SI - Earnings call transcript Q1 2021 | Silvergate Capital Corp

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Operator

Good day and welcome to the Silvergate Capital Corporation First Quarter 2021 Earnings Conference Call. All participants will be in a listen-only mode. [Operator Instructions] Please note that this event is being recorded. I would now like to turn the conference over to Lauren Scott, at Investor – Silvergate Investor Relations. Please go ahead.

Lauren Scott

good and operator you, morning everyone. Thank your quarter XXXX appreciate participation in first Corporation Capital Silvergate earnings the We call. Officer; our With me Tony Financial Officer; our Chief Ben here today are Martino, Alan our Strategy Officer. Chief Lane, Executive and Reynolds, Chief

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

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

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

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

Alan. turn over to like the would to I Now call

Alan Lane

pace started In to currency the morning powered strong and transactions from by in on record Exchange Silvergate customers Thank $X.X with everyone. quarter at more a on to digital growing SEN. volumes than we by the activity the from grow billion XXXX Lauren SEN very growth you, revenue Network solutions continued expanded demand XX% nearly for the digital first currency up sequential XXX our customers basis. XXX,XXX on good on customers Transaction and a number driven records added or during to note, new platform representing the quarter. SEN $XXX XX% more increased to of quarter than X,XXX SEN as million. The a sequential last We

benefit collateralized SEN our potential Importantly, pipeline digital SEN. from received strong Leverage as called fund a currency of effects by Silvergate. with financing Last network SEN lending which remains loans. to product uses we through institutional And agreement dollar our loan the customers the introduced we new entering robust the investors created Silvergate to continue the year, into by U.S.

approved $XXX end, the year. had have We of market demand lines deal great million a seen quarter million and $XX the of at we credit versus totaling as of end of

a We early new stages borrower's in segregated SEN still Digital be Fidelity account. announced the that we Custody at will custodians Assets and in the Leverage as Bitcoin end are March, and two the of holding Coinbase of collateral scaling

partnerships as choice more We clients these greater are to a come the to we and about and very access excited investor with our provide additional partnerships capital. diverse institutional create of custodians network to

offering in Silvergate’s when The products the needed growth further remain dollars equity for through with us average compared a including in led to Tony strategic billion to first forefronts currencies, a or invest I to ATM seven capital Leverage billion require the deposit an digital $X.X further and to about I new As allows more development fourth SEN a Silvergate program will influx quarter financial hours of our which expansion to early XXXX. day and XX stay real of who by launch growth, support institutional our of continued raise ability an of from only on billion the deposits March. participants to ATM our at-the-market in to also in the deposits currency investors week. after adopt customers days Average grew U.S. from significant quarter in coupled $X.X efficiently future, in Tony? currency industry's few we have of the time of moments digital discuss walks $X.X digital seen excited incredibly move the These plans you the results. and evolution. increases

Tony Martino

you, Alan everyone. and Thank good morning

on up or income first Silvergate net diluted net reported per seen share of from first quarter $X.X or or million share per both X of revenue income. the was for $X.XX per fourth growth net an up Slide the digital fee income diluted increase XXXX primarily in of Increase in currency driven As quarter share million, $X.XX diluted with of $XX.X from and XXXX. $X.XX quarter income by in of related $X.X comparisons million

to expense insurance for strategic FDIC the absolute sheet. due non-interest growth caused both and higher also and by of expense growth of rate higher investments balance We our increased the saw level

interest benefit for an $X.XX $X.X have the share up from benefit came Net in income per a last more income in which period last the the which was million or compared compared we tax of million year. moment discuss was to X.XX%. option XX% up stock and at quarter. X% margin, to addition, in $X.X interest I'll in by quarter Net In exercises detail driven quarter same

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

December driven customers the transactions to with institutional deposits digital client elevated and currency other Turning digital by assets were from exchanges, increase record billion an FinTech the related evidenced XXXX, quarter. XX, billion activity deposits at in X, investors SEN XXXX, increase and significant $X Slide by a at $X.X volume March from XX, during

currency carry take in As as customers focus our the on typically balances the XX/X $X.X a from industry totaled approximately deposits strategy the the availability of of gathering customers can advantage over as representing XX% billion we weekend digital of fluctuate the reminder, this at to deposits deposits digital currency bearing our Non-interest continue total deposit customers. SEN. higher quarter, our end to of

average cost a of is result, our zero. As for the essentially quarter deposits weighted

to of compared the X, Slide to quarter X.XX% fourth year. of X.XX% the for last quarter quarter for first was X.XX% in margin interest the net and Turning XXXX first

While we cash just deposit loans grew I a in the by in significant mix asset higher decline balances as the the quarter, NIM growth driven mentioned. was our result of in

interest In rate reflecting environment. were new lower rates purchased securities current quarter during impacted interest addition, the securities on the yields by

of of the income income by fee securities the million first customers. Turning was in by XXX% offset lower as sales to from or the next customers. from extinguishment prior increased fees quarter XXXX and first sequentially currency partly year-over-year, on XXXX up volume $X.X see million digital increase customers higher an quarter turned increase transaction of XX% XX% and to slide, of income non-interest we mortgage digital currency gains currency the loans. Non-interest from income by of from income quarter the and of digital XX% our for $X.X $X.X in first fee In sale million an up turned debt warehouse was fee increased digital quarter, continue X, an million from or Slide increase $X.X currency

growth. first XXXX deposit comparisons as million expense for The the compared strategic driven from both non-interest and to to to to our $X.X the of investments as higher million by Slide increase $X related quarter million $XX.X growth quarter significant quarter X, Federal up the in continued drive was Insurance Turning initiatives XXXX. expense of our is up well fourth Deposit

quarter Turning $XXX X, corresponding the fourth the of up balance X.XX%. yield to securities Slide our $XXX of million a for portfolio a with from yield Year-over-year $X.X totaled quarter increased XXXX at $XXX end million first billion securities with of the million. of X.XX% a of

from total estate basis XX, family to our loans. XX, at value Leverage a in fourth million portfolio. our one-to-four estate or On to residential ratios decrease compared XXXX basis remains up to March the loan were points quality $X.X loans nearly mortgage XXXX. the or Slide loan totaling total SEN the multi-family credit with continue our the Loan X to our balances. along compared $XX.X $XXX.X of commercial million for first weighted portfolio XX, assets of residential balances the quarter relative quarter Our assets XX% at at $X.X family one-to-four see in elevated benefit of million breakdown total XXXX. as the quarter, and relative was from XX, real At LTV growth loans XXXX, and strong multi-family historically December to of XX% X.X% to million Overall, as March warehouse a can real X our or first well you Non-performing commercial points strong. end portfolio assets and in XX% up average and

portfolios Slide XX past, is losses. I we more levels As the at update and loan which modifications. on the key our supporting to of amount an said our the in of COVID-XX allowance maintain for loan view portfolio detailed provides

work case-by-case a demonstrated provided borrowers a on the one-to-four payment basis, to we've and continue borrowers On based our closely provide We environment. to support current with need. family in commercial deferral

loans As of investment. March XX, held or million of $XX for our X.X% totaling total XXXX, modifications

the per ratios an at capital of of of $XXX.X company two in million net discounts equity XXXX. shares million into underwritten underwriting touch the January, proceeds Slide offering we diving we with on public share expenses. wanted price Before and to offerings completed on I XX, In $XX completed our after X.X to offering a

at then million. at-the-market resulted the As The $XXX.X $XXX proceeds million ATM shares XX, launched March. March average $XXX.XX program of mentioned, of million of nearly the under X.X Alan price offering On an previously a in we net at we sold beginning program. transaction

Now, turning to ratios. capital our

with X and the leverage be of well capitalized well the X.X% minimum Tier ratio to the at ratio the under at Federal level, Banking ratio X% bank X.XX% bank was Regulations. considered excess company in level Our

of compared ratio increased the significantly capital last [XX.XX%] risk-based deposits. total increase to Our due in quarter to

growth XX.XX% I With back like loan-to-deposit end of it loan significant was Our the quarter. at the the during closing quarter was to increase as than more offset for Alan deposits hand that, by would to in ratio remarks.

Alan Lane

industry the currency which to exciting digital to growing solutions provide is Silvergate an day, innovative rapidly, to Every our opportunity Tony. for continue is Thanks, customers.

stable positioned see SEN offerings. for from for growth lending payments you on avenues coin well provide XX, create Silvergate critical remains the the by effects to multiple funding. to As infrastructure created can Slide to network

addition customers. In management exchange currency deposit cash and solutions our digital for foreign to currency

products network mentioned of enhanced expand providing and partners we our a As I capital additional choices with customers creating custody continue our asset SEN to earlier, Leverage digital while flexibility.

continuously that coming customers I And industry. the our working And tremendous remain additional updates expand are believe are provide the quarters. in our path to asking excited opportunity our about product forward of our Operator? open stages digital like for in the incredibly offerings forward. to I for. growth sharing to to currency strategic we a are early ask I questions. look operator the solutions the to I with that, line on We in any initiatives would

Operator

[Operator Instructions] go Please will ahead. time, pause And this to Vafi Joseph And at the assemble our Canaccord. roster. come first from question with today momentarily we'll

Joseph Vafi

bit others may Great there marketplace, Maybe of perhaps little you. And be mentioned could of to partners just was larger on to there kind model in you is if possibility Hey, maybe solutions part a guys, well fulfill be may a stay competitive what nice and some the from here think good with morning. relationships I the and start quite how be to And cost being advantage able know the partners your partner guidelines? of able kind then quick expand marketplace. you'll of other why could here you capital your lending the wondering large your follow kind Fidelity to I after regulatory some within we to that. first in can kind demand that with I and relative have of And opportunity low then you up think here. bank Coinbase. be relative more of I these chose maybe on your see results to Alan, these

Alan Lane

for the morning. good Thanks Joe Sure. and question,

partnerships with Digital the So, Custody Assets. are and Fidelity very yes, Coinbase we about excited

is then the we're what trying and that of network As bit our custodians I've have do to partnering so digital because essentially you risks a talked as our a biggest here about the Silvergate assets that digital asset moving and customers, is a you're bearer Bitcoin customers in know fact respective recently, with are this that little partnering choice the is of really digital one asset. when more create with

this another is if you've and of from to customers our got for so more custodian, choice. trust a And to to somewhere then network in your vision that our and Bitcoin so don't you really that custody custodian move create one you we it want will offer custodians

they've already as partner order pipeline, and first they've have chosen in mentioned to or or as mentioned that Bitstamp to custodian our their earlier, customers chosen I partners, their move as others against you it. bet preferred we So one not Anchorage borrow if our Fidelity Custody of Coinbase or if -- in the Bitcoin will

So these would number in really again, the say, the to that's Ben, in this to that question. to opportunity are, of the so which if actual quickly. target, capital, ability on right raise move actually growth next it's blocks, let has he are ramp -- ahead -- on little more that building before the to vision. to outstandings thanks me us terms he anything the the bit add I a target, And wants can ask a But gives we grow we outstandings to foundational the And up. of little we're

Ben Reynolds

Yes, thanks. morning Thanks, Joe. and Alan good

have it, Fidelity March. for those Coinbase we announced during partnerships So that may missed with these and

in so which first excited came additional quarter those And part those XX the related to commitments of Silvergate the relationships the extremely quarter. it of post the allow that as product, are see really possession and ability to late But this kind liquidate customers window, ensuring as we be. we and about of the additional a didn't in within while [indiscernible] our will of Bitcoin need collateral has hour

are of Silvergate. Bitcoin Fidelity looking of benefit customers both that leverage, relationships may and group the diverse to be it a of So long and customers existing Silvergate for not these is Coinbase existing have

So us another customer base. it to our gives avenue grow

your of framing part think the around I question, was Joe opportunity.

way by not significant Bitcoin. total willing time, any we approximately Bitcoin are grew one to that of that dollar billion new funding so of the U.S. during that alone. same value the we're market quarter by the at collateralized that And And look at first provide aware is competitors $XXX that's

and Bitcoin So leverage asset significantly, the the constant. increased funding values for while the of U.S. for supply of of the remain demand dollars leverage

excited we existing opportunity that still our them of looking than is XXX really efficient believe of on we're that thing topic mentioned, quarter say going almost I'll all more that, capital. had Alan about customers And institutional utilizing as were The less we for are as So the XX% last forward. the this product. end, of investor

Operator

Perito KBW. will And with come next our question from Michael ahead. Please go

Michael Perito

Thanks guys. questions. morning, good taking Hey, my for

Alan Lane

morning Mike. Good

Michael Perito

cash, the that the balance sheet. only am mean, on conservative guys like over the I obviously I quarter. the currency you on raise know capital start imagine your when doesn't first in, the I the you average levering going same something they and dollars time, the as longer digital of but haven't for SEN at guys deposits in you come deposits I are X% these basis on annualized I of if to would two-thirds you think seeing an moved earning the mean, I case be assets seem in term.

elevated mean, inflated seem deposit like I overly here. doesn't base the is or it So

curious what any on can guys of timing, are the I'm you us update could you up there afterwards. of ask expect just the position follow if we in is bank deployed? my I liquidity that and give about as And and how stop I'll thinking guess and terms So

Alan Lane

then our and that growth I answering really comment these first, time. portfolio balance a mean, But talked a I we area at little we're is well. potential take other And spreading there right, deposit this ecosystem. duration which Sure, to we lines level SEN whom the on at It in to be been because diverse would we have past you existing the redeploy touch of grow growing pleased over market order we've then point. that the currency difficult and Leverage area warehouse a to loan me absolutely which with are to group at and warehouse on complement loan securities sheet, portfolio. few I'll mortgage area, see the some area customers to we of the the good hope short of side. over -- around the sure looking the in very a refi the we're last front the question partners very the that, make the would we've primary portion adding the in previous in deposits whims talked on we're as would grow to back Tony as to high with risk of growth custody where in asset on and looking them quarters is are at say is to want just mortgage about Mike, digital bit kind But customers about the will we into digital do portfolio And we really more of really commitment then cryptocurrency if absolutely it's let the ask you're the our

growth are I the can the portfolio. that continue you think on Leverage comment to And would to expect SEN warehouse. areas Tony ask those me mortgage securities and let be two So

Tony Martino

thanks, Alan. Mike. morning, Good Sure,

So alluded note portfolio yields. flexibility of as you high AAA. AA our of or and may and important have short-term more investment you'll quality factors our rated And was portfolio are XX% us for

more our invested to we've quarter, purchases of at those has -- $X.X that it about two-thirds of the the of And significantly about So were weighted end portfolio rates. was the increased over adjustable towards billion, portfolio.

of continues it's Alan nice to securities the on high a the Leverage said I given though, also diversification, side, the on as be the SEN indication focus we've lending kind and alluded with a on you So balanced yield deposits. as to us an gives low of

good we capacity liquidity have lot do that, want maintain said a borrowing we Having liquidity available. so a to of And secondary profile.

portfolio. the opportunity to have investment increase do we So

Michael Perito

it's just a on have and right an reinvested lot like of X.X, conservatism a And guess mean, the sounds -- growth, continued process. investment leaving I few obviously, that it's -- like I dollars said line you the can reason north harping hit period ongoing and to there's the guess I And us is think table for because last between I I'm and that as so on -- has transpired. that of fine a be that weeks cetera. mean, the et process end mean, that for there's is it book I fair

So that towards looks of has end the end continued has of it process if first balance the just as period the based it of like kind curious quarter on sheet.

Tony Martino

Yes, it’s right Mike.

Alan Lane

stepping XX I'm jump we get sorry, will are sheet. then that, adjustable rate rise bit prudent of me to out and opportunity SEN if balance want years. here, and we we haven't and and investment between are rate that some sure But second, of and on interest and the seen getting want here so term and we're prudent longer the exposure walking grow that for money the because some not career industry mindful balancing warehouse, that I've to And stressed in and back for the a of the banking out And yield in possible Tony, are with the a absolutely we conservatism overall and table. portfolio some for to mortgage they're securities for in rates again, said risk this when line we're mean Leverage right, interest going my the with be as feel Mike, in let been little leave to good but comfortable that environment of start deposits results between stable, industry wanting the in to rate yield. in continue. in always we're that we you've you're make the we we doesn't are cowering a first Having this quarter for on lowest

Michael Perito

well, Very taken helpful. Thank you. as And at endpoint Alan.

So well. Tony as appreciate and the comments

one customers. can really been strong out little added what drivers the it's as on lot I more strong a few curious Can as probably was quarter. last some seems that pipeline give of of Obviously, little the a Just break you fee years the bit one growth a just color for you in maybe me. in you last was digital bigger increase. more if bit related the more currency the customers, for guys of

there additive of kind guys is are We any that progresses that pickup potentially here, pickup from you. that if additional you or as be payment curious the color would the any great? doing are there's, could expected be to year stablecoin stuff Thank

Alan Lane

an growth and that in is on to attributed the fee not this Unfortunately, is income but in to significantly first a there activity I coming lot growth exciting opportunity in don't say pointing hard And in the historically strong in the we've some for currency that for to time, mentioned, quarter you working on while can the going something then something wires management the lot out you excuse position there's biggest in fee exchange But clock seen anything addition because to we and that that areas that with really Thanks grow that at see growth in that's of it that and team that haven't stablecoin been anticipate we've are growth income that -- great foreign in of around you transactions, opportunity also fee see thanks. will a -- share we've stablecoin so opportunities. to has it's area. had pretty And future. area on fees. me, the that explosive charge SEN this when the SEN and cash our here. been do a as in is can income. SEN yet, has -- Yes, we as And that our the we that we're to imagine, see working in coming pass that growth growth ACH the we movements

Michael Perito

in. my Great. Appreciate Thank else let questions. someone taking guys jump for it. I'll you

Alan Lane

Thanks, Mike.

Operator

Hallum. ahead. Craig And our Sutton from go next question will Please with George come

George Sutton

Thank you.

think as Are this how at apologies run there? rate from you So of look network from -- there? out plus billion growth do with perspective you building run XXX size, the a we look what I'm Slide curious I'm QX QX it does rate then for maybe and question look to this as who you look curious like and equipped months? and for different sort of for you the And opportunities lists and but growth. anybody in at that XX best this have slide doesn't is the six I for up, Ben, your

Alan Lane

Yes, morning. George, good

Before X in for to in do second explosive I be in fourth Ben there. of transfers say your question, the want which that your which of might the ask Slide first in is to on just first comment on quarter. part growth what the so part question billion might referring -- I be quarter to the -- was SEN the first $XXX you

ramp expect continue. We that to

customers even we're of as the run we've journey is during We XXXX saying the so. quarter that the And because added it's -- confidence first more been we've this se, in that as the part rate with per of And in or looking customers it So stop but in in our quarter. the last And year of any we on been stronger business. since quarter. added a is strong then pipeline added at as doing or with than first other reason more candidly growth. that we not another the have

it just they And API to can rate code the takes it boarded participate that there to so those growth for turn so so into a previous a customers continuing. get in on are you're that Slide XX. that while SEN And, just over see coming on And folks for this me the to to these conversations as now we've more to let going space. had, Ben aware we the question lot are that from and

Ben Reynolds

adding creating coming of mentioned, focused today. So to increases piece the associated launching launch in really quarters. products in by expenses part the any increase don't SEN the dollars in for our to as instead, us, the pin them sustainable products that points. We're a exist costs of with new to for in strategy. already growth for caused upon planning key that won't CapEx that see customers But platform, for solutions in was we you piece products we're competitive new existing solutions But millions us is a we've see quarter our customers problems by as that Tony solve new solve means that of during value which of that had We products create is a that which something on advantage spending we'll build have our announce new and build critical marketplace. to R&D their

to of as a important which that's announced to offering, it's see our foundational really last quarter, that we think I we custody initiatives. our infrastructure piece stablecoin note required and scale lending

of So today, payments. capabilities of each Silvergate with burn the issuers provides nature based SEN. U.S. reminder, a just stablecoin and as mitten That's over the piece commerce the regulated XX/X four a critical of for infrastructure

the and SEN the transform in front in look about remain and the payments those we'll that. of play us quarters to excited can capabilities in incredible coming So to the expand opportunity role

of Slide have you XX, we some this when areas at look potential at So growth significant there. pretty

quite we wouldn't of that think the opportunities those busy several to to this point. that say the and there's add is to for with TAM associated But rest of the significant us year. keep I So at it anything enough

George Sutton

it's Right, one board. bring tell, suffered customers investments for potential on from customers that you're curious ability could other the to number. add never we you've -- really can to those quick which question, increase the nicely, continue side, to I'm demand if I looks It making you what up from like is XXX what

much building in So I'm how just curious there. you're capacity expansion

Ben Reynolds

bull call our pipeline Yes, following prospective us it last that customers, in market, environment. George, we we're we waiting really that on a -- of back happen this list then, lot does that we that don't crypto have a those a XXXX bottleneck, not were back for absolutely, during there the our calling in

as very strong this quickly offering. customers team, the information. have onboard is institutional they It can as get us We a can we -- is an

a platform, for are there than a different banking institutions. it's standards So bit different little consumer

There's technology. a actually us electronic, that and they as And apply playing an branches, with they fully can have upload documents, don't can the necessary so even get can entity obviously, as we've account. they they on we start got, the before for website, the the API in information invested open to quickly up have we folks show sandbox

So technology in customer quickly the they got as show the as expand up. we've people to the base

that's all. So I have that anything in bottleneck a not And missed then area? at

Alan Lane

nothing that's No, I on think my part. to add

George Sutton

Thank you, guys.

Ben Reynolds

Thank you.

welcome. are You

Operator

And David Chiaverini question Please from ahead. Wedbush come our next go Securities. with will

David Chiaverini

follow up I A you. questions thanks. on Hi, for guess, with a starting the couple portfolio. of securities

which purchases assuming you rates, were on two-thirds yields. putting Are share yields You at adjustable books the what able mentioned were at? lower I'm them you're that of the securities to

Alan Lane

Yes, I'll ahead Thanks, address and that let go one. Tony Tony.

Tony Martino

Thanks for Yes, at rate. your won't fixed our about securities of portfolio backed the question no securities portfolio, are securities, thanks. the but terms references of agency rate, And comment on your variable we half was individual half is end, it of I in majority Yes, of the David. mortgage the from securities. -- --

much kind period Alan we're, in the good So And you're how would give I is a think said, mean, going as what here that invest of and previous in be. a into of timing comments, of sense a time. yield the in could to terms you of I factor

across yield the looking are planning and accordingly. curve you're we So

hopefully that the answers question sufficiently. So

David Chiaverini

on moving And Leverage follow Thanks. then Great. a there. to SEN up

for of mentioned pipeline you your about, the mentioned XXX the -- leverage go Ben customer could do of You than How institutions product. terms some indications how in think XX% are currently XX% that of look that from and base? of taking about much where does interest advantage less

Alan Lane

want know got Yes, I take further. mentioned don't we any think -- pretty strong pipeline. Ben, you a that Ben we've to if I

Ben Reynolds

And the dollars you classes significantly, industry leverage the of mean, look classes, U.S. they a different as Yes, just we trade time so when at investors ways. in when things asset the is using growing constrained. of so at prime and truly a for institutions and serve the as multiple the of really other asset our supply funding institutional leverage that one brokerage -- whole they're I

all for them so, almost greater some are of so customers early, just of and looking talking our and capital from looking leverage with And type. efficiency for it's

to, we is go higher. to could It's that Is say, Is but that it it's what like David having conversations it XX%? estimate to from or XX%? hard it's hard we're the XX% think it so, XX%? And

a to And look way, far. so continue in prudent have it to roll out as we're we thus to going

David Chiaverini

last question. And is thanks picture that. for big of question my a Great, more then

on or Just new Have competitive whether into getting the if that doing the are of And any are space? occurs? space getting you into environment? mode -- large entrants your on of hearing the are to customers improve you what considering small the

Alan Lane

also bankers this it's are in coming a most the like you in the of it participated where Yes, of banks your we I pretty the still couple presenting, can of far and in that, Having in presenting space. understanding industry seems terms said occasionally are webinars of interested folks away people to I've tell hear that in into are banks space.

And so still I there's a gap. pretty big think

ago, Leverage SEN currency using SEN in and products participant adding provide that of a the that from additional I SEN the that SEN. So say competitive are customer, we're not our then seeing David, other quarter. SEN adding provides. couple a much then value entrants. add makes exchange, SEN our of in conjunction them lot the the stickier. also effect with participating incremental network not remains that new value we as And with customers we is adding new network just those and to of and had And who XXX that But a the we that the And the it already would for advantage add every entrants customers only every time foreign get incredible things SEN. we them in do each Leverage, on And is creates years like first it started

on and ability custodian then move you're keep custodians you also your of I effect. dollars a the the got once Bitcoin borrow at and than think of you've network a U.S. creating have better to moat so to the And just can't SEN choice. SEN XX/X because network a of a that of will further for deepening And Leverage moat be and ability your

think that's strong and going deep just moat. an to I be incredibly

David Chiaverini

much. very thanks Great,

Alan Lane

you the for Thank questions.

Operator

next Compass Point. go Grosso Mike And will from come question our with Please ahead.

Michael Grosso

they or growth a on market the stablecoin some total of a look stablecoin grew My I and provide Congrats of around deposits faster XX, going a from infrastructure. bit morning. than nice of is like outstanding at looks cap quarter. If it quarter-over-quarter, question Slide the the currency after standpoint? that a there color market you're digital market of some deposit your deposit you this portion can Is segmentation perhaps some quarter. on Good

Alan Lane

stablecoins dollar, SEN day, Silvergate the USDC of sell And those some stablecoin where U.S. my we're balances, rate to the We reserves a the and And Yes, which by that of mint dollars for Bank Pax stablecoin transactional yields. for the to those are margin participants, sheet. burn back is a deposits hold and all now. the mentioned X Gemini and in all those buy for issued dollar, U.S. are previous question then customers going API And Silvergate I participating exchange And issuers regulated it the is week hours what we're to the ability transactional Coinbase. on to already dollars size Slivergate than SEN dollar places triple some we're a of backing you side. because environment mints is stablecoins, with via my the large that to Circle the we Reserve to importantly the that cash answer stablecoins to TrueUSD, of other their appreciate net network. issuers, are network seeking to earn we earlier to and the we interest and is in And our excess Mike, as have cash be stablecoin And lot that and on this the that stablecoins, the burn that those them seeking go this And question, and it observation. of API. and also be that days to the against in and tie the good we trying yield that's are can we're XX to such opportunity. we've of and them allows very double a they -- growing hold our or the is emphasize that on really you the not sheet of for all the that And were Silvergate our the tokens SEN bank not also of and areas in aren't doing balance lowest billions our there's around back But lifetime. excess in not the Leverage. the that balance for if had that interest questions could the us

and on to them. stablecoin And be something this like saying a is those be providing that just hold issuers if infrastructure the order earn a ways the Because right. might earn the customers license, our is have business need not the want fact interest that actually viable partners they other we those to not many balances a a stablecoin without to issuers are let In way to Reserve for so do to obvious you bank long everybody we're seek of critical interest. they're winded we're happy Bank that to will deposits, and in

a pay do partner. they're those on don't need banking is deposits. what we earn And interest. interest they so And to attempting But

bank. primarily the transactional are We

there your further pause And follow you going if have to answered and see if on so or that let question me before up.

Michael Grosso

really that's No, helpful.

you're relationships, the was those aren't this announcement of think stablecoin morning, one the so exclusive nature. that and know issuers and targeting maybe transactional and I so it's an that there from helpful more of to

and question got currencies My up helpful this I Venmo. morning, PayPal color. on mean, we that's an now noting purchases of is announcement will that broader on on digital So commerce. Bitcoin a enabled be follow

pretty my in mean, from of seat, broader terms I significant a milestone So adoption. that's

and value me role investor could SEN is these some make how and platforms help the interactions when briefly can But in institutional outline and provides customers between these your of enable -- does how some you the we think there. commerce? potentially of announcements? plays I all Silvergate of the payment into How what enabling relationship understand and Silvergate the understand exchanges fit the Silvergate

Alan Lane

next of from to a see level, to that who Venmo. announcement going likely to players through for of that And their as here SEN all they need I'm to say somebody customers that, already buy are a in me But source they're institutional step. let in was on who to the ask kind a high did But Yes, is need of somewhere. know, the Bitcoin providing to Bitcoin, just going source those that jump you participant. ability That's at that second. anticipated. first that And I Ben all, just

in we're Ben, chain directly to against while so to in And are it's in the that quite players couple if consumers, not institutional ecosystem ask wants And he SEN. facing often the the we examples. of off enabling fact comment and I'll a the participate give via

Ben Reynolds

is people to asset today payment Yes, I digital you as I of a looking the an rail. as as think opposed are buying distinctions are of when one class the key -- that, think that Bitcoin majority gold or it at

speed that of the do Bitcoin that and of it some the Bitcoin, to is in sort the nature use the with of blockchain And blockchain to also just stability lack transactions cost intrinsic the Bitcoin the that takes value. of has to the update

Silvergate used been a that U.S. that you we're big about blockchain. from have long completely or case. most time in which cases believe and currencies, Bitcoin Separately And Bank for though, talking the dollars so Central stablecoins, of in digital on emergence at and are have believers really a

the terms and chain And Bitcoin speed provide transactions. on of does of potentially those so update, that that's rail the -- and to of cost in that stability, then doesn't some things also

through blockchain cases that are network grow. opportunity ultimately doing and massive see and on mint And through make used we that the the Silvergate will of burn this and that both early. are so order necessary still we exchange that really And exist a XX/X enabling capabilities to dollars think in

to payments. surface that. the to a play that over just growth those starting really at broadly the there's really last And as the you trading, on to as scratch relates it's focused look in it huge based far is role a quarter opportunity while case just to the blockchain And really Silvergate we used so really of for And stablecoins it during types think year, and defy things. massive commerce. in relates stablecoin on And the so

Michael Grosso

deposits, added about billion and I'll capital X. -- Understood, bit billion a allocation. is, I the my up, queue we I guess, think balance up you've hop quarter-over-quarter on that's as $X.X Thank sheet follow going what anticipate relates helpful. to back of but, we the is there some of comfortable deposit in color, mean, or any growth nearly digital should one, And are for the into I last in that but quarter, $X.X be loan currency I quarter-over-quarter, you on cash securities factors the it that tick forward? saw book at considering, look putting the this cash -- between holding that understand, some color there helpful? getting you're or or mentioned additional that more will you this you. that relationship is that and was conservativism a

Alan Lane

and of also we goes have I focused in duration not and trying I what grow our move in our as out to I to loan stablecoins put regarding securities the back to the to long-term. the the back -- I and is and load are And for the putting really the it. are as liquid it's X not with always that day, demand dollars on SEN the a seek prudent the just would Yes, that and the and up put cash hours the would we a about it on comfort higher that kind excess we expect be have balance going just fact one warehouse of should really have always And days building it. yes, calibrate to the the the that mean, that back answer on cash we we ability at stay meet and platform continue nature demand first to focused SEN where a on the And, XX out don't and earlier platform level we counting them of was see to XX/X you're the longer yields the to securities, but very a sustainable things saying mindset that have in over demand to that percent question out, been week. tying we ability to above mortgage the go earnings, it and will yielding customers of pipeline, terms higher say the could on juice this us -- the the leverage short-term we that seeing

at growth of in we dollars nights ecosystem so the to are Bitcoin opportunities advantage is and and deposits because see keep Silvergate the part reason of on more as wanting they account And more customers their in weekends. can expands trading so take

gets addition will calibrated to we that income interest be confident that of over we're enjoying. time we the that a net our in all so And generating very how manage nice I'm liquidity growing income and in and fee base

Michael Grosso

you. thank Understood,

Alan Lane

the for Mike. questions Thanks

Operator

Barclays. Eugene question next Please come Koysman our will ahead. go with from And

Eugene Koysman

bit to -- are a begin into of how the different them in at currency enough reinvested the related flows way point? liquidity at much step wanted that a securities recent digital you of And the moving think that positive in you discussed the earlier. this namely, Good I can loans morning, and take sticky was another

Alan Lane

in deposits calibrate it's if the then, And in way the SEN, saying growth average same way, is sticky that's grow growing different And enough, quarter, sure through therefore one Eugene And when how customers, we've our you've this deposits average? better to the and how they're all lost had high the the already over the continued point? do we it's and fact much we what we that be. of weren't Eugene, fourth ways So share we've the thing. that liquidity slightly a low what forward. mentioned is but much the the -- much rapid and in for quarter, how math, community of a fact The low. point? was to experienced growth to -- sure about to different first that of we thinking the managing what the it's the we -- the slightly suffice going how ongoing that? quarter, can bit added we're mean But, that you, a way with that say does the joining probably various it done our XXX just another stages that at a look is really is started then -- first is I'm deposit above not is Yes, for to broader we our the rather, on base? and we it going the at that What insight little but you into need that excess We've look of recent not get liquidity so maintain sticky we've the so it look are high what most the customer to --

Eugene Koysman

Got it.

ATM talk your your you March that disclosures. so $X with about And trajectory maintain? share in you through your billion and us watermark Can high through of February

Alan Lane

the I want Yes, in the you which to would just comment Eugene? specifics. But refresh to to continued we that that disclose the for think that indicate all was But ask I Tony on our earnings I'll think million, do release actually those grow. high for quarter Tony, $X.X numbers

Tony Martino

correct. that's Yes,

digital $X.X Alan deposits high average low $X.X million indicated. was the currency the million So $X.X the as billion, was are

Eugene Koysman

in lot the Got the about interest you what now will and given that And how day the management Thank the able of as calls your weekend. a portfolio system on question. liquidations margin grow XX% the that if there investors during results from Can -- in gotten to your in handle And drop any saw capacity -- risk you. then market were to I've we risk it. that about more as talk And management larger? just it? position grows how you liquidation? collateral also, was handle to Bitcoin

Alan Lane

I'll think comment Ben specifics. just may that a frame ask recall you to to for a that's you, little this question. And I But we that will first, bit the Eugene, great more to start call, And of a Yes, collateral in range. you typically SEN Leverage coverage -- the the typically then range. would we our XX% LTVs XX% if have in margin on on -- XX%

no at drawdown LTV maximum if the And would me have not let just our were a if weekend even on comment But portfolio. he the We've have had ask initiated that the alone we to this hiccups. And had still customers any XX% margin based call. of so, further. a losses math in Ben any wants not over significant

Ben Reynolds

of but use perspective, just management multiple -- the one is also perspective a considerations of risk from from Yes, growth a the not and custodians.

so Coinbase books deep what have of and the now factors in how and And one there is, that Anchorage access look addition are that Fidelity. to Bitstamp, have. the platforms market order to different sort And we they on we makers at of those and

there another liquid Bitcoin factor is on market. and the that And is so most it only because making we're loans –

have really And launch a we we thorough place, programs. number it different those and as those these good so to-date a we each overall. evaluation we and But of do types partners any haven't mentioned, of Alan of in we liquidations of about had controls before feel

Eugene Koysman

is if say custodians Got custodians using level to through one looks will specific of it. the customer terms you? And multiple have do customer you from margin borrow in difference on

Ben Reynolds

We have borrowing? limits single customer

Eugene Koysman

Got it.

Alan Lane

a a have we Yes, that whatever a look at amount on that and particular is need so particular on sure appropriate sufficient basis do we partner, that we it a, on loan if it be. we custodian-by-custodian collateral the make to at that at -- this partner have liquidate the

is partners. underwritten. margining the doing on has that basis loan where different that's of a collateral custodian we're like a on any cross So really not the appropriate at case-by-case amount appropriate the exchanges really It across or is

Eugene Koysman

last currently players the space sheet stablecoin what compete do transactions. follow Understood, and or -- if are customers will capturing What and moving with have I is opportunity be servicing On for for burning then into stablecoin able GTS typical eventually move one, balance one ultimate larger through to may. platforms border? to effectively these you who corporate I size Silvergate your their minting the and that to across customers money

Alan Lane

not sure the understand that Yes, I question.

not primary in question. sure we've our I fact our talked the the the minting so the So ecosystem understand that state is burning, stablecoin that that in about role and --

Eugene Koysman

need if today, do another, one transactions, currently there they're $XX sheet guess, they with a were a for $XX to question, say big from are services, balance are customers corporate the that how burning? able to country using are shot transaction So is, billion, sizable minting stablecoin, to I And there and your and one to you if for support of partners. billion corporate you in these global let's balance But kinds of transaction move sheet? moving

Alan Lane

me say do not make need I corporate No, is blockchain, reserves. sheet those protocols. open a because not obvious, we doing I these this me describing, balance stablecoin you Eugene, And -- would let we're but if think like large corporate you're forgive permissionless a on that sure so understand a holding customer the sizable that in happen a what transaction

that. and have So they of like] blockchain. U.S. from takes the we stablecoin, not would it's a on one already somewhere deposits the is actually our a to to own wanted moving if party But the partners, they the the those ability through reserve it not in -- place mint do the stablecoin, would one be another [feat of absolutely sitting can to transaction

Eugene Koysman

you. it. got Thank Yes,

Alan Lane

the bet. for You questions. Thanks

Operator

muted Hey, will Canaccord. Vafi And Jeff our there your ahead. from Joseph with perhaps go question is Please line next come Vafi

Joseph Vafi

Sorry about that, guys.

neither Leverage SEN positive is and Just and down partnerships from may it partnering providing of slouch Fidelity. distribution a more to for then go to bit back I clearly service like financial Please alike. not maybe and those companies little pike. quick Coinbase a and mean, Thanks. any means. sounds you're But they Alan, one SEN is cost be you? more a explain in instead commenting and effect the the and interesting financial companies those compared network that standpoint, there as a be the of capital coming a But by of with follow driver it'd Obviously, up directly circling to

Alan Lane

the But a And probably about a some to to the of they Yes, fact these job going point we what aren't banks, matter earlier players, The question. that's this is, of financial right. all with back of making strongly haven't so good we deposits? do are done enough. great larger questions these

has the we our partner technology natural space and the sophisticated as deposits but we seems U.S. continue players they have own a So it's only natural a even they adding is more and of partners, more need are has this customers source for Fidelity into about borrowing going massive are SEN not against customers opportunity, of But only have, digital digital have assets dollars, to they for the back institutions so dollars. a has -- a and to strong want funding they Ben digital And to a lend in to out and bullish do and this Leverage that who demand whom that into be as in more a that this come dollars. playing And other institutional on grow talked of pipeline, And we lot lot converting with because have space, come is their U.S. terms U.S. we're as there's Bitcoin to those that custodial the and that of if They large another don't borrow, need way. some is out Coinbase, assets a providing fact into they of there's with have just for those players need deposits. the financial institution we demand players to pointing they fit absolutely services. reason assets, if dollar and and network the like just financial customers. want that this you're the think deposit positioning why space. And

Joseph Vafi

Alan. much, very Thanks

Alan Lane

You for bet. questions. you Thank the

Operator

remarks. And to the any back Alan over turn question to for and this answer conclude Lane like our I'd session. conference closing will

Alan Lane

you All Carl. right, thank

serve thanks with your And trusting truly I call just It We still business. and for everyone And look those day shout ongoing I to hanging up, to support. quarter. speaking everybody. with soon. on to for forward for wrap you continued is a Before thank to Have for great a great finally, on Silvergate to interest again we in this customers give Silvergate also a want want your our a to pleasure out team you. us for the your

Operator

Thank now The presentation. for attending is concluded. you conference today's

You may this now disconnect time. your lines at

Silvergate Capital (SICLQ) 20 Apr 212021 Q1 Earnings call transcript