- Earnings call transcript Q3 2022

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Operator

Hello and welcome to today’s Silvergate Capital Corporation Third Quarter 2022 Earnings Conference Call. My name is Jordan and I will be coordinating your call today. [Operator Instructions] I am now going to hand over to Hunter Stenback to begin. Hunter, please go ahead.

Hunter Stenback

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

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

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

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

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

Alan Lane

and Silvergate XX% our quarter as backdrop, diverse an results, Thank this million, asset you, strategic to by Hunter the common compared and record third challenges. shareholders Silvergate on streams the to second available broader to increase Against initiatives. even digital $XX.X reported good quarter revenue morning our everyone. net continued of progress experience strong of driven income ecosystem delivered

lowest some the our and ecosystem. want price to digital color its market quarter, third I dive asset results, Bitcoin of cap year. I hit Before the on into In the broader provide

contrast, billion quarter in than than $XX of dedication time, team. digital asset the At Silvergate which this average these $X.X not a of the strength since billion SEN customers, our years XXXX deposits, only of asset have X fourth have of and and our We fewer volumes. customers, had $XXX seen $XX XXXX. By average levels last billion, digital that point the testament volumes of to the quarter of more platform deposits is we over and X,XXX billion of spend

and to again done have to third trading trends we better past, SEN with decrease second $XXX compared The a of their were the mainly industry, in As lower of within the the the broader trading the how impacted on asset stablecoins. increased to According Bitcoin in by saw correlated worked this digital Volumes activity specifically daily sequential understand quarter. volumes Metrics dollar quarter, a transfer volumes XX% we with the Coin data, with basis. Ethereum in SEN broader on billion, this industry. both quarter, quarter volume

stablecoin during be that from such always volumes market industry the sizable correlation It’s USDC as the saw in between Fed issuers, won’t to note the and linear. As the quarter. important drop cap

power the network. use cases SEN, within and the Given we in the confident opportunities of the expansion for the different of platform remain the

Now, to moving compared deposits $XX.X quarter billion declined quarter. to the in from our third key to $XX digital asset billion metrics, last customers average

the clients added last our quarter, year. value since the increase clients on We same most number volatility XXXX low continue sequential reaching increase, of we customers as XXX base. during to Importantly, to our the of quarter of in The that range the third a billion over saw $XX deposit focus high of basis the and billion platform. deposits our asset on $XX.X digital high-quality we of XX over a customers continue quarter narrow bring an lower adding a in signaling to

prospects. XXX new potential of over robust customers with pipeline Our digital asset remains

billion Leverage, to commitments lending billion demand end growing to Bitcoin we to X% quarter. for total $X.X the with Turning the $X.X collateralized approved compared continued product, the saw SEN at product, strong of our second

addition, the between outstanding $XXX an and Leverage balance million during a of $XXX quarter In of million, with range balances $XXX outstanding we SEN million. average experienced

our of with SEN liquidations. loans forced All losses no continued or as Leverage perform to expected,

a Bitcoin these a agreement with pledge to to overcollateralized As their loan pay-down terms X reminder, have design, draw, by comply XX and a loans our day, or the customers are the of ability week. collateral days additional hours as

provide Finally, an progress towards strategic I our update on to we initiatives. are the would like making

and the and committed expect initiative happen customers to to that based coming bringing regulatory this additional opportunities Silvergate continue being our That blockchain we actively on continue approach said, payments We in our tokenized in we explored remain to regulators new the compliant exciting on this engaged and of our products and are year. risk-based Unfortunately, regulatory longer prudent a compliant a dollar to anticipation the launching in policymakers manner culture quarters. by to balance no with with blockchain. updates of innovation to other will provide launching

blockchain you Silvergate trillion the we on commerce and taking one market solution. ahead the asset digital disrupt position in both best remains the power global is payment opportunity a balanced Slide approach, of the massive. X, based with see While the trillion market can are $X industry a as current $XX to We believe

take a to innovation. XX pleased the am continues in evolve, will our to with our we grow share week. to offer customer without barriers. maximized for customer days a SEN to through or customer customers operates with X hours that to to opportunities SEN asset an when be support payment windows assets, customers will meaningful and constraints a our We customers for approach, model to availability it’s already our in line we increased XX/X with ecosystem In support digital to I time fourth who quarter, day, give continue digital that and their approach updates the support payments model is first activities them. introduce we this As product provide Euro existing banking geographic our real-time execute Enhancing have industry incredibly work will which convenient and

enables earlier near week. launch announced day, to Finally, SEN, euros we real-time a Euro customers a transfer which XX the days X hours year, in this the of

quarter, just a technology and momentum rise customers’ our I gained proud this example more to This rates held am one is with in euro that ECB deposits. turn in This what’s forward we detail take XXXX. meet of we platform to progress on our the and will out products Tony our this customers your our to quarter close provide over we ability needs. review questions. Tony? come we made as strategy turn before in against now it I more to look results financial to of

Tony Martino

and from morning of million second $XX.X share with X $X.XX the in up a leverage interest quarter with diluted detail driven later backdrop was the XX% an of X% financial and during XX% Silvergate key diluted $X.XX good in common quarter share Against net per million and reaching of shareholders XXXX. the available the quarter compared to income, per Alan Starting of common million digital per everyone. share X on. another Tier quarter results. in capital or $X.XX you, to ago higher more XXXX. last quarter quarter third XX% diluted and overall Slide quarter which We in at on will second the Revenue to net of from our compared year or reported income record $XX.X or discuss compared increase ratio compared XX.XX%, industry, million strong quarter $XX.X I Thank the third $XX.X asset ratios to maintained up our challenging same by to the the up

in quarter, Next, on to digital average deposits last down the were XX% compared billion X, Slide asset quarter. $XX customer

As saw billion. to high range low of lower the $XX billion of our a of volatility Alan narrowed during within quarter the mentioned, in deposit $XX.X as we base a deposits

as weighted reflecting Our deposits we of essentially at basis deposit of gathering cost deposits brokered zero compared quarter digital strategy. liability digital zero, of annualized to certificates our last for as the strategy. asset management utilized part increased remained our short-term points to asset cost average of slightly The deposit XX quarter

for third third we an to quarter from of managing the net third compared in a to year. partially environment. increase $XX.X was interest Net interest of quarter $XX.X position of mitigated rate last of rate to interest Slide increase million down to third X.XX% as focus was quarter in in margin our quarter X.XX% on second NIM the to our X.XX% increase $XX.X continue and from the impact within compared the rate and quarter, benefit by compared rising million income in derivatives quarter sensitive quarter we X, asset The was the the second XXXX Turning as sensitivity. million the prior interest the

yield $XX.X of increased X.XX% of quarter, second $XX.X a of a quarter, with X.XX%. third totaled balance end billion billion. from billion, yield portfolio down Year-over-year, securities of at securities Our with corresponding for the slightly the the a $X.X

strategy, risk hedged we approximately our interest-earning of part As of XX% rate to interest assets reduce risk. management our

on were loan on to portfolios. we loan our divest one-to-four a commercial or year-over-year $XXX.X real basis, to multifamily loans Moving family, continue down total estate portfolio, the XX% as million and

of of loans During real quarter, $X.X loans million family $XX.X the one-to-four sold and we family have one-to-four an to estate million held-for-sale. additional transferred real estate

decreased in As million for million second a result, to the quarter. losses $X.X loan allowance $X.X the from

rate to As rate are a in continues Silvergate currently we for operating positioned last hikes. rising further we quarter, and discussed environment well be

are assets our rate. XX positive static million As give sheet approximately rate period. of over adjustable a sense and interest you of estimated basis is income approximately interest-earning balance To sensitivity, net point our interest current shock, $XX a of XXXX, XX-month interest rate increase to a assuming a September XX% XX

last X, for was securities the expense the quarter non-interest quarter a to prior gain-on-sale in $X.X prior million, growth prior related ongoing in income up to is was the the $XX.X basis compared and non-interest Turning decreased The increase year. decline in the quarter million from $XX.X $X.X XXXX. compared the of expense million primarily The quarter compared the to due the $X.X investments to to of of due to quarter to non-interest on non-interest compared quarter X million, prior third million second increases Slide and primarily Slide XXXX year-over-year of investments. our in same to shows strategic for year recognized and third which million year. the quarter income $X.X

growth our quarter support strategic and We fourth to initiatives. investments the will during make to continue

expenses am end approximately we trajectory the Question-and-Answer Operator? intangible We operating though range. the questions. continue Overall, our open year Session low of this rest may that, would in XXXX through of excluding million, to $XXX up full and to the operator toward come $XXX quarter the be this million in in for like to to remain results XXXX. any I to of ask With line our confident proud the of expect amortization any range I

Operator

[Operator question first Instructions] of please ahead. go Stanley. Manan Gosalia comes Manan, Our from Morgan

Manan Gosalia

Hi, good morning.

Alan Lane

morning. Good

Manan Gosalia

I see the quarter a think of prices you Do a is know SEN relative rates that you crypto SEN driver you scarce, we rebound volumes normal of should there, think in I Bitcoin Q-on-Q, and that do hear down we interest in wanted in just in prices? other – the a rebound is, more think if XX% volumes XQ are volumes? function platform big past volatility on up, that becoming transfer get of was that. are Just the is new guess similar it the I or function the going in and your stablecoin for stability volumes and view, the a question SEN a to to what is transfer greatest the Bitcoin liquidity expect do you

Alan Lane

Yes.

volume SEN calmed there the And unwind digital to for in am just to as some in of of assets. bit we seen volumes power a has on ecosystem. comment quarter I then past, ecosystem the is SEN across Bitcoin other have a minute in a the things But was with little demonstrated the leverage in drive in come volatility we more price volume. broader as some volatility, when Bitcoin lot lot is in the we have the that the the point the your And and way of of a a to volatility down saw broader second that really kind certainly price the and best Ben way, So little ask there the the of when of of down. of going shared bit and instance,

comments – just but that opportunities a use also ask correlations for with volume And different any the to point you is really want and so – where to comment and look that? the exactly are who where broader ecosystem, fact lot that, many of I Ben, Ben customers our that there the add it’s should will less to this to so and come just SEN pinpoint provides difficult on trading we for the to on out, from do drivers. because

Ben Reynolds

make X,XXX in for question. data. when thanks there have know, at in the Coin over now in bull XX exchange kind up And that are and data as and a Alan that market. using at first exchange volume exactly introduced I we That’s and thanks, you about we the trusted Metrics are had we volume so bear or we Yes, back exchanges specifically, ecosystem. Silvergate data, dataset. that market digital of when trusted is of customers asset We metric that mean, right. reported look the you middle And I using a think previously, the

other this two of That out – about there from said several that the volumes of that next. being saw were in one to those numbers correlation we there flat quarter. so quarter quarter reports And lack sort

I think X of the but price is haven’t now. question think and volatility years quarter exactly it, I your – part level which for this seen initial at we this nailed

there which were back so significant to uses the point, pretty dramatically SEN, probably stablecoins, driver. that And for are down the the this is including multiple most But quarter.

surprising given not overall, that So macro the backdrop.

Manan Gosalia

Got into on as then and you how follow-up, XXXX? we sheet thinking you And the about FHLB You go this are a brokered talk a little it. could bit during about some funding especially balance maybe CDs as quarter. brought

Thanks. size sheet the shorter securities let to not to level? question cash to some fund dated get to a I why deposit the And a balance guess Just of clients? the you specific or of are managing wanted some is of sense runoff the

Alan Lane

am great Tony. Yes, it I go I question. sorry, to just ahead, kick that’s a you. going was Yes, to

Tony Martino

Thanks, Alan.

seen hasn’t we – the amortization changed the of relatively to consistent. the would second funding the stable And – portfolio, not on a Thanks composition and balance for and of use side. really the by wholesale relatively to investment balance you are and the quarter – large, maintain the strategy happy securities as have Manan. the is between jump side the some there But our we asset you indicated, the change. question, We but of and Yes, quarter expected supplement we portfolio. has level some in. the of end did on short-term Sorry the performance sheet on so sheet we are to with been third end

And that stability so, are – we we have kept on portfolio during the quarter.

Manan Gosalia

you. Thank Great.

Operator

comes Alexopoulos please question of next from ahead. Steven Steven, go Our JPMorgan.

Steven Alexopoulos

morning, If there? in of tied stablecoin this Is good I start color updated Hey, of wanted Is regulatory everyone. an give it the technology a to you hurdle? terms rollout more this year. a hurdle? timeline? delaying Is there to a

Alan Lane

I Steve. appreciate question. Yes, good morning, the

this – I it. will not we year earlier that certainly So, that issue. the technology foremost, was and acquired to we acquired when go first say it’s We a ready technology

some that in compliance it out terms mean, in position like working update the dollar more sound our have of year. the that But are timeline. launching regulatory shouldn’t my – and we policymakers on with are that to read closely best at we feel the are when point just that with operational tokenized not to a you bank in that blockchain. And that safe going the into this to an certainly that along to bumps any really working that a the we are and sure as looks the speed we something of, with disappointed strongly and We very any provide compliant, regulators this this just there position we is, of hit it said, internally, build goal don’t I miss But on prepared And still we the in right. we really – I sure making regulators to and so continue make launch of are it’s we got muscle the way. it remarks, regulatory muscle other launch we anything and

Steven Alexopoulos

helpful, Alan. that’s Okay,

you In a at volumes you or us billion so stabilizing this that And do is how follow-up average, to deposits still point? if $XX more $XX is related give Thanks. there much in could at the sense look at see terms billion this asset billion rangers a stablecoin we of $XX to balances there digital of downside?

Alan Lane

the customers banked going not of just really just don’t on now, we of what going because of kind learned high second this it’s stable a Yes, the one then pointing we we I drop and am take in quarter and have predicting And just deposits we almost been made question third added And am the given drop part we I first back in strong out, it pointed in Ben now, reasons of with all the one backdrop, it will future. this the importantly, I as go to that XX months out X continued past in drop XXXX the the broader difficult has But mean then stabilized a to drawdown quarter bear bear remain to thing from that saw same last to look of drive to into cryptocurrency portion. guidance, Steve we and years for doing macro then this remains combined which forward? the we stablecoin last predict customers, the quarter say deposit in have the time, will second every we the the of the not experienced peak of things XX%, I are starting stability it’s beginning experienced bear having provide XXXX. similar a market, going over have I now to But of add the ecosystem And at the adoption. and that, – if XXXX, What the to few terms bit is kind very of from the in as exact that we were the market, time comment surprising. see XX% side in our in pipelines do expect we went kind deposits though we SEN a kick the of market. thing for to back a as the I year activity was of about the – that’s year. is we you and with fact,

And hope stability let me the deposits in to we Ben ask so, stablecoins. mentioned comment continue for prepare so while on the But as market. is, what the we that to see next you of additional in turnaround adding kind to customers, the

Ben Reynolds

Yes, thanks, Alan.

down So, I $XX billion market QX, billion, USDC $XX saw quarter of of is about declined from QX and a which Silvergate XX%. deposits we think were XX% between value the or average in to the total about so. decrease

that’s regulated the meaningful recall so, And bank out from that for is that directional stablecoin there. standpoint, Silvergate just transactional a issuers the are

when SEN that hours XX burned, are minted day, a week often because new days network, over stablecoins it’s a or X activity happens that So the in real-time.

that banks deposits, nothing in encouraged the decrease from haven’t customers we or the in validation deposits don’t they take pay the to so, overall redemption really are And seeing And bank for to sort sort And is and need macro seen excess over if our just have realm us their that the our do what always in of also our being for we of those that we really transactional cap changed we broader and other of – issuance for has you that trend will, of terms market platforms. maybe do changed a in customers. interest. But anything of reflective the think quarter.

we that So, but how about one. that’s think

Steven Alexopoulos

Okay. Thanks my questions. for taking

Operator

Dave please comes question of next Our Compass Rochester go Dave, Point. ahead. from

Dave Rochester

good morning, Hey, guys.

one this terms Just on the quick you wanted about to hedging, just talked you and ask have on added a the that. what quarter

going info I new and plan out that forward? the Q, but what’s know the hedging have trajectory starting in got you some that on of or to then just Some forward trying all, at what’s figure the

Alan Lane

appreciate am as upfront comes you in take more much pointed that, this third so I that? going there to out, quarter sure this to I do second point. be like the with how Tony, out, let can have anything not say question. Q, detail Q that the Tony at say quarter just you’d But add one. additional when I’ll we Yes, the Dave, you to will

Tony Martino

Yes.

hedging of fixed in part the part and rate response for to Dave, kind is of portfolio. of two fair of flavors, takes some the your just down is some So value hedging question, the hedging to of related it rates it then

earnings So, it’s bulk the the assets, XX% as we a two of those during made interest-earning and in put on flavors hedges second of deck, the about of provided combination hedges aggregate total those up of quarter. were the

Alan remained So, the consistent the will provide end our second of question. quarter. the asset end for sensitivity and we in the quarter the third has the of said, as Thanks relatively details between Q. And more

Dave Rochester

over go about you on about end now, any sensitive more forward, are you it? of stop next of layering you the hit remain thoughts you are good And when asset does are that? where or in at the thinking How And will it neutral the quarters? you for couple thinking

Alan Lane

environment. like – else pretty volatile are Yes, I we current macro think observing everyone the

time, going environment our at monitor and this on are to and we balance update we – evaluate the to nothing continuing but posture the sheet. So to macro are

Dave Rochester

Okay. Thank you, guys.

Operator

Vafi question Joseph next Our the yours. from Joseph, Canaccord. of comes is line

Joseph Vafi

morning. Hey, guys. Good

back a initiative stablecoin on the more. couple there a in I today. circle other Maybe that least could I on the we regulated are stablecoins are market me. decently bit for out clearly know something are mean, for commerce. little at focused really you Just just

those I follow-up a maybe e-commerce of of or will it kind the that of then thing here kind after are work little color And same compliance? on stablecoin provide full is and activity it some are related specific you just policy two with so maybe more and if regulatory to the Perhaps is perhaps more that. you regulatory could doing,

Alan Lane

a comments. to bit I appreciate and I do with ask Thanks. here question. little here? we kick us further are But and Jo. Ben, on come Yes, the I may some jump to going where Ben then stablecoin want talk you to the about off am in in really

Ben Reynolds

Thanks the Yes. Jo. for question,

when to the risk cap, that think what’s rails. is for off currency and technology a that at massive the current don’t scale become So massive let’s to folks digital market that apparent numbers. current it fiat primarily today. want you round take really that and that’s trading stablecoins clear current and $XXX at a using get a become value are dwarfs today And $XXX have in think look they it’s that and is cases the use available of – you the onto I usage is for I regulators call what’s when policymakers opportunity – for the a used exchanges – billion billion And payments

relatively folks, has there do lot to so let’s And And seeing of user $X regulatory and have been say, they sure consumer what a what certainly invest we their commentary so, indicative ultimately type protections I the general have with I at to you we you back it’s are receive sure that’s around, How massive like really value that’s last need fact that the place? the concept of be, are nature feeling scale? think in a public do of appropriate of what end people, the in dollar worth days. just these that when And there in of commentary present this technology, over a conversations and what How make that from a XX you do If new the think TAM. risk-based in make are a that trillion this funds? really were approach relatively new with stablecoins, look token you is can those does and the place?

anyone anything? to And be so to bank continue positioned best his think opportunity. But we do the And to as make Alan we are that there that we of think able Alan, get mentioned we you this to in comments, do to deliver sure it right. of want that, we out because on add want

Alan Lane

don’t this Ben. follow-up Why No. at see question, Jo, what has Thanks, point? we

Joseph Vafi

on of lot supply looks of something it’s that makes and broadly. for Yes, feels versus was billion trade related trading honestly activity thanks. That if $XXX used of like it a stables me. And – kind kind to crypto MX sense more money

So follow-up here, one the bringing on what that’s newer in obviously. customers And get if could are maybe quick new for, they then the could if on the a are focus customers, customers kind big of these a we difference feel just for coming of quarter, perhaps – versus deposits existing they offset kind mean we the kind do we deposit macro new are customer customers feel how bringing in contribution and existing kind balances to versus smaller about how that deposits for deposits may and lower of Thanks, what to for customers? perhaps guys.

Alan Lane

good one. some question. you Yes, I that data for Ben think got on Jo, that’s And another has great

Ben Reynolds

the thanks Yes, for question, Jo.

of customer’s in we And category look balances exchanges think and investors, lower deposit we continuous volatility that institutional price again regular that that outflows think those basis. the quarter. definitely at volumes. low on when we obviously, by and So are you look a indicative I at on And our saw

add And customers. XXX SEN did from to the deposits integrated this seen billion process customers we within platform, as get we in suggested, that grow onboarding year over the you quarter and XX As $X and the actually platform. close have the typically those will they to new in about XXXX. in come fully finish customers continue From have that on

that good have interest really the good are that pipeline and customers in seeing really now from we So engagement, are onboarded.

industry. Of the broader course, that’s being offset macro by conditions crypto in the

expect. state this what we with would things, of overall, sort given of guess so feels the consistent And I

Joseph Vafi

it. Great guys. Thanks for all that color. appreciate Much

Operator

Our Michael, go ahead. please comes next KBW. of from question Michael Perito

Michael Perito

Hey, Thanks questions. for good my morning. taking

reduce try maintain balance but scenario to Just of size strategy versus spread go, here guys quarter, a are the really and kind different guys balance as borrowings see small next I am guys on the understand the sheet understanding or I challenging expect to you maybe trying that sustainable kind way? mean, a do CDs it. shrink thinking you deposits if of in to just build to brokered you follow-up continued I or in a much about how start predict from I that sheet to overall is temporary asset where the to hypothetical, of deposits mean, the does mean, of it’s and kind it

Alan Lane

really I has – any will let me Tony see will if this additional on Yes, then I and touch thoughts. quickly

securities of we duration the majority we the our built we as those in may through attempted relatively that short recall experienced, securities As rates with you portfolio to, keep were growth buying we adjustable rapid etcetera. while

though And the so rate place. started to and environment benefit even to hedges in continue put some we from rising we

As in a that we we Having securities rising his said The a little environment at lower of from lag prepared continue to benefit also bit mentioned our when experienced indexes on a earnings benefit interest that based to the benefit is pace. albeit rate rate the in down. is slowing – Tony the there the remarks, continue benefit rising environment a just in various reprice.

rise. earnings a a are have little impact, rates while still in of we tailwind of there bit So, terms continuing to

securities. some the take it far guidance, potential be to Mike of sell we kind might to earnings sense to that and give those the So we but some as up make so due nature provide it comes, rate again, of to same forward adjustable of par, hasn’t it of because securities and don’t seemed closer the certainly will

there and you So add anything that have with to if to like that, I would know is further Tony, – if – I that? don’t

Tony Martino

our which Tier that ratio to close think gone not so on is say, key quarter, kind our Yes. than to XX% of No, have to Mike, up. that the seen our in X Alan kind ratio, you other much add of is leverage it’s I

of plenty in is said, adjustable capacity. delay there And a typically Alan the as to there XX arching XX day securities. re-pricing So, is day of rate the

in So, interest aren’t top rate some from visible line. in rises, of September benefits those even the yet

benefit to forward. continue will from sensitivity we asset So, going

Michael Perito

the new then Got balances appreciate color it. deposit And on the secondly, Thank engagement. you. customer just and of kind

that this stablecoin the as related my which Obviously, of we kind activity how digital about asset that. income, is doesn’t that really customer to about impact $X translates million think was understanding quarter. fee Just

guys quarter, I customers? guys the lull did quarters to figure can guess we start is new last see that activity add kind of trend of So, lower it you to few mean this reverse maybe in see continue you of the – contraction? optimistic but Are that this I

Alan Lane

Yes.

less necessarily very comments by Mike, – is, then also who obviously money volumes they volatility, none the off fact the wiring lower and that price dollars of other, activity, and there metrics my I earlier that are correlated existing And what think resulted It’s lower I and volumes. mean around to lower back SEN SEN each customers with trading just of or money, with on-ramping to market these etcetera, activity. that’s off-ramping is are while broadly drivers are out transactions, fairly in of going lower wiring correlated. in

market announcements the the last So, some Visa, made live SEN BlackRock-Coinbase just the to made as of it’s up Nasdaq about to been all of – or months thing that just as custody that trajectory announcements still things are we months announcing who a about long-term that that as the announcements, is the the is Mellon crypto to is there continuing in adoption they – planning coming BNY so have add three mean is use are come. or have one the none think announcement. still and They There with hard – partnership, And lot the MasterCard, think yet. these predict. things all yet. stabilizes, two in really institutional the as custody, are have yesterday long the crypto are The is, institutional customers, out broader of to you we I if we right. zoom it’s confidence just into market

long-term And optimistic not could trajectory. these time to on be so But the out. we more take play things

Michael Perito

Great. Thanks.

Operator

question next ahead. go from Sutton Our of Craig-Hallum. comes George, please George

George Sutton

but I also higher terms impact? those you. through to obviously of of of the if understand deposits, same will with could walk volatility, Is the average try break in sizing sort interest account options apart react way rate any they Thank you really a there two to more curious to that am customer have. to of intention an the

Alan Lane

Yes. Ben, that one? to you want do take

Ben Reynolds

George. answer Yes. unfortunately, that’s is a not. the question, good And short Yes,

about a lot environment the the volatility, actually good because a continue want this around our a quarter in and of of we and our opportunities have was different directly robust deleveraging That of well want customers second trading lot a from globe. comes system of kind We we customers. coming will is arbitrage platforms environment in talked the as to what of say, of with the volume, for new they online, like really they And whatnot. really that said despite all trading assets different a that didn’t that and lot and perform

they what can are what you those we two an of in pale look strategies – these are they comparing interest those deposits, from of when kind today, trading at return. level this when things at generate sort even earn can so And at rate that on annualized at versus comparison excess they

there those of going And If that improved trading from different are opportunities, two and and environment will drive to or the whatever that think engagement they deposits earn. what they really macro course, said, XXX so, it’s But take aren’t is those our things then that to earn their customers. difficult parse there we ultimately kind can ultimately basis of increased points

George Sutton

it. Got

timing, only before and you the relative happen a clarity might your there are somewhat that clarity. the be or out certainly that? independent to project, of project that one there to So, and regulatory looking it for regulatory need policymaker stablecoin should awaiting we Is policymaker is broader that not

Alan Lane

us project up that with that comments cards been on Ben different out commission, have years, of all thinks was having credit going are impossible the by have to that history last of electronic as the talking stablecoin with weeks. about the at our the earlier. Everybody the the have that last with And Yes. we mean transfer back working this we things make couple contemplated. very brought – kind have and are all things – there kind has I funds that over comment of the away. our of over the have reminds the of I perspective, public waiting controls that we this me and what seen – gone points industry in is the of relevant you some of policymakers, going are the Nobody EFT this all regulators place, got that several And back consistent and on all to data our for bills late and the obviously, The It’s really ‘XXs looked policymakers mid are from and others conversations might it’s broader are virtually for. as the be wants sure Congress, etcetera, and I some being similar. way very to

get tokenized crypto stablecoin transitioned the And of blockchain. the where to will that, we to that I going all confident dollar to volumes that time, in a are issuing and am get the of relatively can a these in as to get And market. crypto the we And so once questions various volatility actually we – as through point something my opportunity are will micro modest you markets. the over that and I for complexion absolutely at a from if what global we on on commented around we look it thing also and in to that payments the you is that opportunity really of separate it’s prepared remarks, market is that Silvergate is the used change And payments, the here just the once massive. back globe, will, go kind the referring for

George Sutton

Perfect. Thanks guys.

Operator

comes Chiaverini Wedbush please Securities. go from [Operator David, Instructions] Our David of next ahead. question

David Chiaverini

taking the question. Hi. for Thanks

SEN what So, higher? billion, it to are Is your about drive could higher? commitments to about $XXX but to bullishness the balances leverage, your of balances commentary as investors? wanted increased only could what $X.X curious that outstanding million. outstanding Just Curious on these ask to as get

Alan Lane

appreciate I Dave, question. that Yes.

the there is in But this area, ecosystem, come of say there bit for be there flat volatility commented that could this the your has another draw just in we that that’s in and there And and we will are uninterrupted earlier, of volatility back of volumes world leg mining the its computer as well. there when Bitcoin drive at familiar, point, price and network the at no as of – fact rate can Bitcoin kind that One, really other lines highs, bottom. all-time been always Bitcoin the But things. the especially also up-time that that be on working their was is price demonstrates has of There down, since down customers are stability with some XXXX, couple that in as fact that claim gone operating to you network actual I down. Bitcoin now, price that is up-time. a are highs. the the to with early XXX% hash And certainly to as borrowings. the a I are still Bitcoin additional is them think I off may think and of the that is the relatively quite that opportunities notwithstanding not

a little continue commitment that of lending continue level. over the other bit so this quarter that is and we all the to notwithstanding we SEN add against the it And Bitcoin, metrics customers spot to in believe is massive. And grow of this opportunity leverage time, a here, bright

David Chiaverini

volumes then market overall SEN on Can environment? that, comment for the down follow-up. our comment platform headwinds? money the an using to a you very crypto you Just competitive clients or are Thanks alternative move helpful purely, competitive and is could XX%, on environment? this

Alan Lane

But don’t and volumes Silvergate not seeing any We we into banks what have potential track and of – other Yes. just it. insight of certainly banks. direct deposits we other – are do transfers on between

ecosystem. Ben and all opportunity market of things it’s more I less that terms trading in lower in mentioned volumes of the the earlier indicative think just really

David Chiaverini

very Thanks much.

Operator

of please next question Jared, ahead. comes Our Wells Fargo. your Jared Jared, is from line Shaw go open.

line go your next Timo, is question Wells open. Timo, Our ahead. from of Fargo. comes please [indiscernible]

Unidentified Analyst

Can you hear me?

Operator

Yes.

Alan Lane

Timo. Hi can hear We you.

Operator

go Please Timo. ahead. with reconnected have We Instructions] [Operator

Jared Shaw

Can Hi. This Jared. actually me? you hear is

Alan Lane

Hi, Jared.

Jared Shaw

Alright.

additional an are about is Sorry just following incremental there pressure potential competitive for that guess another announcement the I this the question. up, impact been out last, up on problem going Coinbase I had or volumes, for where just the SEN the with working is think sort to to that’s significantly [indiscernible] platform Thanks of we taking an overall? they saw there.

Alan Lane

Yes.

burning, quite have quite we but you this enabled, had think to mentioned. specific I they expected that announcement that platform, clear, just as some wasn’t just a an for And frankly, and announcement competing the that be time. dementing

relatively have One of at started going to one challenges exchanges and therefore can. XXXX, few we that when back back the having this again, to ecosystem, way ecosystem, seek the then things redundancy and banking banks were the platforms these participants of there banking, even was looking first they were market the just, all other where

see across And And as it’s that mentioned, related I to significant any SEN. announcement directly so we on we that expected. something have certainly surprised volumes know the to given the don’t it a impact to was the in candidly, I wasn’t that in like And have place just that redundancy already fact exchange that that place. of platforms lot we these expect

Jared Shaw

gentlemen. it for Thanks the That’s Okay. follow-up.

CDs would broadly you rate you deposits? Just to in be the terms more of go focus going in percentage and deposits, the the sort bringing any go? floating big [ph] willing of shifting have is deposit how third those guess of I deposits quarter interest brokered added bearing back And – the on CDs, of have then to

Alan Lane

and just go Tony. ahead this will one, I Yes. take

sheet out. a assets generate And those very So, that we are the a liquid funding specific or of of balance sheet. we as But balance done further provide and will what at ability deposit wholesale positive very during they are various And incremental if are And or that to we described, you wholesale just past, have earlier sheet what kind I whether to Federal it’s home playing funding, some any at we made are types the a loan know, And what had very with for quarter, we those strategies, there, percentage the the borrowings, guidance. broader at we can they borrowings so that our looking the sell the question. And have comes of certainly and certainly really be no borrow run this deposits, we look bank spread against securities. updates pressure. securities could point, comfortable as borrowings. strategy if and back those comments as so brokered then we certainly that assets – as in of we of balance management it to part the other around you of or CDs of don’t what question percentage

Jared Shaw

you. Thank

Operator

We the have further hand no for of back any phone closing line, questions will I remarks. End Q&A on so

Alan Lane

Alright. Thank you, Jordan.

everybody of the result notwithstanding it’s Silvergate. thank the hard plus So, of work I our optimistic customer. just the entire want strength remain very challenging We the XX environment, joining platform, our customers And I provides to team platform continuing thank today. the we the for that the to added of add team. and at opportunities another to we on want are actively long-term

day. So, team. a thank I you and for who to the hope Silvergate you Thank have called you in you, great of all

Operator

This concludes joining. for you call. today’s Thank

your disconnect now may You lines.

Silvergate Capital (SICLQ) 18 Oct 222022 Q3 Earnings call transcript