Silvergate Capital Corporation announced a steady stream of cryptocurrency deposits in the second quarter.
Deposits totaled $13.3 billion in the second quarter, down from $14.7 billion in the prior three months. Diluted earnings per share rose to $1.12, beating Wall Street expectations of $0.84. Investors remained bullish despite the slowdown in deposits. Eight of nine investors surveyed by FactSet Research Systems designated the stock as a buy. Accrued net income for the second quarter totaled $38.6 million.
Silvergate is a regulated, institution-focused bank whose deposits are insured by the Federal Deposit Insurance Corporation (FDIC). The bank is a member of the Federal Reserve and holds a California charter.
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 revenue declined from $8.9 million in the first quarter of 2022 to $8.8 million in the second quarter. Fee income was also down $2.5 million from $11.3 million a year ago.
Despite serving as an institutional lender for USD/BTC collateral, Silvergate saw no liquidation during the credit crisis that began with the withdrawal of cryptocurrency bank Celsius suspended. It received $1.4 billion in leverage commitments, up from $1.1 billion at the end of the first quarter.
The bank’s money transfer system, Silvergate Exchange Network, through which crypto companies such as Coinbase, Gemini and Kraken move money to each other, served $191.3 billion in transfers in the second quarter.
Silvergate launches its own stablecoin issued by banks
Silvergate’s CEO touted the robustness of the platform, which was able to emerge from a market downturn relatively unscathed. The systems are built to deal with volatility and high trading volumes, he said. He highlighted the firm’s strong focus on client liquidity and risk management practices.
The first institutional client Silvergate acquired was SecondMarket in 2013, which struggled to find banks willing to bet on bitcoin. By introducing the Silvergate transaction network, the company eliminates some of the opportunities that customers miss when trying to do 24/7 bitcoin business with traditional banks that work 40 hours a week.
Silvergate acquired assets from Meta’s failed Diem stablecoin project for $182 million in February 2022. CEO Alan Lane said it plans to launch its own regulated stablecoin in 2022 in partnership with a consortium of banks.
Silvergate stock has a price target of $124.50, representing a 60% upside from its current price.
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