SI - Earnings call transcript Q1 2020 | Silvergate Capital Corp

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Operator

Good morning and welcome to the Silvergate Capital Corporation, First Quarter 2020 Earnings Conference Call.

During today's presentation, all parties will be in a listen-only mode.

Following the presentation, the conference line will be opened for questions with instructions to follow at that time.

As a reminder, this conference call is being recorded.

I would now like to turn the call over to Shannon Devine, Investor Relations for Silvergate. ahead. go Please ahead. go Shannon please

Shannon Devine

Chief Thank Silvergate you, participation With We your Ben President morning, here Chief Martino, Financial Officer; Director and our first of good and and our in Lane, call. EVP are everyone. Officer; quarter Tony today our and appreciate Reynolds, Alan operator, Executive Bank's XXXX me Development. earnings Corporate

the XX:XX of replay p.m. the section a reminder, will call a XXXX. on this Access also telephonic XX, is replay to time available Investor Eastern of available As on our May through be Relations website.

deck today's of Additionally to a IR on is section slide website. complement discussion available our

Securities Before and remarks and prospects. that Commission. expectations, to to of constitute Litigation this from other set results the factors of plans we and forth XXXX. statements about actual everyone a factors subject beliefs, the uncertainties COVID-XX are or that in estimates, remind forward-looking certain let could risks cause begin, call the including statements management's may Private meaning future Reform implied and Such statements. by differ These me periodic Act include Exchange are filed contain within current other variety statements with the reports Such risks, Securities such and pandemic materially our indicated those of that

not undertake statements. forward-looking do We any duty such to update

most A non-GAAP measure these presentation isolation we believe with substitute measures which in can our GAAP. reconciliation evaluating The a results found discuss are measures, be performance. GAAP additional the release. of non-GAAP in this in Additionally, for earnings certain be during information will of accordance as to call, today's in our should U.S. comparable or we prepared considered useful not

turn the over At this Alan. point, to I'll call

Alan Lane

growing our of COVID-XX that on Shannon, and results of will the operations pandemic. rapid ensure spread then and review known given the to around the Exchange of to our open we've update the I'll quarter more On you, our with us portion review an then and Ben our provide Reynolds we'll for the continue the SEN. questions. Silvergate taken results call, success a global your achieve and safety detailed Network, for financial our we good customers call employees uninterrupted the the of world first to the today will the steps Thank our provide service today's everyone. our morning, I is Tony, and as also call. payments platform Q&A

the a by to for challenging time our thanking as has I'd live. greatly changed we hard how truly of like COVID-XX employees efforts their and all and pandemic during start work work

that safety business first tests to Our employees maintains I continuity priority ensure been effectiveness. robust has am and plan grateful with Silvergate our plan's the periodic of the a

plan which recent our our to September year, was last our continuity most the move of a of team portion environment business positioned working test pandemic operations. seamlessly majority maintaining to of employees while our remote quickly Our of in a

during also remain and supporting to this communities challenging our local We committed customers period.

help established and we customers COVID-XX this who Protection assistance been through difficult Paycheck and the relationships those under part payment remain referral SBA's result, borrowers We a for time to impacted initiated forward. have our relief have As our with the committed for doing partnering by seeking economy to Program. move

been protect steps on More began Silvergate loan approach time. some in While disciplined maintain portfolio. culture and ensure quality maintaining of overall interest tenet underwriting to the economic downturn declining and for rates against company uncertain, place taking lending taking core prepare the necessary procedures potential economy with credit its impact a strict year we underwriting a the sheet. duration to our the is of the have measured and steps standards are ago, our a the our pandemic than while we we for A balance conservative our of to

is in estate is average XX% the average commercial where residential loan-to-value of portfolios XX, and both loan-to-value approach in the portfolio weighted as March is evident multifamily conservative real XX% real XXXX. and weighted estate our where Our our single-family

in from a strong and benefit our at liquidity ratio of had of provides fair At for represented securities sale with an which market had and such face cash in position, of equivalents us the confidence XX.XX% also value, balance cash, held risk-based total sheet uncertain assets. capital We $X.X capital investment liquidity and environment. end, which Silvergate quarter billion of XX% total real a

positioned the we leading we solutions also Silvergate an we innovative economic provider to industry. currency have balance a downturn, positioned participants for world in and in financial to the of services sheet succeed have digital as digital While our become have infrastructure

believe banking a We the traditional during currency in the world is but across particularly experienced first is Silvergate system, has major not dislocation volatility. bank market, XX/X to business only that operates which into which occurred all five asset bring sleeps. classes days week given the never legacy financial relevant also only hours, which XXX digital the that in normal operations, today have historically This the extreme

hours providing week. provides the a ability a enables to as seven capital the critical efficiency them SEN asset institutional advantage, it digital day, dollars exchanges days near U.S. to clients a class in Importantly, real trade and currency between XX move our time the

a these competitive hedge are customer. they over can't. money SEN noncustomers have Our a customer have more efficient. cost between don't move at is times be hedge when deposits can from transferred customers' the and transfers are the current you result, SEN, These leave no our advantage use deposit since book aren't who customers a And as use to capital Silvergate customers the Silvergate customers that customer funds on to fund Silvergate our SEN, because other to that

of customers XXX through the currency our pipeline very process. to our first As currency the in customers grew digital digital remained and pipeline its continued transfer with billion SEN of quarter fourth We platform our of SEN going are shown these volumes new The the as on over the and our over during as XXX, $XX.X onboarding digital XX,XXX currency value expansion XX% the over SEN impressive the advantage sales slide our network quarter reflect quarter. metrics Both five, institutional substantiated transactions since growth first net XXXX. strong of XXX% to alone. of competitive by well in clients year-over-year platform's completed while effect customers and

of in the increased transaction XXX% customers' also While for quarter. contributed digital over the previous to drove that our versus strength customers believe manually growth growth gain in bitcoin overall also quarter, we currency digitally volume as new preference versus transact Silvergate's share to SEN the the XX% volume

income deposit compared to demand first our currency the from in drove as transaction XX% activity million fee customers. management services rose and for quarter cash $X.X currency digital foreign currency more exchange solutions Digital our solutions, to as XXXX

with You adding may could recall same headcount. during customers provide quarter that our that Silvergate that adopt so we the upgraded more income. growth Finastra XXXX, management fee customers wire corresponding solutions and platform its operations the and during to We've at management seen platform API-enabled cash without in scale time a

we and Additionally, the robust believe product the out that are quarter of during building in demand FX was stages for still suite. services early we

number network customers' develop needs. new of to meet competitive of the to effect continue stronger offerings our will continue clients, and enable SEN advantage product to that the successfully institutional and we grow to As we grow believe the Silvergate

hours To our XX customers in of collateralized allow dollar repayments The will Leverage, and to that to per process am seven per the SEN product U.S. excited week. launch by time by obtain real very days SEN point, loans which I bitcoin. loans uses bank fund day

collateralized served us initiative We are applying have bitcoin the the and well approved new that million standards to $XX.X over same this first in years the rigorous underwriting quarter through loans. lending

the phase rolling are out XXXX. with expectations that still product currently highlight would the the fully of second pilot half in I we in of more

customers' innovative Importantly, on and Leverage Over we a this culture SEN driver. see our growth demonstrates as further strong time, needs. focus Silvergate's serving

addition, will we value enhance to the product In SEN work as and in both the continue competitive invest its of to advantage. we new development

review to our a would to the of I that, results. over financial like With call for more now Tony detailed turn

Tony Martino

and $X.X the per diluted Alan, quarter fourth XXXX. and in morning income first good million net per or everyone. $X.XX reported This Silvergate million of $X.X share reported of diluted $X.XX from up you, Thank morning, quarter share,

of value to increased at book share tangible XX% $XX.XX up end quarter, compared per the the Our year ago. a to

at digital quarter, of the Turning March increased quarter $X.X currency total of million The XX.X% representing from XX.X% $X of first to X. our prior billion Noninterest-bearing our XXXX. as deposits reflects deposits quarter In deposit the XXXX. slide total levels increase in deposits XX, $XXX.X changes totaled fourth to or to the billion customers. deposits in compared

associated deposit net with hedging from our customers. The March in of increase as digital XX, callable in of increase million deposit deposits a brokered as $XXX.X changes strategy certificates in reflects of total XXXX our currency levels well

certificates callable their calling to We have while lower brokered a at portion of our extending continued associated deposit the by and rates, cost these duration. lower deposits of reissuing with

XX, of XXXX. and XX million to December with months X.XX% cost of value of deposit cost remaining a of compares X.XX% $XXX.X March balance million all-in a of of as of face duration with an duration balance XXXX, of brokered As a callable all-in $XXX certificates had our months. XX, a of of an and remaining XX This

the total the the $X.X quarter was basis CDs. brokered points expense resulting callable XX of cost calling from for Out with throughout the with carrying of On for XX the weighted to a the CDs underlying overall basis basis our the million portion to points basis, total average XX an related basis cost quarter. all-in of of remaining related deposits was a CDs basis points, premium the points XX of points XX the

the the This not average XX XX also related related average compares points and the CDs. weighted basis a basis quarter of XXXX, compares basis when to of have first to of XXXX, interest callable in deposits the quarter This points eight of which were points did CDs. brokered a callable brokered to of of we in cost of deposits to any cost premium weighted expense fourth

to Turning X. Slide

the first quarter interest to of quarter net the XXXX. for first X.XX% Our in fourth compared X.XX% margin the and was for quarter X.XX%

The first reissuing from federal point approximately million decrease rate as a first reductions XX or the brokered of funds expense basis quarter and last as the well calling by premium $X.X in both driven was resulting quarter CDs. reduction the three quarters over

at premium brokered Our both expense funds $XXX.X quarter as lower non-interest-bearing XX was the in and CD million additional an rate favorable points brokered CD volume prior and from offset compared as a deposits. increase basis on an flat average of mix was in to cost by interest call basis

X.X notional net a had gain years. of a These locking over first in positive three-month million versus an yield which of of the $XXX we and of be average floors During resulted sold points amount for the a the rate and of million quarter of duration LIBOR weighted strike recognized were interest the in level XXXX, remaining rate of $X.X floors, LIBOR at weighted XX breakeven sold interest imputed one thus price term X.X% term. average remaining original basis in to

hold in to duration another rate of X.XX% of which one-month remaining strike a floors, continue million price and We X.X $XXX a have amount notional LIBOR interest versus years.

Non-interest to on on first million for X. a $X.X of in the gain a of both and of related the $X.X advance, $X.X primary million driver was first quarter million and XXXX term the quarter. $X.X extinguishment termination gain increase million, compared securities the of million Now million a of decrease and Slide within quarter XXXX. of on was issued million repaid the of to in $X.X The five-year FHLB debt non-interest the XXXX fourth of quarter sale $X.X to $XXX,XXX an to income increase was the compared $XX linked-quarter on which income a

partially of on gain completed sale business Marcos the or ago fees, was XXX% of pre-tax $X.X $XXX,XXX and when non-interest sheet a of extinguishment loan and million million comparable $X.X our March debt income portfolio sweeps. for increased XX% related earlier by due in decrease year or to on the was sale gain to XXXX, off-balance securities and the on Excluding to a quarter. branch primarily by This compared offset that San of increase discussed fees a in in service deposit increase $XXX,XXX deposit-related gain

million $XXX,XXX which Turning X. and first XXXX salaries due in quarter communications expense a linked-quarter million $XX.X XXXX. the the for million, primarily first of in XXXX by in to professional the decrease to employee and $XX.X Non-interest quarter to and fourth benefits, data in $XX.X of quarter The increase of processing, services. of was offset compares Slide increases was

XX. Slide to On

of quarter, first fourth million million yield a XXXX $XX with balance of up a during XXXX. $XXX for of the X.X% at portfolio quarter of end with securities corresponding totaled yield Our million the the X.XX% from $XXX of a

with the equivalents assets combined portfolio securities with Our of the total our of when first XX% balance cash cash as a quarter $X.X of billion. and combined represented of balance end of

bonds. During with quarter, purchased $XX.X the municipal million plus were single a rating These we of rate tax-exempt better. bonds first highly all rated fixed A in or

$X.X loans first increase a the originations. quarter warehouse of XX% Our X% The driven billion, March to lending a linked-quarter mortgage our XXXX correspondent at increase XXXX XX, and in single-family the was were compared fourth of increase from loan the and quarter to compared by an XXXX. increase

from is assets XXXX. portfolio total million $X.X basis quality non-performing is totaled assets or at we XX December our of decrease the XXXX. points had assets XX of March of That $XXX,XXX that total XX, basis credit as or $X.X the in loan points Overall, assets strong non-performing a million XX, our at of

XX, On of you majority our held the breakdown loan-to-value for slide a can for see the of loans ratios investment.

mentioned estate relatively from Alan the loans default. losses of we to loan-to-value collateral ratios real our levels, significant in managed low providing protection As on earlier, event the

helped levels charge-off our of has our is losses. one and low contribute supporting historically allowance level elements of loan the collateral Our our to current for key level

our On portfolio slide based estate provided breakdown type. have loan further on commercial a XX, of we collateral real

loans loan-to-value for was as and quarter for Our total million $XXX and end collateralized XX.X% exposure for hospitality XX.X% by a retail weighted retail. hospitality with average of of

and portfolio recorded historically we losses and provision charge-offs to fourth average in loan our XXXX loan loans, and quarter. weighted in quality estate, commercial quarter, in influenced no The estate real $XXX,XXX for as credit first to based by single-family the multifamily in strong real our on modest loan-to-value and level of provision by residential loan-to-value was largely range. margins loan the first of balances compares the low-to-moderate was low evidenced a minimal which During mid-XX% provision recorded ratios our quarter increases the

due loss of with significant is believe exposure retail current environment there to the the to relatively Although, the defaults in loan-to-value sectors ratio of and uncertainty a provides low that along we only hospitality the the lower our of in portfolio. in COVID-XX modest pandemic impact event probability

under the very working current necessary with provide our been circumstances. We've closely borrowers to support

of provided we residential commercial multifamily As our our to and industrial of representing April our two deferrals of and borrowers; loan single-family XX an XXXX borrowers and of of XX, payment commercial value borrowers; five aggregate million. $XXX.X

XX. slide to Turning

Tier XX.XX% regulations. level was company well and leverage XX.XX% bank of ratio to the well Our total excess X capitalized ratio federal bank considered minimum X% the be with level under banking the at ratio at in

that capital in fact Our and ratio high-grade held reflects total of are deposits a risk-based our securities. large highly the at and cash liquid proportion XX.XX%

during to exceeded of end X% quarter. the X% Our of a growth as compared of loan-to-deposit of XXXX XX.XX% ratio was XX% the year-end growth deposit at the loan decrease the quarter,

call With for Alan remarks. that, closing I'd to like back to turn the

Alan Lane

Thank partnering and the this a that part committed economy to we customers through doing with help difficult reiterate our I to you, to time remain want our move moment take to forward. Tony.

to grateful inspired our their are to employees who our We resilience challenges customers, them. ability in the of to and continue build front by businesses and despite demonstrate

of price growth same during unprecedented, volume compared non-linear. in was fourth was bitcoin during first currency quarter The time quarter, will XX% of average nearly but up we the the transactions roughly platform, also The our the to experienced expansion our we the bitcoin be the to believe was first while quarter digital period. during continue flat daily

broader hold the in the March, which market bitcoin of unwound the price be the quarter. to saw of during at investors of market currency cash dislocation middle institutional and in more positions caused to digital also We the end

capital related As class. customers continue the such, deposit asset to to allocating currency the us digital in beyond. difficult expect for second to Nevertheless, grow, estimate and as our the quarter it's activity and balances markets digital currency we

time In have you and to today. on platform for Thank our focused the business building control we closing, expanding we focusing our on over. will again your continue things remain

to open the operator the questions. like Operator? I'd that, With for lines to ask up any

Operator

Instructions] Thank Canaccord. from from is you. coming Joseph first today [Operator question Our Vafi

Your line is now live.

Joseph Vafi

what just question. and has a hooking Bitcoin the some on call, my Obviously seeing for a of Hey little it thought taking your as of I of think lot on of model. surge the negatives some working maybe perhaps and of insight relates Bitcoin I first. guys. just here perhaps the side to in shown Thanks the the wondering initiatives you're positive on? I so and you business could provided of we far strength through jump I for just a bit would the Bitcoin you that was positives your in business resilience think that's if price Bitcoin go of you're and in QX. what Alan,

Alan Lane

you Sure. to Thanks morning. talk this Joe. Great to

I doing first think weigh since I I'll and a on Tony lot in of talking Ben? already, Ben let question. been that here have

Ben Reynolds

so, the Yes itself is currencies. guess Silvergate I of other digital Alan. that probably stating doesn't Bitcoin it any any or hold here out Thanks worth gate

As facilitate dollar. you know of U.S. Joe, we the transfer the

you of income So or balance have sort any it immediate impact doesn't if will. sheet

a that the the trading business we and position our to we've that strong That and in XXXX. the of SEN. around usage maturing. market is seen I that asset on important happened and saw And in quarter the first the here said, certainly and strong our events it's volumes the volatility volume touched the lead Alan think that some to of strong class

were Bitcoin XX% our up I were volumes the XXX%. volumes trading and transaction think up

we is do institutional the What which found and or have that more difficult that correlate exchanges estimate our trading this using broad because class. a ecosystem it that, well Alan many within both shows as strategies digital currencies of really and investors different is we asset to to of are price executing ever. such our deposits So of customers the mentioned platform than are

So believe a volatility that rational our did the deposits as On fairly quarter we in very asset clients March, the basis, a $XXX million. cash way. a picked of we see up will the class in significant increase in in allocate to go-forward

of so going what forward. overall, and our sort so that's -- And view

segments be as this digital more The is last that as would that have what the an might on to that I not assets. from seen that allocation is provides increases price not point we've investor thing say -- -- might interest

of in the folks generally the that see And the of also that price expansion so as that well. time space in you number think and into institutional positioned of we for we're well expansion are terms coming

Joseph Vafi

That's Okay. helpful.

as how or and product on all at the volatility the lot price this the plan is of in some we've -- it's acting there. Has road a year? changed that then leverage follow-up the product that Bitcoin now How rollout Leverage the -- Just SEN map seen does to see on nice progress better? the SEN the for a here

Alan Lane

Yes. Joe, again. this is Alan

on me and see that then any Ben comments. if in we'll Let follow-up has weigh

One our whether that we by collateral and the we or also collateral. and/or whether mechanisms have in was pilot “margin we price Bitcoin the collateral customers of test then are the to liquidate Bitcoin eager covering -- which of to we shortfalls the the make our the things were calls" monitor are –

Ben first quarter. just the saw need to monitoring asset quite sharing class. volatility a say happy during that order as see And to the I'm that some And we well. was volatility bit In in test to worked our of really you

of being But and did you cetera. perspective, the change measured add? it's with immediate the don't a that rollout anything just et to concept any continuing of road our matter Ben have see steady we in our map. the have now from aware believe so we proven And we risks

Ben Reynolds

-- about institutional done is Yes. bring for to have investor the the I features position And the XX/X SEN last one is you think about mean, to move their of ability the one they turbulent of it liquidated. you clients when our our and during, the think collateral things clients, times. product, key around to want when

the the capability a API, SEN Importantly, days we've and loan XX a as to to seven it draws Leverage, hours day enabled make repayments week. relates over

that liquidate margin time efficiency potentially And like ultimately is, think in so, achieve order those clients because to we really can and calls. a positions to feature make capital in that key other our places March,

first very And as so, with been pleased how performed quarter. said, Alan we've the it in

Joseph Vafi

on, you're a then, know quick of Great. where But one here I really net wondering see rest Thanks outlook margin for a XXXX. the you this maybe lot. providing And at point. I if any had one, final guidance just thoughts was interest you not high-level

Alan Lane

Yeah. thanks question. this Joe, is the Vafi for Hi

that's to great Tony for time to a I weigh in. think ask me Tony?

Tony Martino

Sure, Yeah. Joe.

the I So -- as margin, the comment interest was with net to I it CD was impacted call that by want indicated. firstly, make it brokered premium,

of to $X.X callable million and lower strategy So to cost. our we the our of feature hedging That incurred a CDs. part brokered we call reissue premium the of was part continue

So had that point about impact. a XX basis

are So, X.XX% you was quarter. that several there pretty that our March we NIM the in around highlighted actions press release. exclude normalized on rates the right down And as to basis decisive if which undertook came we which in consistent a impact fourth was

a million of about quarter the So of those million half we firstly, in our going we a $X.X that's duration floors, rate sold we of remaining floors. life for -- of forward And floors. interest – total our benefit locked $XXX the

the million the also points. the at We've our we quarter -- of cost to reduced end million the the to -- of and XXX brokered at what end $XXX from basis the we of was $XXX funding lowering CDs balance year

to portfolio then and partly supplement the a done and the was that late of NIM. at last -- to but in also impact But quarter the year-end quarterly. $XX some started divestiture, We week right a added as in bonds. to investing no we about high-quality -- So real very municipal had started on million lastly bit the we

around or give always don't quarter moving because don't say So assumes so minus us parts NIM. keep going XXX X. basis And point the items, we typically like further impacting the call we that these that entry aggregate although, impact we do to brokered CDs plus many given factors give into these points I'd an of guidance some flexibility.

So we've opportunities levers got those themselves. present levers done in NIM multiple the in we've manage summary, won't hesitate to past as and the the as we to use

Joseph Vafi

Thanks much. very

Tony Martino

welcome. You're

Operator

you. Thank

from Our Barclays. next question Eugene today is Koysman coming from

Your line now is live.

Eugene Koysman

have my Good incremental taking SEN first bit? volume Clearly, and deposit in give on and strong in you digital has question. the the SEN morning. trends, us of And quarter. slowed currency-related the quarter same transaction thank a or the trends you so color pretty volume, seen second you for you growth far the any deposit Can through that April? Have kind

Alan Lane

this Thanks morning. question. Sure. joining. for Good for Eugene, thanks is Alan. And the

comments While some we we forward-looking insight. as guidance provide on typically quarter, the Tony will on a of just provide a first make don't couple basis which can mentioned that

as about if average dig can balance look level of end deposit grew million, period average standpoint, while a -- $XXX mentioned see number $XXX the and deposits like versus the by the was almost the you the in From deposits only our at that Ben up million. period end you

So insight that late some you the quarter into surge. gives

holding year-end. of see month a the quarter and was March the of of did We the up surge as here cash terms We're first deposits have we, of part those characterized that of leave more this institutional still in a reason seen bank. over at fact, bit in portion little the But investors because the in second we now quarter. end then what in outflow of

to don't you than information. of quarter we monthly previous can And part But other typically then, every first the volumes, like share as transaction your it was month. question, tell SEN what in relates is, the higher month the I

read essentially, each to of growth of and all to that? was you a And of were that we have record. month it anything monthly look so, in be it would setting the It month happened at did correct not add that to quarter, assume Ben, March. the new a

Ben Reynolds

think nothing I add. to Yes, it. that's

Eugene Koysman

very Also Leverage the of in client And talk the you. SEN your Thank to -- of pricing? terms Have That's clients reception been helpful. product? receptive you can

Alan Lane

Ben, I'll want upfront let just any very size. I'll pilot address say are that, to that. we we Yes. because you provide limited But, have the Ben color? sample in a do

Ben Reynolds

strong. think there on speaking, across their is Yes. currencies reports a leverage class, what exchange. than And different that historically if asset wanted out are the trade demand platform I have and mean, digital there's that, I industry, U.S. know But you we're providing of you had you look companies that as dollars are the showing that's number we both doing. on to slightly to

And so, at if five exchanges, you a quite were if capital using five across to -- of trading you different have bit spread that's you exchanges. were that have different

with for customers in know leverage a lot they And looking have exchanges talking that are demand efficiency. we their capital of that for and

to so, there about -- few firms but you starting there's into that And if prime space, the a think really large that that's isn't brokerage are come institutional player doing that.

And so, strong. the has been demand

research are key looking market it our what we continuing do the factors and clients been very understand there. overall, But, are demand is so for has are to a interest mentioned, and As high. Alan pilot and that

Eugene Koysman

Thank you.

Operator

Thank you.

Michael KBW. question Schiavone from coming next is today from Our

line Your is now live.

Michael Schiavone

my taking Hi, guys. for question. Thanks

Alan Lane

You bet.

Michael Schiavone

quarter? new was how in of the Can you guys to build the please much deposit customers share related

Alan Lane

this and customers other. level -- Yes, And the and detail. the share levels then of typically number exchanges institutional we all break deposit out of break do that We the Alan. is don't that by investors Michael, type. down We into both

what But bit that over. to get typically And it moved deposits find onboard is so, we actually can way. little while new a them that the for a little customers, we takes you see as

that a large based a modest talking prior that, from kind And the -- amongst the some individual the fluctuations see what basis of we rest accounts is is growth rolling plus maybe that just quarter had quarter. And on then volatility onboarded of earlier. about very it on -- part some growth growth of on in were some we'll see we customers, so, customers from new

Michael Schiavone

are Okay. you on of Thanks. comfortable the And outlook with credit That's made some reserve? the credit, helpful. are today? the you that what guys qualitative how drive assumptions the And in to increase

Alan Lane

great I'll question. think, And, one Tony? over Yes, that Tony. that's turn a I to

Tony Martino

Alan. Thanks, Sure.

is impact COVID kind of the everyone's certainly, credit, frame. on Michael, So, in

terms and at really determining biggest loan provision, expectation provision go it's when XX our is allowance losses versus our up in our In of for allowance factor is at where basis our year-end the given points, back loss default. the look we modestly of

in And by very of as event traditionally majority conservative them LTVs, know, extra provides are maintained And estate. our which loans, low we've substantially real of collateralized lending standards the default. coverage and of you all the

already the over of really de is factors. loss -- So, the qualitative minimis answer directly, last most driver of driven -- several our low the years history volume. by We our is question loan to do your of more we increase the reserve already given pretty

not So really lot quarter the is. But really the feel the good when driven significant move we the by that. you given our impacted of at portfolios, loan-to-value by a – unsecured sector, our ratios increases again, are so and about look we're provision pretty this where

Michael Schiavone

the do are you. as or that thoughts guys future a you Okay. considering growth Network? should Exchange updated consider services any Thank products have And new guys are from any growth on we Silvergate you as opportunities? opportunities there fee And follow-up

Alan Lane

Alan. is This Michael. Sure,

or currency for wire cetera say category, way individual income components earnings using far fees out as the between exchange. fee fee up we was as transactional fees, ACH, foreign as goes participation the broader income services, release, to bank management well et we split SEN the as income cash transfers essentially As every happy shared up. was it the either that flat fee I'm in in

And say. first categories I have category were quarter. should up the in didn't down any was that so all we But flat, and/or

at time. ongoing we've products, settlement then is to announcements We any talking And a services an have for project. been product make while That as as custody about don't far providing this digital and assets. new still

very continuing SEN but the in Leverage of behind custody then And more it. complete that broadly to is second focused project and are We -- get pilot and the for distributed eager settlement right half year. coming this on to the

of year our So, year, benefits from the product that into thinking while this the we through for to end have about are expect we don't XXXX. certainly providing offering of customers as and impact this move that potential any we service

Michael Schiavone

well guys. all Great. That’s and me. Thanks again stay for

Alan Lane

too. Thanks, Michael, you

Ben Reynolds

you. Thank

Operator

Thanks.

from Todd Ryan The Block today Research. question Our from next is coming

now is line Your live.

Ryan Todd

the speak I'm Thanks Good taking on my morning. stablecoins. everyone for safe I wondering if is bit could staying call. outlook there. a you hope company's to

understanding to majority, out there stablecoin all I'm But if other capture there U.S. that wondering better with core a So that market. service my to are not it's Silvergate issuers. share works opportunities the if

then in quick the working that, to a latest follow-up from white initiative the interest curious Libra with Silvergate with also And paper, if changes any forward. Thanks. there's going to that

Alan Lane

thoughts, banking that something we for more settlement future Ryan. offering. the product active for far for that the a just we the probably stablecoin beyond or stablecoin same providing for it evolves the And Ben, as playing banking the the then very and follow or are closely. services the additional how should Silvergate relates Ben part put about and the very morning, as not issuers. in we if Good obviously mentioned, as second he as the other has provide It's closely. ask we regulated Libra. are watching to platforms. custody direct of any stablecoin can And I'm whether market just your question in question. Yeah. issuers thanks going you How Thanks United as that be to do also in services address States Yeah, the we're And view that maybe thinking joining and role is category I

Ben Reynolds

Yeah.

are Silvergate think solutions. digital to infrastructure an industry, you about as when management services the provider cash So, the around of that we one currency provide

are ACH wire these and So transactions.

will or at shorter into need in get still if it their term, take off. their think get least to And fiat about term they -- short stablecoins so medium if the people need you to to

lot get one has solutions of our we to clients people allow those with to did stablecoin. it proprietary areas our management that conversations just around is so solved well of providing cash one have technology. quickly between but things a of the And SEN the where as and through fiat That's

had to we're looking of all investigating of to a of participants fair are projects As very stablecoin characterize think it's in number it conversations stablecoins. and we're with Libra, that to folks. space folks said, a I and it very we're open in it are launch relates as working have that with interested Alan -- and our probably as various terms dynamic keeping options out something that of and all the there It's

Ryan Todd

One Thanks. color. I may. final helpful Really follow-up if

there's color forward. FX enabling how the around any dollar. just Just your on if been given exchange capabilities strength base recent quarter past incremental there wondering I'm customer that's of used going for the this Thanks.

Alan Lane

Sure. Ben do you want to continue?

Ben Reynolds

Yes.

So, institutional and their side when is network, liquidity other for And network, the for of Silvergate institutional we exchanges have looking exchanges the think are of about capital the the on looking investors you one we on on investors. the Exchange are have the what Network efficiency. really and have platforms we side

and that are underserved. We clients well-documented space somewhat fairly this in it's know

that And so as our into of go was capital efficiency create Alan to that's about. settlement and part custody desire talking and

exchange services. is foreign same true The for

a with so to may usually be or And may lot friction correspondent -- between and between banks not dollars that dollars those are or yen moving done and there's euros crypto. because friendly of transactions

taking friction ends so -- time. ends it up than And the more up anything

offering we've so And so continuing that months more in been fulsome it. on or in a FX offering XX last income growth with fee working growth creating and to the and the we're see associated for

So, we build to in think and area great it's opportunity as we're continuing well. that that a

Ryan Todd

from Great. Thanks. all That's me.

Ben Reynolds

Thanks Ryan.

Operator

session. end comments. I'd floor further our We like back the you. or any to for the reached closing of to question-and-answer Thank Alan over turn

Alan Lane

you Thank everybody Well for this joining Great. thank operator. you morning.

that we health continue the and call During to stays and on hope to this well. our safe maintain uncertainty, employees this period of we'll of work as safety everyone

as quarter acceptance outlook a well and results market first demonstrate world digital prepare taken positioning the the to steps clearly remains economy for for of While we as competitive the the our significant the uncertain, SEN. that have

successful SEN's expand again to opportunities July. competitive the our the of payments We further Have day. again by excited by you ahead the on We're network everybody lie build launch for to our updating time product quarter and great a second the many offerings the highlighted your pilot. today. forward Thanks in call look advantage global Leverage that SEN of

Operator

today's Thank conclude teleconference. That does you.

You may disconnect for your your line at this time and have a wonderful you day. We today. participation thank

Silvergate Capital (SICLQ) 1 May 202020 Q1 Earnings call transcript