Crypto bank Silvergate evaluating ability to survive as going concern

Shares of crypto-focused bank Silvergate plunged in after-hours trading on Wednesday after the lender said it was evaluating its ability to survive as a going concern.

California-based Silvergate, one of just a few US banks to focus heavily on crypto, has been hit hard by the recent collapse of digital token prices and the implosion of Sam Bankman-Fried’s FTX empire, which was a banking client.

In a regulatory filing on Wednesday, Silvergate said it would not be able to file its annual report with the Securities and Exchange Commission on time. It said it would miss the March 16 deadline because of a further weakening in its capital position since last month, when it reported dismal fourth-quarter earnings.

Silvergate said it was “evaluating the impact that these subsequent events have on its ability to continue as a going concern for the twelve months following the issuance of its financial statements”.

The bank disclosed that its capital ratios would suffer from fresh losses on its securities portfolio, which amounted to $5.7bn at the end of 2022, following further such sales in January and February. The bank has been selling off securities in an effort to meet withdrawals from crypto customers amid what it has described as a “crisis of confidence” in the sector.

“These additional losses will negatively impact the regulatory capital ratios . . . and could result in the company and the bank being less than well-capitalised,” Silvergate said.

The warning marks a precipitous fall for the once small community bank that supercharged its growth by pushing into cryptocurrencies. Many of the world’s top crypto miners, exchanges and custodians used Silvergate to deposit and transfer billions of dollars.

The bank’s share price rose to a high of $219.75 in November 2021 but on Wednesday closed at $13.53. The stock was trading down a further 32 per cent in after-hours trading in New York following the filing.

Silvergate in 2022 reported a full-year loss of $949mn in 2022 compared with a profit of $76mn in 2021.