Silvergate Exceeds Estimates for Q1 Earnings

Led by digital asset-related revenue, Silvergate Capital Corporation (NYSE:SI), which is up about 82% year-to-date, announced first quarter earnings that exceeded expectations Tuesday. 

“Everyday, the digital currency industry is growing rapidly, which is an exciting opportunity for Silvergate to continue to provide innovative solutions to our customers,” said Silvergate CEO Alan Lane on Tuesday’s earnings conference call. “I believe we are in the early stages of a tremendous opportunity in the digital currency industry.”

The crypto-friendly bank, whose clients include Coinbase, Gemini and Kraken, reported first quarter net income of $12.7 million, or $0.55 per share, exceeding the Zacks Consensus Estimate of $0.48 per share. During the first quarter of 2020, Silvergate reported earnings of $0.23 per share. Silvergate has surpassed earnings per share consensus estimates for the past four quarters. 

Digital currency customers grew from 969 in the fourth quarter of 2020 to 1,104 in the first quarter of 2021. Digital currency customer deposits grew from $5 billion during the fourth quarter of 2020 to $6.8 billion in the first quarter of 2021. Deposits from digital currency clients comprised 98% of Silvergate’s total deposits, according to the earnings report. 

“We added more customers in the first quarter of 2021 than we’ve added in any other quarter,” said Lane. “There are just a lot more folks coming into this space, and it takes a while for these customers to get on board to participate in this, and, and so we just see that that growth rate continuing.” 

Silvergate’s digital currency customer-related fee income for the first quarter was $7.1 million, up from $3.8 million during the fourth quarter of 2020. 

The Silvergate Exchange Network (SEN), Silvergate’s internal settlement service clients use to fund crypto trading accounts, handled 166,772 transactions and $166.5 billion of US dollar transfers during the first quarter of 2021. Transactions increased 84% and dollar transfers increased 181% from the fourth quarter of 2020. 

As central banks continue to explore the possibility of implementing digital currencies, Silvergate executives said a digital dollar will make using cryptocurrencies safer, easier and cheaper, and will likely provide an opportunity to expand the SEN. 

“I think the majority of people that are buying Bitcoin today are looking at it as digital gold, or as an asset class, as opposed to a payment rail,” said Ben Reynolds, Chief Strategy Officer at Silvergate on the call. “We think that both use cases will exist and are still early, and we see this massive opportunity of enabling dollars on a blockchain and ultimately doing that through the Silvergate Exchange Network.”