
realize value from these technology assets.
Business Update Conference Call and Webcast Details
The Company will host a conference call at 8:00 a.m. (Eastern
Time) today, January 5, 2023.
The conference call can be accessed live by dialing
1-844-200-6205, or for international callers 1-929-526-1599, and
entering the access code 712040. A replay will be available
starting at 10:00 a.m. (Eastern Time) on January 5, 2023 and can be
accessed by dialing 1-866-813-9403, or for international callers
+44-204-525-0658. The passcode for the replay is 535429. The replay
will be available until 11:59 p.m. (Eastern Time) on January 19,
2023.
Interested investors and other parties may also listen to a
simultaneous webcast of the conference call by logging onto the
investor relations section of the Company's website at
https://ir.silvergate.com. The online replay will remain available
for a limited time beginning immediately following the call.
Fourth Quarter and Full Year 2022 Earnings Conference Call
and Webcast Details
The Company will release its fourth quarter and full year 2022
financial results before market open on Tuesday, January 17, 2023,
with a conference call to follow at 11:00 a.m. (Eastern Time) the
same day.
The conference call can be accessed live by dialing
1-844-200-6205, or for international callers 1-929-526-1599, and
entering the access code 308427. A replay will be available
starting at 1:00 p.m. (Eastern Time) on January 17, 2023 and can be
accessed by dialing 1-866-813-9403, or for international callers
+44-204-525-0658. The passcode for the replay is 949184. The replay
will be available until 11:59 p.m. (Eastern Time) on January 31,
2023.
Interested investors and other parties may also listen to a
simultaneous webcast of the conference call by logging onto the
investor relations section of the Company's website at
https://ir.silvergate.com. The online replay will remain available
for a limited time beginning immediately following the call.
About Silvergate
Silvergate Capital Corporation (NYSE: SI) is the leading
provider of innovative financial infrastructure solutions and
services for the digital asset industry. The Company’s real-time
payments platform, known as the Silvergate Exchange Network, is at
the heart of its customer-centric suite of payments, lending and
funding solutions serving digital asset companies and investors
around the world. Silvergate is enabling digital asset markets and
reshaping global commerce for a digital asset future.
Disclaimer
The Company’s preliminary estimates of the financial metrics
included in this press release are based solely on information
available to it as of the date hereof and are inherently uncertain
and subject to change. Accordingly, you should not place undue
reliance on the preliminary financial metrics, which may differ
materially from the actual results for the fourth quarter of
2022.
Statements in this press release may constitute forward-looking
statements within the meaning of the Securities Exchange Act of
1934, as amended. These forward-looking statements reflect our
current views with respect to, among other things, future events
and our financial performance. These statements are often, but not
always, made through the use of words or phrases such as “may,”
“should,” “could,” “predict,” “potential,” “believe,” “will likely
result,” “expect,” “continue,” “will,” “anticipate,” “seek,”
“estimate,” “intend,” “plan,” “project,” “projection,” “forecast,”
“goal,” “target,” “would,” “aim” and “outlook,” or the negative
version of those words or other comparable words or phrases of a
future or forward-looking nature. These forward-looking statements
are not historical facts, and are based on current expectations,
estimates and projections about our industry and management’s
beliefs and certain assumptions made by management, many of which,
by their nature, are inherently uncertain and beyond our control.
The inclusion of these forward-looking statements should not be
regarded as a representation by us or any other person that such
expectations, estimates and projections will be achieved. Although
we believe that the expectations reflected in these forward-looking
statements are reasonable as of the date made, such forward-looking
statements are not guarantees of future performance and are subject
to risks, assumptions and uncertainties that are difficult to
predict. For information about other important factors that could
cause actual results to differ materially from those discussed in
the forward-looking statements contained in this release, please
refer to the Company's public reports filed with the U.S.
Securities and Exchange Commission.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230104005963/en/
Investor Relations: Edelman Smithfield for Silvergate
(858) 200-3782 investors@silvergate.com Media: Edelman
Smithfield for Silvergate press@silvergate.com
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