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Silvergate Capital(SICP) - 2022 Q2 - Earnings Call Transcript
SICPSilvergate Capital(SICP)2022-07-19 18:57
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Financial Data and Key Metrics Changes - Silvergate reported record net income available to common shareholders of 35.9million,anincreaseof4535.9 million, an increase of 45% from the previous quarter, with EPS of 1.13, up 43% from the prior quarter [7][15] - Revenue reached 79.8million,up3379.8 million, up 33% sequentially and 88% year-over-year, driven by higher net interest income [15][16] - Total assets remained stable at 15.8 billion, a 29% increase compared to the same quarter last year [16] Business Line Data and Key Metrics Changes - Average deposits from digital currency customers decreased to 13.8billion,down613.8 billion, down 6% from the previous quarter, with significant fluctuations observed during the quarter [11][17] - The number of digital currency customers increased to 1,585, adding over 80 clients during the quarter, although this was a decline compared to Q1 [12] - SEN Leverage commitments grew 28% to 1.4 billion, with no losses or forced liquidations reported [13] Market Data and Key Metrics Changes - Bitcoin and Ethereum dollar trading volumes were relatively flat, yet the SEN experienced some of its highest daily trading volumes ever, with transfer volume of 191billion,a34191 billion, a 34% increase sequentially [10] - The price of Bitcoin dropped from approximately 45,000 at the end of Q1 to about 20,000bytheendofQ2,reflectingsignificantmarketvolatility[31]CompanyStrategyandDevelopmentDirection−ThecompanyaimstolaunchitsownU.S.dollar−backedstablecoinin2022,followingtheacquisitionofblockchain−basedpaymenttechnologyassets[14][50]−Silvergateemphasizesadisciplinedapproachtoinnovation,focusingonintroducingnewproductsthatsolvecustomerproblemswhilemanagingrisk[9]Management′sCommentsonOperatingEnvironmentandFutureOutlook−Managementnotedthatdespitethechallengingenvironmentinthedigitalassetindustry,theydidnotseeaslowdownininstitutionalcustomerinterest[25]−Thecompanyremainsoptimisticaboutdepositstabilityduringmarketdownturns,basedonhistoricalperformance[26]−Managementexpressedconfidenceintheirriskmanagementpractices,statingnoneedforchangesdespitemarketvolatility[72]OtherImportantInformation−Non−interestincomeforQ2was20,000 by the end of Q2, reflecting significant market volatility [31] Company Strategy and Development Direction - The company aims to launch its own U.S. dollar-backed stablecoin in 2022, following the acquisition of blockchain-based payment technology assets [14][50] - Silvergate emphasizes a disciplined approach to innovation, focusing on introducing new products that solve customer problems while managing risk [9] Management's Comments on Operating Environment and Future Outlook - Management noted that despite the challenging environment in the digital asset industry, they did not see a slowdown in institutional customer interest [25] - The company remains optimistic about deposit stability during market downturns, based on historical performance [26] - Management expressed confidence in their risk management practices, stating no need for changes despite market volatility [72] Other Important Information - Non-interest income for Q2 was 9.2 million, relatively flat compared to the prior quarter, with a year-over-year decline primarily due to lower trading volumes [21] - Non-interest expenses increased to $30.6 million, driven by higher salaries and professional services expenses related to strategic growth initiatives [22] Q&A Session Summary Question: How are institutional customers responding to recent market volatility? - Management indicated no slowdown in institutional interest, with many viewing the pullback as an opportunity [25] Question: What is the outlook for deposit growth in the second half? - Management refrained from making predictions but noted historical stability in deposits during downturns [26] Question: Can you provide insights on deposit trends throughout the quarter? - Management highlighted significant fluctuations in deposits, driven by market events, but emphasized the resilience of their customer base [29][31] Question: How is the company managing SEN Leverage commitments? - Management expressed satisfaction with SEN Leverage performance and indicated a cautious approach to risk management [35][37] Question: What updates can be shared regarding the stablecoin initiative? - Management confirmed they are on track to launch the stablecoin by the end of the year, emphasizing compliance and safety [50][64] Question: Are there any pressures from competition affecting client behavior? - Management reported no significant pressure on fees or deposit balances, attributing customer focus to risk management during market stress [66]