- Silvergate Bank suffers over 30% stock value decline due to the announcement of delayed submission of the 10-K report.
- The bank suffered a loss of $ 1 billion last year and foresees more losses as it sells assets to cover customer withdrawals.
- High-profile crypto clients are now ceasing operations with the bank as they fear its ability to stay afloat.
Silvergate’s value of stock shares fell by over 30% during after-hours trading due to its notice to the Securities and Exchange Commission(SEC) that it will delay the submission of its annual 10-K report.
The crypto-friendly bank postponed the filing of its 10-K report and requested more time in addition to the already extended deadline of 16th March, stating that it “requires additional time to perform analysis, record journal entries related to subsequent events and to complete management’s evaluation of internal controls over financial reporting.”
The bank said it was reviewing any pending regulatory requirements related to its operations as it acknowledged that it anticipated more inquiries from the SEC and Department of Justice due to the crypto-related side of its business.
Silvergate explained the circumstances that contributed to this delay starting with the fact that the bank made a $ 1 billion loss in the last quarter of last year compared to a net income of $75.5 million. The bank had to sell assets beyond its initial plan to try to offset the loan it acquired from the Federal Home Loan Bank of San Francisco.
Additionally, the bank sold more assets in January and February, from which it expects to record more losses. Silvergate said,
“These additional losses will negatively impact the regulatory capital ratios of the Company and the Company’s wholly owned subsidiary, Silvergate Bank (the “Bank”), and could result in the Company and the Bank is less than well-capitalized. In addition, the Company is evaluating the impact of these subsequent events on its ability to continue as a going concern for the twelve months following the issuance of its financial statements.”
Silvergate suffered an $8.1 billion bank run due to its relations with FTX amidst its collapse. The bank later reduced crypto-related deposits to distance itself from the industry, which led to a $14 billion decline in deposits. That, in addition to the losses it has made, is foreseen to place the bank in critical financial health. This has attracted speculations that the bank might be on its deathbed.
However, due to its regulatory and financial challenges, Silvergate has stated that it is reevaluating its business and restrategizing, all while working to submit its 10-K report as soon as possible.
Fleeing Customers
Less than a day after the notice was filed with the SEC, several crypto clients of Silvergate have announced the suspension of transfers and business operations with the bank. The fleeing began with LedgerX, one of the few surviving subsidiaries of the collapsed FTX, who sent an email to their customers stating that, in the future, they will be using Signature Bank to receive domestic wire transfers.
Coinbase followed by switching to Signature for dollar payments for its institutional customers. The crypto exchange tweeted that the switch was “out of an abundance of caution.”
Since then, more companies, including Galaxy, Paxos, Gemini Cboe Digital, Circle, and Bitstamp, have continued to jump ship from Silvergate due to the concern about the bank’s continuity, with most of them heading to rival Signature Bank.
