SI - Earnings call transcript Q3 2020 | Silvergate Capital Corp

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Operator

Good morning and welcome to the Silvergate Capital Corporation Third 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 open for questions with instructions that follow at that time.

As a reminder, this conference call is being recorded. I would like to turn the call over to Ms. for Relations Investor Devine, Silvergate. Shannon Please go ahead.

Shannon Devine

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

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

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

the pandemic let undertake COVID-XX factors a These are estimates, contain actual remind implied constitute are periodic Such update plans We within Securities other management’s and that remarks Private Before that this statements subject Reform to of variety about risks, beliefs, and statements me Act the of and those of Securities certain with we results include future risks Litigation filed forward-looking by forth XXXX. to not such Exchange including in or statements reports from materially that and do and call set our may indicated factors, other any expectations, forward-looking uncertainties Such begin, meaning the prospects. differ duty everyone statements. to cause current such Commission. could statements. the

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

Alan Lane

results Exchange or for and results have them and team. calls, having I X good hard to necessary investing years challenging results, down to ago, growing our would earnings before decision time. digital an decision that the payments of addressed high of and global could our where are and work the efforts platform opening we emerging before SEN our the just the a compliance will will the more environment third The previous once workforce our our review incredible achieving and achieving the is the I investable level volumes, then years Today, currencies by on to service like the continued detailed we we ecosystem compete Silvergate doubled by payments in I dedicated the develop continued our you, technology operations in and an during in digital be Network, invest Thank class, regulatory that have commitment a Silvergate speaking quarter third $XXX the Several evident SEN. from how remotely. optimized achieved SEN. morning Tony are record without the our of results call turn in in banking overview again to And acceptance billion quarter possible asset to transfer milestone, world. deliver currency of when success surpassed as XX% inception. not And a saw The Shannon questions. our continued a own digital everyone. made we global our such to we so of who succeed current On work to will provide to financial clients. over I while provide call continuing their thank our employees uninterrupted our would for we platform, infrastructure

exceeding the the that we SEN’s expanding alone, in billion $XX effect to of was This Our further during continue over all completed customers and completed $XX new network platform. third advantage XXXX. add validates the transfers billion competitive quarter to SEN as the milestone during customers

currency net as seen compared customers XX% increased quarter be Slide third of digital in quarter. XXXX in year year-over-year can the As XXX to to the third on X, XXX ago

digital digital effect to and compared to the the increase be we the continue of process. was year-over-year or to and a third order in year investors forward, in pipeline impressive the in in handled second even of increase potential to and third currency as These a the strong very representing Looking SEN SEN growth digital SEN’s for the currency as XXXX of XX% maintain compared This the XX,XXX in demonstrate the currency of than quarter. quarter third contributed third second transact on either transactions, million income quarter the compared $X.X need million the $X.X quarter to customers, network to ago the ecosystem. to sequential pipeline activity of results XXXX. in in quarter to strong XXX $X.X with XXXX more fee strong a increase strong efficiently as new currency to the on-boarding compared XXX% quarter XX% in currency clearly record sequential the prospects million more increase of a digital as and also XXX% Digital

currencies digital trading balances higher transact occurring we transactions and the Further, third active to the customers quarter currency on other on the price we SEN. $X.X an deposit which million in billion deposits number as to and to the environment, quarter, saw order maintained appreciation of saw digital in increase SEN. the $XXX Bitcoin in believe grow the strong During third contributed

treasuries benefit. believe to continue more as as in currency Bitcoin, to investments digital price linear. digital Silvergate that will not appreciation, whole their levels, a firms FinTech within past, such seen volumes ecosystem corporate our the but in growth and the we Factors is we and announced currency continue as currency volatility will the markets expand have deposit deposit As and influence trading digital

days the at and the repayment, of third risk-adjusted as loans expand enable long which SEN Leverage to dollar lines credit with growth of the customers $XX.X pilot compared week exited the end million will our facilitate Silvergate a availability Leverage, with to allows the time. a to prudent for XX to anticipate combined day, judiciously of that Silvergate of attain underwriting, approved trajectory customers quarter. SEN offering. draws returns we We expand will believe to loan unique quarter, over capabilities make reminder We $XX.X as We hours attractive X second a and SEN U.S. in obtain progress. by to totaling million the to program significant collateralized credit we continue Bitcoin, our a Turning

our Before turning to the risk I thought on the the Tony, success. key call banking provide over I briefly would that foundation for metrics touch

a and way no disciplined duress loss is expense. little culture, employed in the loan always which have provision navigate key and credit in factor with a our losses ability conservative of We recent economic the to loan

Turning while sometime to we negatively net recognized ago could impacted rates, our margin interest rate profitability rate in risk, and be interest a that don’t interest environment. predict interest we falling

we past. strategy discussed rate So proactively hedging this the interest with risk the addressed we in have in early XXXX,

by and capital we XX, XX.XX% of Finally, a reflected XX.XX%. our risk-based September of sheet loan-to-deposit well-capitalized total as ratio with highly ratio XXXX remain liquid balance a at

sheet economic position especially are uncertain SEN available that risk days highly day, performance, their Our To ongoing with provides a to days pleased the a and week, minimize XXX customers XX via given our deposits we environment. our a confidence am the I strong financial and liquid balance very our ensure managing X that year. hours are conclude, with

We with for I be are exciting enviable results. While warehouse our believe the Fed’s like policy business headwind zero SEN, should mortgage in detailed our to engine a earnings. With with has a Silvergate. to provides Tony review investment over would the numerous growth, while a I will position enhance holds very continue an to to what turn opportunities to be rate contributor that, financial call be a interest excited which the more of growth we Silvergate more many, for us the couldn’t scalable strong profitable in for for and future

Tony Martino

everyone. good and Alan you, Thank morning

in As $X.XX of reported in The Slide XXXX. diluted quarter mortgage warehouse quarter million our was income digital Silvergate per up due increasing quarter diluted fee $X.X with net share, revenue growth record reported outlined last handled as per X, $X.XX from income versus currency-related this second growth, the share we from and to interest or business a quarter income, financing profitability million combined transactions. of increase with on third of $X.X level

outstanding the quarter in expense calling of all CDs end interest by our last by reduced quarter. the brokered we addition, In

included also a decreasing prior from any benefit upon the to benefited effective as development than from any in an not the or research yields absence your a current $X.XX reduction and had of we $XXX,XXX adjustment We which aggregate, impact securities quarter tax our rate, securities filing our returns, sell of the a tax share last credits. which tax in due of approximately during year-to-date and more offset gains also did items, quarter. These versus impact a

last margin per ago quarter, the quarter, income interest $XX.XX to over net securities to year second coming in earlier. the compared end largely share value $X was book up X tangible we with XX% funding XX% quarter to increased the Our the $X.X up at the discussed quarter as during at our X.XX%, up was reduced compared in points of the second income million period. to XXXX interest the quarter. gain-on-sale million in $X.X as basis due of costs, Non-interest million Net of

million, of for loan remained losses allowance Our for at points investment. basis loans XX held representing $X.X

average as at billion, X, XXXX. compared XXXX. by second quarter. deposits deposits basis of Slide the points volume totaled deposits from customers, prior transactions the in to Turning the bearing billion XX% increase quarter increased September as currency our absence driven compared levels of was representing digital earlier. an cost quarter at resulting from to to discussed basis third an in third due On $X.X during basis, XX CDs overall Alan deposit brokered quarter, end billion weighted $X.X the were X XX, in increase deposits total quarter deposits Non-interest for The from to $X.X in the the of quarter has SEN the total point linked the of our in was of the of quarter

X.XX% XXXX. to X, second for and Slide the X.XX% interest margin the compared for the net quarter to third quarter third Turning of in was quarter X.XX% our

The third on related along offset currency securities, brokered by during digital cash driven in yield of drove the equivalents reduction impact loans the deposits. and level increase quarter the partially in increase of quarter a cash CDs, down by higher the which with funds cost of to low was callable and the maintaining

quarter a gains of deposit-related for of securities the the a to quarter period, loans primary decrease XXXX was deposits. XX% compared second of million driver fees income of Slide $X.X $X.X million non-interest service the quarter compared increase third in off The $XXX,XXX the and to million, sheet or of XXXX. to on of $XXX,XXX offset XXXX partially primarily decrease to on third second compared $X.X and XXXX offset Now in this by $X $X.X increase million or on ago quarter the of an by in $X.X fees. of the XX.X% was non-interest to decline to XX.X% X, fees a was due the income increase $XXX,XXX balance Compared increase million decrease decrease of million, gain-on-sale year to in in related in a deposit-related sale in

slightly of to portfolio and of quarter down XXXX up second of $XXX Turning quarter X.XX% expense. Slide the to when employee securities administrative yield the our to Slide of quarter yield million and its to in $XX.X was expense versus in X, X.XX%. $XX.X of with third third second end $XX.X up to compared increases at benefits XXXX a $X of On million services a professional general the million balance million, million, non-interest quarter XXXX, corresponding third the other due quarter, totaled the from XX, with and $XXX from salaries for million for of the

of as assets of portfolio, represented our balance securities strong with with the equivalents, end cash $X.X Our combined the with liquidity cash keeping XX.X% our of billion. third combined of quarter in of a total when position, and balance

from of compared million compared Our at increase quarter prior XXXX. year $XXX the up the XXXX, and aggregate XX XX, at non-performing was of basis of in or total driven XX% totaled were loans, were the Overall, basis assets June provide loans, XX, XXXX. portfolio a assets portfolio loan or from On are and September that quarter up linked is $XXX,XXX warehouse million XXXX. detailed by The Slide of decrease at quality an related September $X.X $X.X million XXX% points that non-performing which total into loans we our XX, and credit loan leveraged some XXXX of assets on points XX mortgage is assets as our XX, billion, $X.X new our COVID-XX a up to update loan which breakdown third modifications. the total of had our to in strong, we

work provide the continue with circumstances. We to our current closely to very necessary under support borrowers

As and or our total $XX interest-only XX, see our with a loan X-to-X commercial the of million or value of aggregate loan full can for of on real remaining along breakdown of September XX, ratios XXXX, loans, deferrals residential our you for estate an we balance X.X% Slide modified held investment, payment payments. On loans. multifamily have loan-to-value

weighted to our estate levels, loan-to-value losses third of the and losses. in ratios allowance for the quarter, in average low X-to-X loan touched levels loans levels the is significant which from residential providing Alan default. estate protection end collateral As our At portfolio we the our relatively managed and for in earlier, was event moderate our upon portfolios multi-family XX% on to key we real of to LTV portfolio. at our commercial supporting our family maintain real XX% The

The not prior and During in estate remained to the record loan quarter multifamily recorded quality second $XXX,XXX single-family in loan the provision loan-to-value was charge-offs loans estate XXXX we investment. compares and did commercial level due to flat low-to-moderate the third quarter, quarter. losses, real by – the company’s held which and allowance largely historically strong minimal from the our of for real for credit margin and influenced a

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

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

XX.XX% ratio quarter second a the the to compared the was loan-to-deposit of as deposit prior Our the our than quarter, our growth of to at compared XX.XX% end the more offset at decrease growth loan quarter. end

have we to formal presentation, for up of I lines ask the like open would the Operator? the that the concluded any part Now to questions. operator

Operator

[Operator Instructions] the comes of Vafi Our line question Joseph first from with Canaccord.

proceed with may question. You your

Joseph Vafi

first loans new kind kind that SEN then – here, of going some here the results. was Terrific here. a ramps you exactly of there if and anything Leverage on growth that nice explain we in balance kind it’s the on pilot and constrained terms you trajectory SEN progress Really saw one of on kind that see the there this Number kind morning. think quarter somewhat or other broad-based? wondering of in on And think maybe the your SEN are exiting on means I Good that secondly, I level was there, the metrics you in now sheet and growth what share getting of demand Leverage is to large I at in good guys. Thanks. customer could accelerating that the company point? to kind have Hey, if mentioned I and you view and like so of would the growth think at product of Alan, was business, things, you and some the

Alan Lane

the you was the do at Joe, as a Alan. in kind cryptocurrency he as much color and just just combination significant concentration there questions? I the very increase see of will to that the in was as Thank Ben, numbers. words Joe. morning, mentioned prices ahead if and This the want it’s my truly in great to Good to question. I ask address go This activity along. SEN no the in activity, the Ben question. is Yes. really outset, bit your humming for going say more wants in the well opening am the remarks, I increase on just little give just just you to But Joe’s

Ben Reynolds

Thanks, Sure. Joe. Thanks, Alan.

to scale So, offering. a in have make product months be amount work strategic Anchorage that the we to we SEN in successful and out XX and place partners to in product enable next the for take the us couldn’t SEN incredible have of believe of can the both percent quarters. more say coming Today, week, days the unique pilot combined be done underwriting, we where a Bitstamp and could the to It’s excited Leverage step to of advances are over will make past the excited day, with an pilot leverage two we hard them. loan to X become. Alan SEN Leverage But prudent grow with XX how capabilities the the hours a we that as big mentioned,

we almost the XXX the As greater that institutional we for are customers of looking end of that investors efficiency. deposit believe of them and all had quarter, as capital

we are QX so any of to notice guess quarters. are will our SEN what on is than And as from Leverage customers. strong we the place in going pilot coming demand But maybe we growth like more which was of more and look to importantly, and the are we where QX, not in guidance QX you are I a is most provide out than seeing going

institutional coin in that segments, all customer catalyst, increase large digital couldn’t usage ahead. path wasn’t didn’t And exchanges, about really think a it, of excited but as – ramps, a single hit so our to have it we stable on I investors currency issuers. the relates just And as across and key then more major we Alan provided it be seen we the SEN significant and

Joseph Vafi

SEN like, good know backlog in customers. growth backlog and to is in generally follow-up institutions of perhaps at metrics maybe ago? the are starting newer Great, quality that X thanks. has here lot. there changed of that and pretty And And I and quality just quick months one a the a pipeline related kind does or what the and of Thanks higher to now digital terms versus perhaps of and currencies that X look now just volumes

Alan Lane

keep Ben, going want you that just on to on Yes. one? do

Ben Reynolds

Yes, yes.

network excited a we and So, really OTC at the the that what and Silvergate of are to and to but to it’s firms we looking market-makers a and created impressed investors, and Exchange use we the two-sided have Silvergate be network is continue caliber that exchanges Network of institutional desks. to really that of call testament coming

And established, are into those we be excited that allows to the FinTech and system traditional say, XX so the space, that let’s the come the folks of wire as players able of week the to Silvergate settle as opposed to Exchange a trade XXX to dollar side come part hours the more do. Network bigger, to looking hours Silvergate the U.S. you

feel about pipeline, the about we our and are really prospects Joe So, that excited good coming way. the

Joseph Vafi

Thanks very much guys.

Ben Reynolds

Thanks bet. the for You questions.

Operator

Eugene of with Our question Barclays. Koysman from line comes next the

with may You proceed your question.

Eugene Koysman

Good morning.

Alan Lane

Eugene. morning, Good

Eugene Koysman

these when growth, to and customer the key these fin-techs. for fin-techs? talk Are events we So, of from deposits by exchanges the down and drivers Can clearly traders, type, abnormalities and expect bit just other of going currency specifically deposits forward? at a other saw look board, some but normalize about strong we you one-time back exchanges there or your we more digital across not inflows should any being from

Alan Lane

ask a add This question color. in done Eugene. and will Alan. will is as have I Ben with I past, little then Sure, the to I start the

we for we the account So, us as us, continue to hold goal with pretty impressive engage them, they of in for so And counterparty improve SEN. to out friction primary the to ecosystem question, ecosystem. see in our us, of this coming really last the on to risk have past, all to to saying can here an response folks to that Ben open the for take this capital and trading deposits efficiency in on to discussed transact as was is the just

as look path with continues be etcetera. to XXX% continue we come that to already folks our they states and are investors, be just are exchanges, And so to into folks And the space, it are new very door, and that receiving to it the advisors folks to that, seems in institutional talking the like just as by order to their the to for referrals various OTC they be desks do SEN. blessed looking referral constant a new part enter space, other folks of looking are in are be to

it to see So, to I color I has if additional over beyond any will think turn that. he Ben

Ben Reynolds

the quarter, Yes, deposits I think growth months in the data for million during of points deposit top the million grow of X first us exciting is one $XXX by XXXX. that’s the only of on but that in $XXX not

Alan are as and we a $XXX about, about grow to customers So, seeing talking total increase year we was And this are continuing of million. products.

it that digital then there during us. firms. trading include from an strong capital I that a are makes notice tailwinds and by some probably created active And trends assets XXXX, very of price VC think that class number as to an crypto of formation also corporate treasuries appreciation significant those in Bitcoin positive environment, to asset significant have investable sense – of for adoption note new

are from of we those trends going so all benefit that on. And positive to continuing are

but the piece created remainder network capital be by XXXX our the it’s infrastructure predict As Alan that a confident efficiency. of has to effect continue use difficult critical that deposit in perspective, to the of create like that’s are a SEN greater will look this we customers year what said, from will to

Eugene Koysman

customers, would adding the the Thank share comments you was from customers, new able specifically how existing be you. influence to follow-up your as the exchanges, customers it. exchanges versus Got more because about Alan, new us just related of of to farms the how with or say on the to exchange deposits much of deposit of would with gauge if us how could of the of the volumes much wasn’t And higher, these if JPMorgan flows? much in how help – banking that? biggest been let’s they picture, also, much JPMorgan the your you have

Alan Lane

again. Alan is This Eugene. Sure,

not kind existing that you is that mean see first with customers. outsized ours relates your And we JPMorgan And currently or it question versus think anecdotally and that mentioned, what into how mover. is is space. as don’t who everybody second nobody that I when customers volume new targeting sense Silvergate. we that the that significant have this of of they an – increase I we tell not of, question, as, think multiple of impact a not I be we want really it’s on I multiple which of aware your they the made volumes have in coming from much those by coming the would really disclose exchanges, either existing as is can to exchanges didn’t partners, So, importantly, seen and banking the than to but first both And announcement, sources two are of has customers an liquidity. are other decrease

And a the ecosystem to really type and purportedly of no from customers can so same and volumes other far might any those of and want give chance volumes activity, customers, so that. seeing is we are that across when Dan type the banking, see same increases basically so on have are are what increasing volume he impact seeing we add that increase to we JPMorgan the from that color

Ben Reynolds

think right. Yes, is no, I that

Eugene Koysman

come warehouse kind sale? present? quarter? wanted like of of are turn in the side your over the you Thank are also then the the third now what down customers seeing what you. quarter held in What before to for And at that Has are the activity speed, the plans your for And levels there? for shift to sheet. mortgage elevated I other warehouse And balance just

Alan Lane

is Alan. this Sure,

of as And you to So is division, continuing warehouse years. of boom sure activity warehouse is home ever are bit of and mortgage to on increasing well rates our there XXXX, we a in aware, add lows. at customers margin. been for positioned the spring to a continue since participate growth. historic customers our am about of warehouse, earnings And, launched one few again, mortgage that the the going in so, very that interest talked strong Silvergate exited past, we a on we we as focused the on, back has now, fact have that contributor is scalable right once we have And to in of businesses. business been I great mortgage once lot a in have ours again And the who a customers market, And refi residential the we discussed other lines of have we in over the trying that the, the operation have as, a really have warehouse to to that is our digital last deposit some specifically, also the currency years, match. of of to things of be growth the it’s the a and duration scalable liability also that experiencing are the the complement initiative. liability business, of very mortgage asset is And, great duration potential the the we in that great duration that

balance balance see deposits sheet digital sheet on are to to month As to we currency that the and and deposits that month, from etcetera. our deposits institutional fluctuations investors, day volatile, we on our assume with week, going from to exchanges on those potentially are, those are a deposit side the week from day, deposits, that are

want fund not is weeks. average two be in we less deposits a portion investing long of so asset. term appropriate very duration a where us to is those our But the those of it use than loans operation, to those would mortgage And deposits for warehouse to

not has changed. so And that

are this very through the weeks. then loans funded mortgage ultimate loan that right are of investor volumes, continuing companies increases to being and sold seen ours are in those and have pandemic, clients the are under to two consistently in they seeing We that

is with rate so of and liquidity, business. we are it And very exposures we are very there, have the and comfortable comfortable asset the interest that class we scalable line with that a

Eugene Koysman

Thank you. That is very helpful.

Operator

next the from Our comes with KBW. Michael Instructions] question of Perito line [Operator

question. may with proceed You your

Michael Perito

good Hey, morning,

Alan Lane

Mike. Hey,

Michael Perito

hit just to for I few Thanks on. questions. a want things my I taking had more

on thought you I there? follow-up then you Leverage, us how to past, class remind quick around process regulatory are much aren’t is comment And changed apologize taking am get remind on also or discussed balance a to sheet long something can balances and your willing go But take guys exposure to us just you I but can updated? Just might has to if in the the a the of position kind know asset this you today in loans? treatment of if of these I the secondly, that where the we SEN capital how kind on

Alan Lane

you capital? Tony, the to take want regulatory Sure. on do question

Tony Martino

Yes.

So just XXX% capital they are perspective, risk-weighted. from a regulatory

Alan Lane

Yes. give walk to would And in. a thought I Tony chance I

on Leverage, crisis, spring opened that limit, in to XXXX business are that business we we very last SEN said, line let’s we at height crisis, we earlier during okay, to are then will mortgage the much the our on you what when of way if look of million assets. which in it’s we that way was the and devote a bank, well, XX% fact number So a started, are approaching mortgage I when sheet small smaller of about balance we was then and back commenting the way the financial and the we $XXX grown was And now. warehouse started financial warehouse, of the the

I X still days is a hours liquid be best and it’s believe that the find the not very done, ratio and of the because importantly, days walk number fact run. customers So, comfortable year capability in position liquidate have it’s aware monitor with I our as – asset on is collateral crawl opportunity is that have trades that And weekends. and this we margin collateral made week, combination lending also risks. but said like coverage And and some a with that margin we the is provide bank am down a could then of Silvergate and one, only to to in the past different the day, that and a make of call that in pay where nights a if not coverage the I a also XXX the collateral only making sure loan. calls the opportunity and to all ultimately has collateral we have ever falling, we the XX/X, candidly, a we are XX to typically then we of the ourselves the we ratio

a you way continue prudent the a many percentage estate day, how our capital, And our it’s get maybe being have as will fraction service the we and regulatory to a something borrower, probably a an relative additional that well, consistent real high is framework, are that with percentage but we said, is think of estate the much deemed your on in analysts of expect with can as for what more providers, and we bank we with about portfolio? out Bitcoin XXX% at instance. how borrowers, be you providers have commercial is one limit will going also risk of size real as at obviously, regulator of are concentration looking standpoint as each on with the a this And on a partnering overall to than XXX%. layered the remember, adding and And in limits we then the said, So, risk individual adding many one that are capital. asset we as capital. as that’s looking with their level us size back risk very to of them? And roll XXX% a suggesting approach. from to layered of it are when very risk than commercial you are line about not at the we the is very It’s manner different comfortable then now, of Leverage, in with in to I be capital of going treatment holding is classes of if so risks be so SEN And are we common to see service that with this start we there the less limitation line am think risk. outset a of we something the And a

first can XXX I you the since wanted million, lot efficient want. that’s institutional send Ben let’s $XXX touched number on that are that three to the pilot, throw would let’s and the And a a just I one we would launched we be less operated quarters by taking see, just than think were on well, is, probably you them that of say, have institutional leveraged some prudent got Well, under clients any that can of way we rollout every right investor say approach. you a assume single there, million we what that of the in earlier kind fact not have investor, $X.X per where much loans, them do with more to that.

to say that our turns to not of and last is balances characteristics demand able play, layoff other of But do find category, was that of of very other because will of time long we we we over see believe definitely that bit are line the we was will loan is side. a I the I significant on will But winded can to fee ago. yield a holding going extent, this actually that be regarding we the lenders. certainly the And answer thing as back start that thing be and a of what possible we balance balance yield this that complimentary so a last we on here. I the that the business to sheet, we deposit attractive this couple our grow is income asset again, mindful opportunity a be I the to portions can those I We comment making And And for risks comfortable into to I is it discussing are to balance class apologize will scalable a a minutes this only also a very exceeds scalability. seeing come participants sheet is sheet. this believe the but say little

that’s So, about are the rollout. way we the thinking

Michael Perito

you really I upon your to want the prior you my and you said fair to helpful. of be questions going on, question and it – answer. is Thank long kind That and that was guys say just I I that you know so to sense. everything probably grow more move not basically, And before to based the appreciate hearing don’t But you. are And though, the a stretch mean, makes already I measured one you of have. gates relative to initially, here. be correct? this to I demand out I But limiting growth that if the are to say, day guys that here going than will guess to can prior correctly remarks you the it’s

Alan Lane

absolutely. Yes, belief. that’s Yes, our

Michael Perito

if just guess results year-to-date have Yes, then further look that scalability, third but you your guys And a as quarter, the do improving were metric which almost here, talked or things third at to your it performance? see measure of of two metric? back, then I you the you sense on of if as obviously do very per mindful go you quarter, I curious if is but makes at XQ that FTE okay. just about in something is strong, kind continued just that One, that’s are I up I measure look little back internally you moving And quickly. which other want you look kind momentum differently things and and of to but revenue XX%, on, kind

Alan Lane

that question, Yes, that’s one? Mike. want take you Tony, a do to great

Tony Martino

question, the have definitely businesses businesses. that as the No, the we we said, But focus for the Thanks scalable of sure. conscious metric. are Mike. in though, we on past, are Yes,

as take got been volumes of, and teams infrastructure. So with warehouse on existing we business, case the the able both leading SEN well to have as in big the indicators, our mortgage incremental have the, we

and that volumes the increased increase why that continue can So we comfortable that existing with is infrastructure. the we some are to has metric

to In but a FTE I be would terms products. of builds, products, build related with more the necessarily new existing of not that mean, required development

Michael Perito

with currency Ben, longer And obviously, for or And And guess but maybe a seemed the I then strong it to broadly continued just on just while fees, are competition speaking. fee lastly pickup income here. seems of I few on financial has brokerage quite the industry, any crypto the at broader is look but have impact for not But customer a of the pressures of has last if the kind is of like or growth runway mean, the your it planning directly notably, Alan a all, of? that, guys there any side, the traditional the I question, you the maybe based is, bank now, been negative is that really your of at quarters fee, term some set in the and of question digital services remarks. while the scope on growing, whether there my kind in internal growth, around mean, lot be or emerge, could and that term kind there pressures we longer I envision to should mindful thoughts space

Alan Lane

this Mike, Sure, is Alan.

about that that charge looking I under the We fact mentioned, are that pressure, as the and is one banking is will landscape are across that the a don’t remind certainly decision. aware you And everybody other things fees on for we SEN. call currently strategic

provide a customers possibility to we when XX/X we time, quite over able to we from it’s banking XX that that focused the that and on is value strongly items of certainly is you their access are pressure being traditional do at wires, customers, platforms what it fee so at liquidity time, the we right on a believe significant in there And truly the are services provide see hours week. our utility income kind that, offer, while the the day, X growth, looking this those our ACH fee frankly right with very significant right and a the days have line

they market. – then with and We that monitoring get believe so we and fees competitive fence understate ACH the certainly And once And can additional they are on are board the over do it, want I with order platform. no but on to the to our fee, money the transact competitive don’t wire XX/X the in charge. the

relatively the in currency offering, fact exchange new second then, So past also a year. its we in foreign the it’s that the about have is still offering talked

don’t of the And that fee income linear. see generally now. fee potential right that income over predicting definitely of remarks we we deposit question, – to we income going on levels, so the that high both we out, track broader opening said growth there. as of do cryptocurrency quarter it’s build that and shared activities, did growth that’s but appreciate likely the because grow with a Having was things the as not we activity I levels in in to I up markets. are into touched quarter will my I our is third activity have – as going have true we am not the fact believe that, that, but is to the a be the see general that the fall And to underlying is one that not pretty I fee kind continue going our those off, in time, in past lot seen

talking if or instance, just the we that it’s quarter kind of look not but made had little see that go trajectory am you strongly predicting were for I in the fact just overall in quarter. is dipped last year’s about income little up of into it comfort fourth right. just we take back we a the and deposit the just great bit fee third even are Again, it’s So, really growth, graphically, going to that but a to and Tony easy through, a bit that in whether presentation then was what in spike we the here,

Michael Perito

Great. taking Thank appreciate you guys I for it. my questions.

Alan Lane

You bet. Thanks Mike.

Operator

Michael of from Grosso Our with Point. line next Compass the question comes

You question. your with may proceed

Michael Grosso

broad the on morning these you like? to two from October far SEN growth my from the ask, that then been going through comment I on the improvement can the – of I July could kudos strong are in quarter, have I some see. and questions thus if follow digital what like and I quarter? seeing deposit would sequential or growth, the helpful on and But that sources did and announcements And fin-techs can here ramp fairly there just thanks growth look for of be that anything currency post you large well? if September taking Was product that am Good questions, quarter, can as through of industry on cadence volume fairly suit in

Alan Lane

volatility, their a see quarter. example, early Sure, And in opportunities and of second. and liquidity want on uncommon come some before I it depending of over anything then volatility see week going trading again, in unusual. on questions. us capital back. are on say for the weekend make to not the to turn to a a the kind will that as may they ratable may didn’t down is of customers enough because lot be am Ben over to what But week sure are the the was what just surge we for are that a that wanting seeking they we they as increase I our just the or in – and over customers etcetera. the to and in Mike. deposits the weekend draw month they are those deposits – Thanks a then transacting have again, seeing Friday not to may see There week the SEN movement, I an general, month. And efficiency, then throughout it’s it’s to weekend And do, they

then liquidity manage the that such a throughout again, the monthly daily, that we the go one a there profile definitely And so ongoing, continue this don’t to in there see, And of But to weekly, is below. is we of that volatility spikes prudent reasons which fashion. baseline we continue month. is we see kind

will comment questions. ask of to any kind Ben more on any, responses if that direct So he has with your I volatility,

Ben Reynolds

coming the is greater think, perch, are out network. macro capital exchange about are products looking unique the, of kind Thanks, institutional looking to I sides, a Silvergate that, Alan. response what a one those of the are on the on and for the And, other that in side, exchange environment because the they firms, benefits Silvergate folks new of liquidity things investor having very and question Yes, greater from fact for efficiency. seeing we and in

ahead out, of those And aware of announcements oftentimes, so just Silvergate of time. say is come these kind when things, broader let’s

Silvergate on us. demands it What going about opportunity sustainable a our is the And an how unique is gives think us way solve in creates what advantage that are to so, important of can customers, a problems because in that marketplace. and for those competitive the

tide that corporate we an Bitcoin a folks. that excited point able players some lifts are a work with at Silvergate products really just the in we space. that excited be do our so, the are on boats, where fin-tech and think to treasuries we new And And are about base into investing have rising and is and customer to as coming class asset we other

Michael Grosso

commented products, quarter helpful. emerging given announcements incremental build to know like as demand. Alan, I plans Is those that and as pilots new any certainly organically think come to is services far Great, potential of of On significant product you on that very lines, know custody on seems I point and be some that ability choose new to or some of that pursue, along that that? or I callout we place these should or post have previously there these provide from fin-techs guess would that you that have you something, the is how about a should be something would to that

Alan Lane

we would are to custody us you likely a Mike, Yes, a solution, see great say I internally/organically. build question. are that not that’s –

right, not Security very providers, custodians using Modules. to so, are we technology, when, the choose of we best somewhere, the, be when Leverage like a gaps continue to you of some in going who custody dollars services need will SEN the And, air potential which their with more have the clearly, first some some the, price looking via are with could help to that end the in chosen robust and foremost, space, the, helping literally of the also, it’s, some had from with and solutions, without very provide order to, custody doing But will, the point, so HSM, today. types partnerships too, growing likely have the announce of the in is a partner to good your of we monitoring We a to and us already bunker up already is institutional with more looking space. everything it’s management, of we investor the the not look community at table we anything hundreds and, we the partners solution develop liquidation being spent Hardware to space, secure of offering for different have custody but if existing with not and this as management them bunker, offering the get millions stakes only we liquidate, books, to don’t and

we while so have And yet, have not anything we don’t to announce.

launched when look definitely, We have us is but are, because continuing money, not to be say or to for yet that make And point it. had we not could seen changing. anything yet I way a it we as at have the not what would reason to this is, certainly

Michael Grosso

Thank Great I it. appreciate you.

Alan Lane

You your questions. bet. for Thanks

Operator

with Ryan of Our next question from Research. comes Todd one Block

may You question. proceed with your

Ryan Todd

Good my morning thanks question. taking and for

a thinking So this I was we angles. can have from now few

PayPal services providing just say will digital since to Bitcoin But weeks, past asset holding think financial last I second from behind interpretive the that bit. coins, it stable your come on some companies, and I to payment on moment, So whether in banks out this reframe and corporate that’s SEC’s week. assets the just few know obviously, balances letter treasury a try its having reserve I industry it’s statement is

not addressable it’s some se, to over total market cycle that new monetize like on announcements, insight SEN backlog But opens wondering how am And I about the this in providing for these kind what looks into charging some for pie wondering up of SEN. SEN I this then for sales guidance mean, customers maybe rationale entrance customers? volumes the strategic from of of mentioned you way are potentially also Thanks. time? a am thinking I prospective of whether about You the per talked growing

Alan Lane

Yes, Ryan, questions. this is Alan. the for Thanks

sales over the think, talk I about to Ben little a turn will it cycle. I to bit

Ben Reynolds

these thanks looks of the kind Yes, of their for that’s investor, first we our institutional started and of had sales bit and The so, foremost, true than due coin potential create XXXX – diligence And a cycle currency sales doing or Silvergate for Yes, dating to digital and still and stable back a exchange to today. new different getting a an the one customers cycle process compliance issuer. programs. banking, a when Alan. customers understanding quite

how the of And they sales of doing so, cycle is a the timing on-boarding it. of lot really how depends that been mature And long, is same. kind and client largely how the long on have

that things over network to coins week, our the dollar much receive, a is, emerging scalable very in traditional we API, can is And this the very allows clients attribute of wire continue and is it really very, too and those sort quickly way X haven’t SEN burn fashion we ACH, payments, talked in U.S. a to between of our dollar very you of One blockchain the where and by the be XX mint it – that payments U.S. about a and stable days liquidity of on because the about payments, they of or are another SEN. call to that think and whether other we clients But a mentioned, it. space, things about addition if hours be Silvergate you to then allows excited it also saying does Ryan. what that those their to day, And coin programmatically. them stable source

capabilities there, the we addition the another we to mentioned. some payments the of can excited support that to continue And you our that for to are we other API needs that’s and so our are ways SEN so about. folks platform develop in that and that can that continue we Leverage infrastructure support And area

Ryan Todd

a been Bitcoin? if am has this And there intention just then collateral besides And expand assets with specifically, helpful. other any exchanges. a that that’s been yet don’t wondering, to to follow-up just has I then or as plans margin Leverage mentioned quick expand I intention Awesome, SEN other know also on

Alan Lane

Alan, I take will Yes, this those. is

market? a of some we – may whether insured, current financial those regulated we How and assets, book the federally at not by of those no deepest they not we will liquidity opportunity Bitcoin. the far be they assets, look the for of assets? to got have trade, plenty deepest order other as What’s largest do the the which some institution, we we focus the pools. there’s at beyond that it’s or is plans their, look the – securities, of or We Bitcoin, of different expand to liquidity Being on us how is believe may deep characteristics

are assets additional conversations over something to that’s add very well providers, that, expand that so going so make sure that and is this else, we time. But not far we won’t adding say we as other service with partnering of we pilot, we have they pilot in want make worked with our are that’s And Bitcoin to us with others. are then we of working partners, But very look as as them. beyond to sure before, well And on very we rewarded out with to both that two for move these. with the well

looking we deepen have And the the so we existing, while partnerships for to next that are partner. really will that look are we

have partners, any anything but say announce won’t today. we don’t not to have that’s we other So, to

Ryan Todd

it. Awesome. Got

Congrats Okay, the on thanks. quarter.

Alan Lane

Thanks, Ryan.

Operator

we over have of this to and session. Ladies Alan call for and turn would end closing to gentlemen, the question back answer today’s like reached remarks. I

Alan Lane

Thank you, Alright. Laura.

third opportunities pleased our such the we as results combined our with develop grow demonstrate as liquidity as and to We SEN numerous positioning the We believe are loan the runway further the boundless clearly and with that Leverage. that quarter quality credit they capital, SEN is to for very grow given we strong the portfolio, have SEN. continue of solid Silvergate’s ample products

a for Silvergate. in truly strength the are holds of with and position what are excited future We

our for time everyone employees safe. and want and us ongoing And commitment. everybody here hard is you a work Thank pandemic, you. hope Thank to I continuing do great with the hope thank Given your again today have once you their again for day. I

Operator

Thank you concludes for today’s joining today. This conference. us

may this You at time. lines your disconnect

Silvergate Capital (SICLQ) 26 Oct 202020 Q3 Earnings call transcript