Read crypto-friendly bank Silvergate 10k warning losses & reg crackdown may make it unviable

Silvergate did well banking crypto firms, but is now caught in the fallout. The bank said it earned $77.5 million in 2021 but lost $948.7 million in 2022. Excerpted and linked below are more key notes from the Silvergate 10k filed March 1, 2023

Subsequent to December 31, 2022, a number of circumstances have occurred which will negatively impact the timing and the unaudited results previously reported in the Earnings Release, including the sale of additional investment securities beyond what was previously anticipated and disclosed in the Earnings Release primarily to repay in full the Company’s outstanding advances from the Federal Home Loan Bank of San Francisco.

The Company sold additional debt securities in January and February 2023 and expects to record further losses related to the other-than-temporary impairment on the securities portfolio.

These additional losses will negatively impact the regulatory capital ratios of the Company and the Company’s wholly owned subsidiary, Silvergate Bank (the “Bank”), and could result in the Company and the Bank being less than well-capitalized.

In addition, the Company is 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 Company is currently in the process of reevaluating its businesses and strategies in light of the business and regulatory challenges it currently faces.

While we currently expect that there will be negative changes to the Company’s financial condition and results of operations for the year ended December 31, 2022 as preliminarily reported in the Earnings Release, until this process and the audit is complete, and the results are evaluated by the Company’s management and the Company’s independent registered public accounting firm, the Company cannot currently quantify such changes to its preliminary results of operations or financial condition for the fourth quarter and full year ended December 31, 2022.

There are or will be important factors that could cause the Company’s actual results to differ materially from those indicated in these forward-looking statements, including, but not limited to, the following:

– The viability of the Company’s digital asset focused business following the substantial volatility in the digital asset industry during the fourth quarter of 2022 and continuing into 2023, including several high profile bankruptcies, which has disrupted investor confidence in cryptocurrencies and led to a rapid escalation of oversight of the digital asset industry.

-The Company’s ability to comply with the heightened regulatory scrutiny of banking institutions that provide products and services to the digital asset industry.

– The safety and soundness concerns expressed by the federal banking agencies regarding banking institutions with business models that are concentrated in digital asset related activities.

– The Company’s ability to retain digital asset customers and related low cost deposits in light of the significant volatility in the digital asset industry.

– Risks and uncertainties, including potential liability and restrictions on the Company’s business, resulting from various litigation (including private litigation) and regulatory and other inquiries and investigations against or with respect to the Company, investigations from our banking regulators, congressional inquiries and investigations from the U.S. Department of Justice.

– The Company’s assessment in accordance with applicable accounting rules regarding the Company’s ability to continue as a going concern for the twelve months following the issuance of its financial statements.

– The Company’s ability to remediate any possible material weaknesses.

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Reference:

– Read Silvergate bank 10k filed 3/1/23 saying crypto market strain may make it unviable