Silvergate Capital reports Q4 financial metrics, provides business update

Silvergate Capital announced select unaudited and preliminary financial metrics for Q4 and provided a business update. Silvergate’s total deposits from digital asset customers declined to $3.8B at the end of Q4. 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. Silvergate is taking several actions, including recalibrating its expense base and evaluating its product portfolio and customer relationships going forward. In addition, Silvergate has made the decision to substantively reduce its workforce. The Silvergate Exchange Network continues to operate 24/7 with average daily volume totaling $1.3B during the 4Q22 vs. $1.2B in Q3. At December 31, 2022, SEN Leverage commitments declined to $1.1B vs. $1.5B at September 30. The average 4Q22 outstanding balance of SEN Leverage loans was $328M vs. $308M in 3Q22. All SEN Leverage loans continued to perform as expected with zero losses and no forced liquidations. Total deposits from digital asset customers declined to $3.8B at December 31, 2022, vs. $11.9B at September 30, 2022. Average deposits from digital asset customers declined to $7.3B during 4Q22 vs. $12.0B during 3Q22, with a high of $11.9B and a low of $3.5B during Q4. As of December 31, 2022, approximately $150M of Silvergate’s deposits were from customers that have filed for bankruptcy. As of December 31, 2022, Silvergate held total cash and cash equivalents of approximately $4.6B, which is in excess of deposits from digital asset customers. Silvergate sold $5.2B of debt securities for cash proceeds during 4Q22. The sale resulted in a loss on the sale of securities and related derivatives of $718 million during the fourth quarter of 2022. At December 31, 2022, the company held $5.6B of total debt securities at fair value which include unrealized losses of approximately $0.3B. The company anticipates selling a portion of these securities in early 2023 to reduce wholesale borrowings, which will result in the recognition of a Q4 impairment charge related to the unrealized loss on those securities expected to be sold. At December 31, 2022, the company held $2.4B of short-term brokered certificates of deposit and $4.3B of short-term Federal Home Loan Bank advances.