Silvergate Capital(SICP) - 2022 Q3 - Quarterly Report

Financial Performance - Net income for the three months ended September 30, 2022, was $43.3 million, an increase of 12.2$38.6 million for the three months ended June 30, 2022 [149]. - Net income for the nine months ended September 30, 2022, was $109.3 million, a 91.3$57.1 million for the same period in 2021 [149]. - Net interest income increased by $10.3 million for the three months ended September 30, 2022, compared to the previous quarter [149]. - Net interest income for the three months ended September 30, 2022, was$80,888,000, a 14.7% increase from $70,546,000 for the previous quarter [150]. - Noninterest income decreased by 8.2$8,454,000 from $9,214,000 in the prior quarter [150]. - Noninterest income decreased by$7.1 million or 20.7% for the nine months ended September 30, 2022, compared to the same period in 2021 [169]. - The company reported a net interest margin of 2.31% for the three months ended September 30, 2022, compared to 1.96% in the previous quarter [155]. - The average annualized yield on total interest earning assets increased from 1.25% for the nine months ended September 30, 2021, to 1.96% for the nine months ended September 30, 2022 [163]. Asset and Equity Management - Total assets as of September 30, 2022, were $15.47 billion, a decrease from$16.01 billion as of December 31, 2021 [145]. - Total shareholders' equity decreased to $1.33 billion as of September 30, 2022, from$1.61 billion as of December 31, 2021 [145]. - Shareholders' equity decreased by $0.3 billion or 17.2$1.3 billion at September 30, 2022, compared to $1.6 billion at December 31, 2021 [175]. - The company had$1.2 billion in credit extension commitments as of September 30, 2022, indicating significant off-balance sheet exposure [219]. Loan and Deposit Activity - The total loans held-for-investment amounted to $470.962 million, with$108.281 million due in one year or less and $317.278 million due in one to five years [186]. - Total loans outstanding at the end of the period were$470.96 million, down from $599.11 million at June 30, 2022, and$816.66 million at September 30, 2021 [202]. - Deposits decreased by $1.1 billion or 7.4$13.2 billion at September 30, 2022, compared to $14.3 billion at December 31, 2021 [209]. - Noninterest bearing deposits totaled$12.0 billion, representing approximately 90.7% of total deposits at September 30, 2022, down from 99.5% at December 31, 2021 [209]. Regulatory Compliance and Risk Management - The company is subject to supervision by the Federal Reserve and the California Department of Financial Protection and Innovation, ensuring regulatory compliance in its operations [135]. - The company maintained a comprehensive liquidity risk management process to address potential adverse liquidity events [218]. - The company has access to diverse funding sources, including lines of credit and repurchase agreements, to support liquidity needs [218]. - The bank employs interest rate floors, caps, and swaps to manage interest rate risk exposure [225]. Digital Asset Market Position - The digital asset industry is viewed as a significant and growing market, with the company leveraging its expertise to provide critical financial infrastructure solutions [136]. - The company has experienced a first-mover advantage in the digital asset industry, which is considered a cornerstone of its leadership position today [136]. - The company’s customer base includes major U.S. exchanges and global investors, indicating a strong market presence in the digital asset sector [139]. - As of September 30, 2022, the company had over 300 prospective digital asset customer leads in various stages of onboarding, reflecting strong demand for its services in the digital asset industry [137]. Interest Rate Sensitivity - The bank's interest-sensitive assets exceed interest-sensitive liabilities, resulting in an asset-sensitive position with a period gap of $7,383,364 thousand [226]. - Under a static balance sheet scenario, a +100 bps interest rate shock would increase net interest income by 13.66$2.6 million or 8.5% for the three months ended September 30, 2022, primarily due to increases in salaries and employee benefits [171]. - Salaries and employee benefits rose by $3.3 million or 20.0% for the three months ended September 30, 2022, driven by a 20.2% increase in average full-time equivalent employees from 336 to 404 [171].